Everyone wants to earn and save taxes as well, but both never go hand-in-hand. There are many people who drain their money as TDS from their salary every year. Don’t fall into that category, as tax savings is not as tricky as you think. ELSS is the most rightful resource where you can invest and take an exemption of Rs. 1.5 Lac under Section 80C of the Income Tax Act, 1961.
What Are ELSS Funds?
ELSS funds are such mutual fund schemes that are created by the government to develop a habit of long-term savings among people. To improve the equity participation of people, the government has provided tax deduction through such schemes.
ELSS schemes are the best way to grow money and save taxes. These funds have a lock-in period of 3 years. They invest their corpus in the diversified equity stocks and reflect the returns of equity markets.
Equity Linked Savings Schemes are moderately high-risk funds that offer benefits to people of every age group. Many fund houses offer funds under this category. Some of the top ELSS funds of 2018 where you can invest in for tax savings are briefed as under:
Reliance Tax Saver (ELSS) Fund (G): One of the best ELSS funds which is performing consistently well for many years, is managed by Mr Ashwin Kumar. The fund has been following the benchmark S&P BSE 100 (TRI).
The fund has a statutory lock-in period of 3 years. It allocates its assets predominantly in the equity and equity-related securities to generate long-term capital appreciation.
Past Performance Analysis: The fund has provided magnificent returns of 46% in the year 2007. It was launched in 2005, and since then it has provided returns of 17%. The annualized return of the fund for the last 5 years is 19.46% with current AUM of Rs 10,511 Cr as on April 30, 2018.
L&T Tax Advantage (G): Being one of the most recommended funds by the financial advisors, this fund is among the top two in the league. An open-ended ELSS fund with a statutory lock-in period of 3 years, it is managed by Mr S.N. Lahiri. The fund follows the benchmark S&P BSE 200 TRI index and has the minimum expense ratio of 1.84%.
It follows the growth investment strategy in large-cap companies in diversified sectors. It has the AUM of Rs 3,285 Cr as on April 30, 2018.
Past Performance Analysis: The fund has provided 13.13% annualized returns in the past 1 year. Its returns for the year 2017 were 42.27%, which is 3.1% higher than its benchmark. The fund has its best returns in 2009 with 86.66%. Its 5 years annualized return was 19.16%. The fund was launched in the year 2006, and since inception, its average return is 13.85%.
Aditya Birla Sun Life Tax Relief 96’ (G): Rated 5 stars by Value Research, this is another ELSS scheme with a target allocation of 80% in equity and 20% in debt and money-market instruments. It has a mandatory lock-in for 3 years.
Currently, the fund is managed by Mr Ajay Garg whose investment objective is saving tax while growing capital of investors. The AUM of the fund as on April 30, 2018, is Rs 6,060 Cr.
Past Performance Analysis:The fund is providing outstanding returns beating its benchmark every year. Its returns of 1 year for the year 2017 were 43.12%, i.e., 9.86% higher than its benchmark. The annualized return of the fund for 5 years is 21.99%, and it has given annualized returns of 26% since its inception.
ELSS mutual funds are such schemes which provide higher returns and have the shortest lock-in period than any other investment options that offer tax saving benefits under Section 80c. Such funds also offer regular income in the form of dividend during lock-in period which makes them unique and extraordinary.
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