It's that time of the year when you have been nudged by your employer to submit your tax saving and other investment proofs. Likewise, to reduce your tax outgo, you tend to invest in various eligible instruments against which you can claim tax deduction as per the various provisions of the Income Tax Act.
So, as ELSS is one equity linked asset class or mutual fund scheme which can make you eligible for tax deduction under section 80C.
ELSS is a mutual fund scheme that is eligible for deduction under section 80C as well as has a lock-in of 3 years i.e. redemption in the investment is not allowed before 3 years.
Hence if you are gearing ahead to plan your taxes for the ongoing fiscal year then here are some of the CRSIL Rank 1 ELSS funds you can consider for investment.
As per CRISIL, the Rank 1 is hinting at 'very good performance'. "In any peer group, the top 10 percentile of funds are ranked as CRISIL Fund Rank 1 and the next 20 percentile as CRISIL Fund Rank 2", says the company on its website.
Quant Tax Plan:
The corpus in the fund is largely concentrated in large caps Since its launch in 2000, the fund has yielded a higher return of 15 percent. SIP in the fund can be initiated for Rs. 500. Against the Nifty 500 TRI, the fund has yielded a return of 60 per cent.
On the expense ratio front, the fund is an expensive bet with expense ratio at 2.62 percent.
In terms of returns, SIP in Quant Tax plan started 5 years ago has doubled investors' money and an investment of Rs. 6 lakh is now worth Rs. 13.06 lakh.
BOI Axa Tax Advantage Fund:
The scheme has outperformed its benchmark index and delivered higher returns of nearly 40 percent. The SIP in the fund can be started for Rs. 500.
The fund again has a high expense ratio and a corpus of Rs. 517 crore. Some of the top holding in the portfolio include ICICI Bank, HDFC Bank, Bajaj Finance, Infosys, Divis etc.
Union Long Term Equity Fund:
An almost 10 year fund has since inception given returns of over 15 percent. The fund has again a high expense ratio of over 2.5 percent. The fund's performance is benchmarked against S&P BSE 500 TRI.
The corpus under the fund is Rs. 443 crore.
SIP in the fund can be kickstarted for just Rs. 500. Fund with major allocation of over 60 percent in large caps has stocks like RIL, Infosys, HDFC Bank and ICICI Bank among others.
In 5 years lump sum investment of Rs. 1 lakh and Rs. 10000 monthly
SIP is equivalent to now Rs. 2.19 lakh and Rs. 9.87 lakh.
IDFC Tax Advantage:
The scheme is aimed at diversifying portfolios and can include stocks of companies with strong fundamentals that are reasonably valued. In the scheme, one can start a SIP at just Rs. 1000.
The fund's expense ratio is relatively less at 0.74 percent and the fund's AUM is Rs. 3355 crore. Some of the top stocks in the fund's portfolio are ICICI Bank, HDFC Bank, SBI, RIL, Tata Motors and Bharti Airtel among others.
Points to be mindful of when investing in ELSS funds
1. Take the SIP advantage for better fund allocation and avoid lump sum investment in ELSS mostly executed towards the close of the financial year in a hassle.
2. Avoid committing to new ELSS every year just for tax benefits as it shall in the long run harm your overall financial goal that is otherwise maintained to be realised through ELSS investment.
3. Don't just redeemed the funds as soon as the 3-year lock in associated with ELSS ends. So, be committed to your investment mindfully unless necessary.
4. Lastly in the selection of the ELSS fund its consistent performance, fund managers' method should play a center role and not just the current rating by the rating agency which can otherwise have a big influence.
Investing in mutual funds poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, and the author, are not liable for any losses caused as a result of decisions based on the article.