Top 5 ELSS Mutual Funds to Save Tax and Build Wealth in February 2025

Looking to maximize your tax savings while growing your wealth? As the financial year nears its end, many investors rush to invest in tax-saving instruments without a strategic plan. However, tax planning should be an integral part of your financial strategy, not a last-minute decision. Among the various tax-saving options, Equity-Linked Savings Schemes (ELSS) stand out for their dual benefit of tax deductions and wealth creation.

In this article, we explore what ELSS mutual funds are and highlight the Top 5 ELSS Mutual Funds for February 2025, based on an in-depth evaluation of performance, risk, and cost metrics.

What Are ELSS Mutual Funds?

As per SEBI guidelines, these funds must allocate a minimum of 65% of their assets to equities.

Key Features of ELSS Funds:

• Tax Benefits: Eligible for tax deduction up to ₹1.5 lakh under Section 80C of the Income Tax Act (Old Regime).

• Lock-in Period: Three years, the shortest among all tax-saving investment options under Section 80C.

Top 5 ELSS Mutual Funds to Invest in February 2025

At 1 Finance, we have developed a proprietary Mutual Fund Scoring and Ranking System, which evaluates funds based on performance consistency, risk-adjusted returns, and cost-effectiveness. Here are the top performers:

1. DSP ELSS Tax Saver Fund

Rank: 1
Score: 99/100

A consistently strong performer, the DSP ELSS Tax Saver Fund has demonstrated resilience during market downturns while delivering robust returns.

Key Highlights:

• Assets Under Management (AUM): ₹17,771 crore

• Expense Ratio: 0.74%

• 5-Year CAGR: 20.11%

2. JM ELSS Tax Saver Fund

Rank: 2
Score: 95/100

Known for its high risk-adjusted returns, JM ELSS Tax Saver Fund has outpaced the benchmark regularly. However, its slightly higher expense ratio is something investors should consider.

Key Highlights:

• AUM: ₹187 crore

• Expense Ratio: 1.15%

• 5-Year CAGR: 19.62%

3. Quant ELSS Tax Saver Fund

Rank: 3
Score: 94/100

The Quant ELSS Tax Saver Fund has outperformed its peers with outstanding returns, driven by its dynamic equity allocation strategy.

Key Highlights:

• AUM: ₹11,561 crore

• Expense Ratio: 0.65%

• 5-Year CAGR: 29.44%

4. SBI Long Term Equity Fund

Rank: 4
Score: 91/100

This fund boasts a strong track record of delivering superior risk-adjusted returns over time, making it a reliable choice for conservative equity investors.

Key Highlights:

• AUM: ₹11,561 crore

• Expense Ratio: 0.93%

• 5-Year CAGR: 23.06%

5. Kotak ELSS Tax Saver Fund

Rank: 5
Score: 90/100

The Kotak ELSS Tax Saver Fund is known for effectively managing downside risks while offering competitive returns.

Key Highlights:

• AUM: ₹6,501 crore

• Expense Ratio: 0.57%

• 5-Year CAGR: 17.85%

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Why Choose ELSS for Tax Saving?

• Potential for Higher Returns: Exposure to equities can potentially deliver higher inflation-beating returns.

• Diversification: ELSS funds invest across sectors and market caps, providing a balanced equity exposure.

Conclusion

Investing in ELSS mutual funds not only enables you to optimize your tax liability but also helps you build a corpus for future goals. The funds listed above have shown strong historical performance and sound risk management. Consulting a SEBI-registered financial advisor can help tailor a tax-saving strategy that best suits your needs.

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