Best ELSS Mutual Funds to Invest: A Guide for Smart Tax-Saving Investments

Equity Linked Savings Schemes (ELSS) are among the most popular investment options for those looking to save on taxes while enjoying the potential for long-term wealth creation. These funds, often referred to as “tax-saving mutual funds,” qualify for tax deductions under Section 80C of the Income Tax Act, making them an attractive option for investors. In this article, we will delve into some of the best ELSS mutual funds in the market, analyzing their performance, investment strategy, and benefits to help you make an informed decision.

Why Choose ELSS Mutual Funds?

ELSS mutual funds stand out for their dual benefit of tax savings and equity market exposure. Here’s why ELSS funds are often a preferred choice for investors:

• Tax Benefits: Investments in ELSS are eligible for tax deductions of up to ₹1.5 lakh under Section 80C, which can help investors save up to ₹46,800 in taxes, depending on their tax bracket.
• Growth Potential: As ELSS funds invest primarily in equities, they offer higher growth potential compared to other Section 80C options like Public Provident Fund (PPF) and National Savings Certificate (NSC).
• Shortest Lock-in Period: ELSS funds come with a three-year lock-in period, the shortest among all tax-saving investment options under Section 80C.

Key Factors to Consider Before Investing in ELSS Funds

When selecting an ELSS mutual fund, it’s essential to assess various factors such as:

• Historical Performance: Consistent returns over a 3- to 5-year period can indicate reliable fund management.
• Risk Tolerance: ELSS funds carry market risk, so understanding your risk tolerance is crucial before investing.
• Expense Ratio: Lower expense ratios allow more of your money to stay invested and potentially grow over time.
• Fund Manager’s Experience: The experience and strategy of the fund manager can significantly impact a fund’s performance.

With these factors in mind, let’s explore some of the best ELSS mutual funds currently available in the market.

1. Mirae Asset Tax Saver Fund

• Investment Objective: Mirae Asset Tax Saver Fund aims to provide long-term capital growth by investing primarily in equity and equity-related securities.
• Performance: This fund has shown consistent performance, delivering around 14-15% returns over the last five years.
• Expense Ratio: The fund has a competitive expense ratio, making it cost-effective for investors.
• Fund Manager’s Strategy: The fund manager follows a diversified investment strategy, investing across various sectors and market capitalizations.
• Why Consider: The fund’s strong track record, coupled with a prudent investment strategy, makes it an ideal choice for investors looking for stable returns in the long run.

2. Axis Long Term Equity Fund

• Investment Objective: The primary goal of this fund is to provide long-term capital growth while allowing tax savings.
• Performance: Axis Long Term Equity Fund has delivered consistent returns over the years, with a focus on quality stocks that show potential for stable growth.
• Expense Ratio: The fund has a moderate expense ratio, balancing costs with high-quality investment returns.
• Fund Manager’s Strategy: Known for its conservative approach, the fund manager emphasizes investing in well-established companies with robust financials.
• Why Consider: Ideal for investors seeking stable, low-risk returns, this fund is well-suited for risk-averse individuals.

3. Canara Robeco Equity Tax Saver Fund

• Investment Objective: The Canara Robeco Equity Tax Saver Fund seeks to generate capital appreciation by investing primarily in equities.
• Performance: This fund has consistently outperformed its benchmark, delivering returns of 13-15% over the past five years.
• Expense Ratio: It maintains a low expense ratio, allowing more funds to remain invested and grow.
• Fund Manager’s Strategy: The fund manager follows a balanced investment strategy with a blend of large-cap and mid-cap stocks.
• Why Consider: Its low-risk approach and impressive returns make it a strong choice for conservative investors.

4. Invesco India Tax Plan

• Investment Objective: Invesco India Tax Plan aims for capital growth over the long term by investing in a diversified portfolio of equity and equity-related instruments.
• Performance: The fund has shown resilience in both bullish and bearish markets, providing consistent returns of 12-14%.
• Expense Ratio: The fund’s expense ratio is competitive, enabling cost-effective growth over time.
• Fund Manager’s Strategy: The fund manager maintains a balanced approach, investing across sectors to minimize risk.
• Why Consider: With a well-diversified portfolio and consistent performance, this fund is suitable for investors with a moderate risk tolerance.

5. DSP Tax Saver Fund

• Investment Objective: DSP Tax Saver Fund aims to achieve capital appreciation by investing in a mix of large-cap, mid-cap, and small-cap stocks.
• Performance: The fund has delivered strong returns, averaging around 12-14% over the past five years.
• Expense Ratio: This fund has a moderate expense ratio, balancing quality and cost-effectiveness.
• Fund Manager’s Strategy: The fund manager emphasizes growth-oriented stocks, leveraging both established companies and emerging opportunities.
• Why Consider: Suitable for aggressive investors who seek high-growth opportunities with a willingness to accept volatility.

6. Motilal Oswal Long Term Equity Fund

• Investment Objective: This fund seeks to provide long-term capital appreciation through investments in a focused portfolio of equity and equity-related securities.
• Performance: Known for high growth potential, this fund has delivered impressive returns, particularly in bullish markets.
• Expense Ratio: Slightly higher expense ratio, but justified by the growth-centric approach of the fund.
• Fund Manager’s Strategy: The fund manager adopts a concentrated investment strategy, focusing on 25-30 high-quality stocks.
• Why Consider: With its focused investment approach, it is ideal for investors with high-risk tolerance who seek substantial growth.

7. IDFC Tax Advantage (ELSS) Fund

• Investment Objective: The fund aims for capital appreciation through a diversified investment strategy across various sectors and market capitalizations.
• Performance: This fund has delivered competitive returns with moderate volatility, appealing to both conservative and moderate investors.
• Expense Ratio: The expense ratio is relatively low, making it a cost-effective option.
• Fund Manager’s Strategy: The fund manager focuses on a diversified portfolio, balancing growth and risk.
• Why Consider: A well-rounded fund that caters to a broad range of investors, balancing growth with moderate risk.

8. Kotak Tax Saver Fund

• Investment Objective: Kotak Tax Saver Fund aims to generate long-term capital appreciation by investing in equity securities across sectors.
• Performance: It has delivered stable returns, generally in the range of 12-13% annually.
• Expense Ratio: The fund maintains a low expense ratio, enabling long-term cost efficiency.
• Fund Manager’s Strategy: The fund manager takes a diversified approach, with a slight tilt toward large-cap stocks.
• Why Consider: This fund is suitable for investors seeking stability with moderate growth potential.

9. Aditya Birla Sun Life Tax Relief 96

• Investment Objective: This fund seeks to provide long-term capital growth through a diversified portfolio, investing primarily in large and mid-cap stocks.
• Performance: Historically, this fund has generated consistent returns, with an emphasis on quality stocks.
• Expense Ratio: It has a moderate expense ratio, balancing cost with quality investments.
• Fund Manager’s Strategy: The fund manager focuses on companies with robust financials, ensuring stable returns.
• Why Consider: A great option for investors who prefer a quality-driven, large-cap-focused approach to tax-saving investments.

10. Tata India Tax Savings Fund

• Investment Objective: Tata India Tax Savings Fund aims to provide capital growth by investing in equity securities.
• Performance: Known for consistent performance, it has delivered stable returns of around 11-13%.
• Expense Ratio: With a low expense ratio, this fund is cost-efficient for long-term investors.
• Fund Manager’s Strategy: The fund manager follows a balanced strategy, with exposure across large-cap and mid-cap stocks.
• Why Consider: Ideal for those looking for a balanced approach, combining stability and moderate growth.

Disclaimer: Mutual fund investments are subject to market risks. Past performance is not indicative of future returns. Investors should conduct their own research or consult a financial advisor before investing. This article is for informational purposes only and does not constitute financial advice.