Top Mutual Funds Under Section 80C to Invest Online in 2024

Explore Section 80C of the Income Tax Act for potential tax savings. ELSS mutual funds, a top investment choice, provide up to INR 1.5 lakh in tax deductions. While they yield profitable long-term returns, remember that ELSS mutual funds become taxable after 3 years. 

To make informed investment decisions, delve into the details of these funds. Check out our guide on the best ELSS mutual funds to get started on maximizing your savings.

What are Mutual Funds Under 80C?

The best 80C investment of the Income Tax Act provides an opportunity for taxpayers to reduce their tax liability significantly. By making eligible investments, individuals can claim tax 80c mutual fund deduction of upto Rs. 1.5 lakh as outlined in this section.

One attractive option for both salaried and self-employed individuals is the Equity Linked Savings Scheme Mutual Funds (ELSS). These funds not only provide a tax deduction but also offer the potential for wealth creation

List of Best Mutual Funds Under 80C in India 2024 

Here is a list of mutual funds eligible for 80C deduction based on 1 year absolute returns available to investors in India for 2024.

Fund Name	Sub-Category	Fund Size (in Crs)	1Y Returns	Alpha
Quant ELSS Tax Saver Fund	Equity Linked Savings Scheme	₹7,237	60.82	4.69
SBI Long Term Equity Fund	Equity Linked Savings Scheme	₹20,085	59.21	6.31
Bank Of India Tax Advantage Fund	Equity Linked Savings Scheme	₹1,090	55.18	3.85
Motilal Oswal ELSS Tax Saver Fund	Equity Linked Savings Scheme	₹3,025	54.37	6.04
Sundaram LT Micro Tax Advantage Fund	Equity Linked Savings Scheme	₹40.98	54.21	1.41
ITI ELSS Tax Saver Fund	Equity Linked Savings Scheme	₹266.71	52.95	3.69
JM ELSS Tax Saver Fund	Equity Linked Savings Scheme	₹114.64	46.49	2.23
HDFC ELSS Tax Saver Fund	Equity Linked Savings Scheme	₹ 13,440.72	46.09	3.48
Franklin India Taxshield Fund	Equity Linked Savings Scheme	₹6,032.54	45.82	2.70
DSP ELSS Tax Saver Fund	Equity Linked Savings Scheme	₹13,583	42.18	0.83

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data on the top mutual funds under 80C in India in the list is from 27th February, 2024.  However, for real-time updates on share price and market trends, visit the smallcase stocks collection today!

Top 10 Funds Under 80C: An Overview 

Here is a brief overview of the mutual funds under 80C that were listed above, for a well-rounded understanding.

Quant ELSS Tax Saver Fund

Quant Mutual Fund presents the Quant ELSS Tax Saver Fund Direct-Growth, a medium-sized ELSS mutual fund in operation since January 1, 2013, totaling ₹7,237.64 Cr in assets as of February 27, 2024. With an expense ratio of 0.76%, lower than its peers, this fund has consistently shown strong performance. Over the past year, it achieved an impressive 61.9% for 1 year return. Notably, investors have seen their money double approximately every 3 years with this fund.

SBI Long Term Equity Fund

SBI Mutual Fund offers the SBI Long Term Equity Fund Direct Plan-Growth, an ELSS mutual fund launched on January 1, 2013. With a 10-year, 11-month track record, as of February 27, 2024, it manages assets worth ₹20,085.15 Cr, positioning it as a medium-sized fund in its category.

The fund’s expense ratio stands at 0.98%, comparable to typical rates in the ELSS category. Over the last year, SBI Long Term Equity Fund Direct Plan-Growth has shown a commendable return of 60.11% in one year. Has demonstrated a pattern of doubling invested capital every four years.

Bank Of India Tax Advantage Fund

Bank of India Mutual Fund presents the Bank of India Tax Advantage Direct-Growth, an Equity Linked Savings Scheme (ELSS) that has thrived for a decade and eleven months since its inauguration on January 1, 2013. With ₹1,090.31 Cr in assets under management (AUM) as of February 27, 2024, this fund, though modest in its category, stands out. Sporting a 1.21% expense ratio, it exceeds the typical charges of comparable ELSS funds.

In the past year alone, Bank of India Tax Advantage Direct-Growth yielded impressive returns of over 55.17% for one year.

Motilal Oswal ELSS Tax Saver Fund

Launched on December 26, 2014, Motilal Oswal ELSS Tax Saver Fund Direct-Growth, an ELSS mutual fund by Motilal Oswal Mutual Fund, has been operational for 8 years and 11 months. With assets totaling ₹3,025.82 Cr as of February 27, 2024, it falls within the medium-sized category. The fund boasts an expense ratio of 0.65%, lower than many counterparts in the ELSS segment.

Over the past year, the fund has exhibited a remarkable return of 54.85% for one year.  Noteworthy is its capacity to double invested capital every 4 years.

Sundaram LT Micro Cap Tax Adv Fund-Sr IV

Sundaram Asset Management Company Limited stands as a wholly-owned subsidiary of Sundaram Finance Limited (SFL), one of India’s most esteemed and long-standing Non-Banking Financial Companies (NBFCs). With assets totaling ₹ 40 Cr as of February 27, 2024, it falls within the small-sized category. The fund boasts an expense ratio of 1.32%, lower than many counterparts in the ELSS segment.

Over the past year, the fund has exhibited a remarkable return of 54.72% for one year.

ITI ELSS Tax Saver Fund

ITI Asset Management Holding Ltd. functions as a buy-side intermediary, advisory, and asset management firm in Emerging and Global Markets. It offers clients access to various alternative investments, ETFs, and products with varying risk levels and investment horizons. With assets totaling ₹266 Cr as of February 27, 2024, it falls within the small-sized category. The fund boasts an expense ratio of 0.48%, lower than many counterparts in the ELSS segment.

Over the past year, the fund has exhibited a remarkable return of 53.90% for one year.

JM ELSS Tax Saver Fund

Launched on January 1, 2013, the JM ELSS Tax Saver Fund Direct Plan-Growth, an ELSS mutual fund by JM Financial Mutual Fund, has a decade-long track record. As of February 27, 2024, it manages assets worth ₹114 Crores, positioning itself as a relatively smaller fund in its category.

With an expense ratio of 1.26%, higher than the average among ELSS funds, the fund has a noteworthy 1-year return of 47.35%.

HDFC ELSS Tax Saver Fund

Launched on January 1, 2013, HDFC ELSS Tax Saver Direct Plan-Growth, an ELSS mutual fund by Hdfc Mutual Fund, has a 10-year 11-month track record. As of February 27, 2024, the fund manages assets worth ₹13,086 Crores, positioning it as a large-size fund in its category. With an expense ratio of 1.14%, higher than most other ELSS funds, it’s essential to consider the associated costs.

Over the last year, the fund exhibited a robust 46.99% return for one year. Notably, the fund has doubled invested capital every 3 years, indicating consistent growth.

Franklin India Taxshield Fund

Launched on January 1, 2013, Franklin India Taxshield Direct-Growth, an ELSS mutual fund by Franklin Templeton Mutual Fund, has a 10-year, 11-month track record. As of February 27, 2024, it manages assets worth ₹6,032 Cr, positioning itself as a large-size fund in its category. The fund’s expense ratio is 1.09%, aligning with industry standards.

Over the past year, Franklin India Taxshield Direct-Growth has delivered an impressive return of 46.62% for one year. The fund has demonstrated a pattern of doubling invested capital every four years.

DSP ELSS Tax Saver Fund

Launched on January 1, 2013, DSP ELSS Tax Saver Direct Plan-Growth, an ELSS mutual fund by DSP Mutual Fund, has a 10-year, 11-month track record. As of February 27, 2024, it manages assets worth ₹13,583 Cr, positioning itself as a large-sized fund in its category. With an expense ratio of 0.68%, this fund outperforms most other ELSS funds in terms of cost efficiency.

Over the past year, the DSP ELSS Tax Saver Direct Plan-Growth has yielded a remarkable 43.04% one year return. Notably, the fund has consistently doubled invested capital every 4 years.

How Do Funds Under 80C Work?

Mutual funds under Section 80C of the Income Tax Act provide investors with a tax-efficient investment avenue. Section 80C mutual funds deductions can be done on their taxable income by investing in specified financial instruments, including certain mutual funds. Here’s a brief overview of how these funds operate within the 80C framework:

• Eligible Investments: Mutual funds under 80C encompass Equity-Linked Savings Schemes (ELSS). ELSS under 80c primarily invest in equities, offering the potential for capital appreciation.
• Lock-in Period: To avail of tax benefits under Section 80C, investors should note that ELSS funds come with a mandatory lock-in period of three years. During this period, investors cannot redeem or sell their units.
• Tax Benefits: Investment in mutual funds 80C qualify for a deduction of up to Rs 1.5 lakh from the investor’s taxable income under Section 80C. This deduction is subject to the overall limit prescribed by the section.
• Market-Linked Returns: Unlike traditional tax-saving instruments, ELSS funds provide market-linked returns. The performance of the fund is directly influenced by the performance of the underlying equities.

Features of Mutual Funds Under Section 80C

Unlock the benefits of a ELSS Mutual Fund under 80C with these key features:

• Swift Access: A mere 3-year lock-in period, shorter than other sec 80C options.
• Tax Advantage: Qualify for a tax deduction of up to Rs. 1.5 lakh under Section 80C.
• Tax-Free Gains: Profits earned through ELSS Mutual Funds are exempt from taxation.
• Equity Earnings: Seize high earning potential by tapping into the equity markets.
• Tax-Efficient Withdrawals: Enjoy tax-exempt withdrawals from ELSS Mutual Funds.
• Dividend Potential: Opportunity for dividend earnings even during the lock-in period.
• Accessible Investment: Begin investing with as little as Rs. 500, sans any upper limit.

Who Should Invest in Mutual Funds Under 80C?

To save up to Rs 46,800 annually on taxes, consider investing in ELSS. These funds are ideal for those willing to take risks and commit to the mandatory three-year lock-in period. For optimal returns, it’s advised to stay invested for a minimum of five years, allowing your investments to navigate market cycles and yield excellent long-term results.

Young professionals in the early stages of their careers can leverage 80c ELSS for its compounding benefits. With time on their side, they can enjoy substantial returns while simultaneously saving on taxes, making ELSS a fitting choice for individuals seeking both growth and tax efficiency.

Factors to Consider Before Investing in Mutual Funds Under 80C

Here are a few factors to consider while investing in tax saver mutual funds under 80C:

ELSS Fund Asset Allocation

ELSS fund managers allocate a minimum of 80% of assets to equity and equity-related instruments, with flexibility for the remaining portion to be invested in fixed-income or money market instruments. Investment choices are tailored based on the fund’s objective and risk level, influencing the preference for small-cap or large-cap stocks.

Lock-in Period Advantage

ELSS funds, qualifying for tax benefits under Section 80C, feature a three-year lock-in period – the shortest compared to alternatives like PPF (15 years) and NSC (5 years). This lock-in facilitates compounded returns, making ELSS funds, with market-linked potential, a prudent inclusion in tax-saving portfolios.

SIP Approach for ELSS Investment

Employing a Systematic Investment Plan (SIP) in ELSS funds allows for regular, small investments, leveraging Rupee Cost Averaging. This minimizes the average purchase cost and mitigates the risk of lump-sum investments during market peaks. Notably, the lock-in period applies to each SIP under 80c installment, aligning with the investment date.

Strategic ELSS Fund Portfolio Management

Investors should exercise caution in adding multiple ELSS funds to their portfolio. Instead of solely focusing on tax benefits, investors need to consider the risk levels and other aspects of each scheme. Careful planning is crucial to avoid over-exposure and ensure a diversified ELSS fund portfolio.

Risk Levels in ELSS Funds

ELSS funds primarily engage in equity instruments, exposing them to stock-associated risks. However, it’s important to note that not all ELSS funds carry high risk. Fund managers offer varying risk levels to cater to diverse investor preferences.

Risks Involved While Investing in Mutual Funds Under 80C

ELSS stands out as a leading tax-saving product in today’s market. Yet, it’s crucial to be aware of associated risks. Let’s explore them:

Liquidity Risk

In the realm of mutual funds, liquidity risk arises when investors may face challenges redeeming their investments without a potential loss. ELSS funds impose a 3-year lock-in period, restricting investors from redeeming or transferring their investments during this time. This lock-in period introduces liquidity risk, limiting investment decisions.

Market Risk

Investors may incur losses due to market downturns, driven by various factors like recession, politics, or market sentiment. ELSS funds, mandated to have at least 80 percent of their portfolio in equities, expose investors to market risk. The fund’s portfolio becomes susceptible to market fluctuations and downturns.

Performance Risk

Investors often choose 80c mutual funds list based on the belief in active and competent fund management. Performance risk arises when the fund manager’s decisions negatively impact the scheme’s portfolio, leading to potential losses for investors.

Higher Exposure to Equity

Unlike many tax-saving options in India that lean towards debt, ELSS funds present a diversified equity-oriented investment approach. Combining tax-saving and capital appreciation, ELSS is a favored investment avenue. Despite offering high return potential compared to other tax-saving products, the equity exposure introduces risk due to the inherent volatility and market fluctuations associated with this asset class.

Benefits of Investing in Mutual Funds Under 80C

Here are a few of the benefits of investing in mutual funds under 80c:

Tax Efficiency in Mutual Funds Under 80C

• ELSS funds offer a tax deduction of up to ₹150,000 under Section 80C of the Income Tax Act for the current financial year.
• The unique feature of combining tax savings with potentially high returns distinguishes ELSS from other investment options.

Brief Lock-in Period in Mutual Funds Under 80C

• ELSS has the shortest lock-in period among tax-saving funds, at just 3 years, compared to 5 or more years for alternatives like PPF or Fixed Deposits.
• This shorter lock-in period facilitates higher returns for investors.

Favorable Tax Rates on Gains for Mutual Funds Under 80C

• ELSS funds require a minimum 3-year investment period, leading to long-term gains.
• Gains exceeding ₹1,00,000 are taxed at a lower rate of 10%, contrasting with the 15% tax on short-term capital gains.

Compounding Benefits in Mutual Funds Under 80C

• ELSS, with its 3-year lock-in, encourages disciplined, long-term investment and harnesses the power of compounding.
• The recommended investment horizon of 5-10 years helps investors capitalize on compounding for sustained growth.

Flexibility in Redemption in Mutual Funds Under 80C

• Investors are not compelled to redeem their ELSS funds after 3 years; continuation is an option.
• No maximum investment duration provides flexibility for investors satisfied with the fund’s performance.

Higher Returns Through Equity in Mutual Funds Under 80C

• ELSS funds, investing in equities, typically yield returns in the range of 15-20%, outperforming other tax-saving options.
• Over a 3-year span, compounding and equity returns contribute to the superior performance of ELSS.

SIP Convenience for Mutual Funds Under 80C

• ELSS investments offer the convenience of Systematic Investment Plans (SIP), allowing investors to contribute fixed amounts at regular intervals.
• This feature caters to the needs of the salaried class, enabling systematic monthly investments.

Safety and Transparency in Mutual Funds Under 80C

• Mutual fund investments, including ELSS, adhere to SEBI regulations, ensuring transparency.
• All mutual fund companies are required to make necessary disclosures, providing investors with a secure and transparent investment avenue.

How to Choose Best Mutual Funds Under 80C for Investing?

Investing in mutual funds under Section 80C can be a tax-efficient strategy, but navigating the options requires careful consideration. Here’s a guide on how to choose the best mutual funds under Section 80C without explicit recommendations:

• Risk Assessment: Begin by assessing your risk tolerance. Section 80C mutual funds list come with varying levels of risk, from equity to debt. Choose funds aligned with your comfort level and financial goals.
• Historical Performance: Evaluate the historical performance of funds. While past performance doesn’t guarantee future results, it provides insights into a fund’s consistency and management strategy.

• Expense Ratios: Keep an eye on expense ratios. Lower expense ratios indicate a more cost-effective fund, allowing you to retain a higher share of returns.

• Portfolio Composition: Analyze the portfolio composition. Diversification is key; a well-balanced mix of assets can mitigate risk.

• Fund Manager Expertise: Research the fund manager’s track record. A skilled and experienced fund manager can significantly impact the fund’s performance.
• Tax Implications: Understand the tax implications of the fund. ELSS funds offer tax deductions under Section 80C, but it’s crucial to be aware of the associated lock-in period.

What are the Returns on Mutual Funds Under 80C & How are They Calculated?

The returns on mutual fund investment under 80c eligible for deduction under Section 80C are determined by the fund’s performance in the market. These funds typically invest in a diverse range of instruments, including equity-linked savings schemes (ELSS) and other tax-saving avenues.

The calculation of returns involves tracking the fund’s net asset value (NAV) growth over the investment period. NAV represents the market value of the mutual fund’s assets minus its liabilities. Investors can gauge the performance by comparing the NAV at the time of investment with the NAV at the time of redemption.

It’s important to note that the returns are subject to market fluctuations, and past performance does not guarantee future results. Additionally, the specific tax-saving mutual fund’s performance is influenced by the performance of the underlying securities in its portfolio.

Investors should carefully assess the historical performance, risk factors, and investment objectives before considering mutual funds under Section 80C. Consulting with financial advisors can provide valuable insights tailored to individual financial goals and risk tolerance.

Taxation of Mutual Funds Under Section 80C as per the Union Budget 2024

Section 80C mutual funds or ELSS funds are equity funds that are taxed accordingly . Being aware of these tax implications is essential for making informed financial decisions. The Union Budget for 2024-25 has made significant changes to the taxation on equity mutual funds. Here we have listed these changes, along with the revised tax rates for equity mutual funds:

Short-Term Capital Gains Tax

Any gains made when holding equity mutual funds for less than 12 months are considered short-term capital gains. The Union Budget 2024-25 increased the tax rate on these gains to 20%. The STCG tax rate was previously 15%. 

Long-Term Capital Gains Tax

For equity mutual funds held for over a year, gains are classified as long-term capital gains. The new budget introduces these key changes:

• Tax-Free Limit: The capital gains up to Rs. 1.25 lakh per year are tax-free. This is an increase from the previous limit of Rs. 1 lakh.
• Tax Rate: The gains exceeding Rs. 1.25 lakh are now taxed at a flat rate of 12.5%. This is an increase from the previous rate of 10%.
• Indexation: The benefit of indexation, which allowed investors to adjust the purchase price for inflation, has been removed for all asset classes, including equity mutual funds.

Indexation was a method that allowed investors to adjust the purchase price of assets for inflation. This adjustment reduced taxable profits when selling assets like property or gold. Previously, these long-term capital gains were taxed at 20%. The new rule imposes a flat 12.5% tax on all long-term capital gains but eliminates any indexation benefits.

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%

To Wrap It Up…

In summary, understanding mutual funds eligible for tax benefits under Section 80C is crucial for informed financial planning. This SEO-optimized exploration highlighted the diverse options available, from Equity-Linked Savings Schemes (ELSS) to certain debt funds. By considering factors like lock-in periods, risk profiles, and historical performance, investors can align their tax-saving goals with a suitable mutual fund.

It’s imperative to emphasize that the selection process should be based on individual financial objectives and risk tolerance. Regular monitoring and staying updated on tax regulations ensure a well-informed approach to maximizing benefits under Section 80C.

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Frequently Asked Questions (FAQs) on Mutual Funds Under 80C