One can invest in ELSS in one of two ways: as a single sum or as part of a systematic investment plan (SIP) to increase their investment portfolio. Section 80C of the Income Tax Act allows for tax deductions of up to Rs 1.5 lakh on investments in specific instruments such as ELSS mutual funds throughout the course of a fiscal year.
Investors can begin SIPs of a certain amount in such funds for a set period of time. Experts urge investors to choose monthly SIPs, which allow them to participate in the stock market without attempting to time it and also adds discipline to their investments. Investors can select either growth or dividend plans.
CRISIL ranks mutual fund schemes according to their market return, volatility, exposure, liquidity, and other factors. A Rank1 shows exceptional performance, making the stock appealing for investment. CRISIL has selected four tax-saving ELSS schemes as the best among others.
Quant Tax Plan
Quant Tax Plan Direct-Growth is a modest fund in its category, with 327 crores in assets under management (AUM). The fee ratio of the fund is 0.5 percent, which is lower than the expense ratio of most other ELSS funds.
The scheme intends to achieve capital appreciation by investing primarily in growth-oriented equity shares. The secondary goal is to provide dividends and other forms of income. Crisil has given this fund a high rating. It has the highest rank of Number 1.
Quant Tax Plan Direct-Growth returns for the previous year are 77.10 percent. Since its inception, it has generated an average yearly return of 21.62 percent.
The Healthcare, Financial, FMCG, Construction, and Metals sectors account for the majority of the fund's holdings. In comparison to other funds in the category, it has less exposure to the Healthcare and Financial sectors.
ITC Ltd., Indiabulls Real Estate Ltd., Vedanta Ltd., Aurobindo Pharma Ltd., and Reliance Industries Ltd. are the top five holdings of the fund.
Canara Robeco Equity Tax Saver
Canara Robeco Equity Tax Saver Direct-Growth manages a total of 2,469 crores in assets (AUM). The expense ratio of the fund is 0.84 percent, which is lower than most other ELSS funds.
Canara Robeco Equity Tax Saver Direct has a 1-year growth rate of 55.75 percent. It has had an average yearly return of 17.09 percent since its inception. Crisil has given this fund a high rating. It has the highest rank of Number 1.
The scheme invests primarily in equities in order to generate long-term capital appreciation. It also qualifies for Section 80C tax breaks. The scheme may invest in both primary and secondary markets, as well as in international equity markets such as ADRs/GDRs.
BOI AXA Tax Advantage Fund
BOI AXA Tax Advantage Direct-Growth is a modest fund in its category, with assets under management (AUM) of 490 crores. The product has a 1.67 percent expense ratio, which is higher than other ELSS funds.
The recent one-year returns on BOI AXA Tax Advantage Direct-Growth are 60.86 percent. It has generated an average yearly return of 19.22% since its debut. The scheme aims to create a diverse portfolio of stocks from companies with long-term business methods, with no market capitalization or sector bias. The system will use a top-down method to selecting stocks.
The fund's top 5 holdings are in ICICI Bank Ltd., HDFC Bank Ltd., Infosys Ltd., Divi's Laboratories Ltd., PI Industries Ltd..
IDFC Tax Advantage (ELSS) Fund
The IDFC Tax Advantage (ELSS) Direct Plan-Growth manages assets worth 3,316 crores (AUM). The fund's fee ratio is 0.87 percent, which is lower than the expense ratios charged by most other ELSS funds.
The 1-year growth returns on IDFC Tax Advantage (ELSS) Direct Plan are 61.78 percent. It has had an average yearly return of 18.44% since its inception.
The majority of the money in the fund is invested in the financial, technology, automobile, construction, and fast-moving consumer goods industries. The goal of the strategy is to create a diverse portfolio of stocks from firms with excellent fundamentals that are available at reasonable prices.
Why You Should Opt SIP in ELSS?
A Systematic Investment Plan is a fantastic strategy to invest in ELSS (SIP). Through rupee cost averaging, a SIP allows you to profit from market ups and downs. This is a monthly investment method in which a set amount is invested. When the market is down, you buy more units for the same price, and when the market is up, you buy fewer units for the same price. This results in a lower cost per unit over time than if you buy all the units at once. Ultimately, an ELSS is a smart investment instrument for saving taxes and building wealth over time. Think beyond the three-year lock-in period if you truly want to reap the benefits of your tax-saving investments. By investing mostly in shares, ELSS hopes to outperform rising inflation over time.
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