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ELSS funds offer tax deductions up to Rs. 1.5 lakh under Section 80C.
They have the shortest lock-in period of three years among tax-saving options.
SBI, HDFC, and Motilal Oswal ELSS lead January 2026 based on 5-year SIP returns.
Looking to save taxes while growing your money? ELSS mutual funds might be just what you need. These special equity funds help you cut your tax bill and build wealth at the same time. ELSS stands for Equity Linked Savings Scheme. Think of it as a mutual fund that invests your money in stocks while giving you tax benefits. Here's what makes them different; you must invest at least 65% in equity markets, and you cannot withdraw your money for 3 years.
The big draw? You can claim tax deductions up to Rs. 1.5 lakh every year under Section 80C. This means you could save up to Rs. 46,800 in taxes annually. That's real money back in your pocket. Now that you have understood what these funds are, along with their benefits, let’s explore the best ELSS tax-saving mutual funds to invest in January 2026.
Based on 5-year returns through monthly SIP, here are the top ELSS mutual funds in India for 2026:
SBI ELSS Tax Saver Fund leads the pack with 19.07% annual returns. With a fund size of Rs. 32,609 crore, it has shown steady performance. You can start with just Rs. 500 through SIP or a lump sum.
HDFC ELSS Tax Saver Fund comes second with 18.78% returns. Managing Rs. 17,163 crore, this fund has built a solid track record. Minimum investment is also Rs. 500.
Motilal Oswal ELSS Tax Saver Fund gives 17.25% returns with a fund size of Rs. 4,341 crore. Start with Rs. 500 through either investment method.
DSP ELSS Tax Saver Fund offers 16.71% returns and manages Rs. 17,570 crore. This is another strong choice for tax savers.
Other good options include JM ELSS (15.34%), HSBC ELSS (15.25%), and Franklin India ELSS (14.95%). Even funds with slightly lower returns, like Quant ELSS (13.96%) and ICICI Prudential ELSS (13.95%), can fit your portfolio based on your goals.
Here is a quick comparison table on best ELSS funds for 2026 based on the above information:
These funds work well for people who want to save taxes and don't mind taking some market risk. If you're okay with keeping your money invested for at least 3 years, ELSS could be right for you. They're perfect for long-term investors. While the lock-in is 3 years, staying invested longer often brings better results. If you have 5 years or more, even better.
The 3-year lock-in is actually the shortest among all tax-saving choices. Compare this to PPF, which locks your money for 15 years. You get your money back much faster with ELSS. Moreover, these mutual funds invest in the stock market. This gives them the chance to earn higher returns than fixed deposits or PPF. Of course, returns are not guaranteed since they depend on market performance. But over time, equity investments have shown strong growth potential.
Also Read: 2026 Watchlist: Best Performing Mid-Cap Mutual Funds for High Growth
Remember the 3-year lock-in period. You cannot take out your money before this time ends, no matter what. Plan accordingly. Returns are not fixed. They go up and down with the stock market. Some years will be good, others might be tough. This is why a longer time frame helps smooth out the bumps. You can invest through SIP (monthly payments) or a lump sum (one-time payment). SIP is popular because you can start with Rs. 500 per month and build the habit of regular investing.
Market risk is real. When stocks fall, your fund value falls too. Factors like economic slowdowns or political issues can affect returns. Liquidity risk means your money is stuck for 3 years. Make sure you have other savings for emergencies before putting money in ELSS.
Also Read: Top Gold Mutual Funds in India to Add to Your 2026 Investment Watchlist
ELSS mutual funds give you two benefits in one package: tax savings and wealth growth. With the shortest lock-in among tax-saving options and good return potential, they're worth considering. Start with funds that have strong track records and large fund sizes. SBI, HDFC, and Motilal Oswal are currently leading based on recent performance. Although remember, past returns don't guarantee future results.
Invest only if you can stay put for at least 3 years. Think of ELSS as a long-term commitment, not a quick fix. With patience and regular investing, these funds can help you save taxes while building a solid financial future.
1. What is an ELSS mutual fund?
ELSS mutual funds are a type of investment that combines both savings and investment in stocks, while also acting as a way to reduce your taxes. ELSS Mutual Funds invest at least 65% of the total fund's assets in equity securities (stock). This offers you an opportunity to deduct your contributions to the fund from your taxable income each year under Section 80C of the Income Tax Act.
2. How much tax can I save with ELSS funds?
You can contribute a maximum of Rs. 1.5 lakhs to an ELSS mutual fund in a financial year and receive a tax deduction on that amount under Section 80C. Depending on the income tax bracket you fall into, this means you could save as much as Rs. 46,800 each year.
3. Why is ELSS better than other tax-saving options?
ELSS has a much shorter lock-in period than other types of tax-saving options, such as PPF, which has a lock-in period of 15 years. Moreover, ELSS invests primarily in equities (stocks), which historically have provided higher returns over the long term than fixed income tax-saving instruments.
4. Is it risky to invest in ELSS mutual funds?
ELSS mutual funds do carry some degree of market risk, due to their investments in stocks, and there will likely be fluctuations in returns in the short term. However, historical performance has shown that the equity markets have generally produced better long-term gains than the historical performance of other tax savings options.
5. Should I invest in ELSS through SIP or a lump sum?
Both options work well, but SIP is preferred by many investors. SIP allows you to invest small amounts regularly, reduces market timing risk, and helps build disciplined investing habits while still enjoying tax benefits.
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