ELSS Mutual Fund: Equity-linked savings scheme is a tax-saving mutual fund scheme that promotes long-term investment.
ELSS, an equity linked savings scheme, is a tax-saving mutual fund scheme that promotes long-term investment. In a financial year, you can avail tax exemption under the Income Tax Act section 80C on investments up to Rs 1.5 lakh in these schemes. However, there is no limit to invest in ELSS. ELSS is also getting better returns than other traditional investment instruments like FD, National Savings Letter (NSC) or Kisan Vikas Patra (KVP) for tax savings. Compared to the last 5 years, the ELSS scheme has yielded up to 26 per cent. That is, up to 4 times more profit than FD of a big bank. There are at least 20 such funds in ELSS Kategiri, whose returns for 5 years have been between 15 and 26 per cent.
3.13 lakh in 5 years of 1 lakh
If you look at the returns chart, there are at least 20 such ELSS funds in the last 5 years, in which 15% to 26% have been returned. In this case, the Mirae Asset Tex Saver Fund has been at the top, with a 5-year return of 26 per cent. In this context, the value of 1 lakh here increased to Rs 3.13 lakh in just 5 years. If the Monthly SIP of Rs 5000, then the value of your SIP would have increased to more than 5 lakhs in 5 years. Here are some good returns funds….
Mirae Asset Tax Saver Fund
5-Year Return: 26%
1 Lakh Value of Investment: 3.13 Lakh
10 thousand Monthly SIP Value: 5.06 Lakh
Total Assets: 5648 Crore (January 31, 2021)
Expense Ratio: 0.25% (December 31, 2020)
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Kotak Tax Saver Fund
5 Year Return: 19%
1 Lakh Investment Value: 2.40 Lakh
10 thousand Monthly SIP Value: 4.46 Lakh
Total Assets: 1540 Crore (December 31, 2020)
Expense Ratio: 0.83% (December 31, 2020)
IDFC Tax Advantage (ELSS) Fund
5 Year Return: 19%
1 Lakh Investment Value: 2.39 Lakh
10 thousand Monthly SIP Value: 4.45 Lakh
Total Assets: 2678 Crore (January 31, 2020)
Expense Ratio: 0.83% (December 31, 2020)
Axis Long Term Equity Fund
5 Year Return: 19%
1 Lakh Investment Value: 2.37 Lakh
10 thousand Monthly SIP Value: 4.60 Lakh
Total Assets: 25,508 Crore (January 31, 2020)
Expense Ratio: 0.73% (December 31, 2020)
No lock in period obligation
These funds have a lock in period but the specialty is that even after that they can continue to invest in it. A scheme with a lock in period of 3 years or 5 years can also be held for a long time. Keeping it for a longer period increases the chance of increasing returns. The advantage of having a lock in period is, it holds the investor for a long period, which also increases the scope of increasing returns.
Redemption Amount Tax Free
The return on investment in ELSS and the amount of redemption is also completely tax free. ELSS offers better post-tax returns, as LTCG is exempted from income tax up to Rs 1 lakh a year from ELSS mutual funds. Taxes at the rate of 10 per cent have to be paid for profits exceeding this limit. Talking about investing in ELSS, at least 80 percent of this exposure is in equity. It can technically be up to 100 percent. It also has the flexibility to invest in all market caps.
Good option in inflationary times
ELSS usually gives high returns. Investing in equity effectively provides better returns that are higher than the regular inflation rate. On the other hand, most tax-saving options with fixed returns such as PPF, 5-year FD, NSC, etc. are hardly able to give higher returns than inflation. At the same time, the interest rates on options like FD, NSC are continuously decreasing.
