What does ELSS mean?
ELSS is an abbreviation used for Equity Linked Savings Schemes. It is a Tax-saving mutual fund essential for those trying to save their taxes in a financial year. In formal terms it can be said, Section 80C of the Income Tax Act allows tax deductions of up to Rs 1.5 lakh in a financial year. So to make the maximum use of your constitutional rights, you can invest in ELSS for a profitable investment.
Where is this ELSS investment made?
ELSS’s investments are made in stock. One of the distinguishing characteristics of ELSS funds is that they provide you with tax advantages when you invest in them, under Section 80C of the Income Tax Act of 1961. By making an investment in ELSS funds, you are eligible to deduct up to Rs. 1.5 lakhs from your taxes each financial year.
Because of this, ELSS is a preferred investment choice by most of your companions, over conventional tax-saving methods like fixed deposits, public provident funds, and national savings certificates. Hence the desire of every investor to reduce their tax burden is fulfilled and perhaps they face increased returns also.
Another reason for its advantageous factor is that they give you the highest returns due to their long course of nature. Economic Times states that ELSS offers an average return of around 15% over 10 years.
Why should you invest in ELSS Funds?
- Tax Benefits: Section 80C of the Income Tax Act of 1961 provides tax advantages for ELSS funds. By making an investment in ELSS funds, investors may deduct up to Rs. 1.5 lakhs from their taxes each financial year.
Because of this, ELSS is a well-liked investment choice for anyone wishing to reduce their tax burden and perhaps earn larger returns than they would with conventional tax-saving tools.
- Possibility for Better Returns: ELSS funds invest largely in equities and equity-related securities, which have the potential to produce greater returns over the long run. The potential for better returns over a longer investment horizon exists even if equities investments have a higher risk profile than other asset types.
- Diversification: ELSS funds make investments in a variety of industries and businesses, which benefits investors by promoting diversity. Because to the fact that the success of one stock or industry has little impact on the portfolio as a whole, this helps to lower the risk of your investment made.
- Lock-In Period: A three-year lock-in term is necessary for ELSS funds. This lessens the likelihood of your impulsive selling during times of market volatility and helps investors develop a long-term investing strategy.
- Professional Fund Managers: Professional fund managers oversee the management of ELSS funds. These managers have the experience and knowledge to invest in the ideal equities at the ideal times, potentially generating greater returns for your investments.
Best ELSS or Tax-Saving Mutual Funds to invest in 2023, stated by Economic Times:
The common factors and distinguished characteristics of all the below-mentioned best ELSS or Tax-Saving Mutual Funds to invest in 2023:
- They all have a diversified equity fund that primarily invests in equities and equity-related securities of businesses with a range of market capitalizations and industry sectors.
- They all have an investment philosophy, which prioritizes high-quality businesses with promising development prospects and robust business models.
- The fund selects its stocks using a bottom-up strategy and invests in businesses that have a competitive edge and are accessible at fair prices.
- The fund follows a bottom-up approach to stock picking and invests in companies with strong growth potential and available at reasonable valuations.
- The fund aims to invest in high-quality businesses with sustainable competitive advantages and strong management teams.
- Axis Long-Term Equity Fund
An ELSS fund provided by Axis Mutual Fund is the Axis Long-Term Equity Fund. Since the fund’s creation in 2009, Mr. Jinesh Gopani has been its manager.
One of the top-performing ELSS funds in the market, the fund has a history of generating steady returns over the long term. The fund has produced an annualized return of almost 19.5% as of March 2023, which is greater than the returns of the benchmark index and the category average.
- Canara Robeco Equity Tax Saver Fund
The fund is managed by Mr. Miyush Gandhi, who has been managing the fund since 2016. As of March 2023, the fund has delivered an annualized return of around 20.5% since its inception, which is higher than the benchmark index returns and the category average.
- Mirae Asset Tax Saver Fund
The fund is managed by Mr. Neelesh Surana, who has been managing the fund since 2015. As of March 2023, the fund has delivered an annualized return of around 21.5% since its inception, which is higher than the benchmark index returns and the category average.
- Invesco India Tax Plan Fund
The fund is managed by Mr. Amit Ganatra, who has been managing the fund since 2019. As of March 2023, the fund has delivered an annualized return of around 17.5% since its inception, which is higher than the benchmark index returns and the category average.
- DSP Tax Saver Fund
The fund is managed by Mr. Rohit Singhania, who has been managing the fund since 2018. As of March 2023, the fund has delivered an annualized return of around 18.5% since its inception, which is higher than the benchmark index returns and the category average.
- Quant Tax Plan
The fund is managed by Mr. Nilesh Shetty, who has been managing the fund since 2022. Being a new addition to the ELSS category, Quant Tax Plan does not have a long track record of performance. As of March 2023, the fund has delivered an annualized return of around 6.5% since its inception in 2022.
- Bank of India Tax Advantage
The fund is managed by Mr. Karan Singh, who has been managing the fund since its inception in 2022. Being a new addition to the ELSS category, the Bank of India Tax Advantage Fund does not have a long track record of performance. As of March 2023, the fund has delivered an annualized return of around 8.5% since its inception in 2022.
A little tip for you: However, it’s crucial to remember that ELSS funds are vulnerable to market risks, so before purchasing ELSS funds, you should think about your investment goals, risk tolerance, and time horizon. Before making any investment decisions, it is also advised that you speak with a financial expert.
Which of the above-mentioned top ELSS fund did you choose for yourself, drop them in the comments section.
