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Among various mutual fund categories, Equity-Linked Savings Schemes (ELSS) are one of the most preferred options in India. Investors choose best ELSS funds in India, because ELSS funds offer dual benefits, tax savings under Section 80C and higher returns through equity investments.
If you’re planning to invest in mutual funds and want to know best ELSS mutual funds in India 2025, this guide will help you. We’ll explain how ELSS funds work, ELSS benefits, risks and share a list of top-performing ELSS funds you can consider for your portfolio
What is ELSS Mutual Funds 2025?
ELSS Mutual Funds are one of the best tax-saving investment options under Section 80C of the Income Tax Act, 1961. By investing in ELSS, you can claim tax deductions of up to ₹1.5 lakh and can save up to ₹46,800 in taxes every year.
These funds invest at least 80% of their portfolio in equities and equity-linked instruments, which helps your money grow faster. With a lock-in period of just 3 years, ELSS mutual funds offer the shortest lock-in among all Section 80C options. After the lock-in period, you can redeem your investment freely without any restrictions. ELSS dividends can be reinvested (under growth option) or distributed to investors (under dividend option).
Below is the chart representing the growth of the ELSS mutual fund over the years in terms of AUM.
ELSS Funds (in ₹ Cr.) : Assets Under Management (AUM) Growth
Values in ₹ (Cr.)
No Data Found
List of Best ElSS Mutual Funds in India 2025
Here are top mutual funds in India, based on 5yr returns.
| Fund Name | 1Y Return | 3Y Return | 5Y Return | Risk | Rating |
|---|---|---|---|---|---|
| Quant ELSS Tax Saver Fund Direct Growth | -9.30% | 16.66% | 28.65% | Very High | ★★★ |
| Motilal Oswal ELSS Tax Saver Fund Direct Growth | 0.63% | 25.87% | 27.06% | Very High | ★★★★ |
| SBI ELSS Tax Saver Fund Direct Growth | -0.82% | 24.84% | 25.73% | Very High | ★★★★★ |
| HDFC ELSS Tax Saver Fund Direct Plan Growth | 6.62% | 22.77% | 25.51% | Very High | ★★★★★ |
| Bandhan ELSS Tax Saver Fund Direct Plan Growth | -0.49% | 16.95% | 24.62% | Very High | ★★★★ |
| Franklin India ELSS Tax Saver Fund Direct Growth | 1.46% | 20.03% | 24.58% | Very High | ★★★★ |
| DSP ELSS Tax Saver Fund Direct Plan Growth | 1.50% | 20.30% | 24.38% | Very High | ★★★★ |
| JM ELSS Tax Saver Fund Direct Plan Growth | -3.03% | 21.08% | 24.28% | Very High | ★★★★ |
| Nippon India ELSS Tax Saver Fund Direct Growth | 2.05% | 18.69% | 24.09% | Very High | ★★★ |
| Parag Parikh ELSS Tax Saver Fund Direct Growth | 6.83% | 19.92% | 23.64% | Moderately High | ★★★★★ |
| Bank of India ELSS Tax Saver Direct Growth | -7.75% | 18.93% | 23.23% | Very High | ★★ |
| Mahindra Manulife ELSS Tax Saver Fund Direct Growth | 1.83% | 16.14% | 22.74% | Very High | ★★★ |
| Kotak ELSS Tax Saver Fund Direct Growth | -0.34% | 17.81% | 22.66% | Very High | ★★★ |
| Mirae Asset ELSS Tax Saver Fund Direct Growth | 2.98% | 17.44% | 22.54% | Very High | ★★★ |
| Quantum ELSS Tax Saver Fund Direct Growth | 2.11% | 18.11% | 21.65% | Very High | ★★★★ |
| ICICI Prudential ELSS Tax Saver Direct Plan Growth | 4.59% | 17.12% | 21.63% | Very High | ★★ |
| HSBC ELSS Tax Saver Fund Direct Growth | 1.29% | 20.46% | 21.62% | Very High | ★★★ |
| Union ELSS Tax Saver Fund Direct Growth | 3.20% | 16.62% | 21.56% | Very High | ★★★ |
| Canara Robeco ELSS Tax Saver Direct Growth | 2.28% | 16.05% | 21.53% | Very High | ★★★ |
| ITI ELSS Tax Saver Fund Direct Growth | -1.32% | 22.44% | 21.52% | Moderately High | ★★★★ |
| PGIM India ELSS Tax Saver Fund Direct Growth | 4.94% | 15.45% | 21.48% | Very High | ★★★ |
| Tata ELSS Fund Direct Growth | 0.49% | 16.56% | 21.34% | Very High | ★★ |
| Sundaram ELSS Tax Saver Fund Direct | 4.46% | 16.12% | 21.31% | Very High | ★★★ |
| Edelweiss ELSS Tax Saver Fund Direct Growth | 1.19% | 17.69% | 21.19% | Very High | ★★ |
| Baroda BNP Paribas ELSS Tax Saver Fund Direct Growth | 4.07% | 19.25% | 21.04% | Very High | ★★★ |
| Invesco India ELSS Tax Saver Fund Direct Growth | 1.09% | 18.18% | 20.53% | Very High | ★★ |
| LIC MF ELSS Tax Saver Direct Growth | 2.35% | 16.60% | 20.23% | Very High | ★★ |
| Taurus ELSS Tax Saver Direct Growth | 1.85% | 18.67% | 19.66% | Very High | ★★★★ |
| UTI ELSS Tax Saver Fund Direct Growth | -0.30% | 13.90% | 19.37% | Very High | ★★ |
| Groww ELSS Tax Saver Fund Direct Growth | 0.83% | 16.13% | 18.95% | Very High | ★★★ |
| Axis ELSS Tax Saver Direct Plan Growth | 3.37% | 13.20% | 16.71% | Very High | ★ |
| Shriram ELSS Tax Saver Fund Direct Growth | -8.99% | 12.57% | 15.73% | Very High | ★ |
| Aditya Birla Sun Life ELSS Tax Saver Direct Growth | 4.57% | 14.91% | 15.26% | Very High | ★ |
Features of ELSS Mutual Funds
- ELSS funds may have slightly lower returns than small cap funds but beats other tax saving options like PPF and NPS Etc.
- By allocating funds to ELSS, individuals or Hindu Undivided Families (HUF) can reduce taxable income by up to ₹1.5 lakh. This implies when investing ₹1.5 lakh in year in an ELSS allows for tax rebate of up to ₹46,800 for that year, investments exceeding ₹150,000 do not contribute to additional tax deductions.
- ELSS funds primarily focus on equity investments although they may include minor allocations to debt. Investors have the flexibility to choose between systematic investment plans (SIP) or lump sum investments when participating in ELSS.
- ELSS schemes come with lock in period of approximately 3 years providing investors with stable investment horizon.
- Higher Return: Best ELSS mutual funds can offer higher returns compared to provident funds, pension funds or post office saving schemes. This is because ELSS funds invest in high risk, high return assets like stocks, unlike fixed income options such as bank deposits or PPF. As stock prices rise ELSS funds can provide higher returns for investors due to the fluctuating Net Asset Value (NAV).
- Shorter lock-in period: ELSS funds have 3 year lock in, shortest among tax saving options. Compared to PPF's 15 year maturity, tax saver funds are more liquid.
- ELSS Tax Benefits: ELSS is great way for investors to save on taxes and earn better returns compared to a savings account.
- Market Risk: Investors can lose money due to things like economic downturns, political issues or changes in market mood. For Equity Linked Savings Schemes, fund manager must put at least 80% of their portfolio in stocks. So if stock market isn't doing well, it affects best ELSS mutual funds too.
- Liquidity Risk: If a fund invests heavily in stocks that are difficult to buy or sell due to low trading volumes, that fund may face challenges in trading at the right time. ELSS funds come with a mandatory three-year lock-in period, meaning investors cannot withdraw or transfer their investments during this time. And, if the fund focuses on small-cap companies, the risk of capital loss increases.
Who Should Invest in ELSS Mutual Funds 2025?
- Who Wants to Save Tax: ELSS mutual funds offer tax savings of up to Rs. 46,800 annually. While riskier than fixed deposits or the National Pension Scheme they provide variable returns, ranging from negative to over 30% per year.
- Long Term Investors: ELSS funds have a 3 year lock in period, requiring investors to stay committed. Continuing beyond this period ELSS funds provide better returns if you hold for the long term.
- Salaried People: As salaried employee,a portion of your income goes to fixed income product, Employee Provident Fund (EPF). To balance risk and return in your investment portfolio, consider ELSS. It offers the potential for extraordinary returns and qualifies for tax deduction under section 80C. Compared to other products like Unit Linked Insurance Plans (ULIPs), ELSS has shorter lock in period of 3 years providing a more flexible investment option. ULIPs, with lock in period of five years and PPF, with a 15 year lock in, come with higher periods and potentially lower returns.
- For New Investors: For new investors, ELSS is an excellent choice, offering tax benefits and exposure to equity investing and mutual funds. Patience and discipline are crucial in equity investing, investors compromised higher returns by short term market fluctuations. ELSS's lock in period encourages long term commitment and mitigating impulsive decisions. Utilizing SIP in ELSS allows for regular, disciplined investing. Investing more when market is down, benefits you when it turns favorable.
How to select best ELSS Mutual 2025 for tax saving?
In 2023, India has over 40 ELSS funds making it tough to choose best ELSS mutual funds in India. Investors should avoid picking funds based on popularity, short term performance or NAV. Instead focus on consistent performance by evaluating funds on both quantitative and qualitative aspects.
Past Performance
Investing in ELSS aims to grow wealth by diversifying across various stocks and sectors. Analyzing a scheme’s past performance is essential for setting realistic expectations but don’t rely too heavily on it when shortlisting best ELSS mutual funds. Past performance doesn’t guarantee future results. Use historical returns to gauge how consistently the scheme has performed in the past.
Compare with Category Peers and Benchmark Index
Check how well the scheme has done compared to its benchmark and peers over different time periods like 1 year, 3 year, 5 year, 7 year and since inception. Remember, no ELSS stays top performer every year, even last year best ELSS funds. Evaluate past performance to see if the fund consistently performed well. If a fund lacks long term track record or has one time good performance, it might be wise to overlook it and find other best mutual funds.
Evaluate Fund Performance in Market Cycles
ELSS funds often excel in rising markets but in downturns, some may struggle. It’s important to choose schemes that consistently perform well in both bullish and bearish market conditions compared to benchmarks and peers.
Risk Adjusted Better Returns
ELSS funds, being mainly in stocks, face market ups and downs. A fund manager can help manage this volatility using effective risk management techniques. To assess if fund gives good returns for its risk, check its Standard Deviation (higher means more volatility), Sharpe ratio (higher is better for risk adjusted return) and Sortino ratio (higher shows better downside risk control).
Fund Manager
Best ELSS performance relies on fund manager’s skill in identifying market opportunities. Check the manager’s qualifications, experience and track record with other schemes. Also consider the number of schemes they handle. If manager oversees too many (more than five), it may lead to inefficiencies. So ensure a manageable workload for optimal performance.
1. Lock in period
ELSS funds have three year lock in period, meaning investments can’t be redeemed before three years. Investors should be aware of this and plan accordingly.
2. Desire Return
ELSS funds don’t guarantee returns as they depend on how well the underlying investments perform. Investing for a longer time may bring bigger returns compared to other tax saving options. Remember, ELSS invests in stocks, so there are risks like market volatility that could affect prices.
3. Investment Time
For ELSS funds, aim for longer investment horizon, possibly over five years to manage market fluctuations due to their equity exposure.
For Dividend Taxation: ELSS dividends are part of taxable income, taxed based on investor’s income bracket. A 10% TDS applies if dividends exceed ₹10,000 in a financial year.
For Capital Gains Taxation: ELSS has minimum lock in period of 3 years, all capital gains are considered long term. Gains above ₹1.25 lakh from ELSS unit redemption incur a 12.5% LTCG tax rate.
Comparison of ELSS Mutual Funds with Other Investment Options
| Investment Option | Lock in Period | Returns | Risk | Tax Benefits | Tax on Returns | Investment Flexibility |
|---|---|---|---|---|---|---|
|
ELSS Mutual Funds |
3 years
|
12% to 15%
|
High |
Section 80C + LTCG tax free up to ₹1 lakh
|
Partially Taxable |
SIP or Lump sum, highly flexible
|
|
Public Provident Fund (PPF) |
15 years
|
7% to 8% |
Low |
Section 80C + tax free interest
|
No Tax |
Fixed annual investment cap
|
|
Fixed Deposits (FD) |
5 years
|
5% to 7% |
Low |
Section 80C
|
Taxable Interest |
Lumpsum, limited flexibility
|
|
National Pension System (NPS) |
Till retirement
|
9% to 12% |
Moderate to High |
Section 80C + additional ₹50,000 under 80CCD(1B) |
Partially Taxable |
Flexible contribution amounts |
|
National Savings Certificate (NSC) |
5 years |
7% to 8% |
Low |
Section 80C |
Taxable Interest |
Lump sum only |
Final Words
After choosing best ELSS mutual funds for tax savings and wealth growth be patient and give your investments time to perform. Consider staying invested beyond the three year lock in period for maximum returns and achieving financial goals. Avoid timing the market even in short term uncertainty, ELSS can reward investors in the long run. Opt for the SIP route to minimize the impact of volatility and benefit from compounding wealth.
Frequently Asked Questions
Who should invest in ELSS?
If you are looking for good returns and want to save on taxes ELSS funds can be great option. They are ideal for longterm financial goals like planning for retirement, buying a house or covering your child's college expenses.
How much can you invest in year in ELSS?
There is no upper limit to how much you can invest in ELSS. However you can claim tax benefits on investments of up to ₹1.5 lakh per financial year.
How do you invest in ELSS?
You can invest either lump sum amount or start SIP with as little as ₹500. Choose the method that aligns with your financial goals and timeline.
What are the tax saving benefits of ELSS?
Investments in ELSS can help you save up to ₹1.5 lakh on your taxable income under Section 80C of Income Tax Act.
Where does ELSS invest your money?
ELSS funds invest at least 80% of their portfolio in equity stocks and related securities.
What is the lock in period of ELSS?
ELSS has lock in period of three years. For SIP investments each installment is locked in for three years from date it is invested.
