Best ELSS Mutual Funds in 2024

Equity Linked Savings Scheme (ELSS) funds are the investment options for tax saving and wealth creation. The best ELSS mutual funds in 2024 offer the combined benefits of investment growth, tax benefits of equity investments, and tax deductions under Section 80C of the Income Tax Act 1961.

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This article will help you make informed decisions by exploring the top 10 ELSS funds to invest in 2024.

What are ELSS Mutual Funds?

The full form of ELSS is Equity Linked Savings Scheme. ELSS mutual funds primarily invest in equity or equity-related instruments that helps you save income tax under Section 80C of the Income Tax Act, 1961. These investment options come with a lock-in period of 3 years, during which you cannot withdraw your money. The ELSS funds combine the potential for long-term capital growth with tax-saving benefits.

ELSS funds primarily invest in the following equity and equity-related assets to generate capital appreciation over the long term:

Stocks
Convertible bonds
Equity index futures
Equity swaps
Equity options

Top 10 ELSS Funds to Invest in 2024

The following table lists some of the best ELSS mutual funds in 2024 for investments with high returns:

ELSS Fund Name	AUM (in Crores)	3-Year Returns	5-Year Returns	10-Year Returns	Expense Ratio (ER)#
Quant Tax Plan - Direct Plan (G)	Rs. 4,924.99 crores	35.14%	27.19%	24.30%	0.76%
SBI Long Term Advantage Fund - Series IV - Direct Plan (G)	Rs. 186.83 crores	35.94%	25.39%	--	0.93%
Sundaram Long Term Tax Advantage Fund - Series III - Direct Plan (G)	Rs. 34.23 crores	44.74%	22.54%	--	1.15%
Bank of India Tax Advantage Fund - Direct Plan (G)	Rs. 888.58 crores	25.01%	21.42%	18.13%	1.22%
Bandhan Tax Advantage (ELSS) Fund - Direct (G)	Rs. 5,160.17 crores	30.18%	18.46%	18.59%	0.63%
Mirae Asset Tax Saver Fund - Direct Plan (G)	Rs. 17,985.39 crores	22.17%	18.25%	--	0.66%
Canara Robeco Equity Tax Saver Fund - Direct Plan (G)	Rs. 6,139.98 crores	21.51%	18.14%	16.45%	0.55%
Kotak ELSS Tax Saver Fund - Direct Plan (G)	Rs. 4,198.60 crores	24.27%	18.06%	17.92%	0.54%
DSP Tax Saver Fund - Direct Plan (G)	Rs. 12,085.93 crores	24.29%	18.03%	18.05%	0.8%
JM ELSS Tax Saver Fund - Direct Plan (G)	Rs. 92.34	23.91%	17.94%	18.24%	1.42%

*Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product by an insurer or any other financial product.
#Expense Ratio as declared on 30 September 2023.
NOTE: The list is not a comprehensive one, and it is recommended to do thorough research whenever investing in these funds.

What are the Features of Equity Linked Savings Scheme (ELSS)?

ELSS mutual funds are the best tax-saving investments with the following key features:

Features	Details
Lock-in Period	ELSS mutual funds have a lock-in period of 3 years i.e. you cannot withdraw your investments in the ELSS scheme before the completion of 3 years However, you can switch your investment to another ELSS fund without breaking the lock-in period
Investment Options	You can invest in the best ELSS funds through the following methods: Lump Sum Amount Systematic Investment Plan (SIP)
Systematic Investment Plan (SIP)*	ELSS funds offer the option of investing through SIP You can invest a fixed amount at regular intervals, like monthly and quarterly It helps in rupee-cost averaging and mitigating the impact of market volatility
Minimum Investment	The minimum investment amount in ELSS mutual funds is generally as low as Rs. 500
Asset Allocation	80% of the total corpus under ELSS shall be invested in equity and equity-related instruments as per the Securities Exchange Board of India (SEBI) guidelines
Dividend and Growth Options	ELSS funds provide you with the flexibility to choose between the following ways of investment: Dividend Option The fund will pay out a portion of its profits to you in cash. Growth Option The returns are reinvested to compound the overall investment value. Dividend Re-investment Option This option allows you to reinvest your dividends in additional units of the fund instead of receiving them in cash.
Risk- Returns Ratio	ELSS funds are equity-oriented funds, and hence, they come with a higher risk than other type of debt fund schemes However, they also have the potential to generate higher returns in the long term.
Potential for Higher Returns	Equity Linked Savings Schemes (ELSS) have the potential to generate higher returns compared to traditional tax-saving instruments like Fixed Deposits (FD) or Public Provident Funds (PPF)
No Exit Load	There is no exit load on ELSS funds. So, you can redeem your units at any time after the lock-in period without any penalty.

*You can calculate your SIP returns from the ELSS mutual funds using an SIP Calculator.

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What are the Tax Benefits of ELSS Funds?

The following table shows the ELSS tax benefits along with their tax implications:

Tax Benefit	Description
Tax Deduction under Section 80C	Investments in ELSS mutual funds are eligible for a deduction of up to Rs. 1.5 lakhs in a financial year under Section 80C of the Income Tax Act.
Long-Term Capital Gains (LTCG)	Gains from ELSS investments held for more than one year are taxed at a flat rate of 10% on capital gains exceeding Rs. 1 lakh.
Short-Term Capital Gains (STCG)	ELSS investments held for less than one year are taxed at a rate of 15% on the capital gains.
Dividend Distribution Tax (DDT)	ELSS funds are exempt from DDT, which means you receive dividends tax-free.
No TDS on Redemption	There is no Tax Deducted at Source (TDS) on the redemption of ELSS units.

How Does ELSS Mutual Funds Work?

Let us learn the workings of the Equity Linked Savings Scheme (ELSS Scheme) from the steps mentioned below:

Step 1: You invest money in an ELSS fund.

Step 2: The fund manager invests your money in a portfolio of stocks, convertible bonds, and other equity-linked investment securities.

Step 3: The value of your investment will go up and down depending on the performance of the underlying instruments.

Step 4: You can withdraw your money from the fund after three years.

What are the Benefits of Investing in Best ELSS Mutual Funds in 2024?

ELSS funds come with huge benefits. The most common reasons for investing in an ELSS fund are as follows:

Tax Saving Investments:
- ELSS tax benefits are the prime reason to invest in these mutual fund schemes
- ELSS funds offer tax deductions of up to Rs. 1.5 lakhs under Section 80C of the IT Act, 1961.
- This helps in reducing your taxable income
Long-Term Investment Options:
- ELSS scheme helps in building a habit of investing for a more extended period
- These funds come with a lock-in period, under which you need to invest for a minimum of 3 years
- Moreover, you can get more tax benefits on returns after indexation by investing for a longer period in top ELSS funds.
High Returns in the Long Run:
- With a long-term investment option, you can allow your funds to grow and redeem the benefits after 3 years
- Since ELSS funds invest the money in equities, the possibility of earning good returns is higher
The discipline of Investing:
- With ELSS mutual funds, you can inculcate the habit of saving consistently with Systematic Investment Plans (SIPs)
- These funds allow you to start an investment as low as Rs.500 per month
- This nurtures the practice of investing and benefits you from rupee cost averaging and compounding
Shorter Lock-In Period:
- ELSS has a lock-in period of just three years
- This is the shortest among tax-saving investments, which allows for more liquidity
Professional Management:
- ELSS funds are managed by experienced fund managers
- These professionals have the expertise to select the right stocks
- They invest your money in a way that minimizes risk and maximizes returns

Factors to Consider While Investing in ELSS Mutual Funds

Here are some of the essential aspects one should keep in mind before making any kind of investment in Equity Linked Savings Scheme (ELSS funds):

Investment Goals: Determine your financial goals and the purpose of your investment in ELSS mutual funds.
Risk Tolerance: Assess your risk tolerance to choose between growth and dividend options.
Fund Performance: Research the historical performance of ELSS funds and their consistency.
Expertise of Fund Manager: Evaluate the track record and experience of the ELSS scheme fund manager.
Lock-In Period: Be aware of the mandatory three-year lock-in period for ELSS investments.
Diversification: Check the diversification of the fund across different stocks to manage risk.
Expenses: Understand the Expense Ratio (ER) and other costs associated with the fund.
Tax Benefits: Ensure you understand the ELSS tax benefits and other tax implications from these investment plans.
SIP or Lump Sum: Decide whether to invest through Systematic Investment Plans (SIP) or lump-sum investments.
Exit Strategy: Plan for what you will do with your investments once the lock-in period ends.

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Who Should Invest in ELSS Mutual Funds?

The following category of investors should consider investing in Equity Linked Savings Scheme (ELSS) Mutual Funds:

Tax Savers: Individuals looking to save on income tax through Section 80C deductions.
Long-Term Investors: Those willing to invest for at least three years to potentially benefit from equity returns.
Risk Takers: People with a higher risk tolerance who can withstand market fluctuations.
Goal-Oriented Investors: Those with financial goals like wealth creation or retirement planning.
Equity Investors: Individuals interested in equity markets and seeking diversification.
Investors Seeking Liquidity: As ELSS mutual funds have a shorter lock-in period compared to other tax-saving options, it suits those who want relatively quicker access to their investments after the lock-in period.

In Conclusion

The best Equity Linked Savings Scheme (ELSS mutual funds) in 2024 offer an attractive combination of tax benefits, the potential for higher returns, and a shorter lock-in period. These funds are well-suited for tax-savvy investors who are looking to grow their wealth over the long term. The ELSS funds provide you with the benefits of professional fund management and the flexibility to align with individual financial goals and risk tolerance. Careful consideration and research are crucial in selecting the right ELSS fund that aligns with your specific needs and objectives.

FAQ's

What is the full form of ELSS?

The full form of ELSS is Equity Linked Savings Scheme.
Which ELSS fund is best in 2024?
Some of the top-rated ELSS funds based on their past performance and risk-adjusted returns include:
- Quant Tax Plan - Direct Plan (G)
- SBI Long Term Advantage Fund - Series IV - Direct Plan (G)
- Sundaram Long Term Tax Advantage Fund - Series III - Direct Plan (G)
- Bank of India Tax Advantage Fund - Direct Plan (G)
- Bandhan Tax Advantage (ELSS) Fund - Direct (G)
What is the best ELSS mutual fund to invest in 2024?
Some of the best mutual funds to consider in 2024 are as follows:
- DSP Tax Saver Fund
- Nippon India Tax Saver Fund
- SBI Long-Term Equity Fund
- Quant Tax Plan
- Motilal Oswal Long-Term Equity Fund
Should I invest in 2 ELSS funds?

Whether or not you should invest in 2 ELSS funds depends on your individual investment goals and risk tolerance. If you are a new investor or have a low-risk tolerance, it is generally better to invest in a single ELSS fund. This will help you to simplify your portfolio and reduce your risk.
However, if you are an experienced investor with a high-risk tolerance, you may consider investing in 2 ELSS funds. This can help you to diversify your portfolio and reduce your overall risk.
Is PPF better than ELSS?

Whether PPF or ELSS is better depends on your individual financial goals and risk appetite. If you are a conservative investor with a long investment horizon, PPF may be a good option for you. It offers guaranteed returns and tax benefits. However, if you are willing to take on more risk to earn higher returns, ELSS may be a better option. It has the potential to generate higher returns over the long term.
What happens to ELSS after 3 years?

After the mandatory lock-in period of 3 years, ELSS funds become open-ended, diversified equity-oriented mutual funds. This means that you can redeem your units whenever you want. You can also continue to invest in the fund beyond the lock-in period.
Which fund comes under ELSS?
Here is a list of some of the most popular ELSS funds in India:
- Axis Long-Term Equity Fund
- DSP Tax Saver Fund
- Franklin India Taxshield Fund
- HDFC ELSS Tax Saver Fund
- ICICI Prudential Long Term Equity Fund (Tax Saving)
- Kotak Mahindra ELSS Tax Saver Fund
- Mirae Asset Tax Saver Fund
- Motilal Oswal Long-Term Equity Fund
- Nippon India Tax Saver Fund
- SBI Long-Term Equity Fund
- Quant Tax Plan
- PGIM India ELSS Tax Saver Fund
How do I invest in an equity-linked savings scheme?

Follow the steps mentioned below to learn the way to invest in Equity Linked Savings Scheme (ELSS scheme):
Step 1: Open a Demat and Trading Account with a stockbroker

Step 2: Choose an ELSS Fund

Step 3: Invest in the ELSS Fund

Step 4: Reinvest your Earnings

What is the difference between equity-linked savings schemes and mutual funds?

ELSS (Equity Linked Savings Scheme) and Mutual Funds are both investment options that allow you to grow your money over time. However, there are some key differences between the two:

Particulars	Equity Linked Savings Scheme (ELSS)	Mutual Funds
Tax benefits	ELSS is a tax-saving investment, i.e. you get tax deductions on your investment amount u/ Section 80C of the IT Act.	Mutual funds do not offer any tax benefits.
Investment objectives	ELSS is an equity-oriented investment, which means that it invests primarily in stocks	Mutual funds can invest in a variety of asset classes, including stocks, bonds, and money market instruments.
Lock-in period	ELSS has a lock-in period of 3 years	Mutual funds do not have any lock-in period

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
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