Best ELSS Mutual Funds

An ELSS fund (equity-linked savings scheme) has an asset allocation that forms as 65% invested in equity and equity-linked securities, with some exposure to fixed-income securities as well. Unlike other mutual fund schemes, this scheme has a lock-in period of 3 years.

It is the only type of mutual fund eligible for tax deductions under provisions of Section 80C of the Income Tax Act, 1961. Here, you can claim a tax rebate of up to Rs. 1,50,000 and save up to Rs. 46,800 in a year through taxes alone.

Disclaimer: Below-mentioned is a list of some of the best-performing ELSS Funds in India. These funds have been listed based on their 1-year Return, Fund size, Rating, and Risk.

The best performing ELSS mutual funds can stand favourable to:

1. Investors Who Want to Save through Tax

ELSS funds are appropriate for any taxpayer prepared to take the risks of an equity-associated tax-saving device. This is the only 3-year scheme coming under Section 80C for tax benefits.

2. Long Term Investors

As previously mentioned, ELSS funds have a lock-in period; this lock-in period ensures you stay invested in the fund for at least three years. Moreover, these funds tend to perform much better when you continue, even after the lock-in period, to witness the growth potential.

Assessing your returns on ELSS mutual funds investments is easy. Simply use the ELSS calculator and estimate your returns over a period of your choice.

The following factors to consider when finding and choosing the best ELSS funds to invest in 2025:

1. Lock-In Period of the Fund

ELSS funds come with a lock-in period, as mentioned earlier, and the minimum lock-in period of the fund is three years. The investments need to be kept for a minimum of three years, and it is not possible to redeem the holdings before it. Therefore, the investors who invest in these funds will have to be considerate of this factor. 

2. Returns of the Fund

You should be aware that ELSS funds do not provide guaranteed returns because they are fully contingent on the performance of the underlying securities. A longer investment horizon, however, can yield larger returns than any other tax-saving investment alternative.

3. Investment Horizon

To invest in ELSS funds, you need to have a longer investment horizon, perhaps longer than five years. To limit market volatility, the equity exposure of ELSS funds requires a longer investment horizon.

Here are some of the benefits of investing in the best ELSS mutual fund in 2025:

• Shortest lock-in period: The 3-year lock-in period of ELSS mutual funds is the shortest among other tax-saving investment options. For example, PPF has a minimum maturity period of 15 years. Hence, tax-saver fund schemes are more liquid.

• Potential to generate high returns: Contrary to ELSS mutual funds, other tax-saving investment options, like bank fixed deposits and PPF, generate a fixed income. Conversely, ELSS funds invest in stocks of different companies, and their NAV fluctuates accordingly. An uptick in prices of such underlying securities can yield sizeable returns for investors. 
• Tax benefit: Investments up to Rs.1.5 lakh are eligible for tax deductions as per the provisions of the Income Tax Act. 

Investment modes: Two routes via which individuals can invest in the best ELSS mutual funds are – Systematic Investment Plan and lump-sum. SIP allows individuals to invest in a scheme by paying fixed instalments at regular intervals (monthly, quarterly, annually, etc.). On the flip side, the lump-sum method allows investors to allocate the available funds to an ELSS mutual fund scheme in one go.

While finding the best ELSS funds 2025, ensure to check the associated risks:

1. Liquidity Risk

Liquidity risk in mutual funds refers to the probability that investors will be unable to redeem their investments without experiencing a loss in value. Investments in ELSS funds will be subject to a three-year lock-in period. The investor cannot redeem or transfer his or her ELSS investment during the lock-in period. 

2. Market Risk

Market risk is the probability that investors will suffer losses as a result of the market's bad performance. There are numerous reasons that might have an adverse effect on stock market prices, including recession, political considerations, market sentiment, and so on. 

Equity Linked Savings Schemes must invest at least 80% of their assets in equity securities. As a result, an ELSS fund's portfolio is subject to market risk.