Top 5 Tax Saving Mutual funds (ELSS) in India to invest for 2014

Top 5 Tax Saving Mutual funds (ELSS) in India to invest for 2014Top 5 Tax Saving Mutual funds (ELSS) in India to invest for 2014

Few days back, I have written an article about Tax saving bank FD schemes and several readers appreciated that it indeed was a useful info for them during this time. A couple of my friends advised me to write about top tax saving mutual funds in India to invest for tax saving (ELSS). Dec is approaching very fast and salaried individuals need to plan for their tax savings. Salaried individuals can invest in tax saving mutual funds / ELSS mutual funds as part of section 80C up to Rs 1 Lakh. In this article, I would detail about best tax saving mutual funds in India to invest for 2014.

What are tax saving mutual funds (ELSS)?

Tax Saving Mutual funds (ELSS-Equity Linked Saving Schemes) primary objective is to provide tax rebated u/s 80C (Maximum u/s 80C is Rs 1 Lakh) along with providing higher returns. ELSS Mutual funds have a lock-in period of 3 years from the date of investment.

Also read: Best Large cap mutual funds to invest for long term

Top 5 Tax Saving Mutual funds (ELSS) in India to invest for 2014

  • These top 5 mutual funds in India have been arrived based on below parameters.
  • Top 5 funds picked based on highest returns received in the last 3 to 5 years
  • Funds which are rated by Crisil as Rank-1, Rank-2 and Rank-3 which specifies good fundamentals for these top 5 mutual funds.
  • Value research rated these mutual funds as 5 star and 4 star.
  • AUM (Assets under management) > 100 Crores. This proves investor confidence among these top 5 mutual funds.

Top # 1: Can Robeco Equity TaxSaver

Strategy of the fund: This fund invests in large cap and mid-cap companies and can invest in small-cap as and when the opportunity arises. It invests majorly in financial services and technology companies.

Performance of the fund: This is a top performing mutual fund and its 5 year returns are 23% per annum which has beaten even equity mutual fund returns. It gave 8% returns in last 1 year.

Reasons to invest: This fund consistently beats its peer mutual fund schemes and its benchmark. One should have this fund in their portfolio. AUM of this scheme is Rs 550 Crores which shows investor confidence in the scheme. Crisil Ranks this mutual fund as Rank-2 and Value Research rates this as 5-Star (5 out of 5).

Top # 2: ICICI Pru tax Plan Mutual fund

Strategy of the fund: This fund invests in large cap up to 65% of its portfolio and balance in mid-cap companies. Its investment strategy is to invest for 3 to 5 years in growth companies across market capitalization.

Performance of the fund: This is a 2nd top performing mutual fund and its 5 year returns are 22.5% per annum which has beaten even equity mutual fund returns. It yielded 10% returns in last 1 year.

Reasons to invest: This is diversified multi-cap fund with average risk and high growth prospects. One should have this fund in their portfolio. AUM of this scheme is Rs 1,353 Crores which shows investor confidence in the scheme. Crisil Ranks this mutual fund as Rank-3 and Value Research rates this as 4-Star (4 out of 5).

Top # 3: Franklin India Tax Shield Mutual fund

Strategy of the fund: This fund’s primary objective is to invest in medium to long term in growth companies and provide investors with IT rebate.  It invests in 50 to 55 companies across various market capitalization.

Performance of the fund: This is a 3rd top performing mutual fund and its 5 year returns are 19% per annum which has beaten even equity mutual fund returns. It yielded 9.6% returns in last 1 year.

Reasons to invest: This scheme is from one of the reputed old houses which has vast experience and works well in volatile markets too. AUM of this scheme is Rs 890 Crores which shows investor confidence for the scheme. Crisil Ranks this mutual fund as Rank-2 and Value Research rates this as 5-Star (5 out of 5).

Top # 4: BNP Paribas Tax Advantage plan Mutual fund

Strategy of the fund: It aims to get long term capital growth by diversifying its portfolio across various sectors.

Performance of the fund: This is the 4th top performing mutual fund under tax saving and its 5 year returns are 17.6% per annum. It yielded 12.9% returns in last 1 year.

Reasons to invest: It has beaten equity mutual funs performance. AUM of this scheme is Rs 129 Crores which shows investor confidence for the scheme. Crisil Ranks this mutual fund as Rank-1 and Value Research rates this as 5-Star (5 out of 5).

Also Read: How salaried individual can save income tax from 80C and beyond?

Top # 5: Axis Long Term Equity Fund

Strategy of the fund: Invests in a diversified portfolio of strong growth companies with sustainable business model. Its benchmark is BSE-200 stocks, but invests beyond that. It invests 50% in large cap and balance in other market capitalization stocks.

Performance of the fund: This is a 5th top performing mutual fund under tax saving and its 3 year returns are 7% per annum. It yielded 13.5% annaulised returns in the last 2 years.

Reasons to invest: Fund has flexible to invest across all sectors and market capitalization. The performance of the fund shows the confidence and future prospects. AUM of this scheme is Rs 635 Crores which shows investor confidence in the scheme. Crisil Ranks this mutual fund as Rank-1 and Value Research online ranks it as a 5-Star rating.

Conclusion: Tax saving mutual funds (ELSS) provides good opportunity for individuals who are looking to save tax u/s 80C and to get higher returns. Investing in these top 5 mutual funds provides scope for you to diversify your investments and yield higher returns over a period of time.

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Suresh
Top 5 Tax Saving Mutual funds (ELSS) in India to invest for 2014

Suresh KP

86 comments

    1. Shah, The data is correct. I rechecked since you expressed a doubt. Also you posted another two links which does not talk about these top 5 funds at all, hence there is nothing to verify from such links and I have deleted them.

  1. Hi Suresh,

    Thanks for your valuable information. Could you please let me know how much time (minimum) i need to wait to achieve best returns from above mentioned tax saving funds apart from lock-in period of 3 years..

    1. Hi Shobana, These are good for 3 to 5 year investment period. If you are able to get 13%-15% annualised returns in 5 years, you should book profits and come out. 

      1. Hi Suresh,

        Thanks for your clarification. I understand that I can book profit whenever i earn 13%-15% annualized returns, probably this happens in 3-5 years. Please guide me, what i need to do if the time period crosses 5 years, but dont get expected returns?

        And as of now, i can see Axis LT Equity Fund(G), ICICI Pru Tax Plan-Reg(G), Franklin India TaxShield(G) are performing well compared to Canara Robecco and BNP Paribas. Please share your opinion whether these 2 funds will come up in future?

        1. Shobana, It depends. If your ELSS fund is good and due to market conditions the returns are not that good, you can stay invested. You can check with me or any other financial advisor and take opinion in case you are not getting any good returns, but want to take view before exit.

  2. Hi Suresh Sir,
    Sir I m looking for long term investment & also tax saving . Plz tell me which option is better between ppf and elss fund.

    1. Vikas, Both have their own positives and negatives. PPF-Good for retirement planning + tax savings + Tax free returns + 15 years period + 8.5% returns. Otherside ELSS MF’s-Good for tax saving + 3 year lock-in period + 9% to 12% returns + returns would be taxable based on indexation. If we compare both, ELSS ranks high as post tax returns would be more than 10% whereas PPF gives only 8.5%. However you should choose good ELSS funds.

    1. Vikas, This ELSS fund formed just 2-3 years back. This is not yet ranked by Crisil. Investors have invested for just Rs 12 Crores. Anything less than Rs 100 Crores AUM, I would not feel comfortable even though the performance is good. There are better ELSS funds to invest. 

  3. Dear Suresh  Thanks for the informative blog as always… I am expecting retirement funds from abroad which will amount to around 40 lakhs.  I am 48 years old and I would appreciate if you could suggest any sound investment options where I can park this sum without paying much tax on returns and get good steady returns?  Thanks in advance for your advise

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