Last Updated on Apr 25, 2025 by vanessa sequeira
When tax-saving season rolls around, most investors scramble to find options that not only reduce their tax burden but also help grow their money. If you’ve ever found yourself wondering how to save on taxes and invest smartly, Equity Linked Savings Schemes (ELSS) might just be the answer. With the dual benefits of tax deductions under Section 80C and the potential for long-term capital appreciation, ELSS tax-saving mutual funds have become a go-to choice for both new and seasoned investors. Let’s explore more about them, their features, factors to consider before investing, and the best ELSS mutual funds based on various fundamental factors.
Table of Contents
Best ELSS Mutual Funds – Based On Low Expense Ratio
| Name | AUM (Cr) | CAGR 3Y (%) | Expense Ratio (%) |
| Navi ELSS Tax Saver Nifty 50 Index Fund | 86.44 | 0.00 | 0.1 |
| 360 ONE ELSS Tax Saver Nifty 50 Index Fund | 79.36 | 0.00 | 0.27 |
| Zerodha ELSS Tax Saver Nifty LargeMidcap 250 Index Fund | 176.62 | 0.00 | 0.27 |
| Navi ELSS Tax Saver Fund | 55.32 | 13.93 | 0.39 |
Note: The data is from 25th April 2025. To get this list of ELSS funds based on low expense ratio in India on the Tickertape Mutual Fund Screener, apply the below-mentioned filter.
- Category > Equity > Equity Linked Savings Scheme (ELSS)
- Plan: Growth
- Expense Ratio (%): Set to Low – Sort from lowest to highest
Top ELSS Mutual Fund – Based On A High 3-Yr CAGR
| Name | AUM (Cr) | CAGR 3Y (%) | Expense Ratio (%) |
| SBI Long Term Equity Fund | 27,730.33 | 24.82 | 0.95 |
| Motilal Oswal ELSS Tax Saver Fund | 3,816.77 | 24.77 | 0.7 |
| HDFC ELSS Tax saver | 15,555.71 | 23.32 | 1.11 |
| ITI ELSS Tax Saver Fund | 377.68 | 22.25 | 0.57 |
| SBI LT Advantage Fund-V | 342.25 | 21.41 | 0 |
| ICICI Pru LT Wealth Enhancement Fund | 37.80 | 20.48 | 0.99 |
| DSP ELSS Tax Saver Fund | 16,217.91 | 20.44 | 0.75 |
| JM ELSS Tax Saver Fund | 167.42 | 20.25 | 1.03 |
| Franklin India ELSS Tax Saver Fund | 6,358.59 | 19.98 | 1.08 |
| Parag Parikh ELSS Tax Saver Fund | 4,905.72 | 19.55 | 0.63 |
Note: The data is from 25th April 2025. To get this list of ELSS funds based on low expense ratio in India on the Tickertape Mutual Fund Screener, apply the below-mentioned filter.
- Category > Equity > Equity Linked Savings Scheme (ELSS)
- Plan: Growth
- CAGR 3Y (%): Set to High – Sort from highest to lowest
Best ELSS Funds In India – Based On A High 3-Yr Average Rolling Returns
| Name | AUM (Cr) | CAGR 3Y (%) | Expense Ratio (%) | 3Y Avg Annual Rolling Return (%) |
| SBI Long Term Equity Fund | 27,730.33 | 24.82 | 0.95 | 28.27 |
| Motilal Oswal ELSS Tax Saver Fund | 3,816.77 | 24.77 | 0.7 | 27.81 |
| HDFC ELSS Tax saver | 15,555.71 | 23.32 | 1.11 | 25.01 |
| Sundaram LT Tax Adv Fund-Sr III | 30.07 | 18.27 | 1.18 | 24.99 |
| Sundaram LT Tax Adv Fund-Sr IV | 19.67 | 18.48 | 1.18 | 24.98 |
| Sundaram LT Micro Cap Tax Adv Fund-Sr VI | 32.63 | 17.41 | 1.18 | 24.25 |
| Sundaram LT Micro Cap Tax Adv Fund-Sr IV | 32.10 | 16.98 | 1.33 | 24.20 |
| Quant ELSS Tax Saver Fund | 10,404.84 | 15.68 | 0.5 | 24.07 |
| Sundaram LT Micro Cap Tax Adv Fund-Sr III | 67.63 | 16.78 | 1.25 | 24.04 |
| SBI LT Advantage Fund-III | 68.50 | 18.27 | 0 | 23.53 |
Note: The data is from 25th April 2025. To get this list of ELSS funds based on low expense ratio in India on the Tickertape Mutual Fund Screener, apply the below-mentioned filter.
- Category > Equity > Equity Linked Savings Scheme (ELSS)
- Plan: Growth
- 3Y Avg Rolling Returns (%): Set to High – Sort from highest to lowest
Less Volatile ELSS Funds In India
| Name | AUM (Cr) | CAGR 3Y (%) | Expense Ratio (%) | Volatility (%) |
| Parag Parikh ELSS Tax Saver Fund | 4,905.72 | 19.55 | 0.63 | 12.34 |
| Bajaj Finserv ELSS Tax Saver Fund | 44.27 | 0.00 | 0.45 | 13.01 |
| Quantum ELSS Tax Saver Fund | 209.18 | 19.01 | 0.89 | 13.28 |
| HDFC ELSS Tax saver | 15,555.71 | 23.32 | 1.11 | 13.70 |
| ICICI Pru ELSS Tax Saver Fund | 13,632.70 | 16.50 | 1.13 | 14.16 |
| Bandhan ELSS Tax Saver Fund | 6,596.51 | 15.33 | 0.69 | 14.33 |
| Sundaram Diversified Equity | 1,427.77 | 13.96 | 1.74 | 14.37 |
| UTI ELSS Tax Saver Fund | 3,592.53 | 13.46 | 0.92 | 14.52 |
| Sundaram ELSS Tax Saver Fund | 1,288.19 | 15.28 | 1.72 | 14.61 |
| Axis ELSS Tax Saver Fund | 34,176.50 | 12.05 | 0.77 | 14.66 |
Note: The data is from 25th April 2025. To get this list of ELSS funds based on low expense ratio in India on the Tickertape Mutual Fund Screener, apply the below-mentioned filter.
- Category > Equity > Equity Linked Savings Scheme (ELSS)
- Plan: Growth
- Volatility (%): Set to Low – Sort from lowest to highest
How do ELSS Mutual Funds Work?
An Equity-Linked Savings Scheme (ELSS) is the only type of mutual fund that offers tax benefits. They are diversified equity funds. They invest in tax-saving equity funds and equity-linked instruments. ELSS mutual funds for tax saving have a mandatory lock-in period of 3-yr, after which it becomes an open-ended scheme.
Section 80C of the Income Tax Act, 1961 allows you to claim a tax deduction on the amount that you invest in ELSS. The maximum deduction you can claim in this regard is ₹1,50,000 per year, subject to the overall permissible limit of the section.
Features Of ELSS Mutual Funds
Here are some notable features of ELSS mutual funds:
- There are different payout methods when it comes to SIP in elss mutual funds. One is a growth scheme in which you receive a lump sum amount after the lock-in period. Another is the dividend scheme, which provides regular dividends during the 3-yr lock-in period.
- The fund invests at least 80% in equity and equity-related instruments in a diversified manner, i.e. across market capitalisations, themes, and sectors.
- There is a lock-in period of 3-yr with no provisions to make a premature exit.
- ELSS funds are the only tax-saving investment with the potential to offer inflation-beating returns.
- ELSS investment strategies are considered high-risk investments as they invest in the equity market, which is volatile in nature.
Who Should Explore ELSS Mutual Funds?
Equity-Linked Savings Schemes (ELSS) funds are designed for investors who are looking to save taxes while gaining exposure to equities. High-return ELSS funds are suitable for individuals who have a medium to long-term investment horizon and are comfortable with the volatility of the equity market. Those who wish to maximise their tax-saving potential under Section 80C of the Income Tax Act should consider tax-saving ELSS funds. These funds are also ideal for investors seeking a blend of wealth creation and tax benefits. If you are someone who is willing to stay invested for a minimum of three years and can tolerate short-term market fluctuations, long-term ELSS investments may be suitable.
Advantages of Investing in ELSS Mutual Funds
- Tax Savings: ELSS funds are one of the most popular tax-saving ELSS funds under Section 80C, allowing investors to claim tax deductions of up to ₹1.5 lakh annually.
- Potential for High Returns: Being equity-oriented, the best ELSS mutual funds have the potential to offer high returns over the long term. Investors in best-performing ELSS for SIP can benefit from systematic investment plans (SIPs) that allow them to invest in a disciplined manner while averaging their cost of purchase.
- Short Lock-in Period: Unlike other tax-saving instruments such as PPF and NSC, ELSS funds come with a relatively short lock-in period of three years. This makes it a liquid investment compared to other options with longer tenure.
- Diversification: ELSS mutual funds invest in a diversified portfolio of stocks, which helps mitigate risks associated with investing in a single company. By choosing top ELSS mutual funds, investors can ensure better exposure to different sectors of the economy.
- Potential to Build Wealth: Over the long term, equity-linked savings schemes can provide superior returns compared to traditional tax-saving instruments like fixed deposits or PPF. With top-performing ELSS funds, investors can benefit from the growth of the equity market, enabling wealth creation.
Risks of Investing in ELSS Mutual Funds
- Market Volatility: As ELSS funds invest in equities, they are subject to market fluctuations. Investors must be prepared for the inherent risk associated with equity-linked savings schemes.
- Lack of Guaranteed Returns: Unlike fixed-income tax-saving instruments, the returns on tax-saving ELSS funds are not guaranteed. The performance of the best equity-linked savings schemes depends on the market conditions and the fund manager’s ability to pick winning stocks.
- Lock-in Period: While the three-year lock-in period is shorter than other tax-saving instruments, it can still be restrictive for those who may need access to their funds in the short term. This lock-in period may also result in liquidity risk for investors.
- Higher Risk for Aggressive Investors: Some of the best ELSS mutual funds focus on growth-oriented, mid-cap, or small-cap stocks, which can carry higher risks.
How to Choose ELSS Mutual Funds for Investment
- Assess Your Risk Appetite: If you are a conservative investor, investing in ELSS funds that focus on large-cap stocks could be beneficial. On the other hand, aggressive investors may choose funds with a higher allocation to mid- or small-cap stocks, as they have the potential for greater returns but come with increased risk.
- Look for Consistent Performance: Consider the best ELSS funds India by evaluating their past performance. A good track record of steady returns over a 5-10 year period is often indicative of a reliable fund. Additionally, check how the fund performed during market corrections to gauge its resilience.
- Fund Manager’s Expertise: The expertise of the fund manager plays a crucial role in the performance of top-performing ELSS funds. Review the fund manager’s experience and their ability to navigate market cycles.
- Expense Ratio: The expense ratio refers to the annual fees that a fund charges for managing the portfolio. A lower expense ratio is crucial when investing for the long term, as it can make a significant difference in overall returns.
- Tax Efficiency: Some of the best ELSS mutual funds may offer tax advantages over others due to their ability to manage capital gains efficiently. Understanding the tax implications of your investments will help you maximise returns.
- SIP Facility: For investors looking to invest in a disciplined manner, choosing funds with a SIP option can be advantageous. The best-performing ELSS for SIP allows investors to invest systematically and benefit from rupee cost averaging over the long term.
Factors To Consider Before Investing In ELSS Mutual Funds
If you are looking forward to investing in ELSS funds with high returns, consider the following factors:
Financial Goal And Investment Plan
Your investments should align with your financial goals. Therefore, curating an investment plan that suits your income, risk appetite, and other factors is crucial. While one scheme might be perfect for an investor, it is not necessary that it will work for you as well.
Risk Appetite
Even the top ELSS funds for 2025 are exposed to volatile market conditions because of their underlying securities. Therefore, these funds are associated with high risk. Hence, if you decide to invest in ELSS mutual funds, make sure to assess your risk profile beforehand.
Investment Time Horizon
ELSS funds have a lock-in period of 3-yrs. It means investors cannot redeem their capital and gains within that time frame. Hence, it is vital to consider before investing in ELSS before you part with your savings for 3-yrs.
Fund’s Past Performance
You should always check returns generated by a fund over a trailing period of 3-yr and 5-yr or longer if necessary. When you understand how a specific scheme has performed in the previous years in response to the different market conditions, it is easy to check if it aligns with your investment goals.
Funds’ Plans
There are two types of plans available for a fund – direct and regular. In a direct plan, there is no role of brokers, and hence, they are offered directly to the investor. On the flip side, regular plans involve third-party participation. So, they entail a commission.
To Conclude
ELSS mutual funds are tax-saving and have a 3-yr lock-in period. Although high-growth ELSS funds have the potential to yield high returns, they are considered to be highly risky investments. You can save your research efforts and time by using Tickertape’s Mutual Fund Screener to find the best mutual fund based on your risk tolerance and investment preferences! For all your research needs, #TickertapeHaiNa!
FAQs
Why should you invest in ELSS mutual funds?
ELSS mutual funds are tax-saving funds that give you an opportunity to generate wealth over time, like all other mutual funds, along with saving tax.
What are the disadvantages of ELSS mutual funds?
ELSS mutual funds invest heavily in equity markets. Equity-related instruments are heavily susceptible to market volatility. Hence, due to this, ELSS mutual funds are highly risky.
Is ELSS taxable after 3-yrs?
The long-term capital gains on ELSS are tax-exempt up to Rs. 1 lakh and the dividend received is tax-free. Even after the lock-in period of 3-yrs, you can continue your investment in these funds.
As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!
