Top ELSS Mutual Funds: As the tax season approaches, investors might be looking for avenues to build wealth and save tax while doing it. Equity Linked Saving Schemes (ELSS) might just be the option you must be looking for. These schemes allow investors to build a savings pool and also avail tax benefits on the same. 

What Is ELSS?

ELSS funds are referred to as tax-saving funds due to the tax exemption they provide an investor as per Section 80C of the Income Tax Act. This section provides investors an opportunity to claim tax deductions. Maximum tax exemption under the section is Rs 1.5 lakh per annum. These schemes generally have a lock-in period of 3 years which means that the investors are not allowed to withdraw their funds from the scheme for the period. 

However, before finding an appropriate ELSS that suits your financial goals, it is important to evaluate the past performance of the fund, expert ratings, reputation of the fund house, and your liquidity needs. 

Also Read : Hybrid, Equity, And Debt Funds: Understanding The Risks And Which One To Choose. Explained

Experts Pick

Gaurav Goel, SEBI registered investment advisor, explained, “There are number of factors which are important to consider before selecting the right schemes. One of the important factors is the historical return. Generally, people look at point to point returns. However, we prefer rolling returns as they provide a more realistic return perspective. We also pay a lot of emphasis on the fund manager, fund house, liquidity and risk ratios like Sharpe, Treynor and Sortino.”

According to Goel, his picks for the top 5 tax saving mutual funds are Quant ELSS Tax Saver Fund, SBI Long Term Equity Fund, Motilal Oswal ELSS Tax Saver Fund, Bank Of India ELSS Tax Saver Fund, and HDFC ELSS Tax Saver Fund. Goel stated that the Quant Fund gave investors a yield of 34.97 per cent in a three-year period, while SBI fund provided a return of 27.18 per cent. Motilal Oswal reported a return of 25.29 per cent, with Bank of India giving investors 24.49 per cent return in the three-year period. The HDFC fund provided returns of 26.69 per cent for the investors in the lock-in period. 

Also Read : Large Equity Mutual Funds: A Stable And Reliable Investment? Check Out The Top 5 Performing Funds In 2024

Based on performance, assets under management (AUM), and the returns provided to investors, Nitin Shahi, Executive Director, Findoc, shared his choice for the top 5 picks in ELSS. 

Best Performing ELSS In 2024

Fund Name Return In 3 Years (In Percentage)
Bank of India ELSS Tax Saver Fund

31.65%
HDFC ELSS Tax Saver Fund  31.23%
Mahindra Manulife ELSS Tax Saver Fund  23.12%
Canara Robeco ELSS Tax Saver  21.92%
PGIM India ELSS Tax Saver Fund  18.53%

Melvyn Santarita, Analyst, Morningstar Investment Research India, pointed out that Quant and HDFC tax saving funds remained a favourite. Sharing their recommendations, the analyst picked Quant ELSS Tax Saver with a 3 year return of 26.72 per cent, followed by HDFC ELSS Tax Saver yielding 25.89 per cent in three years. Other names in the best performers included Kotak ELSS Tax Saver Reg and Parag Parikh ELSS Tax Saver Reg with 3-year returns of over 20 per cent each. Mirae Asset ELSS Tax Saver Reg also remianed another good option with 16.82 per cent returns in the lock-in period. 

[Disclaimer: Investing in the stock market and mutual funds involves financial risks. Please invest responsibly and only after thorough research and careful consideration. Reader discretion is advised.]