ELSS Funds- Best Tax Saving Mutual Funds in India

Best ELSS Funds

Today, we will look at the meaning of ELSS funds, their taxation, explain why ELSS funds are the best tax saving mutual funds in India and also reveal the best ELSS funds to invest in

Let us now look at the best ELSS Tax Saving Mutual funds in India

ELSS FundsRankMF Rating1 Year3 Years5 YearsSince Inception
Axis Long Term Equity Fund5 Star3.04%7.94%10.83%16.07%
Canara Robeco Equity Tax Saver Fund4 Star13.85%9.58%11.23%18.45%
Aditya Birla Sun Life Tax Relief ’96 Fund4 Star1.69%1.73%8.95%9.83%
UTI Long Term Equity Fund4 Star7.35%3.28%8.34%10.29%
Kotak Tax Saver Fund4 Star4.57%3.87%9.57%10.97%

The 5 year return difference between a top performing 5-star rated ELSS fund (Axis Long Term Equity Fund) and a 1-star rated ELSS fund (Indiabulls Tax Saving Fund) is a whopping 16.97%! 

Unfortunately, it takes a keen eye and decades of expertise to discover the best mutual fund amongst the duds. Fortunately for you, RankMF researches and ranks all the mutual funds in India and provides the most reliable and honest answer on ‘Kaunsa Mutual Fund Sahi Hai!’. So, this tax season, don’t settle for mediocre tax saving options and instead choose ELSS funds – the best tax saving option in India and get the dual advantage of tax saving and wealth creation!

Parting away with your hard-earned money is never easy and therefore investors are always on the hunt for tax saving opportunities. Unfortunately, the majority of the investors stick to the traditional 5-year-tax saving FD without realising that they are missing out on the best tax saving option in the form of ELSS funds.  

Equity Linked Savings Scheme, or ELSS funds,  are equity-oriented mutual funds that have emerged as the best tax saving option for investors, compared to traditional tax saving options like NPS, PPF, ULIPs and others. 


Elss Fund


What are ELSS funds

ELSS funds are equity-oriented mutual funds that invest 80% of their corpus in equity and equity-related instruments of companies across sectors and market capitalization. ELSS funds are popularly known as ‘tax saving’ funds as they offer the dual benefit of tax saving and wealth creation. 

How do ELSS funds help in saving tax?

ELSS funds are a unique type of equity mutual funds that qualify for tax deduction. You can claim upto Rs 1.5 Lakh as a deduction under section 80C of the Income-tax act. Unlike equity mutual funds, ELSS funds have a lock-in period of 3 years. 

In case you have invested in ELSS funds through a SIP, then each SIP installment will have a lock-in period of 3 years from the date of purchase. While ELSS funds have a lock-in period of 3 years, since in principle, they are equity-oriented mutual funds, you should hold your investments for a minimum of 5 years to generate lucrative returns. 

How are ELSS funds taxed? 

The taxation of ELSS funds is similar to the taxation of other equity-oriented mutual funds. Short-term capital gains are taxed at flat 15% whereas long term capital gains are taxed at 10% if the overall gains exceed Rs 1 Lakh in a financial year. The tax exemption limit of Rs 1 Lakh is including the gains realised in direct equity i.e. equity shares. 

Since ELSS funds cannot be redeemed, under any circumstances, before 3 years, short term capital gains tax is never applicable for ELSS funds. While calculating the long term capital gains tax for ELSS funds, the cost price of units bought prior to 31st January 2018, will be the NAV as on 31st January 2018 according to the grandfathering clause. 

How have  ELSS funds performed in comparison to other tax saving options

ELSS funds, whilst carrying the lowest lock in period have outperformed all other tax saving options in India such as PPF, NPS, NSC, 5-year tax saving FDs etc. 

ELSS funds Vs. Traditional tax saving options in India

Tax Saving InstrumentLock-in PeriodAverage Returns
5-year tax saving bank FD5 Years3% – 5%
Public Provident Fund15 Years7% – 8%
National Pension SchemeTill Retirement7% – 10%
National Savings Certificate5 Years7% – 8%
ELSS Funds3 Years12% – 15%

ELSS funds are the best tax saving option for investors who want to save tax but not settle for low returns. As evident in the above table, ELSS funds have beaten the traditional tax saving options in both, returns and lower lock-in period parameters. 

Also, Open your demat and trading account with Samco – India’s best equity broking house today to start investing in top ELSS funds.

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