Top Tax-Saving Mutual Fund In India

Summary
ELSS (tax-saving mutual funds) allow a tax deduction of up to ₹1.5 lakhs under the old tax regime while allowing exposure to equities.

The lock-in period for ELSS funds is mandatory for 3 years, which is the minimum lock-in period amongst other tax-saving funds under section 123 (section 80C).

Best 10 Tax-Saving Mutual Funds: Quick Comparison

The best tax-saving mutual funds in India as of 31 July 2026 are listed below. The list below includes the best tax-saving funds, based on their NAV, AUM, expense ratio, and returns.

Name	NAV	AUM (In ₹ Crores)	Expense Ratio (%)	1 year Returns (%)	3 years Returns (%)	5 years Returns (%)	Benchmark
SBI ELSS Tax Saver Fund	476.66	31,839	1.11	0.88	16.55	16.94	BSE 500 India TR INR
Nippon India ELSS Tax Saver Fund	145.14	14,880	0.87	2.57	14.17	14.16	Nifty 500 TR INR
TATA ELSS Fund	53.96	4,597	0.68	6.43	13.76	14.16	Nifty 500 TR INR
HDFC ELSS Tax Saver Fund	1,503.66	15,685	1.18	(0.62)	15.16	16.51	Nifty 500 TR INR
Mirae Asset ELSS Tax Saver Fund	57.75	26,049	0.56	4.42	14.05	13.16	Nifty 500 TR INR
Baroda BNP Paribas ELSS Tax Saver Fund	114.03	897	0.92	6.84	16.78	13.58	Nifty 500 TR INR
Edelweiss ELSS Tax Saver Fund	139.03	443	0.88	7.59	14.66	13.64	Nifty 500 TR INR
DSP ELSS Tax Saver Fund	156.33	16,562	0.9	1.11	15.47	13.68	Nifty 500 TR INR
Motilal Oswal ELSS Tax Saver Fund	63.29	4,862	0.97	4.25	21.46	17.46	Nifty 500 TR INR
HSBC ELSS Tax Saver Fund	154.60	4,081	0.97	5.08	17.18	14.07	Nifty 500 TR INR

Top 10 Tax-Saving Mutual Funds

The top-performing tax-saving funds mostly invest in equity stocks that qualify for a deduction of ₹1.5 lakhs as per the old tax regime, under Section 123 of the Income Tax Act, 2025. This section was formerly known as Section 80C.

1. SBI ELSS Tax Saver Fund

This fund has an AUM of ₹31,839 crore with an expense ratio of 1.11%. It delivered a 1-year return of 0.88% and a 3-year return of 16.55%. The fund also shows a 5-year return of 16.94%. The fund’s large AUM size provides liquidity and stability, while it may reduce the flexibility to invest in smaller opportunities. 

2. Nippon India ELSS Tax Saver Fund

The AUM of Nippon India ELSS Tax Saver Fund is valued at ₹14,880 crore, with an expense ratio of 0.87%. It displayed a 1-year return of 2.57%, a 14.17% return in 3 years, and a 14.16% return in 5 years. The fund maintains a diversified portfolio, but it may experience high volatility because of its exposure to small-cap and mid-cap businesses.

3. TATA ELSS Fund

TATA ELSS Fund holds an AUM worth ₹4,597 crore with a 1-year return of 6.43%. It also shows a 13.76% return in 3 years and a 14.16% return in 5 years, while holding an expense ratio of 0.68%. The low expense ratio helps the fund retain more net returns. 

4. HDFC ELSS Tax Saver Fund

The HDFC ELSS Tax Saver Fund holds an AUM worth ₹15,685 crore with an expense ratio of 1.18%. The fund has earned returns of 15.16% in 3 years and 16.51% in 5 years. However, it recorded a negative 1-year return of 0.62%. It mostly focuses on fundamentally strong companies. 

5. Mirae Asset ELSS Tax Saver Fund

The AUM of Mirae Asset ELSS Tax Saver Fund is valued at ₹26,049 crores and has an expense ratio of 0.56%. The fund recorded a 1-year return of 4.42% and a 3-year return of 14.05%. It also recorded a 5-year return of 13.16%. These funds have a low expense ratio and focus on balancing a diverse portfolio. However, only focusing on growth potential may cause high volatility during market fluctuations. 

6. Baroda BNP Paribas ELSS Tax Saver Fund

The Baroda BNP Paribas ELSS Tax Saver Fund has an AUM of ₹897 crores with an expense ratio of 0.92%. It recorded a return of 6.84% in 1 year, 16.78% in 3 years, and a 5-year return of 13.58%. The fund has a relatively small portfolio, which may cause portfolio concentration risk. 

7. Edelweiss ELSS Tax Saver Fund

The Edelweiss ELSS Tax Saver Fund has recorded a 1-year return of 7.59% and a 3-year return of 14.66%. It also delivered a 5-year return of 13.64%. It has an AUM worth ₹443 crore with an expense ratio of 0.88%. It includes a competitive expense ratio and active asset selection.

8. DSP ELSS Tax Saver Fund

The AUM of DSP ELSS Tax Saver Fund is worth ₹16,562 crore, while holding an expense ratio of 0.9%. It delivered a 1-year return of 1.11%, a 3-year return of 15.47%, and a 5-year return of 13.68%.

9. Motilal Oswal ELSS Tax Saver Fund

The Motilal Oswal ELSS Tax Saver Fund holds an AUM worth ₹4,862 crore while holding a 0.97% expense ratio. The fund has delivered a return of 4.25% a year, 21.46% in 3 years, and 17.46% in 5 years. It focuses on high-quality growth businesses. However, it may create significant impacts during market movements.

10. HSBC ELSS Tax Saver Fund

The NBSC ELSS Tax Saver Fund has an AUM worth ₹4,081 crore with an expense ratio of 0.97% and a 1-year return of 5.08%. The fund also recorded a 3-year return of 17.18% and a 5-year return of 14.07%. It allows a diversified exposure to equity and tax benefits on long-term wealth.

How We Selected These Tax-Saving Funds?

The funds were selected based on qualitative and quantitative factors suitable for a wide range of investors.

1. Asset Under Management (AUM): AUM indicates the total value of the assets that are managed by the fund. Higher AUM means more investor confidence and thus, the ability of the fund to handle a bigger investment portfolio.

2. Net Asset Value (NAV): The NAV denotes the per-unit market value of a mutual fund. Although a high or low NAV cannot be taken as an indicator of the fund’s quality, it helps in understanding the current price at which they can be bought or redeemed.  

3. Expense Ratio: The expense ratio represents the yearly charge levied by the fund house to manage the fund scheme. Funds having low expense ratios could generate better net returns in the long run, provided other factors remain the same.

4. Absolute Returns: The funds are compared considering the historical returns for different time periods. It provides information about the past track record of the fund.

Tax-Saving Funds VS Other Funds Category

The table below shows how Tax Saving mutual funds differ from other mutual funds.

Basis	Tax Saving Funds	Flexi Cap Funds	Debt Funds
Primary Investment	Equity stocks with tax saving benefits	Equity across large,  mid, and small cap funds	Invest in fixed-income funds such as bonds, treasury bills, and money market instruments
Risk	High	Moderate to high	Low to moderate
Tax Benefits	Eligible for deduction up to ₹1.5 Lakhs under Section 123, formerly 80C	No tax deductions	No tax deductions
Suitable for	Investors seeking tax benefits and long-term wealth building	Investors seeking diversified equity exposure	Investors seeking low risk with stable income

Benefits and Risks of Tax-Saving Mutual Funds

The benefits of Tax Saving mutual funds are listed below.

1. Tax Saving: These funds qualify for tax deduction under the Income Tax Act of up to ₹1.5 Lakhs as per Section 123, formerly known as Section 80C. 

2. Long-term goals: These funds are suitable for investors seeking to invest for a long period, to facilitate wealth creation over time. 

3. Short Lock-in Period: These funds have the shortest lock-in period of 3 years. Hence, the tax benefit is only eligible after a 3-year lock-in period under the Income Tax Act.

4. Diversified Portfolio: These funds allow investors to explore various sectors and companies and reduce the risk of concentration in a single market or sector.

The risks associated with Tax Saving mutual funds are listed below.

1. Lock-in Restriction: Investors need to stay invested till the end of the lock-in period to claim tax benefits. They cannot redeem or switch within the period.

2. Performance risk: The fund’s performance depends heavily on the fund manager’s allocation and management and the underlying portfolio. 

3. Market Movement: Since these funds invest in equity stocks, they are affected by changing market conditions, resulting in NAV changes due to market sentiment.

Who Should Consider And Avoid Tax-Saving Mutual Funds?

Investors who should consider investing in tax-saving mutual funds are given below.

1. Salaried Taxpayers: Investors who have a regular income and prefer tax deduction benefits can choose to invest in tax-saving mutual funds. They aim to earn inflation-adjusted returns over traditional ones. 

2. Growth-oriented investors: Investors who have a high risk tolerance and focus on growth-potential businesses to facilitate long-term wealth building can choose to invest in tax-saving funds.

3. First-time equity investors: Investors who aim to lock the funds for a minimum period of 3 years to claim tax benefits. 

Investors who should avoid investing in tax-saving mutual funds are listed.

1. Risk-averse investors: Investors who have a low risk appetite and prefer stable and regular returns can choose to avoid investing in these equity-oriented funds.

2. Short-term planners: Investors who want their investments to be flexible to redeem when required should avoid these funds. 

3. New tax regime optants: Investors who opt for the new tax regime should avoid these funds, since section 123 or 80C is not available in the new tax regime.

How To Choose A Tax-Saving Mutual Fund?

Investors can choose a suitable fund by evaluating the fund’s necessary fundamentals and matching them with their investment goals.

1. Lock-in period: Investors must evaluate the fund and the lock-in period, since the tax benefit is only eligible after a 3-year lock-in period. 

2. Historical Performance: Investors must analyse the fund’s past performance, which will provide an insight into its consistency and efficient management.

3. Expense fees: Evaluate the charges associated with the fund for maintaining and managing its functions. 

4. Fund manager: It is important to evaluate the fund manager’s past records because they are responsible for the selection and allocation of the funds.

5. Risk and returns: Evaluate the fund’s risk profile from the official document and also analyse past performance results. 

SIP vs Lump  Sum For Tax-Saving Funds

Investors can choose to invest in tax-saving funds through both SIPs and Lump sums. Let’s understand which is more suitable for investors.

Basis	SIPs	Lump sum
Meaning	Investing a fixed amount at regular intervals	Investing a large amount of capital at once
Suitable for	These are suitable for beginners and investors with regular incomes	These are best suited for investors with surplus money available
Risk	Relatively lower risk because of rupee cost averaging	Higher tax-saving market risk since it is exposed to the market
Returns	Steady returns over time, but might be lower in a steadily rising market	May generate high returns if invested during favourable prices

Direct vs Regular Tax-Saving Funds

Let’s understand the difference between direct and regular tax-saving funds.

Basis	Direct Tax Saving Funds	Regular Tax Saving Funds
Meaning	Directly purchasing from AMCs without any involvement of intermediaries	Purchased through brokerage platforms, banks, or distributors
Returns	Relatively higher returns due to lower cost	Relatively lower returns because of certain fees and charges
Suitable for	Investors comfortable with independent decision-making and investment management	Investors who seek expert guidance
Cost	Low investment cost because of no intermediaries	High cost because it involves distributors and intermediaries

Taxation of Tax-Saving Mutual Funds

The taxation on capital gains of tax-saving mutual funds depends on the holding duration of the asset. Since the fund’s fixed lock-in period is 3 years, it exceeds the holding period for short-term capital gain. Therefore, it is eligible for only long-term capital gains, and in that case, it is taxed at a rate of 12.5% on the capital gains after an exemption of ₹1.25 lakhs.

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