Best Tax Saving Mutual Funds in 2020 - Best Performing Tax Saving Mutual Funds in India

Best Tax Saving Mutual Funds - Consider the best performing tax saving mutual funds to invest in 2020 with Find the list of best tax saving mutual funds in India on the basis of Returns, Latest Nav, Ratings, Performance etc

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Best Tax Saving Mutual Funds

Better than FD

  • point

    Lower tax if you withdraw after 3 years

  • point

    Scripbox pre-selects the 3 best debt mutual funds for you from over 5900 debt mutual fund schemes.

  • founder-logo

    Motilal Oswal Long Term Equity Fund - Regular Plan - Growth

    • EQUITY
    • Tax Saving
    ₹ 1,411.09 Cr
    Fund Size
    ₹ 500
    Min Investment
    5+ Yrs
    Return (3yr)
  • founder-logo

    Mirae Asset Tax Saver Fund -Regular Plan-Growth

    • EQUITY
    • Tax Saving
    ₹ 3,184.25 Cr
    Fund Size
    ₹ 500
    Min Investment
    4+ Yrs
    Return (3yr)
Tax Saver Plan
Better than Insurance, FD
  • 12-14%
    Growth Rate
  • 3 Years lock-in

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Scripbox pre-selects the 2 best ELSS mutual funds for you from over 145 ELSS mutual fund schemes

What are Best Tax Saving Mutual Funds?

Tax saving mutual funds are just like any other mutual fund with the only difference of bearing a tax benefit. An investment made towards a tax saving mutual fund is allowed as a deduction under section 80C of the Income Tax Act, 1961.

Majorly tax saving mutual funds are ELSS wherein the investment is equity-oriented and the lock-in period is 3 years.

How do Tax Saving Mutual Funds Work?

The process of investing in a mutual fund can be listed in just 4 steps

  1. Step1- Investors pool their investments with a fund manager
  2. Step2- The fund manager invests the pool of investment in various securities
  3. Step3- These securities generate returns for the investors
  4. Step4- The returns are paid back to the investors or invested back in the fund, as chosen by the investors

The securities selected for investment belong to different industries and sectors. This is done to ensure even if one industry generates low or no returns, other industries can balance the expected returns.

Industry % of the total investment
Automotive 23%
Banking/td> 24%
Power 17%
FMCG 19%
Hospitality 17%

Tax saving mutual funds have a lock-in period of 3 years from the investment until the maturity of the funds. In case the investment is made through SIP, the lock-in period is calculated for every installment of investment.


If SIP is made monthly from January 2020, then the installment of January 2020 will be matured in January 2023. For then the installment of February 2020 will be matured in February 2023

The redemption of investments is possible only for the unlocked units at the current NAV price for the units available for redemption at maturity. The investor needs to submit a withdrawal form to the fund manager and the amount will be credited to the account.

Features of Best Tax Saving Mutual Funds

Tax saving mutual funds or ELSS are a better option of investments than other tax saving schemes. The features of ELSS are listed below.

Tax saving mutual funds are Equity Linked Mutual Funds (ELSS) and open-ended in nature

These mutual funds are exposed to market fluctuations and are risky. However, the risk level depends on the investor and his understanding of risk. Risk is a factor which is dependent on what is the limit of an individual given his spending, cost of living and income.

The lock-in period for the investment made is 3 years

No limit on Maximum Investment. Minimum Investment Amount differs for fund houses. However mostly the minimum investment amount is Rs 500 only An entry load and exit load applies to ELSS schemes. These are fees charged by the fund managers on purchase/sale/redemption/transfer of the fund units by the investors. Deduction on investment is allowed under section 80C up to Rs 1.5 lakh

Benefits of Investing in the Tax Saving Mutual Funds

Equity-linked saving scheme (ELSS) is an ideal investment option for investors who wish to save tax and earn a higher return at the same time.

The key benefits of investing in ELSS are listed below:

Invest in equity while saving

ELSS allows an investor to benefit save money and enjoy the growth and returns associated with securities in the ELSS portfolio. While other saving schemes offer an average of 8% returns, ELSS provides better returns being a good portfolio with diverse and quality stocks.

Inspire saving habit

ELSS allows an investor to invest as low as Rs 500 per month, turning small savings into an investment developing habit of continuous savings.

Tax Benefit

One of the major reasons to invest in ELSS is the tax benefit it carries. The principal amount of investment is allowed as a deduction u/s 80C along with tax benefits of maturity amount and returns earned.

Other Benefits

ELSS allows an investor to invest monthly through SIPs and thus eliminating the need to invest a huge amount at once.

These investments are managed by professional fund managers, hence a layman having less knowledge about the market and its trends can invest freely.

A portfolio of various securities from different industries and sectors is made, hence minimizing the market risk of investing in the equity market

Taxation on Best Tax Saving Mutual Funds in India

The principal amount invested in ELSS is allowed as a deduction under section 80C up to Rs 1.5 lakh of the Income Tax Act, 1961.

Long-Term Capital Gains (LTCG) tax is applicable on ELSS funds as the lock-in period is 3 years. LTCG @ 10% is levied on the capital gain earned over Rs 1 lakh

Tax Saving Mutual Funds ELSS vs PPF vs FD

Particulars    ELSS  PPF  FD
 ELIGIBILITY  An Individual taxpayerincluding NRI  Resident Individual taxpayer  An individual taxpayer including NRI and HUF
 Minimum amount  Rs 500  Rs 500  Rs 100
Rate of interest 12% to 14% 8.10% 7% to 9% varies Bank to Bank
 Risk  Depends on market fluctuation  No-Risk  No-Risk
 Lock-in Period  3 years  5 years  5 years
 Tax Implication Principal amount deductible u/s 80C deduction up to Rs 1.5 lakh Returns- 10% LTCG  Principal amount deductible u/s 80C deduction up to Rs 1.5 lakh interest- Taxable  Principal amount deductible u/s 80C deduction up to Rs 1.5 lakh Interest- Taxable

Top 2 Best Tax Saving funds

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