ELSS – Options for the Tax Payers in 2017-2018
Viren, a store manager with a leading MBO got hassled after looking at the Investment Declaration form, his HR asked him to submit. Instantly got in touch with a mutual fund distributor and asked for forms to invest an amount of INR 50,000, downloaded the form, filled, signed & shipped. The missing link here, was he failed to ask or mention – that he is looking for some tax saving schemes. Since most of the investors look at mutual funds as one of the leading money market instrument for wealth creation, Viren just followed the norm. Back in mind, he was also assuming that the investment would work as tax saving investment in the declaration form.
On realizing, the purpose is still impending, he decided to speak to us on tax advice and how we thought that the mutual fund he chose to invest in must be an ELSS. Let us learn more about ELSS here:
What is ELSS?
ELSS stands for Equity Linked Savings Scheme. ELSS comprise a unique class of mutual funds that provide investors with tax benefits under Section 80C. Like other mutual funds, ELSS as financial products are also offered by fund houses and are handled by experienced fund managers. Therefore, when you invest in an ELSS scheme, you get to invest in a professionally managed tax saving investment option.
Why people Opt for ELSS Mutual Funds:
- Shorter Lock-in period
- Tax Exemptions
- Options of SIP
- Optional Dividend & Growth option
- Transparent & Trackable
- Ease of Transaction
Comparison of select tax savings instruments across key criteria:
Popular ELSS Funds for Tax Saving and Wealth Creation:
Axis Long Term Equity Fund
Launched in December 2009, this fund has grown rapidly and have the largest AUM. Axis Long Term Equity is a large cap oriented fund with almost 70% in large cap space.
Returns: 22% (CAGR) and 20% (CAGR) over the last 3 years and 5-year period.
Franklin India Tax Shield
Launched in April 1999, Franklin Tax shield is being generating a return of 24% over the last 17 years. This fund is accelerating and has beaten its own benchmark in 12 out of last 15 years and has generated over 20% (CAGR) and 17% (CAGR) in the last 3 and 5 years. However, with almost 80% invested in giant companies, the risk of losses from possible market corrections is also high.
DSP BlackRock Tax Saver
Launched in January 2007, this is a large cap fund with 68% invested in the large cap companies. The fund focuses on companies with strong growth potential and higher valuations. The fund has delivered 22% (CAGR) and 19% (CAGR) over the last 3 and 5 years respectively.
ICICI Pru Long Term Equity
Launched in August 1999, the fund rests on a value investment style. This fund raised the bar and outperformed its benchmark for 13 among the last 15 years. The return rates have been 18%(CAGR) and 17% during the last 3 and 5 years.
Highly invested on the mid-cap and small cap companies, the ICICI Pru Long Term focus on attractive valuations and thereby reduced risk from market corrections.
Birla Sun Life Tax Relief
Launched in 1996, this fund is best for long term wealth management & generation. The fund invests through multi-cap approach and assures wealth creation by investing 80-100% in equities and sometimes in debt and other money market instruments. This tax saver fund has generated over 21% and 18% (CAGR) over the last 3 and 5 years’ period.
Reliance Tax Saver Fund
Launched in September 2005, Reliance Tax Saver focuses primarily on the mid-cap and small cap companies with 55% portfolio invested in such stocks. However, over the last 3 and 5 years, the fund has outperformed the average return by 5-10 percentage points.
The fund has generated returns of 26% and 21% (CAGR) over the last 3 and 5 years.
Well like all other mutual fund investments, the past performances of ELSS cannot be seen as a guarantee for their future performance but they are useful in giving us a direction for our Tax Planning Investments.
Please compare and match the funds performance with your financial plan & goals before you decide to invest in any of the ELSS funds.
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