Top 5 Best ELSS Funds to invest in 2020 | Tax Saving Mutual Funds
Top 5 Best ELSS Funds to invest in 2020 | Top ELSS Tax Saving Mutual Funds
For salaried individuals, it is tax time now. They may need to invest in tax saving investment options by January, else they need to pay higher income tax. Earlier we covered that there are over 15+ Tax Saving Investment Options in India to get income tax exemption u/s 80c. If you are looking to save income tax and earn higher returns with short term liquidity, tax saving ELSS mutual funds could be the best bet for you. Which are the best ELSS funds to invest in 2020? Which are the Top ELSS Tax Saving Mutual Funds that can give higher returns in India?
What are ELSS Mutual Funds?
There are various mutual fund schemes in India. An Equity Linked Savings Scheme (ELSS) / Tax Saving Mutual Fund is an open-ended equity mutual fund scheme that help you to save tax and also gives an opportunity to grow their money. One can invest in ELSS mutual funds, which qualifies for income tax exemption u/s 80c upto Rs 1.5 Lakhs per annum.
How does ELSS funds work?
ELSS are diversified equity MFs where most of the corpus is invested in equity and equity related instruments. Investment in ELSS comes with a lock in period of 3 years. ELSS funds offer a simple way to get tax benefits and at the same time get an opportunity to gain from the potential of equity markets. They offer the twin benefits of tax deduction and capital appreciation. The returns of the ELSS funds reflect returns from the equity markets. ELSS schemes are open ended, which means, the investor can subscribe to the fund at any day. NAV (Net Asset Value) of the fund is decided on every business day.
What is our methodology in picking the Top ELSS funds for 2020?
Before we check which is the best ELSS mutual fund, let us look at how we filtered them. Below is the methodology we have used in picking up ELSS funds to invest now.
1) ELSS Mutual Fund schemes that have performed well in the last 5-10 years are considered here.
2) Tax Saving Funds that have performed well in various stock market cycles are further filtered.
3) Funds that are rated 5 star, 4 star, 3 star by value research online are considered.
4) Majority of these funds are already recommended by us earlier, hence if you have already invested, it could be repetition for you.
Top 5 Best ELSS Mutual Funds for 2020 to save tax
Here are the list of best tax saving mutual funds to invest through SIP in 2020.
1) Tata India Tax Savings Fund
2) Axis Long Term Equity Fund
3) DSP Tax Saver Fund
4) Aditya Birla Sun Life Tax Relief 96
5) Invesco India Tax Plan
Top 5 ELSS Mutual Funds – Detailed View
Here are the Top ELSS Funds for 2020.
#1 – Tata India Tax Savings Fund
Fund Overview: The scheme seeks long-term capital growth. Investments in equity would be at least 80% of the corpus, while allocation to debt and money market instruments can go up to 20%. This mutual fund has given 13% annualized returns in the last 10 years and 11% annualized returns in the last 5 years. Crisil ranks it as Rank-3 and Value Research as 5 Star.
#2 – Axis Long Term Equity Fund
Fund Overview: The scheme aims to generate regular long term capital growth from a diversified portfolio of equity and equity related securities. The Scheme Will invest in companies with strong growth & a sustainable business model. This mutual fund has given 11% annualized returns in the last 5 years and 16% annualized returns in the last 3 years. Crisil ranks it as Rank-1 and Value Research as 5 Star.
#3 – DSP Tax Saver Fund
Fund Overview: The scheme seeks to generate medium to long-term capital appreciation from a diversified portfolio that is substantially constituted of equity and equity related securities of corporates, and to enable investors avail of deduction from total income, as permitted under the income tax act. This mutual fund has given 13% annualized returns in the last 10 years and 10% annualized returns in the last 5 years. Crisil ranks it as Rank-2 and Value Research as 4 Star.
#4 – Aditya Birla Sun Life Tax Relief 96
Fund Overview: The scheme seeks long-term capital growth and will invest approximately 80 per cent of its assets in equity, while the balance would be a invested in debt and money market instrument. It was converted to an open-ended scheme with effect from July 1999. A combination of top down & bottom up approach will be followed in the stock selection process. This mutual fund has given 12% annualized returns in the last 10 years and 10% annualized returns in the last 5 years. Crisil ranks it as Rank-3 and Value Research as 4 Star.
#5 – Invesco India Tax Plan
Fund Overview: The scheme aims to generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities. It intends to invest across market capitalisation sectors utilizing bottom up approach. It will aim to have concentrated well researched portfolio, which would be around 20 – 50 stocks. This mutual fund has given 14% annualized returns in the last 10 years and 10% annualized returns in the last 5 years. Crisil ranks it as Rank-2 and Value Research as 4 Star.
Comparison of Top and Best ELSS Mutual Funds for 2020
One should note that performance indicated here is the past performance and does not indicate any guaranteed future returns.
SIP Performance – 3 Years and 5 Years – Tax Saving Mutual Funds
Now let us look at SIP returns. If one would have invested Rs 1,000 per month for 3 years or 5 years, here is how the investment would have grown now.
Here are some of the FAQs about Best Tax Saving Mutual Funds 2020?
Which Mutual Funds are eligible for 80c?
Only ELSS or tax saving mutual funds are eligible for 80c exemption up to Rs 1.5 Lakhs in a financial year.
Which ELSS is best to invest in 2020?
We have provided the list of 5 funds above to save tax u/s 80c. We would advise you to invest atleast 2-3 funds instead of just 1 fund. This way you are diversifying your portfolio and reducing any future risk of under performance of a single mutual fund.
Is ELSS Taxable after 3 years?
ELSS has lock-in period of 3 years. Means you cannot sell them within 3 years. After 3 years, you can sell them. The returns from ELSS after 3 years are taxed at 10% (without indexation benefit) if they exceed Rs 1 Lakh in any financial year.
Is ELSS better than PPF?
Both have its pros and cons. ELSS mutual funds have 3 year lock-in period. The returns are not guaranteed, however, there is scope to get higher returns between 12% to 15%, if invested for 8-10 years. ELSS Funds are good for High to moderate risk takers. On the other hand PPF has lock-in period of 15 years and has fixed rate of return. The current PPF interest rate is 7.9%, hence returns are limited. PPF is suitable for low risk takers, however, one can even plan and and create 1 Crore Corpus with PPF. Based on your risk appetite and tenure, you need to choose the best tax saving option.
Is ELSS Safe?
ELSS Mutual Funds are like any other equity mutual funds that invests in stock markets. Hence, these are for high risk takers. However if you invest for medium to long term of 5-10 years, the risk is reduced, however not completely eliminated. If you are a low risk taker, you should avoid ELSS funds. If you are moderate to high risk taker, invest in ELSS funds.
Is it the right time to invest in ELSS?
Investment in equity markets has been always risky. Hence, investing through SIP in mutual funds for medium to long term has always benefitted investors. Forget about checking whether it is the right time to invest in ELSS or not, just go ahead and create SIP in ELSS funds.
Can I withdraw ELSS Mutual Funds after 3 years?
ELSS funds have a lockin period of 3 years and you can always withdraw after this. However, if you can invest for 8-10 years, you can expect higher returns.
How do I start ELSS Mutual Funds?
You can invest in ELSS tax saving funds as low as Rs 500 per month. First, you need to select a good ELSS mutual fund. Second approach the AMC website and buy ELSS direct plans through their website. If you it is too much to go through AMC website, you can approach any mutual fund broker (like icicidirect or fundsindia etc.,) and start investing online on their site.
Do I need to invest every year in ELSS?
Whatever you invest in ELSS MFs in a financial year is eligible to get income tax benefit u/s 80c for that year. If you want the tax savings in subsequent financial years, you need to invest in that year too.
Is ELSS good for long term investment?
Mutual Funds are good if you can invest for at least 8-10 years. Though ELSS has 3 year lock-in period, you should invest in medium to long term to get superior returns.
Can I invest in top 10 ELSS funds?
One might be investing in several mutual funds from large cap, midcap, multi cap, etc. While you can invest in top 10 ELSS funds, you may have too many funds in your portfolio and it would be difficult to track. We would advise you to invest for 2-3 ELSS funds only.
Which are best ELSS funds as per value research?
Value Research rates the funds as 5 stars to 1 star. The higher the stars, the fund is categorized as highly rated one. The funds we indicated are all 5 star and 4 star ELSS funds from value research.
Which are best ELSS funds as per Crisil?
Crisil rates the funds as Rank-1 to rank-5. The lower the rank, the fund is categorized as good and vice versa. From the above list, check which is Rank-1 and Rank-2 and these are Top ELSS funds as per Crisil.
Readers, do you think this article covers all your queries? If not, leave comment, we would provide necessary clarifications and update this article too.
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Top 5 Best ELSS Mutual Funds for 2020 to save tax