Tax saving is a top priority for many investors in India, especially during the financial year-end. One of the most popular and efficient ways to save taxes while growing your wealth is by investing in ELSS (Equity Linked Savings Scheme) mutual funds. Not only do these funds offer the potential for high returns, but they also come with tax benefits under Section 80C of the Income Tax Act.
In this comprehensive guide, we’ll dive deep into the best tax-saving ELSS mutual funds in India, their benefits, and how you can make the most of them in 2025.
What Are ELSS Mutual Funds?
Before we explore the best tax-saving ELSS mutual funds, let’s first understand what ELSS is all about.
An ELSS mutual fund is a type of equity mutual fund that primarily invests in stocks and equity-related securities. The main advantage of an ELSS is its eligibility for tax deductions under Section 80C. By investing in an ELSS, you can claim deductions of up to ₹1.5 lakh from your taxable income, thus lowering your tax liability.
Key Features of ELSS Mutual Funds:
-
Tax Benefit: You can claim deductions up to ₹1.5 lakh per annum.
-
Lock-in Period: ELSS funds come with a mandatory 3-year lock-in period, making them a good option for long-term investors.
-
Potential for High Returns: Being equity-based, they offer the possibility of higher returns compared to other tax-saving instruments.
-
Risk Factor: As they invest in stocks, ELSS funds carry a higher risk, but with the potential for higher returns as well.
Top 5 Best Tax-Saving ELSS Mutual Funds in India for 2025
When it comes to best performing ELSS funds, it’s important to select funds that align with your investment goals, risk tolerance, and financial objectives. Here’s a list of top-rated ELSS funds that have shown strong performance over the years and continue to stand out in 2025:
1. Axis Long Term Equity Fund
-
Rating: 5 Stars (CRISIL)
-
Returns (5 Years): 16.5% p.a.
-
Minimum Investment: ₹500 (SIP), ₹5,000 (Lumpsum)
-
Expense Ratio: 0.49%
Axis Long Term Equity Fund is one of the most consistent top ELSS funds in India. It has a track record of delivering impressive returns over both short and long-term horizons. Its portfolio is diversified across large, mid, and small-cap stocks, which helps balance risk while maximizing returns.
2. Mirae Asset Tax Saver Fund
-
Rating: 5 Stars (Morningstar)
-
Returns (5 Years): 18.6% p.a.
-
Minimum Investment: ₹500 (SIP), ₹5,000 (Lumpsum)
-
Expense Ratio: 0.58%
With its focus on growth-oriented stocks, Mirae Asset Tax Saver Fund has become a top choice for tax-saving investors. The fund has performed exceptionally well and is known for its robust portfolio management.
3. Parag Parikh Tax Saver Fund
-
Rating: 4.5 Stars (CRISIL)
-
Returns (5 Years): 14.2% p.a.
-
Minimum Investment: ₹500 (SIP), ₹5,000 (Lumpsum)
-
Expense Ratio: 0.71%
This fund is popular for its risk-adjusted returns. Parag Parikh Tax Saver Fund invests in both domestic and international markets, which helps in diversification. It’s a solid choice for investors looking for long-term growth and tax-saving benefits.
4. UTI Long Term Equity Fund
-
Rating: 4 Stars (CRISIL)
-
Returns (5 Years): 13.5% p.a.
-
Minimum Investment: ₹500 (SIP), ₹5,000 (Lumpsum)
-
Expense Ratio: 0.79%
UTI Long Term Equity Fund has been a reliable performer in the ELSS category. It has a balanced mix of equity exposure, focusing on both growth and value stocks.
5. DSP BlackRock Tax Saver Fund
-
Rating: 4 Stars (Morningstar)
-
Returns (5 Years): 15.3% p.a.
-
Minimum Investment: ₹500 (SIP), ₹5,000 (Lumpsum)
-
Expense Ratio: 0.75%
DSP BlackRock Tax Saver Fund invests in a diversified portfolio of large and mid-cap stocks. The fund has demonstrated solid growth over the years, making it an excellent choice for tax-saving investors.
Why Should You Invest in ELSS Mutual Funds for Tax Saving?
If you’re wondering, “What are the benefits of investing in ELSS mutual funds?”, here are a few key reasons why ELSS is a great option for tax-saving:
1. Tax Deduction Under Section 80C
-
You can claim a maximum deduction of ₹1.5 lakh in a financial year.
-
This can significantly reduce your taxable income and, in turn, your tax liability.
2. Higher Potential for Returns
-
Unlike traditional instruments like PPF or NSC, ELSS funds invest in equities, which offer better returns over the long term. Historically, ELSS funds have outperformed other tax-saving instruments by a significant margin.
3. Shorter Lock-in Period
-
ELSS funds have a lock-in period of just 3 years, which is lower than other tax-saving instruments like PPF (15 years). This makes ELSS a more flexible investment.
4. Diversification of Portfolio
-
ELSS funds typically invest in a diversified portfolio of stocks across sectors, which reduces the risk associated with investing in individual stocks.
ELSS vs PPF for Tax Saving: Which Is Better?
When it comes to tax saving, ELSS vs PPF (Public Provident Fund) is a common debate. Here’s a comparison to help you decide which is better for your needs:
| Feature | ELSS Mutual Funds | PPF |
|---|---|---|
| Lock-in Period | 3 Years | 15 Years |
| Tax Deduction | Up to ₹1.5 Lakh under 80C | Up to ₹1.5 Lakh under 80C |
| Return Potential | High (Market-linked) | Low (Fixed Interest Rate) |
| Risk | High (Equity-based) | Low (Government-backed) |
| Liquidity | Moderate (After 3 years) | Low (After 15 years) |
If you’re looking for higher returns, ELSS mutual funds might be the better choice. However, if you’re risk-averse and prefer guaranteed returns, then PPF might suit you better.
FAQs on Tax-Saving ELSS Mutual Funds
1. Which ELSS mutual funds give the best returns in India?
-
Some of the best-performing ELSS funds in India are Mirae Asset Tax Saver Fund, Axis Long Term Equity Fund, and Parag Parikh Tax Saver Fund. These funds have consistently delivered excellent returns over the long term.
2. How to invest in tax-saving ELSS mutual funds for beginners?
-
Beginners can invest in ELSS funds by opening a mutual fund account with a fund house or using an online platform. It’s best to start with a Systematic Investment Plan (SIP), which allows you to invest a fixed amount regularly.
3. What are the benefits of investing in ELSS mutual funds?
-
The benefits include tax deduction under Section 80C, higher returns compared to traditional tax-saving instruments, and a short lock-in period of just 3 years.
4. Best ELSS mutual funds for long-term tax saving in India?
-
Some of the best funds for long-term tax saving include Mirae Asset Tax Saver Fund and Axis Long Term Equity Fund, which have demonstrated strong performance over multiple years.
5. Are ELSS mutual funds better than traditional tax-saving instruments?
-
ELSS funds offer higher returns but come with higher risk. Traditional instruments like PPF and NSC are safer but offer lower returns. It depends on your risk appetite.
6. How much can I save in taxes by investing in ELSS mutual funds?
-
By investing up to ₹1.5 lakh in ELSS mutual funds, you can save up to ₹46,800 in taxes (if you’re in the highest tax bracket of 30%).
Comments (0)