Effective mode of Tax Savings – ELSS Mutual Funds

ELSS mutual funds have been ranked the best tax saving method for the second year in a row by The Economic Times. There are many other tax saving options too – Bank FDs and NSCs are extremely comfortable investments which are 100% secure and safe investment options.

PPFs are also popular options for the conservative investor who doesn’t mind reduced returns as long as they are guaranteed. Newly introduced Government schemes like the Sukanya-Samriddhi Scheme and the Senior Citizens Saving Scheme are lucrative, but limited new options for certain portions of society.

However, when it comes to yielding maximum rewards with flexibility and assurance, nothing beats ELSS Mutual Funds.

What are ELSS Mutual Funds?
Equity Linked Saving Scheme Mutual funds are special kinds of mutual funds which are exempt from tax under section 80C of the Income Tax Act. ELSS mutual funds offer double the advantage of capital benefits along with Tax exemption.
The majority of the corpus is invested in equities. ELSS mutual funds come with a 3-year lock-in period, much lower than Bank FD’s. ELSS mutual funds offer a lot of flexibility as well – You choose either a growth option, where you receive the total sum at the end of 3 years in growth schemes, or you can opt for a dividends option, where you will regularly draw a dividend income whenever returns are announced, including during the lock-in period.

What are the benefits of investing in ELSS mutual funds?

  1. ELSS mutual funds have a much lower lock-in period as compared to other tax-saving mechanisms. PPF investments are locked in for 15 years, Bank FDs for 5 years and NSC options have a 6-year lock-in.
  2. ELSS mutual funds have tremendous potential to back up your tax savings with credible gains. ELSS funds have given an average of a 17.8% return over the last three years, the highest among any other tax-saving tool. Over a 5 year period, PPFs stand no chance against the returns seen on ELSS mutual funds.
  3. They are highly transparent, allowing you to choose the right fund to invest in wisely.
  4. It’s really easy to invest in them. If you have completed the KYC process, you can do it easily, from the comfort of your home. If you haven’t, you can go online with Mfundz and complete all process easy and efficient.
  5. They carry risks but more than make for it in the flexibility they offer.SEEING IS BELIEVING

Have a look at ELSS mutual funds generated returns by SIP over last 10 years.

Reliance – Tax Saver (G) 5490 2.01 19.1764 22.1992 17.3001 16.707 Sep 21, 2005
Franklin – India Tax shield (G) 2306 2.42 17.9667 19.7387 16.3959 21.181 Apr 10, 1999
ICICI Pru – Long Term Equity Fund Reg (G) 3454 2.31 16.8348 19.7213 16.3857 21.8778 Aug 19, 1999
L&T – Tax Advantage Fund (G) 1733 2.14 17.2758 17.9434 14.9105 14.8916 Feb 27, 2006
Birla SL – Tax Plan Reg (G) 390 3.01 19.542 21.2512 14.881


14.881 Oct 01, 2006
Category average ELSS       16.82         18.09          13.34

All returns are % CAGR basis,   Data as on 30/09/16

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