Top Elss tax saver mutual funds review

Top Elss tax saver mutual funds review

You must have heard about Tax Saver Mutual Fund or ELSS in connection with saving tax. But accurate information about this tax-saving option is hardly available. First of all, people have to understand mutual funds, and after that, it is tax-saving mutual funds. Saving this tax is a hassle.

Top Elss tax saver mutual funds review

Let us try you should understand tax-saving mutual funds well so that you too can take advantage of them. Did you know that this tax-saving method has the most chance of earning the most! And this method also has the least conditions!

What is Tax Saving Mutual Fund

It is a type of mutual fund. But it also has another name and because of that, confusion also spreads. So its other name is Equity Linked Saving Scheme (ELSS). 

It’s solving the mystery, this fund is understood by the Income Tax Department as ELSS (Elss tax saver mutual funds). 

Therefore, ELSS consider as a tax-saving mutual fund.

  • So Equity Linked Saving Scheme or Tax Saving Mutual Fund is an option in which tax is saved by investing money. And this way of saving tax can be one of the best earning.
  • Tax saving mutual funds are a kind of category. And different companies are running mutual fund schemes in this category. You can save tax by investing in the scheme of your choice. By the way, do you know that there are more than a dozen mutual fund companies in India?
  • Do you know of other ways to save tax? Do you know that EPF, PPF, Life Insurance, and NSC are also tax-saving schemes?

Equity Mutual Fund Scheme

Actually, equity means shares only. So there are hundreds of such equity mutual fund schemes operating, and people pour their money into them.
Tax Saver Mutual Funds are also such equity mutual fund schemes. That is, these schemes also invest in shares only. Yes, you get the benefit of tax deduction only because of investing in shares.

These mutual funds mostly buy shares of large companies.
There is no restriction on these, large companies the scope of the loss is less.

Better Return

All the rich people of the country have made money by industry. The industry is the fastest way to grow in today’s era. And this stock market also gives you a chance to invest money in a similar industry. 

  • Perhaps you do not know that from 1980 till today, the stock market has given an average return of 15% annually.
  • Since your tax-saving mutual fund also invests in stocks, it is also likely to make the most money. In the last 15 years, these funds have given an average return of 21% per annum.
  • Now there is no such earning anywhere else. Be it gold or property, all these stocks have lost in front of returns in the long run.
  • That is why if you want to earn the most from your tax-saving investment, then invest money in Tax Saving Mutual Fund i.e. ELSS.

Invest in SIP every month

Be it Tax Saving Fund or any other mutual fund, all of them provide the facility of SIP. SIP is a way of investing in mutual funds. In this method, you invest a ‘fixed amount’ in a mutual fund at a ‘fixed interval’. Usually, this fixed interval is of one month.

  • When you invest a fixed amount in a mutual fund scheme on any date of every month, then it will be considered as SIP.  
  • Nowadays, on choosing the method of SIP, money is automatically deducted from your account every month. This gives convenience to both you and the mutual fund company.
  • There is one more advantage of investing through the SIP method. Every month you get units of a mutual fund at different rates. Sometimes the price is high and sometimes it is low. 
  • Overall you can get units of the mutual fund at an average price. That is, you do not have to worry about the ups and downs of the market.
  • SIP is like a recurring deposit of the bank, just the number of units purchased in it keeps on increasing. You can read our other article to understand more about SIP.

80C Tax Saving

The tax savings in tax-saving mutual funds are due to section 80C. This section of the Income Tax Act mentions those investments and expenses that save tax by investing money.

According to the rules, the amount of money you invest in these schemes will be deducted from your taxable income. Now if the taxable income is reduced, then the tax will be saved automatically. 

  • Under section 80C, you can deduct a total amount of up to Rs 1.50 lakh from taxable income.
  • Do you know that on deduction of 1.5 lakh in taxable income, the tax is reduced by about Rs 46 thousand!
  • We mentioned a limit to getting tax exemption from section 80C. And that is why tax exemption can be availed through ELSS also up to a limit. However, there is no maximum limit to investing in this fund.

Tax-Free Income

By investing money under section 80C, there is an opportunity to reduce the tax. But Tax Saving Mutual Fund allows you to save tax in addition to this.

  • Generally, when you increase the money by investing somewhere, the increased amount is treated as income and taxed on it. 
  • But this does not happen in the case of Tax Saving Mutual Fund. No matter how much your money increases by investing in it, enjoy the maturity amount as well.
  • If the investment is made in shares for more than one year, then no capital gains tax is levied on the profits. On the other hand, if you had invested money in Fixed Deposit or NSC, then the interest amount consider taxed.

Choose Direct Plan

Choose the direct plan to avoid distributor commission.
Every mutual fund scheme has two plans, a Regular plan, and a Direct plan. Direct plans have started from 2013 following the instructions of SEBI.
The direct plan of the mutual fund scheme is not sold through the distributor. You can buy these plans only from the mutual fund company’s website or office.

The distributor is not included, so the distributor commission is saved, and that’s why you earn more from the direct plan.

Top 3 ELSS Funds

After knowing about Tax Saving ELSS Fund, now you have to decide which Mutual Fund Scheme to choose. By the way, you can do research on your own to choose a mutual fund and it will be the best too. But if you are short of time, you can check out my list of top tax-saving mutual funds. I made this list for PlanMoneyTax English.

So the Best Tax Saving Mutual Funds for 2022 are –

1. L&T Tax Advantage Fund

This is the first fund on our list. This fund has performed well over the years. This fund has also taken a little risk.

It has given a return of around 14% per annum in the last three years. If you had invested 10 thousand rupees in this fund in January 2013, then today that amount would have increased to more than 23 thousand rupees. Its fund manager is SN Lahiri. He has been handling this fund since November 2012.

2. Aditya Birla Sun Life Tax Relief 96

It is a very old tax-saving fund. And been earning good money for last many years. In the last 5 years, this fund has given a return of 21% per annum.
If you had invested Rs 10,000 in this fund in January 2013, today its value would have been close to Rs 26,000. Ajay Garg has been handling this fund since October 2006.

3. Axis Long Term Equity

Till two years ago, this mutual fund scheme was in vogue. It had earned so well that no other fund was visible around. But the year 2017 was not good for it.

However, in 2018 it has picked up the pace again and has managed to get the third position. Axis Long Term Equity has generated 22% year-on-year earnings in the last five years.

If you had invested 10 thousand rupees in this fund in January 2013, then today their value would have been close to 29 thousand rupees. Jinesh Gopani has been managing this fund since October 2011.

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