The Best ELSS Mutual Funds - Full Guide 2025.
Do you want to invest in high growth Indian mutual funds? Small cap funds are also becoming popular among investors who are willing to get more returns and take calculated risks. The entire article will take you through the best small cap mutual funds of 2025, the management of these funds, their characteristics, strengths and weaknesses, professional opinion and the most frequently asked questions.
ELSS Fund, What Is?
ELSS mutual funds, also known as Equity Linked Savings Schemes, are diversified equity funds that will enable you to save up to [?]1.5 lakh in taxes under Section 80C per financial year. They are largely equity based and have a three year lock-in period the lowest of all other tax saving options found under 80C.
- They invest at least 80 percent of total assets in equities and equity related securities.
- These funds make investments in all market caps and market sectors in an attempt to gain the highest returns.
- The investments made may either be through lumpsum or via Systematic Investment Plans (SIP).
Key Features
- Tax deduction up to [?]1.5 lakh.
- Shortest 3-year lock-in.
- Tax-saving and capital appreciation.
- SIP and lumpsum options.
Pros and Cons
| Pros | Cons |
|---|---|
| Tax benefit less than 80C | Risks associated with the market. |
| Minimal lock-in period | None. |
| High returns potential | Performance variability. |
| SIP encourages investing with discipline | No assured returns. |
The Best ELSS Fund in 2025?
Selecting the optimal ELSS fund requires more than a sightseeing of returns in the past. Consider these aspects:
- Past performance and 3, 5 and 7 year consistency.
- Experience and record of fund manager.
- Portfolio quality and diversification.
- Expense ratio and fund size.
- Asset allocation and investment style.
People also ask
ELSS or PPF Which would be more advantageous in terms of saving tax?
ELSS has a higher returns with a lesser lock-in than PPF, but is more risky because it is an investment in the stock market.
Did you know? Data released by SEBI indicated that in 2024, Indian investors were still interested in ELSS funds to the tune of more than Rs 1.5 lakh crore.
What are the most suitable ELSS Mutual Funds to invest in 2025?
This is a summary of the ELSS funds that have good performance and good management history:
Quant Tax Plan
- 3-year CAGR: 26.5 percent
- 5-year CAGR: 27.8 percent
- Fund Size: [?]8,500 crore
- Expense Ratio: 0.78 percent
- Multi cap aggressive approach.
Key Highlights
- Good results over the last few years.
- Invests in the sectors that have greater mid and small cap allocation.
- Apposite to aggressive investors.
Pros and Cons
- Higher return potential
- Knowledgeable fund management.
- Greater mid small cap exposure makes it more volatile.
Mirae Asset Tax Saver Fund
- 3-year CAGR: 20.2 percent
- 5-year CAGR: 20.3 percent
- Fund Size: [?]21,400 crore
- Expense Ratio: 0.55 percent
Key Highlights
- Meaning large and mid caps.
- Lower risk than comparable returns.
Pros and Cons
- Consecutive and steady returns.
- Among the cheapest in category.
- Performance of funds can cushion in case growth of large cap reduces.
People also ask
Is SIP superior to lumpsum in ELSS?
SIP guarantees the averaging in terms of rupee and is applicable to the majority of investors whereas lumpsum might be preferred when a market correction is observed.
Axis Long Term Equity Fund
- 3-year CAGR: 14.5 percent
- 5-year CAGR: 15.7 percent
- Fund Size: [?]33,000 crore
- Expense Ratio: 0.69 percent
Key Highlights
- Fair heavy, large cap.
- One of the most reliable and ancient ELSS funds.
Pros and Cons
- Lower volatility
- Well-known fund management
- Underachieving students languish two years.
Experts Insight: Mirae Asset Tax Saver Fund has been suggested by many financial planners as a recommendation investment in ELSS in 2025 because of its high cap orientation and risk-adjusted returns.
Parag Parikh Tax Saver Fund
- 3-year CAGR: 19.8 percent
- 5-year CAGR: 18.5 percent*
- Fund Size: [?]2,050 crore
- Expense Ratio: 0.77 percent
Key Highlights
- Value oriented approach
- Excellent diversification with a bit of internationalization.
Pros and Cons
- Apposite to conservative and moderate risk takers.
- Unique investment style
- No best in pursuit of highest returns.
Canara Robeco Tax Saver Fund Equity.
- 3-year CAGR: 18.2 percent
- 5-year CAGR: 17.4 percent
- Fund Size: [?]5,210 crore
- Expense Ratio: 0.61 percent
Key Highlights
- Stable large cap performance.
- Lower expense ratio
Pros and Cons
- Well balanced risk reward
- Supported by skilled administration.
- A little poorer historical performance as compared to best peers.
People also ask
Do ELSS investments assure returns?
No, ELSS funds are market-driven and are not guaranteed to give returns.
ELSS Funds ELSS in 2025, Shortlisted - Overview.
| Fund Name | 3-Year CAGR | 5-Year CAGR | Fund Size (Cr) | Expense Ratio |
|---|---|---|---|---|
| Quant Tax Plan | 26.5% | 27.8% | 8,500 | 0.78% |
| Mirae Asset Tax Saver | 20.2% | 20.3% | 21,400 | 0.55% |
| Axis Long Term Equity | 14.5% | 15.7% | 33,000 | 0.69% |
| Parag Parikh Tax Saver | 19.8% | 18.5% | 2,050 | 0.77% |
| Canara Robeco Equity Tax Saver 18.2% 17.4% 5,210 0.61%. |
*Data as on January 2025
What Do ELSS Funds Benefit and Risk in 2025?
Benefits
- Tax Efficiency: An investor will be allowed a deduction of upto [?]1.5 lakh per year, thereby decreasing the taxable income.
- Wealth Creation: Post tax returns are higher than those of fixed income tax savers during historical periods.
- Minimum Lock-In: 3 years, versus 5 or 15 years on most other 80C configurations.
- Open and Controlled: The SEBI controlled, and disclosed.
- Flexible Investments SIP, lumpsum, or both.
Risks
- Market Fluctuations: The returns are not predetermined and are subject to market performance.
- Lock-In Restriction: There is no possibility of taking an early exit in the next 3 years.
- Variable Performance: There is no guarantee of future returns based on the past performance.
- Selection Problem: Excess funds generate confusion among new investors.
Did you know? The categorisation of ELSS schemes was carried out to enable investors to easily compare returns, asset allocation and risk.
How to Invest in ELSS Funds in 2025?
You can invest in ELSS within a short time by most popular AMCs through:
- Fund House website or app
- Online broking platforms such as Groww, Zerodha, Kuvera and Paytm Money are registered.
- By mutual fund distributors or demat facilities.
Steps:
- Complete KYC compliance
- Choose a fund and amount of investment.
- Choose SIP or lumpsum mode
- Make payment digitally
- Confirm and folio statement.
People also ask
Do I have the option to redeem my ELSS scheme with SIP after 3 years?
ELSS is subject to a 3-year lock-in period on each SIP installment, and as such, you can only redeem the SIP units you have that are 3 years old.
Investors in ELSS Mutual Funds?
ELSS investments are appropriate to investors who:
- Western desire to save taxes less than 80C per year.
- Long or medium-term investment.
- Is able to bear temporary market fluctuations.
- Seeking tax savings and capital growth.
It is best suited to novices and professional investors alike who are interested in taking advantage of the Section 80C in the most efficient way possible as they begin to accumulate wealth in the equity markets.
Expert opinion: ELSS are gaining popularity in 2025 as young salaried professionals choose it as their first-choice tax-saving and equity-investment vehicle, to compound faster and liquidity faster after lock-in.
ELSS Mutual Funds as opposed to other types of Tax Saving Investments.
| Product | Lock-In (2025) indicative returns | Risk Level | Tax Treatment. |
|---|---|---|---|
| ELSS MF | 3 yrs | 12-20 percent | High |
| PPF | 15 yrs | 7.1 percent | Very Low |
| Tax Saving FD 5 yrs 6-7 percent Low Interest taxable. | |||
| NSC | 5 yrs | 7.7 percent | Low |
| NPS | Until 60 10-12 percent | Moderate | Partly tax exempt. |
What Taxation ELSS will be in 2025?
- ELSS funds investment of up to [?]1.5 lakh per annum is deductible under 80C.
- Any profits exceeding [?]1 lakh of a financial year is taxed on as long-term capital gains at a rate of 10 percent.
- Income taxed on dividend earned according to your income bracket.
- No deduction of source taxes up to redemption.
People also ask
Do ELSS mutual funds provide returns that are tax free?
The exemptions of up to 1 lakh per year are allowed. Above that is subject to 10 percent LTCG.
Most of the errors to be avoided when investing in ELSS Funds
- Hurried to invest in March, and chose badly.
- Only pursuing high returns in the short run.
- Not taking account of expense ratio and portfolio turnover.
- Failure to remain locked-in.
- Not looking at portfolio performance at least once per year.
Did you know? Investors sold many of their holdings of old ELSS after lock-in in 2020 2024 and missed more bull runs. It is usually beneficial to hold good funds even after 3 years.
Quick Recap
- ELSS funds are largely equity-based investments and provide tax advantages.
- They have the shortest lock-in of the Section 80C-type at 3 years.
- The best plans in 2025 would be Quant Tax Plan, Mirae Asset Tax Saver, Parag Parikh Tax Saver, Canara Robeco Equity Tax Saver and Axis Long Term Equity Fund as per recent records and wise fund management.
- Select it depending on your risk profile, historical performance, cost rate and investment objectives.
People Also Ask Frequently Asked Questions.
What is the maximum number of ELSS funds that I can make?
There is no official limit. You are allowed to invest in more than one ELSS fund but it is prudent to have not more than two or three funds to monitor and to diversify.
Is ELSS safe to invest online?
Yes, provided that your platform is registered with SEBI or AMFI and you have quality payment gateways.
What will be the case when I redeem before 3 years?
ELSS holdings can only be redeemed after the lock-in period of three years unless upon your death; the proceeds will be paid to your nominee.
Can I set up auto SIP in ELSS?
Yes, in ELSS you can have auto debit SIP facility in most platforms and fund houses using your bank account.
Can NRIs invest in ELSS funds?
Yes, NRIs, having valid Indian PAN and bank accounts can invest in most of the ELSS funds except some AMC specific restrictions.
Sources
- AMFI India returns and AUM figures are compiled.
- Value Research, and fund houses by January 2025.
- To access the most recent facts and regulations, go to AMFI India and SEBI.
