‘Best ELSS’ is a site to introduce you the ELSS (Equity Linked Saving schemes). You also know this investment scheme with the name of ‘tax saver mutual fund’ or ‘tax saving mutual fund’. I have tried to cover all the aspects of the ELSS. From the ‘investment strategy’ to the ‘tax benefit’, you would learn everything about this mutual fund scheme. I also publish the list of the ‘best ELSS funds’ every year.
This page gives you an overview of the ELSS. For detailed information about the different aspects of tax saving mutual funds and best ELSS mutual funds you should follow the given links.
What is ELSS | Meaning of ELSS
The ELSS stands for Equity Linked Saving scheme. As its full form indicates, The ELSS is a scheme which invests in equities, i. e. Share market. It is basically a diversified equity mutual fund which gives you the benefit of tax deduction under section 80C of the income tax act. The tax benefit of ELSS comes with the lock in period of 3 years.
Features of ELSS
The ELSS or tax saver mutual fund is a plan to give you tax benefit along with the high return. However, there are some features which may not suit to some investors. Go through the features of ELSS.
Diversified Mutual Fund – It is like any other diversified equity mutual fund which invests in the variety of shares. There is no restriction to invest only in big companies or mid-cap companies. The fund manager can choose any company from the share market.
Better Return – Because of the investment in the share market, the ELSS can give a high return. In the longer term, the share investment has given highest return.
More Risk – The investment in ELSS is riskier than the fixed deposit, NSC or PPF. If share prices go down, your original investment can also lose the value.
All round tax benefit- As it is tax saver mutual fund scheme, the ELSS gives all round tax benefit. The investment is tax-free because of the section 80C. The profit from this scheme is also tax-free because of the zero long term capital gains on share investment.
Lock-in of 3 years- The tax benefit of ELSS comes with the restriction on redemption. You can’t get back your money before 3 years of the investment. The money gets locked for 3 years.
Read More: ELSS Features
ELSS Vs other Tax Savers
There are two purposes of equity linked saving schemes. The first is tax saving and second is high return. Thus, it would be prudent to compare the ELSS with other tax saving investment plans. We should compare the ELSS with other tax savers on the basis of return, risk and the tax benefit.
ELSS Vs PPF
Both of these investment gives all round tax benefit. You get the tax deduction under section 80C at the time of investment. The Interest and maturity amount is also tax-free.
ELSS invests in share market. Thus, it has the potential to give the best return. Whereas, the PPF gives slightly higher return than the bank fixed deposit.
The Higher return of ELSS comes with greater risk. The investment in share market is always risky, even, you can loose some investment. Whereas, the PPF gives you the predetermined return. You would never loose the value of your investment.
Read More: ELSS Vs PPF
ELSS Vs NSC Vs Tax Saving FD
The NSC and tax saving FD also saves tax under section 80C. But these don’t give all round tax benefit like an ELSS or PPF. The interest earning of these investments are subject to tax.
The return of tax saving FD and NSC is similar to the PPF. You can be assured of the return during the 5 year lock-in period. On the other hand, there is no assurance of the return in tax saver funds.
NSC and tax saving FD are not risky at all. You will never loose the money. ELSS is risky and your money can reduce.
ELSS Vs ULIP
ULIPs are also tax saving investment which gives a small insurance cover as well. The ULIP also invests in share market. However, you have the option to transfer some amount in safer balanced funds. Therefore, it may seem less risky than the tax saving mutual funds.
However, the return from ULIP would be lower than the tax saving mutual funds because of the higher expenses. Also, in the ULIP, money is locked for 5 years.
Read More: ELSS Vs ULIP
Popular ELSS Mutual Funds
The equity linked saving schemes are becoming popular with the rise of the share market. Seeing the high return, people want to take some risk. However, still, they prefer the ELSS which belongs to the established corporate houses. Following is the list of those tax saver mutual funds which have the highest assets under the management.
Axis Bank ELSS
Axis Long Term Equity fund is the tax saving mutual fund of the axis bank. However, the separate company Axis MF manages the mutual fund business of the axis bank. This scheme is relatively new however it has become very popular during last few years because of the extraordinary return. It is now considered as the Best ELSS Fund. The axis long term equity fund has Rs 10,000 Cr in its kitty.
Reliance Tax Saver ELSS
The ELSS of Reliance mutual fund has been quite popular during the certain periods. This fund gives splendid return when there is a market rally. However, It slips swiftly during the market downturn. The fund is at number two in the asset under management. It has over 5000 Cr in its kitty.
HDFC Tax Saver
HDFC mutual fund has the great reputation due to its flagship schemes HDFC growth and HDFC 200. This reputation also worked for the HDFC tax saver. The HDFC ELSS has given an average return. It has about 5000 Cr AUM.
SBI is a household name in India. That is why every scheme with the name of SBI carries more trust. The ELSS scheme of SBI is the SBI magnum tax gain. This is the oldest tax saving mutual fund. It has given outstanding return during the 2000-2006. It still commands 4th position among tax saver funds. It has 4,700 Cr AUM.
ICICI Prudential Tax Plan
ICICI Prudential tax plan is a well-managed tax saving mutual fund scheme. The prodigy of the ICICI bank makes it one of the preferred tax saver fund. The scheme has about Rs 3000 Cr AUM.
Best ELSS Tax Saving Funds
The best ELSS mutual funds are those schemes which have the greater potential of high return and with lesser risk. Thus, a tax saving mutual fund scheme which gives above average return with below average risk is the best equity linked saving scheme. To choose such schemes, I go through the performance of mutual fund schemes during last one, three and five years. I also check out the yearly return of the ELSS. I consider only those fund the ‘best ELSS’ which are less risky and slides less in the market downturn. You would see a list of best tax saving mutual fund for the ongoing year. I also give a separate list of best tax saving funds for the SIP.
Best ELSS for 2016
This is the list of the selected top 3 ELSS funds. You can invest in any of these funds. These tax saver funds take less risk and give a high return. To learn about these funds and selection process, you should visit the post ‘Top ELSS for 2016‘.
|1||Birla Sun Life Tax Plan|
|2||Axis Long Term Equity Fund|
|3||DSP BlackRock Tax Saver Fund|
Best ELSS SIP for 2016
The SIP investment is a regular investment. To get maximum profit from this way of investment you need a consistent performer. That is why I have prepared another list of Top ELSS SIP funds 2016. Some best ELSS may overlap in both the list.
|1||Axis Long Term Equity Fund|
|2||Birla Sun Life Tax Plan|
|3||Franklin India Taxshield|
How To Invest in ELSS
The investment in ELSS funds is similar to the investment in any mutual fund scheme. You can invest in ELSS through the offline mutual fund distributors and online distributors. Most of the stock broker act as the mutual fund distributor as well. Also, there are thousands of separate mutual fund distributors . The investment through the distributors is a little costly as you have to bear the expense of distributor commission.
To reduce the mutual fund expense you can directly invest into the ELSS. The direct investment can be done through the offline mode i. e. through the offices of the fund house. Else, you can also invest through the portals of fund houses. To learn about the online investment, you can read my post on online ELSS investment.
You can invest in ELSS through the one-time lump sum payment and SIP payments. The ELSS SIP should be the preferred mode of investment as it is disciplined ways of investing and reduced the risk of market fluctuation.
This was the overview of the equity linked saving scheme. You can explore other aspects of the ELSS and SIP. I have also given special coverage to the Axis long term equity fund. Do read and give your valuable feedback.