Last year, I have written best ELSS tax saving mutual funds to invest in India for 2015. These mutual funds have given superior returns. One can invest in tax saving funds and save tax u/s 80C upto ₹ 1.5 Lakhs. If you are in high tax bracket of 30%, you can get tax rebate of as high as ₹ 45,000 in a year. Which are the top 5 best performing ELSS Tax Saving Mutual Funds to invest for 2016? Which Tax Saving Mutual Funds you should invest in 2016 through SIP to get highest returns? Which are the best ELSS Funds to invest in 2016?
What is ELSS Tax Saving Mutual Funds in India?
If you are already familiar about these funds, you can skip this section. Equity Linked Mutual Funds (ELSS), commonly known as Tax Saving Mutual funds provides tax rebate u/s 80C upto ₹ 1.5 Lakhs apart from providing higher returns as they invest in direct equity. You can invest more than ₹ 1.5 Lakhs, however they do not qualify for 80C rebate beyond this amount. They have a lock-in period of 3 years from the date of investment. However, you can keep them beyond 3 years too for long term investment. Hence you should invest in Best ELSS mutual funds to invest in sip.
Also Read: 13 Ways to save tax and get tax free income of over ₹ 10 Lakhs
Advantages of investing in ELSS Tax Saving Mutual Funds
- Offers highest returns (not fixed and not guaranteed) compared to other tax saving schemes like PPF and NSC.
- Lowest lock-in period of 3 years. NSC has 6 years and PPF has 15 year lock in period.
- Investors can opt for dividend option and get regular income even during the lock-in period.
- Investing in ELSS funds through SIP every month would help you reduce burden of investing lump sum, take care of market fluctuations and provide higher returns. However one should note that 3 year lock-in period applies to each and every SIP. As an example, if your SIP is on 10-Nov-15, it has lock-in period of 3 years. Your next SIP is on 10-Dec-15, even this too would have 3 years lock-in period. Hence I am comparing returns for atleast 5 years assuming that investor would invest for 2 years and his last SIP would expire only after 5 years period.
Top 5 Best Performing ELSS Tax Saving Mutual Funds for 2016
These top 5 mutual funds in India have been analysed and shortlisted based on key parameters.
- Picked based on highest returns received in the last 5 years.
- SIP returns has also been considered in listing under top funds. Hence you would see some funds moving out of our bucket recommended last year as a small shift in holding value would shift it out of top 5 funds. There are also new funds came in due to this change. This would benefit investors instead of simply looking at lump sum investment returns.
- Funds which are rated by Crisil as Rank-1, Rank-2, Rank-3 and Rank-4 which indicates good fundamentals for these top 5 tax saving mutual funds.
- Value research (VRO) 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.
- Note that due to market volatility, you could see less returns in last 1 year and some you even see negative returns. This is temporary phenomenon and you should not avoid good funds in this process.
Important Note: Some blogs / Websites / Portals have recommended top 10 tax saving funds where SIP returns are very low. Means if you invest lump-sum, you would have got benefitted, but if you invested through SIP, you would be looser. Hence check SIP returns too before investing in any of such funds. I have taken care to consider SIP returns too as part of my analysis in this article.
Top-1: 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 the 1st top performing ELSS mutual fund. It has generated 9.6% returns in last 1 year and 17.5% annualized returns in last 5 years. If one would have invested ₹ 1,000 per month through SIP, for 5 years the investment would have been ₹ 60,000 and your money would have grown to ₹ 114,000. If one would have invested ₹ 1,000 per month through SIP, for 3 years the investment would have been ₹ 36,000 and your money would have grown to ₹ 56,000.
Reasons to invest: This fund consistently beats its peer mutual fund schemes and its benchmark. This fund is a consistent performer in rising and falling markets. One should have such funds in their portfolio. AUM of this scheme is ₹ 6,236 Crores which shows investor confidence in the scheme. Crisil Ranks this mutual fund as Rank-1 and Value Research rates this as 5-Star (5 out of 5). I feel this is one of the best ELSS Funds to invest in 2016.
Top-2: Reliance Tax Saver ELSS
Strategy of the fund: The mutual fund scheme aims to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments and provides tax saving u/s 80C.
Performance of the fund: As per our analysis, this is Top-2 ELSS mutual fund. It has generated -1% (negative) returns in last 1 year and 12.7% annualized returns in last 5 years. If one would have invested ₹ 1,000 per month through SIP, for 5 years the investment would have been ₹ 60,000 and your money would have grown to ₹ 105,000. If one would have invested ₹ 1,000 per month through SIP, for 3 years the investment would have been ₹ 36,000 and your money would have grown to ₹ 53,500.
Reasons to invest: You could see negative returns in last 1 year, but it is due to market volatility. AUM of this scheme is ₹ 4,213 Crores which shows investor confidence in the scheme. Crisil Ranks this mutual fund as Rank-4 and Value Research rates this as 4-Star (4 out of 5). You should consider this as one of the best ELSS Funds to invest in 2016.
Also Read: Which are the Best Tax Saving Investment Plans in India?
Top-3: Religare Invesco Tax Plan
Strategy of the fund: The scheme aims to generate long-term capital growth from a diversified portfolio of mostly in equity and equity-related securities. It will aim to have concentrated well researched portfolio for around 20 – 50 stocks.
Performance of the fund: As per our analysis, this is Top-3 best performing ELSS mutual fund to invest in 2016. It has generated 8.7% returns in last 1 year and 12.3% annualized returns in last 5 years. If one would have invested ₹ 1,000 per month through SIP, for 5 years the investment would have been ₹ 60,000 and your money would have grown to ₹ 99,000. If one would have invested ₹ 1,000 per month through SIP, for 3 years the investment would have been ₹ 36,000 and your money would have grown to ₹ 52,000.
Reasons to invest: This fund is new entrant in my top 5 tax saving funds list. AUM of this scheme is ₹ 255 Crores which shows investor confidence in the scheme. Crisil Ranks this mutual fund as Rank-1 and Value Research rates this as 5-Star (5 out of 5). Hence this is one of the Best ELSS mutual funds to invest in sip.
Top-4: BNP Paribas Long Term Equity 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 continues to be in 4th top performing SIP mutual fund under tax saving. It has generated 6.5% returns in last 1 year and 13% annualized returns in last 5 years. If one would have invested ₹ 1,000 per month through SIP, for 5 years the investment would have been ₹ 60,000 and your money would have grown to ₹ 100,000. If one would have invested ₹ 1,000 per month through SIP, for 3 years the investment would have been ₹ 36,000 and your money would have grown to ₹ 51,000.
Reasons to invest: It has beaten equity mutual funds performance even in this volatility market. AUM of this scheme is ₹ 408 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). You can consider this is one of the Best ELSS mutual funds to invest in sip in 2016.
Top-5: Franklin India TaxShield 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 5th top performing mutual fund if one would have invested through SIP mode. It has generated 8.7% returns in last 1 year and 13.3% annualized returns in last 5 years. If one would have invested ₹ 1,000 per month through SIP, for 5 years the investment would have been ₹ 60,000 and your money would have grown to ₹ 98,200. If one would have invested ₹ 1,000 per month through SIP, for 3 years the investment would have been ₹ 36,000 and your money would have grown to ₹ 51,000.
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 ₹ 1,810 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). Make this as part of of your Best ELSS mutual funds to invest in sip.
Also Read: Best SIP Mutual Funds to invest for long term in 2016
Conclusion: These best ELSS Funds to invest in 2016 provides opportunity for individuals who are looking to save tax u/s 80C and also aiming to get higher returns. Since this investment option has several benefits of less lock-in period, highest returns, etc., investors can opt them as one of the best tax saving options.
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Suresh
Top 5 Best ELSS Tax Saving Mutual Funds for 2016
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