ELSS or Equity Linked Savings Scheme is a type of Mutual Fund that is equity diversified with a major portion of the fund corpus being invested either in Equity Funds or equity-related products. Primarily, 80% of these tax saver Mutual Funds are exposed to equity and the remaining 20% in debt, money market instruments, cash or in even more equity instruments.
ELSS funds (also known as the tax saving Mutual Funds) are open-ended, meaning that investors can subscribe to these funds whenever they wish.
In the capital markets, Mutual Funds aid in tax saving under its Equity Linked Saving Schemes or ELSS. By Investing in ELSS or Equity Linked Savings Scheme, one can attain deductions upto INR 1,50,000 from their taxable income as per the Section 80C of Income Tax Act. Moreover, the units of each scheme are offered at its Net Asset Value or NAV. The NAV of these tax saver Mutual Funds is announced on each business day and it keeps on changing in accordance to the prices of stocks held in the portfolio of the scheme. Some of the Best elss Mutual Funds or tax saving Mutual Funds are mentioned below. Take a look!
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Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) 2018 (%) Tata India Tax Savings Fund Growth ₹19.5926
₹2,063 7.3 6.1 15.4 13.8 11.5 13.6 IDFC Tax Advantage (ELSS) Fund Growth ₹57
₹2,107 8.3 2.9 7.4 11.7 8.6 1.9 DSP BlackRock Tax Saver Fund Growth ₹52.765
₹6,186 6 9 17.4 12.4 10.6 14.8 L&T Tax Advantage Fund Growth ₹57.468
₹3,396 9.4 7.5 9.7 10.9 9 4.6 Aditya Birla Sun Life Tax Relief '96 Growth ₹32.99
₹9,998 7.8 9.6 8.2 12.5 9.5 4.3 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 17 Jan 20
|Tenure||15 years||6 years||5 Years||3 years|
|Returns||7.60% (Compounded Annually)||7.60%(Compounded Annually)||7.00 - 8.00 % (Compounded Annually)||No Assured Divividend / Return as it market linked|
|Min. Investment||Rs. 500||Rs. 100||Rs. 1000||Rs. 500|
|Max. Investment||Rs. 1.5 Lakhs||No Upper Limit||No Upper Limit||No Upper Limit|
|Amount Eligible for Deduction under 80c||Rs. 1.5 Lakhs||Rs. 1.5 Lakhs||Rs. 1.5 Lakhs||Rs. 1.5 Lakhs|
|Taxation for Interest/return||Tax Free||Interest Taxable||Interest Taxable||Gains up to INR 1 lakh are free of tax. Tax at 10% applies to gains above INR 1 lakh|
Being a combination of equity and tax saving, Equity Linked Savings Scheme is an optimal gateway to equity. Since these mutual funds invest in equity-related instruments, the money you invest grows as the stock market grows. So, the gains are high in ELSS Mutual Funds.
Not only the money you invest grows but also you can save tax by investing in ELSS mutual funds. Under section 80C of Income Tax, you can avail tax exemption of 1,50,000 from your annual income. So Equity Linked Savings Scheme provides double benefits through a single scheme.
The lock-in period of Equity Linked Savings Scheme is 3 years, which is much less than others like NSC (National Savings Certificate) that has a lock-in period of 6 years and PPF (Public Provident Fund) has that of 15 years.
SIP or Lump sum? This is the most common query people have while investing in ELSS Mutual Funds. Though most of the people would suggest ELSS through SIP, the final decision should always depend on your motive. The SIP route is undoubtedly a convenient option as the investment can be divided into small amounts over a period of time. The investment can also be as low as INR 500 per month. Further, if you choose a wrong scheme through SIP, a huge amount will not be locked with Equity Linked Savings Scheme.
Everyone who wishes to invest in tax saving Mutual Funds can go for Equity Linked Savings Scheme. Just that, these Mutual Funds have a higher risk factor since most of the investments are in stock markets. As the market goes up, your money grows and vice versa. Even senior citizens who have a taxable income and are ready to take some short-term risks can invest in these Mutual Funds and avail long-term benefits.
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Planning taxes is a fundamental part of financial planning. ELSS Funds not only help in tax saving but offer money growth as well. So, make an ELSS investment today to enjoy unbelievable tax benefits and money gains.
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