Top 7 Best ELSS Tax Saving Mutual Funds to invest in 2017-2018

Top and Best ELSS tax Saving Mutual Funds to invest in India in 2017-2018Top 7 Best ELSS Tax Saving Mutual Funds to invest in 2017-2018

Last year in Nov-2015, I have recommended some of the Best ELSS funds to invest in India in 2016. These mutual funds have given superior returns up to 25% in last 1 year. ELSS Funds are useful for employees or business men who want to save income tax u/s 80C. If you are in the highest tax bracket of 30%, you can get a tax exemption of over  Rs 45,000 in a financial year along with good returns. Which are the Top and Best ELSS Tax Saving Mutual Funds to invest for 2017-2018? Which are the best ELSS funds to buy now?

What are ELSS Tax Saving Mutual Funds?

If you are already familiar with this, you can skip this section.

Equity Linked Mutual Funds (ELSS), generally called as ELSS or Tax Saving Mutual funds provide tax exemption u/s 80C upto Rs 1.5 Lakhs along with mutual fund benefits. You can invest upto Rs 1.5 Lakhs and get maximum tax exemption. If you invest beyond it, excess invested amount does not qualify for 80C exemption.

Also Read: 4 Ways to increase your SIP returns in Mutual Funds

What are the advantages of investing in ELSS Tax Saving Mutual Funds?

ELSS Funds have several positive factors.

1) Offers a tax exemption upto Rs 1.5 Lakhs u/s 80C.

2) Provides superior returns (which are not fixed and not guaranteed) compared to other tax saving schemes like PPF, NSC, bank saving FD schemes etc.,

3) ELSS funds have less lock in period of 3 years. Other instruments like NSC has six years and PPF has 15 year lock-in period if you save money in these instruments.

4) Investors have an option to choose dividend option in these ELSS funds. For dividend option, one would get regular dividends (again, not guaranteed) even during the lock-in period.

5) Investing in Tax Saving mutual funds by monthly SIP would help individuals save every month instead of a lump sum.

Limitations of investing in ELSS Funds

While it has several positive factors, this too has few limitation factors.

1) ELSS funds invest in equities, hence these are risk investment options compared to other tax saving options.

2) ELSS funds have 3 year lock-in period for lump sum and for each and every SIP. As an example, if your SIP is on 19-Sep-16, it has lock-in period of 3 years. Your next SIP is on 19-Oct-16, even this too would have 3 year lock-in period.

I am comparing returns for at least 5 years, assuming that an investor would invest for 2 years and his last SIP would expire only after a 5 year period.

Also Read: Top 10 Best Mutual funds to invest in India in 2017-2018

Top 7 Best ELSS Tax Saving Mutual Funds to invest for 2017-2018

These top 7 mutual funds to invest in 2017-2018 have been analysed and shortlisted based on key parameters.

1) Picked based on highest returns received in the last 5 years.

2) SIP returns have also been considered in listing top funds. Since one may look at SIP investment, returns from SIP would be key for the success of investing in ELSS funds.

3) Funds that are rated by Crisil as Rank-1, Rank-2, Rank-3 and Rank-4 which indicates good fundamentals for these top 7 tax saving mutual funds. Means these are best ELSS funds as per Crisil.

4) Value research (VRO) rated these mutual funds as 5 star, 4 star and 3 star. Means these are best ELSS funds as per value research.

5) AUM (Assets under management) > 300 Crores. This proves investor confidence among these top ELSS mutual funds.

Top#1: Axis Long Term Equity Fund

Strategy of the ELSS fund: The ELSS scheme is to generate regular long term capital growth from a diversified portfolio of equity and equity related securities in India. The MF Scheme will invest in a company that has strong growth and sustainable business model.

The performance of the fund: This is the Top-1 ELSS mutual fund, which I have been recommending and which has been consistently performing well. This mutual fund has generated 11.6% returns in last 1 year and 22% annualized returns in the last 5 years. If you have invested Rs 1,000 per month through SIP, in 5 years the investment would have been Rs 60,000 and your investment value would have grown to Rs 109,000.

Reasons to invest: This fund performed well and gave 22% annualized returns in 5 years compared to S&P BSE 200 Benchmark annualized returns of 12.7%. Crisil Ranks this mutual fund as Rank-2 (Lowest is better) and Value Research rates this as 5-Star (5 out of 5, higher is better). One of the best ELSS funds to buy through SIP.

Top#2: Reliance Tax Saver Fund

Strategy of the ELSS fund: The MF scheme aims to generate L/T capital appreciation from a stock portfolio that is invested predominantly in equity and equity related instruments in India.

Performance of the fund: This is the Top-2 tax saving mutual fund, which I have been recommending and which is consistently giving highest returns. This mutual fund has generated 20% returns in last 1 year and 21% annualized returns in the last 5 years. If you have invested Rs 1,000 per month through SIP, in 5 years the investment would have been Rs 60,000 and your investment value would have grown to Rs 109,000.

Reasons to invest: It is a consistent performing tax saving Fund. This fund performed well and gave 21% annualized returns in 5 years compared to S&P BSE 100 Benchmark annualized returns of 12.2%. Crisil Ranks this mutual fund as Rank-3 (Lowest is better) and Value Research rates this as 3-Star (3 out of 5, higher is better).

Top#3: DSP BR Tax Saver Fund

Strategy of the ELSS fund: The mutual fund scheme aims to generate medium to long-term capital appreciation from a diversified stock portfolio of equity and equity related securities along with tax savings.

Performance of the fund: This is the Top-3 tax saving mutual fund, which I have been recommending and which is consistently giving superior returns. This mutual fund has generated 24% returns in last 1 year and 20% annualized returns in the last 5 years. If you have invested Rs 1,000 per month through SIP, in 5 years the investment would have been Rs 60,000 and your investment value would have grown to Rs 107,000.

Reasons to invest: This is a consistent performing tax saver Fund. This fund performed well and gave 20% annualized returns in 5 years compared to NIFTY 500 Benchmark annualized returns of 13%. Crisil Ranks this mutual fund as Rank-2 (Lowest is better) and Value Research rates this as 4-Star (4 out of 5, highest is better). One of the good ELSS funds to invest through SIP.

Also Read:  Top International Mutual Funds to buy now in India

Top#4: Birla SL Tax Relief 96 Fund

Strategy of the ELSS fund: This mutual fund scheme aims for long term capital appreciation by investing upto 80% in equity and balance in debt related instruments.

Performance of the fund: This is the Top-4 tax saving mutual fund to invest. This mutual fund has generated 19% returns in last 1 year and 16% annualized returns in the last 5 years. If you have invested Rs 1,000 per month through SIP, in 5 years the investment would have been Rs 60,000 and your investment value would have grown to Rs 105,000.

Reasons to invest: This is a consistent performing ELSS Fund. This fund performed well and gave 19% annualized returns in 5 years compared to S&P BSE 200 Benchmark annualized returns of 12.7%. Crisil Ranks this mutual fund as Rank-1s (Lowest is better) and Value Research rates this as 4-Star (4 out of 5, higher is better).

Top#5: Franklin India Tax Shield Fund

Strategy of the ELSS fund: The MF scheme aims medium to long term growth of capital along with income tax rebate. This scheme invests in equities and it has good exposure to PSU Bonds, debentures and other debt related instruments.

Performance of the fund: This is the Top-5 tax saving mutual fund to invest. This mutual fund has generated 16% returns in last 1 year and 19% annualized returns in the last 5 years. If you have invested Rs 1,000 per month through SIP, in 5 years the investment would have been Rs 60,000 and your investment value would have grown to Rs 101,000.

Reasons to invest: This is a consistent performing ELSS Fund. This fund performed well and gave 19% annualized returns in 5 years compared to NIFTY 500 Benchmark annualized returns of 13%. Crisil Ranks this mutual fund as Rank-2 (Lowest is better) and Value Research rates this as 4-Star (4 out of 5, higher is better). One of the top ELSS funds to invest through SIP in 2017-2018.

Top#6: BNP Long Term Equity Fund

Strategy of the ELSS fund: The MF scheme aims to get long term growth along with a tax rebate.

Performance of the fund: This is the Top-6 tax saving mutual fund to invest. This mutual fund has generated 11% returns in last 1 year and 19% annualized returns in the last 5 years. If you have invested Rs 1,000 per month through SIP, in 5 years the investment would have been Rs 60,000 and your investment value would have grown to Rs 98,000.

Reasons to invest: This is a consistent performing ELSS Fund. This fund performed well and gave 19% annualized returns in 5 years compared to NIFTY 200 Benchmark annualized returns of 12.7%. Crisil Ranks this mutual fund as Rank-3 (Lowest is better) and Value Research rates this as 3-Star (3 out of 5, higher is better).

Top#7: Invesco India Tax Fund

Strategy of the ELSS fund: This mutual fund scheme aims to get capital appreciation and provide tax saving to fund holders.

The performance of the fund: This is the Top-7 tax saving mutual fund to invest. This mutual fund has generated 16% returns in last 1 year and 18% annualized returns in the last 5 years. If you have invested Rs 1,000 per month through SIP, in 5 years the investment would have been Rs 60,000 and your investment value would have grown to Rs 102,000.

Reasons to invest: This is a consistent performing ELSS Fund. This fund performed well and gave 18% annualized returns in 5 years compared to S&P BSE 100 Benchmark annualized returns of 12.2%. Value Research rates this as 4-Star (4 out of 5, higher is better). One of the best ELSS funds for 2017-2018.

Complete list of Top ELSS Funds to invest in 2017 is given below:

List of Top and Best ELSS Tax Saving Mutual Funds to invest in 2017-2018.

Also Read: Best Midcap and Smallcap Mutual funds that can double your money in medium term

How to buy ELSS funds online?

These are like any other mutual funds. You can login to your mutual fund account and create SIP or invest in lumpsum to buy ELSS funds online.

Conclusion: If you are looking to save income tax u/s and want to invest in mutual funds to get good returns, you can invest in these Top ELSS Tax saving mutual funds.

All the best for your tax saving !!!

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Suresh

Top 7 Best ELSS Tax Saving Mutual Funds to invest for 2017-2018

17 comments

  • Himani Arora

    Dear Sir,

    Can you please advise on Kotak Tax Saver – Regular Plan (G).
    I am looking at investing Rs. 10,000 per month through 4 different SIPs of 3K, 3K, 3K and 1K per month and looking at medium and long term investment of 3-5 years. Please suggest.

    Thank you for your article, time and inputs on the queries.

  • Richa

    Hi!

    Iam looking to invest about 5 lac rupees in one go, i do not want to take the SIP route. Can you plz suggest some investment plan, if possible a tax saving plan plz.

    Thanks!

    • Sajid

      Hi Richa,

      You can Tranche out the lump sum amount in various equity funds if you want aggressive returns and the asset allocation of your over all portfolio permits.

      Tax saving with ELSS can be done upto 1.5L investments, although the ELSS schemes would alow you to invest more but it simply isn’t neccesary to lock in your funds.

      Ideal portfolio in case of tax saving instrument not chosen for the FY:

      Franklin India tax shield fund – Dividend option – 1.5L

      HDFC Equity fund- Growth- 1.5L

      ICICI Prudential value discovery fund- Growth – 1L

      SBI Magnum Mid cap Fund Growth -1 L

      Invest and hold for 24-36 Months, you’ll have handsome post tax and inflation returns.

      In case you’ve already done the tax saving instrument for the current FY, Then:

      HDFC Equity fund- Growth- 2L

      ICICI Prudential value discovery fund- Growth – 2L

      SBI Magnum Mid cap Fund Growth -1 L

      These are pure equity portfolios considering your risk taking ability as high.

      Regards,

      Sajid

  • SC JAIN

    I WANT TO INVEST IN ELSS PURELY FOR TAX SAVING PURPOSES.  PL SUGGEST WHICH ELSS FUND I SHOULD CHOSE.

  • Nishant

    Suresh,

    Not only does the return matter but also the Expense ratio of quantum is lowest which erodes your profit. Also it is more stable. Let the nature or risk apetite of investor decide which is better and not just the return of 1,3 or 5 years.

    Regards

  • Kaushal Kumar

    Dear Suresh KP.

    In the last 1 year Quantum Tax Saving Fund has been the best fund in the category. Is it advisable to invest in Quantum Tax Saving Fund for tax saving purpose.

    Fund

    Rating

    Launch

    1-Year Ret

    3-Year Ret

    5-Year Ret

    Expense Ratio (%)

    Assets 
    (Cr)

    Quantum Tax Saving Fund

    Dec-2008

    12.30

    17.89

    17.78

    1.25

    49

    Axis Long Term Equity Fund

    Dec-2009

    -0.97

    21.12

    21.92

    1.98

    10,487

    DSP BlackRock Tax Saver Fund

    Jan-2007

    10.94

    21.46

    21.06

    2.59

    1,458

    Invesco India Tax Plan

    Dec-2006

    3.89

    19.61

    18.92

    2.53

    320

    Reliance Tax Saver Fund

    Sep-2005

    4.72

    23.74

    22.45

    2.00

    5,882

    • You might be seeing 1 year performance only. You should look at medium term to long term of 3 to 5 years atleast. There are better funds than this. e.g. This fund provided 18% returns in last 3 years or 5 years, other top funds provided more than 20% annualised returns. 

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