Is ELSS the best mutual fund scheme in India?
Mutual funds are an ideal investment vehicle for fulfilling most of your financial goals in life. Financial Goals can be Tax Saving, Wealth Creation, Retirement Planning, Children’s Education, etc. For investors having a financial goal of saving taxes, Equity Linked Savings schemes (ELSS) are the top mutual funds to invest in India.
ELSS, or Equity Linked Savings Schemes, are a type of mutual funds offered in India that offer substantial tax benefits to their investors. ELSS funds are actually considered a type of equity mutual fund, since they mainly invest in stocks of companies. Where they differ from other equity funds is the fact that they are the only mutual fund type that has a three-year lock-in period, after which the investor can withdraw their money without having to pay any capital gains tax.
The tax benefits offered by ELSS funds make it one of the best mutual fund scheme in India for investors looking to reduce their tax liability while making investments. Investing in ELSS funds can give investors a deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. This essentially means that any money invested in ELSS can be written off their total income, thereby reducing their overall tax burden. These funds are also known to offer higher returns than most other mutual funds and fixed deposits, making them a great option for long-term investments.
Comparison of ELSS with other tax saving investments in India:
| Tax Saving Investment Options | |||
|---|---|---|---|
|
Investment |
% Expected Returns |
Lock in Period |
Tax on Returns |
|
5 Year Bank FDs
|
6% to 7%
|
5 years
|
Yes
|
|
PPF |
7% to 9% |
15 years* |
No |
|
NSC |
7% to 9% |
5 years |
Yes |
|
NPS |
7% to 10%
|
Upto Retirement Age |
Partialy Taxable |
|
ELSS |
12% to 15%**
|
3 years |
Partially Taxable
|
The main reason why ELSS funds are the top mutual funds to invest in India is that beyond the tax benefits and higher returns, they also provide investors with a wide range of investment options. Investors can choose from various debt, mid-cap and large cap funds, thereby creating a diversified portfolio. However, since ELSS funds mainly invest in the stock market, they are subject to market risks, so investors should be cautious while investing in them.
While ELSS funds provide a great opportunity to avail of tax benefits while making long-term investments, it’s important to remember that they still come with risks like all other investments. Therefore, it’s important to invest in them only after thoroughly researching all the available options and understanding one’s own financial needs and goals. An investor should also remember to assess their risk appetite and choose the funds that best suit their needs.
In conclusion, ELSS funds are the best mutual fund scheme in India for investors looking to avail of tax benefits while making long-term investments. However, before investing, an investor should make sure to do their research and assess their risk appetite carefully in order to maximise their returns and minimise any potential risks.
3 Top Mutual Funds To Invest in India(ELSS) – India 2023
| ELSS Recommended: | |||||
|---|---|---|---|---|---|
|
Scheme Name |
AUM |
TER |
1 Year Return % |
3 Years Return % |
5 Years Return % |
|
ICICI Pru Long Term Equity Fund – (G) |
9,072.14 |
1.93% |
5.86% |
15.39% |
11.50% |
|
HDFC Tax Saver Fund (G) |
8,715.76 |
1.88% |
12.10%
|
13.95%
|
7.84% |
|
Franklin India Taxshield – (G) |
4,312.12 |
1.94%
|
5.66%
|
14.51% |
9.33%
|
**Note- Past performance may or may not be sustained in future. Please read the scheme related documents or consult your financial expert before investing.
