ELSS isn't just about tax savings: This fund outperformed many equity schemes over 3, 5, 10 years

Equity Linked Savings Schemes (ELSS) are often viewed primarily as tax-saving investments under Section 80C of the Income Tax Act. However, long-term performance data shows that some ELSS funds have done much more than reduce tax liability—they have also delivered returns that rival or outperform several diversified equity mutual funds.

According to Value Research data as of July 3, 2026, Motilal Oswal ELSS Tax Saver Fund has emerged as one of the few equity mutual funds to generate annualised returns of more than 15% consistently across three-, five- and ten-year periods, highlighting the wealth-creation potential of tax-saving funds.

A rare combination of tax savings and strong returns

The fund delivered an annualised return of 23.29% over three years, 19.07% over five years, and 18.32% over ten years. These returns place it among a select group of mutual funds that have maintained consistent long-term performance across multiple market cycles.

Its SIP performance has also remained robust. A systematic investment plan (SIP) in the fund generated returns of 21.82% over one year, 15.92% over three years, 20.19% over five years, and 18.75% over ten years, according to the data.

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The performance suggests that ELSS funds can serve a dual purpose—helping investors claim tax deductions while simultaneously building long-term wealth through equity investing.

Motilal Oswal ELSS Tax Saver Fund: Performance Snapshot 

Metric	Return (%)
3-Year Annualised Return	23.29
5-Year Annualised Return	19.07
10-Year Annualised Return	18.32
1-Year SIP Return	21.82
3-Year SIP Return	15.92
5-Year SIP Return	20.19
10-Year SIP Return	18.75
Fund Category	Equity: ELSS
Assets Under Management (AUM)	₹4,663.26 crore

Source: Value Research

Launched in January 2015, the Motilal Oswal ELSS Tax Saver Fund is an equity-linked savings scheme (ELSS) that combines tax benefits under Section 80C with a high-conviction equity portfolio.

As of July 6, 2026, the fund manages ₹4,663 crore in assets and maintains a concentrated portfolio of 30 stocks, with 97.55% invested in equities. Financials account for the largest sector allocation (25.8%), followed by consumer discretionary, materials and industrials.

Its top holdings include MCX, Onesource Specialty Pharma, Zen Technologies, Muthoot Finance and Ather Energy. The fund follows a growth-oriented strategy with exposure to quality businesses and emerging themes. It has also generated a positive alpha of 8.09 and a Sharpe ratio of 0.77, indicating strong risk-adjusted performance relative to its benchmark.

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ELSS offers more than tax benefits

ELSS funds invest predominantly in equities and equity-related instruments and come with a mandatory lock-in period of three years, the shortest among tax-saving investments eligible under Section 80C.

Unlike traditional tax-saving options such as the Public Provident Fund (PPF), National Savings Certificate (NSC) or tax-saving fixed deposits, ELSS returns are market-linked. While this exposes investors to short-term market volatility, it also offers the potential for significantly higher long-term returns.

Financial planners often recommend ELSS to investors with a long investment horizon who are comfortable with equity market risks and are looking to combine tax efficiency with wealth creation.

ELSS vs Other Section 80C Investments

Investment Option	Returns	Lock-in	Risk Level	Tax Benefit
ELSS Mutual Funds	Market-linked	3 years	High	Eligible under Section 80C*
Public Provident Fund (PPF)	Government-declared	15 years	Low	Eligible under Section 80C*
National Savings Certificate (NSC)	Fixed	5 years	Low	Eligible under Section 80C*
Tax-saving Fixed Deposit	Fixed	5 years	Low	Eligible under Section 80C*

*Subject to the applicable tax regime and prevailing tax laws.

Lock-in encourages long-term investing

One reason many ELSS funds have generated competitive long-term returns is the mandatory three-year lock-in. Since investors cannot redeem units during this period, fund managers are able to pursue longer-term investment strategies without worrying about frequent redemptions.

For investors, the lock-in also promotes investment discipline by reducing the temptation to exit during periods of market volatility.

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Although three years is the mandatory holding period, financial advisers generally recommend staying invested much longer to maximise the benefits of compounding.

Past performance is not a guarantee

While the Motilal Oswal ELSS Tax Saver Fund has delivered impressive historical returns, experts caution that investors should not choose a fund based solely on past performance.

They should also consider factors such as investment objectives, portfolio quality, fund manager experience, expense ratio, risk-adjusted performance and whether the scheme aligns with their financial goals and risk appetite.

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It is also important to note that tax benefits under Section 80C are available only under the applicable provisions of the Income Tax Act and may vary depending on the tax regime chosen by the investor.

The latest performance data reinforces that ELSS funds are not merely tax-saving instruments. For investors seeking long-term equity exposure, they can also serve as effective wealth-creation vehicles, combining tax efficiency with the potential to generate inflation-beating returns over extended investment horizons.