Are you looking for the best way to save taxes while growing your wealth? Equity-Linked Savings Schemes (ELSS) are among the most popular tax-saving investment options in India. With the dual benefit of tax exemption under Section 80C of the Income Tax Act and potential high returns, ELSS funds are an excellent choice for long-term investors. But with so many options available, how do you choose the right one?
In this article, we’ll explore the best ELSS mutual funds to invest in 2025, their benefits, and key factors to consider before investing.
What Are ELSS Funds?
Equity-Linked Savings Scheme (ELSS) is a category of mutual funds that primarily invest in equity and equity-related instruments. These funds offer a tax deduction of up to ₹1.5 lakh under Section 80C and have a lock-in period of three years, the shortest among tax-saving investments.
Key Benefits of ELSS Funds
- Tax Savings: Eligible for deduction under Section 80C, reducing your taxable income.
- Higher Returns: Since ELSS funds invest in equity, they offer better returns compared to traditional tax-saving options like Fixed Deposits and PPF.
- Short Lock-in Period: ELSS has a 3-year lock-in, compared to 5 years in FD and 15 years in PPF.
- Potential for Long-Term Wealth Creation: Equity investments have historically outperformed other asset classes in the long run.
Best ELSS Mutual Funds to Invest in 2025
Here are the top-performing ELSS funds that investors can consider:
1. Mirae Asset Tax Saver Fund
- 3-Year Returns: 25.6%
- 5-Year Returns: 20.8%
- Expense Ratio: 0.57%
- Why Invest? Consistent high returns and lower expense ratio make it a top performer.
2. Canara Robeco Equity Tax Saver Fund
- 3-Year Returns: 23.4%
- 5-Year Returns: 18.7%
- Expense Ratio: 0.65%
- Why Invest? One of the most stable ELSS funds with a strong equity portfolio.
3. Quant Tax Plan
- 3-Year Returns: 28.5%
- 5-Year Returns: 21.2%
- Expense Ratio: 0.78%
- Why Invest? Aggressive investment strategy leading to high growth potential.
4. Parag Parikh Tax Saver Fund
- 3-Year Returns: 21.3%
- 5-Year Returns: 17.6%
- Expense Ratio: 0.83%
- Why Invest? Diversified portfolio with a mix of domestic and international stocks.
5. Axis Long Term Equity Fund
- 3-Year Returns: 19.5%
- 5-Year Returns: 16.8%
- Expense Ratio: 0.70%
- Why Invest? Reliable fund with a long-term track record of stable returns.
How to Choose the Best ELSS Fund?
Before investing in an ELSS fund, consider these factors:
1. Past Performance
While past performance does not guarantee future results, choosing a fund with a strong track record of at least 5 years can be beneficial.
2. Expense Ratio
A lower expense ratio (below 1%) ensures that fund management costs do not eat into your returns.
3. Fund Manager Experience
An experienced fund manager with a good performance history can significantly impact returns.
4. Risk Appetite
ELSS funds are equity-based and come with risks. Choose funds that align with your risk tolerance.
5. Portfolio Diversification
Look for funds that have a well-diversified portfolio across different sectors and market capitalizations.
Frequently Asked Questions (FAQs)
1. Which ELSS fund has the highest returns?
Currently, the Quant Tax Plan has the highest returns, with a 3-year CAGR of 28.5%.
2. What is the minimum investment required?
Most ELSS funds have a minimum investment requirement of ₹500.
3. Can I withdraw money before 3 years?
No, ELSS funds have a mandatory lock-in period of 3 years.
4. Is ELSS better than PPF for tax saving?
ELSS offers higher returns, but PPF provides guaranteed returns and is risk-free. It depends on your risk appetite.
5. Are ELSS funds taxable after 3 years?
Yes, Long-Term Capital Gains (LTCG) above ₹1 lakh are taxed at 10%.
Conclusion
Investing in ELSS mutual funds is one of the smartest ways to save taxes while building wealth. The funds listed above have strong performance records, making them ideal for investors in 2025. However, always consider your financial goals, risk appetite, and investment horizon before making a decision.
If you’re looking for high returns, tax benefits, and long-term wealth creation, ELSS is an excellent choice. Start investing today and take a step towards financial freedom!
