Tax Saving Mutual Funds - The ELSS Way!

Tax Saving ELSS Mutual Funds
Tax Saving ELSS Mutual Funds

by 5paisa Research Team Last Updated: Dec 09, 2022 - 11:04 am 12.4k Views

With a new financial year around the corner, every salaried or self-employed person would consider saving taxes! What if, you could accumulate wealth while savings taxes? With top ELSS Mutual Funds, you can! 

However, selecting the best ELSS fund can sometimes be tricky. At that point, comparing the various aspects of the funds can be the best course of action.  Not only that, your Financial Goals, time horizon & level of risk tolerance also play an important role in the process of fund selection. To make this simpler, we have hand-picked Top performing ELSS funds for you.

List of Top performing ELSS Funds to invest in today:

Fund Name 3Y Returns
(as on Oct 19, 2022)
Min SIP Amt
Quant Tax Plan  41% p.a. Rs.500/-
Parag Parikh Tax Saver Fund 25% p.a. Rs.1,000/-
Canara Robeco Equity Tax Saver Fund 22% p.a. Rs.500/-
Mirae Asset Tax Saver Fund 21% p.a. Rs.500/-
Kotak Tax Saver Fund  20% p.a. Rs.500/-


1. Quant Tax Plan

It is an Equity scheme launched by Quant Mutual Fund & is managed by Mr. Vasav Sahgal. With a category average return of 18% p.a., this fund has 3 Year annualized returns of 41% p.a. 

2. Parag Parikh Tax Saver Fund

It is an Equity Scheme launched by Parag Parikh Mutual Fund & is managed by Mr. Rajeev Thakkar. With a category average return of 18% p.a., this fund has 3 Year annualized returns of 25% p.a. 

3. Canara Robeco Equity Saver Fund

It is an Equity Scheme launched by Canara Robeco Mutual Fund & is managed by Mr. Vishal Mishra. With a category average return of 18% p.a., this fund has 3 Year annualized returns of 22% p.a. 

4. Mirae Asset Tax Saver Fund

It is an Equity Scheme launched by Mirae Asset Mutual Fund & is managed by Mr. Neelesh Surana. This fund has 3 Year annualized returns of 21.79% p.a. with a category average return of 18.33% p.a. 

5. Kotak Tax Saver Fund

It is an Equity Scheme launched by Kotak Mutual Fund & is managed by Ms. Harsha Upadhyaya. This fund has 3 Year annualized returns of 20.43% p.a. with a category average return of 18.33% p.a.


So, what are ELSS Funds?

ELSS are Equity Linked Savings Scheme that invests its majority of the corpus (i.e., at least 65%) in Equity & Equity related instruments. The biggest benefit you will get when investing in these funds is the lowest lock-in period of 3 years among other tax-saving instruments. This indicates that you can sell your investments only after three years from the date of purchase. However, it is advised to hold onto your investments for as long as possible to maximize the earnings from ELSS funds.


Did you know?

ELSS investments are deductible upto ₹150,000 under Section 80C of the Income Tax Act of 1961, letting you save a maximum of ₹46,800 in a financial year.


Who should invest in these Funds?

1. First-time Investors – If you regularly invest in Mutual Funds or are a first-time investor, ELSS can be a great investment for you. Because along with Wealth creation, ELSS also provides you the advantage of saving taxes!

2. Salaried Employees – As a salaried employee, you might be contributing a certain amount towards EPF, NPS, ULIPs, or any other investment instrument for saving taxes. In comparison to these investments, ELSS funds have the potential for extraordinary returns as well as a reduced tax burden!

When you want to balance risk & return on your investment portfolio, ELSS can be a great choice. But do you ever ponder why NPS & ULIPs are in the same category, offer the same benefit, yet differ from ELSS Funds? Because, in addition to tax benefits and equity investments, the National Pension Scheme (NPS) and Unit Linked Insurance Plans (ULIPs) have a longer lock-in period and lower potential returns!

Herein, ELSS Funds have a 3-year lock-in period and offer better liquidity in comparison to other investment avenues.

SIP or Lumpsum – Which mode to choose?

In ELSS you can opt for Lumpsum or SIP mode as per your choice. Through the Lumpsum Mode, you can invest a one-time investment in these funds (For Eg: ₹1 Lakh invested on 19th Oct 2022). If you’re someone who wants to opt for disciplined investing, you can opt for SIP Mode. Through SIPs, you can buy more units when the markets are down & fewer units when the markets are up. As a result, your price for buying units gets averaged out & ends up being on the lower end!


What should one take into account before investing in the best ELSS Fund?

1. Returns – Although past returns do not guarantee future returns, it is important to consider past performance before you choose the Best ELSS fund for investing. When a fund outperforms its benchmark & peers, it delivers higher returns.

2. Fund Manager – The fund manager is an additional factor to think about as he/she is responsible for managing your funds. Because in order to select the best stocks and build a solid portfolio, the fund manager must be knowledgeable and experienced.

3. Expense Ratio – The cost incurred to manage a fund is called an Expense Ratio. It is usually preferable to choose funds with lower expense ratios because they allow you bigger take-home returns.

4. Financial Parameters – For a more detailed analysis, you can also consider financial parameters such as Standard Deviation, Sharpe Ratio, and Alpha & Beta. A fund that has a higher beta and standard deviation is riskier than one that has a lower beta and standard deviation. You can select funds with a higher Sharpe Ratio since they offer appealing risk-adjusted returns increasing your overall investment potential!


How is ELSS taxed?

As discussed above, investments in ELSS are tax deductible up to ₹1.5 Lakhs under section 80C of the Income Tax Act, 1961. This assists you in saving taxes up to ₹46800 in a Financial Year.
Apart from this, as ELSS are Equity Funds, Long term Capital Gains (LTCG) are exempt up to ₹1 Lakh. Long-term Capital Gains above ₹1 Lakh are taxed at a rate of 10% plus cess, without the advantage of indexation.


Can you redeem funds partially?

Depending on your needs, you can choose a partial redemption or full redemption of your Funds. But, the units that have not yet completed the three-year required lock-in term cannot be redeemed.


Wrapping it up

Given that, ELSS outperform alternative tax-saving strategies since they have the shortest lock-in period (3 years), offer high returns & also save on taxes! These funds are an excellent option if you're looking for a tax-efficient investment strategy for yourself.
Are these top ELSS funds, something you want to invest in?, Click here to start the right away!

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About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.


Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.

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