10 best tax-saving mutual funds in 2023

Mutual funds are professionally managed instrument that collects money from various investors and invests in securities. Using this instrument, you can invest in stocks or bonds without directly buying these from the market. If you put your money in a mutual fund, you basically allow the fund manager to invest your money, along with that of other investors in the fund, to invest the sum on your behalf in asset classes like bonds, equities, fixed-income securities or other commodities.

If you invest in equity-link saving schemes, or ELSS, which is a class of mutual funds, you can even save on taxes by claiming tax deductions of up to Rs 1,50,000 under Section 80C. Apart from tax-saving, many ELSS funds also offer great returns, making them an attractive investment option. Let us take a look at some of the top 10 ELSS funds that have given the best 3-year returns, according to data from PhonePe Research:

Fund name

Fund size (Rs cr)

3-year returns (%)


Quant Tax Plan




Parag Parikh Tax Saver Fund




IDFC Tax Advantage (ELSS) Fund




PGIM India Long Term Equity Fund




Mirae Asset Tax Saver Fund




SBI Long Term Equity Fund




Sundaram Tax Savings Fund




HDFC Taxsaver




DSP Tax Saver Fund




Kotak Tax Saver Fund



5 reasons why investing in ELSS Mutual funds is a good option for income tax saving?

1.The double benefit of tax rebate: Investing in an ELSS investment not only provides tax deduction under Section 80C but also gives handsome wealth growth. The investment gives you the chance of earning extraordinary returns by staying invested for 5 years or more.

2.Smallest lock-in period: ELSS mutual funds come with the smallest lock-in period of 3 years among instruments that allow tax savings under Section 80C. So, it is more liquid with more gains in income tax savings. Also, this is the only asset class which offers inflation-beating returns and stands out among tax-saving options.

3.Professionally managed: ELSS funds, like all mutual funds, are managed by industry experts called ‘fund managers. They track the markets keenly and their rich experience gives them excellent knowledge of managing portfolios. They and their team of researchers and analysts also guide investors on safe and profitable investment options based on the investor’s risk appetite, time horizon and goals.

4.Investor’s choice: Investors get a wide range of choices on how much they wish to invest — from as low as Rs 1,000 and upwards — based on their needs.

5.Ease of use: Investors can buy or sell any mutual fund in simple steps. They can either choose the fund they want to invest in or do so with assistance from a broker. The transaction takes place directly from the account linked to the mutual fund.

Who can invest in ELSS mutual funds to save tax?

Investing in ELSS is an option for any individual who wishes to save on income tax under Section 80C, which allows up to Rs 1,50,000 of savings. However, only those who are able to stay invested for at least the mandatory lock-in period of three years and have some risk appetite should invest in these funds.

To get the best returns on mutual funds, investors should keep their money invested for at least 5 years. This way, you give your investment the necessary amount of time to go through market cycles and generate excellent long-term returns.

Young investors can invest with a long-term perspective in the early stages of their careers. ELSS is best suited for these investors because they have time to fully utilise the power of compounding and enjoy high returns while also saving on taxes.

Summary: Because these funds invest their assets in equity and equity-related securities, ELSS is suitable for investors with higher risk tolerance. For individuals who fall in high income-tax brackets, ELSS is an excellent investment. Among Section 80C investments, the lock-in period for ELSS is the shortest. You can save money on taxes and build wealth by investing in ELSS.