List of Mutual Funds Eligible for 80C Deduction
For possible tax savings, look into Section 80C of the Income Tax Act. One of the best investing options, ELSS mutual funds, offer tax deductions of up to Rs. 1.5 lakh. Even while ELSS mutual funds provide lucrative long-term returns, keep in mind that they are subject to taxes after three years. You must check these funds' specifics to make well-informed investment choices that enable you to reduce your tax liability in the long run. To begin optimising your savings, review our guide to the top ELSS mutual funds.
Table of Content
What are Mutual Funds Eligible for 80C Deduction?
Equity funds are a type of mutual funds that allocate a significant amount of their corpus to equity or equity-related securities, also known as ELSS funds. Since ELSS funds are capable of providing a hefty tax exemption of up to Rs. 150,000 from your taxable income under Section 80C of the Income Tax Act, they are also referred to as tax-saving schemes. An ELSS fund is an equity-oriented program with a three-year lock-in period, as the name implies. Many taxpayers have resorted to ELSS schemes in recent years in order to receive tax benefits. You can receive tax exemption on your investment up to Rs. 150,000 if you invest in ELSS schemes. Additionally, if your income exceeds Rs. 1 lakh, it will be taxed at a rate of 10% and will be classified as Long Term Capital Gain (LTCG) at the end of the three-year period.
Features of Mutual Funds Under Section 80C
Swift Access: Shorter than other Sec 80C alternatives, with a lock-in period of only three years.
Tax Benefit: Be eligible for a Section 80C tax deduction of up to Rs. 1.5 lakh.Â
Tax-Free Gains: ELSSÂ Mutual Fund profits are not subject to taxes.Â
Equity Earnings: Take advantage of the equity markets to maximise your earning potential.Â
Profitable Withdrawals: Take advantage of ELSS Mutual Funds' tax-exempt withdrawals.Â
Dividend Potential: Even during the lock-in period, there is a chance to collect dividends.Â
Accessible Investment: Start investing with no upper limit, as little as Rs. 500.
How do Mutual Funds Under Section 80C Work?
A tax-efficient investment option is offered to investors through mutual funds under Section 80C of the Income Tax Act. Those who invest in specific financial instruments, such as mutual funds, can claim Section 80C mutual fund deductions on their taxable income. This is a synopsis of how various funds function inside the 80C framework:
Eligible Investments: Equity-Linked Savings Plans (ELSS) are included in mutual funds under 80C. The primary investment of ELSS under 80c is in stocks, which have the potential to increase in value.
Lock-in Time: Investors should be aware that there is a three-year lock-in period for ELSS funds in order to receive tax benefits under Section 80C. Investors are unable to sell or redeem their units at this time.
Tax Benefits: Under Section 80C, an investor's taxable income may be reduced by up to Rs 1.5 lakh if they participate in mutual funds. The overall limit specified by the provision applies to this deduction.
Market-Linked Returns: ELSS funds offer market-linked returns, in contrast to conventional tax-saving options. The success of the underlying stocks has a direct impact on the fund's performance.
List of Mutual Funds Eligible for Section 80C Deduction
Here are the best options in mutual funds eligible for Section 80C deduction:
SBI LT Advantage Fund-V:Â SBI Mutual Fund introduced the SBI Long Term Advantage Fund-Serie V, an Equity Linked Savings Scheme (ELSS), on December 21, 2017. By primarily investing in equities and equity-related assets, the fund seeks to generate long-term financial appreciation. It has a three-year lock-in period, which is standard for ELSS funds. The fund's AUM was Rs. 369.13 crore as of January 2, 2025, and its cost ratio was 0.00%. In addition, the fund achieved absolute 1-year returns of 45.29% and a 3-year CAGR of 20.31%.
Motilal Oswal ELSS Tax Saver Fund:Â The Motilal Oswal ELSS Tax Saver Fund is an Equity Linked Savings Scheme (ELSS) that aims for long-term capital appreciation while offering tax-saving advantages under Section 80C of the Income Tax Act, 1961. The main investments made by this fund are in a diverse portfolio of stocks and securities linked to stocks. The fund's AUM was Rs. 4,186.93 cr as of January 2, 2025, and its cost ratio was 0.65%. In addition, the fund achieved absolute 1-year returns of 49.50% and a 3-year CAGR of 29.12%.
HSBC Tax Saver Equity Fund:Â In India, HSBC Mutual Fund offers an open-ended equity-linked savings plan (ELSS) called the HSBC Tax Saver Equity Fund. It is intended to give investors the advantages of both tax savings under Section 80C of the Income Tax Act of 1961 and wealth growth through equity investments. The fund's AUM was Rs. 260.16 crore as of January 2, 2025, and its cost ratio was 1.60%. In addition, the fund achieved absolute 1-year returns of 35.22% and a 3-year CAGR of 20.14%.
HSBC ELSS Tax Saver Fund:Â Under Section 80C of the Income Tax Act of 1961, investors can benefit from both capital building and tax savings through the HSBC ELSS Tax Saver Fund, an equity-linked savings plan (ELSS). This fund, which has a three-year lock-in requirement, mainly invests in a diverse range of stocks and equity-related derivatives. The fund's AUM was Rs. 4,302.98 cr as of January 2, 2025, and its cost ratio was 1.10%. In addition, the fund achieved absolute 1-year returns of 35.50% and a 3-year CAGR of 19.57%.
JM ELSS Tax Saver Fund:Â Under Section 80C of the Income Tax Act of 1961, the JM ELSS Tax Saver Fund is an equity-linked savings plan (ELSS) that offers the combined advantages of wealth accumulation and tax savings. It mainly makes investments in a broad range of stock and equity-related securities from various industries and market capitalisations. The fund's AUM was Rs. 183.48 cr as of January 2, 2025, and its cost ratio was 1.27%. In addition, the fund achieved absolute 1-year returns of 31.23% and a 3-year CAGR of 20.93%.
WOC ELSS Tax Saver Fund:Â One kind of Equity-Linked Savings Scheme (ELSS) that aims to provide both tax savings and long-term capital growth is the WOC ELSS Tax Saver Fund. Investors are permitted to deduct up to Rs. 1.5 lakh every fiscal year under Section 80C of the Income Tax Act. The fund's AUM was Rs. 292.68 crore as of January 2, 2025, and its cost ratio was 0.70%. In addition, the fund had absolute 1-year returns of 31.30% and a 3-year CAGR of 0.00%.
SBI Long-Term Equity Fund:Â With a three-year statutory lock-in period, the SBI Long-Term Equity Fund is an open-ended equity-linked savings plan (ELSS) that provides tax advantages under Section 80C of the Income Tax Act of 1961. This plan, which is run by SBI Mutual Fund, focuses on businesses with significant development potential in a variety of industries and mainly invests in a broad portfolio of equities and equity-related instruments. The fund's AUM was Rs. 27,847.49 cr as of January 2, 2025, and its cost ratio was 0.93%. In addition, the fund achieved absolute 1-year returns of 28.15% and a 3-year CAGR of 24.99%.
SBI LT Advantage Fund-III:Â SBI Mutual Fund introduced the SBI Long Term Advantage Fund-Series III, an Equity Linked Savings Scheme (ELSS), on December 31, 2015. The fund's main goal is to provide income tax benefits under Section 80C of the Indian Income Tax Act and produce capital appreciation over a ten-year period by investing primarily in equities and equity-related instruments of corporations. The fund's AUM was Rs. 78.66 crore as of January 2, 2025, and its cost ratio was 0.00%. In addition, the fund achieved absolute 1-year returns of 28.31% and a 3-year CAGR of 20.08%.
ICICI Pru LT Wealth Enhancement Fund:Â Long-term wealth creation is the goal of the open-ended equity-oriented mutual fund known as the ICICI Prudential Long-Term Wealth Enhancement Fund. Its primary investments are in a diverse portfolio of securities with varying market capitalisations that include equity and equity-related securities. The fund seeks to identify growth-oriented businesses in order to take advantage of India's potential for economic expansion. The fund's AUM was Rs. 42.04 cr as of January 2, 2025, and its cost ratio was 0.99%. In addition, the fund achieved absolute 1-year returns of 27.85% and a 3-year CAGR of 22.61%.
Invesco India ELSS Tax Saver Fund:Â Through investing in a diverse portfolio of stocks and equity-related instruments, investors can potentially earn good returns while saving taxes with the Invesco India ELSS Tax Saver Fund, an equity-linked savings scheme (ELSS). Under Section 80C of the Income Tax Act, it is eligible for tax deductions, providing an annual tax exemption of up to Rs. 1.5 lakh. The fund's AUM was Rs. 2,918.68 cr as of January 2, 2025, and its cost ratio was 0.76%. In addition, the fund achieved absolute 1-year returns of 27.67% and a 3-year CAGR of 16.53%.
How to Choose the Best Mutual Fund Eligible for 80C Deduction
Section 80C mutual fund investments can be a tax-efficient tactic, but weighing your options carefully is necessary. Without specific suggestions, follow this advice to help you select the finest mutual funds under Section 80C:Â
Start by determining how much danger you can tolerate. The risk of the Section 80C mutual fund list ranges from debt to equity. Select investments that fit your financial objectives and comfort level.
Assess the funds' past performance. Although historical performance doesn't ensure future outcomes, it does reveal information about the consistency and management style of a fund.
Pay attention to spending ratios. A fund with lower expense ratios is more cost-effective and lets you keep a larger portion of the profits.
Examine the composition of the portfolio. Diversification is essential; risk can be reduced by having a well-balanced mix of assets.
Check the track record of the fund management. The success of the fund can be greatly impacted by a knowledgeable and professional fund manager.
Recognise the fund's tax ramifications. Section 80C tax deductions are available for ELSS funds, but it's important to understand the lock-in period.
Calculation of Returns on Mutual Funds Eligible for 80C Deduction
The performance of the mutual fund in the market determines the returns on investments made under Section 80C that are eligible for a deduction. These funds usually make investments in a variety of products, such as tax-saving options and equity-linked savings plans (ELSS). Returns are calculated by following the growth of the fund's net asset value (NAV) during the course of the investment. The market value of the mutual fund's assets less its obligations is known as its net asset value, or NAV. By contrasting the NAV at the time of investment with the NAV at the time of redemption, investors can assess the performance. Market swings could affect the returns, and previous performance is no guarantee of future outcomes. Furthermore, the performance of the underlying securities in the portfolio of the particular tax-saving mutual fund affects the fund's overall performance.
Conclusion
In conclusion, knowing which mutual funds qualify for Section 80C tax benefits is essential for wise financial planning. By taking into account variables such as lock-in durations, risk profiles, and past performance, investors can match an appropriate mutual fund with their tax-saving objectives. It is crucial to stress that each person's financial goals and risk tolerance should serve as the foundation for the selection process. A knowledgeable approach to optimising benefits under Section 80C is ensured by routine monitoring and keeping abreast of tax legislation.
FAQ
Q1. Who should invest in mutual funds under 80C?
For investors who are prepared to take chances and stick with the required three-year lock-in period, ELSS funds are the best option. It is recommended that you remain invested for at least five years in order to maximise returns. This will allow your assets to weather market cycles and produce superior long-term outcomes. Early-career young professionals can take advantage of 80c ELSS's compounding benefits. ELSS is a suitable option for anyone looking for both growth and tax efficiency because, with time on their side, they can save taxes and enjoy significant returns.
Q2. How long should I stay invested in mutual funds under 80C?
If there is a three-year lock-in period, investing in Equity Linked Saving Schemes (ELSS), also referred to as ELSS funds, is eligible for an income tax mutual fund 80c deduction under the Income Tax Act.
Q3. Where do mutual funds under 80C invest?
Mutual funds that qualify under Section 80C generally make investments in a variety of assets, such as debt instruments and/or stocks. These funds, like Equity-Linked Savings Schemes (ELSS), carefully distribute their investments to strike a balance between risk and possible profits.
Q4. What are the returns on mutual funds under 80C?
Since mutual funds under 80C are prone to market swings, they cannot promise any particular returns. The performance of the fund portfolio's underlying assets determines returns.
Q5. When should I invest in mutual funds under 80C?
At the start of the fiscal year, investors must think about making Section 80C investments in mutual funds. They can take advantage of compounding's advantages over a longer time frame by doing this. Potential growth and the completion of the required lock-in period—usually connected to tax-saving mutual funds like ELSS—are made possible by this early investment.
Q6. What is the lock-in period for mutual funds under 80c?
Under Section 80C, mutual funds normally have a three-year lock-in term. Investors are unable to sell or redeem their units during this period, guaranteeing compliance with the legal requirements for Section 80C tax benefits.
Q7. Can I claim 80C deductions on mutual funds other than ELSS?
No, only Equity-Linked Savings Schemes (ELSS) qualify for 80C deductions.
Q8. Do all ELSS funds have the same lock-in period?
Yes, all ELSS funds have a mandatory lock-in period of three years.
Q9. Can I claim an 80C deduction if I redeem my ELSS before three years?
No, premature withdrawals result in loss of deduction benefits.
Q10. Is there a maximum limit on claiming 80C deductions for ELSS investments?
Yes, you can claim up to ₹1.5 lakh in total 80C deductions, including ELSS and other eligible investments.
Q11. Can ELSS funds offer both tax savings and dividends?
Yes, ELSS funds offer both dividend and growth options, but dividend payouts are taxable.
Q12. What happens if I invest in an ELSS fund in joint names?
Only the first holder can claim the 80C deduction, provided they contribute to the investment.
Q13. Are SIP investments in ELSS eligible for 80C deductions?
Yes, but each SIP installment is locked in for three years separately.
Q14. Can I switch between different ELSS funds and still claim 80C?
No, switching ELSS funds is treated as redemption, which resets the lock-in period.
Q15. Is ELSS the best tax-saving option under 80C?
While ELSS offers high returns, risk-averse investors may prefer PPF or NSC under 80C.
Q16. Can ELSS investments be shown as tax savings for salaried employees?
Yes, ELSS investments can be declared under 80C while submitting tax-saving proofs to employers.
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