Best ELSS Tax Saving Mutual Funds

Recently I have posted an article on Best Equity Mutual funds for the year 2019, and now as the tax saving season is on here I am presenting you the best tax saving mutual funds. It is the time for planning your tax saving exercise as the financial year 2018-19 is about to end. ELSS tax saving mutual funds are the best way to save income tax and getting a good return on your investment. ELSS (Equity Linked Saving Scheme) is the best way to save tax and create wealth.

On ELSS funds you will get tax benefits under section 80 C of the income tax act. It comes with a lock-in period of 3 years, means you cannot withdraw the funds before completion of 3 years from the date of purchase. It offers various benefits as mentioned below.


Features of ELSS [Tax Saving] Mutual Funds


  • It invests into the equity market
  • There is no capping limit on how much you can invest in ELSS
  • Get tax benefit under section 80C
  • ELSS funds come with a lock-n period of 3 years
  • LTCG (Long Term Capital Gain) tax is applicable to ELSS funds
  • You can invest in ELSS funds with as low as Rs. 500
  • It comes with both dividend and growth options

According to me, there are 2 distinct benefits of investing in ELSS mutual funds.

  1. 100% investment in equity schemes for higher returns with tax benefits
  2. Reasonably, short lock-in period of 3 years

Let’s have a look at some other benefits of ELSS funds.

  • Highest returns among all tax saving instruments
  • The tax benefit of up to Rs. 1.5 lakhs
  • You can continue to hold the fund even after completion of the lock-in period of 3 years
  • It provides investment through SIP option
  • Excellent gateway for the new investor in the stock market

The shortcoming of ELSS Mutual Funds


Though it is the best tax saving option, there are certain drawbacks of ELSS funds as below

  • It invests in the equity market, so the risk is high, sometimes it gives negative returns
  • There is a lock-in period of 3 years, means you can not withdraw the funds before completion of 3 years from investment date
  • On redemption, it is taxable (you need to pay LTCG tax on the profit you earn)

Best ELSS Mutual Funds

Aditya Birla Sun Life Tax Relief 96 – Direct (Growth) ∗∗∗∗∗

Aditya Birla Sun Life Tax Relief 96 is the best ELSS fund so far. It has given a whopping 24.47% return since inception. It invests into the high growth company with a composition of 80% into equity and rests 20% into debt funds. Its direct fund scheme was launched in Jan 2013 and that has also given a very good return of 17.63%. In the last 3 years, the fund has given 13.61% returns which is very good along with tax saving benefits.

Key Highlights of the fund

  • Its regular plan was launched in the year 1996 (22 years old fund)
  • Consistently given high returns (Since inception 24.47% CAGR returns)
  • Starts with as low as Rs. 500 SIP
  • Well balance asset allocation among various sectors

The fund invests into multi-cap category across various sectors hence it is able to generate high returns. From its asset allocation, you can very well judge that it is investing in only quality companies. (see the fund holding below)

Fund Holding

Company Sector % Assets
Honeywell Automation Engineering 7.39
Gillette FMCG 7.33
Reliance Industries Energy 7.29
Bayer CropScience Healthcare 5.92
Pfizer Healthcare 5.84
GlaxoSmithKline Pharma Healthcare 5.18
Sundaram-Clayton Automobile 4.82
Thomas Cook (India) Services 4.53
HDFC Financial 4.4
Shopper’s Stop Services 3.34
Johnson Controls – Hitachi Air Conditioning India Cons Durable 3.17
Kotak Mahindra Bank Financial 3.15
Biocon Healthcare 3
Bosch Automobile 2.19
ICRA Financial 2.14
Shree Cement Construction 1.82
MRF Automobile 1.8
HDFC Bank Financial 1.7
ICICI Bank Financial 1.61
IndusInd Bank Financial 1.54
Capital First Financial 1.48
Zee Entertainment Services 1.41
Bata India FMCG 1.31
Maruti Suzuki India Automobile 1.26
Tata Consultancy Services Technology 1.26

HDFC Tax Saver Fund – Direct (Growth) ∗∗∗∗∗

The is from the HDFC AMC offers tax saving with wealth creation in the long term. The fund is launched in 1996 and is one of the oldest funds in the ELSS category. It has generated 27% CAGR returns since its inception.

The fund is giving good returns in spite of its passive investment strategy. It invests into low-risk companies and hence it’s failed in taking the advantage of the market’s upward movement. The AUM of the fund is steadily increasing since 2016 after the market rally that we have witnessed.

In order to generate the high return, the fund invests in growth companies. The company under this funds would generally consist of medium to large-sized companies.

Fund Holding

Company Sector % Assets
Infosys Technology 8.55
ICICI Bank Financial 8.45
HDFC Bank Financial 8.2
NTPC Energy 7.86
State Bank of India Financial 6.88
GAIL Energy 5.97
Reliance Industries Energy 4.82
ITC FMCG 4.75
Larsen & Toubro Construction 4.28
Vedanta Metals 3.8
Cipla Healthcare 3.28
Tata Steel Metals 3.21
NHPC Energy 2.25
Oracle Fin Ser Software Technology 2.24
Axis Bank Financial 2.16
Power Grid Corporation Energy 1.39
BPCL Energy 1.36
Bharat Electronics Engineering 1.35
L&T Technology Services Engineering 1.27
Tata Motors DVR Automobile 1.21
Aurobindo Pharma Healthcare 1.11
Solar Industries Chemicals 1.1
Gujarat Pipavav Port Services 1.09
ICICI Prudential Life Insurance Co. Ltd. Financial 1
Sadbhav Engineering Construction 0.88

 

Axis Long Term equity Fund-Direct (Growth) ∗∗∗∗

Axis long-term equity fund is another good fund which has given a very good return in the past and continued to perform year on year. AUM of 16,467 crores as on 30th September 2018. It has a proven track record of 17% CAGR return since its inception. It has consistently outperformed its benchmark BSE 100 Funds since its launch.

You can start investing in the fund for as low as Rs. 500. The fund is investing around 97% of the AUM into equity funds.

TOP 5 SECTORS % Of Net Assets
Banks 20.00
Finance 18.74
Software 12.48
Auto 7.22
Auto Ancillaries 7.22

 

Fund Holding

Company Sector % Assets
HDFC Bank Financial 8.82
Tata Consultancy Services Technology 8.44
Kotak Mahindra Bank Financial 6.59
Bajaj Finance Financial 6.09
Pidilite Industries Chemicals 5.64
HDFC Financial 4.84
Maruti Suzuki India Automobile 4.82
Gruh Finance Financial 4.43
Avenue Supermarts Services 3.91
Sun Pharmaceutical Inds. Healthcare 3.88
TTK Prestige Cons Durable 3.27
Torrent Power Energy 3.25
Bandhan Bank Financial 2.99
Info Edge (India) Services 2.93
Eicher Motors Automobile 2.83
Motherson Sumi Systems Automobile 2.66
Sundaram Finance Financial 2.51
Larsen & Toubro Construction 1.96
Wabco India Automobile 1.95
Endurance Technologies Automobile 1.49
Divi’s Laboratories Healthcare 1.44
Symphony Cons Durable 1.39
Astral Poly Technik Chemicals 1.36
Page Industries Textiles 1.27
Nestle India FMCG 1.01

 

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