These funds invest in different kinds of companies to spread out the risk and aim to increase your money over time. You can invest as much as you want, but the tax benefit is capped at ₹1,50,000. By investing this amount, you could save up to ₹46,800 in taxes each year.

Before you decide to put your money in an ELSS fund, consider a few things:

• Fund returns: Look at how well the fund has done compared to others and the market benchmark. Good funds usually show strong performance over time.
• Fund house history: Choose a fund from a company that has a consistent track record of doing well over many years.
• Expense ratio: This shows how much of your investment goes towards managing the fund. A lower expense ratio means more profit for you.
• Fund manager: This person manages the fund, so they should be skilled and experienced.
• Investment method (SIP or Lumpsum): Decide if you want to invest a fixed amount regularly (SIP) or a big amount all at once (Lumpsum).

Terms Used

• SIP (Systematic Investment Plan): Think of SIP like a piggy bank. Instead of putting a large amount of money in all at once, you put in a small, fixed amount regularly (like every month). This is a way to invest in mutual funds, where your money is pooled with others and invested in a mix of things like stocks and bonds. It’s like slowly building up your investment over time.
• Expense Ratio: This is like a maintenance fee for your investment. When you invest in mutual funds, there’s a company managing your money. The expense ratio is a yearly fee they charge you, calculated as a percentage of the amount you have invested. It covers things like the cost of managing the fund, administrative expenses, etc. A lower expense ratio means you get to keep more of your investment gains.
• Section 80C Tax Deduction: This is a section in India’s Income Tax Act that allows you to reduce your taxable income. If you invest in certain financial products like life insurance, certain mutual funds (ELSS), pension plans, etc., you can claim a deduction on your income tax. It’s like the government giving you a discount on your taxes if you save or invest your money in specific ways.
• Lock-in Period: This is a time period during which you cannot withdraw your investment. For example, if you invest in a tax-saving mutual fund under Section 80C, you might have a lock-in period of 3 years. This means you have to leave your money in the fund for at least 3 years before you can take it out. It’s like a commitment period for your investment.