ELSS mutual funds are eligible for tax deductions under Section 80C of the Income Tax Act. The amount invested in ELSS mutual funds is deducted from the investor's taxable income, reducing the tax liability. The maximum deduction allowed under Section 80C is Rs. 1.5 lakhs per financial year. Long-term capital gains on ELSS mutual funds are taxed at a rate of 10% for gains over Rs. 1 lakh.