Top Performing Tax Saving Mutual Funds To Invest in 2021

Top Performing Tax Saving Mutual Funds To Invest in 2021

Many investors are seeking the best funds that not only give them accurate results but also save their taxes to a greater extent.

In India taxation is a major concern and therefore many Indian investors are looking for the equity trading investment that gives them adequate tax benefits. As a result, they opt for ELSS funds.

ELSS is basically an equity-linked saving scheme mutual fund that invests in equity, stocks and equity-related securities across different market segments.

Investment in ELSS mutual funds allow investors to gain outstanding tax benefits under section 80 C of the income tax act. For instance, one can save around 1.5 lakh per year by investing in ELSS funds.

One thing you should be aware of about ELSS mutual funds is that the funds come with a lock-in period of 3 years. The period is less than other schemes such as PPF whose minimum lock-in period is 5 years. 

How Much Should You Invest in ELSS?

To invest in ELSS funds, either you can make a lump-sum investment or start a SIP. The minimum amount of SIP starts with Rs 500. Though there is not a maximum limit on the investment amount, investors can enjoy tax benefits up to Rs 1.5 Lakh under section 80 C in the financial year.

Features of the ELSS Funds

ELSS mutual funds are the best investment options to make money through equity markets. This allows investors to save adequate tax amounts from the funds. Since the funds come with a flexible lock-in period, it allows investors to stay invested in the long run and avoid selling.

One interesting thing about ELSS funds is that some of these funds are considered as growth funds as they reinvest the returns and generate outstanding stock trading returns at the end of the lock-in period. 

ELSS funds also come with dividend reinvestment options which enable investors to decide if they want to reinvest the dividend amount in the markets.


Many investors invest in ELSS funds only because these funds help investors to save tax who have a lock-in period of only three years. For instance, if an investor invests 1.5 Lakh each year, he can save a tax up to 46,800.

After a period of three years, the gains come from ELSS funds considered as a long term gain and are taxed at 10% for the gains occurring above 1 Lakh. 

The taxes saved by ELSS funds are via tax deductions, tax exemption and benefit of indexation. If someone invests 1.5 Lakh, it can be deducted by taxable income and the return comes under 1 Lakh and is exempted from the taxation.

Hence by investing in ELSS funds, investors can save tax and generate wealth for a better future. 

The Funds are Suitable for.

Investing in ELSS mutual funds is a smart way to save a large amount of money that may go toward taxes. However, it may be noted that ELSS funds may not give expected returns as these funds are mostly dependent on equity and online stock trading markets.

Hence, ELSS mutual funds are apt only for those who want to save their taxes and have a will to take a risk by investing in equities.

Another benefit of investing in ELSS funds is that the investors who are willing to take an adequate risk may earn huge returns as compared to fixed-income investments. Therefore, the ELSS funds are for those whose age comes between 20-35. 

People of a large age group such as above 40 should not seek ELSS funds as they are full of risks. Instead, they can invest in other safer schemes such as PPF, NPS, FD and more.

Anyone who can invest for a longer duration without seeking the locking period should invest in ELSS funds.

Advantages of Investing in ELSS Funds

One of the greatest advantages of investing in ELSS mutual funds is that it offers a safer investment medium for investors who have zero knowledge of equity markets.

Secondly, the mutual funds are managed by fund managers who are experts in the equity segment. They invest their money in the top companies as per their knowledge and experience.

This gives investors an opportunity to generate better returns than other tax saving schemes such as PPF, NPS etc.

Thirdly, ELSS funds come with a lock-in period of three years which is less than other closed-ended funds and tax saving schemes.

Last but not the least, ELSS funds also invest in mid-cap companies which allow investors to substantially earn higher returns than large-cap funds. Although the risk factor of mid-cap funds is higher than large-cap funds, you need to analyze your investment aim and risk appetite before making any such decisions.

Let’s discuss the Top 10 Tax Saving Mutual Fund Schemes:

Quant Tax Plan Direct-Growth

The fund has given an annualized return of 30.02% in the past three years. Last year, the scheme’s total return was 126.78%.

Why Invest: 

This fund has consistently outperformed other funds by giving a whopping 126.78% return in the past year. The minimum lump sum amount required to invest in this scheme is Rs 500.

Mirae Asset Tax Saver Fund Direct-Growth

In the last three years, the fund has given an annualized return of 20.92%. Last year, the returns generated by this fund was 74.49%.

Why Invest

It is considered the most remarkable equity mutual fund in India that has managed to provide a 74.49% return in the last year.

Canara Robeco Equity Tax Saver Direct-Growth

The fund has given an annualized return of 20.36% in the last three years. In the last year, the returns were 67.43%. The fund has continuously hit the benchmark in the equity segment.

Why Invest

The fund has consistently outperformed the other similar funds by generating a 67.43% return in the last year.

DSP Tax Saver Direct Plan-Growth

The fund’s annualized return for the last three year was 17.77%. It’s last year returns were 68.95%. 

Why Invest

It is also counted as the remarkable fund in India by giving a 68.95% in the last year. The minimum investment amount required to invest in this scheme is Rs 500.

BOI AXA Tax Advantage Direct-Growth

The fund has given an annualized return of 17.65% in the last three years. The fund’s last year returns were 75.15%.

Why Invest

The minimum investment amount required to invest in this fund is Rs 500. The fund has outperformed other funds by providing 75.15% returns in the last year.


ELSS schemes offer amazing tax benefits compared to other schemes. That’s the reason investors prefer to invest in schemes that generate outstanding returns with tax benefits.

The mutual fund schemes described above are the best schemes to invest in in 2021. 

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