Tax Saving Investment ELSS With Highest Return : Equity Linked Savings Scheme (ELSS) is a great investment option where one can expect high market linked returns along with saving tax. The top 9 ELSS schemes falling in this category have given average annual returns of 20% to 31% in the last 5 years. These top funds include schemes of leading fund houses like SBI, HDFC, Motilal Oswal and Parag Parikh.
Performance of Top 9 ELSS Tax Saver Funds
These 9 ELSS funds have given an average annual return of more than 20% in the last 5 years. All data is for the direct plans of these schemes and is taken from the website of Association of Mutual Funds in India (AMFI):
1. Quant ELSS Tax Saver Fund (Direct Plan)
5 Year Return (CAGR): 31.63%
2. Bank of India ELSS Tax Saver Fund (Direct)
5 Year Return (CAGR): 24.42%
3. SBI Long Term Equity Fund (Direct)
5 Year Return (CAGR): 23.79%
4. Parag Parikh ELSS Tax Saver Fund (Direct)
5 Year Return (CAGR): 23.52%
5. Motilal Oswal ELSS Tax Saver Fund (Direct)
5 Year Return (CAGR): 23.27%
6. Bandhan ELSS Tax Saver Fund (Direct)
5 Year Return (CAGR): 21.77%
7. DSP ELSS Tax Saver Fund (Direct)
5 Year Return (CAGR): 21.23%
8. JM ELSS Tax Saver Fund (Direct)
5 Year Return (CAGR): 21.13%
9. HDFC ELSS Tax Saver Fund (Direct)
5 Year Return (CAGR): 20.55%
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Features of ELSS Funds
According to SEBI rules, it is necessary to invest at least 80% of ELSS funds in equity or equity related instruments. The remaining 20% can be invested in other assets. These funds provide the opportunity for both wealth creation and tax saving in the long term. ELSS has a lock-in period of 3 years, which is less than all other tax saving schemes.
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Tax benefits on investing in ELSS
Investing up to Rs 1.5 lakh in ELSS during a financial year gives exemption under Section 80C of the Income Tax Act. If there is a profit of up to Rs 1.25 lakh during a financial year on selling units after 3 years of lock-in, then no tax has to be paid on it. If the profit is more than this, Long Term Capital Gain (LTCG) tax is levied at the rate of 12.5%. This is also less for those falling in higher tax slabs.
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Risk factors and investment precautions
Fund managers invest the money invested in ELSS funds in the stock market, hence they are affected by market fluctuations. This is the reason why all the ELSS funds mentioned above have been kept in the Very High risk category on the Riskometer. However, this risk can be reduced in the long run by investing through SIP. Nevertheless, it is very important to keep in mind your risk appetite and financial goals before investing.
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(Disclaimer: The purpose of this article is only to provide information and not to recommend investment in any scheme. The past returns of equity mutual funds cannot be considered as a guarantee of future performance. Any investment decision should be taken after getting complete information and Do this only after taking advice from a SEBI approved investment advisor.)
