Best Tax Sving Funds Tax season always feels stressful, doesn’t it? You’re worried about deductions, paperwork, and whether you’re really making the most of your money. The truth is, smart investing can actually help you save taxes and build wealth at the same time. And that’s where ELSS (Equity Linked Savings Scheme) funds come in.
If you’ve been wondering where to start, here’s a simple breakdown of the best tax saving funds in 2025 that could give you relief today and growth for tomorrow.
What Is an ELSS Fund?
- An ELSS fund is a type of tax saving mutual fund that invests mainly in equities (stock market).
- You can claim up to ₹1.5 lakh deduction under Section 80C of the Income Tax Act.
- Minimum investment starts at just ₹500.
- Lock-in period is only 3 years, the shortest among all tax-saving options.
- Long-term, these funds are known for giving higher returns than traditional tax-saving schemes.
Top 5 Best Tax Saving Funds (ELSS) in 2025
Here are five ELSS funds that have consistently delivered good returns while helping investors save tax.
| Fund Name | 3-Year Return | Expense Ratio | VR Rating | AUM (₹ Cr) |
|---|---|---|---|---|
| Bandhan ELSS Tax Saver Fund | 23.67% | 0.53% | ★★★★ | 6,253 |
| DSP ELSS Tax Saver Fund | 21.77% | 0.79% | ★★★★ | 14,076 |
| Parag Parikh ELSS Tax Saver Fund | 22.98% | 0.69% | ★★★★★ | 3,175 |
| Mirae Asset ELSS Tax Saver Fund | 19.63% | 0.64% | ★★★★ | 21,476 |
| Invesco India ELSS Tax Saver Fund | 19.19% | 0.73% | ★★ | 2,530 |
Why ELSS Is a Smart Choice
When you invest in ELSS, you’re not just reducing your tax liability—you’re also planting seeds for long-term wealth. Here’s why many investors prefer ELSS funds:
- Dual benefit: Tax saving + wealth creation.
- Higher return potential compared to PPF, FD, or NSC.
- Short lock-in: Just 3 years, unlike PPF (15 years) or NSC (5 years).
- Flexibility: Withdraw anytime after lock-in.
- Ease of investing: Start SIPs with as low as ₹500.
How to Get Started – Step by Step
- Decide your goal – Tax saving, wealth creation, or both.
- Select a fund from the list of top ELSS performers.
- Choose SIP or lump sum – SIPs help in disciplined investing.
- Stay invested for the long term – While the lock-in is 3 years, staying longer often gives better returns.
- Track performance every year, but avoid panicking over short-term ups and downs.
FAQs on ELSS Funds
Q1. What is the lock-in period for ELSS funds?
Three years, which is the shortest among tax-saving options under Section 80C.
Q2. Can I withdraw money before 3 years?
No, withdrawal is allowed only after the 3-year lock-in.
Q3. How much tax can I save with ELSS?
Up to ₹1.5 lakh deduction under Section 80C of the Income Tax Act.
Q4. Is ELSS risky?
Since it invests in equities, there’s some market risk. But staying invested for 5–7 years can help balance out the volatility.
Q5. Which is better—ELSS or PPF?
ELSS offers higher return potential and shorter lock-in, while PPF is low risk but comes with a 15-year lock-in.