Equity Linked Savings Schemes (ELSS) continue to be a popular choice among investors for their potential high returns coupled with tax-saving benefits. Known for a mandatory lock-in period of three years, ELSS funds invest predominantly in equities and are the only mutual fund category eligible for tax deductions under Section 80C. For investors looking to grow wealth while saving on taxes, ELSS offers a compelling combination. Here’s a look at the top-performing ELSS funds of 2024 that have shown impressive returns, both on lump-sum investments and Systematic Investment Plans (SIPs).
Understanding ELSS and Its Tax-Saving Advantage
ELSS funds allocate at least 80% of their portfolio to equities, and some funds reach nearly 100% equity allocation. They have a three-year lock-in period, meaning you cannot redeem your investment before this time. However, you’re free to keep your investment after the lock-in if you see good returns and wish to continue growing your money. Due to their equity exposure, ELSS funds may experience market fluctuations, but they generally deliver attractive long-term returns. For investors looking for tax benefits, they are also the only mutual fund type that qualifies for deductions up to Rs. 1.5 lakh under Section 80C.
Why SIP in ELSS?
While you can invest in ELSS as a lump sum, SIPs (Systematic Investment Plans) offer a way to invest smaller amounts monthly. SIPs provide benefits like rupee-cost averaging, which can minimize the impact of market volatility, and they help inculcate disciplined investing habits. In fact, some ELSS funds have shown annualized returns of 27% to 38% for SIP investors over a three-year period, making them an appealing option for wealth accumulation and tax savings.
Below are some of the top ELSS funds in 2024 that have delivered impressive results on both lump-sum and SIP investments.
1. Motilal Oswal ELSS Tax Saver Fund
- 3-Year Lump Sum Return: 20.7% per annum
- 3-Year SIP Return: 38.92% per annum
Motilal Oswal ELSS Tax Saver Fund has been a star performer, offering strong returns for both lump-sum and SIP investors. Over the past three years, a lump sum investment in this fund has yielded an impressive 20.7% annual return, turning Rs. 1 lakh into Rs. 2,09,459. SIP investors who invested Rs. 10,000 per month saw their portfolio grow to Rs. 6,22,072 in three years, with an annualized return of nearly 39%.
- Fund AUM: Rs. 4,194.64 crore
- Expense Ratio: 0.64%
- Benchmark: Nifty 500 TRI
- Top Holdings: Trent, Zomato, Kalyan Jewellers, Prestige Estates, Suzlon Energy, Inox Wind
2. HDFC ELSS Tax Saver Fund
- 3-Year Lump Sum Return: 25.57% per annum
- 3-Year SIP Return: 28.67% per annum
The HDFC ELSS Tax Saver Fund has consistently delivered strong performance, achieving a 25.57% annual return on lump-sum investments over three years. With an initial investment of Rs. 1 lakh, investors have seen their investment grow to Rs. 1,98,108. SIP investors who invested Rs. 10,000 monthly over three years achieved an annualized return of 28.67%, totaling Rs. 5,43,731.
- Fund AUM: Rs. 16,761 crore
- Expense Ratio: 1.08%
- Benchmark: Nifty 500 TRI
- Top Holdings: ICICI Bank, HDFC Bank, Axis Bank, HAL, Cipla, SBI
3. SBI Long Term Equity Fund
- 3-Year Lump Sum Return: 24.03% per annum
- 3-Year SIP Return: 33.82% per annum
SBI Long Term Equity Fund is another strong player in the ELSS category. A lump sum investment of Rs. 1 lakh three years ago would have grown to Rs. 1,91,028, reflecting an annual return of 24.03%. SIP investors have enjoyed even higher returns of 33.82% per annum, with Rs. 10,000 per month totaling Rs. 5,82,249 after three years.
- Fund AUM: Rs. 28,733 crore
- Expense Ratio: 0.93%
- Benchmark: Nifty 500 TRI
- Top Holdings: HDFC Bank, M&M, RIL, Bharti Airtel, ICICI Bank, Torrent Power
4. SBI Long Term Advantage Series III
- 3-Year Lump Sum Return: 22.68% per annum
- 3-Year SIP Return: 28.08% per annum
SBI Long Term Advantage Series III has also delivered solid returns, with a three-year lump sum annualized return of 22.68%, turning Rs. 1 lakh into Rs. 1,84,638. SIP investors have earned 28.08% per annum, transforming Rs. 10,000 monthly contributions into Rs. 5,39,396 over three years.
- Fund AUM: Rs. 81 crore
- Expense Ratio: 0.97%
- Benchmark: Nifty 500 TRI
- Top Holdings: Zomato, RIL, HDFC Bank, Tube Investments, Balrampur Mills
5. Sundaram Long Term Tax Advantage Fund Series III
- 3-Year Lump Sum Return: 22.30% per annum
- 3-Year SIP Return: 27.37% per annum
Sundaram Long Term Tax Advantage Fund Series III rounds out the top-performing ELSS funds. A Rs. 1 lakh investment would now be worth Rs. 1,82,928, reflecting an annual return of 22.3%. SIP investors have seen returns of 27.37% per annum, with a Rs. 10,000 monthly SIP reaching Rs. 5,34,306 in three years.
- Fund AUM: Rs. 39 crore
- Expense Ratio: 1.37%
- Benchmark: Nifty 500 TRI
- Top Holdings: MCX, KEI, Safari, Greenpanel Ind, KSB
A Few Things to Keep in Mind
While ELSS funds offer significant tax benefits and the potential for high returns, they come with a lock-in period and are subject to market risks due to their equity exposure. Expense ratios can vary between funds, affecting the net returns, so it’s essential to compare expense ratios before investing. Additionally, remember that past performance is not indicative of future results. Always consult a financial advisor to align investments with your risk tolerance and financial goals.
For investors looking to maximize returns with a tax-saving angle, ELSS funds offer a robust option.
