Best ELSS Funds for 2025

The asset allocation of an ELSS fund, or equity-linked savings plan, is composed of 65% investments in equities and equity-linked assets, with a small amount of exposure to fixed-income instruments. This mutual fund program features a three-year lock-in term, in contrast to other schemes.

According to the terms of Section 80C of the Income Tax Act of 1961, it is the only kind of mutual fund that is deductible from taxes. This blog lists some of the best ELSS Funds that you can invest in:

Top ELSS Funds for 2025

SBI Long Term Equity Fund Direct Plan-Growth - SBI Long Term Equity Fund Direct Plan-Growth is an ELSS mutual fund from SBI Mutual Fund, launched in the year 2013. The fund mainly invests in sectors like Financial, Energy, Technology, Healthcare, and Metals & Mining. It has a lower focus on Financial and Energy sectors compared to other funds in the same category. The fund aims for capital growth by investing in equities, cumulative convertible preference shares, and fully convertible bonds and debentures.

Motilal Oswal ELSS Tax Saver Fund Direct-Growth - Motilal Oswal ELSS Tax Saver Fund Direct-Growth is an ELSS mutual fund from Motilal Oswal Mutual Fund, launched in the year 2014. The fund primarily invests in Capital Goods, Services, Consumer Discretionary, Financial, and Construction sectors. It has less exposure to Capital Goods and Services compared to other funds in this category. The main goal of the fund is to achieve long-term capital growth through a diversified mix of equity and equity-related instruments.

Quant ELSS Tax Saver Fund Direct-Growth - Quant ELSS Tax Saver Fund Direct-Growth is an ELSS mutual fund from Quant Mutual Fund, launched in the year 2013. The fund invests mostly in the Energy, Financial, Consumer Staples, Insurance, and Healthcare sectors. It has a lower focus on Energy and Financial sectors compared to other funds in this category. The fund's main objective is capital appreciation by investing primarily in equity shares with growth potential. It also aims to generate dividend income and other earnings.

HDFC ELSS Tax Saver Direct Plan-Growth - HDFC ELSS Tax Saver Direct Plan-Growth is an ELSS mutual fund from HDFC Mutual Fund, launched in the year 2013. The fund predominantly invests in the Financial, Healthcare, Automobile, Technology, and Communication sectors. It has a smaller exposure to Financial and Healthcare sectors compared to other funds in this category. The fund seeks capital growth and income by investing mainly in equity and equity-related instruments.

JM ELSS Tax Saver Fund Direct Plan-Growth - JM ELSS Tax Saver Fund Direct Plan-Growth is an ELSS mutual fund from JM Financial Mutual Fund, launched in the year 2013. The fund primarily invests in the Financial, Capital Goods, Healthcare, Technology, and Services sectors. It has a lower exposure to Financial and Capital Goods sectors compared to other funds in the same category. The aim of the fund is to achieve long-term capital growth while also providing income tax relief on investments. At least 80% of the funds are invested in equity instruments.

Features of ELSS Funds

• Returns from ELSS funds may appear lower than small-cap funds but are higher compared to tax-saving instruments like PPF or NPS.
• Investments in ELSS can reduce taxable income by up to Rs. 1.5 lakh.
• A contribution of up to Rs. 1.5 lakh allows for tax rebates of up to Rs. 46,800, as the amount is deducted from taxable income.
• Investments beyond Rs. 1.5 lakh do not qualify for additional tax deductions.
• ELSS can be invested in through SIP (Systematic Investment Plan) or lump sum.
• ELSS funds mainly focus on equity but may also have small investments in debt.
• The typical lock-in period for ELSS funds is around 3 years.

Who should opt for ELSS?

Investors seeking tax saving opportunities - Any taxpayer who is willing to assume the risks involved with an equity-related tax-saving tool may use ELSS funds. This is the only three-year plan that qualifies for tax advantages under Section 80C.

Investors with a long term outlook - ELSS funds have a lock-in term that guarantees you will remain invested in the fund for a minimum of three years. Furthermore, these funds often perform far better when you keep seeing the growth potential even after the lock-in period.
 

Factors to be Considered while Investing in ELSS Funds

1. Lock In period

ELSS funds have a lock-in time; the fund's minimum lock-in duration is three years. It is not feasible to redeem the assets before the minimum three-year period that the investments must be maintained. Consequently, investors in these funds will need to take this into consideration. 

2. Returns of the Funds 

Because ELSS funds are entirely dependent on the performance of the underlying stocks, you should be aware that they do not offer guaranteed returns. All other things being equal, a longer investment horizon can produce higher returns than any other tax-saving option.

3. Investment Duration

You need to have a longer investment horizon—possibly more than five years—in order to invest in ELSS funds. The equity exposure of ELSS funds necessitates a longer investment horizon in order to reduce market volatility.