Tax Saving 2026: Best ELSS Funds to Claim ₹1.5 Lakh Deduction, Invest Now

Best ELSS Fund: As the financial year enters its final stages, the primary concern on every Indian taxpayer’s mind is how to legally reduce their tax liability. If you’re investing under the old tax regime, ELSS (Equity Linked Savings Schemes) remain the most preferred and effective option for availing deductions of up to ₹1.5 lakh under Section 80C of the Income Tax Act.

In the 2026 market landscape, where technology and infrastructure are witnessing a new boom, the consistent performance of certain tax-saving funds has not only provided investors with tax savings but also helped them build wealth over the long term, far more than bank FDs or PPFs.

Top Performing ELSS Funds for 2026

Based on this year’s market analysis and the average returns (CAGR) over the past 3 to 5 years, here are some top funds that can be part of your tax planning:

1. SBI ELSS Tax Saver Fund

This is one of India’s oldest and most trusted funds. According to 2026 data, this fund has delivered impressive annualized returns of around 24.5% over the past 3 years. Its large portfolio and balanced asset allocation make it a safe bet for new investors.

2. Quant ELSS Tax Saver Fund

This fund from Quant remains a top choice for investors seeking slightly aggressive returns. Its 5-year average returns have been around 21.3%. This fund is known for its dynamic investment style, which rapidly adapts its portfolio to changing market conditions.

3. Motilal Oswal ELSS Tax Saver Fund

This fund primarily focuses on quality companies. Its 3-year returns through 2026 have been around 24%. Its low expense ratio makes it attractive to investors seeking better returns at lower costs.

4. HDFC ELSS Tax Saver Fund

With its strong presence in large- and mid-cap companies, this HDFC fund has proven its stability through 2026. By delivering returns of over 22% over the past 3 years, it has proven that experience and sound stock selection pay off in the long run.

Why ELSS is Important

There are a few compelling reasons why ELSS is more popular in 2026 than other tax-saving options (like PPF or NSC):

Shortest Lock-In Period

While PPF has a lock-in period of 15 years and NSC has a lock-in period of 5 years, ELSS locks your money in for only 3 years. It is the most liquid (easily withdrawable) option available under Section 80C.

Inflation-Beating Returns

Since at least 80% of ELSS is invested in equities (stock market), it has the potential to deliver returns of 12-15% or more over the long term, far exceeding the inflation rate.

Compounding and Disciplined Savings

By investing small amounts every month through a SIP (Systematic Investment Plan), you not only save tax but also grow your wealth faster by taking advantage of rupee cost averaging.

Keep these things in mind before investing

When investing in ELSS, remember that it is subject to market risks. As per the new rules applicable in 2026, long-term capital gains (LTCG) above ₹1.25 lakh are now taxed at 12.5%. Therefore, if you are investing solely to save tax, it would be wiser to invest through SIPs throughout the year rather than rushing at the last minute.