Best ELSS Funds in India (2025)

Investing in an ELSS mutual fund offers attractive benefits, but before you invest, it’s crucial to align your investment goal with the selected funds. Success hinges on ensuring that the chosen funds align with your objectives. To make informed decisions, assess factors such as historical performance, returns, latest NAV, exit load, and the fund manager’s portfolio performance. This blog provides a comprehensive overview of these aspects to enhance your understanding of ELSS fund investments.

List of Best ELSS Funds to Invest in 2025

Here is an educational ELSS Mutual Funds list of the best ELSS funds 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 top ELSS funds 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 10 Best ELSS Funds: An Overview 

Here is a brief overview of the top rated ELSS 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. As of 20th January 2025, the fund had assets under management (AUM) worth of Rs. 10,512.81 cr., and an expense ratio of 0.59%. Furthermore, the fund had a 3-yr CAGR of 15.37%, and a 5-yr CAGR of 31.46%.

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. As of 20th January 2025, the fund had an AUM worth of Rs. 38.54 cr., and an expense ratio of 1.18%. Furthermore, the fund had a 3-yr CAGR of 17.70%, and a 5-yr CAGR of 26.84%.

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. As of 20th January 2025, the fund had an AUM worth of Rs. 37.66 cr., and an expense ratio of 1.33%. Furthermore, the fund had a 3-yr CAGR of 17.22%, and a 5-yr CAGR of 26.45%.

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. As of 20th January 2025, the fund had an AUM worth of Rs. 32.82 cr., and an expense ratio of 1.19%. Furthermore, the fund had a 3-yr CAGR of 16.78%, and a 5-yr CAGR of 26.26%.

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. As of 20th January 2025, the fund had an AUM worth of Rs. 35.21 cr., and an expense ratio of 1.18%. Furthermore, the fund had a 3-yr CAGR of 18.03%, and a 5-yr CAGR of 26.19%

Sundaram LT Tax Adv Fund-Sr IV

Sundaram Long Term Tax Advantage Fund – Series IV is a closed-end Equity Linked Savings Scheme (ELSS) from Sundaram Asset Management Company. Like other ELSS funds, it comes with a three-year statutory lock-in period, offering both long-term capital appreciation potential and tax benefits under Section 80C of the Income Tax Act. As of 20th January 2025, the fund had an AUM worth of Rs. 22.77 cr., and an expense ratio of 1.18%. Furthermore, the fund had a 3-yr CAGR of 17.88%, and a 5-yr CAGR of 26.15%

Sundaram LT Micro Cap Tax Adv Fund-Sr III

Sundaram Long Term Micro Cap Tax Advantage Fund – Series III is a closed-end Equity Linked Savings Scheme (ELSS) from Sundaram Asset Management. True to its name, the fund invests predominantly in micro-cap stocks, seeking to uncover high-growth potential in smaller, emerging companies. As of 20th January 2025, the fund had an AUM worth of Rs. 81.57 cr., and an expense ratio of 1.25%. Furthermore, the fund had a 3-yr CAGR of 17.17%, and a 5-yr CAGR of 26.07%

SBI LT Advantage Fund-IV

SBI Long Term Advantage Fund – Series IV is a close-ended Equity Linked Savings Scheme (ELSS) from SBI Mutual Fund. It primarily invests in equity and equity-related instruments with an aim to generate long-term capital growth. As of 20th January 2025, the fund had an AUM worth of Rs. 220.20 cr., and an expense ratio of 0.00%. Furthermore, the fund had a 3-yr CAGR of 13.08%, and a 5-yr CAGR of 25.67%.

SBI LT Advantage Fund-III

SBI Long Term Advantage Fund – Series III is a closed-end Equity Linked Savings Scheme (ELSS) from SBI Mutual Fund. As an ELSS, it carries a mandatory lock-in of three years, during which units cannot be redeemed or switched, and offers tax deductions under Section 80C of the Income Tax Act. As of 20th January 2025, the fund had an AUM worth of Rs. 75.52 cr., and an expense ratio of 0.00%. Furthermore, the fund had a 3-yr CAGR of 16.23%, and a 5-yr CAGR of 24.79%.

SBI LT Advantage Fund-I

SBI Long Term Advantage Fund – Series I is a closed-end Equity Linked Savings Scheme (ELSS) from SBI Mutual Fund. It comes with a mandatory three-year lock-in period, during which investors benefit from tax deductions under Section 80C of the Income Tax Act. As of 20th January 2025, the fund had an AUM worth of Rs. 51.56 cr., and an expense ratio of 2.65%. Furthermore, the fund had a 3-yr CAGR of 16.18%, and a 5-yr CAGR of 24.22%.

How to Invest in the Best ELSS Mutual Funds?

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

• To invest in mutual funds, you can visit an equity investment platform such as smallcase or Tickertape.
• The next step would be to research and identify the best ELSS funds to invest in which aligns with your investment thesis. You can easily select and learn more about the best ELSS 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 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 the Best ELSS Funds?

An ELSS fund, with 65% in equities and equity-linked securities and a dash of fixed-income exposure, features a unique 3-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. Explore the top ELSS funds in the current market in the table below.

How do Best 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 capitalization 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, optimizing risk-adjusted portfolio returns. Explore tax saver ELSS funds for enhanced tax savings.

Features of the Best ELSS Funds 

Here are a few key features of the best ELSS Funds

Unlocking Tax Savings with ELSS: The Brief Guide

Discover the shortest lock-in period among tax-saving investments with Equity Linked Savings Schemes (ELSS), set at a mere 3 years. Following this period, investors gain the flexibility to update their portfolios. ELSS outshines traditional avenues like fixed deposits, public provident funds, and national pension schemes, offering the potential for superior returns.

Tax Efficiency and Wealth Growth: The ELSS Advantage

Under Section 80C of the Act, ELSS investments present an attractive tax benefit of up to 1.5 lakh. Beyond tax savings, ELSS empowers you to strategically manage your taxable income through eligible deductions, paving the way for enhanced returns.

Flexible Investment Paths: Lumpsum or SIP? Your Choice Matters

Seize control of your investment strategy with ELSS, offering the freedom to choose between lumpsum or 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 with ELSS. 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 Invest in the Best ELSS Funds?

As a salaried employee, a portion of your income contributes to the Employee Provident Fund (EPF), a fixed income product. To balance risk and return in your investment portfolio, consider the Equity Linked Savings Scheme (ELSS). ELSS not only offers the potential for extraordinary returns but also qualifies for tax deductions under section 80C. Unlike Unit Linked Insurance Plans (ULIPs), which have a longer lock-in period and lower return potential, ELSS funds have the shortest lock-in period of three years.

For new investors, ELSS presents an ideal choice. Beyond tax benefits, it provides exposure to equity investing and mutual funds. 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. Utilizing 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 for your 2024 investments:

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. This lock-in period is a crucial aspect to factor into your decision-making process.

Performance-Dependent Returns

It’s essential to recognize that ELSS funds do not guarantee returns. Instead, their performance is intricately tied to the success of the underlying securities. This means that investors should be prepared for variable returns, contingent on market conditions and the fund’s performance.

Extended Investment Horizon for Optimal Returns

To maximize 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. Investors seeking substantial returns should be prepared for a more extended engagement with their investments.

Risks Involved While Investing in the Best ELSS Funds

Navigating the landscape of ELSS funds for 2023 requires a keen understanding of associated risks. Let’s delve into these potential pitfalls:

Liquidity Risk

When considering ELSS funds, investors need to be mindful of 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. This period of illiquidity demands careful consideration and strategic planning.

Market Risk

Another crucial factor in the ELSS investment landscape is 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. Investors should be cognizant of these external factors that can significantly impact stock market prices and, consequently, the performance of their ELSS investments.

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. Investors must comprehend and accept the potential volatility associated with equity exposure when venturing into ELSS funds.

Benefits of Investing in the Best ELSS Funds

Unlock the advantages of investing in the best ELSS funds in 2024:

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.

Dynamic Returns through Stock Investments

Unlike traditional tax-saving options such as bank fixed deposits and PPF, ELSS 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. An upswing in the prices of these underlying securities can translate into significant gains.

Tax Deductions for Investments up to Rs.1.5 Lakh

Investors can leverage 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 optimize 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. Start by assessing the fund’s historical performance, considering consistent returns over various market cycles. Scrutinize the fund manager’s track record and investment strategy to ensure alignment with your risk tolerance and financial goals.

Expense ratios play a crucial role; opt for funds with lower expenses to maximize your returns. Diversification is key to managing risk, so evaluate the fund’s portfolio for a well-balanced mix of stocks across different sectors.

Additionally, delve into the fund’s investment tenure and lock-in period. A longer investment horizon can potentially yield better results, and understanding the lock-in period ensures alignment with your liquidity requirements.

Stay abreast of the market and economic trends, as these factors influence the performance of ELSS funds. Lastly, consider seeking professional advice to supplement your research, ensuring a comprehensive understanding before making any investment decisions. Remember, the goal is not just to find the best ELSS 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 the best Equity Linked Savings Scheme (ELSS) mutual funds are calculated is essential for informed investment decisions. ELSS funds primarily invest in equities, and their returns are influenced by the performance of the underlying stocks.

• 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 realized when fund managers buy and sell securities.
• Expense Ratios: It’s important to note that returns are impacted by the fund’s expenses. The expense ratio, representing the percentage of assets used for fund management, can influence the net returns to investors.
• Lock-in Period Considerations: ELSS 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

ELSS funds are taxed as equity funds in India. Understanding the latest tax regulations on equity mutual funds is essential for making informed investment decisions. The Union Budget 2024-25 has introduced significant changes to the taxation of equity mutual funds, simplifying the tax structure while altering rates and benefits. Here is a detailed breakdown of the new tax rules:

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.

Indexation is a method used to adjust the purchase price of an asset (like property or gold) for inflation over the years. This adjusted price is then used to calculate capital gains. Previously, long-term capital gains from selling property, gold, or other unlisted assets were taxed at 20%, but you could use indexation to reduce your taxable profit. The new rule simplifies the tax structure by setting a flat 12.5% tax rate for all long-term capital gains. However, it removes the indexation benefit.

Summary

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 prioritize aligning these aspects with their financial goals. Regular reviews and staying attuned to market dynamics are crucial for optimizing good ELSS funds’ portfolios. 

Remember, the “best” ELSS mutual fund is subjective, dependent on individual preferences and risk appetite. Informed decision-making, coupled with ongoing market awareness, will empower investors to craft a resilient portfolio tailored to their unique financial objectives.

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