"Ankur, I have Rs 1.5 lakh sitting idle. Should I put it in a tax-saving FD or try mutual funds?"
We get this question every February from NRIs across Dubai, Abu Dhabi, and Sharjah. The March 31 deadline looms. Tax-saving panic sets in.
Here's what we tell them at Belong: If you're comfortable with some market risk and want your money working harder, ELSS mutual funds are your best bet.
They offer the shortest lock-in (just 3 years) among all Section 80C options. And historically, they've beaten fixed deposits by a wide margin.
Our team, including Savitri and Sai, has guided hundreds of UAE-based NRIs through this exact decision. We know the confusion. Which fund? Will they even accept my investment? What about US/Canada restrictions? How does taxation work?
This guide answers everything. We've ranked the best ELSS funds by 5-year returns, listed fund houses that accept NRI investments, and explained the complete tax math.
If you're part of our WhatsApp community, you've probably seen us discuss this already. For everyone else, here's the complete breakdown.
What is ELSS and Why Should NRIs Care?
ELSS stands for Equity Linked Savings Scheme. It's a type of mutual fund that invests at least 80% of its corpus in equities. The remaining can go into debt instruments.
Here's why NRIs prefer ELSS over other tax-saving options:
Shortest lock-in period. Just 3 years. Compare this to PPF (15 years), NSC (5 years), or tax-saving FDs (5 years).
Higher return potential. ELSS funds have historically delivered 12% to 20% annualized returns over 5 years. Fixed-income options rarely beat inflation.
Tax deduction up to Rs 1.5 lakh. Under Section 80C of the Income Tax Act, your ELSS investment reduces your taxable income. If you're in the 30% bracket, you save up to Rs 46,800 annually in taxes.
NRIs are eligible. Unlike PPF (where NRIs cannot open new accounts) or NSC, ELSS is fully accessible to NRIs.
👉 Tip: ELSS tax benefits are only available under the old tax regime. The new tax regime does not allow Section 80C deductions. Use our Residential Status Calculator to check your tax status.
Top 10 ELSS Funds Ranked by 5-Year Returns
The following funds are ranked by their 5-year CAGR (Compound Annual Growth Rate). This ranking uses actual performance data as of December 2025.
Why 5-year returns? ELSS has a 3-year lock-in. But smart investors stay longer. A 5-year horizon smooths out volatility and shows consistent performers.
Rank | Fund Name | 5-Year CAGR | AUM (Rs Cr) | Expense Ratio |
|---|---|---|---|---|
1 | Quant ELSS Tax Saver Fund | 25.23% | 12,444 | 0.59% |
2 | SBI ELSS Tax Saver Fund | 22.56% | 32,327 | 0.92% |
3 | HDFC ELSS Tax Saver Fund | 22.68% | 17,241 | 0.99% |
4 | Motilal Oswal ELSS Tax Saver Fund | 21.69% | 4,402 | 0.63% |
5 | Mirae Asset ELSS Tax Saver Fund | 19.80% | 24,347 | 0.52% |
Source: Value Research, Groww, December 2025
Let's look at each fund in detail.
Quant ELSS Tax Saver Fund
This fund has been the category topper for the past three years. It follows an aggressive investment style with exposure to mid-cap and small-cap stocks alongside large-caps.
3-Year Return: 28.76% XIRR
5-Year Return: 25.23% CAGR
AUM: Rs 12,444 crore
Expense Ratio: 0.59% (Direct Plan)
Minimum Investment: Rs 500 (SIP and Lumpsum)
What makes it stand out? The fund manager uses a dynamic asset allocation strategy. They're not afraid to take contrarian bets. This approach works well in bull markets but can underperform during corrections.
Who should invest? Aggressive investors with high risk appetite. If you can stomach 20% drawdowns, this fund can reward you handsomely.
👉 Tip: Quant Mutual Fund accepts NRI investments from UAE, UK, and other countries. Check with the AMC for current US/Canada eligibility.
SBI ELSS Tax Saver Fund
The largest ELSS fund by AUM. SBI's brand trust attracts conservative NRIs who want stability alongside returns.
3-Year Return: 22.59%
5-Year Return: 22.56%
AUM: Rs 32,327 crore
Expense Ratio: 0.92% (Direct Plan)
Fund Manager: Dinesh Balachandran
Portfolio approach: Heavy allocation to large-cap stocks. Top holdings include HDFC Bank, ICICI Bank, and Bharti Airtel. The fund maintains 70% in equities with sectoral focus on Financials, Technology, and Communication.
Who should invest? NRIs seeking a balance of growth and stability. The large AUM means lower impact cost and better liquidity.
For more on SBI NRI accounts and services, check our detailed guide.
HDFC ELSS Tax Saver Fund
HDFC AMC's flagship tax-saver. Known for disciplined stock selection and consistent benchmark outperformance.
3-Year Return: 20.95%
5-Year Return: 22.68%
AUM: Rs 17,241 crore
Fund Manager: Roshi Jain
Top holdings: HDFC Bank (9.70%), Axis Bank (8.91%), ICICI Bank (8.86%), SBI Life Insurance (5.13%), and Maruti Suzuki (5.07%).
The fund maintains a large-cap bias with selective mid-cap exposure. Lower volatility compared to Quant but also lower upside in bull markets.
Motilal Oswal ELSS Tax Saver Fund
A focused portfolio fund. Typically holds 25-30 stocks compared to 50+ in larger funds. This concentration can amplify gains and losses.
3-Year Return: 25.73%
5-Year Return: 26.52% (Direct Plan)
AUM: Rs 4,402 crore
Expense Ratio: 0.63%
Investment style: Bottom-up stock picking with a "buy right, sit tight" philosophy. The fund avoids frequent churn. Ideal for investors who believe in long-term wealth compounding.
Mirae Asset ELSS Tax Saver Fund
Mirae Asset has built a reputation for consistent outperformance across categories. Their ELSS fund follows the same discipline.
3-Year Return: 20.22%
5-Year Return: 19.80%
AUM: Rs 24,347 crore
Expense Ratio: 0.52% (lowest among top funds)
The fund uses a blend approach. Large-cap stocks for stability, mid-cap for growth. Lower expense ratio means more of your returns stay with you.
👉 Tip: Use Belong's NRI FD Comparison Tool to compare ELSS returns against fixed deposit alternatives.
Can NRIs Invest in ELSS Funds?
Yes. NRIs can invest in ELSS mutual funds. SEBI regulations permit this under FEMA guidelines.
However, there are conditions:
Account requirement: You need an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account with an Indian bank. Investments must be in Indian Rupees, not foreign currency.
Repatriation rules:
- NRE account investments are fully repatriable (you can send the money back abroad)
- NRO account investments have partial repatriability (up to $1 million per year across all NRO accounts)
KYC compliance: Complete your Know Your Customer process with documents including passport, overseas address proof, PAN card, and a recent photograph.
For a detailed comparison of NRE vs NRO accounts, read our comprehensive guide.
Special Restrictions for US and Canada NRIs
Here's the catch. If you're an NRI in the United States or Canada, most Indian mutual fund houses won't accept your investment.
Why?
FATCA (Foreign Account Tax Compliance Act). This US law requires financial institutions to report accounts held by US persons. Indian AMCs find the compliance burden heavy. Many chose to simply reject US/Canada-based NRI investments.
Which fund houses accept US/Canada NRIs?
As of December 2025, these AMCs allow investments with additional documentation:
AMC | Mode of Investment |
|---|---|
SBI Mutual Fund | Offline only with signed declaration |
HDFC Mutual Fund | Limited schemes, offline |
ICICI Prudential | Select schemes with FATCA declaration |
Motilal Oswal | Online via select platforms |
UTI Mutual Fund | Offline with additional paperwork |
Sundaram Mutual Fund | Select schemes |
Tata Mutual Fund | Select schemes |
L\&T Mutual Fund | Select schemes |
Source: Motilal Oswal, Zerodha Z-Connect, December 2025
👉 Tip: US-based NRIs should know that Indian mutual funds are classified as PFICs (Passive Foreign Investment Companies) under US tax law. This creates complex tax reporting requirements. Consider consulting a cross-border tax advisor.
For NRIs seeking simpler alternatives, GIFT City mutual funds offer a compelling option with no capital gains tax for NRIs.
Tax Benefits Explained: How Much Can You Actually Save?
Let's do the math.
Maximum deduction: Rs 1,50,000 under Section 80C
Tax savings by bracket (Old Regime):
Tax Bracket | Investment | Tax Saved |
|---|---|---|
10% | Rs 1,50,000 | Rs 15,600 (including cess) |
20% | Rs 1,50,000 | Rs 31,200 (including cess) |
30% | Rs 1,50,000 | Rs 46,800 (including cess) |
Critical point: These deductions ONLY apply under the old tax regime. The new tax regime, which became the default from FY 2023-24, does not allow Section 80C deductions.
If your taxable income in India is substantial and you have multiple deductions (home loan, insurance, NPS), the old regime often works better. For income with minimal deductions, the new regime's lower slab rates might save more.
Use our NRI Tax Filing service to determine which regime suits you.
How Are ELSS Returns Taxed?
After the 3-year lock-in, when you redeem your ELSS units, the gains are treated as Long-Term Capital Gains (LTCG).
Current LTCG rules (as of FY 2024-25):
- Gains up to Rs 1.25 lakh per financial year: Tax-free
- Gains above Rs 1.25 lakh: Taxed at 12.5% (no indexation benefit)
Example:
You invest Rs 1.5 lakh. After 3 years, it grows to Rs 2.5 lakh.
Your gain: Rs 1 lakh (below threshold)
Tax: Zero
If your gain exceeds Rs 1.25 lakh, only the excess is taxed.
TDS for NRIs: Unlike resident investors, NRIs face TDS (Tax Deducted at Source) on mutual fund redemptions. The AMC deducts tax before crediting your account. You can claim credit for this TDS while filing your return.
DTAA benefit: If you're in a country with a Double Taxation Avoidance Agreement with India (like UAE, UK, US), you can avoid paying tax twice on the same income. Learn about India-UAE DTAA benefits in our detailed guide.
ELSS vs Other Tax-Saving Options for NRIs
NRIs have limited options under Section 80C. Here's how ELSS compares:
Option | Lock-in | Expected Return | NRI Eligibility |
|---|---|---|---|
ELSS Mutual Funds | 3 years | 12-20% | Yes |
Tax-Saving FD | 5 years | 6-7% | Yes |
NPS (Tier 1) | Till age 60 | 8-12% | Yes |
PPF | 15 years | 7.1% | Cannot open new accounts |
NSC | 5 years | 7.7% | No |
ULIP | 5 years | Variable | Yes |
Source: RBI, Income Tax Portal, December 2025
Why ELSS wins for most NRIs:
- Shortest lock-in. Your money isn't stuck for a decade.
- Equity exposure. Participate in India's growth story.
- No new account hassle. Just complete KYC with any AMC.
- SIP flexibility. Start with Rs 500 per month.
👉 Tip: If you're uncertain about whether to start with ELSS or mutual funds vs fixed deposits, consider your risk appetite and investment horizon first.
How to Invest in ELSS from UAE (Step-by-Step)
Step 1: Check Your Tax Regime
First, decide whether you'll file under the old or new tax regime in India. ELSS makes sense only under the old regime.
Use Belong's Compliance Compass to check your overall compliance status.
Step 2: Complete Your KYC
Documents needed:
- Valid passport (self-attested)
- Overseas address proof (utility bill, bank statement)
- PAN card
- Recent passport-size photograph
- FATCA/CRS declaration
KYC can be completed through:
- Video KYC (many AMCs now offer this)
- In-person verification at AMC offices
- Power of Attorney to a trusted person in India
Step 3: Open an NRE or NRO Account
You need an Indian bank account to invest. Most NRIs in UAE already have one. If not, banks like HDFC, ICICI, and Axis offer doorstep account opening in UAE.
Step 4: Select Your Fund
Choose based on:
- 5-year consistent returns (not just 1-year toppers)
- Fund manager's track record
- Expense ratio (lower is better)
- Portfolio composition (large-cap vs mid-cap bias)
Step 5: Invest via SIP or Lumpsum
SIP (Systematic Investment Plan): Invest a fixed amount monthly. Each SIP installment has its own 3-year lock-in. If you start in January 2025, your January installment unlocks in January 2028, February's in February 2028, and so on.
Lumpsum: One-time investment. Better if you have surplus funds before March 31 and want to claim the full Rs 1.5 lakh deduction.
Step 6: Track and Review
Don't check daily. Review quarterly. ELSS is meant for 5+ years, not for trading.
3 Common Mistakes NRIs Make with ELSS
Mistake 1: Investing in March just for tax-saving
Many NRIs rush in March to save tax. They pick the highest-rated fund without research. But March 2025's top fund might not be March 2028's best performer.
Better approach: Start a SIP in April. Spread investments throughout the year. You'll average out market highs and lows.
Mistake 2: Choosing based on 1-year returns alone
One-year returns are noise. Three-year consistency matters. Five-year track record matters more. Check rolling returns, not point-to-point returns.
Mistake 3: Redeeming after exactly 3 years
The lock-in is a minimum, not a target. Equity wealth compounds over time. If your financial goals allow, stay invested for 7-10 years. You'll potentially double or triple your corpus.
👉 Tip: For NRIs planning to return to India, understanding ELSS taxation during status change is critical. Your RNOR status can provide tax benefits for up to 3 years.
GIFT City Alternative: Tax-Free Mutual Funds for NRIs
If ELSS doesn't suit your situation (US/Canada restrictions or new tax regime), consider GIFT City mutual funds.
Key benefits:
- Zero capital gains tax for NRIs and OCIs
- No NRE/NRO account needed
- Invest in USD (no currency conversion hassle)
- Regulated by IFSCA (India's international financial regulator)
At Belong, we specialize in GIFT City investments. Explore funds like DSP Global Equity Fund and Tata India Dynamic Equity Fund for diversified exposure.
For a detailed comparison, read our guide on GIFT City vs Regular Mutual Funds.
Final Thoughts: Which ELSS Fund Should You Pick?
There's no single "best" ELSS fund. It depends on your risk profile:
Conservative NRIs: SBI ELSS Tax Saver or Mirae Asset ELSS Tax Saver. Large-cap focused, lower volatility, consistent returns.
Moderate risk-takers: HDFC ELSS Tax Saver or Motilal Oswal ELSS Tax Saver. Balanced approach with selective mid-cap exposure.
Aggressive investors: Quant ELSS Tax Saver. Higher volatility but potential for category-beating returns.
US/Canada NRIs: Check AMC eligibility first. Consider GIFT City mutual funds as a tax-efficient alternative.
Whatever you choose, remember: ELSS is a tax-saving tool AND a wealth-creation vehicle. Don't redeem at 3 years just because you can. Stay invested if your goals permit.
Want personalized guidance? Join our WhatsApp community where thousands of NRIs discuss investment strategies daily. Or download the Belong app to explore GIFT City mutual funds and USD fixed deposits designed specifically for global Indians.
Disclaimer: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully before investing. Past performance is not indicative of future results. This article is for informational purposes only and does not constitute investment advice. Consult a qualified financial advisor for personalized recommendations.
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