Equity Linked Savings Scheme (ELSS) offer tax benefits under Sec 80C of the Income Tax Act. One of the biggest benefits that they have as compared to other tax saving instruments is that they have a lock-in period of only 3 years.
If you look at the other tax saving options like, PPF, Tax Savings Bank Deposits, they have a much higher lock-in period.
Here are some of the 3 best ELSS schemes. In shortlisting them we have taken into account ratings of Crisil and past track record of the fund in question. Having said that we wish to emphasize that past track record is no indication of future performance.
1) Axis Long Term Equity Fund
Axis Long Term Equity Fund has a ranking of number "1" by Crisil for June 2015. Value Research Online has also accorded a 5 star rating to the fund.
The 5 year returns of the fund is as much as 18 per cent, clearly beating any debt instrument in the country. If we carefully analyze the portfolio, we see stocks of blue chip companies like HDFC Bank, TCS, Kotak Mahindra Bank, Sun Pharma.
Looking at the strong portfolio of the company, it is highly possible that the fund would continue to perform well.
Strong ratings, solid portfolio and tremendous past track record, make this among the best ELSS funds to invest in.
2) Religare Invesco Tax Plan
Religare Invesco Tax Plan is another top rated ELSS scheme. The fund like Axis Long Term Equity Fund has a number "1" rating from Crisil and a 5 star rating from Value Research Online. The fund has given a return of 23 per cent for three years and almost 13 per cent over 5 years.
Religare Invesco Tax Plan is not too different from the Axis Long Term Equity Fund, though one must admit that in terms of returns the latter is much better.
Both the funds are highly rated and have given good returns in the slightly longer term. Religare Invesco Tax Plan is also among the best ELSS Funds to invest in.
3) BNP Paribas Long Term Equity Fund
The fund is not ranked number one, but number "2" by Crisil. However, Value Research Online continues to accord the fund a "5 star" rating.
Again, like peers the fund has a solid portfolio including several blue chip banks like HDFC Bank. An interesting feature of the fund is that among its top three holdings, it has holdings in Idea Cellular and Bharti Airtel. The fund maybe overweight on telecom stocks.
We wish to warn investors that some of the best ELSS funds of today, might not necessarily be the best ELSS of tomorrow.
The above are largely based on ratings and past track record. However, one bad apple in the portfolio or a sustained and long decline in the benchmark indices can results in painful losses for investors. If you do not have an appetite for risk, look at other safe tax saving options like bank deposits and PPF.