Are there equity funds that also double up as tax savers?
Shalini Gupta, Ghaziabad
Yes, there is a type of diversified equity fund known as equity-linked savings schemes (ELSS). Investments in these funds qualify for tax deductions under Section 80C of the Income Tax Act. Unlike other tax saving options like PPF, NSC, NPS or contributions to the PF which have guaranteed returns, there is no such guarantee when you invest for tax savings in an ELSS. Returns on ELSS depend on fund performance, which is stock market linked. The biggest advantage in considering investments in ELSS—they have the shortest lock-in of three years among the other available options. There is also the potential for higher growth and wealth creation when investing in ELSS over the fixed return tax savings options, as most of them post inflation adjustment but barely post any significant gains.