Mutual Funds: 11 best ELSS funds that help save on taxes while creating wealth in the long run

With the tax-saving deadline approaching, consider investing in ELSS funds for potential market-linked returns and tax benefits. Some ELSS funds have outperformed the Nifty 50 Index, leading to substantial wealth accumulation for investors.

Abeer Ray
First Published27 Mar 2024
Top ELSS funds that you may invest in.
Top ELSS funds that you may invest in.

With the deadline for investing in tax-saving instruments approaching on March 31, time is running out. While reducing the tax burden is a top priority for many taxpayers, it’s equally important to focus on wealth creation. This leads us to consider investing in equity-linked savings schemes (ELSS)

ELSS is a mutual fund category that offers tax benefits of up to 1.50 lakh under Section 80C of the Income Tax Act while also providing the potential for market-linked returns.

Examining the five-year returns of ELSS funds shows their impressive performance over the last ten years or more. While some might contend that these funds carry the same volatility as equity-based funds, it’s undeniable that numerous funds in this category have outperformed the benchmark Nifty 50 Index. As a result, many investors have accumulated substantial wealth.

Interpreting ELSS fund returns

Consider the Quant ELSS Tax Saver Fund, which has provided a return of 26.66% over the past decade. This fund has performed remarkably well for over 10 years, enabling investors to profit from market fluctuations and also benefit from tax savings.

Name of the fund

10-year returns (in %)

Monthly investment 

(in Rs)

 

Investment tenure 

(in years)

Invested amount

(in Rs)

Estimated returns 

(in Rs)

Maturity amount 

(in Rs)

Quant ELSS Tax Saver Fund

26.66

12,500

10 

15,00,000

59,58,807

74,58,807

          Source: AMFI (As of March 25, 2024)

Many taxpayers regret choosing other ELSS fund options. Nevertheless, these funds have also generated respectable returns since their inception, benefiting many of their investors in the long term. The following table illustrates the performance of other tax-saving mutual funds in the past 10 years and how investors have benefited from putting their money in them.

Name of the fund

10-year returns (in %)

Monthly investment 

(in Rs)

 

Investment tenure 

(in years)

Invested amount

(in Rs)

Estimated returns 

(in Rs)

Maturity amount 

(in Rs)

Bank of India ELSS Tax Saver

20.30

12,500

10 

15,00,000

33,73,608

48,73,608

Bandhan ELSS Tax saver Fund

19.79

12,500

10 

15,00,000

32,14,938

47,14,938

DSP ELSS Tax Saver Fund

19.37

12,500

10 

15,00,000

30,88,708

45,88,708

Kotak ELSS Tax Saver Fund

19.29

12,500

10 

15,00,000

30,65,107

45,65,107

JM ELSS Tax Saver Fund

19.19

12,500

10 

15,00,000

30,35,803

45,35,803

Invesco India ELSS Tax Saver Fund

18.40

12,500

10 

15,00,000

28,11,765

43,11,765

Franklin India ELSS Tax Saver Fund

17.68

12,500

10 

15,00,000

26,18,657

41,18,657

Sundaram ELSS Tax Saver Fund

17.20

12,500

10 

15,00,000

24,95,490

39,95,490

ICICI Prudential ELSS Tax Saver Fund

16.87

12,500

10 

15,00,000

24,13,297

39,13,297

HDFC ELSS Tax saver

16.60

12,500

10 

15,00,000

23,47,512

38,47,512

          Source: AMFI (As of March 25, 2024)

Weigh risk vs. return before investing

Investments are intended to increase wealth over time, facilitated by factors such as interest, dividends, or asset appreciation. It’s essential to comprehend the diverse investment options available and their associated risk-reward profiles. ELSS funds, for instance, offer significant growth potential albeit with some level of volatility. Furthermore, consistent investing, even with modest amounts, often yields better results than a large lump sum investment at an inopportune moment.

ELSS funds serve as a valuable avenue for tax-saving and long-term wealth accumulation. However, investors must recognize that past performance doesn’t guarantee future outcomes. Additionally, when making investment decisions, investors should be prepared to undertake risks and align their investments with their financial objectives.

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