« The 2023 Arthgyaan Year in Review The worst performing mutual funds of 2023: are you invested in these funds? »

What are the best tax-saving ELSS mutual funds in 2024?

Posted on 01 Jan 2024
Author: Sayan Sircar

Tags: Choosing Investments ; Tax ; Mutual Funds

8 mins read
📢Join 3400+ readers on WhatsApp and get new post notifications!

This post sifts through 39 options to find the best ELSS funds for investing in 2024.

What are the best tax-saving ELSS mutual funds in 2024?

Disclaimer: The fund names mentioned in this article are not recommendations to invest/not invest in those funds. Please perform adequate due diligence before making any investments. Past performance does not give any indication about future performance. You can lose all or part of your capital in mutual funds.

This article is a part of our detailed article series on the concept of ELSS Tax savings mutual funds in India. Ensure you have read the other parts here:

Which are the best performing tax-saving ELSS mutual funds in Apr 2024?

This post sifts through 43 options to find the best performing ELSS funds for the 3-year period ending before Apr 2024.

Which are the best performing tax-saving ELSS mutual funds in March 2024?

This post sifts through 43 options to find the best performing ELSS funds for the 3-year period ending before March 2024.

What are the best tax-saving ELSS mutual funds in 2023?

This post sifts through 38 options to find the best ELSS funds for investing in 2023.

Should you invest in ELSS Index Funds like the 360 ONE ELSS fund?

This article discusses a new category of ELSS funds relaunched in India that are run as index funds. Should investors invest in ELSS index funds for tax-saving purposes?

What are the best tax-saving ELSS Mutual Funds in 2022?

This post sifts through 38 options to find the best ELSS funds for investing in 2022.

📚 Topics covered:

Do you really need to invest in ELSS funds?
What is ELSS?
Filling 80C without ELSS
Choosing an ELSS fund
How to interpret the table

This article is frequently updated. The latest version is here.

Do you really need to invest in ELSS funds?

Before we discuss ELSS investing, you need to note that ELSS is a part of 80C deduction which is no longer an allowed tax deduction in the new tax regime. You should always check first if you will save more tax in the new tax regime: Which is the best tax regime to choose from April?

What is ELSS?

Equity Linked Savings Scheme (ELSS) funds are mutual funds that are an eligible scheme to get tax deduction under Section 80C of the Income Tax act. 80C allows you to get a deduction of ₹150,000 per financial year if you are in the old tax regime, which leads to a saving of ₹46,800 tax per year in the highest tax bracket.

ELSS funds have a mandatory 3-year lock-in for every purchase. So, if you are investing in a SIP form, then keep in mind that every SIP installment is locked for three years from the date of purchase.

Many investors use the 1-lakh equity LTCG tax exemption to roll their ELSS funds every year. This form of tax harvesting involves selling the oldest ELSS units (more than three years old) and reinvesting them immediately in the same or another fund.

Instead of going through a mad last-minute rush to invest in ELSS due to the tax-proof submission deadline, this post will help investors to shortlist funds for review.

Did you know that we have a private Facebook group which you can join for free and ask your own questions? Please click the button below to join.

Filling 80C without ELSS

Investments in ELSS funds should be only to fill any remaining 80C limit and should be as per the equity allocation of your goals. If your 80C is already full with ₹1.5 lakhs of investments, please ignore ELSS funds. This recommendation for avoiding ELSS comes from the fact that these are active funds and leads to portfolio clutter if not reviewed properly. Related: Are you checking the performance of your funds regularly?.

We will use a waterfall approach to fill the 80C limit (see this for details on 80C investing) by moving to the next step only if anything is left within the 150,000 limits:

Step 1: Mandatory EPF contribution if you are salaried
Step 2: Life Insurance premium - Why you should have term insurance?
Step 3: Housing loan principal
Step 4: Children’s school tuition fees
Step 5: Long-term investments - NSC, PPF, ELSS, NPS, 5-years tax saving FD etc.

ELSS should be considered as a part of investing for long-term goals as per the right asset allocation. This article talks about asset allocation for goals where equity allocation can be appropriate: What should be the Asset Allocation for your goals?.

Also read
Sovereign Gold Bond (SGB) 2023-24 (Series III) priced at 6199: Who Should Invest?

Choosing an ELSS fund

All ELSS funds were currently available only as active funds until December 2021 when the first passive ELSS fund was launched.

A thumb rule to choose active funds can be

keep the expense ratio (TER) as low as possible
past returns are good to know (to avoid the consistently worst funds) but unimportant as a predictor of future returns
stick to 1-2 ELSS funds in the whole portfolio
you should ignore star ratings shown in rating portals

To know about the best ELSS funds for 2024:

Warning and disclaimer: Choosing the best fund is an attempt to predict the future by looking at what things were in the past. You cannot predict the future is one of the axioms of personal finance. Therefore, investors should not spend too much time trying or believing in future predictions. This chart for example:

3-year rolling lump sum return of Nifty 50 index funds vs today's best and worst performing ELSS funds

The chart shows that today’s “best” performing ELSS fund has fluctuated around the returns of the index fund over a 3-year period using the previous 13 years’ worth of historical data. Today’s “worst” performing fund has also performed in the same way. This proves that there is no guarantee that either choice of today’s best or worst-performing ELSS will beat the Nifty 50 index fund over the next three years.

How to interpret the table

We have created a simple ranking scheme based on AuM, TER, SIP returns (3 and 5 years) and the last five calendar year absolute returns to generate a ranking of ELSS funds. It should be evident that funds without five years of history will appear at the bottom of the ranking table. We believe this to be fair since an active fund manager needs to prove their ability to beat their peers and the benchmark for a minimum amount of time.

This table shows the ELSS funds’ relative ranking based on the previous paragraph’s criteria.

Best tax-saving ELSS Mutual Funds in 2024?

If your current ELSS fund is in the top 3, you can consider keeping it. If not, consider reviewing if you are happy with the performance or not. If your current ELSS fund has a high TER (above 1%), re-consider continuing at such a high expense ratio. If you are invested currently in Regular funds, this is how you switch to Direct: How to switch from regular to direct funds?.

If you are considering investing in a new ELSS fund, look at the top 3-5 to understand the fund’s investment objective and the risks. Always consult with an investment advisor before making any investments.

Operationally speaking, if you have the cash available, perform a single lumpsum investment unless the amount is very large compared to your existing portfolio. In such a case, break it over a few months. The AMC will send an account statement by email that will suffice for investment proof submission.

What's next? You can join the Arthgyaan WhatsApp community

You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

For resident Indians 🇮🇳:

For NRIs 🇺🇸🇬🇧🇪🇺🇦🇺🇦🇪🇸🇬:

Share on WhatsApp:

To understand how this article can help you: