These are mutual funds with tax benefit. You can invest up to Rs 10,000 a year in such schemes to avail of the tax benefit.

These funds have a lock-in period of three years. It prevents you from unnecessary withdrawals and spending and helps earn a return over time.

"A three year lock-in period is essential because the real potential of equities starts to show only after a few years," explains Mr. Matai.

Sanjay Matai recommends the top three ELSS Funds:

1. HDFC Tax Saver (G)

Fund Type: Open Ended

Investment Plan: Growth

Minimum Initial Investment: Rs. 500

One Year Return: 23.3 %

2. SBI Magnum Tax Gain Scheme (G)

Fund Type: Open Ended

Investment Plan: Dividend

Minimum Initial Investment: Rs. 500

One Year Return: 31.9 %

3. Birla Sun Life Tax Relief 96

Fund Type: Open Ended

Investment Plan: Dividend

Minimum Initial Investment: Rs. 500

One Year Return: 41.1 %