Top ELSS Mutual Funds in India 2025: Returns Calculation, Taxation, & More

Equity Linked Savings Schemes (ELSS) are a unique category of mutual funds that combine tax efficiency with equity market participation. Designed to encourage long-term investing, they offer a structured approach to wealth creation while providing tax benefits. This blog provides a comprehensive overview of these aspects to enhance your understanding of ELSS fund investments.

List of Best ELSS Funds in 2025

Here is an educational list of ELSS mutual funds in India based on their 5-yr CAGR:

Fund Name	Fund Size (Rs. in cr.)	CAGR 5Y (%)
Quant ELSS Tax Saver Fund	10,512.81	31.46
Sundaram LT Micro Cap Tax Adv Fund-Sr VI	38.54	26.84
Sundaram LT Micro Cap Tax Adv Fund-Sr IV	37.66	26.45
Sundaram LT Micro Cap Tax Adv Fund-Sr V	32.82	26.26
Sundaram LT Tax Adv Fund-Sr III	35.21	26.19
Sundaram LT Tax Adv Fund-Sr IV	22.77	26.15
Sundaram LT Micro Cap Tax Adv Fund-Sr III	81.57	26.07
SBI LT Advantage Fund-IV	220.20	25.67
SBI LT Advantage Fund-III	75.52	24.79
SBI LT Advantage Fund-I	51.56	24.22

Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.

Note: The list of ELSS mutual funds in India is from 20th January 2025 and the data is derived from Tickertape Mutual Fund Screener, using the following filters:

• Category: Equity Linked Savings Schemes (ELSS)
• Plan: Growth
• CAGR 5Y: Sorted from Highest to Lowest

Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.

Top 5 Best ELSS Funds: An Overview 

Here is a brief overview of the best performing ELSS mutual funds listed above:

Quant ELSS Tax Saver Fund

Quant ELSS Tax Saver Fund is an Equity Linked Savings Scheme (ELSS) offered by Quant Mutual Fund. As an ELSS, it is designed to provide both long-term capital appreciation and tax-saving benefits under Section 80C of the Income Tax Act, up to an investment limit of Rs. 1.5 lakh per financial year. 

Sundaram LT Micro Cap Tax Adv Fund-Sr VI

Sundaram Long Term Micro Cap Tax Advantage Fund – Series VI is a closed-end equity-linked savings scheme (ELSS) designed to offer both potential long-term capital appreciation and tax benefits under Section 80C of the Income Tax Act. 

Sundaram LT Micro Cap Tax Adv Fund-Sr IV

Sundaram Long Term Micro Cap Tax Advantage Fund – Series IV is a closed-end equity-linked savings scheme (ELSS) that combines the goal of long-term wealth creation with tax benefits under Section 80C of the Income Tax Act. By concentrating on smaller, emerging companies (micro-cap stocks), the fund seeks higher growth potential, albeit with greater volatility. 

Sundaram LT Micro Cap Tax Adv Fund-Sr V

Sundaram Long Term Micro Cap Tax Advantage Fund – Series V is a closed-end equity-linked savings scheme (ELSS) that focuses on investing predominantly in emerging micro-cap companies with the potential for above-average growth over the long term. Its three-year lock-in period, mandated by ELSS regulations, fosters a long-term perspective while also providing tax benefits under Section 80C of the Income Tax Act. 

Sundaram LT Tax Adv Fund-Sr III

Sundaram Long Term Tax Advantage Fund – Series III is a closed-end Equity Linked Savings Scheme (ELSS) that aims to provide long-term capital growth along with tax benefits under Section 80C of the Income Tax Act. By investing predominantly in equity and equity-linked instruments, the fund seeks to capitalise on the growth potential of diverse market segments while benefiting from the stability of a closed-end structure.

How to Invest in the Best ELSS Mutual Funds?

You can easily invest in ELSS mutual funds by following these steps:

• To invest in best mutual funds India, you can visit an equity investment platform such as smallcase or Tickertape.
• The next step would be to research and identify the top 5 ELSS funds which aligns with your investment thesis. You can easily select and learn more about the best tax saving mutual funds with the help of a financial tool like the Tickertape Mutual Fund Screener. With 50+ pre-loaded filters, it helps you to create a comprehensive list by giving insights about the fund’s performance. Try it now!
• Once you have selected the best funds based on different metrics and parameters, go to smallcase.com or the smallcase app, and login via your phone number. Click on ‘Discover‘ and enter the name of the specific mutual fund name in the search bar and hit enter. You can click on ‘invest now’ and select whether you want to invest a lump sum amount or start a SIP and start investing!

What are ELSS Funds?

An ELSS fund allocates a minimum of 65% to equities and equity-linked instruments, complemented by a limited exposure to fixed-income securities. It has a mandatory three-year lock-in period. It stands as the sole mutual fund category qualifying for tax deductions under Section 80C of the Income Tax Act, 1961. This offers an opportunity to claim a tax rebate of up to Rs. 1,50,000, potentially saving Rs. 46,800 annually. 

How do ELSS Funds Work?

ELSS funds, or Equity Linked Savings Scheme funds, represent diversified equity funds. They invest in listed company stocks based on the fund’s investment objective, diversifying across market capitalisation and industry sectors, including Large Caps, Mid Caps, and Small Caps. The goal is long-term capital appreciation. Fund managers select stocks through thorough market research, optimising risk-adjusted portfolio returns. Explore tax saver ELSS funds for enhanced tax savings.

Features of the ELSS Funds 

Here are a few key features of the best ELSS Funds

• Tax Efficiency and Wealth Growth: Under Section 80C of the Act, ELSS investments present an attractive tax benefit of up to 1.5 lakh. Beyond the ELSS tax benefits, these funds empowers you to strategically manage your taxable income through eligible deductions, paving the way for enhanced returns.
• Flexible Investment Paths: ELSS funds offer the freedom to choose between lumpsum or a Systematic Investment Plan (SIP). Opting for SIP not only enables rupee cost averaging but also eliminates the burden of a hefty lumpsum investment, making it a lighter load on your financial journey.
• Professional Management for Optimal Growth: Entrust your investments to seasoned professionals navigating market dynamics and ELSS funds performance. Fund managers, well-versed in market fluctuations, expertly oversee the money invested in ELSS, ensuring a robust and strategic approach to wealth management.

Who Should Explore ELSS Funds?

To balance risk and return in your investment portfolio, you can research Equity Linked Savings Scheme (ELSS) funds. They not only offer the potential for extraordinary returns but also qualify for tax deductions under section 80C.

For new investors, ELSS presents an ideal choice. Beyond tax benefits, it provides exposure to equity investing and mutual funds India. Equity investing demands patience and the discipline to stay invested for the long term. ELSS’s lock-in period ensures investors commit to a long-term approach, preventing impulsive withdrawals due to short-term market fluctuations. Utilising Systematic Investment Plans (SIP) for ELSS allows for regular investing and takes advantage of rupee cost averaging. This strategy helps accumulate more units during market downturns, ultimately benefiting investors when the market rebounds.

Factors to Consider Before Investing in the Best ELSS Funds  

Consider the following key factors when selecting the most suitable ELSS funds:

• Lock-In Period Significance: ELSS funds impose a mandatory three-year lock-in period, restricting the redemption of investments before this duration. Investors must carefully evaluate their commitment to this time frame, as premature withdrawals are not permitted. 
• Performance-Dependent Returns: It’s essential to recognise that ELSS funds do not guarantee returns. Instead, their performance is intricately tied to the success of the underlying securities. 
• Extended Investment Horizon for Optimal Returns: To maximise returns, ELSS funds require a longer investment horizon, preferably exceeding five years. This extended commitment helps mitigate market volatility, especially considering the inherent exposure to equities within ELSS funds. 

Risks Involved While Investing in the Best ELSS Funds

Navigating the landscape of ELSS funds requires a keen understanding of associated risks. Let’s delve into these potential pitfalls:

• Liquidity Risk: This risk revolves around the possibility of investors being unable to redeem their investments without incurring a loss in value. This constraint is primarily due to the three-year lock-in period, during which an investor cannot readily redeem or transfer their ELSS investment. 
• Market Risk: This risk stems from the likelihood of investors experiencing losses due to unfavorable market conditions. The stock market’s performance is influenced by various factors such as economic recessions, political considerations, and overall market sentiment. 
• Equity Exposure Risk: Equity Linked Savings Schemes are mandated to allocate a minimum of 80% of their assets to equity securities. This statutory requirement exposes the ELSS fund’s portfolio to inherent market risks. As equity markets fluctuate, the fund’s performance is intricately tied to these market movements.

Benefits of Investing in the Best ELSS Funds

Here are the advantages of investing in the best ELSS funds:

• Shorter Lock-In Period for Greater Liquidity: Investing in the best ELSS funds provides a distinct advantage with a mere 3-year lock-in period, making it the most liquid option among tax-saving investments. This stands in stark contrast to alternatives like the Public Provident Fund (PPF), which imposes a significantly longer 15-year maturity period.
• Potential Returns Through Stock Investments: Unlike traditional tax-saving options such as bank fixed deposits and PPF, ELSS equity tax saver funds stand out by investing in a diversified portfolio of stocks from various companies. The net asset value (NAV) of ELSS funds fluctuates in tandem with market movements, offering investors the potential for substantial returns. However, one must keep in mind that returns are not guaranteed.
• Tax Deductions for Investments up to Rs.1.5 Lakh: Investors can leverage mutual funds tax benefits under the provisions of the Income Tax Act by allocating funds to ELSS. With eligible investments capped at Rs.1.5 lakh, individuals can optimise their tax liabilities while fostering wealth creation through strategic mutual fund investments.

How to Choose Best ELSS Funds for Investing?

Selecting the right Equity Linked Savings Scheme (ELSS) mutual fund requires a strategic approach rooted in informed decision-making. 

• Assess historical performance: Look for the top mutual funds in India with consistent returns across different market cycles.
• Evaluate the fund manager: Analyse their track record and investment strategy to ensure alignment with your risk tolerance and financial goals.
• Consider expense ratios: Opt for funds with lower costs to maximise returns over the long term.
• Examine portfolio diversification: A well-balanced mix of stocks across sectors helps manage risk effectively.
• Understand investment tenure and lock-in period: A longer investment horizon can enhance returns, while awareness of the lock-in period ensures liquidity planning.
• Stay informed about market trends: Economic conditions and market movements impact ELSS fund performance.
• Seek professional advice: Supplement your research with expert insights for a well-rounded investment decision.

Remember, the goal is not just to find the top 10 tax saving mutual funds, but those that best suit your unique financial objectives and risk tolerance.

What are the Returns on the Best ELSS Funds & How are they Calculated?

Understanding how the returns on ELSS mutual funds in India are calculated is essential for informed investment decisions. ELSS mutual fund schemes primarily invest in equities, and the performance of the underlying stocks influences their returns.

• Market Performance: ELSS funds’ returns are closely tied to the overall performance of the stock market. As the market fluctuates, the value of the fund’s portfolio adjusts accordingly.
• Net Asset Value (NAV): The Net Asset Value represents the per-unit market value of the ELSS fund. Calculated by dividing the total value of the fund’s assets by the number of outstanding units, NAV is a key metric for tracking performance.
• Dividends and Capital Gains: Returns may also be generated through dividends from stocks held within the fund and capital gains realised when fund managers buy and sell securities.
• Expense Ratios: It’s important to note that the fund’s expenses impact returns. The expense ratio, representing the percentage of assets used for fund management, can influence the net returns to investors.
• Lock-in Period Considerations: ELSS tax saving funds come with a mandatory lock-in period. Understanding how this period affects returns is crucial, as premature withdrawals may have implications.

Taxability on the Best ELSS Funds

Short-Term Capital Gains (STCG)

If you hold equity mutual funds for less than a year, the gains from these investments are classified as short-term capital gains. According to the new budget, these gains are now taxed at a rate of 20%, which has been increased from the previous rate of 15%.

Long-Term Capital Gains (LTCG)

For equity mutual funds held for more than a year, the gains are considered long-term capital gains. The key points to note under the new budget are:

• Tax-Free Limit: Gains up to Rs. 1.25 lakh in a financial year remain tax-free. This limit has been increased from the previous threshold of Rs. 1 lakh.
• Tax Rate: Any gains above Rs. 1.25 lakh are taxed at a flat rate of 12.5%. It was previously taxed at 10%.
• Indexation: It’s important to note that the benefit of indexation, which previously allowed investors to adjust the purchase price of their assets for inflation, has been removed for all asset classes, including equity mutual funds.

Capital Gains Tax	Holding Period	Old Rate	New Rate
Short-Term Capital Gains (STCG)	Less than 12 months	15%	20%
Long-Term Capital Gains (LTCG)	More than 12 months	10%	12.50%

No Indexation Benefit: This change affects the overall tax liability, potentially increasing it for long-term investors.

To Wrap It Up…

To conclude, navigating the landscape of the best ELSS funds is essential for informed investment decisions. This exploration has shed light on critical factors such as factors, features, benefits, risk management, and expense ratios. Investors should prioritise aligning these aspects with their financial goals. Regular reviews and staying attuned to market dynamics are crucial for optimising ELSS funds’ portfolios.

FAQs