Why ELSS Funds are More Than Just an Investment Option?

With the increase in popularity of mutual fund market, new schemes from various categories are regularly hitting the market. With so many schemes and so many categories, often times investors get confused as to which scheme or which category, they should invest in. Well, today in this article, we will discuss that why ELSS funds (Equity Linked Savings Scheme) are the best investment option available for the investors.

What Are ELSS?

ELSS, also known as tax saver schemes, are a type of equity schemes that not only provide you with great returns, but also tax exemption on the invested amount. ELSS funds invest their major part in equities, thus providing investors with great opportunities to grow, on the other hand under sec 80c, the schemes offer tax benefit which make them eligible for providing the investor with tax exemption on their income. However, the one thing that should be kept in mind is that the maximum amount for which the exemption is allowed is Rs 1.5 lakh. You can start SIP in the ELSS funds with as low as Rs 500 and can enjoy the tax benefit.

What Makes it an Optimal Investment Option?

Now an important question is "What makes ELSS a good investment option?", and we will understand this with the help of an example.

Let’s say a person invests Rs 1 lakh in ELSS Fund, for a period of 3 years. Now under sec 80c, the investor gets a tax exemption of 30% as he falls in the highest tax bracket. So the tax exemption that he will get on his total investment is Rs 30000. Now let’s say the scheme gives an absolute return of 15% in 3 years, giving the investor a profit of Rs 15000. The total profit he will be making after tax exemption and getting returns on the scheme is Rs 45000, which is really good as compared to other category of schemes. So by investment in ELSS funds, you can enjoy the dual benefits of high returns and tax exemption, without shelling any extra money.

Which schemes to Choose?

This is the next question that comes to mind. Let’s have a look at some of the top performing ELSS Funds that you can choose from.

Reliance Tax Saver Fund- An open ended scheme, this ELSS fund is among the best tax saver schemes. The fund has given returns of -2.71%, 6.59%, and 20.98% in 1, 3, and 5 years, respectively (as on May 31, 2018) and it has a current NAV of Rs 55.87 (as on Jun 25, 2018).

DSP BlackRock Tax Saver Fund - This ELSS mutual fund has a current NAV of Rs 44.87 (as on Jun 25, 2018) and has an asset size of Rs 4366.38 crore. The scheme has shown returns of 6.63%, 11.95%, and 20.77%, in 1, 3, and 5 years, respectively (as on May 31, 2018).

Aditya Birla Sun Life Tax Relief 96 Fund - This ELSS Fund is one of the best schemes from Aditya Birla Sun Life. The Fund has given returns of 16.26%, 13.73%, and 23.74% in 1, 3, and 5 years, respectively and has a current NAV of Rs 31.52 (as on May 31, 2018).

L&T Tax Advantage Fund -This scheme is also a very good choice to start investing in ELSS Funds. It has a current NAV of Rs 54.62 and has given returns of 9.36%, 13.07%, and 20.36%, in 1, 3, and 5 years, respectively.

In the above article, we have discussed what ELSS funds are and what are some top performing schemes from this category. Using this analysis, you can make your investment decision in this following category and enjoy the dual benefits of this scheme.

Dishika is well-versed with the ups and downs of the financial market and has published articles on mutual fund and SIP. She is associated with MySIPonline.com, which is an AMFI registered mutual fund company.