An Equity Linked Savings Scheme (ELSS) invests a majority of its corpus in equity and equity-related instruments and features a 3-year lock-in period. In the event that this period expires, an ELSS scheme will convert into an open-ended plan.

An investment in an ELSS fund up to Rs.1.5 lakh is eligible for a tax deduction under section 80C of the Income Tax Act 1961. A long-term portfolio return that offers tax benefits is the primary objective of the best ELSS mutual funds.

Features of ELSS Mutual Funds
A few features of ELSS mutual funds 2023 are as follows:

• Asset allocation: A minimum of 80% of their investment corpus must be allocated to equity shares, according to SEBI guidelines.
  
• Risk-reward ratio: The performance of top ELSS mutual funds is affected by volatile market conditions since they invest primarily in stocks. Due to the high risk involved with these funds, they are extremely risky. Similarly, this exposure to equity allows them to potentially earn higher returns than fixed deposit funds or debt funds.

Who Are These Funds Suited For?
Best tax saving mutual funds are ELSS funds that save taxes while maximizing portfolio returns, so they are also called best tax saving mutual funds. These fund schemes invest mainly in stocks, which allows them to generate substantial yields compared to other investment avenues, such as debt-oriented schemes or FDs. As a result of extensive equity investments, this investment option is riskier than other investment options. Investors must however consider several factors before choosing an ELSS mutual fund that best suits their needs.

The top 5 mutual fund schemes are listed below

Quant Tax Plan Direct Growth
Fund Performance: Over the past three years, Quant Tax Plan Fund has generated annualized returns of 46.33%, and in the last five years it has delivered returns of 23.29%. In the Quant Mutual Funds category, Quant Tax Plan Fund falls under the Equity category.
Minimum Investment Amount: Investments in Quant Tax Plan Fund cannot be made as lump sums or SIPs without a minimum amount of ₹500.

Parag Parikh Tax Saver Fund Direct Growth
Fund Performance: As part of the PPFAS Mutual Funds Equity category, the Parag Parikh Tax Saver Fund falls under the Equity category.
Minimum Investment Amount: If investing in the Parag Parikh Tax Saver Fund via lump sum, the minimum amount required is 500, and if investing via SIP, the minimum amount required is 1,000.

Mirae Asset Tax Saver Fund Direct Growth
Fund Performance: The Mirae Asset Tax Saver Fund has given annualized returns of 31.42% for the past three years and 15.96% for the last five years. The Mirae Asset Tax Saver Fund resides in the Equity category on the Mirae Asset Mutual Funds website.
Minimum Investment Amount:Investing in Mirae Asset Tax Saver Fund via lump sum requires only £500, while investing through SIP requires £500.

Canara Robeco Equity Tax Saver Direct Growth
Fund Performance: A three-year annualized return of 28.66% was achieved by the Canara Robeco Equity Tax Saver Fund and a five-year annualized return of 15.93% was achieved. In the Canara Robeco Mutual Funds category, the Canara Robeco Equity Tax Saver Fund falls under the Equity category.
Minimum Investment Amount:A lump sum investment or a monthly installment investment in Canara Robeco Equity Tax Saver Fund requires a minimum investment of ₹500.

Bandhan Tax Advantage (ELSS) Direct Plan Growth
Fund Performance: Over the past three years and over the past five years, the Bandhan Tax Advantage (ELSS) Fund has delivered an annualized return of 37.74 % and 13.45 %, respectively. As part of IDFC Mutual Funds’ Equity category, Bandhan Tax Advantage (ELSS) Fund is part of the bandhan Tax Advantage (ELSS) Fund.
Minimum Investment Amount: In Bandhan Tax Advantage (ELSS) Fund, the initial investment is $500 when made as a lump sum and $500 when made as a SIP.

The following are some advantages of investing in the best ELSS mutual fund in 2023:

• Shortest lock-in period: There are other tax-saving investing options, but ELSS mutual funds have the shortest lock-in period among them. The minimum maturity period for PPFs is 15 years. Thus, tax-saving fund schemes have a greater degree of liquidity.

• Potential to generate high returns: While ELSS mutual funds generate a variable income, other tax-saving investment options, like bank fixed deposits and PPFs, do not. As a result, ELSS funds invest in stocks of different companies, and their NAV goes up and down as a result. In the event the prices of these underlying securities rise, investors may be able to realize substantial returns.

• Tax benefit: According to the Income Tax Act, investments up to Rs.1.5 lakh are eligible for tax deductions.

• Investment modes: There are two ways in which individuals can invest in the best ELSS mutual funds – through a Systematic Investment Plan or a lump-sum investment. Individuals can invest in an ELSS mutual fund scheme by paying fixed instalments on a regular basis (monthly, quarterly, annually, etc.). A lump-sum investment, on the other hand, allows investors to invest all the available funds at once.