Top 5 Best ELSS Tax Saving Mutual Funds for 2016

Top 5 Best Performing ELSS Tax Saving Mutual Funds for 2016Top 5 Best ELSS Tax Saving Mutual Funds for 2016


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 Rs 1.5 Lakhs. If you are in high tax bracket of 30%, you can get tax rebate of as high as Rs 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 Rs 1.5 Lakhs apart from providing higher returns as they invest in direct equity. You can invest more than Rs 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 Rs 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 Rs 1,000 per month through SIP, for 5 years the investment would have been Rs 60,000 and your money would have grown to Rs 114,000. If one would have invested Rs 1,000 per month through SIP, for 3 years the investment would have been Rs 36,000 and your money would have grown to Rs 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 Rs 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 Rs 1,000 per month through SIP, for 5 years the investment would have been Rs 60,000 and your money would have grown to Rs 105,000. If one would have invested Rs 1,000 per month through SIP, for 3 years the investment would have been Rs 36,000 and your money would have grown to Rs 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 Rs 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 Rs 1,000 per month through SIP, for 5 years the investment would have been Rs 60,000 and your money would have grown to Rs 99,000. If one would have invested Rs 1,000 per month through SIP, for 3 years the investment would have been Rs 36,000 and your money would have grown to Rs 52,000.

Reasons to invest: This fund is new entrant in my top 5 tax saving funds list. AUM of this scheme is Rs 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 Rs 1,000 per month through SIP, for 5 years the investment would have been Rs 60,000 and your money would have grown to Rs 100,000. If one would have invested Rs 1,000 per month through SIP, for 3 years the investment would have been Rs 36,000 and your money would have grown to Rs 51,000.

Reasons to invest: It has beaten equity mutual funds performance even in this volatility market. AUM of this scheme is Rs 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 Rs 1,000 per month through SIP, for 5 years the investment would have been Rs 60,000 and your money would have grown to Rs 98,200. If one would have invested Rs 1,000 per month through SIP, for 3 years the investment would have been Rs 36,000 and your money would have grown to Rs 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 Rs 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

List of Top and Best Performing ELSS Tax Saving Mutual Funds for 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.

If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.

Suresh
Top 5 Best ELSS Tax Saving Mutual Funds for 2016

Suresh KP

50 comments

  • Hari

    Can you pls suggest two or three best ELSS sip funds to invest for long term goals… I’m planning to invest 7500 to 8000 per month..

    I am planning to invest in ELSS Mutual funds SIP.

    I am planning to invest 7500 to 8000.
    Also planning to invest in the beginning of the month one sip on all mutual funds, middle of the month one sip on all mutual funds and end of the month of the month one sip on all mutual funds..

    for ex: if i want to invest in axis LT tax saving fund 1500 per month. I will split 1500 into three sip’s as follows,
    between 1 to 10 date of the month 500 sip
    between 11 to 20 date of the month 500 sip
    between 21 to 30 date of the month 500 sip

    is this good method to follow or only one sip any day of the month is good.if so suggest better dates to invest sip every month.

    Pls suggest which are all elss sip mutual funds from the below list can I invest and how much i can invest on each as per ur selection:

    Axis Long Term Equity

    Birla Sun Life Tax Relief 96 D

    Franklin India Taxshield Fund

    ICICI Prudential Long Term Equity (Tax Saving)

    Reliance Tax Saver (ELSS) Fund-G

    BNP Paribas Long term 23

    DSP BlackRock Tax saver

    Sundaram Taxsaver D

    HDFC Taxsaver Fund

  • BKG

    Hi Suresh sir,

    I am regular reader of your articles and benefited by investing MF recommended by you.

    But in CANARA ROBECCO EQTY TAX SAVER, return in 21 months investment is 6%. Please advice if I should continue or switch to other CANARA MF or any other MF .

    Regards

  • akshay

    Sir, 

    I have one small query, if i invest in ELSS, apart from 80CC, the amount I get on maturity is it tax free?

  • Nataraj

    Hi Suresh

    I want to invest 3000 per month in 3 ELSS funds (Rs.1ooo in each fund).

    Axis Long Term Equity Fund – Regular Plan (G)
    Birla Sun Life Tax Relief 96 (G)

    What is the best possible way to invest in SIPS and to avoid the transaction charges.

    Should i invest monthly 1000 to each of the 3 funds ? or is there any best way to invest 3k per month ? Please suggest

    And also please suggest me 3 best ELSS funds to invest for long term.

  • Mukesh

    Hi Suresh –
    I am currently investing in below ELSS mutual funds through SIP.

    1. ICICI Pru L/T Eq (Tax Sav) Gr Fund
    2. Reliance Tax Saver Gr Fund
    3. Axis L/T Equity Gr Fund
    4. Tata India Tax Svgs Reg Gr Fund
    5. Motilal Oswal MOSt Focused L/T Reg Gr Fund
    6. Franklin India Taxshield Gr

    My questions are –
    1. Do you think 6 mutual funds are too many to have in ELSS. I have 4 other equity funds split into small-cap, mid-cap, sector fund (pharma) and multi-cap.
    2. If 6 are too many which funds among the above mentioned funds can I drop?

    Thanks,
    Mukesh

    • Mukesh, You can select 2-3 funds in ELSS category. Axis l/t equity, franklin India tax shiedl, reliance tax saver are top funds from your category, others you can exit.

Leave a Reply

Your email address will not be published. Required fields are marked *