Equity-Linked Savings Schemes (ELSS) are of special significance over all other mutual fund options because of tax benefits under Section 80C of the Income Tax Act. Also known as tax saver mutual funds, ELSS has the shortest lock-in period of three years. Investment up to Rs 1.5 lakh/year (which is equivalent to Rs 12,500/month SIP) qualifies for the deduction and reduces the tax liability of the investor. But what about returns? 

ELSS funds have at least 80% allocation into equities. In past, equity funds have given higher returns over the long term. In the last three years, most of the ELSS funds have given good returns of over 15%. There are six ELSS funds that have returned over 24% in these three years, according to data on the Association for Mutual Funds in India (AMFI) website.

The SIP calculator shows that if someone had started a SIP of Rs 12,500/month in any of these funds six funds three years ago, the value of his/her investments would have grown to at least Rs 6.6 lakh or even more. 

ELSS funds with over 20% returns in 3 years

Here’s a look at the six tax saver funds that have given a return of over 20% in the last three years. Investors should note that there is no guarantee that these funds would continue to give such high returns in future as well: 

1. Canara Robeco Equity Tax Saver Fund

The direct plan of this scheme has given a return of 26.34% in 3 years while the return from the regular plan in the same duration is 24.86%. The fund tracks S&P BSE 500 Total Return Index which has given a return of 21.86% in the three years. 

2. Bank of India Tax Advantage Fund

The direct plan of this scheme has given a return of 29.14% in 3 years while the return from the regular plan in the same duration is 27.75%. The fund tracks S&P BSE 500 Total Return Index which has given a return of 21.86% in the three years. 

3. IDFC Tax Advantage (ELSS) Fund

The direct plan of this scheme has given a return of 26.52% in 3 years while the return from the regular plan in the same duration is 25.13%. The fund tracks S&P BSE 500 Total Return Index which has given a return of 21.86% in the three years. 

4. Parag Parikh Tax Saver Fund

The direct plan of this scheme has given a return of 25.78% in 3 years while the return from the regular plan in the same duration is 24.20%. The fund tracks NIFTY 500 Total Return Index which has given a return of 21.47% in the three years. 

5. Quant Tax Plan

The direct plan of this scheme has given a return of 44.62% in 3 years while the return from the regular plan in the same duration is 41.87%. The fund tracks NIFTY 500 Total Return Index which has given a return of 21.47% in the three years. 

6. Mirae Asset Tax Saver Fund

The direct plan of this scheme has given a return of 24.16% in 3 years while the return from the regular plan in the same duration is 22.43%. The fund tracks NIFTY 500 Total Return Index which has given a return of 21.47% in the three years. 

Should you invest? 

The deduction can be claimed for only up to Rs 1.5 lakh under Section 80C in a Financial Year. You may invest in ELSS funds if you have not already exhausted the Section 80C limit. 

The investment decision should be based on your risk appetite and requirement. Chasing past returns may put your money at huge risk. In case of confusion, always take advice from a professional and trusted financial advisor before making any investment decision.