Most  of the  investors select tax-saving mutual  funds  which are also called  as equity-linked saving schemes – ELSS for Income Tax benefit.  This may sound weird to few people but with research, one can find the tax-saving mutual funds finding their own way. The reason is very simple which is tax saving as it's name states! Equities are very risky investments and allowing tax to break, dictate or making decision is not considered favorable. If   investor is glad about the tax benefit which is just used as an add-on, they will treat the tax-saving mutual funds similar to regular expanded equity funds. In other words, they will make use of the similar yardstick to choose tax-saving mutual funds, as they have for any varied equity fund.

Following are some of the parameters which will help you evaluate your selection prior to selecting the right tax benefit that will help you in saving tax.  

Performance: Along with other things, investors should evaluate the tax-saving fund on NAV returns. While performance itself is not everything, it is however a serious factor on which a fund must exchange itself before considering investing in it.   Overall the performance of the mutual funds should be unique over long time frames of 3 years, 5 years. etc. For this you may need to look at the calendar of yearly returns and not just compounded annual growth returns (CAGR).

Investment approach:  The investment should be approached by the fund manager with the investment style. Normally, mutual funds are either managed through solid systems and procedures or by strong individualistic trait, where the mutual fund manager has enough scope to make decisions about the investments. As this investment may be a strategy of protecting the investment and gives comforts to the investors too, one need to understand the level of risks and their association with this fund. If you invest in a tax saving mutual funds with 3 year minimum commitment, there are certain benefits that come along with selecting the predictably managed funds, that dig for stocks that are undervalued as the mutual fund manager has the comfort of taking investment calls for a long time.

Risk return and instability: The mutual fund’s NAV of an investor is usually above in one month and may be down sometimes worse in the following month. Therefore, before investing one should know these kind of confusion are likely and most of the investors can do without. Equity funds alone cannot remove havoc in the performance of the equities nature, but it can be controlled by following investments which are disciplined in approach. You should be able to identify mutual funds that have lower 'standard deviation’ (a degree used to measure instability in NAV performance).

In the same way, you should search for tax-saving mutual funds by which the investors are satisfied and less of risks taken by them.  

Other parameters: There are many other parameters which are usually looked as entry load and its record of track of the company of asset management. Most of the tax saving fund’s entry load are of 2.00-2.25%. Some fund houses ignore the entry load on the investments made through SIPs (systematic investment plans).

Remember that in tax-saving mutual funds, the fund organization should have a minimum of 3-year track record or above and also should have witnessed and experienced the upturns and downturns of the market. Therefore, it is very essential to give much importance to the research and planning while investing in tax-saving funds. This way you not only get the benefit of tax saving,  you can also look at a possibility for negotiation and forfeiting the chance  to make a great equity investment.