- Want to invest in an instrument that can offer higher returns and save taxes?
- There’s none better than ELSS to invest in - choose from the list of ELSS funds shown in this post
ELSS (Equity-linked Savings Scheme) or tax saving mutual funds as they are famously called are a great option to fulfill the dual purpose of generating a high return and saving tax. Investments in these funds up to INR 1.50 lakh annually qualify for a tax deduction under Section 80C of the Income Tax Act. These funds have seen significant interest from investors and have become a household name. Every mutual fund company has a tax-saving fund, so there are more than 30 tax-saving funds to choose from. This makes it a difficult choice. To make it easy, we share with you the three best tax saving funds.
Axis Long Term Equity Fund
This fund is offered by Axis Mutual Fund which is a subsidiary of Axis Bank. Axis Tax Saver is the largest and most popular tax-saving scheme with the highest Assets Under Management (AUM) of INR 19,632 crores. This fund has a consistent track record and has beaten its benchmark. This fund is also rated Five Stars by rating agency Value Research. The portfolio of this fund has invested about 70% in large-cap and the rest 30 % in small and mid-cap stocks. Thus, it is a well-diversified portfolio and expected to continue its good performance. If you are looking at investing in only one ELSS fund, this is the top recommendation.
Aditya Birla Sun Life Tax Relief 96
This fund is offered by Aditya Birla Sunlife mutual fund which is a part of the Aditya Birla Group. The AUM of this fund is INR 9,371crores. It has been a good performer with a strong track record for the past many years. The portfolio is multi-cap in nature with 45% in large-cap stocks and 55% in mid and small-cap stocks. This highlights a more aggressive approach by the fund manager with higher weightage to mid & small caps. Also, considering the correction in mid and small-cap stocks and funds, this is a good time to enter this fund. It is rated Four Stars by Value Research.
Invesco India Tax Saver
Invesco India Tax Saver is offered by Invesco Mutual Fund, which is relatively lesser known in India, but it is one of the largest asset managers in the world. This fund manages only INR 930 crores of AUM and is much smaller than the other two recommendations, but in terms of performance, it does not lag behind any fund. It has consistently been among the top three funds in this category for many years now. The portfolio is tilted more towards large caps with about 70% allocation and the rest in mid & small caps. It is rated Four Stars by Value Research.
Let us look at the performance (returns in % terms) of these funds in the last 3, 5 and 7 years
|Fund Name||Last 3 years||Last 5 years||Last 7 years|
|Axis Long Term||5.11||6.48||15.46|
|Aditya Birla Tax||1.10||5.24||13.37|
|Invesco Tax saver||2.06||5.19||12.78|
As we can see, due to correction in equity markets, returns for the last 3-5 years are not great but over the last 7 years and beyond is impressive. We recommend allocating amongst the three funds equally to have a good portfolio consisting of tax saving mutual fund schemes.