A tax saving mutual fund, also called Equity Linked Savings Scheme (ELSS), is a mutual fund scheme that invests in equity & equity related securities.
Save ₹45,000 in Taxes with Tax Saving Fund
Average returns around 15% in last 3 years, better than Fixed Deposit or PPF
Has a lock in period of 3 years only
Invest upto Rs 1,50,000 in these funds as per Sec 80C
Benefits of Investing in Tax Saving Mutual Funds
Equity Linked Savings Scheme (ELSS) is a diversified equity mutual fund. It invests your money in equity shares of companies across market capitalisation i.e. large-cap/mid-cap/small-cap. Such diversification helps to wade through turbulent markets and keep your returns in line with your expectations.
Compared to other tax-saving options, ELSS has the lowest lock-in period of 3 years. Being an equity fund, it will be advisable to stay invested for a longer duration.
It helps you to avail tax deduction under Section 80C in the EEE format i.e. tax exemption, wealth accumulation and zero exit load.
You can start investing using SIP of as low as Rs 1000. Moreover, there’s no upper limit on amount of investment.
As compared to the conventional FDs, ELSS gives higher returns to beat inflation in an efficient manner.
Comparison with other Tax Saving Investments
There are several other savings schemes that helps in wealth creation like FD, PPF and NSC to name a few. But the returns from these schemes are taxable. This is where ELSS ( Tax Saving Mutual Funds) stands out with its dual-benefit – its returns are generally higher and tax-free. This coupled with a mere lock-in period of 3 years is all the more reason for you to invest in ELSS ( Tax Saving Mutual Funds ) now. Here is a quick glimpse at how ELSS is superior to other commonly used tax-saving investments :-
|Investment||Returns||Lock-in Period||Tax on Returns|
|5-Year Bank Fixed Deposit||6% to 7%||5 years||Yes|
|Public Provident Fund (PPF)||7% to 8%||15 years||No|
|National Savings Certificate||7% to 8%||5 years||Yes|
|National Pension System (NPS)||8% to 10%||Till Retirement||Partially Taxable|
|ELSS Funds||15% to 18%||3 years||No|
As a tax-paying citizen, the Section-80 of the Indian Tax Act allows you some breather – a deduction of up to Rs. 1,50,000 from your total annual income.
Best performing Tax Saving Funds
Many investors start their investment journey through an ELSS to save taxes. Eventually, they start spreading their investments once they get a better understanding of various available schemes. Sometimes it becomes difficult for an investor to compare all the above parameters and choose a mutual fund accordingly. ClearTax can help you here by handpicking the most suitable and best performing investment portfolios for you based on your financial goals.
|Aditya Birla Sun Life Tax Relief 96||4||23.7%||5,032 Cr||Equity|
|DSP BlackRock Tax Saver Fund||4||22.0%||3,905 Cr||Equity|
|Axis Long Term Equity Fund||4||21.8%||16,161 Cr||Equity|
|ICICI Prudential Long Term Equity Fund(Tax Saving)||4||18.5%||5,034 Cr||Equity|
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