Tax saving mutual funds are essentially, Equity Linked Savings Schemes that offer tax benefits under Sec80C of the Income Tax Act. These have not only helped save tax, but, have given solid returns over the last few years. Here are 3 tax saving mutual funds that can generate solid returns over the medium to long term.
BOI Axa Tax Advantage Fund
This is an ELSS scheme that helps you save tax. Amounts up to Rs 1.5 lakhs, qualify for tax rebate under Sec80c. The fund has generated solid returns of 16 per cent over the last 5 years and 17 per cent over the last 7 years on an annualized basis. Investors can also choose to invest through the Systematic Investment Plan route, given that the markets have rallied sharply in the last few months.
The NAV under the growth plan is currently Rs 74.92. It's important to note that dividends are taxable on mutual funds and capital gains will apply, when you sell the units. The fund has holdings in large cap stocks like Reliance Industries, HDFC Bank, PI Industries, Kotak Mahindra Bank and Infosys. The assets under management of the fund is just Rs 351 crores, despite being rated as 5-star by Crisil and Value Research.
Canara Robeco Equity Tax Saver Fund
This again is a fantastic performer in terms of ratings from lead agencies, returns and its strong portfolio. Canara Robeco Equity Tax Saver Fund has given returns of 14.34 per cent on an annualized basis for three years and 15.35 per cent and 16.54 per cent over three and five years,
Again, the fund like most others has stuck to quality stocks like Infosys, ICICI Bank, HDFC Bank, Bajaj Finance, Tata Consultancy Services and Reliance Industries.
If you are looking to invest in the growth scheme the net asset value is Rs 89.82. There is an option to also invest through the SIP route, wherein the investor can invest small sums of Rs 500 every month. It's important to remember that tax benefits are available only on investments upto Rs 1.5 lakhs.
Edelweiss Large Cap Fund
This is another ELSS scheme that has done well over the last 1 year. The fund has generated a returns of 19.66 over the last 1 year and 13.44 per cent on an annualized basis over the last 5 years. The returns of the fund since launching in 2009 has been more than 13 per cent.
Interestingly, the fund has almost 10 per cent in cash and the remaining invested in equities and debt, with equities contributing nearly 85.6 per cent to the portfolio. Edelweiss Large Cap Fund has a good portfolio, which has names like HDFC, Infosys, ICICI Bank and HCL Technologies. The minimum investment required under the plan is Rs 5,000.
If you are a long term investor, who also wants to save tax, this fund is good, as the portfolio is sound and so are some of the ratings.
About the author
Sunil Fernandes has spent 27 years tracking and covering stock markets for frontline investment and leading business dailies, including Hindustan Times, Deccan Herald, Oman Economic Review, Gulf Times and Dalal Street Investment Journal. Sunil is currently the Managing Editor for GoodReturns.in, a top personal finance and business news website. His areas of expertise include stocks, commodities, forex, mutual funds, banking and tax planning.