Mumbai, Dec 5 - Equity Linked Savings Scheme or ELSS has fast emerged as one of the most popular options for investment in equities through mutual fund route for higher return and better tax savings. As we are on the verge of entering into the new year, it’s the best time to evaluate our portfolio and invest in top performing ELSS funds to generate sound return from our investment. ELSS is also an ideal financial instrument for tax planning as an investor can save up to Rs 1,50,000 under Section 80C of Income tax Act. In this perspective, we try to collate the top five ELSS funds based on their performance and other financial parameters.
“The best trigger for investing in ELSS is tax savings as it provides better return due to the lock-in period. IRR (internal rate of return) on post tax basis is usually higher in these kinds of financial instruments,” Aslam Checkar, Head (PMS & Mutual Fund) at Karvy Private Wealth told ‘The Finapolis’.
He also said that fund manager has the liberty of executing his investment ideas due to the stable nature of funds owing to the lock-in period. As compared to open-ended mutual funds, redemption pressure in ELSS is less frequent, he added.
Notably, ELSS has a lock-in period of 3 years to make it eligible for tax savings. It is an ideal instrument for an investor who seeks wealth creation over a longer time frame. As a category, ELSS has garnered 13.33% return in the last three years, 19.11% in five years and 9.46% in last 10 years.
According to Karvy Private Wealth, investors can consider investing in these ELSSs based on their past performance. HDFC Long term Tax Advantage Fund, Aditya Birla Sun Life Tax Relief 96, ICICI Prudential Long term Equity Fund (Tax saving), Reliance Tax Saver are the schemes recommended by the private investment firm.
As per available data, Aditya Birla Sun Life Tax Relief 96 gave a return of 15.31% in three years and 21.58% in last five years to investors. Similarly, HDFC Long term Tax Advantage Fund generated a return of 11.54% in three years and 18.66% in five years. Under the ELSS category, ICICI Prudential Long term Equity Fund gave a return of 8.45% in three years and 17.21% in five years. Reliance Tax Saver is another top performing ELSS fund which has given a return of 11% in three years and 21.99% in five years.
Apart from these funds, DSP BlackRock Tax Saver Fund is another good fund to bet on as the scheme has given a return of 19.8% in five years and 13.9% in last three years. Investors can also consider investing in Axis Long term Equity Fund which has given a return of around 22% in five years and 11.74% in last three years.