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Best Tax Saving Mutual Funds

Tax saving

Introduction

Mutual funds have always been a preferred option to earn good returns. However, mutual fund returns are subject to tax. Thankfully, you can get the benefits of mutual fund investments and also save tax! It is possible with the Equity Linked Savings Scheme.

With Equity Linked Savings Scheme, also known as tax saving mutual funds, you can avail of tax deductions under Section 80C of the Income Tax Act. You can research and invest in these funds easily through online trading apps.

In this article, we will explain tax saving mutual funds and some of the best tax saving mutual funds in the market.

What are Tax Saving Mutual Funds?

Tax saving mutual funds, or the Equity Linked Savings Scheme, majorly invest in equities and equity-related stocks. These schemes are eligible for tax deductions up to ₹1,50,000 under Section 80C of the Income Tax Act. Any amount above this limit is not eligible for deduction. In addition, these are the only mutual funds eligible for tax exemptions. Moreover, unlike other 80C eligible instruments, they have a shorter lock-in period and better returns if invested for a longer time. So if you are looking for dual benefits of wealth creation and tax savings, this is the right choice for you.

Features of ELSS funds

  • Tax benefits under Section 80C
  • Opportunity to generate high returns with the majority investment in equity and related instruments, and the balance being in fixed income securities
  • Lock-in period of 3 years
  • Facility to invest through SIP (Systematic investment plan) or lump sum payment
  • Availability of both growth and dividend payout options

Top Tax Saving Mutual Funds in the Market

1. Mirae Asset Tax Saver Fund – Growth

  • Launched in 2015 by the Mirae Asset Mutual fund house, the fund aims to generate long-term capital appreciation for its investors. The asset allocation of the fund is 99.21% in the equities. The minimum lump sum and SIP investment are ₹500. Any additional investment is also ₹500.

Why invest?

  • The current NAV of the fund is ₹30.50.
  • The fund has assets under management worth ₹11,963 Crore as of March 2022.
  • There is no exit load.
  • The fund’s expense ratio is 0.52%, which is much lower than other schemes.
  • The fund’s returns over 1-year, 3-year and 5-year periods are 10.66%, 20.72%, and 16.55%, respectively. It has outperformed its average category returns.
  • The fund has doubled its investment every two years.

2. DSP Tax Saver Fund – Growth

  • Being active for over 15 years, the DSP mutual fund focuses on generating medium and long-term capital appreciation along with tax savings. It aims to offer both growth and stability to its investors by investing in emerging as well as established companies. The fund has invested 98.4% in equities and equity-related instruments.

Why invest?

  • The current NAV of the fund is ₹73.
  • The fund has assets under management worth ₹9811.13 Crore.
  • There is no exit load.
  • The expense ratio is 1.92%, much lower than the category average of 2.03%.
  • The fund’s returns over 1-year, 3-year and 5-year periods are 9.69%, 17.24% and 11.98%, respectively. The fund has consistently performed better than its category average returns.

3. Quant tax plan- Growth

  • With more than a decade of experience in the industry, the Quant Group focuses on two mantras: relevancy and predictive analytics. Its tax saving mutual fund aims to generate capital as well as dividend for its investors. This is possible due to its 99.96% allocation in equity and equity-linked securities.

Why invest?

  • The current NAV of the fund is ₹203.82.
  • The fund has assets worth ₹1316.08 Crore under its management.
  • There is no exit load.
  • Its 1-year, 3-year and 5-year returns are 14.77%, 33.28% and 20.66%, respectively. It has performed exceedingly well compared to its category returns in all the years.

Read also : How Can Self-employed Professionals Take Advantage Of Paying Taxes Every Quarter?

4. Tata India Tax Savings Fund – Growth

  • A leader in financial services, the Tata mutual fund house is built on intellectual capital and a robust risk management framework. Its tax-saving fund aims to capture the upside potential of equity markets. The asset allocation of the fund is 96.88% in equities and the balance in cash and cash equivalents.

Why invest?

  • The current NAV of the fund is ₹25.14.
  • The fund has assets worth ₹2978.40 Crore under its management.
  • You can invest through SIP, SWP( Systematic Withdrawal Plan) and STPs (Systematic Transfer Plan).
  • The fund returns over 1-year, 3-year and 5-year periods are 10.31%, 13.86% and 10.39%, respectively. The fund has performed better than its category returns in 1-year and 5-year periods.

Final Thoughts

After reading the above article, you will have a good understanding of some top ELSS funds in the market. Before investing, always remember these funds invest in stocks, which is why they have high risks. Caution and research are advised.

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