Best ELSS Funds 2018
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Top funds 3Y Return 5Y Return
Aditya Birla Sun Life Tax Relief 96 Fund (G) 14% 25.96% Invest
Axis Long Term Equity Fund (G) 12.25% 27.09% Invest
DSP BlackRock Tax Saver Fund (G) 13.12% 23.98% Invest
L&T Tax Advantage Fund (G) 13.61% 22.31% Invest
Reliance Tax Saver (ELSS) Fund (G) 8.2% 24.99% Invest
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Aug 10, 2018 5 min read

5 Best Tax Saving (ELSS) Mutual Funds

Read this blog to know all about ELSS Funds and see the top 5 tax saving schemes that you can choose to invest in 2018.

The stress of last-minute tax planning is not new, and the low returns and high lock-in period offered by conventional tax saving options (PPF, FD, etc.,) act like a multiplier to that. Well, you don’t have to worry anymore; as with ELSS funds, you can easily beat the heat.

1. What Are ELSS (Tax-Saving) Mutual Funds?

ELSSs (Equity Linked Savings Schemes) are those mutual funds, by investing in which investors can enjoy the dual benefits of tax saving as well as high equity returns. This category is included U/s 80C which allows the investors to get tax benefits on investments of up to Rs 1.5 lakhs.

2. Who Should Invest in ELSS?

Tax Saving funds are best-suited to investors who have a moderately-high risk appetite and are comfortable with an investment horizon of 5-10 years; as being an equity scheme, it gives the best results in a long-term. People with annual income of more than Rs 5 lakhs can use these saving options to create a good future corpus while enjoying the tax benefits on their investment amount.

3. How to Choose a Best ELSS Funds To Invest?

There are various parameters to choose a best tax saving mutual fund online. Let's have a quick look at what they are:

  • Performance History- In this step, we check the past performance of an ELSS fund. This tells us about the behaviour of a scheme in various market conditions. Keep in mind that the past performance cannot be used directly to predict the future of a scheme.
  • Asset Size- Look out for a scheme that has a good asset size (more than 300 crores), as it helps the respective fund managers in creating a more diversified and focused portfolio.
  • Allocation: This is a two-step check in which, first you have to see what part of the total investments are in equities and how much are in debt instruments, and the second step is to see the sector allocation and then analyzing it by comparing with the current equity market behavior.
  • Diversification: This is a check to see in what manner the funds are distributed among different market caps. By looking at this, you can analyze the investment style of the fund manager, and can also predict what kind of returns it can give in the near future.

Advantages:

  • The first and foremost advantage of investing in tax saving Fund is the tax deductions that you can claim by investing in these schemes. As per Sec 80C, investment up to Rs 1.5 lakhs will be exempted from your annual taxable income. Through this, an investor can save up to Rs 46,350* in taxes.
  • These schemes have a lock-in period of only 3 years, which is the lowest in comparison to other instruments (PPF, NSC, FD, etc.,) which fall U/s 80C, the lock-in of which can range from 5-15 years.
  • The annualized returns of more than 12% are like a cherry on the top of a cake.
  • The minimum investment amount for most of the tax saving funds is just Rs 500, which means anybody can invest in these schemes without affecting their monthly budget.

Disadvantages:

  • Being an equity oriented scheme, the risk associated with these is very high and this is considered as one of the greatest drawbacks of ELSS funds.
  • After making an investment you cannot redeem them before completion of lock-in period (3 years).

5. Top 5 ELSS Mutual Funds

By analyzing different parameters such as the investment strategy of the fund manager, asset allocation, risk factor, etc., the experts at MySIPonline have selected 5 best tax saver mutual funds that you can choose to invest in 2018. Let's have a look at them. 

 Scheme NameAUM(in crores) Returns (as on Aug 08, 2018) Allocation
 3 Years5 Years 10 Years Equity  Debt & Cash
Reliance Tax Saver (ELSS) Fund (G)  Rs 10,083 Cr. 6.10% 23.82% 15.67%  98.15% 2.21%
Aditya Birla Sun Life Tax Relief 96 Fund (G) Rs 6,187 Cr. 12.33%  24.81% 14.22% 96.68% 3.31%
L&T Tax Advantage Fund (G) Rs 3,335 Cr. 12.58% 21.28% 15.06% 94.49% 5.51%
Axis Long Term Equity Fund (G) Rs 18,262 Cr. 11.75% 25.87% - 97.94% 2.21%
DSP BlackRock Tax Saver Fund (G) Rs 4,218 Cr. 11.83% 22.85% 14.53% 97.53% 2.47%

This covers all the basic information about ELSS funds. If you have a query or doubt regarding any of the above schemes, feel free to connect with our experts.

Must Read : Why ELSS is Important For Every Investor's Portfolio
 

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