Published on April 11, 2025
Equity Linked Savings Schemes (ELSS) are among the most sought-after investment options for individuals looking to save taxes and grow wealth. As we step into 2025, the search for the Best ELSS fund 2025 has intensified. This article will guide you through everything you need to know about ELSS funds, their benefits, and the top-performing funds of the year.
What is an ELSS Fund?
An ELSS fund is a type of mutual fund that primarily invests in equities. It is unique because it offers dual benefits: tax savings and wealth creation. Investments in ELSS funds are eligible for tax deductions under Section 80C of the Income Tax Act, up to ₹1.5 lakh annually.
Key Features of ELSS Funds
- Short Lock-In Period: ELSS funds have a lock-in period of just three years, the shortest among tax-saving options.
- High Return Potential: Since they invest in equities, ELSS funds have the potential to deliver higher returns compared to traditional instruments like fixed deposits or PPF.
- Diversification: These funds invest across various sectors, reducing risk and enhancing growth opportunities.
Why Choose the Best ELSS Fund 2025?
Investing in the Best ELSS fund 2025 can help you achieve your financial goals while saving taxes. Here are some reasons why ELSS funds are a preferred choice:
- Tax Benefits: Save up to ₹46,800 annually by investing ₹1.5 lakh under Section 80C.
- Wealth Creation: ELSS funds offer inflation-beating returns over the long term.
- Flexibility: You can invest through a lump sum or a Systematic Investment Plan (SIP).
- Beginner-Friendly: ELSS funds are an excellent entry point for new investors in the equity market.
Factors to Consider When Selecting the Best ELSS Fund 2025
Choosing the right ELSS fund requires careful evaluation. Here are some factors to keep in mind:
1. Performance History
Look for funds with consistent returns over the last 5-10 years. Historical performance can indicate how well the fund is managed.
2. Expense Ratio
A lower expense ratio means higher returns for investors. Always compare the expense ratios of different funds.
3. Fund Manager’s Expertise
The experience and track record of the fund manager play a crucial role in the fund’s performance.
4. Portfolio Composition
Check the sectors and stocks where the fund is invested. A diversified portfolio reduces risk.
5. Risk Level
Assess your risk tolerance before investing. ELSS funds are subject to market risks, so choose a fund that aligns with your financial goals.
Top 5 Best ELSS Funds to Invest in 2025
5 Best ELSS Funds to Invest in 2025 | Best Mutual Funds
Here are the Best ELSS funds 2025 based on performance, fund size, and investor reviews:
1. Quant ELSS Tax Saver Fund
- Annualized Return: 20.17% since inception.
- Fund Size: ₹9,486 crore.
- Expense Ratio: 0.50%.
- Why Choose It?: High returns and low expense ratio make it ideal for aggressive investors.
2. DSP ELSS Tax Saver Fund
- Annualized Return: 17.95% since inception.
- Fund Size: ₹14,981 crore.
- Expense Ratio: 0.72%.
- Why Choose It?: Consistent performance and large fund size ensure stability.
3. SBI Long Term Equity Fund
- Annualized Return: 16.50% since inception.
- Fund Size: ₹25,724 crore.
- Expense Ratio: 1.07%.
- Why Choose It?: Trusted brand and strong management.
4. Franklin India ELSS Tax Saver Fund
- Annualized Return: 16.22% since inception.
- Fund Size: ₹5,986 crore.
- Expense Ratio: 1.09%.
- Why Choose It?: Diversified portfolio and reliable returns.
5. HDFC ELSS Tax Saver Fund
- Annualized Return: 15.29% since inception.
- Fund Size: ₹14,671 crore.
- Expense Ratio: 1.09%.
- Why Choose It?: Balanced approach and steady performance.
Explore these helpful articles to expand your knowledge about wealth creation and financial planning:
- How to Make $100,000 a Year in Passive Income
- Tax Planning and Management
- What Are the 7 Steps in Personal Finance?
How to Invest in the Best ELSS Fund 2025?
A Guide on How to Invest in Best ELSS Funds | ETMONEY
Investing in ELSS funds is simple and convenient. Follow these steps:
- Choose a Platform: Use trusted platforms like ET Money or Groww to invest.
- Complete KYC: Ensure your KYC is verified before investing.
- Select the Fund: Based on your goals and risk appetite, choose the best ELSS fund.
- Decide Investment Mode: Opt for a lump sum or SIP based on your financial situation.
- Monitor Performance: Regularly track your investments and make adjustments if needed.
Risks Associated with ELSS Funds
While ELSS funds offer high returns, they come with risks. Market volatility can impact returns, especially in the short term. It’s essential to have a long-term investment horizon to mitigate these risks.
Expert Tips for Investing in ELSS Funds
- Start Early: Begin investing at the start of the financial year to maximize benefits.
- Diversify Investments: Spread your money across multiple funds to reduce risks.
- Review Annually: Evaluate your portfolio every year to ensure it aligns with your goals.
For more information, explore trusted resources like MoneyControl and Financial Express.
FAQs on Best ELSS Fund 2025
1. What is an ELSS fund?
An Equity Linked Savings Scheme (ELSS) is a type of mutual fund that invests primarily in equities. It offers tax benefits under Section 80C of the Income Tax Act, making it a preferred investment option for tax-saving and wealth creation.
2. Why should I invest in the Best ELSS Fund 2025?
Investing in the Best ELSS fund 2025 offers:
- Tax savings up to ₹1.5 lakh per year.
- Potentially high returns compared to traditional tax-saving options like fixed deposits.
- A short lock-in period of three years.
3. How do I choose the Best ELSS fund for 2025?
You should consider:
- The fund’s past performance over the last 5-10 years.
- The expense ratio (lower is better).
- The fund manager’s expertise and track record.
- The portfolio composition and risk level.
4. Can I start with a small amount?
Yes! You can start investing in ELSS funds with as little as ₹500 through a Systematic Investment Plan (SIP). This makes ELSS funds accessible to all types of investors.
5. Is there any risk involved with ELSS funds?
Yes, ELSS funds invest in equity markets, which are subject to market risks. Returns can be volatile in the short term. However, over the long term, these funds tend to deliver inflation-beating returns.
6. What is the lock-in period for ELSS funds?
ELSS funds have a mandatory lock-in period of three years. You cannot withdraw your investment before this period ends.
7. Are the returns from ELSS funds taxable?
Yes, returns over ₹1 lakh are taxed at 10% under Long-Term Capital Gains (LTCG) tax rules.
8. Can I diversify my ELSS investments?
Absolutely! You can invest in multiple ELSS funds to diversify your portfolio and reduce risks. This ensures better risk management and balanced returns.
9. Should I choose SIP or lump sum investment in ELSS?
Both options are viable:
- SIP: Ideal for regular investors who want to invest small amounts periodically.
- Lump Sum: Suitable for those who have surplus money to invest at once.
10. What are the top-performing ELSS funds in 2025?
Some of the Best ELSS funds 2025 include:
- Quant ELSS Tax Saver Fund
- DSP ELSS Tax Saver Fund
- SBI Long Term Equity Fund
- HDFC ELSS Tax Saver Fund
- Franklin India ELSS Tax Saver Fund
11. How can I invest in ELSS funds?
You can invest in ELSS funds through online platforms like ET Money or Groww. Ensure your KYC is completed before making any investments.
12. How can I maximize my returns from ELSS?
To maximize your returns:
- Start investing early in the financial year.
- Diversify your investments across multiple funds.
- Stay invested for the long term to ride out market volatility.