5 Best ELSS Funds to invest in 2020-21 | Top Performing Tax Mutual Funds

Best ELSS Funds to invest in 2020-21 | Top Performing Tax Mutual Funds


For salaried individuals, it is tax time now. They may need to invest in tax saving investment options by January, else they need to pay higher income tax. Earlier we covered that there are over 15+ Tax Saving Investment Options in India to get income tax exemption u/s 80c. If you are looking to save income tax and earn higher returns with short term liquidity, tax saving ELSS mutual funds could be the best bet for you. Which are the Best ELSS mutual funds to invest in 2020 in India? Which are the Top ELSS Tax Saving Mutual Funds that can give higher returns in India?

What are ELSS Mutual Funds?

There are various mutual fund schemes in India. An Equity Linked Savings Scheme (ELSS) / Tax Saving Mutual Fund is an open-ended equity mutual fund scheme that help you to save tax and also gives an opportunity to grow their money. One can invest in ELSS mutual funds, which qualifies for income tax exemption u/s 80c upto Rs 1.5 Lakhs per annum.

How does ELSS funds work?

ELSS are diversified equity MFs where most of the corpus is invested in equity and equity related instruments. Investment in ELSS comes with a lock in period of 3 years. ELSS funds offer a simple way to get tax benefits and at the same time get an opportunity to gain from the potential of equity markets. They offer the twin benefits of tax deduction and capital appreciation. The returns of the ELSS funds reflect returns from the equity markets. ELSS schemes are open ended, which means, the investor can subscribe to the fund at any day. NAV (Net Asset Value) of the fund is decided on every business day.

What is our methodology in picking the Top ELSS funds for 2020?

Before we check which is the best ELSS mutual fund, let us look at how we filtered them. Below is the methodology we have used in picking up Top ELSS mutual funds funds to invest in 2020 in India.

1) ELSS Mutual Fund schemes that have performed well in the last 5-10 years are considered here.

2) Tax Saving Funds that have performed well in various stock market cycles are further filtered.

3) ELSS funds that has beaten its peers and benchmark in terms of rolling returns are considered.

4) Majority of these funds are already recommended by us earlier, hence if you have already invested, it could be repetition for you.

Top 5 Best ELSS Mutual Funds for 2020 to save tax

Here is the list of best tax saving mutual funds to invest through SIP in 2020.

#1 – Quant Tax Plan

#2 – Axis Long Term Equity Fund

#3 – BOI AXA Tax Advantage Fund

#4 – Canara Robeco Equity Tax Saver Fund

#5 – Invesco India Tax Plan

Top 5 ELSS Mutual Funds – Detailed View


Here are the Top ELSS Funds for 2020.

#1 – Quant Tax Plan

Fund Overview:

The scheme aims to generate capital appreciation by investing predominantly in equity shares with growth potential. The secondary objective is to give dividend and other income.

This mutual fund has given 10% annualized returns in the last 10 years and 15% annualized returns in the last 5 years.

This fund outperformed benchmark and peers from rolling returns point of view for 1 year, 2 years, 3 years and 5 years period.

#2 – Axis Long Term Equity Fund

Fund Overview: The scheme aims to generate regular long term capital growth from a diversified portfolio of equity and equity related securities. The Scheme Will invest in companies with strong growth & a sustainable business model.

This mutual fund has given 16% annualized returns in the last 10 years and 13% annualized returns in the last 5 years. 

This ELSS fund outperformed benchmark + peers from rolling returns point of view for 1 year, 2 years, 3 years and 5 years period.

#3 – BOI AXA Tax Advantage Fund

Fund Overview:

The scheme seeks to build a diversified portfolio of stocks of companies having sustainable business models, without any bias of market capitalisation and sector. The scheme will follow top-down approach of equity selection.

This mutual fund has given 11% annualized returns in the last 10 years and 13% annualized returns in the last 5 years. 

This Tax saving ELSS fund outperformed benchmark and all its peers from rolling returns point of view for 1 year, 2 years, 3 years and 5 years period.

#4 – Canara Robeco Equity Tax Saver Fund

Fund Overview:

The scheme seeks to achieve long term capital appreciation by predominantly investing in equities. It also offers tax benefits under Section 80C. The investments may be made in primary as well as secondary markets and scheme may also invest in overseas equity markets like ADRs/GDRs.

This mutual fund has given 12% annualized returns in the last 10 years and 12% annualized returns in the last 5 years. 

This Tax saving ELSS fund outperformed benchmark and all its peers from rolling returns point of view for 1 year, 2 years, 3 years and 5 years period.

#5 – Invesco India Tax Plan

Fund Overview: The scheme aims to generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities. It intends to invest across market capitalisation sectors utilizing bottom up approach. It will aim to have concentrated well researched portfolio, which would be around 20 – 50 stocks.

This mutual fund has given 13% annualized returns in the last 10 years and 11% annualized returns in the last 5 years. 

This Tax saving ELSS fund outperformed benchmark and all its peers from rolling returns point of view for 1 year, 2 years, 3 years and 5 years period.

Here are some of the FAQs about Best Tax Saving Mutual Funds 2020

Which Mutual Funds are eligible for 80c?

ELSS or tax saving mutual funds are eligible for income tax u/s 80c up to Rs 1.5 Lakhs for a financial year.

Which ELSS is best to invest in 2020?

We have provided the list of 5 funds above to save tax u/s 80c. We would advise you to invest atleast 2-3 funds instead of just 1 fund. This way you are diversifying your portfolio and reducing any future risk of under performance of a single mutual fund.

Is ELSS Taxable after 3 years?

ELSS has lock-in period of 3 years. Means you cannot sell them within 3 years. After 3 years, you can sell them. The returns from ELSS after 3 years are taxed at 10% (without indexation benefit) if they exceed Rs 1 Lakh in any financial year.

Is ELSS better than PPF?

Both have its pros and cons. ELSS mutual funds have 3 year lock-in period. The returns are not guaranteed, however, there is scope to get higher returns between 12% to 15%, if invested for 8-10 years. ELSS Funds are good for high to moderate risk takers. On the other hand PPF has lock-in period of 15 years and has fixed rate of return. The current PPF interest rate is 7.1%, hence returns are limited. PPF is suitable for low risk takers, however, one can plan and and create 1 Crore Corpus with PPF. Based on your risk appetite and tenure, you need to choose the best tax saving option.

Is ELSS Safe?

ELSS Mutual Funds are like any other equity mutual funds that invests in stock markets. Hence, these are for high risk takers. However if you invest for medium to long term of 5-10 years, the risk is reduced, however not completely eliminated. If you are a low risk taker, you should avoid ELSS funds. If you are moderate to high risk taker, invest in ELSS mutual funds.

Is it the right time to invest in ELSS?

Investment in equity markets has been always risky. Hence, investing through SIP in mutual funds for medium to long term has always benefitted investors. Forget about checking whether it is the right time to invest in ELSS or not, just go ahead and create SIP in ELSS funds.

Can I withdraw ELSS Mutual Funds after 3 years?

ELSS funds have a lock-in period of 3 years and you can always withdraw after this. However, if you can invest for 8-10 years, you can expect higher returns.

How do I start ELSS Mutual Funds?

You can invest in ELSS tax saving funds as low as Rs 500 per month. First, you need to select a good ELSS mutual fund. Second approach the AMC website and buy ELSS direct plans through their website. If you fee it is too much to go through AMC website, you can approach any mutual fund broker  or third party platform like icicidirect or fundsindia etc. and start investing online on their site.

Do I need to invest every year in ELSS?

Whatever you invest in ELSS MFs in a financial year is eligible to get income tax benefit u/s 80c for that financial year only. If you want the tax savings in subsequent financial years, you need to invest in that year too.

Is ELSS good for long term investment?

Mutual Funds are good if you can invest for at least 8-10 years. Though ELSS has 3 year lock-in period, you should invest in medium to long term to get superior returns.

Can I invest in top 10 ELSS funds?

One might be investing in several mutual funds from large cap, midcap, multi cap, etc. While you can invest in top 10 ELSS funds, you may have too many funds in your portfolio and it would be difficult to track. We would advise you to invest for 2-3 ELSS funds only.

Which are best ELSS funds as per value research?

Value Research rates the funds as 5 stars to 1 star. The higher the stars, the fund is categorized as highly rated one. The funds we indicated are all 5 star and 4 star ELSS funds from value research.

Readers, do you think this article covers all your queries? If not, leave comment, we would provide necessary clarifications and update this article too.

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Suresh KP

Top 5 Best ELSS Mutual Funds for 2020 to save tax

Suresh KP

11 comments

    1. Hello Gaurav, Generally I don’t recommend any fund which has short term performance. This fund was launched 1.5 years back only. The performance is good, but its short term performance. You can go for other funds recommended in this article where there is consistent performance over 5+ years.

  1. Hi Suresh,

    I have been investing in Reliance ELSS since 2018 and I dont see it listed in your list.
    Please suggest if I need to stop investing in this fund & withdraw the amount , and choose once of above fund for ELSS. Please suggest.

    1. Reliance is under performer now. However you can wait for 1-2 years before you exit. Generally these funds tend to perform on lower side some times though they have good long term history.

  2. sir i have some investment in

    ICICI Prudential Bluechip Fund Reg G ,
    icici pru val discovery (G) ,
    Nippon India Growth Reg D,
    Franklin india smaller cos.

    Should i wait or exit from these fund.

    1. Hello Manish, 3 out of 4 funds are from midcap/smallcap and this portfolio is high risk. You can continue ICICI Pru Bluechip Fund and Franklin India smaller cos fund. ICICI Value discovery fund is high risk fund, if you are ok, you can continue. Nippon India Growth fund is under performer, you can review and exit.

  3. I have invested in Invesco Tax-Direct plan this March and the appreciation as of today is just 3.9%. I am surprised that in the past 3 months the returns is being shown as 9.7%.

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