About ELSS Mutual Funds
ELSS or Equity-Linked Savings Schemes are mutual funds that invest primarily in equities or equity-related products. 80% of their investments must be invested in equities, and the lock-in period is 3 years. These tend to be open-ended funds that make a fair bit of returns. But most importantly, they qualify for tax deductions under Section 80C of the Income Tax Act, 1961.
Investment portfolio-wise, ELSS are just like any other equity fund as the exact amount and proportion of investment in companies and sectors differ from fund to fund based on the preference of the fund manager. The dividends earned in ELSS may either be reinvested (under the growth option) or given to the investors (under the dividend option).
How Do ELSS Funds Work?
When you invest in an ELSS fund, your money goes towards buying a diverse portfolio of equities or equity-related instruments. ELSS funds primarily invest in growth-oriented firms, although they may also hold debt or money market instruments for portfolio management.
Here’s how ELSS funds work:
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Equity allocation: At least 80% of the total assets in an ELSS fund must be invested in equity or equity-related instruments.
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Professional management: The fund manager will actively select stocks which are based on research, valuation, and risk management.
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Lock-in period: Every investment (including SIP instalments) is subject to a mandatory 3-year lock-in from the date of investment.
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Options: Investors can choose a growth option, where returns are reinvested, or they can go for an IDCW (Income Distribution cum Capital Withdrawal) option, where income may be distributed periodically.
Top 10 ELSS Mutual Funds to Invest in
The following are the top ELSS Funds in India:
| Name | AUM | CAGR 3Y | Expense Ratio | Absolute Returns - 1Y |
| SBI ELSS Tax Saver Fund | 32608.80 | 24.70 | 0.92 | 8.41 |
| Motilal Oswal ELSS Tax Saver Fund | 4341.47 | 23.52 | 0.64 | 4.96 |
| SBI LT Advantage Fund-V | 377.32 | 23.16 | 0 | 12.58 |
| WOC ELSS Tax Saver Fund | 437.94 | 22.20 | 0.67 | 6.99 |
| HDFC ELSS Tax saver | 17163.37 | 22.03 | 1.08 | 11.27 |
| DSP ELSS Tax Saver Fund | 17609.03 | 21.37 | 0.67 | 11.19 |
| Sundaram LT Tax Adv Fund-Sr IV | 22.30 | 21.11 | 1.18 | 6.77 |
| JM ELSS Tax Saver Fund | 215.83 | 20.86 | 1.01 | 4.76 |
| Baroda BNP Paribas ELSS Tax Saver Fund | 941.43 | 20.75 | 1 | 9.59 |
Note:The data above is as of Feb 9, 2026, and is sorted and ranked as per 3-year CAGR.
SBI ELSS Tax Saver Fund
SBI ELSS Tax Saver Fund is managed by Dinesh Balachandran, this ELSS offers Section 80C tax benefits with a 3-year lock-in and 0.92% expense ratio. It seeks long-term capital appreciation via diversified equities across market caps, balancing growth and stability for tax-savvy investors.
Motilal Oswal ELSS Tax Saver Fund
Motilal Oswal ELSS Tax Saver Fund is an open-ended scheme, managed by Rakesh Shetty with a low 0.64% expense ratio, 3-year lock-in, and Section 80C deductions. It targets capital growth through a concentrated portfolio of high-quality growth stocks, suiting aggressive long-term investors.
SBI Long Term Advantage Fund - Series V
Nidhi Chawla manages this close-ended series at 0% expense ratio (Direct), with Section 80C perks and 3-year lock-in. Focused on capital appreciation from stable large- and mid-cap equities, it's ideal for low-cost tax planning.
WOC ELSS Tax Saver Fund
WOC ELSS Tax Saver Fund invests in companies across market capitalisations.Ramesh Mantri along with his team manages the scheme offering with 0.67% expense ratio, 3-year lock-in, and tax savings under 80C. It aims for risk-adjusted returns via diversified quality equities, perfect for balanced growth seekers.
HDFC ELSS Tax Saver
An open-ended Equity Linked Savings Scheme with a statutory lock in of 3 years and tax benefit. The scheme is managed by Amar Kalkundrikar and Dhruv Muchhal at 1.08% expense ratio. It pursues capital appreciation through sector-diverse equities, leveraging HDFC's strong equity expertise.
DSP ELSS Tax Saver Fund
DSP ELSS Tax Saver Fund is an open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefits. Rohit Singhania manages this scheme with a 0.67% expense ratio fund with 3-year lock-in and 80C tax efficiency. The scheme aims long-term growth from large- and mid-cap equities with solid governance.
Sundaram Long Term Tax Advantage Fund - Series IV
S Krishnakumar leads this close-ended fund at 1.18% expense ratio, with 3-year lock-in and Section 80C deductions. Seeks appreciation from undervalued equities across caps, appealing to value-oriented tax investors.
JM ELSS Tax Saver Fund
Deepak Gupta, Satish Ramanathan and Asit Bhandarkar oversee this 1.01% expense ratio ELSS with 3-year lock-in and 80C benefits. Aims for growth via flexible equity and derivatives investments across market sizes.
Baroda BNP Paribas ELSS Tax Saver Fund
Baroda BNP Paribas ELSS Tax Saver Fund is an open ended Equity Linked Saving Scheme with a statutory lock in of 3 years and tax benefit. Sanjay Chawla and Pratish Krishnan manages this 1.00% expense ratio fund, offering 3-year lock-in and Section 80C tax savings. Focuses on capital appreciation through diversified growth-value equity blends.
Features of ELSS Mutual Funds
The key features of ELSS mutual funds are as follows:
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Equity-oriented structure: ELSS schemes allocate at least 80% of their total assets to equity and equity-related products. A small portion might be allocated to debt or money market instruments for portfolio management.
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Section 80C tax deduction: Investments of up to ₹1.5 lakh in a financial year qualify for deduction under Section 80C of the Income Tax Act, 1961, under the old tax regime. Investments beyond ₹1.5 lakh are not eligible for additional tax deductions.
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Potential tax savings: Investors in the highest 30% tax rate under the former regime might save up to ₹46,800 on a ₹1.5 lakh investment, excluding applicable cess.
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Mandatory 3-year lock-in: Each investment, including every SIP installment, is subject to a mandatory 3-year lock-in period effective from the date of investment.
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Flexible investment options: Investors can invest either through a lump sum or via a Systematic Investment Plan (SIP).
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Market-linked returns: Since ELSS funds are equity-focused, returns are market-linked and may outperform typical fixed-income tax-saving vehicles, subject to market risks.
Advantages of ELSS Mutual Funds
The following are some of the advantages of ELSS mutual funds:
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Tax saving: It is an excellent tool for retail investors to save a large portion of their income from being taxed and additionally earn far higher returns from deploying the money than in a savings account.
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Short lock-in period: Compared to provident funds and pension funds, ELSS mutual funds have a relatively shorter lock-in period of 3 years (there may be some equity or debt funds, though, which may have a lower lock-in period than ELSS funds).
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Higher returns: Again, compared to provident funds or pension funds or even post office savings schemes, the returns of ELSS mutual funds can be higher, especially if they are some of the best ELSS funds. This is because they play with high-risk, high-return investment avenues like equity.
Overall, ELSS mutual funds can be a great way to induce the retail, salaried investors of India to start investing in the market, thereby channelling idle funds into the equity market.
Factors to Consider Before Investing in ELSS Funds
Before investing in ELSS funds, consider the following key factors:
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Risk Profile: ELSS funds are equity-linked, which means they are exposed to market risk and can be volatile in the short term. Ensure that your risk tolerance matches the fund's equity exposure.
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Tax Regime Choice: Only the old tax regime provides tax benefits under Section 80C. If you choose the new regime, ELSS will not offer 80C deductions.
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Lock-in Period: Each SIP installment has a three-year lock-in from the date of investment. You cannot redeem the units before the lock-in period ends.
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Expense Ratio: Lower expense ratios aim to optimise net returns by reducing fees charged to investors. When choosing an ELSS fund, consider the direct plan expense ratio.
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Fund Performance Consistency: Instead of focusing just on recent returns, consider historical performance across multiple market cycles. Consistency frequently suggests improved management discipline.
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Fund Manager Experience: Experienced fund managers can assist you manage market ups and downs. Evaluating the manager's track record reveals how the fund has handled various situations.
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Asset Allocation: Check how aggressively the ELSS fund allocates across large, mid, and small caps. A well-balanced allocation can help manage risk while seeking growth.
Who Should Invest in ELSS Mutual Funds?
1. Salaried Individuals
For salaried employees contributing to the Employees' Provident Fund (EPF), which is a fixed-income option, investing in ELSS could offer higher returns. ELSS not only provides the potential for long-term growth but also offers tax deductions under Section 80C.
While other options like ULIPs and NPS also offer tax benefits, they come with longer lock-in periods and possibly lower returns. ULIPs have a five-year lock-in, while NPS is more retirement-focused, locking funds until the age of 60. In contrast, ELSS has the shortest lock-in period of just 3 years.
2. First-Time Investors
If you're new to investing, ELSS is an excellent choice. Along with tax savings, it introduces you to equity and mutual fund investments. Though equity can be volatile in the short term, investing for over 5 years significantly reduces risk.
SIPs (Systematic Investment Plans) in ELSS are a smart way to start, helping you accumulate units when markets are down and reap the benefits when they rise.
How to Choose ELSS Mutual Funds?
Selecting the right ELSS mutual fund requires thoughtful analysis aligned with your investment goals and risk tolerance. Start by reviewing key factors like:
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Expense ratio: Look for funds with a low expense ratio to ensure more of your money is invested and not eaten up by fees.
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Fund manager’s track record: Check the experience and success of the fund manager to gauge their ability to handle different market conditions.
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Fund performance: Analyse the fund’s performance over various market cycles, focusing on consistency and resilience during market downturns.
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Risk-return ratios: Consider metrics like standard deviation, Sharpe ratio, and Treynor ratio to assess the fund’s risk-return profile.
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SIP investment: Opt for systematic investment plans (SIPs) to benefit from rupee-cost averaging and reduce the impact of market volatility.
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Investment strategy: Ensure the fund’s strategy aligns with your financial goals and risk tolerance, whether you’re seeking aggressive growth or stable returns.
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Liquidity preference: Consider the lock-in period and your liquidity needs before committing to an ELSS fund.
Taxation on ELSS Mutual Funds
The taxation rules for ELSS mutual funds are as follows:
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Section 80C deduction: Investments up to ₹1.5 lakh in a financial year qualify for deduction under Section 80C of the Income Tax Act, 1961, only if you select the old tax regime.
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Lock-in period: ELSS has a mandatory 3-year lock-in, so redemption is possible only after 3 years from the date of each investment.
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Long-term capital gains (LTCG): Since redemption is allowed only after 3 years, gains are treated as long-term capital gains.
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LTCG exemption limit: LTCG up to ₹1.25 lakh in a financial year is exempt from tax (as per amendments introduced in July 2024).
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LTCG tax rate: Gains exceeding ₹1.25 lakh are taxed at 12.5% without indexation benefits.
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IDCW taxation: Income received under the IDCW (Income Distribution cum Capital Withdrawal) option is added to your total income and taxed as per your applicable income tax slab.
How To Invest In ELSS Funds On Angel One?
Investing in the ELSS Mutual Fund is hassle-free when done through your Angel One account. You just have to follow these simple steps:
Step 1: Log in to your Angel One account.
Step 2: Determine an ELSS fund that suits your needs and risk profile. You can learn more about each ELSS fund on the Angel One app. Things to consider at this stage are:
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Search for the fund you want to invest in.
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Analyse the fund’s past performance, tax incidence, and the sectors and companies it invests in.
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You can also calculate the potential returns using the calculator.
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Evaluate the fund’s level of risk, its ratings, and its expense ratio.
Step 3: Once you finalise the ELSS fund(s) you want to invest in, open your Angel One account, go to the Mutual Funds section, and look for it.
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Decide whether you want to invest via SIP or make a one-time investment
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Decide your monthly SIP date. Now, enter the amount you want to invest and choose the payment mode.
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After placing the order, you can create an AutoPay to make hassle-free future installments in case of SIP investments.
