The stock market has seen a massive plunge in the last about 6 months, wiping off significant gains that mutual funds across categories had clocked in the post-pandemic period. Benchmark equity indices Sensex and Nifty have plunged 14% from their September peaks. This recent crash in equities has ensured that mutual funds across categories remain in the red in terms of their short-term returns (1 month, 3 months and 6 months). In such a situation, choosing the right fund has become more challenging than ever.
With the financial year about to end, many of you would be looking for an investment instrument that also helps in tax savings under the Old Tax Regime. If you want to create wealth for the long term and also want to save tax, then ELSS (Equity Linked Savings Scheme) can be a great option.
Also read: Top 5 dividend yield mutual funds with highest returns in 5 years
In this write-up, we will take a look at the 10 best ELSS mutual funds based on their last 5-year returns.
Top 10 tax-saving mutual funds to invest in 2025
1. Quant ELSS Tax Saver Fund
Returns 5 years: 32.51%
Launch date: 01 January 2013
Riskometer: Very High
2. SBI Long Term Equity Fund
Returns 5 years: 26.08%
Launch date: 01 January 2013
Riskometer: Very High
3. Parag Parikh ELSS Tax Saver Fund
Returns 5 years: 24.93%
Launch date: 24 July 2019
Riskometer: Very High
4. HDFC ELSS Tax Saver Fund
Returns 5 years: 24.20%
Launch date: 01 January 2013
Riskometer: Very High
5. Bandhan ELSS Tax Saver Fund
Returns 5 years: 23.88%
Launch date: 01 January 2013
Riskometer: Very High
6. DSP ELSS Tax Saver Fund
Returns 5 years: 23.04%
Launch date: 01 January 2013
Riskometer: Very High
7. Bank of India ELSS Tax Saver Fund
Returns 5 years: 22.16%
Launch date: 01 January 2013
Riskometer: Very High
8. Franklin India ELSS Tax Saver Fun
Returns 5 years: 22.07%
Launch date: 01 January 2013
Riskometer: Very High
9. Mirae Asset ELSS Tax Saver Fund
Returns 5 years: 21.78%
Launch date: 28 December 2015
Riskometer: Very High
10. Quantum ELSS Tax Saver Fund
Returns 5 years: 21.40%
Launch date: 23 December 2008
Riskometer: Very High
(Data: Value Research, Amfi)
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Benefits and Risks of ELSS Funds
Benefits of ELSS:
Tax Savings: Under Section 80C, a deduction of up to Rs 1.5 lakh is available, which can save tax.
Shortest lock-in period: While PPF has a lock-in period of 15 years and FD has a lock-in period of 5 years, ELSS has a lock-in period of only 3 years.
Possibility of long-term growth: Since this fund invests in equity, there is a possibility of getting good returns in the long term.
Facility of small investments: Through SIP, you can invest small amounts every month, which does not put pressure on the budget.
Risks of ELSS:
Market volatility: Since it is completely based on equity, there can be losses if the market falls.
No guaranteed returns: Unlike FD or PPF, it does not offer a fixed interest rate, rather the return depends entirely on the performance of the market.
Lack of liquidity: It is not possible to withdraw the investment before 3 years, which can be difficult in times of emergency.
Who should invest in ELSS?
If you are willing to invest for the long term, can handle market volatility and want to focus on wealth creation along with saving tax, then ELSS can be a good option for you. Especially, if you are thinking of investing in equity for the first time, then this can be the right entry point.
Summing up
If you are also one of those people who decide to invest in a hurry to save tax in the last days of March, then ELSS can be a better option. But keeping in mind the current market correction, choose the fund wisely, so that along with saving tax, you can also get good returns.