There are several tax saving investment schemes in India, where an investor gets exemption u/s 80c. Majority of them have a lock-in period of over 5 years. However, ELSS Tax saving mutual funds have lowest lock-in period of 3 years. While the returns are not fixed, these can provide high returns if invested for a medium to long term. What are ELSS Mutual funds in India? Which are the Top 5 Best ELSS Tax Saving Mutual Funds to invest in 2023 in India?
Also Read: Best Mutual Funds doubling every 5 years consistently
What are Tax Saving Mutual Funds?
Tax Saving Mutual Funds aka ELSS (Equity Linked Saving Scheme) mutual funds invest in a diverisifed portfolio of stocks and also provides income tax benefit u/s 80c up to Rs 1.5 Lacs in a financial year.
Here is the list of benefits of investing in ELSS Mutual Funds.
1) 3 years Lock-in Period โ Majority of the tax saving schemes like PPF, NSC, Tax saver FDโs etc. have lock-in period of 5 years and above. However, ELSS mutual funds have a lowest lock in period of 3 years. Investors can withdraw their money after this lock-in period or continue beyond this too.
2) Tax benefit upto 1.5 Lacs u/c 80c โ One can invest in ELSS tax saving mutual funds up to Rs 1.5 Lacs in a financial year and are eligible for tax benefits u/s 80c.
3) Potential to generate high returns โ All tax saving investment schemes provide fixed income which ranges between 5.5% to 7.5%. In case of ELSS mutual funds, if invested for over 5 years, there is potential to earn 12% to 15% annualised returns though not guaranteed.
Who can invest in ELSS Mutual Funds?
Investors who want to invest in tax saving schemes to save tax u/s 80c up to Rs 1.5 Lacs in a financial year.
Looking for investment for 3 to 5 years or above.
Moderate to high risk investors.
Investors who want to invest small amounts every month to save tax can opt these funds through SIP. One should note that each SIP would have lock-in period of 3 years. E.g. Jan-2023 SIP would have 3 year lock-in period till the end of Dec-2025. Feb-2023 SIP lock-in period is till Mar-2025 and so on.
Investors who are willing to take some risk and expect high returns of over 12% per annum can invest in such schemes.
How we filtered these Top ELSS Funds to invest in 2023?
We used below filters to shortlist these funds.
1) There are 57 ELSS tax saving mutual funds in India as of the day of writing the article.
2) Filtered mutual funds that generated highest annualised returns in the last 3 to 5 years. There are 23 mutual funds that generated over 12% annualised returns in last 5 years.
3) Filtered funds that generated highest SIP returns. We could get 16 mutual funds from this list.
4) Considered funds that generated consistent rolling returns for 3 years and 5 years.
5) Preference given for lowest expense ratio.
6) Finally we could get Top 5 Best ELSS Tax Saving Mutual Funds. We could also observe that the list is same as what we recommended last year on ELSS funds to invest in 2022.
Best ELSS Tax Saving Mutual Funds to invest in 2023
Here is the list of Top 5 Best ELSS Mutual Funds in India for 2023, which are consistent performers.
#1 – Quant Tax Plan
#2 – Canara Robeco Equity Tax Saver Fund
#3 – Mirae Asset Tax Saver Fund
#4 – Bank of India Tax Advantage Fund
#5 – IDFC Tax Advantage (ELSS) Fund
Top 5 ELSS Funds for 2023 โ Detailed View
#1 – Quant Tax Plan
Investment objective of the fund
The investment objective of the Scheme is to generate Capital Appreciation by investing predominantly in a well diversified portfolio of Equity Shares with growth potential. This income may be complemented by possible dividend and other income.
Funds Performance and Risk Statistics
| Performance & Risk Metrics | Quant Tax Plan |
| Value Research Rating | 5 Star |
| 3 Years – SIP Returns | 44% |
| 5 Years – SIP Returns | 34% |
| 5 Years – Annualised Returns | 24% |
| AUM –ย Crores | 1,943 |
| Expense Ratio | 0.57% |
| Risk Grade | Average |
| Return Grade | High |
| Beta | 0.96 |
| Alpha | 18.88 |
This fund has a low beta of 0.96. Beta refers to the volatility of the fund compared to its benchmark (which is 1). Any fund that has a beta of lower than 1 can be considered as less volatile compared to the benchmark.
This fund has a high alpha of 18.8. Alpha is excess returns earned over the benchmark. Any fund that has alpha of more than zero can provide higher returns compared to the benchmark.
Currently it invests 100% in equity. Its majority of the portfolio is invested in stocks in consumer staples, services, financial sector and materials.
From a 3 year rolling return perspective, this fund generated:
- > 12% returns โ 64% of the times
- 0% to 12% returns โ 30% of the times
- Negative returns โ 6% of the times
From a 5 year rolling return perspective (to 2013 where direct funds data is available), this fund generated:
- Over 12% returns โ 100% of the times
- 0% to 12% returns โ Zero times
- Negative returns โ Zero times
This fund generated a 22 % annualized return since inception in 2013 (direct fund). Considering its outstanding performance in the category and low expense ratio, it is one of the Best ELSS Mutual Funds to invest in 2023.
#2 – Canara Robeco Equity Tax Saver Fund
Investment objective of the fund
This ELSS aims to provide long term capital appreciation by predominantly investing in equities to facilitate the subscribers to seek tax benefits as provided under Section 80 C of the Income Tax Act, 1961. However, there can be no assurance that the investment objective of the scheme will be realized.
Funds Performance and Risk Statistics
| Performance & Risk Metrics | Canara Robeco Equity Tax Saver Fund |
| Value Research Rating | 5 Star |
| 3 Years – SIP Returns | 23% |
| 5 Years – SIP Returns | 20% |
| 5 Years – Annualised Returns | 17% |
| AUM –ย Crores | 4,176 |
| Expense Ratio | 0.59% |
| Risk Grade | Low |
| Return Grade | Above Average |
| Beta | 0.87 |
| Alpha | 4.69 |
This fund has a beta of 0.87. Beta refers to the volatility of the fund compared to its benchmark (which is 1). Any fund that has a beta of lower than 1 can be considered as less volatile compared to the benchmark.
This fund has a high alpha of 4.69. Alpha is excess returns earned over the benchmark. Any fund that has alpha of more than zero can provide higher returns compared to the benchmark.
Currently it invests 97% in equity and balance holds in cash. Its majority of the portfolio is invested in stocks in the financial, technology, capital goods, automobile, health care, energy, consumer staples, services, chemicals etc.
From a 3 year rolling return perspective, this fund generated:
- > 12% returns โ 77% of the times
- 0% to 12% returns โ 23% of the times
- Negative returns โ Zero times
From a 5 year rolling return perspective (to 2013 where direct funds data is available), this fund generated:
- Over 12% returns โ 100% of the times
- 0% to 12% returns โ Zero times
- Negative returns โ Zero times
This fund generated a 16 % annualized return since inception in 2013 (direct fund). Considering its outstanding performance in the category and low expense ratio, it can be considered as one of the Best ELSS Mutual Funds in 2023 in India.
#3 – Mirae Asset Tax Saver Fund
Investment objective of the fund
The investment objective of the scheme is to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity related instruments. The Scheme does not guarantee or assure any returns.
Funds Performance and Risk Statistics
| Performance & Risk Metrics | Mirae Asset Tax Saver Fund |
| Value Research Rating | 5 Star |
| 3 Years – SIP Returns | 22% |
| 5 Years – SIP Returns | 19% |
| 5 Years – Annualised Returns | 16% |
| AUM –ย Crores | 13,148 |
| Expense Ratio | 0.50% |
| Risk Grade | Below Average |
| Return Grade | High |
| Beta | 1.00 |
| Alpha | 2.36 |
This fund has a low beta of 1. Beta refers to the volatility of the fund compared to its benchmark (which is 1). Any fund that has a beta of lower than 1 can be considered as less volatile compared to the benchmark.
This fund has a high alpha of 2.36. Alpha is excess returns earned over the benchmark. Any fund that has alpha of more than zero can provide higher returns compared to the benchmark.
Currently it invests 99.5% in equity and balance holds in cash. Its majority of the portfolio is invested in stocks of financial services, technology, energy, healthcare and automotive.
From a 3 year rolling return perspective, this fund generated:
- > 12% returns โ 75% of the times
- 0% to 12% returns โ 25% of the times
- Negative returns โ Zero times
From a 5 year rolling return perspective (to 2013 where direct funds data is available), this fund generated:
- Over 12% returns โ 100% of the times
- 0% to 12% returns โ Zero times
- Negative returns โ Zero times
This fund generated a 20 % annualized return since inception in 2013 (direct fund). Considering its outstanding performance in the category and low expense ratio, it is one of the Best Tax Saving Funds to invest in 2023.
#4 โ Bank of India Tax Advantage Fund
Investment objective of the fund
The Scheme seeks to generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities across all market capitalizations. The Scheme is in the nature of diversified multi-cap fund. The Scheme is not providing any assured or guaranteed returns. There can be no assurance that the investment objectives of the Scheme will be realized.
Funds Performance and Risk Statistics
| Performance & Risk Metrics | Bank of India Tax Advantage Fund |
| Value Research Rating | 4 Star |
| 3 Years – SIP Returns | 24% |
| 5 Years – SIP Returns | 20% |
| 5 Years – Annualised Returns | 15% |
| AUM –ย Crores | 648 |
| Expense Ratio | 1.29% |
| Risk Grade | Average |
| Return Grade | High |
| Beta | 0.87 |
| Alpha | 7.00 |
This fund has a low beta of 0.87. Beta refers to the volatility of the fund compared to its benchmark (which is 1). Any fund that has a beta of lower than 1 can be considered as less volatile compared to the benchmark.
This fund has a high alpha of 7. Alpha is excess returns earned over the benchmark. Any fund that has alpha of more than zero can provide higher returns compared to the benchmark.
Currently it invests 97.2% in equity and balance holds in cash. Its majority of the portfolio is invested in stocks in the financial services, automobile, consumer staple, capital goods and energy.
From a 3 year rolling return perspective, this fund generated:
- > 12% returns โ 69% of the times
- 0% to 12% returns โ 31% of the times
- Negative returns โ Zero times
From a 5 year rolling return perspective (to 2013 where direct funds data is available), this fund generated:
- Over 12% returns โ 100% of the times
- 0% to 12% returns โ Zero times
- Negative returns โ Zero times
This fund generated a 17.4 % annualized return since inception in 2013 (direct fund). Considering its outstanding performance compared to its peers, it can be considered as one of the Top ELSS Mutual Funds in India for 2023.
Also Read:ย This Mutual Fund generated highest SIP returns in 5 years
#5 โ IDFC Tax Advantage (ELSS) Fund
Investment objective of the fund
The Fund is an Equity Linked Savings Scheme (ELSS) that aims to generate long term capital growth from a diversified equity portfolio and enables investors to avail of a deduction from total income, as permitted under the Income Tax Act, 1961.
Funds Performance and Risk Statistics
| Performance & Risk Metrics | IDFC Tax Advantage (ELSS) Fund |
| Value Research Rating | 4 Star |
| 3 Years – SIP Returns | 29% |
| 5 Years – SIP Returns | 21% |
| 5 Years – Annualised Returns | 14% |
| AUM –ย Crores | 3,851 |
| Expense Ratio | 0.74% |
| Risk Grade | High |
| Return Grade | Above Average |
| Beta | 1.11 |
| Alpha | 3.67 |
This fund has a low beta of 0.87. Beta refers to the volatility of the fund compared to its benchmark (which is 1). Any fund that has a beta of lower than 1 can be considered as less volatile compared to the benchmark.
This fund has a high alpha of 7. Alpha is excess returns earned over the benchmark. Any fund that has alpha of more than zero can provide higher returns compared to the benchmark.
Currently it invests 97.2% in equity and balance holds in cash. Its majority of the portfolio is invested in stocks in the financial services, automobile, consumer staples, capital goods and energy.
From a 3 year rolling return perspective, this fund generated:
- > 12% returns โ 55% of the times
- 0% to 12% returns โ 32% of the times
- Negative returns โ 13% of the times
From a 5 year rolling return perspective (to 2013 where direct funds data is available), this fund generated:
- Over 12% returns โ 100% of the times
- 0% to 12% returns โ Zero times
- Negative returns โ Zero times
This fund generated a 18 % annualized return since inception in 2013 (direct fund). Considering its outstanding performance in the category and low expense ratio, it is one of the Top 5 ELSS Funds for 2023.
Top 5 ELSS Funds with annualized returns of 1 year to 5 years
| Mutual Fund Name | 1 Yr | 3 Yrs | 5 Yrs |
|---|---|---|---|
| Quant Tax Plan | 14% | 43% | 24% |
| Canara Robeco Equity Tax Saver Fund | 1% | 24% | 17% |
| Mirae Asset Tax Saver Fund | -3% | 23% | 16% |
| Bank of India Tax Advantage Fund | -3% | 26% | 15% |
| IDFC Tax Advantage (ELSS) Fund | 3% | 26% | 14% |
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Is it the right time to invest in HDFC SHARES / HDFC BANK SHARES as there is a feeling that merger of these two will bring in more profits in the long run ?
Good to invest in lots instead of lumpsum
Thank you very much for your quick response
What about Axis Iong term equity fund. I have few units with average NAV of 45. Should I average or open new one in the mentioned one’s. Actually after similar post before 6 years from you I chose that fund and made good profit.
Request suggestion
Hi Sivaraman, I observed that all Axis MFs are underperforming compared to peers after the scam (fund managers were front running) including Axis LT Equity fund. You should review this one time and exit if possible.
Sure. Thanks for the guide