Best Tax Saving Mutual Funds (ELSS) in India – 2025
ELSS or Equity Linked Savings Schemes are a popular category of mutual funds that help investors save taxes while creating long-term wealth. These funds primarily invest in equities and equity-related instruments, making them suitable for individuals who have a higher risk appetite and a long-term investment horizon. One of the major attractions of ELSS funds is that they qualify for tax deduction under Section 80C of the Income Tax Department, allowing investors to claim deductions of up to ₹1.5 lakh in a financial year.
What is ELSS?
ELSS or Equity Linked Savings Scheme is a type of equity mutual fund that offers both tax-saving benefits and wealth creation opportunities. These funds invest primarily in equities and equity-related instruments, which means they have the potential to deliver higher returns than traditional tax-saving products.
Investments in ELSS are eligible for tax deductions under Section 80C of the Income Tax Department, allowing investors to claim deductions of up to ₹1.5 lakh in a financial year. ELSS funds also come with a mandatory lock-in period of three years, which is the shortest among all Section 80C tax-saving investment options.
Performance of Top ELSS Funds in 2025
Several ELSS funds have delivered excellent long-term returns and have become popular among investors. As of 2025, the Quant ELSS Tax Saver Fund has given around 28.5% CAGR over 3 years and 23.7% over 5 years with an expense ratio of 0.76%.
The Mirae Asset Tax Saver Fund has consistently offered 24.2% CAGR over 3 years and 20.8% over 5 years at a low expense ratio of 0.55%.
Other well-performing funds include the Canara Robeco ELSS Tax Saver, Kotak ELSS Tax Saver Fund, Axis Long Term Equity Fund, DSP Tax Saver Fund, Franklin India Taxshield, and SBI Long Term Equity Fund. These funds have delivered returns between 15–22% CAGR over 3 to 5 years, making them some of the best options for tax-saving and wealth creation.
Benefits of Investing in ELSS
Investing in ELSS funds offers multiple benefits. The most significant is tax savings—investors can claim deductions up to ₹1.5 lakh under Section 80C. ELSS funds also have the shortest lock-in period of just 3 years, compared to other tax-saving instruments like Public Provident Fund (PPF), National Savings Certificate (NSC), and Tax Saving Fixed Deposits (FDs) which have lock-in periods of 5 to 15 years.
Because ELSS invests in equities, it has the potential to deliver higher long-term returns, and investors can start with as little as ₹500 through Systematic Investment Plans (SIPs). This makes ELSS an attractive tool for both tax saving and wealth building.
Top Performing ELSS Funds (as of 2025)
| Rank | Fund Name | 3-Year CAGR | 5-Year CAGR | Expense Ratio | Fund Size (₹ Cr) | Min SIP |
|---|---|---|---|---|---|---|
| 1 | Quant ELSS Tax Saver Fund | 28.5% | 23.7% | 0.76% | 5,100 | ₹500 |
| 2 | Mirae Asset Tax Saver Fund | 24.2% | 20.8% | 0.55% | 19,200 | ₹500 |
| 3 | Canara Robeco ELSS Tax Saver | 21.8% | 18.6% | 0.70% | 5,900 | ₹500 |
| 4 | Kotak ELSS Tax Saver Fund | 20.1% | 17.4% | 0.75% | 3,200 | ₹500 |
| 5 | Axis Long Term Equity Fund | 18.4% | 15.9% | 0.65% | 32,000 | ₹500 |
| 6 | DSP Tax Saver Fund | 17.6% | 14.3% | 0.78% | 10,300 | ₹500 |
| 7 | Franklin India Taxshield | 16.2% | 13.7% | 0.90% | 4,800 | ₹500 |
| 8 | SBI Long Term Equity Fund | 15.8% | 12.5% | 0.84% | 9,600 | ₹500 |
📌 Note: Returns are CAGR as of August 2025. Past performance does not guarantee future results.
Who Should Invest in ELSS?
ELSS funds are ideal for salaried individuals, first-time investors, and young professionals who are looking to save taxes and build long-term wealth. These funds suit investors who have a moderate to high risk tolerance and are willing to stay invested for at least 3 to 5 years.
They are also a great choice for people who want to start small and gradually increase their investments using SIPs.
How to Invest in ELSS Funds
Investing in ELSS funds is simple and can be done online. Investors can open accounts with platforms like Groww, Zerodha, Upstox, or ICICIdirect.
After completing KYC verification, investors can choose from top-performing ELSS funds and invest either through lump sum or SIP mode. Starting SIPs early in the financial year helps spread out investments and reduce market timing risk.
Taxation on ELSS Returns
Since ELSS funds have a three-year lock-in, any gains made are considered long-term capital gains (LTCG). Under current tax laws, LTCG up to ₹1 lakh in a financial year are tax-free, and gains above ₹1 lakh are taxed at 10% without indexation.
This makes ELSS funds tax-efficient compared to many other investment products.
ELSS funds are one of the best ways to save tax and grow wealth at the same time. While they carry market risk, their long-term return potential and the short lock-in period make them highly attractive. By investing regularly, staying invested for the long term, and reviewing fund performance periodically, investors can use ELSS funds to build a strong financial portfolio while also enjoying tax benefits.
Business News
You can claim a deduction of up to ₹1.5 lakh per year under Section 80C, potentially saving up to ₹46,800 annually.
No. Each SIP/lump sum installment is locked for 3 years from the date of investment.
Yes. Gains above ₹1 lakh are taxed at 10% under Long-Term Capital Gains (LTCG).
ELSS has higher return potential but comes with market risk. PPF is safer but offers fixed returns. Choose based on your risk profile.
Yes. You can start a SIP (Systematic Investment Plan) in any ELSS fund for disciplined investing.
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