ELSS Mutual Funds – has become a generic term in the mutual fund industry. If we look at the full form of this term it will say Equity Linked Savings Scheme Fund – sounds odd. 😉 Mutual Fund ELSS is a damn good tax-saving instrument but still, it is not used by maximum Indians. “In India, there are close to 3.34 crore individual taxpayers but less than 20% have ever invested in Mutual Fund ELSS.” This article will cover everything related to ELSS – Its meaning, benefits, comparison with other instruments, SIP in ELSS, and best ELSS to Invest.
Must Check – How Healthy Is Your Mutual Fund Portfolio?
Taxes grow without rain. Like it or not, you have to pay your taxes. The trouble is that understanding taxation requires more than a genius mind. Albert Einstein admitted, “The hardest thing in the world to understand is the income tax.”
Tax planning is an essential part of your financial planning. Efficient tax planning enables you to reduce your tax liability to the minimum. This is done by legitimately taking advantage of all tax exemptions, deductions rebates, and allowances while ensuring that your investments are in line with your long-term goals.
What is ELSS Mutual Fund
ELSS is a mutual fund scheme & is quite similar to diversified equity funds of Mutual Fund. As the name suggests, the scheme primarily invests in the equity market by buying equity stocks of companies listed on the stock exchanges.
The units of the scheme are offered at the NAV (Net Asset Value). The NAV is announced for all business days and keeps changing primarily depending upon the movement in the prices of stocks held in the portfolio of the scheme.
How to Invest in ELSS Mutual Fund?
ELSS investments can be made in the same way as other mutual fund investments, through an online investment service account. You can invest either as a lump sum or through the systematic investment plan (SIP) route.
SIP ensures regularity and discipline and reduces the risk to capital
You can invest as little as INR 500 in an ELSS fund
Comparison with other Tax Saving Investments VS ELSS
Must Read – Mutual Fund ELSS Vs PPF – Save Tax & Make Money
Benefits of ELSS Mutual Fund
Tax Benefit at the Investment
You can get tax benefits under section 80 C of Income-tax. The maximum limit is Rs 100000.
The Locking period of ELSS is 3 years which is the shortest in comparison to any other tax-saving investment. This locking is the only difference between diversified equity mutual funds & ELSS.
Any profit/ capital gain you have from ELSS is completely tax-free. If you see returns from NSC & Tax saving Bank FDs they are completely taxable & added to your income. Only PPF Offers tax-free returns but it has a maturity period of 15 years.
Here Is Short Video About ElSS
ELSS schemes keep giving dividends on regular intervals & the whole dividend you receive is tax-free.
No entry Loads (Less Expensive)
Say if you invest Rs 10000 in ELSS Scheme your complete Rs 10000 is invested in Mutual Fund. You have to decide how much want to pay your advisor. BEWARE some insurance agents sell ULIPS as Mutual Fund + Insurance with lots of expenses.
Equity funds can be volatile in the short run but have been known to beat inflation and create wealth over the long run. If you are looking at investing some money that you won’t need future, and are willing to ride the ups and downs of the market, you may find ELSS an ideal tax-saving option.
Best ELSS Mutual Fund Investment in India 2022
The best fund comes out after postmortem so consider them as “Top 10 ELSS Fund in last 7 years”
|Fund Name||3 Years Return (%)||5 Years Return (%)||7 Years Return (9%)||Min Investment||Min. SIP Investment|
|ABSL Tax Relief 96 Fund||11.08||11.57||9.86||500||500|
|Axis Long Term Equity Fund||18.17||16.32||12.88||500||500|
|DSP Tax Saver Fund||22.12||15.57||14.45||500||500|
|Franklin Ind Taxshield Fund||16.82||13.05||11.09||500||500|
|HDFC TaxSaver Fund||14||10.11||8.93||500||500|
|ICICI Pru Long term Equity (Tax Saving) Fund||18.7||14.25||11.65||500||500|
|Kotak Tax Saver Fund||21.83||16.67||14.37||500||500|
|SBI Long term equity fund||17.16||12.71||10.13||500||500|
|Sundaram Tax Savings Fund||18.34||14.72||12.57||500||500|
|L&T Tax Advantage Fund||15.62||12.14||11.24||500||500|
Performance Comparison: As on 8th Feb 2022
Please note that past performance may or may not be sustained in the future.
Points to remember while choosing ELSS Scheme, Short-term Returns May be Misguiding so always look for 5-10 year performance of a fund.
Systematic Investment Plan (SIP) in ELSS
In SIP, you invest a certain amount each month in a fund. It’s an effective way of investing in ELSS as the concept of rupee cost averaging and the power of compounding works well.
SIP ELSS Performance
- Investment Rs 10000 per month
- Time – Last 36 Months
- Total Investment – Rs 1 Lakh
|Fund Name||Present Value||Return (%)||Profit SIP||Profit Onetime Investment|
|ABSL Tax Relief 96 Fund||134000||11.08||78000||34000|
|Axis Long Term Equity Fund||165000||18.17||122000||65000|
|DSP Tax Saver Fund||182000||22.12||175000||82000|
|Franklin Ind Taxshield Fund||159000||16.82||165000||59000|
|HDFC TaxSaver Fund||148000||14||138000||48000|
|ICICI Pru Long term Equity (Tax Saving) Fund||167000||18.7||159000||67000|
|Kotak Tax Saver Fund||181000||21.83||177000||81000|
|SBI Long term equity fund||161000||17.16||152000||61000|
|Sundaram Tax Savings Fund||166000||18.34||170000||66000|
|L&T Tax Advantage Fund||155000||15.62||132000||55000|
Source & Credit: Some of the Data/charts used in the article are taken from NJ India Invest, Mutual Funds India & Value Research.
What’s your experience with Equity Linked Savings Scheme?
Always remember “Tax Saving should be result of your Investment planning and not vice versa”
Know you have a better idea about the ELSS Mutual fund. If you have any doubts or suggestions you can add them in the Comments section.