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    Best Tax Saving Mutual Funds

    Best Tax Saving Mutual Funds - Consider the best performing tax saving mutual funds to invest in 2021 with Scripbox.com. Find the list of best tax saving mutual funds in India on the basis of Returns, Latest Nav, Ratings, Performance etc

    Learn how Scripbox Recommends funds

    Best Tax Saving Mutual Funds

    Best Tax Saving Mutual Funds - Consider the best performing tax saving mutual funds to invest in 2021 with Scripbox.com. Find the list of best tax saving mutual funds in India on the basis of Returns, Latest Nav, Ratings, Performance etc

    Learn how Scripbox Recommends funds

    Best Tax Saving Mutual Funds September 2021

    Best Tax Saving FundsScripbox Opinion
    3Y CAGR
    Till Date CAGR

    Mirae Asset Tax Saver Fund (G)

    22.1%

    22.2%

    22.0%

    21.5%

    Mirae Asset Tax Saver Fund of Income Distribution cum capital withdrawal (PIDCW-A)

    21.3%

    21.8%

    19.4%

    14.8%

    19.4%

    14.8%

    24.7%

    21.1%

    19.3%

    15.8%

    20.4%

    15.5%

    19.2%

    19.0%

    9.7%

    13.6%

    9.3%

    11.4%

    24.0%

    20.4%

    16.3%

    15.9%

    18.3%

    15.5%

    15.6%

    20.3%

    15.3%

    11.7%

    17.7%

    12.1%

    15.6%

    16.6%

    18.4%

    13.3%

    16.5%

    15.4%

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    How to invest in best mutual funds?

    Investing through Scripbox is made easy and paperless. All you need to do is follow the below steps and start investing.

    01

    Choose a plan

    Choose a plan to invest to start investing

    02

    Create an Account

    Create an account with Scripbox through a paperless process, to invest in this fund.

    03

    Invest online & transfer

    Invest via netbanking, UPI or through an SIP (eNACH mandate).

    04

    Track your investments

    Track, invest more and withdraw your investments through the Scripbox dashboard

    3,600+

    AUM

    2,500+

    Cities

    2012

    Established

    How does Scripbox rate funds?

    Proprietary 4-step system to rate mutual funds

    We use a proprietary system to rate mutual funds and based on that make a recommendation or rate the fund as top ranked.

    What Scripbox recommendations mean?
    Scripbox algorithm recommends 2-4 funds for investment for an investment asset class such as large cap, diversified, liquid etc. When you invest for an objective, the algorithm suggests the appropriate asset class and funds.
    Track Record

    Track Record

    We look at consistent and long historical performance for our analysis.

    Fund Size

    Fund Size

    We look at the size of the fund with respect to other funds in the category. Larger funds are preferred.

    Sub-asset Class View

    Sub-asset Class View

    We check if the sub-category of the fund is recommended by us.

    Fund Performance

    Fund Performance

    Consistency of performance over various tenures is analysed for a relative performance stack.

    Track Record

    Track Record

    We look at consistent and long historical performance for our analysis.

    Fund Size

    Fund Size

    We look at the size of the fund with respect to other funds in the category. Larger funds are preferred.

    Impact of Interest Rates

    Impact of Interest Rates

    We check the relative interest rate risk of the sub-category of the fund. Lower the better.

    Credit Attractiveness

    Credit Attractiveness

    We check the credit quality of the underlying instruments present in the fund. Higher the better.

    Equity Funds

    Debt Funds

    A tax-saving mutual fund provides the benefits of investing in equity securities along with a tax deduction. Investors seeking a long term investment coupled with benefits equity and tax saving must consider this fund. Now the question arises which is the best tax saving mutual fund and how to select it. Firstly, ensure that the fund meets your investment goals. Secondly, consider its NAV, risk, historical returns, fund manager’s portfolio while investing.

    Top Performing Tax-Saving Mutual Funds to Invest in May 2021

    Fund NameCategory3 Year Returns
    Mirae Asset Tax Saver FundTax Savings Mutual Fund15.20%
    Canara Robeco Equity Taxsaver fundTax Savings Mutual Fund15.20%
    Mirae Asset Tax Saver FundTax Savings Mutual Fund14.50%
    Canara Robeco Equity Taxsaver fundTax Savings Mutual Fund12.70%
    BOI AXA Tax Advantage Eco fundTax Savings Mutual Fund11.90%
    DSP Tax Saver FundTax Savings Mutual Fund11.80%
    Axis Long Term Equity FundTax Savings Mutual Fund11.80%
    ICICI Prudential Long Term Equity Fund Tax SavingTax Savings Mutual Fund9.70%
    SBI Magnum Long Term Equity SchemeTax Savings Mutual Fund8.10%
    BNP Paribas Long Term Equity FundTax Savings Mutual Fund9.70%

    What are 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

    Step 1 – Investors pool their investments with a fund manager

    Step 2 – The fund manager invests the pool of investment in various securities

    Step 3 – These securities generate returns for the investors

    Step 4 – 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
    Automotive23%
    Banking24%
    Power17%
    FMCG19%
    Hospitality17%

    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.

    Example

    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 Equity Linked Savings Schemes are a better option of investments than other tax saving schemes. The features of ELSS are listed below.

    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

    Tax saving mutual funds are Equity Linked Savings Schemes and open-ended in nature

    Investment in ELSS funds 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.

    Benefits of Investing in the Tax Saving Mutual Funds

    Investment in ELSS mutual funds are 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

    ELSS vs Other Tax Saving Investments

    Other than ELSS , there are other tax saving investment options like fixed deposits, public provident fund, national pension scheme and others. 

    We have mentioned a comparison below to help understand advantages and disadvantages over ELSS vs other schemes

    ParticularsELSSPublic Provident FundNational Pension SchemeFixed Deposits
    Rate of interest12% to 14%8.10%8% to 10%7% to 9% varies Bank to Bank
    RiskDepends on market fluctuationLow RiskLow RiskLow Risk
    Lock-in Period3 years5 yearsTill Retirement5 years
    Tax Advantage on InvestmentPrincipal amount deductible u/s 80C deduction up to Rs 1.5 lakhPrincipal amount deductible u/s 80C deduction up to Rs 1.5 lakhPrincipal amount deductible u/s 80C deduction up to Rs 1.5 lakh Principal amount deductible u/s 80C deduction up to Rs 1.5 lakh
    Tax on Returns10% LTCGTaxablePartially TaxableTaxable

    Frequently Asked Questions

    Who should invest in ELSS tax saving mutual funds?

    Among all investment schemes ELSS is suitable for an investor who has a tolerance for risk and a long-term financial goal to save taxes. An investor who wishes to invest a fixed or variable amount monthly can also choose to invest through SIP.
    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 created, maturity value of the SIP investments made.

    How much amount can one invest in ELSS tax saving mutual funds in the financial year?

    There is no upper limit for investing in ELSS. But while considering tax saving schemes, an investment in ELSS tax saving mutual funds are allowed as a deduction up to Rs 1.5 lakh only

    Can I withdraw the tax saving mutual funds?

    Yes, withdrawal of tax saving mutual funds is allowed at the maturity of the funds. The units available for redemption can be redeemed. But a premature withdrawal of funds before 3 years of lock-in period is not allowed

    Which mutual fund investment is tax-free in India?

    Being tax saver schemes ELSS are the funds which provide a tax advantage. The investments made are allowed as a deduction up to Rs 1.5 lakh and the capital gains up to Rs 1 lakh are tax-free.

    Are ELSS tax saving mutual funds risky?

    ELSS tax saving 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 own spending, cost of living and income.

    Get started with investing today

    Invest in the best mutual funds recommended by Scripbox that are algorithmically selected that best suit your needs.