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Best ELSS Funds for Saving Tax

Let’s update you on the recommendation we have put together for Equity Linked Saving Schemes for 2018. In case you are new to the finance world, you should know that the investments in ELSS or tax saving mutual fund schemes make for great tax deduction of around INR 1.5 lakh under Section 80C of Income Tax Act (ITA), 1961. The schemes mentioned come with a compulsory 3-year lock-in period, giving the shortest possible lock-in period amongst all the tax-saving instruments allowed through Section 80C. Yet, one should prefer a 7- 10 year investment horizon on them.

ELSS Funds

Investing in ELSS Tax Saving Funds can give you a tax deduction through ITA Section 80 C when investing up to INR 1.5 lakh per year. One may count other deductions under this section like the 5-year tax-saver FDs, Employees’ Provident Fund and Public Provident Fund. In case you are unwilling to accept the higher return for a bigger potential return, ELSS is the best product for saving tax in this segment.

  • Lock-In: EPF comes with a 3-year lock in. After this, one may either withdraw the invested money or let it stay in the ELSS fund where it will earn more returns.
  • Returns: An ELSS fund tends to invest minimum 80% of the corpus in equity-based funds. This means that the returns will be largely volatile, and also open to compound largely over a long run.
  • Tax: As per the given information, one will get deductions on investments with the ELSS funds for up to INR 1.5 lakh per year. When dealing with ELSS returns, one should look for long-term capital gain tax on ELSS funds at 10% on the returns above INR 1 lakh. Yet, one only has to pay taxes when you redeem investments towards the fund. Also, dividends on the ELSS funds are open to Dividend Distribution Tax. The imposed tax comes when fund gives out a dividend and the tax on it goes from the fund itself.

ELSS funds for Long Term Wealth Creation

It should be mentioned that equity mutual funds are amongst the great investment options for investors when looking forward to wealth creation in the long run.

Let’s see 10 mutual funds which will double your money in a long duration. These mutual funds such as equities, traditionally deliver variable returns, which are at times very high and at other times very poor.

Equity mutual funds like equities have given fluctuating returns, sometimes disproportionately high and sometimes very low. Over a long period these funds have brought about a return of around 13-15%.


How to Pick the Best Mutual Funds in the Market?

  • Always go for No-Load Mutual Funds.
  • Be attentive towards the Expense Ratio.
  • Override mutual funds that have a high ratio for turnovers.
  • Spot a disciplined Management Team.
  • Locate philosophy that goes with your investment style when choosing mutual funds.

Top ELSS Funds for Tax Saving in 2018-19

There are various good performing ELSS funds out there in the market. One may simply select anyone of them as per your individual requirements. It is quite feasible to split your investment along multiple funds, so as to successfully diversify risk that bring along improved returns over a long duration.

Motilal Oswal Long Term Equity Fund Direct-Growth

Using a relatively younger fund, this is an amazing performer of this segment. The multi-capital instrument diverts a maximum 35 equity and associated instruments across various sectors of market capital. Best allocations come from:

  • Finance
  • Banks
  • Auto
  • Pharma
  • Petroleum
  • Software
  • Transport
  • Gas

1-year return – 23.51% 3-year return – 22.03 %

L & T Tax Adv Direct-G

The scheme’s objective is to deliver long-term capital growth from a diversified portfolio of mostly equity and related securities.

2 Years10.4
3 Years11.5
5 Years17.4

Tata India Tax Savings Direct-G

This fund has delivered over 19.5% (CAGR) since its inception on March 31, 1996. It aims to generate long term wealth via investment in enterprises with quality basics. It utilises a growth and value mixed strategy to achieve full stock selection. As of now, around 99% of the portfolio has witnessed investment towards large and giant capital stocks with the rest going into small and midcap enterprises, after a big shift towards large capital. This has delivered more than 15.5% and 20.9% in the past 3-year and 5-year period. Yet the high portfolio P/E multiple of 30.2 marks an important downward risk to the fund.

IDFC Tax Advantage (ELSS) Direct-G

The fund was initiated on December 26, 2008 and has so far delivered around 19.9% (CAGR) in return since inception. This fund goes along a large-capital approach putting around 87% of its shares in the space for large capital, 7% goes to debt market and the remaining goes into mid-capital and small-capital enterprises. It moves along a conservative take and focuses on enterprises that have low valuations and high growth potential.

Aditya Birla SL Tax Relief 96 Direct-G

This ELSS fund carries an objective of long-term capital growth through a portfolio that has allocated target of 80% equity and 20% debt and securities of the money market.

The fund has an age of 20 years and has delivered a good record so far. It has delivered 17.87% in return over the past 5 years.

1-year return – 15.85% 3-year return – 18.77% 5-year return – 17.87%

Principal Tax Savings Fund Direct

Investment Objective

To deliver a prime quality growth-based portfolio that provides capital gains on the long run for the investors. This scheme is aimed at delivering returns along capital appreciation.

2 Years8.7
3 Years11.0
5 Years18.4

DSP Tax Saver Direct Plan-Growth

DSP Tax Saver Direct Plan-Growth is a large-capital based fund that has around 80% of its investments in large capital enterprises. It uses a bottom-up style of investment that is largely focussed on good enterprises that have good valuations and quality potential for growth. DSP Tax Saver Fund has shown a 14.2% growth on return (CAGR) since inception on January 18, 2007. This fund has brought around 14.7% investments (CAGR) and around 21.2% (CAGR) in the previous 3 years and 5 years each. This fund is managed by Rohit Singhania since July 2015.

HDFC LT Advantage Direct-G

The main objective of this Scheme is generation of long-term capital gains from a portfolio invested largely in equity and related instruments.

2 Years8.4
3 Years11.4
5 Years16.6

Aditya Birla SL Tax Plan Direct-G

The fund’s objective is to deliver wealth in the long term by an investment of 80–100% of the portfolio towards equity and the remaining into debt and money instruments. The fund is among the best of Aditya Birla Sun Life Mutual Funds and works as an amalgamation of the growth and value of investments. It has delivered around 25.3% (CAGR) in return since its 1996 inception. This fund is largely inclined towards large capital with 87% of the portfolio investment in massive and large-capital enterprises and the remaining in medium and small capital enterprises and debt scenarios. This scheme has delivered more than 16.6% and 24.1% returns in the past 3 and 5 year. The Fund manager is Mr. Ajay Garg.

BOI AXA Tax Advantage Direct-G

The policy is designed to generate long-term capital growth out of a diversified portfolio of mostly equity and related instruments all across capitalized markets. The policy is by nature a diversified multi-capital scheme. This Scheme does not deliver any assured returns. There can be zero guarantee on the objectives of the scheme being fully realized.

2 Years6.2
3 Years7.5
5 Years14.8

Invesco India Tax Plan Direct-G

The fund was conceived on December 29, 2006 and has given more than 15.2% (CAGR) benefit since establishment. Its aim is to achieve capital appreciation in the long run through equity investments across market. As of now, large capital enterprises form 75% of the portfolio of this fund, with the remaining 25% being held in mid-capital and small-capital enterprises and debt (1.6%). This fund out pours into mid-capital enterprises that have strong benefit potential from rise in domestic consumption.

Axis Long Term Equity Direct-G

This ELSS fund’s objective is capital appreciation out of a diversified collection of mostly equity assets. Large sector allocations are finance, banking, automobile and industrial products.

2 Years12.78
3 Years22.01
5 Years21.98

Sundaram Diversified Equity Direct-G

The aim of this scheme is to target capital appreciation via investment in diversified stocks such as midcaps.

2 Years3.5
3 Years7.5
5 Years15.0

HSBC Tax Saver Equity Direct-G

Objective is to deliver long term appreciation on the capital via investment in a portfolio of diversified equity related instruments of various enterprises in the many sectors and industries, without any capital bias. Investments may go towards fixed income securities.

2 Years4.6
3 Years6.8
5 Years15.7

ICICI Pru Long Term Equity (Tax Saving) Direct-G

This is a hybrid scheme that has a largely dynamic equity allocation for debt. The balanced fund is great for investors who are looking forward to long-term capital appreciation besides current income in the face of fund’s mix of equity and fixed income security.

1 Years19.44
3 Years17.44
5 Years17.24

FAQs on Best Elss Funds For Saving Tax

Can I redeem ELSS before 3 years?

Equity Linked Saving Scheme is backed by 3 years lock in period. The invested amount cannot be taken out before completion of the lock-in duration. The current SIP in ELSS can be paused and ceased. Yet, redeeming investment before the finish of 3 years is never feasible in ELSS.

How can I invest in ELSS through SIP?

You may initiate investments in ELSS with a minimum amount of INR 500. Also, investors may choose investment of a lump-sum amount in ELSS fund in a single move. You can invest online from the fund house website or through your bank account or offline my submitting the required forms at the branch.

How do I withdraw from ELSS SIP?

When it’s a single investment, you may take out any amount post 3 years. However, when investing via SIP, each EMI has a 3-year lock duration where you may take out the value credited each month. You will have to provide a withdrawal request to the fund house from the applicable channels.

How much should I invest in ELSS to save tax?

The smallest amount which a person can invest into an ELSS is INR 500. This is when there is no upper limit. Yet, tax deduction is made available up to INR 1.5 lakh, invested amount from the financial year.

Is dividend from ELSS taxable?

Investments in the ELSS qualify for deduction of tax up to INR 1.5 lakh via Section 80C of ITA. The tax-saving MF schemes are backed by compulsory 3-year lock-in period.

Is ELSS return tax free?

No, returns from ELSS mutual funds are taxable as per the provisions of the Long Term Capital Gains Tax For the objective of taxation, the returns from ELSS schemes are free up to INR 1 lakh.

Is PPF better than ELSS?

Savings have a critical role to play when meeting the rising requirements of individuals. However, these savings are largely beneficial when they meet your requirements after having beaten inflation.

Is SIP exempted from tax?

SIPs in Only Equity Linked Savings Schemes investments qualify for a deduction of tax under Section 80C of ITA.

Which ELSS is best to invest in 2018?

  • Axis Long Term Equity Fund.
  • Reliance Tax Saver Fund.
  • Aditya Birla SL Tax Relief 96.
  • DSP BR Tax Saver Fund.
  • Franklin India Tax shield Fund.
  • Tata Tax Savings Fund.
  • IDFC Tax Advantage ELSS Fund.
  • ICICI Pru Long Term Equity Fund.

Why is ELSS tax free?

In order to provide various investment and savings avenues at the same time, the government has provided investment instruments under Section 80C of the Income Tax Act, 1961. ELSS fall under this category and enables investors to enjoy tax benefits on the same.

Which is the best tax saving mutual funds or ELSS to invest in 2018?

According to news sources, Aditya Birla Sun Life Tax Relief 96, L&T Tax Advantage Fund and Axis Long Term Equity Fund are some of the best ELSS mutual funds or tax saving mutual funds. To benefit from investments in ELSS mutual funds or tax saving mutual funds, it is recommended to invest for the long term, i.e. with an investment horizon of seven years at the least.