As 2024 draws to its end, it’s the perfect time to pause and reflect on what this year has meant for the investment world. From market volatility to policy shake-ups, ELSS mutual funds have stood their ground, blending tax-saving advantages with the potential for equity-driven growth.
The year’s performance has paved the way for fresh optimism, with 2025 carrying the promise of new opportunities and evolving market trends. Whether you’re gearing up to optimize your tax planning or set the stage for long-term financial goals, now is the time to dive into the top ELSS mutual funds that could help you make the most of this crucial window before March 2025.
Let’s unravel the options that could define your financial journey!
What are ELSS Mutual Funds?
Equity Linked Saving Schemes (ELSSs) are mutual funds that invest part of their assets in stocks and equity-like instruments. They are meant to allow people to save taxes under Section 80C of the Income Tax Act, 1961, permitting a reduction of up to ₹1.5 lakh in a particular financial year.
Here’s what makes these funds stand out:
- Equity’s Focus: At the very least, 80% of the portfolio is invested in equities, which makes it a high-yielding potential option in comparison with the traditional tax-saving instruments.
- Lock-in period: ELSS mutual funds obliges a 3-year compulsory lock-in period, which is the shortest among all Section 80C investments.
- Tax Efficiency: Long-term capital gains (LTCG) up to ₹1 lakh within a financial year are free of tax, while gains above that limit are taxed at 10%.
ELSS mutual funds are the best option for people who want to save taxes as well as create wealth, as long as they are ready to face the uncertainties of the equity market.
ELSS Mutual Funds in 2024: A Year of Remarkable Growth
Equity-Linked Savings Schemes (ELSS) in India shone bright in 2024, delivering great growth and remaining the choice of tax-conscious investors. A large number of ELSS funds delivered returns of more than 40% during the fiscal year 2023-2024, well above their respective benchmarks, which only adds to the appeal.
This performance was supported by a number of factors. The booming Indian equity market in 2024 served as the ideal background for ELSS funds, which mainly invest in equities. With a lock-in period of just 3 years, these funds outshine options like PPF and NSC, which require much longer commitments. This shorter duration ensures significantly greater liquidity for investors. The key role of fund managers was played through strategic diversification of portfolios across sectors and market caps, with the right balancing of risk and reward, thereby capturing market growth. But investors should keep in mind that ELSS funds are tied to market performance, so they are prone to equity-related volatility.
There is a need for a long-term perspective because lock-in aligns with the creation of wealth over time.
Can ELSS be a good Year-end Investment?
ELSS is a year-end investment that blends the best of both worlds: tax savings and growth potential. If you’re looking to cut down your tax bill under Section 80C, ELSS lets you invest up to Rs. 1.5 lakh and claim deductions–plus, it has a lock-in period of only 3 years, the shortest among all tax-saving options under Section 80C.
The best part? It invests in equities, so your money has the potential to grow faster than typical fixed-income options. Whether you’re a cautious investor looking for tax relief or a growth-seeking investor eyeing market returns, ELSS has something to offer. It’s the perfect time to make your money work harder for you as the year ends!
Comparison of Few ELSS Tax Saving Instruments
| Parameter | Market Linked | Fixed Income | Hybrid | |||
| ELSS | ULIP | PPF | NSC | Bank FD | NPS | |
| Lock-in Period | 3 years | 5 years | 15 Years | 5 Years | 5 Years | Till Retirement |
| Minimum Amount | Rs 500 | as per norms | Rs 500 | Rs 100 | as per norms | Rs 500 |
| Maximum Amount | No Limit | No Limit | Rs 1,50,000 | No Limit | No Limit | No Limit |
| Tax Benefits | Rs 1,50,000 | Rs 1,50,000 | Rs 1,50,000 | Rs 1,50,000 | Rs 1,50,000 | Rs 50,000 |
| Avg Returns | Market Linked | Market Linked | 6%-8% | 7%-8% | 6.5%- 8% | 8%–10% |
[In the table above: Avg returns are an estimate, over 15 years (as of November 2024), based on available data. (Only for illustration purposes.)]
Top 5 ELSS Mutual Funds of Year (2024)
| Fund Name | 1Year Return | Expense Ratio | AUM (As on 31-Oct-2024) | Date of Inception |
| Motilal Oswal ELSS Tax Saver Fund | 53.23% | 1.83% | ₹4,074 Cr | 21-Jan-2015 |
| SBI Long Term Equity Fund | 42.00% | 1.60% | ₹27,559 Cr | 31-Mar-1993 |
| HSBC ELSS Tax Saver Fund | 41.30% | 1.89% | ₹4,253 Cr | 27-Feb-2006 |
| HSBC Tax Saver Eqt Fund | 40.09% | 2.47% | ₹258 Cr | 05-Jan-2007 |
| DSP ELSS Tax Saver Fund | 38.29% | 1.64% | ₹16,841 Cr | 18-Jan-2007 |
Data as of 28.11.24
Note: Data has been taken only till the month of November 2024.
Key Things to Keep in Mind Before Investing
Lock-In Period
ELSS funds have a mandatory 3-year lock-in period. Ensure you have sufficient liquidity outside of this investment.
Tax Benefits
Investments qualify for deductions under Section 80C of the Income Tax Act, offering up to Rs. 1.5 lakh in tax savings.
Risk Level
As ELSS funds are equity-oriented, they are subject to market volatility. Assess your risk tolerance before investing.
Historical Performance
Review the fund’s past performance for consistency, but remember that past results don’t guarantee future returns.
Expense Ratio
Lower expense ratio can enhance your net returns over time, making them an important factor to consider.
Portfolio Diversification
Avoid over-investing in a single category to reduce risk and create a balanced portfolio.
Bottom Line
And that’s a wrap! ELSS mutual funds are the perfect blend of tax-saving benefits and growth potential, making them a smart move as we head into 2025. With their equity focus and short lock-in period, they stand out as a versatile option for investor looking to optimize tax planning while building long-term wealth.
As the next year approaches, this is your chance to make your investments work harder and set the stage for financial success. Whether you’re in it for the tax breaks, the growth, or both, these funds can be a game-changer. So, what are your thoughts—will you be jumping into the pool of ELSS or hanging by avoiding the splash? Best SIP platform can make all the difference!
Suggested Read – Quant ELSS Tax Saver Fund vs Motilal Oswal ELSS Tax Saver Fund
