Whenever there is a mention of long-term wealth creation along with income tax savings, the name of Equity Linked Savings Scheme (ELSS) funds comes up. Today, there are approximately 40 ELSS funds in the market, but among these, two funds stand out as not only the oldest but also the top performers, with a 5-star rating from Value Research. These regular schemes are the SBI ELSS Tax Saver Fund and the HDFC ELSS Tax Saver Fund.

SBI ELSS Tax Saver Fund

The SBI ELSS Tax Saver Fund was launched on March 31, 1993. Managed by SBI Mutual Fund, the scheme has delivered a strong 17.02% return since inception.

A lump sum investment of Rs 1 lakh in this fund would be worth Rs 1.53 crore now after 32 years.

Over the last 20 years, the fund has generated a commendable 16.07% CAGR. This open-ended fund allows investors to claim tax deductions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act, making it an attractive option for both wealth creation and tax planning.

The fund’s benchmark is the BSE 500 TRI, and it carries a ‘Very High’ risk rating on the SEBI Riskometer, indicating that it is best suited for investors with a high risk appetite. As of May 31, 2025, the fund manages assets worth Rs 29,667 crore, reflecting strong investor confidence. The expense ratio stands at 1.58% (as of June 30, 2025), which is on the higher side compared to some passive tax-saving alternatives.

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HDFC ELSS Tax Saver Fund

The HDFC ELSS Tax Saver Fund was launched on March 31, 1996. It has built a strong legacy over nearly three decades with an impressive 23.35% return since inception.

A lump sum investment of Rs 1 lakh in this fund made 29 years ago would be worth Rs 4.39 crore now.

Over the past 20 years, the fund has delivered a solid 15.33% CAGR, making it a competitive option among ELSS funds. This open-ended fund also offers tax deductions of up to Rs 1.5 lakh under Section 80C, while aiming to provide capital appreciation through diversified equity investments.

Benchmarked against the NIFTY 500 TRI, the fund falls under the ‘Very High’ risk category on SEBI’s Riskometer.

As of May 31, 2025, the scheme manages an AUM of Rs 16,454 crore, reflecting strong investor trust. However, its expense ratio is 1.68% (as of June 30, 2025), which is slightly on the higher side.

However, it is essential to note that these returns are based on past performance and do not guarantee similar returns in the future.

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ELSS Funds: Benefits and drawbacks

Benefits:

-Tax exemption of up to Rs 1.5 lakh under Section 80C

-Lock-in of only 3 years, which is the lowest among all tax saving options

-Opportunity for equity-based growth in the long term

-You can start investing with small amounts through SIP

Drawbacks:

-Being equity-based, there is a possibility of volatility

-3-year lock-in period

-No guarantee of fixed returns

-Losses can occur during market downturns

What is important for investors?

If you are thinking of investing in ELSS funds, it is important that you do not take the decision only on the basis of ratings or past returns. Factors like the management of the fund, portfolio strategy, risk profile and the time period of your investment are equally important.

Both SBI and HDFC ELSS funds have proven themselves in the long run, but the right investment decision depends on your financial goals, risk tolerance and investment period.

Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.