An equity-linked saving scheme (ELSS) is an equity mutual fund that invests in equities and qualifies for tax deductions under section 80C of the income tax act. They are also called tax saving mutual funds and offer investors reasonable returns along with the advantage of tax saving. At least 80% of the scheme’s assets are invested in equities and there is a lock-in period of 3 years.
ELSS funds invest in equities across different market capitalizations and sectors. The long-term capital gains that an individual earns are tax-free up to Rs. 1 lakh and above this attract a capital gains tax at the rate of 10%.
Things to remember-
- A person can start investing in ELSS scheme with an amount as low as Rs. 500 or with a lump sum amount.
- The ELSS funds have a lock-in period of 3 years. It is calculated from the day you invest the money. The money is invested either as lump sum which is easy to remember and withdraw after 3 years; while in the SIP mode you have to wait for 3 years from the last contribution date.
- The ELSS funds serve twin objective of investment as well as tax saving. It has the shortest lock in period among section 80C tax saving instruments and if kept for a longer time horizon of 5 years and above the ELSS funds give much higher returns than fixed deposits and post office schemes.
- Since ELSS schemes invest in stock markets they are prone to market risks. An investor with a sufficient longer horizon can make good returns.
Comparison between ELSS and other tax saving instruments-
Some ELSS funds where a person can consider investing are-
1)Quant Tax Plan-
Category- ELSS
Fund House- Quant Mutual Fund
Launch date- 7 January 2013.
Fund Managers- Ankit Pande, Vasav Sahgal.
Benchmark- Nifty 500 TRI.
Fund Size- 855.21 crore.
No. of stocks held-45
Equity holding- The fund has 96.41% investment in Indian stocks of which 57.34% is in large-cap stocks, 13.86% is in mid-cap stocks, 21.78% in small-cap stocks.
Returns – The returns of the fund in the last 5 years are 24.13% and since inception is 21.39%.
2)BOI AXA Tax Advantage Fund-
Category- ELSS
Fund House- BOI AXA Mutual Fund
Launch date- 25 February 2009.
Fund Manager- Aakash Manghani.
Benchmark- S & P BSE 500 TRI.
Fund Size- 538.52 crore.
No. of stocks held-67
Equity holding- The fund has 95.61% investment in Indian stocks of which 36.33% is in large-cap stocks, 19.4% is in mid-cap stocks, 13.99% in small-cap stocks.
Returns – The returns of the fund in the last 5 years are 19.57% and since inception is 18.94%.
3)Mirae Asset Tax Saver Fund-
Category- ELSS
Fund House- Mirae Asset Mutual Fund
Launch date- 28 December 2015.
Fund Managers- Neelesh Surana.
Benchmark- Nifty 500 TRI.
Fund Size- 10802.01 crore.
No. of stocks held-65
Equity holding- The fund has 99.57% investment in Indian stocks of which 63.34% is in large-cap stocks, 11.84% is in mid-cap stocks, 5.83% in small-cap stocks.
Returns – The returns of the fund in the last 5 years are 19.59% and since inception is 21.19%.
4)IDFC Tax Advantage(ELSS) fund-
Category- ELSS
Fund House- IDFC Mutual Fund
Launch date- 26 December 2008.
Fund Managers- Daylynn Pinto.
Benchmark- S & P BSE 500 TRI.
Fund Size- 3427.64 crore.
No. of stocks held-47
Equity holding- The fund has 95.54% investment in Indian stocks of which 49.33% is in large-cap stocks, 13.69% is in mid-cap stocks, 22.3% in small-cap stocks.
Returns – The returns of the fund in the last 5 years are 17.91% and since inception is 18.68%.
5)Canara Robeco Equity Tax Saver-
Category- ELSS
Fund House- Canara Robeco Mutual Fund
Launch date- 02 February 2009.
Fund Managers- Vishal Mishra and Shridatta Bhandwaldar.
Benchmark- S & P BSE 500 TRI.
Fund Size- 3217.97 crore.
No. of stocks held-54
Equity holding- The fund has 95.78% investment in Indian stocks of which 65.46% is in large-cap stocks, 12.74% is in mid-cap stocks, 5.26% in small-cap stocks.
Returns – The returns of the fund in the last 5 years are 18.32% and since inception is 15.21%.
6)DSP Tax Saver Fund
Category- ELSS
Fund House- DSP Mutual Fund
Launch date- 18 January 2007.
Fund Managers- Rohit Singhania and Charanjit Singh.
Benchmark- Nifty 500 TRI.
Fund Size- 9397.02 crore.
Equity holding- The fund has 66.47% is in large-cap stocks, 27.8% is in mid-cap stocks, 5.73% in small-cap stocks.
Returns – The returns of the fund in the last 5 years are 15.69% and since inception is 14.63%.
7)PGIM India ELSS Tax Saver-
Category- ELSS
Fund House- PGIM India Mutual Fund
Launch date- 11 December 2015.
Fund Manager- Srinivas Rao Ravuri and Utkarsh Katkoria.
Benchmark- Nifty 500 TRI.
Fund Size- 341.73 crore.
No. of stocks held-37
Equity holding- The fund has 98.59% investment in Indian stocks of which 67.48% is in large-cap stocks, 7.69 is in mid-cap stocks, 12.36% in small-cap stocks.
Returns – The returns of the fund in the last 5 years are 16.24% and since inception is 16.26%.
8)Kotak Tax Saver Scheme-
Category- ELSS
Fund House- Kotak Mahindra Mutual Fund
Launch date- 23 November 2005.
Fund Manager- Harsh Upadhyaya
Benchmark- Nifty 500 TRI.
Fund Size- 2414.86 crore.
No. of stocks held-60
Equity holding- The fund has 95.8% investment in Indian stocks of which 57.42% is in large-cap stocks, 19.18% is in mid-cap stocks, 13.09% in small-cap stocks.
Returns – The returns of the fund in the last 5 years are 15.48% and since inception is 12.77%.
ELSS funds are good for investors as they offer twin benefits of tax saving along with good returns as compared to other investment options. The funds are managed by professionals who have in-depth market knowledge. An investor can compare ELSS funds based on fund history, consistency of returns, and other financial ratios and invest in the best fund.
Also, read- 11 tax-saving options for the salaried employees.