Last Updated on April 21, 2026 by Hemant Beniwal
“There is no best mutual fund. There is only the right fund for your situation, at this stage of your life, with this investment horizon.”
Every January, the same question floods my inbox: which is the best tax saving mutual fund to invest in this year?
I have been getting this question since 2003. And for 23 years, my answer has been the same: there is no such thing as the best ELSS fund. There are good ELSS funds. There are funds that match your situation. And there are funds that have performed well in the past – which tells you something, but not as much as most investors think.
Before I explain how to evaluate ELSS funds, there is one question that must come first: are you in the old tax regime or the new one? Under the new regime (the default from FY 2023-24), Section 80C does not apply. ELSS gives you no tax benefit. If that is your situation, this article is still relevant for understanding ELSS as an equity investment – but the tax-saving rationale disappears entirely.
⚡ Quick Answer
There is no universally “best” ELSS fund – performance rankings change every year and past returns do not reliably predict future returns. What matters more: consistency over 10+ year periods, reasonable expense ratio, fund house quality, and alignment with your risk profile. This post explains the framework for evaluating ELSS funds rather than a list that will be stale in 12 months.
Why “Best ELSS Fund” Is the Wrong Question
Every year, financial websites publish lists of “best ELSS funds for 2026.” These lists are based almost entirely on 1-year or 3-year trailing returns. There are several problems with this approach.
Fund performance is cyclical. A fund that leads the category in one 3-year period often underperforms in the next. The ELSS category contains 40+ funds across large-cap, flexi-cap, and multi-cap mandates. Category leaders rotate. A fund that was ranked #1 in 2021 may be ranked #12 in 2025.
More importantly, the fund that topped the chart last year is not necessarily the one that will serve you well over the next 15 years – which is the horizon that actually matters for a retirement-oriented ELSS investment.
The right question is not: which fund had the best return last year? The right question is: which fund has the combination of consistency, quality, and cost that makes it a reliable long-term equity vehicle for my retirement corpus?
“Past performance may or may not be sustained in future. Mutual funds write this in bold. But who cares? We all chase last year’s winner. And we almost always arrive too late to benefit from the performance we chased.”
– Hemant Beniwal, CFP, CTEP | Founder, RetireWise
The Framework: How to Actually Evaluate ELSS Funds
1. Long-period consistency, not short-period returns. Look at rolling returns over 7-10 year periods – not 1-year or 3-year trailing returns. A fund that has consistently delivered 12-14% CAGR across multiple market cycles is more valuable than a fund that delivered 30% in the last bull market and 5% in the downturn before that. Rolling return data is available on Valueresearchonline.com and Morningstar India.
2. Downside protection, not just upside capture. The best ELSS funds tend to fall less than the category average in bear markets and capture a reasonable proportion of bull market gains. A fund that gains 20% in good years but loses 40% in bad years is inferior to one that gains 15% and loses 20% – even though the former shows higher peak returns. For retirement corpus building, preservation of capital during downturns matters as much as upside participation.
3. Expense ratio. ELSS funds are actively managed equity funds. Expense ratios range from approximately 0.6% to 2.5% depending on the plan and fund house. Over 15-20 years, a 1% difference in annual expenses compounds to a significant reduction in terminal corpus. Check the Total Expense Ratio (TER) of any fund you are considering.
4. Fund manager tenure and fund house quality. ELSS performance is closely tied to the fund manager’s investment philosophy. A fund with a 15-year track record built under one fund manager and then handed to a new manager has less predictable future performance than its past suggests. Assess the fund house’s overall track record, research capability, and stability – not just the individual fund.
5. Portfolio overlap with existing investments. If you already have a large-cap index fund, a flexi-cap fund, and a mid-cap fund, adding an ELSS with similar holdings creates concentration risk without diversification benefit. Check the underlying portfolio of any ELSS fund against your existing holdings before adding it.
Not sure whether ELSS is even the right vehicle for your retirement corpus?
The tax saving question and the investment quality question are separate. A RetireWise advisor can map both for your specific situation.
The Specific Mistake to Avoid: March Lump Sum at Any Price
The most destructive ELSS behaviour is the March rush. Every year, millions of investors invest lump sum amounts in ELSS in the last two weeks of March to meet the tax-saving deadline. They invest at whatever market level prevails in mid-March – which is often elevated after months of sustained flows.
The consequence: they buy at high prices, lock in for 3 years, and may find themselves sitting on negative or flat returns at the 3-year mark if the market corrects during that period.
The solution: ELSS SIP throughout the year. Invest Rs 5,000 or Rs 10,000 or Rs 12,500 per month (Rs 1.5 lakh per year = Rs 12,500 per month) via SIP starting in April. By March, you have completed 12 months of averaging. Your average purchase price reflects a full market cycle rather than a single point-in-time elevated level. Each instalment has its own 3-year lock-in, so 12 SIPs create 12 staggered lock-in end dates – manageable and flexible.
ELSS in a Retirement Portfolio: What Role Does It Play?
For a 45-year-old with 15 years to retirement in the old tax regime, ELSS serves two simultaneous purposes: it is the equity allocation in the tax-saving bucket, and it contributes to retirement corpus. Rs 1.5 lakh per year in ELSS SIPs for 15 years at 12% CAGR produces approximately Rs 74 lakh before tax – a meaningful component of the retirement plan.
For a 55-year-old with 5 years to retirement: ELSS is less appropriate. The 3-year lock-in on new investments means money invested at 58 cannot be accessed until 61 – when you may need it for retirement income. At this stage, transition ELSS contributions toward open-ended equity funds with full liquidity, and begin shifting the existing ELSS corpus (as lock-ins expire) into more stable instruments aligned with your income needs.
Read – ELSS vs PPF: Which Is Better for Tax Saving and Retirement?
Read – When Not to Invest in ELSS: 5 Situations Where It’s the Wrong Choice
Frequently Asked Questions
Should I invest in one ELSS fund or multiple?
One or two ELSS funds is sufficient for the typical retail investor. Adding 3-4 ELSS funds creates pseudo-diversification – you end up with similar underlying portfolios, higher administrative complexity, and no meaningful risk reduction. If you want diversification within the ELSS category, choose one fund with a predominantly large-cap mandate and one with a flexi-cap or multi-cap mandate. More than two is almost never necessary.
My existing ELSS has done poorly. Should I switch?
Evaluate performance over the full market cycle, not just one or two recent years. A fund that underperformed during the 2021-2024 small-cap bull run but held up well during the 2025 correction may be the better fund for the next 10 years. If sustained underperformance over 5+ years persists across different market conditions – and the fund house quality has deteriorated – then switching is reasonable. But switching based on 1-2 years of relative underperformance is usually return-chasing in disguise.
How do I check if my ELSS 3-year lock-in has expired?
Each investment instalment has its own 3-year lock-in. For SIP investments, the lock-in runs from the specific date of each instalment – not from the first SIP date. Your CAMS or Karvy consolidated account statement shows the allotment date and units for each transaction, which lets you track exactly when each instalment becomes liquid. Most fund house apps and CAMS online now show redemption eligibility by transaction date.
The best ELSS fund is the one you invest in systematically, hold through corrections without panic-selling, and align with your actual retirement timeline. That combination matters far more than which fund topped the return chart in any given year. Pick a consistent performer, start a SIP, and let 15 years of compounding do what return-chasing never can.
Consistency beats brilliance. Every time. Over every time horizon.
Want a retirement plan that integrates ELSS, PPF, and equity allocation properly?
RetireWise builds retirement plans where every 80C decision – including ELSS fund selection – serves a specific retirement corpus goal.
💬 Your Turn
How do you currently choose ELSS funds – by past returns, fund house reputation, advisor recommendation, or something else? Share in the comments.
It is a treat to read your works. I completely relish your works and eagerly wait for the next arrival.
Thanks 🙂
Do we invest all the money in first one or part money in all then in what proportion. There trends seems to be really impressive, kindly guide me asap
Hemant thanks for such a helpful post.
I am planning to invest in ELSS mutual fund and time horizon would be 15 years. I will be investing 1 lakh per year to save tax . Now my query is , should I invest in one or two ELSS ( definitely not going to invest in more than two) ?.
My first pick would be AXIS and if you suggest two, may I know what would you suggest for second option?. I can take a bit risk for second one.
Waiting to hear from you.. thanks once again.
nice work keep it up
Aditya Birla Sun Life Tax Relief 96 scheme follows an aggressive multi-cap approach and delivered a positive return in different time frames. It has given 24.47% return since its launch. The fund has a higher allocation to mid-cap stocks which consist of 47% percent (approx.) and balance spread across large cap 43% (approx.) and small cap 10% (approx.). Thanks for sharing a great article.
Really very informative post.Such an amazing experience of reading.I loved it and enjoyed it very much.You shared great content.Keep up the good work.Thanks for sharing.
I am an NRI. All my income is tax free in india. Kindly advice mutual fund is better or I shall go for ELSS. In my opinion since I am not bounded for saving taxes on my income I must go for equity mutual funds with a lesser locked in period. Kindly suggest…….
Hi Ayush,
ELSS is also mutual fund but as you mentioned regarding your tax status – it will be better for you to go for diversified equity funds.
Hi,
I have a plan to invest in SIP. kindly let me know, when i need to invest in every month. will date matters?
If the select the particular date while starting my investment then i need to continue in the same date till end. correct me if i am wrong.
Hi Gowri,
Date Doesn’t matter in investment in mutual through SIP – in the long term it won’t make any difference in returns.
AMC will ask you about SIP starting date. On that particular date, your SIP amount will be automatically debited from your bank account till the end date of investment. Date should be based on your convenience(income date) – if you want you can change this in future.
Sir, I am investing SIP of Rs 10 k in reliance tax saver from sept 2016 .Is it right decision?
Hi Santosh,
If this is the only equity SIP that you are running – I will suggest diversifying.
Sir I want to know the best equity mutual funds in 2017 to invest in as I am new to mutual fund and want to invest in.
Thanks
Informative article. I have many Senior Citizen friends who invest in ELSS Dividend Pay Out option since they require money regularly …& they are quite happy about it !
Sir,
I have started investing in below funds as SIP for next 20 years.Advise if this is good option
1.ICICI pru focusssed bluechip-2500
2.Mirae bluechip emerging fund-2500
3.HDFC balanced -2500
4.Franklin india elss-4000
5.Reliance tax saver-4000
6.Axis Elss-400
7.ICICI pru tax plan-4000
8.Birla top 200 -2500
sir,
i am canara rabbco (LESS
sir,
i have canara rabaco (LESS) for the AY 2010-11 and Axis long term advantage (LESS) for the AY 2013-14.please suggest me in which fund (LESS) i have to invest for the AY 2014-15. advice me shall i invest now or wait for some time for corracton in market.
with regards
sastry
How about your assessment on Best Mutual Fund – 2014 for investing?
Hi All,
I am 26 years old and doing investment in below SIP and funds please suggest my planning is corrret or not ?
HDFC Gold….INR 1500 from last 1 year
HDFC top 200….INR 1500 from last 1 year
DSP BR Small & Mid Cap….INR 1500 from last 1 year
LIC Money back 30k per year from last 1.6 year
HDFC Life for 7 year with 10 year locking……..24K per year 1.6 year
Can i expect approx 2 crore amount after 25 year from SIP ?
Please suggest.
Thanks
Girraj Sharma
Girraj,
You are investing almost Rs 9000 p.m. Even if a 12% return is assumed you may not reach the target amount with this fixed investment. However, your financial situation will not remain same as your income will increase. So you can enhance these contributions periodically which will allow you to reach near your target goal.
Sir
I want to invest annually 60 k in mutual tax saving funds ?
Please suggest the best one.
Thank you.
Anil,
You can consider spreading this into two funds. You can pick from the list.
PROCEDURE TO START SIP WITHOUT ANY AGENT IN DETAIL.
A Saha,
You can visit any respective company website and you will find the detail of the process to invest.
Hello sir,
Since last 2 years i am investing in HDFC Tax saver growth..The performance of this fund is below average compared with category..So should in continue my SIP in the same fund or else change to another fund
Pls advise…
Rgs,
Devendran rangasamy..
Deva,
If the fund is under performing for a long time in comparison to its peers then you can look at alternative. However do analyze the reason for underperformance and then make your decision.
I have shortlisted following tax saving funds from your given list. Pl help in selecting two out of them.
Sl Fund CRISI Value Research
No Rating Rating
1 Axis Long Term Equity Rank One Five Star
2 Canara Robeco Eqt Tax Saver Reg-G Rank Two Five Star
3 BNP Paribas Tax Advantage Plan (G) Rank One Four Star
4 Religare Invesco Tax Plan (G) Rank Two Five Star
VK,
If this is the list you have finalized you can check on the basis of few parameters such as risk adjusted returns (sharpe ratio), portfolio churning etc.. to see which of these has produced better results. The portfolio of these funds will tell you where are they concentrtaed i..e which of these have more exposure to large cap and which one towards midcap. Analyzing on these will give you the two to choose.
Thank you Sir for your valuable information.I too had the same confusion as Mr. VK had, Now i am clear how to take decision regarding tax saving funds.
Hi, Hemanth!
Is it okay to invest in a scheme that has not rated been rated by CRISIL, if it is from a reputed fund house?
Anusha,
Rating agencies have their own parameters basis on which they rank mutual funds schemes. It may happen that a scheme rating may vary among them. CRISIL too has its own ranking methodology. If a fund is not rated by one and is there on the list by other, you should check reason for its exclusion. But if a fund is not rated by ant of the rating agency, then there need to be a strong reason. So you will have to look at the rating methodology and then can only conclude.
Although, you can use these rankings for filtering your selection its advisable to set some of your own and then see how the fund fares.
Dear Anil,
If we do investment for Tax Saving Purpose in Mutual Funds through SIP, is there any locking period in that for redemption of the same. Can you please advice.
Thanks in Advance
Sekar
Yes there is lock in period as mentioned in the post. Please read the post carefully before asking any question.
Hi Anil,
I want to save tax so I want out to invest 50000 in SBI emerging business fund-regular plan-growth in this year . Is this fund comes under ELSS?
Hi Chirag,
SBI emerging business fund comes under Small & Mid Cap Fund Family. So it does not comes under ELSS.
Hi Anil,
I am in bit dilemma. Could you please suggest that Which tax plan is better to choose between the direct plan(newly launched from 1st Jan 2013) and regular plan? When a choice is between Quantum and Religare, according to your view, which is better. Thanks in advance for the reply.
Sir, please suggest an portfolio if an employee earns 3lakhs/year?For rebate in tax and insurance of me, i spend nearly 2500/month in LIC and 1450/month in PLI,5000/year in bajaj super saver plan,16000/year in UTI ULIP and also open an ppf account.Though i save in tax rebate but now i think i am doing mistakes due to lack of knowledge.will u guide me?Also i dont want to open any other plan but i want to switch off an plan against the new plan,please suggest.
I have invested in HDFC Tax saver plan (SIP)..currently 15 th installament is going on. and as per the returns are concerned they are just 3to4% Although earlier returns were quite good but as months are passing returns are decreasing .I am bit worried whether should i continue with plan or not. Lock in period is 3 years …can anybody please suggest me some solution over it..can i change my SIP plan to any other HDFC plan??
SIP return requires long time duartion……….
after 4-5 year you will find the figures like 15-20%
I am looking out to invest in a Mutual Fund – SIP (Tax saving scheme) and one retirement Plan . can you suggest me anything which i can go for as i am very new into this things.
Please do your home work. Do not seek advice.
are there any tax saving benefits for a single women parent. If any, please provide details.
in which mutual fund one should invest
One should not invest in a scheme which one does not understand. One must do research before investing.
Hello Sir,
warm regards. I have gone through your behavioural finance guide and it is very inspirational. Thank you so much for providing such a honest information on Finance behaviour science and methods of assets allocation.
Sir we are working couple in age of 30. Here I would like to mention that in January 2013 following investment in form of SIP is done by us:
SBI emerging business fund-regular plan-growth: 3000INR
Reliance equity opportunities fund-growth plan-growth options: 2000INR
HDFC mid cap opportunities fund-growth: 3000INR
Birla sun life frontline opportunities fund-growth: 2000INR
please suggest me weather I am right in above mentioned investment and what changes can be done.
thanks
Anupam
You are doing fine.
Thank you so much for the reply.
Hi,
I am new to this MF investment. I am 50 yrs old and my annual salary for this current Tax Year 2012-3 is Rs.945000
I have saved around 50K under Sec 80 and another 50K has to be saved. I like to deposit by choosing from your table as below.
Axis Long Term Equity – Rs.25000
Canara Robeco Equity Tax Saver – Rs.25000
Please suggest me whether I am right , I have to deposit for how many years on the above and also any other way to deposit to save further tax other than above.
Instead of lumpsum investment SIP mode is better.
Dear Mr.Anil,
What is the significance of Alpha, Beta, Mean, SD while we try to analyze and Fund through ValueResearchOnline….???? Does a Investor really understand these and go ahead or he can decide based on past performance and the Fund Manager Style??
Value Research gives star ratings to funds which can be a good starting point.
Nice Article.
One of the things to take care of : Past performance does not guarantee repeat future performance. So do look out for changes in fund managers etc.
It would also have been helpful to get a Annual Growth Rate for these funds from the initial year and have the SENSEX data also put into the column. For the years when there is negative return which one stays closest or drops less versus what happens when the years are good [is the amplification the same or is a fund able to lessen amplification when the returns are bad]. That would nice to see.
I am new to this mutula funds investment. Let me know which one is best for to invest this year and let me know the process
Do your home work properly before any investment. Making investments merely based on advice is not proper.
Hi
At first i am really sorry for this elaborate post cum question.Plz bear some patience to read till the end.
I am in a big financial fix.I am 24 yrs old, just 1.4 yrs into a IT job after grad. with a b.tech degree, annual salary around 3 .2 lakhs.I took a LIC endowment plan last yr (paid 2 premiums of 31000 each for the past 2 financial yrs) from our ‘family LIC agent’ (after a lot of persuasion from him) to start insurance and also save tax (hate that decision of mine).I was a novice in personal finance then (now little literate).The plan is for 30 yrs with sum assured 10 lakhs.
Recently, i came across a blog where the disadvantages of endowment plan was enunciated stating the effective return as around 5-6%.They wrote that a good mix of a term insurance (rs 14000) and ELSS investment (rest rs 17000) of this 31000 per yr would fetch much higher returns (securing my nominees by the term insurance and also riding the market using ELSS MFs).
Now, i feel like i have committed a huge mistake and would be even making it worse by continuing this plan for the next 28 yrs.
Should i stop this endowment plan and use the amount in ELSS and term insurance from the next fiscal yr (2013-14) ? I feel like losing 62000 too (saved from this meagre salary for the last 1 yr) since LIC wont pay back any penny if i stop this plan now…..whats the best way ???
Also are ELSS guaranteed to be under the tax saving category for years to come ?? Bcoz if it doesnt, then stoping this endowment plan will be a huge mistake (if i survive till the end of the term of the term insurance, my end resultant cash wudnt be much).
Need some real expert opinion on this.
Plz help me on this.
Thanks in advance.
It is good that you have now realized your mistake. Investment and insurance should never be mixed.Moreover you need insurance only if you have dependents. In case you are not married and you don’t have any dependents you may not require any life insurance at all. It will be better to invest your money in diversified equity mutual funds to meet your long term goals.
Hi Sir,
I just want to know in which tax saving mutual fund i should invest. I have never invested in mutual fund before. Plesase help
You can select one from the table given.
Is it right that every SIP installment in ELSS is locked for 3 years? Say, I am doing a SIP for 5 year in a ELSS, whether my 40th installment will be locked for another 3 year? On that way I can not withdraw my money in a single shot.
You are right.
Hi sir.
When investing in mutual fund is it necessary to read scheme information document and statment of additional information
thanks
No investment should be made without understanding.
I feel that HDFC Tax saver should have been also added into your analysis. This is one of the best tax saver funds with a consistent performance. I was surprised by not seeing it included in your analysis.
It is not possible to include all the funds. Fund selection has to be based on certain criteria.
Respected sir,
I found this very useful, as per your kind guidance I have invested 35000 Rs in Reliance Tax Saver Fund – Gr. Can you pls. help me to know if this is a right decision or not and the tentative returns I can expect after 3 years.
Regards,
Manoj
It is not possible to predict future returns of any fund.
what is your take on health insurance plans esp that by lic. giving a premium of 16000 for a 8L cover ( for two ) or starting a RD of 5000/- per month as a cover against future health needs .
Insurance and investment can not be mixed or compared.
hello sir,
actually m new in corporate and eager to learn to learn more n more about mutual funds and the differences between all.
so i want to ask that if i start a SIP per month n after 15yr maturity i redeem the amount so will it be taxable.
if not the what will b the difference between tax saving fund n these fund if i would invest in LUMSUM as well
There are many categories of mutual funds and tax implications are different in different categories.
Hello Hemant and Anil,
What has happened to HDFC tax saver ? Has this fund not been performing well in the last couple of yrs? Because this fund has been one of the best over the yrs..and to not find this fund in the above mentioned list is a bit of a shame because whenever we talk about tax saving fund..HDFC tax saver comes in our mind. So my question to you is are you surprised by this fund’s performance in the recent times?
I am also thinking same, how come HDFC tax saver is not mentioned in the above list. but in moneycontrol website it is gauged as average performer.
HDFC tax saver was very popular till about a few years back.It is an old fund,launched in 1996. But over the years it has slipped in returns and performance rankings and the other tax saving fund from the same AMC is a better performing one. That could be the reason it is not included.
The “returns since inception” is not a good indicator of performance . If a fund was a top performer during the initial years and has been performing poorly for the last few years, it would still have a decent “returns since inception” score
Hi Hemant
I agree with Manoj. HDFC Tax saver has given 30% returns since launch. It is still one of the best fund though value research has given it a rating of 3 stars.
Manoj
I thnik, all HDFC funds have not performed well in the recent rally.
Hi Hemant
Thanks for performance tables and charts which enhance the utility of the post.