Best ELSS (Tax Saving Mutual Fund) to Invest in 2019

ELSS (Equity Linked Saving Scheme) or Tax Saving Mutual Funds are one of the best investment options for tax saving u/s 80C. These ELSS funds invest mainly in equities making them one of the best investments for long term wealth creation.

Why Invest in ELSS?

High Returns: Of all the tax saving investments ELSS has the potential to give highest returns.

Partially Tax Free on Maturity: The gains made on redemption are long term capital gains (on equity) and so tax free up to Rs 1 Lakh (taxed @ 10%+cess for gains of more than Rs 1 lakh).

Also Read: How are Mutual Funds Taxed?

Lock-in Period: The ELSS funds have lock-in period of 3 years which means once invested you cannot redeem them before completion of 3 years. This is the shortest lock-in compared to all other tax saving investments.

Buy/Redeem Online: You can buy most of Tax saving mutual funds online directly from company website. Also the redemption can be done online and the amount is directly credited to your bank account. This gives lot of convenience.

ELSS – The Cons:

Returns are Unpredictable: ELSS invests in equities and so the returns from these funds are linked to stock market performance. There are times when your money gets more than double in 3 years and also on the other side there can be significant loss. So it’s a high risk investment. However if you choose the right ELSS funds you can expect 10% to 12% returns in long term of 7 to 10 years.

Also Read: Best Tax Saving Investments u/s 80C

Best ELSS Funds to Invest:

Once you are convinced about investment in ELSS funds, the next question is which fund to choose? Believe me it’s not easy thing to do. On the last count there were 36 open ended ELSS funds. To add to it there are several closed ended funds launched in January to March for last minute tax savers. Also most publications come out with their “Best Tax Saving Mutual Funds” list every year – which unfortunately keeps on changing.

As the ELSS returns are linked to stock market no one can predict the returns for next 3 years. So it’s all guessing game based on historical data. We too give you five ELSS funds based on their historical risk/returns balance, consistency of returns, etc.

The funds are in alphabetical order. Choose any one or two:

  1. Aditya Birla Sun Life Tax Relief 96
  2. Axis Long Term Equity Fund
  3. DSP BlackRock Tax Saver Fund
  4. Invesco India Tax Plan

Download Free ebookTax Planning Guide for FY 2019-20

ELSS – Historical Performance

The table below shows the 1, 3 , 5 and 10 year performance (as of May 20, 2019) of selected ELSS Funds. Historically they have given decent returns.

ELSS FundsLaunch Date1-Year Return3-Year Return5-Year Return10-Year Return
Aditya Birla Sun Life Tax Relief 96Mar-96-1.32%13.37%16.26%14.49%
Axis Long Term Equity FundDec-095.24%14.84%16.73%x
DSP BlackRock Tax Saver FundJan-076.11%14.93%14.79%16.08%
Invesco India Tax PlanDec-062.96%14.06%15.04%16.87%

Best ELSS Funds (by Popular Publications):

As mentioned earlier most financial publications come out with their set of recommended ELSS. We list them down

MintEconomic TimesValue Research
  • ICICI Prudential Long Term Equity Fund
  • Invesco India Tax Plan
  • L&T Tax Advantage Fund
  • Axis Long Term Equity Fund
  • Birla Sunlife Tax Relief 96
  • DSP Blackrock Tax Saver Fund
  • Franklin India Tax Saver Fund
  • Aditya Birla Sun Life Tax Relief 96
  • Mirae Asset Tax Saver
  • Motilal Oswal Long Term Equity
  • Axis Long Term Equity

Also Read: Highest Tax Saving Bank Fixed Deposit Rates u/s 80C

ELSS – Points to Keep in Mind while Investing

1. If possible Invest “DIRECT” in ELSS funds. (LearnHow to invest “Direct” in Mutual Fund) If you use broker or invest through intermediaries, your return would come down by 0.5% to 1% every year due to commission paid to them. The table below shows the difference in returns in 5 years.

ELSS FundsDirect Plan (5-Year Annualized Return)Value of Rs 1 Lakh invested in 5 Years (Direct)Regular Plan (5-Year Annualized Return)Value of Rs 1 Lakh invested in 5 Years (Regular)Gains of Direct Vs RegularGains of Direct Vs Regular (in %)
Aditya Birla Sun Life Tax Relief 9617.34%2,22,44916.26%2,12,39910,0504.7%
Axis Long Term Equity Fund18.06%2,29,35816.73%2,16,72712,6315.8%
DSP BlackRock Tax Saver Fund15.80%2,08,23014.79%1,99,3068,9244.5%
Invesco India Tax Plan15.91%2,09,22115.04%2,01,4867,7353.8%

2. Minimum Investment of Rs 500 – the minimum investment is Rs 500 and it can be increased in multiples of Rs 500 only. So you cannot buy ELSS funds for Rs 4300 but can buy for Rs 4,000 or 4,500 (i.e. multiples of Rs 500)

3. Never invest in closed ended ELSS schemes which are miss-sold in the name of tax saving especially in January to March

4. Select ONE or TWO ELSS funds for investment. Do NOT over diversify in multiple ELSS funds.

5. Invest in ELSS in sync with your other investments and overall investment plan.

6. You may want to do SIP than invest in lumpsum. This would help you make regular investment throughout the year. (Read: Which is the Best day for SIP in Mutual Fund?)

Also Read: Child Plans from Mutual Funds – Should you Invest?

7. It’s NOT necessary to redeem these ELSS funds after 3 years. It can remain invested as long as you want.

8. After 3 years you can redeem and then buy again the same fund to get tax benefit for that year. (Assuming the tax laws remain same till then)

9. Choose growth option for long term wealth creation.

10. Dividend reinvestment option is not available for ELSS Funds.

Best ELSS Fund to Invest
Best ELSS Fund to Invest

ELSS – Other Facts:

On death of unit-holder, the ELSS funds can be redeemed by the nominees/legal-heir only after completion of one year of investment.

ELSS funds have to invest minimum 80% in equities or convertible bonds.

The open ended ELSS funds have to open for subscription for at least 3 months every financial year.

6 thoughts on “Best ELSS (Tax Saving Mutual Fund) to Invest in 2019”

  1. Very well explained article on ELSS. ELSS offers a simple way to get tax benefits. ELSS also gives you an opportunity to gain from the potential of equity markets.

  2. Hello Sir,

    As New financial year has begun, need tips to invest in ELSS . Can you please let know for 2018 ?


    Sir, please suggest me two mutual fund for long term investment. I could not decide which are the best because there are many mutual fund scheme.

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