During a
particular financial year, individuals are at various stages of tax planning:
some invest immediately, some are in search of
the best tax-saving options, some want information regarding mutual fund schemes. Tax
saving mutual funds scheme or Equity Linked Savings Schemes (ELSS) are the best
tax-saving option available in Section 80C of the Income Tax Act,1961.
Savings Equity
Linked Scheme Is a Wise Choice for A Risk Taker
In Section 80C of the Income Tax Act of 1961, investments in
ELSS’s qualify for income tax deductions of up to Rs 1.5 lakh within a lock-in
period of three years. Investing in ELSS to save income taxes is a wise choice, start investing
in a staggered manner. This method also offers taxpayers ample amount of time to
research and choose the right scheme that meets
your financial needs.
ELSS are equity mutual fund schemes, meaning you
are investing in stocks. So, invest only
if you have a high-risk tolerance, a stomach to handle the volatile nature of the
stock market. ELSSs have a lock-in period of three years but invest carefully and
only if it’s for a period of five to seven years.
Government-backed tax-saving mutual funds (GILT
Fund) are fixed income instruments offering
modest returns, but a very low-risk option. ELSSs produce superior returns
periodically over a long time since the primary investments are based on stocks. The returns for ELSSs in
tax saving mutual funds category has returned 22.91% in one year, 14.69% in
three years and 18.53% in five years.
Best ELSS
Tax Saving Options of 2018:
Taxpayers plan their tax saving investments every financial year. While most common
investments in the tax saving category life
insurance policies and public provident funds (PPFs).
Equity Linked Savings Schemes (ELSS), a tax saving mutual funds option that is
eligible for Section 80C tax deductions. These schemes have a lock-in
period of just 3 years, which is the
lowest among all Section 80C options. These tax saving schemes generate
substantial returns over long-term
periods. They primarily invest in equity or equity related instruments.
1.
Axis Long
Term Equity Fund
This tax-exempting fund was launched on December 29, 2009,
by Axis
Mutual Fund. The
fund capitalizes on companies which have a
sturdy probability of creating wealth over a period of three to five years.
This fund is a large-cap oriented one with around 70% of its investments in
giant and large cap space.
2.
Franklin
India Tax Shield
Launched
on April 10, 1999, this mutual fund has its eyes on investing in stocks that
have varied valuations and great growth prospects. With almost 80% of its
investments placed in the stocks of giant-cap and large-cap companies, long-term returns are guaranteed to investors
as the scheme is well placed to contain the losses from potential market
corrections.
3.
Reliance
Tax Saver Mutual Fund
Contrasting to most of the ELSS funds, this
fund focuses primarily on investing in the stocks of mid-cap and small-cap businesses.
Presently 55% of its investment portfolio has its holdings in small-cap and
mid-cap stocks. The tax-saving scheme has a mix of
growth prospect and value based style of
investing its financial holdings.
4.
ICICI
Prudential Long Term Equity Fund
This
tax-exempted mutual fund investment scheme was
launched on August 19, 1999. This fund invests in the stocks of those companies
that have great growth prospects and attractive market capitalizations. It follows a value
based investment style, outperforming its competitive peer ELSS Mutual Funds during the initial market phases. Almost 50% of its investment portfolio is
knee-deep in the stocks of mid-cap and small-cap companies.
5.
Birla Sun
Life Tax Relief 96
This tax
relief mutual fund has a primary objective to generate long-term returns by investing 80% of its investment in equities and
equity related instruments and 20% in debt and money market instruments. The
tax-saving scheme has a mix of growth prospect and value based style of investing since its launch on March 29, 1996.
The fund has a multi-cap spectrum with around 47% of its holdings invested in stocks
of giant-cap and large-cap companies and the rest in the stocks of mid-cap and
small-cap companies.
6.
Tata
India Tax Savings
This fund
was launched on March 31, 1996. It
generates a steady and attractive long-term return by investing in companies of
good fundamental foundation. It has stocked a
selection criteria for growth
prospect and value-based strategy. About
44% of its portfolio, has its stock invested in large-cap and giant-cap companies
while the rest is invested in small-cap
and mid-cap companies. This fund attracts investors who tend to favor a multi-cap approach along with high-risk tolerance.
7.
IDFC Tax
Advantage
This mutual
fund was launched on December 26, 2008. The
fund has a multi-cap spectrum, with 43% of its properties in giant-cap and
large-cap companies and the remaining in small-cap and mid-cap companies. Along
with a traditional investment method by concentrating on companies with high
growth prospects and low valuations.
Their high rate of returns on ELSSs makes them the best investment option for
meeting your long-term financial goals like children’s education and retirement
plan investments. To conclude, carefully analyze
your own risk tolerance and our financial
portfolio before selecting the ELSS funds.
