ELSS Mutual Funds

The ELSS fund stands for Equity Linked Savings Scheme. It is an instrument of a long-term capital asset for saving income tax in India. Not all ELSS plans are the same, and they do not necessarily fit in with everyone’s investment objectives and risk appetite. Therefore, you must invest in a scheme that fits with your risk profile and financial goals.

Best ELSS Mutual Funds

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Who Should Invest in ELSS Mutual Funds?

ELSS funds are appropriate for taxpayers prepared to take the risk of an equity-oriented tax-saving device. Because they have a consistent source of income and must make tax-saving investments every year, ELSS funds are better suited for the salaried class. In reality, they can profit from rupee cost averaging by investing in ELSS through SIP monthly. View More

If you are a young taxpayer, you can take advantage of the dual benefit of investing in ELSS, namely the tax deduction under Section 80C and the long-term growth potential of equities, by investing in ELSS yearly. While senior taxpayers can invest in ELSS to take advantage of the tax benefits, the equity risk inherent in ELSS necessitates a longer investment horizon, which they may lack.

Keep in mind that ELSS funds have a 3-year lock-in period.

If you invest now, you cannot withdraw your money until three years have passed if you made a lump sum investment.

Each SIP payment is also subject to the lock-in term.

You must wait until the final SIP instalment has finished three years if you wish to withdraw the entire money invested over 12 months.

However, to experience the true growth potential an ELSS can provide, you must continue with your investments after the lock-in period has passed.

Compared to someone who may be close to retirement, a young taxpayer with many years of productive work ahead of them is better able to make use of the dual benefits of an ELSS.

However, ELSS may be an alternative to examining if a person has the appropriate risk tolerance and still has five to seven years till retirement.

Therefore, ELSS may be your preferred alternative for tax savings, depending on your age, risk tolerance, and other obligations like home and student loan debt that make the previous tax system more suitable for you.

Features of ELSS Mutual Funds

An ELSS can be purchased by an individual or HUF, both under the same PAN. Here are some of the features of ELSS that are worth considering: View More

  • The money invested in an ELSS earns tax-free interest, and capital gains in an ELSS fund are entirely free from tax. However, investors should note that if they hold more than 100 shares with a single company, there might be some restrictions on withdrawal.
  • Dividends distributed by the mutual fund cannot be encashed or withdrawn before maturity. The dividend income received after the completion of three years will also get a tax benefit if it fulfils all conditions for this purpose.
  • All ELSS mutual funds offer diversification and risk mitigation through equities, which help in boosting returns. The capital gains of the best tax saving mutual funds are exempt from taxes if held for more than one year.

Factors to consider while investing in ELSS Funds

Investment horizon

To contemplate investing in ELSS funds, you must have a longer investment horizon than five years. To limit market volatility, the equity exposure of ELSS funds necessitates a longer investment horizon. View More

Returns

You should be aware that ELSS funds do not give guaranteed returns because they are entirely contingent on the performance of the underlying stocks. A longer investment horizon, however, can yield more significant returns than any other tax-saving investment alternative.

Lock-in term

ELSS mutual funds have a three-year lock-in duration. Your investments are legally locked in for three years from the date of purchase, and you cannot redeem them until that time has passed.

The annual tax exemption is limited to Rs.1.50 lakh

Remember that your tax exemption will be restricted to Rs.1.50 lakhs yearly, regardless of how much you invest. The amount you invest is immaterial. Second, this is a broad umbrella limit. For example, if you have already deposited Rs.1.20 lakh in CPF and LIC premiums, your tax exemption on the ELSS fund will be Rs.30,000. It must be considered when determining your post-tax yield.

Popular ELSS Mutual Funds

  • Fund Name
  • Min SIP Investment Amt
  • AUM (Cr.)
  • 3Y Return

AXIS ELSS Tax Saver Fund – Direct Growth is an ELSS scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Jinesh Gopani. With an impressive AUM of ₹34,025 Crores, this scheme's latest NAV is ₹90.5286 as of 18-03-24.

AXIS ELSS Tax Saver Fund – Direct Growth scheme has delivered a return performance of 35.7% in the last 1 year, 9.8% in the last 3 years, and an 17.4% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in ELSS funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹34,025
  • 3Y Return
  • 35.7%

Invesco India ELSS Tax Saver Fund – Direct Growth is an ELSS scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Amit Nigam. With an impressive AUM of ₹2,544 Crores, this scheme's latest NAV is ₹120.39 as of 18-03-24.

Invesco India ELSS Tax Saver Fund – Direct Growth scheme has delivered a return performance of 42.1% in the last 1 year, 15.8% in the last 3 years, and an 17.5% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in ELSS funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹2,544
  • 3Y Return
  • 42.1%

DSP ELSS Tax Saver Fund – Direct Growth is an ELSS scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Rohit Singhania. With an impressive AUM of ₹14,147 Crores, this scheme's latest NAV is ₹121.268 as of 18-03-24.

DSP ELSS Tax Saver Fund – Direct Growth scheme has delivered a return performance of 40.9% in the last 1 year, 19.9% in the last 3 years, and an 17.9% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in ELSS funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹14,147
  • 3Y Return
  • 40.9%

Edelweiss Arbitrage Fund – Direct Growth is an Arbitrage scheme that was launched on 27-06-14 and is currently under the management of our experienced fund manager Bhavesh Jain. With an impressive AUM of ₹8,768 Crores, this scheme's latest NAV is ₹18.8624 as of 18-03-24.

Edelweiss Arbitrage Fund – Direct Growth scheme has delivered a return performance of 8.4% in the last 1 year, 6.2% in the last 3 years, and an 6.7% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Arbitrage funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹8,768
  • 3Y Return
  • 8.4%

Aditya Birla SL ELSS Tax Saver Fund – Direct Growth is an ELSS scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Atul Penkar. With an impressive AUM of ₹15,006 Crores, this scheme's latest NAV is ₹55.31 as of 18-03-24.

Aditya Birla SL ELSS Tax Saver Fund – Direct Growth scheme has delivered a return performance of 32.8% in the last 1 year, 9.1% in the last 3 years, and an 14.6% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in ELSS funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹15,006
  • 3Y Return
  • 32.8%

Parag Parikh ELSS Tax Saver Fund – Direct Growth is an ELSS scheme that was launched on 24-07-19 and is currently under the management of our experienced fund manager Rajeev Thakkar. With an impressive AUM of ₹2,997 Crores, this scheme's latest NAV is ₹27.7396 as of 18-03-24.

Parag Parikh ELSS Tax Saver Fund – Direct Growth scheme has delivered a return performance of 35% in the last 1 year, 23% in the last 3 years, and an 24.6% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in ELSS funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹2,997
  • 3Y Return
  • 35%

HDFC ELSS Tax Saver Fund – Direct Growth is an ELSS scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Roshi Jain. With an impressive AUM of ₹13,820 Crores, this scheme's latest NAV is ₹1228.535 as of 18-03-24.

HDFC ELSS Tax Saver Fund – Direct Growth scheme has delivered a return performance of 46.6% in the last 1 year, 25.1% in the last 3 years, and an 15.4% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in ELSS funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹13,820
  • 3Y Return
  • 46.6%

Union ELSS Tax Saver Fund – Direct Growth is an ELSS scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Sanjay Bembalkar. With an impressive AUM of ₹823 Crores, this scheme's latest NAV is ₹59.52 as of 18-03-24.

Union ELSS Tax Saver Fund – Direct Growth scheme has delivered a return performance of 37.6% in the last 1 year, 18.8% in the last 3 years, and an 14.3% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in ELSS funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹823
  • 3Y Return
  • 37.6%

Mahindra Manulife ELSS Tax Saver Fund – Direct Growth is an ELSS scheme that was launched on 18-10-16 and is currently under the management of our experienced fund manager Fatema Pacha. With an impressive AUM of ₹790 Crores, this scheme's latest NAV is ₹28.0449 as of 18-03-24.

Mahindra Manulife ELSS Tax Saver Fund – Direct Growth scheme has delivered a return performance of 35% in the last 1 year, 19.1% in the last 3 years, and an 14.9% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in ELSS funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹790
  • 3Y Return
  • 35%

Frequently Asked Questions

What are the tax benefits offered by ELSS funds?

ELSS funds provide up to INR 1,50,000 tax deductions under Section 80C of the Income Tax Act, 1961. It helps you save up to INR 46,000 a year in taxes.

Why are the benefits of the ELSS Funds different for young taxpayers and senior taxpayers?

If you are a young taxpayer, you can take advantage of the dual benefit of investing in ELSS, namely the tax deduction under Section 80C and the long-term growth potential of equities, by investing in ELSS every year. While senior taxpayers can invest in ELSS to take advantage of the tax benefits, the equity risk inherent in ELSS necessitates a longer investment horizon, which they may lack.

What are some of the factors that need to be considered before investing in ELSS Funds?

Some factors that need to be considered before investing in ELSS Funds are investment horizon, returns, lock-in term, and the annual tax exemption limit.

What Is the Difference Between ELSS and Tax Saving Mutual Funds?

Several types of mutual funds are available in India, including dividend funds, index funds, growth funds, etc. ELSS or Equity Linked Savings Scheme is one of the investment options offered by mutual fund companies in India.

The main difference between tax saving mutual funds and equity-linked savings schemes is that the former is a must for income tax purposes while the latter can be a part of a long-term financial plan.

How to Choose the Best ELSS Mutual Fund to Invest In?

There are many ELSS funds available in the market today. But choosing the best ELSS fund with the ELSS tax benefit is not an easy task. You need to do your homework and select the best ELSS fund for you. Here is a guide to help you find the best ELSS fund for you:

Review the past performance of over 1, 3 and 5 years before investing.
Choose a fund with consistently higher returns and lower volatility. The riskier the fund, the more volatile its returns are likely to be.

The fund should be managed by an experienced fund manager who has a good track record of consistently beating benchmark returns. The fund should have a low expense ratio. It should have standard tracking error and high liquidity.

Choose a diversified ELSS fund with a long track record of consistent performance. Always check the past performance of the scheme before investing in it.

Which Is the Best ELSS or Other Tax-Saving Investments?

There are many tax saving mutual funds in India where you can invest to save taxes. But which is the best ELSS or other tax-saving mutual fund option in India? Well, there is no one-size-fits-all answer. It depends on a lot of factors such as your investment horizon, risk appetite and so on.

There are many tax-saving investment options under Section 80C of the Income Tax Act. The most popular ones are ELSS, NPS, PPF, Mutual Funds, Sukanya Samriddhi Account and Fixed Deposits. Tax saving mutual funds are a great way to save for retirement and other financial goals.

These funds offer significant tax breaks and provide liquidity, two of the main benefits of investing in mutual funds. However, when choosing a tax-saving mutual fund, your best bets are equity-oriented balanced funds with large fund sizes.

Tax saving mutual funds are a great way to save on taxes. They provide a way to invest in equity and debt instruments to earn you good returns while reducing your tax liability. We have tried to do a comprehensive analysis of all the popular ELSS funds in India and help you pick the best ELSS fund for you.

Who should invest in ELSS Mutual Funds?

ELSS funds are appropriate for taxpayers prepared to take the risk of an equity-oriented tax-saving device. Because they have a consistent source of income and must make tax-saving investments every year, ELSS funds are better suited for the salaried class.

What is the lock-in period of the ELSS Funds?

ELSS funds have a 3-year lock-in period. If you invest now, you cannot withdraw your money until three years have passed if you made a lump sum investment.

Each SIP payment is also subject to the lock-in term.

You must wait until the final SIP instalment has finished in three years if you wish to withdraw the entire money invested over 12 months.

What Is Tax Saving Mutual Funds?

Tax saving mutual funds, also known as ELSS funds, are mutual funds that help save income tax on the profit gained from selling units of mutual funds at the end of a particular year or after a specific period. The government has announced various incentives for investors to save taxes on the capital gain from selling mutual funds units. Commonly people invest their money in mutual funds schemes since it helps save taxes on capital gains made every year. There are three types of mutual fund schemes eligible for saving taxes: equity, debt, and hybrid oriented funds.

How to Save Taxes by Investing in ELSS Mutual Funds?

Equity Linked Savings Scheme (ELSS) works like an insurance scheme. The invested money goes into a non-linked insurance fund, and the interest earned on this investment is tax-free. This interest is credited at the end of every year and is called ‘equated monthly instalment’. There is no upper or lower limit for investment in ELSS lock in period. And every individual is eligible to purchase these funds.

Investors can save on taxes by investing in ELSS funds if they do not claim deductions on their annual income return. ELSS funds are so-called because they provide an exemption from capital gains tax on investments made through them, unlike other mutual funds where long term capital gains are taxed at 15%. So these funds are also called funds that allow ‘tax-free’ growth over three years or more depending upon the fund you choose to invest in.

What Are the Tax Benefits Offered by ELSS Mutual Funds?

Under section 80C of the IT Act, the tax benefit offered by investing in ELSS tax saving funds is 50% of your investment, capped at Rs 1,50,000 for a financial year.  This means that this amount reduces your taxable income and your tax liability. Any amount invested over and above the limit of Rs 1,50,000 will not attract any tax benefit.

The interest earned on fund corpus is another tax benefit. Since you invest in equity-oriented mutual funds, the expected return should be higher than fixed income products like Public Provident Fund (PPF). The interest earned on the corpus is entirely tax-free.

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