Tax-saving mutual funds are also known as ELSS mutual funds. You may claim tax deductions of up to Rs 1,50,000 under Section 80C of the Income Tax Act of 1961. The best investing choice in this section is an ELSS. You gain the advantage of tax reductions as well as long-term wealth creation by investing in these mutual funds.

1. ELSS Mutual Funds – Why and How?
It’s Tax season, Don’t wait till the last date…..
Online 26th
Feb 2022
Tax-saving mutual funds are also known as ELSS mutual funds. You
may claim tax deductions of up to Rs 1,50,000 under Section 80C of
the Income Tax Act of 1961. The best investing choice in this section
is an ELSS. You gain the advantage of tax reductions as well as long-
term wealth creation by investing in these mutual funds.
1. What are ELSS Mutual Funds, and how do they work?
2. Mutual Funds with the Best ELSS Returns
3. What Types of People Should Invest in the Best ELSS
Mutual Funds?
4. What Are the Best ELSS Mutual Funds to Invest In?
5. Investing in ELSS Funds Has Its Benefits
6. What Should Investors Think About Before Investing in
ELSS Funds?
7. ELSS Mutual Funds Taxability
8. ELSS Funds and the Risks Involved
1. What are ELSS Mutual Funds, and how do they work?
The equity-linked savings scheme (ELSS), popularly known as tax-
saving funds, is a kind of mutual fund that belongs to a diversified
group. While they have the most exposure to equities and equity-
oriented products, they also have a portion of their portfolio
invested in debt instruments.
ELSS is covered under Section 80C, which allows you to claim tax
deductions of up to Rs 1,50,000 each year. This might save you up to
Rs 46,800 in taxes every year. The statutory lock-in term for these
funds is three (3) years only, which is the shortest of the 80C
alternatives.

2. 2. Mutual Funds with the Best ELSS Returns
Table 1. Return Performance of ELSS category in last 10 ten years as
on 25th
Feb 2022.
Best ELSS Mutual Fund Schemes performance in last 10 years as on
25th
Feb 2022.
Scheme Name AMC Name
Launch
Date
AUM
(Crore)
Expense
Ratio
(%)
Invested
Amount
Current
Value
Annualized
Return (%)
Axis Long Term
Equity Fund Reg
Gr Axis MF
05-12-
2009
32,136.06 1.61 10000 53680.9 18.28
Quant Tax Gr Quant MF
01-04-
2000
788.62 2.62 10000 52814.75 18.09
IDFCTax Advtg
(ELSS) Reg Gr IDFCMF
26-12-
2008
3,582.68 2 10000 48787.85 17.15
DSPTax Saver
Reg Gr DSPMF
05-01-
2007
9,855.59 1.82 10000 48563.5 17.1
Sundaram Tax
Savings Fund
Reg Gr Sundaram MF
02-01-
2013
945.88 2.36 10000 45649.41 16.38
Invesco India
Tax Gr Invesco MF
29-12-
2006
1,900.21 2.06 10000 45383.72 16.31
BOI AXA Tax
Advtg Reg Gr BOI MF
25-02-
2009
546.15 2.55 10000 44249.17 16.02
Canara Robeco
Equity TaxSaver
Reg Gr Canara MF
05-02-
2009
3,208.77 2.17 10000 43083.49 15.71
JM Tax Gain
Fund Gr JM MF
31-03-
2008
66.12 2.44 10000 42801.34 15.63
ICICI Pru Long
Term Equity
(Tax Saving) Gr ICICI Pru MF
19-08-
1999
9,950.37 1.77 10000 41317.53 15.22
3. What Types of People Should Invest in the Best ELSS Mutual
Funds?
Any one individual or a HUF who wants to save up to Rs 46,800
per year on taxes can consider investing in ELSS. On the other
hand, ELSS funds are only ideal for people who are ready to
Category Average Return(%) Maximum Return (%) Minimum Return(%) Median Return(%)
Equity: ELSS 14.79 18.3 12.02 14.54

3. take a risk and can commit to staying invested for at least the
three-year lock-in term.
Investors should stick with them for at least five years to get
the highest profits from mutual funds. A suitable time frame is
five years. You will give your assets the time they need to cycle
through market cycles and deliver outstanding long-term
returns.
Young investors in their early professional careers have the
opportunity to invest with a long-term view. Young investors
are most suited for ELSS since they have more time on their
hands to maximize the power of compounding and earn high
returns while saving up to Rs 46,800 per year in taxes.
4. What Are the Best ELSS Mutual Funds to Invest In?
a) Returns on Investments - Compare the fund's performance
against that of its rivals to confirm that it has been constant
over time. You may invest in the suggested funds based on
these factors. However, keep in mind that previous success
does not guarantee future results. Future results are contingent
on market movements and the choices of the fund
management.
b) History of the Fund - Choose fund firms that have a track record
of consistent performance over a lengthy period, such as 5 to
10 years. The quality of equities in a fund's portfolio and
benchmark determines its success.
c) Expense Ratio - The expense ratio shows how much of your
money is spent on fund management. Higher take-home
returns are associated with a lower spending ratio. As a result,
if two funds have a comparable track record and asset
allocation, you should choose the one with the lowest cost
ratio.
d) Financial Ratios - To evaluate a fund's performance, use metrics
such as Standard Deviation, Sharpe ratio, Sortino ratio, Alpha,
and Beta. A fund with a greater standard deviation and beta

4. than one with a lower deviation and beta is riskier. Funds
having a higher Sharpe Ratio provide better returns in
exchange for taking on more risk. The job of the fund manager
is critical.
5. Investing in ELSS Funds Has Its Benefits
a. The advantage of a tax refund, as well as an increase in
wealth, is a win-win situation for Tax Savers u/s 80c - ELSS
is the only investment option that delivers tax benefits
under Section 80C of the Income Tax Act of 1961 and
contributes to wealth accumulation. The ELSS funds'
equity exposure allows you to achieve high returns if you
remain invested for at least five years.
b. Section 80C choices with the shortest lock-in duration -
ELSS mutual funds have only a three-year (3 Years) lock-in
period, which is the shortest of all the tax-saving
investment alternatives available under Section 80C of
the Income Tax Act, 1961. As a result, ELSS mutual funds
have higher liquidity than any other Section 80C
investment.
c. Potential for higher-than-inflation returns - The only
Section 80C investment choice that has the potential to
outperform inflation in ELSS mutual funds. This is what
sets ELSS apart from other tax-advantaged investing
alternatives.
d. Money management by experts - All mutual funds are
managed by 'fund managers,' who are financial experts.
These are people that have a proven track record of
managing portfolios and possess a variety of financial
credentials. Every fund manager is supported by a team
of market researchers and analysts who choose just the
highest-performing assets that will benefit investors over
time

5. e. Option to invest every month - You may start investing in
the best ELSS funds with as little as a Rs 1000 SIP.
Furthermore, there is no upper limit to the amount of
money that may be invested.
6. Comparison of ELSS to other tax-saving investments,
Other savings plans that aid in wealth growth include FDs, PPFs,
and NSCs, to mention a few. However, the profits from these
methods are taxed. This is where ELSS (Tax Saving Mutual
Funds) shines out because of its dual benefit: better returns
and no taxes. This, along with the lowest three-year lock-in
period, is another incentive to invest in ELSS (Tax Saving Mutual
Funds) right now. Here's a short rundown of how ELSS
outperforms other popular tax-saving investments:
Returns on Investments Lock-in Period Tax on Returns
Investment Returns Lock-in Period Tax on Returns
5-Year Bank FixedDeposit 6% to 7% 5 years Yes
PublicProvidentFund(PPF) 7% to 8% 15 years No
National SavingsCertificate (NSC) 7% to 8% 5 years Yes
National PensionSystem(NPS)
8% to 10% Till Retirement Partially Taxable
ELSS Funds 10 % to 18% 3 years Partially Taxable
7. What Should Investors Consider Before Investing in ELSS
Funds?
Before investing in ELSS mutual funds, investors should consider the
following important factors:
1. Period of confinement - ELSS mutual funds, like any other tax-
saving investing option, have a lock-in period. ELSS is a three-
year Scheme that is required. There are no measures in place to
allow for early withdrawals. As a result, investors must be ready
to commit to staying for at least three years after purchasing
units.

6. 2. Factor of Risk - Because ELSS mutual funds are equity-oriented,
market changes inevitably affect them. Furthermore, these
funds are subject to all of the risks associated with an equity
fund. As a result, while investing in ELSS mutual funds,
investors must be ready to accept these risks. It's critical to
evaluate your risk profile.
3. SIP and lump sum investments - You may invest in mutual funds
in one of two ways: as a lump sum amount or as part of a
systematic investing strategy (SIP). Most investors choose SIPs
because they may spread their investments out over time. SIPs
allow you to invest a little amount regularly. Investing in a
systematic investment plan (SIP) is recommended because it
delivers the long-term advantage of rupee cost averaging. A
lump-sum investment is typically not recommended unless
there is a good prospect of achieving huge profits.
8. ELSS Mutual Funds Taxability - Because ELSS mutual funds are a
kind of equity fund, they are taxed similarly to equity funds.
Any dividends paid by these funds are added to your income
and taxed according to your tax bracket. Dividends were tax-
free in the hands of investors until Budget 2020 since the fund
house was expected to pay dividend distribution tax.
There is no way to benefit from short-term capital gains since
there is a three-year lock-in period. As a result, there is no tax
on short-term capital gains on the sale of ELSS mutual fund
units. Long-term capital gains of up to Rs 1 lakh per year are
free from taxation. Long-term profits over Rs 1 lakh are taxed
at a rate of 10%, with no indexation advantage.
9. ELSS Funds and the Risks They Involve
Because ELSS mutual funds are equity-oriented, they are subject to
the same levels and types of risks as other equity mutual funds.
However, by remaining invested for at least five years, these risks

7. may be greatly reduced. In addition, the three-year required lock-in
term greatly reduces the danger.
Frequently Asked Questions
1. What is the best way to invest in ELSS mutual funds online?
Ans- Regular ELSS Schemes are available via a mutual fund
distributor. You may invest in an ELSS mutual fund's direct plan
online via an AMC. You must first register with the AMC. Fill in
your personal information, such as your name, phone number,
and so on, on the application form.
You may finish your eKYC by providing your PAN and Aadhaar
numbers. You may advise your bank to send the required cash
to the fund house on a certain date and begin investing in an
ELSS mutual fund by giving online instructions to your bank.
Online platforms such as Swaraj Finpro invest help you to invest
in ELSS mutual funds.
 Swaraj Finpro Invest is a website where you may invest your
money.
 From the list of fund houses, you must choose a mutual fund
house.
 Choose an ELSS mutual fund plan that meets your investing
goals and risk tolerance, then click Invest Now.
 Choose the amount you want to put into the ELSS mutual fund
scheme and whether you want to make a one-time or monthly
SIP investment.
2. Without a Demat account, how can you invest in ELSS mutual
funds?
Ans - By visiting the AMC's branch, you may invest in mutual
funds directly with the mutual fund business. For KYC
compliance, all you have to do is complete the application form
and provide self-attested identification and address
verification.

8. You may submit a check for the first amount, and a PIN and
folio number will be assigned to you. You may also go to a
mutual fund distributor and invest in a mutual fund's regular
plan.
Through an AMC, you may invest in a mutual fund's direct plan
online. Fill out the registration form and enter your PAN and
Aadhaar data to complete your eKYC. You may also put your
money into an internet site like Swaraj Finpro invest.
3. How can I invest in ELSS mutual funds using a systematic
investment plan (SIP)?
a) Before investing in a mutual fund, you must first complete your
KYC by clicking https://swarajfinpro.finsuite.in/0/Client-
Page/Swaraj-Finpro-Account-Opening/. You may do so by
filling out a KYC registration form and submitting self-attested
identification and address evidence to a KRA (KYC Registration
Agency) online.
b) The next step is to go to the fund house's website and choose a
mutual fund strategy.
c) You may establish a username and password by filling out an
application form with the needed information such as your
name, mobile number, and PAN.
d) You next input your bank account information and the amount
of the SIP auto-debit.
e) You may pick a mutual fund plan by logging into your account
with the fund company.
f) The initial SIP payment must be made online, and the following
payment must be made after 30 days. (The AMC will notify you
of the necessary data.)
g) You may keep the SIP going till the end of the specified term.
(You have control over the SIP's duration.)
4. What is the best way to invest a lump amount in an ELSS
mutual fund?

9. Ans - A direct arrangement with the asset management
company allows you to invest a lump sum amount in a mutual
fund. You have the option of investing either offline or online.
At the mutual fund house's branch, you must complete your
KYC by presenting a self-attested identification and address
verification, as well as passport-size pictures.
You might use an online platform like Swaraj Finpro invest to
invest a lump sum money in mutual funds. All you have to do
now is go to Swaraj Finpro invest and choose a mutual fund
firm. If you wish to invest a lump sum amount in a mutual fund,
choose the amount and manner of investment as Lumpsum.
5. What is the best way to invest in mutual funds? (STP way)
Ans - A systematic transfer plan, or STP, enables you to transfer
(switch) a set number of units from one mutual fund scheme to
another within the same mutual fund company regularly.
Depending on market circumstances, you may want to plan an
STP from an equity to a debt plan or vice versa.
6. How I can invest in STP mutual funds in easy steps?
Ans –
 Choose the long-term mutual fund plan (destination fund) in
which you want to invest.
 After that, you may choose the mutual fund plan (source fund)
where you wish to put your lump sum money.
 You have the option of deciding when the lump sum money
deposited will be transferred to the destination fund. STPs may
be selected on a daily, weekly, or monthly basis, according to
your preferences.
7. What is the minimum amount of money required to invest in
ELSS mutual funds?
Ans - SIP stands for Systematic Investment Plan, and it's a way
of investing in mutual funds. You may invest a certain amount
in a mutual fund plan of your choosing regularly. Through the

10. SIP, you may invest as little as Rs 500 every installment in a
mutual fund.
8. What is the best way to invest in mutual funds on behalf of
minors?
Ans - In the name of a minor kid, you may invest in mutual
funds. In the mutual fund folio, the minor kid is the only owner.
The mutual fund folio's guardian must be a parent or a court-
appointed guardian.
 When starting a mutual fund folio, provide documentation that
indicates the child's date of birth, such as a passport or birth
certificate. You'll also need paperwork to prove the
parent/connection guardians with the minor kid. (For a parent,
it may be a passport; for a guardian, it could be a copy of the
court order.)
 To invest in mutual funds in the name of a minor kid, the
parent or guardian must be KYC-compliant.
 Even a little child's mutual fund folio may be used to set up a
SIP or STP instruction. It would, however, end if the minor kid
reached the age of eighteen.
9. How can you make a short-term investment in mutual funds?
Depending on your financial goals and risk tolerance, you may want
to investigate mutual funds. To accomplish your short-term financial
objectives, invest in debt funds. You may invest in direct debt mutual
funds with the mutual fund firm either physically or online.
You may, however, invest in ordinary debt fund plans via a mutual
fund distributor. Debt funds may be purchased via an internet
platform such as Swaraj Finpro invest.
10. How mutual funds be used to invest in gold?
Gold ETFs and gold funds may be purchased either online or via a
mutual fund distributor. You may also use a mutual fund distributor
to invest in these funds.

11. You might, however, use the SIP technique to invest in gold funds or
gold ETFs. You may put in as little as Rs 500 for every payment.
Online platforms such as Swaraj Finpro invest allow you to invest in
gold ETFs and gold funds.
11. What are the best ways to invest in mutual funds for
retirement?
For retirement, you may invest in equity mutual funds or ELSS
mutual funds. To attain long-term financial objectives such as
retirement planning, you must invest in equity funds for the long
term.
Through an asset management firm, you may invest in direct equity
funds and ELSS. Regular plans of these mutual funds, on the other
hand, might be purchased via a broker. Through online platforms like
Swaraj Finpro invest, you may invest in equity funds and ELSS.
12. What are the best ways to invest in international mutual
funds?
You may invest directly in International Mutual Funds in India via an
AMC. It is a mutual fund scheme in India that invests in international
company equities. You could want to look at fund of funds schemes
that invest in overseas mutual funds or have a portfolio that
resembles a stock market index like the Nasdaq 100 or the S& P
500.
Through an internet platform like https://swarajfinpro.com/ invest,
you may invest in International Mutual Funds.
Go to https://swarajfinpro.com/ to get started.
From the list of fund houses, you must choose a mutual fund house.
Choose an International Mutual Fund from the 'Equity' category that
meets your investing goals and risk tolerance, then click Invest Now.

12. Select the amount you want to put into the mutual fund and
whether you want to make a one-time or recurring investment.
13. As a student, how do you invest in mutual funds?
Ans - If you are a student above the age of 18, you may simply invest
in mutual funds. A Mutual Fund Distributor may also help you invest
in regular mutual fund schemes.
However, you must complete your KYC at the mutual fund house's
branch by presenting a self-attested identification and address
evidence as well as a passport-size photo. Before investing in mutual
funds, you may complete eKYC by entering your PAN and Aadhaar
data online.