Tax planning is an important exercise for every individual. A Financial year is about to end. You must have completed your tax planning exercise. If not it’s high time. When it comes to tax planning, ELSS is the best tax saving option. You can reduce your tax liability as well as earn capital appreciation by investing money in Tax saving mutual funds ELSS. In this post, I will share information about the Top 5 Best ELSS Tax Saving Mutual Funds.
What is ELSS?
A Full form of ELSS is Equity-linked saving scheme. It is a category of mutual fund that helps in saving taxes. ELSS offers dual benefits. You can get capital appreciation as well as tax saving under section 80C of Income-tax by investing in ELSS. ELSS funds have two categories Growth and Dividend. A Growth category provides capital appreciation whereas the dividend category provides dividend payouts.
Key Features of ELSS Funds
- Lowest Lock-in Period – ELSS comes with the lowest lock-in period of 3 years. It is the lowest lock-in period compared to other tax saving options such as PPF, NPS or tax saving FD.Tax Benefits – You can claim tax deduction up to 1.5 Lakh under section 80C by investing money in ELSS funds. The tax benefit of ELSS has made it special among the equity mutual funds.
- SIP or Lump Sum – ELSS provides an option to invest money via lump sum or SIP route. As you can invest money via the SIP route, you need not invest big money at the end of the financial year.
- Transparency – The complete portfolio of the mutual fund is transparently available to everyone online. It will help the investor to analyze before investing money.
Top 5 Best ELSS Tax Saving Mutual Funds
Mirae Asset Tax Saver Fund
Mirae Asset Tax Saver Fund is first in the list of Best ELSS Tax Saving Mutual Funds. This fund has given highest returns compared to other 80 C investments. This fund is given 5 star rating by valueresearchonline. This fund has generated 18.8% returns in last 3 years. The major fund holding of this fund is in finance sector. This fund is managed by an experienced fund manager.
Axis Long Term Equity Fund
Axis Long Term Equity Fund is very good ELSS mutual fund for the investment. Axis Long Term Equity fund has generated 18.28% returns for the investor in last 3 years. It is 5 star rated fund managed by an experience fund manager. One can invest in this fund via SIP route.
Aditya Birla Sun Life Tax Relief 96 – Direct Growth
Aditya Birla Sun Life Tax Relief 96 – Direct Growth is next best ELSS in the list. The objective of this fund is to invest 80% of the assets in equity and remaining in debt and money market instruments. Aditya Birla Sun Life Tax Relief 96 – Direct fund has given very good returns to the investors. In last 3 years this fund has generated 13.5% returns for the investors.
DSP Tax Saver Fund
DSP Tax Saver Fund is 4 star rated fund. This fund has generated very good return in last few years. Expense ratio of this fund is low. It is managed by experienced fund manager. You can invest in this fund via SIP route.
Kotak Tax Saver – Direct
Kotak Tax Saver is 4 star rated popular ELSS mutual fund. Kotak Tax Saver fund has generated 15.24% returns in the last 3 years. A Majority investment of this fund is in financial sector. The expense ratio of this fund low. It is managed by an experienced fund manager.
Things to Know before investing money in ELSS
- ELSS invests money in equity (Share market). This means it is not a suitable product for conservative investors.
- Your money will be locked for 3 years once you invest in ELSS. The amount received from ELSS would be taxable as per long term capital gain tax.
- The return from ELSS is not guaranteed. This means you may end up making losses from ELSS.
- There are no limits on the investment amount. You can start SIP with Rs.500. There are no limits even on holding period.
- Tax exemption is limited to 1.5 Lakh per annum under section 80c.
- You should avoid too many ELSS funds in your portfolio. Ideally, you should have the maximum top 2-3 ELSS funds in your portfolio.