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Best ELSS Funds

Best ELSS Funds - Consider the best performing elss mutual funds to invest in 2023 with Scripbox.com. Find the list of best elss funds in India on the basis of Returns, Latest Nav, Ratings, Performance etc.

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Best ELSS Funds to Invest in 2023

Fund Name3Y ReturnsExpense Ratio
DSP Tax Saver Fund (G)
Mirae Asset Tax Saver Fund (G)
Union Tax saver ELSS Fund (G)
Bank of India Tax Advantage Fund (G)
Canara Robeco Equity Taxsaver fund (G)
Kotak Tax Saver Scheme (G)
Bandhan Tax Advantage ELSS Fund (G)
PGIM India ELSS Tax Saver Fund (G)
Quant Tax Plan (G)
Nippon India Tax Saver ELSS Fund (G)
UTI Long Term Equity Fund (G)
Tata India Tax Savings Fund (G)
ICICI Prudential Long Term Equity Fund Tax Saving (G)
SBI Long Term Equity Fund (G)
Mahindra Manulife ELSS Fund (G)
HDFC TaxSaver fund (G)
Taurus Tax Shield fund (G)
Quantum Tax Saving Fund (G)
Motilal Oswal Long Term Equity Fund (G)
Invesco India Tax Plan (G)

Note : *NA implies that Fund is relatively new. Not enough data available

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Although the benefits of investing in an ELSS mutual fund are attractive to any investor there are a few parameters that you must consider before investing. The most important parameter for any investor is to match his/ her investment goal with the selected mutual funds. The selected mutual funds must fulfill your goal for a successful investment. To make a well-informed decision you must consider factors like the fund’s historical performance, returns, latest NAV,  exit load, and fund manager’s portfolio performance.

10 Top Performing ELSS Funds to Invest in 2023

Fund Name3 Year Returns5 Year Returns
Bank of India Tax Advantage Fund22.20%11.50%
Parag Parikh Tax Saver Fund27.10%20.40% (Inception)
Mirae Asset Tax Saver Fund (G)23.20%13%
DSP Tax Saver Fund22.10%11.70%
Nippon India Tax Saver ELSS Fund20.80%4.70%
SBI Long Term Equity Fund24.20%10.4%
HDFC TaxSaver fund24.30%8.80%
IDFC Tax Advantage ELSS Fund28.20%11.10%
ICICI Prudential Long Term Equity Fund Tax Saving21.10%10.20%
Canara Robeco Equity Tax Saver fund21.20%13.70%
Axis Long Term Equity Fund10.40%8.30%

What are ELSS Funds?

Equity Linked Savings Scheme (ELSS) is a kind of mutual fund scheme that invests in equity and equity-related instruments. ELSS comes with a lock-in of 3 years and provides a tax benefit up to 1.5 lakhs in a year under section 80C of the Income Tax Act.

Investments in ELSS can be made through lump-sum payments or SIP. If payments are made through SIP, the lock-in period of 3 years is taken for each SIP.

What is a mutual fund NAV?

Net asset value NAV is the market price of the fund. It is important because it represents the worth of each share of the fund. One can say just like shares have a share price, mutual funds have a NAV to represent it’s worth.

Features of ELSS Mutual Funds

  1. Lowest Lock-in period: Equity linked savings schemes have the lowest lock-in period when it comes to tax-saving investments. It has a lock-in period of 3 years post which the investments can be updated. ELSS funds offer the possibility of a higher return as compared to traditional tax-saving fixed deposits, public provident fund, national pension scheme, and others
  2. Save Tax: Investments in ELSS funds provide a tax benefit of 1.5 lakh as per section 80C of the Act. It helps you to save tax and get better returns. It helps you in planning your taxable income by claiming tax deductions
  3. Mode of investment: Investments in ELSS can be made either through the lumpsum method or SIP. If invested through SIP mode, it offers the benefit of rupee cost averaging and saves the trouble of investing a lumpsum amount at one go.
    Thus investment through SIP mode also does not feels heavy on the pocket.
  4. Management of the invested amount: ELSS are managed by professionals who are well-versed with the market conditions and are aware of the ups and downs in the market. The money invested by anyone through ELSS is managed by these fund managers.

Who should Invest in ELSS funds?

  1. Any individual or HUF can make investments in ELSS through SIP or lumpsum method. ELSS is considered better if you have a long term investment horizon, preferably more than 3 years.
  2. ELSS comprises mostly equity instruments that can offer exceptional returns but also demands a good understanding of equity asset class risk from the investor.
  3. Furthermore, by investing in ELSS funds, one can claim to benefit up to 1.5 lakhs under section 80 C of the income tax act.

Tax Benefits of ELSS Mutual Funds

Investing in ELSS mutual funds offers tax benefits under Section 80C of the Income Tax Act, 1961. As per Section 80C, investments up to INR 1,50,000 in a financial year in ELSS mutual funds qualify for tax exemption. Thus, investing in ELSS mutual funds helps you save on taxes. You will be able to save up to INR 46,800 in a year on taxes by investing in ELSS mutual funds. Also, it is important to note that additional investments (over and above INR 1,50,000 per year) do not qualify for a tax deduction.

What are the Options for Investing in the Best ELSS Funds?

  1. Growth Option: Under the growth option, the profits made by the fund is not paid off as dividend. Instead, they are reinvested in the scheme. The profits are distributed to the investors at the time of redemption. This is also dependent on the NAV of the fund as if the profits go up so will the NAV and vice-versa
  2. Dividend Option: As the name suggests, the profits made in the schemes are not re-invested but distributed as dividends to the investors on a half-yearly, quarterly, or annual basis. The dividend declaration and payment is not fixed. It happens only when the scheme generates profits.

How to Evaluate the Best ELSS mutual funds?

Evaluating top mutual funds to invest can be a tricky task. One can check the below parameters in order to evaluate the funds:

  1. Fund house history: Ideally, fund houses that have performed consistently over a long term horizon, say above 5 years, should be considered for the purpose of investment. If the fund outperforms its benchmark, it is considered that the fund has delivered higher returns. Keep in mind, the performance of the fund depends on the quality and performance of the stock it has in its portfolio before concluding on top mutual funds.
  2. Returns: Comparing just the respective fund’s return with the benchmark is not enough. One also needs to compare the performance of the funds with its competitors. The investments should be made after carefully evaluating the returns over a longer period of time.
  3. Expense Ratio: Equity linked savings schemes are managed by professionals who invest their own time and resources to provide a better return on your investment. Their knowledge of the markets and deep understanding of the field helps them in evaluating which stocks should form part of the fund.
    The expense ratio shows how much money goes towards managing the fund. If the fund has a lower expense ratio that means your take-home returns will be higher and vice versa.
  4. Portfolio Turnover: Portfolio turnover simply means how quickly stocks in the funds are bought & sold by the fund manager.
    As the funds are eventually handled by the fund manager, he gets to decide when to enter or exit the market. A low portfolio turnover indicates that he is neither entering nor quitting the markets.
    On the other hand, a high turnover indicates that too frequent movements have been made in the portfolio.

ELSS Funds vs Tax-saving Investment Schemes

When it comes to financial planning, managing tax-saving investment schemes, and picking the best-suited investment scheme is crucial. It depends on the investor, his investment objectives, knowledge of the investment plans and other factors

To help you decide on ELSS vs other tax saving schemes, we have listed a comparison below:

Investment PlansReturnsLock-in PeriodTax Implications
ELSS Funds15% to 18%3 yearsInvestment- Tax Deduction
Income- Partially Taxable
Tax Saving Fixed Deposits6% to 7% differs from bank to bank5 yearsInvestment- Tax Deduction
Income- Taxable, if interest > Rs 10,000
Added to taxable income
Public Provident Fund (PPF)7% to 8%15 yearsInvestment- Tax Deduction
Income- Non-Taxable
National Pension System (NPS)8% to 10%Till RetirementInvestment- Tax Deduction
Income- Partially Taxable
National Savings Certificate7% to 8%5 yearsInvestment- Tax Deduction
Income- Taxable

Frequently Asked Questions

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

Lock-in period is the time period for which investments are required to be made to avail of the tax benefits. In the case of ELSS, it is 3 years.

How is ELSS SIP different from normal SIP?

When we make a SIP, a fixed amount is deducted monthly towards the investment. In an ELSS, each SIP made is locked in for a period of 3 years if the investor wants to avail of the tax benefits.
It is very convenient and easy nowadays to invest through SIP, you only need to link your saving account to the fund manager. Then provide an instruction to deduct investment amount every month from your saving account.
You can use Scripbox’s SIP calculator to estimate the wealth gained and maturity of the investments made through SIP to help you in investment planning

What is the maximum tax benefit that can be availed by investing in ELSS?

The maximum tax advantage that can be availed by investing in ELSS funds is 1.5 lakhs under section 80C of the income tax act. Any amount invested above 1.5 lakh would not qualify as an eligible investment for the purpose of claiming a tax deduction.

How risky are ELSS funds?

Like all other market-linked funds, ELSS funds are also subject to market risk as it invests in equity and equity-related instruments.

I have already exhausted my 1.5 lakh limit investment, should I still invest in ELSS?

This would not be a good option as this will lock your investment for 3 years without giving any tax advantage. Your taxable income would remain the same due to no further deductions. One can instead invest in other mutual funds that provide better returns like equity funds, hybrid fund.

Who should invest in ELSS funds?

Individuals who are looking for inflation-beating returns in the long run and which provides tax benefit should invest in ELSS.