It's March! Top 5 Tax Saving Funds to Invest in for AY 2018-19
Every year with the arrival of March, we recommend some of the best tax-saving ELSS funds to invest in India. Our last year’s Top recommended ELSS funds gave returns between 30%-45% in just a year. You might be pondering why we always recommend investing in ELSS at this time of the year. What is the benefit?
It isn’t the way that we should invest in ELSS at the end of a financial year only. ELSS fund can be a valid option to invest when you want to enjoy good returns with the extras of tax-saving. Investing in these tax-saving options is useful for the ones who want to save income tax under Section 80C. You can get the tax exemption of up to Rs. 46,350 in a financial year if you belong to the highest tax bracket of 30%.
Let us have a quick rundown on the benefits of investing in tax-saving mutual funds.
Benefits of Investing in ELSS Funds
- Tax Exemption: Tax-saving mutual funds provide the tax exemption of up to Rs. 1.5 lakh on the investment along with the scheme benefits, under Section 80C of the Income Tax Act, 1961.
- Higher Returns: ELSS provides higher returns as compared to the other tax saving investment such as PPF, NSC, Bank Fixed Deposit schemes, etc., in most cases.
- Lowest Lock-in Period: Tax-saving mutual funds have a lower lock-in period of 3-years than NSC (6 years) and PPF (15 years).
- Regular Income: ELSS funds have dividend options which could lend you a regular income. (It is not guaranteed)
- Invest from as low as Rs. 500: Unlike the other tax saving instruments, you can start saving in tax saver mutual funds through SIP of as low as Rs. 500.
Top 5 Tax-Saving Mutual Funds to Invest in AY 2018-19
The top 5 mutual funds to invest in AY 2018-19 are chosen by analyzing them on the basis of the following parameters:
- Consistent performance in the last 5 to 10 years
- Highest returns through SIP
- CRISIL rating as Rank-1, Rank-2, etc.
- Value Research Online rating such as 5-star, 4-star, etc.
Top #1 Reliance Tax Saver (ELSS) Fund
Strategy of the Fund: The fund aims to generate long-term capital gains by investing predominantly in equity and equity related instruments.
Past Performance of the Fund: This fund has been the personal favorite of our fund analyst. The experts have recommended this fund as it has been consistently performing well. This mutual fund has generated over 46% returns in the last 1 year and 23% of CAGR returns in the last 5 years. Since inception, the fund has given 17% of annualized returns. Looking at the return percentage, if you would have invested Rs. 10,000 per month through SIP in the last 5 year, the investment amount would have been Rs.6 lakh, and the investment value would have grown to Rs. 10 lakh approx.
Reasons to Invest: The fund has asset allocation spread across the high conviction large-cap and mid-cap companies which are leaders in their respective areas. Most of these companies are in-line with the emerging market trends. Also, the historical performance of the reliance tax saver fund is compelling enough to let you include this fund to your investment list. A 3-star rating from both CRISIL and Value Research makes it one of the best ELSS tax-saving mutual funds to invest in this year.
Top #2 Aditya Birla Sun Life Tax Relief 96 Fund
Strategy of the Fund: This ELSS is a diversified scheme investing majorly in equities to help investors create wealth over the long-term, with tax benefit under section 80C.
Past Performance of the Fund: The fund has performed very well since it was launched. Investors who invested an amount of Rs. 61000 as Rs. 1000 monthly for 5 years have yielded Rs. 1 lakh approx over the period. The fund saw 43% of growth last year and a total of 25% of annualized returns from its inception.
Reason to Invest: With ABSL Tax Relief '96 Fund, you can save tax up to Rs. 53,303/- per annum under Section 80C of the Income Tax Act, 1961. The 2nd ranking by CRISIL and 4-star rating given by Value Research make it a blind pick in the tax saving category. The recent portfolio allocation of the fund shows its interest towards the healthcare sector. This is undoubtedly an emerging sector right now as the economic policies for the coming year are anticipating investment towards the aspects of health and hygiene.
Top #3 Axis Long Term Equity Fund
Strategy of the Fund: The fund relies on the bottom-up selection of quality equity and equity-related securities to generate sustainable growth.
Past Performance of the Fund: The fund has topped the charts for years. It has generated 37% returns in the last year and 23% of CAGR returns in the past 5 years. The multi-cap strategy of the axis long term equity fund has accrued 19% returns since its launch. The smallest investment of Rs. 1000 every month for 5 years would have created a worth of Rs. 97,000 over the period.
Reason to Invest: The fund invests in the companies which have sound management and corporate governance along with a track record of managing the business in all economic cycles. The fund has eyed high growth since its inception by betting on the leaders of large-cap, probable leaders of small & mid-cap, and the categories with low penetration. This fund has acquired Rank 4 by CRISIL and 4 stars by Value Research by avoiding highly cyclical and regulated sectors which can hinder its performance. This fund can be a good option for the ones with a low-risk profile.
Top #4 DSP BlackRock Tax Saver Fund
Strategy of the Fund: This fund provides tax benefits while generating a medium to long-term capital appreciation by investing in a diversified portfolio that constitutes of equity and equity-related securities.
Past Performance of the Fund: This mutual fund has given 36% and 21% returns in the last 1 and 5 years, respectively. Moreover, the fund has been performing consistently since its inception and has given 16% of annualized returns. As per the experts, if you would have invested Rs. 1000 through SIP in this fund 5 years back, your total accumulated amount would have become Rs. 61,000. Not only this, the worth of your investment would have been approx. Rs. 95,000.
Reason to Invest: The fund manager of this fund seeks both value and growth by using quantitative analysis, investment opportunities, and potential strengths of the areas during the fund allocation. The fund has targeted the finance and banking sectors which are pacing up with the upcoming economic developmental policies. With a 3-star rating from CRISIL and 4-star rating from Value Research, DSP BR Tax Saver Fund can be a good pick for tax-saving benefits.
Top #5 Mirae Asset Tax Saver Fund
Strategy of the Fund: The fund has no bias towards any style or theme. The diversified portfolio of the fund aims to generate long-term capital growth by investing in equity and equity-related instruments predominantly.
Past Performance of the Fund: Being an equity fund, this ELSS possesses the potential to provide high returns if held for a prolonged period. It is evident from the past performance of the fund where it has generated 23% returns since it was first surfaced. Mirae asset tax saver fund has secured the 5th position on our list as it is a newcomer with respect to its peers. Otherwise, the past year annual returns of this fund were around 48%. Provided that you would have been pouring in Rs. 1000 monthly in this fund since Jan 2016, you might have reaped a total of Rs. 34000 approx in the two years.
Reason to Invest: The fund follows the top-down approach to choose the robust business models to invest in. The fund manager has invested in the companies anticipating high return ratios from the macroeconomic and sectoral trends. This fund has made it to our list because of its exceptional performance in the mere 2 years of its launch. The fund has beaten its benchmark returns every year.
*Data source: Value Research
You can invest in the ELSS mutual funds like any other mutual fund. You can login to your mutual fund account on MySIPonline and invest through SIP or lumpsum to buy these tax saving funds. All the best for your tax saving for FY 2017-18!
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