Even with impressive returns over the last five years, the Equity Linked Savings Scheme (ELSS) category is witnessing a strange trend. Data from the Association of Mutual Funds in India (AMFI) shows that between April and September 2024, the net flow of investments in ELSS funds has been negative. Investors have pulled out Rs 2,030.89 crore from ELSS during this period, withdrawing more than they invested.
A key reason behind this shift is the growing adoption of the new tax regime, which does not offer any tax benefits for ELSS investments. As a result, many investors are turning away from these schemes.
Top ELSS Funds Delivered Up to 36% SIP Returns
While many people associate ELSS investments primarily with tax savings, data shows that these funds are highly capable of building wealth. Some of the top-performing ELSS funds have generated annualized SIP returns of up to 36% over the last five years.
Here’s a quick look at the top-performing ELSS funds:
| Scheme Name | Annualized SIP Return (5 Years) |
| Quant ELSS Tax Saver Fund (Direct Plan) | 36.52% |
| Motilal Oswal ELSS Tax Saver Fund (Direct Plan) | 35.40% |
| SBI Long Term Equity Fund (Direct Plan) | 32.72% |
| JM ELSS Tax Saver Fund (Direct Plan) | 30.26% |
| HDFC ELSS Tax Saver Fund (Direct Plan) | 29.67% |
These figures show that investing through SIPs in top ELSS schemes could more than double the invested amount over five years.
Wealth Creation through SIP: Top 5 ELSS Funds
Here’s how much your investment would have grown if you had invested Rs 10,000 per month for five years in the top-performing ELSS funds:
- Quant ELSS Tax Saver Fund (Direct Plan) – Rs 14.57 lakh
- Motilal Oswal ELSS Tax Saver Fund (Direct Plan) – Rs 14.16 lakh
- SBI Long Term Equity Fund (Direct Plan) – Rs 13.30 lakh
- JM ELSS Tax Saver Fund (Direct Plan) – Rs 12.54 lakh
- HDFC ELSS Tax Saver Fund (Direct Plan) – Rs 12.39 lakh
The total amount invested over five years through SIP would have been Rs 6 lakh. However, the current value of investments in these funds ranges from Rs 12.39 lakh to Rs 14.57 lakh, meaning the invested amount has more than doubled in five years.
More Than Just Tax Saving: ELSS for Wealth Creation
Many investors see ELSS funds only as a tool for tax savings, but their wealth-building potential makes them valuable even without tax benefits. Currently, at least 21 ELSS schemes have generated 25% to 36% annualized returns on SIPs over five years.
Here’s a list of a few other funds with impressive returns:
| Scheme Name | Annualized SIP Return (5 Years) |
| DSP ELSS Tax Saver Fund (Direct Plan) | 28.94% |
| ITI ELSS Tax Saver Fund (Direct Plan) | 28.88% |
| Franklin India ELSS Tax Saver Fund (Direct Plan) | 28.42% |
| HSBC ELSS Tax Saver Fund (Direct Plan) | 26.88% |
| Kotak ELSS Tax Saver Fund (Direct Plan) | 26.54% |
Why Are Investors Moving Away from ELSS?
Despite the solid performance of these schemes, the outflow from ELSS funds shows that many investors are now less inclined to invest in them. The primary reason is the new tax regime, which offers no deductions for investments in ELSS. With the removal of tax-saving incentives, investors are withdrawing their funds and exploring other options.
This change reflects a shift in investor behavior, with more people focusing on schemes that fit their financial goals instead of relying solely on tax benefits.
Consider Market Risks Before Investing in ELSS
While the returns from ELSS funds are attractive, investors must also account for market risks. SEBI mandates that 80% of ELSS investments must be in equities, meaning the performance of these funds is closely tied to stock market fluctuations. Investors should carefully assess their risk tolerance before investing.
ELSS funds, though popular for tax benefits, offer significant wealth creation opportunities over time through disciplined SIP investments.
