10 Best Tax Saving Mutual Funds in India

Among mutual funds in India, ELSS (or equity-linked saving schemes) funds have gained immense popularity. This is because they offer tax-saving benefits, transparency and high liquidity. Moreover, the charges are low, while these funds have offered good returns.

The downside is their element of risk. As the name suggests, ELSS are liked to equity. This means these funds invest your money into the share market, which by nature is volatile. Although a professional fund manager would make decisions regarding the portfolio of stocks, with the aim to maximize gains, the element of risk cannot be totally mitigated. ELSS have a lock-in period, which means that you cannot take your money out before this period ends.

Despite these drawbacks, ELSS have become extremely popular in India because they offer the best rate of return on shorter term investment. With ELSS, one also gets tax benefit under section 80C.

Criteria for Selecting the Best Tax Saving Mutual Funds in India

Of course, the most important criteria for selection would be the Annualized Return (AR). While looking at AR, many focus on the one-year returns. This, however, is not the best approach. It’s best to consider the one-year, three-year and five-year returns.

The next criteria that one can check is the CRISIL Mutual Fund Ranking. This is the relative ranking of mutual fund schemes within a peer group. The CRISIL Rank takes into account parameters like Superior Return Score, Mean Return and Volatility, Portfolio Concentration, Exposure to Sensitive Sectors, Liquidity, Asset Quality and Historic CRISIL Mutual Fund Ranking Performance.

One may also consider the Assets Under Management (AUM), which is the total market value of investments managed by the mutual fund company.

List of Top 10 Tax Saving Mutual Funds in India

Here’s a list of the 10 best tax saving mutual funds in India, along with the CRISIL Ranking, Assets Under Management (AUM – in Rupees Crores, as on December 31, 2016) and Annualized Return (AR) performance for one year, three years and five years.

ELSS FundCRISIL RankAUM 31, 2016)AR – 1 yrAR – 3 yrsAR – 5 yrs
1Axis Long Term Equity Fund (G)29,956.36 15.121.821.7
2Reliance Tax Saver Fund (G)35,579.1729.626.920.9
3DSP BlackRock Tax Saver Fund (G)51,420.4833.024.320.5
4Birla Sun Life Tax Relief 96 (G)42,308.45 21.323.019.8
5Invesco India Tax Plan3314.4322.822.018.8
6HSBC Tax Saver Equity Fund (G)NA167.8731.120.418.5
7Franklin India Taxshield Fund (G)32,196.1821.622.518.3
8SBI Magnum Tax Gain Scheme (G)24,650.56 21.617.916.5
9HDFC Tax Saver (G)24,970.5133.820.015.3
10ICICI Prudential Long Term Equity Fund NA214.7726.222.1NA

When investing in ELSS, it’s best to take the SIP route than putting in a lumpsum. An SIP, or Systematic Investment Plan, allows you to invest a predetermined amount at regular intervals, which could be weekly, monthly or quarterly.

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About the author

Mani Karthik

Having lived in the USA, India & Middle East for over a decade, and having worked for big MNC's to startups, I have a lot to share with you. My aim is to help people, by sharing everything I've learned in life through this blog. Come join my pursuit of happiness! Be a smarter, richer, happier person. WhatsApp me at +001-408-489-4785. Subscribe to my YouTube channel here. <3

1 Comment

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  • Mani Karthik, you have shared an excellent post here. Most people are concerned about ways to save tax and this post you have shared will throw some light. Moreover, mutual funds help you make more money in the long run. Thank you and looking forward to more interesting posts like this one.

MK Bio

Having lived in the USA, India and UAE, I share everything that I’ve learned in life. My aim is to help people by sharing whatever I know, through this blog. Come join my pursuit in becoming a smarter, richer & happier person! Here’s my story so far!