Equity Linked Savings Schemes (ELSS) are a popular investment option for individuals looking to save on taxes while gaining the potential for high returns. These mutual funds invest a major portion of their corpus in equities or equity-related instruments, offering the dual benefits of capital appreciation and tax savings under Section 80C of the Income Tax Act, India. With a mandatory lock-in period of three years, ELSS funds provide a disciplined investment approach and are an excellent choice for investors aiming to build wealth over the long term.

Strategic Advantages of Investing in ELSS

• Dual Benefits: ELSS funds serve the dual purpose of tax saving under Section 80C of the Income Tax Act and potential wealth creation through equity investments.
• Shorter Lock-in Period: Compared to other tax-saving instruments like PPF or 5-year bank fixed deposits, ELSS funds have a relatively shorter lock-in period of three years.
• Higher Return Potential: Given their equity component, ELSS funds have the potential to outperform traditional fixed-income tax-saving investments over the long term.
• Systematic Investment and Withdrawal: Investors can opt for SIP (Systematic Investment Plan) in ELSS funds, enabling them to invest periodically and leverage the benefit of rupee cost averaging. Similarly, systematic withdrawal plans (SWP) can be initiated post the lock-in period for regular income.

How to Choose the Right ELSS Fund

When selecting an ELSS fund, investors should consider various factors beyond just past performance. Here are some key aspects to evaluate:

• Consistency in Performance: Look for funds that have consistently performed well across different market cycles compared to their benchmarks and peer group.
• Fund House Reputation: Opt for funds managed by reputed asset management companies known for their robust investment processes and risk management practices.
• Expense Ratio: Lower expense ratios can significantly impact net returns over time, making it an important factor in fund selection.
• Investment Strategy: Understand the fund’s investment strategy to ensure it aligns with your risk tolerance and investment objectives.

In this blog, we’ll dive into the top 7 ELSS tax saver funds that have not only demonstrated remarkable performance over the past three years but also boast significant Assets Under Management (AUM), ensuring stability and reliability for your investments.

1. SBI Long Term Equity Fund

• Expense Ratio: 0.98%
• 3Y CAGR: 27.53%
• AUM: ₹18,715 CR

A leader in its class, the SBI Long Term Equity Fund offers an impressive blend of high returns and substantial AUM, making it a top pick for tax-saving investors.

2. HDFC ELSS Tax Saver

• Expense Ratio: 1.14%
• 3Y CAGR: 27.53%
• AUM: ₹13,086 CR

Known for its consistent performance, the HDFC ELSS Tax Saver stands out with its stellar three-year compound annual growth rate, making it a solid choice for those looking to maximize their tax savings.

3. Nippon India ELSS Tax Saver Fund

• Expense Ratio: 1.05%
• 3Y CAGR: 25.46%
• AUM: ₹14,028 CR

This fund combines a reasonable expense ratio with robust growth, offering investors a balanced option for tax-saving and investment growth.

4. DSP ELSS Tax Saver Fund

• Expense Ratio: 0.68%
• 3Y CAGR: 24.15%
• AUM: ₹13,583 CR

With the lowest expense ratio among the top performers, the DSP ELSS Tax Saver Fund is an excellent option for investors seeking efficient tax savings and investment growth.

5. Mirae Asset ELSS Tax Saver Fund

• Expense Ratio: 0.6%
• 3Y CAGR: 21.82%
• AUM: ₹18,843 CR

This fund not only provides a low-cost investment option but also impressive returns, making it a preferred choice for savvy investors.

6. ICICI Prudential ELSS Tax Saver Fund

• Expense Ratio: 1.07%
• 3Y CAGR: 20.81%
• AUM: ₹11,871 CR

A blend of reasonable costs and solid returns, the ICICI Prudential ELSS Tax Saver Fund is a go-to for those seeking reliable tax-saving investments.

7. Axis ELSS Tax Saver Fund

• Expense Ratio: 0.79%
• 3Y CAGR: 12.82%
• AUM: ₹34,300 CR

Boasting the highest AUM on our list, the Axis ELSS Tax Saver Fund offers stability and trust, albeit with lower returns, making it suitable for conservative investors.

Conclusion

Investing in ELSS funds is a smart way to save on taxes while potentially earning significant returns. The top 7 ELSS tax saver funds listed above have proven their mettle over time, combining tax efficiency with growth. As with any investment, it’s crucial to consider your financial goals, risk tolerance, and investment horizon before choosing a fund.