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The ELSS are the most effective tax-saving mutual funds investment in India as they provide triple benefits under Section 80C
Published on Aug 1, 2025
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The ELSS are the most effective tax-saving mutual funds investment in India as they provide triple benefits under Section 80C:
● Tax deductions up to ₹1.5 lakh annually
● Shortest lock-in period (3 years) vs. PPF (15 years) or NSC (5 years)
● Potential for inflation-beating returns through equity exposure
In comparison to fixed-income alternatives, ELSS is more concentrated in equities, 65 to 80%, and has a much higher historical return of 12 to 18% CAGR over 5+ years, compared to the 7% in PPF. This blend of growth potential and tax efficiency makes it ideal for long-term wealth builders.
Equity Linked Savings Schemes (ELSS) are very popular in India when it comes to saving taxes and wealth creation. Besides the tax benefits that LSS funds have by virtue of Section 80C of the Income Tax Act, LSS funds also present an opportunity of long-term capital appreciation.
In this blog, we will compare the best performing ELSS funds of 2025 depending on the returns, lock-in period, minimum investment and choice rating.
Fund Name | Returns | Lock-In | Min Investment | Choice Rating |
Canara Robeco ELSS Tax Saver Fund Growth | 20.7 | 3 Years | ₹500 | 4-Stars |
Quant ELSS Tax Saver Fund Growth | 29.4 | 3 Years | ₹500 | 4-Stars |
DSP ELSS Tax Saver Fund Growth | 24 | 3 Years | ₹500 | 4-Stars |
HDFC ELSS Tax Saver Fund Growth | 25.4 | 3 Years | ₹500 | 4-Stars |
Bandhan ELSS Tax Saver Fund Growth | 24.7 | 3 Years | ₹500 | 4-Stars |
● SIP Advantage: The average market volatility is 500+ per month. The lock-in in each installment is independent and lasts 3 years, which increases liquidity as compared to lumpsum.
● One time (Lumpsum) Approach: Invest in a market drop with excessive amounts to get more chances to grow.
Pro Tip: Combine both—use SIP for discipline and lumpsum for opportunistic buying.
1. Ignoring Asset Allocation
Overexposure to volatile small-caps risks capital erosion. Opt for funds with 50–70% large-cap allocation.
2. Panic Exiting at Lock-In End
73% of ELSS gains accrue after Year 5. Stay invested beyond the lock-in for compounding benefits.
3. Overlooking Tax on Gains
Remember: Returns face 10% LTCG tax above ₹1 lakh annually.
Choice India’s tech-powered platform eliminates analysis paralysis:
● Expert-Curated Baskets: There are pre-packaged portfolios such as Tax Saver which includes the best ELSS funds as per risk profiles.
● Goal Tracker: Automatically adjusts SIPs based on the set targets like child education or retirement.
● Zero Fees: The amount saved by direct plan investment is 1 percent of commission per year as compared to regular plans.
● The Quant ELSS Tax Saver Fund has the highest returns at 29.4% making it the most suitable option, in case of high returns being the prime concern.
● If you prefer a fund with a proven track record of stability and good returns, the HDFC ELSS Tax Saver Fund offers 25.4% returns and is an excellent option.
● Investors of this type who want a moderate approach with relatively stable returns have the Bandhan ELSS Tax Saver Fund with 24.7% returns.
The best tax saving mutual fund can be invested in with a minimum investment amount of 500 rupees and the lock-in period is 3 years. All these funds are quite effective, and depending on your risk tolerance and financial objectives, any of these would make a good tax-saving and long-term wealth-generating fund.
One should always talk to a financial advisor to make sure that such investments are going to be reasonable against the background of your financial plan.