Best ELSS Tax Saving Mutual Funds

Recently I have posted an article on Best Equity Mutual funds 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

best ELSS tax saving 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

aditya birla sun life tax saving 96

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)

aditya birla sun life tax relief fund

Fund Holding

CompanySector% Assets
Honeywell AutomationEngineering7.39
Reliance IndustriesEnergy7.29
Bayer CropScienceHealthcare5.92
GlaxoSmithKline PharmaHealthcare5.18
Thomas Cook (India)Services4.53
Shopper’s StopServices3.34
Johnson Controls – Hitachi Air Conditioning IndiaCons Durable3.17
Kotak Mahindra BankFinancial3.15
Shree CementConstruction1.82
HDFC BankFinancial1.7
ICICI BankFinancial1.61
IndusInd BankFinancial1.54
Capital FirstFinancial1.48
Zee EntertainmentServices1.41
Bata IndiaFMCG1.31
Maruti Suzuki IndiaAutomobile1.26
Tata Consultancy ServicesTechnology1.26

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.

HDFC tax saver fund

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

CompanySector% Assets
ICICI BankFinancial8.45
HDFC BankFinancial8.2
State Bank of IndiaFinancial6.88
Reliance IndustriesEnergy4.82
Larsen & ToubroConstruction4.28
Tata SteelMetals3.21
Oracle Fin Ser SoftwareTechnology2.24
Axis BankFinancial2.16
Power Grid CorporationEnergy1.39
Bharat ElectronicsEngineering1.35
L&T Technology ServicesEngineering1.27
Tata Motors DVRAutomobile1.21
Aurobindo PharmaHealthcare1.11
Solar IndustriesChemicals1.1
Gujarat Pipavav PortServices1.09
ICICI Prudential Life Insurance Co. Ltd.Financial1
Sadbhav EngineeringConstruction0.88

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.

axis long term equity fund

TOP 5 SECTORS% Of Net Assets
Auto Ancillaries7.22

Fund Holding

CompanySector% Assets
HDFC BankFinancial8.82
Tata Consultancy ServicesTechnology8.44
Kotak Mahindra BankFinancial6.59
Bajaj FinanceFinancial6.09
Pidilite IndustriesChemicals5.64
Maruti Suzuki IndiaAutomobile4.82
Gruh FinanceFinancial4.43
Avenue SupermartsServices3.91
Sun Pharmaceutical Inds.Healthcare3.88
TTK PrestigeCons Durable3.27
Torrent PowerEnergy3.25
Bandhan BankFinancial2.99
Info Edge (India)Services2.93
Eicher MotorsAutomobile2.83
Motherson Sumi SystemsAutomobile2.66
Sundaram FinanceFinancial2.51
Larsen & ToubroConstruction1.96
Wabco IndiaAutomobile1.95
Endurance TechnologiesAutomobile1.49
Divi’s LaboratoriesHealthcare1.44
SymphonyCons Durable1.39
Astral Poly TechnikChemicals1.36
Page IndustriesTextiles1.27
Nestle IndiaFMCG1.01

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