ELSS funds combine tax saving with equity growth. Investing up to ₹1.5 lakh a year qualifies for a Section 80C deduction, while your money is invested in the stock market for potentially higher long-term returns than PPF or FDs.
The lock-in is only three years, far shorter than PPF's 15 or a 5-year tax-saving FD. Because it is equity, returns are not guaranteed and can be volatile in the short term.
For example, a ₹1.5 lakh investment in an ELSS through a SIP both reduces your taxable income and gives you market exposure. Gains above ₹1.25 lakh a year are taxed as long-term capital gains.