Top ELSS Mutual Funds to Save Tax in 2026
Introduction
Every year as March approaches millions of Indians begin a familiar scramble: the search for ways to save on income tax. For many this usually means locking money away in a bank for five years or putting it into a pension fund where you can’t touch it until retirement.
But what if there was a way to save tax while also giving your money the chance to grow at the same speed as the stock market? Enter ELSS (Equity Linked Savings Scheme).
ELSS is the only type of mutual fund that allows you to claim a tax deduction. It’s like a double-action tablet: it reduces your tax headache and builds your wealth at the same time. In 2026 as the Indian economy continues to expand ELSS remains the most popular tax-saving choice for people who want their money to work hard.
Tax-Saving Instruments at a Glance (2026)
What is an ELSS Mutual Fund?
If you are new to investing the name might sound technical. Let’s break it down.
- Equity Linked: This means at least 80% of your money is invested in the stock market (shares of companies like Reliance Infosys or HDFC).
- Savings Scheme: This refers to the tax-saving benefit provided by the Government of India under Section 80C.
By investing in an ELSS fund you can reduce your taxable income by up to ₹1.5 Lakh every year. Depending on your tax bracket this could save you up to ₹46800 in taxes annually!
The 3-Year Lock-in: A Blessing in Disguise
ELSS comes with a mandatory lock-in period of three years. This means once you put your money in you cannot take it out for 36 months. While some people see this as a hurdle smart investors see it as a safety belt. It prevents you from panicking and selling your stocks when the market goes down for a few days ensuring your long-term wealth doesn't collapse due to emotional decisions.
Top ELSS Mutual Funds to Consider in 2026
Based on their performance management quality and risk-handling in early 2026 here are the top tax-saving funds to watch.
1. HDFC ELSS Tax Saver Fund
Why it’s a Top Pick: HDFC is a household name for trust. In 2026 their ELSS fund has emerged as a top performer focusing on large stable companies that provide a rock-solid foundation for your portfolio.
- Performance: It has consistently delivered over 20% annualized returns over the last 3-5 years.
- Best For: Investors who want a mix of safety and growth from a giant fund house.
2. SBI ELSS Tax Saver Fund
Why it’s a Top Pick: As the largest ELSS fund in India it manages over ₹32000 crores. This massive size means it is very stable and less likely to be affected by sudden market shocks.
- Performance: Known for being a steady-as-it-goes performer with high risk-adjusted returns.
- Best For: First-time investors who feel comfortable with the State Bank brand and want reliable growth.
3. Motilal Oswal ELSS Tax Saver Fund
Why it’s a Top Pick: This fund follows a High Conviction strategy. Instead of buying 100 different companies they pick a few (about 25-30) that they believe will be the biggest winners of 2026.
- Performance: It has delivered some of the highest returns in the category (approx. 24% over 3 years) but can be more volatile (price jumps more).
- Best For: Investors who have a slightly higher risk appetite and want to beat the market significantly.
4. Parag Parikh ELSS Tax Saver Fund
Why it’s a Top Pick: This fund is famous for its Value style. They look for great companies that are currently on sale or undervalued by the market.
- Performance: Highly consistent with a focus on long-term wealth rather than short-term jumps.
- Best For: Patient investors who want a conservative approach to the stock market.
5. Quant ELSS Tax Saver Fund
Why it’s a Top Pick: Quant uses advanced mathematical models and data to decide when to buy and sell. In 2026 their tech-heavy approach has led to massive outperformance.
- Performance: Extremely high returns but it moves very fast. One month it might be up 10% and the next it could be down 5%.
- Best For: Aggressive investors who are comfortable with a fast-moving portfolio.
How to Choose the Right ELSS Fund for You?
Don't just pick the fund with the highest return on the screen. Use this simple checklist:
- Check the Expense Ratio: This is the fee the company charges to manage your money. In 2026 aim for a fund with an expense ratio below 1.0% for Direct plans.
- Look at the Fund Manager: Has the same person been managing the fund for a long time? Stability in management usually leads to stability in returns.
- Analyze the Portfolio: Does the fund invest in companies you know and trust? You can find this list in any mutual fund app.
- Lumpsum vs. SIP: If it’s already March you might need to do a Lumpsum (one-time) investment to save tax. But if you have time start an SIP (Systematic Investment Plan) for ₹5000 every month. It’s easier on your pocket and safer for your money.
The New Tax Regime vs. Old Tax Regime
This is the most important question for 2026.
- Old Regime: You can use ELSS to save tax under Section 80C (up to ₹1.5 Lakh deduction).
- New Regime: You cannot claim the 80C deduction for ELSS.
Wait so should I still buy ELSS if I’m in the New Regime?
Yes! Even without the tax benefit ELSS remains a fantastic Flexi-cap mutual fund. Because of the 3-year lock-in it forces you to stay invested which is the secret to making big money in the stock market. Many people use it as a wealth-building tool even if they don't need the tax break.
Taxation on Gains (2026 Rules)
When you sell your ELSS units after the 3-year lock-in your profit is considered LTCG (Long Term Capital Gain).
- The First ₹1.25 Lakh: Any profit up to this amount in a single financial year is 100% Tax-Free.
- Above ₹1.25 Lakh: You pay a flat 12.5% tax on the remaining profit.
Pro Tip: If you withdraw only a small portion every year so your profit stays under ₹1.25 Lakh you can effectively pay zero tax on your returns!
How to Invest in 5 Minutes
Investing in 2026 is entirely paperless.
- Pick an App: Use a trusted platform like Motilal Oswal Riise app.
- KYC Check: If you’ve never invested before you’ll need to upload your PAN and Aadhaar. It takes about 24 hours to get approved.
- Search for ELSS: Type the name of the fund (e.g. HDFC ELSS Tax Saver).
- Select Direct - Growth: Always choose Direct to avoid paying commissions to agents.
- Pay: Use UPI or Net Banking. You will receive your Units within 1-2 working days.