ELSS Funds Archives

Here are the 6 most consistent ELSS funds

Tax-saving equity funds, otherwise known as Equity Linked Savings Schemes (ELSS), are very popular for many reasons. They offer a tax deduction of up to Rs. 1.5 lakh (per financial year) from total income available under Section 80C of the Income Tax Act, 1961. The three-year lock-in period enables participation in the long-term growth potential of equity markets. Since every fund-house has its ELSS, it can be challenging to pick and choose the best funds from such a large universe. Instead of going for the best performer, investors should select the most consistent ELSS funds. We looked at various periods to find out the 6 most consistent ELSS schemes. Read on.

Consistency is key

Consistency of returns is an important driver of overall investment results. A fund that does well once in a blue moon is not a reliable vehicle for your hard-earned money.

During bull markets, every equity fund does well. Should you go for the fund that has delivered the highest returns? No. It is more important to see how the funds have been able to perform over longer periods.

We looked at point-to-point returns of all the ELSS funds over the long term, i.e. 3-, 5- and 10-year periods. We have taken the regular plan as the direct plans were introduced in 2013. This helped us understand which funds among this large category consistently performed well.

The following is the list of the 6 most consistent tax-savings funds.

Quant Tax Plan
IDFC Tax Advantage (ELSS) Fund
DSP Tax Saver Fund
JM Tax Gain Fund
Bank of India Tax Advantage Fund
Canara Robeco Equity Tax Saver Fund

Here is a table that illustrates the returns of these 6 most consistent funds. Notice how the 6 ELSS funds selected are always in the top 10 best ELSS funds in terms of returns across all the time periods, showing their consistency.

Fund Name	3 Yr Ret (%)	3 Yr Rank	5 Yr Ret (%)	5 Yr Rank	10 Yr Ret (%)	10 Yr Rank
Quant Tax Plan	33.59	1/34	20.45	1/32	19.72	1/26
IDFC Tax Advantage (ELSS) Fund	20.82	3/34	12.66	5/32	17.48	2/26
DSP Tax Saver Fund	18.46	7/34	12.35	6/32	17.14	4/26
JM Tax Gain Fund	17.97	8/34	12.09	7/32	16.29	5/26
Bank of India Tax Advantage Fund	23.77	2/34	13.90	4/32	16.04	7/26
Canara Robeco Equity Tax Saver Fund	20.18	4/34	14.61	2/32	15.41	9/26

Returns as on 22-Jul-2022

Be it a bull market, bear market, or flattish phase, the most consistent ELSS funds such as Quant Tax Plan, IDFC Tax Advantage, DSP Tax Saver, JM Tax Gain Fund, Bank of India Tax Advantage Fund, Canara Robeco Equity Tax Saver have been able to consistently generate high returns, which is above category average and also many peers.

Let us try to understand what has led to the performance of the top 5 ELSS mutual funds.

Quant Tax Plan:

Quant Tax Plan has given returns of 20.82% since its launch in 2013. As of 30th June 2022, the fundâ€™s total assets stood at Rs. 1,370 crores.

From the past performance, we have seen that Quant Tax Plan is the best ELSS scheme as it has topped the charts in the 3-, 5- and 10-year returns.

Let us see the return consistency of the fund by comparing the rolling returns of the fund:

Scheme / Category Name	Less than 0%	0 – 8%	8 – 12%	12 – 15%	15 – 20%	Greater than 20%
Quant Tax Gr	2.92	9.94	10.04	9.61	20.73	46.76
Equity: ELSS	9.22	24.89	26.06	14.41	19.07	6.36

Start Date:- 01-01-2013,Time Period:- 3 Year

This table shows that Quant Tax Plan has given returns greater than 20% over 46% of the time.

Rolling returns are the annualised returns of the mutual fund scheme chosen for a given term, i.e. three years in this case on every day, week, or month up until the end of the duration.

Quant Tax Plan employs a flexible investing strategy concerning the sector and capitalisation exposures. The fundâ€™s portfolio has seen a fair amount of changes due to its investment philosophy of VLRT, which stands for Value, Liquidity, Risk Appetite, and Time.

According to their approach, the market-cap and sector allocations have undergone considerable modifications over time. The fund has historically allocated a sizable portion of its assets to large caps.

The high performance of the fund can be attributed to its higher allocation to mid and small-cap stocks. According to Value Research, the percentage allocation to growing companies is around 38%, higher than the category average of 29%.

Moreover, considering the sectoral allocation, we can see that the fund has a higher allocation to services and lower allocation to financials than the category.

The expense ratio of the regular plan is the highest among its peers, with 2.62%, while the expense ratio of the direct plan of the fund is lower than the average at 0.57%.

IDFC Tax Advantage (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund is another top ELSS fund to invest in and save on tax. The fund was launched on 1^st Jan 2013 and has generated returns of 17.47% since its launch.

The fund also has a higher allocation to small-cap stocks at 16% than the category average of 6.5%.

Let us see the return consistency of the fund in terms of the rolling returns:

Scheme / Category Name	Less than 0%	0 – 8%	8 – 12%	12 – 15%	15 – 20%	Greater than 20%
IDFC Tax Advtg (ELSS) Reg Gr	7.6	10.21	14.66	17.48	29.97	20.09
Equity: ELSS	9.22	24.89	26.06	14.41	19.07	6.36

The rolling returns look attractive as the fund has delivered returns above 15% for more than 50% of the time.

However, it is important to note that the high returns have come from high volatility. The fundâ€™s beta is the highest in the category at 1.15%.

DSP Tax Saver Fund

This tax-saving mutual fund has been a consistent performer over the long term. The fund has amassed a respectable long-term performance history with exposures across market cap sectors, solid stock-level diversity, a mix of growth and value flavours, long-term holdings, and short-term opportunistic plays.

Let us see the returns consistency of this fund that ranks as one of the top 10 ELSS funds:

Scheme / Category Name	Less than 0%	0 – 8%	8 – 12%	12 – 15%	15 – 20%	Greater than 20%
DSP Tax Saver Reg Gr	3.14	12.46	13.43	20.37	27.19	23.4
Equity: ELSS	9.22	24.89	26.06	14.41	19.07	6.36

We can see that the fund has given returns between 15-20% almost 30% of the time.

JM Tax Gain Fund

The fundâ€™s investment style is growth-oriented with a tilt to larger caps. Currently, the fund doesnâ€™t have any exposure to small-cap funds.

This ELSS scheme has given returns of 15.99% since its launch in Jan 2013.

Hereâ€™s how the fund has fared regarding rolling returns against the category.

Scheme / Category Name	Less than 0%	0 – 8%	8 – 12%	12 – 15%	15 – 20%	Greater than 20%
JM Tax Gain Fund Gr	3.37	8.04	16.85	25.33	29.57	16.85
Equity: ELSS	9.22	24.89	26.06	14.41	19.07	6.36

The fund has been able to generate consistent returns.

However, it is essential to consider that the fund size is smaller than the other ELSS schemes, with assets of Rs.61 crores in June 2022.

Moreover, the expense ratio of the direct plan of the fund is on the higher side at 1.61%

Bank of India Tax Advantage Fund

Bank of India Tax Advantage is another top 5 ELSS fund launched on 1^st Jan 2013 and has given returns of 16.77% since its inception.

The fundâ€™s expense ratio is 1.34% and manages an AUM of Rs. 551 crores.

The fund invests in stocks with a wide and narrow moat.

If we see the rolling returns, we can see that the fund has generated negative returns of just 0.11% since its inception in a three-year rolling period.

Scheme / Category Name	Less than 0%	0 – 8%	8 – 12%	12 – 15%	15 – 20%	Greater than 20%
BANK OF INDIA Tax Advtg Reg Gr	0.11	15.96	16.18	28.99	23.78	14.98
Equity: ELSS	9.22	24.89	26.06	14.41	19.07	6.36

Canara Robeco Equity Tax Saver Fund

Canara Robeco Equity Tax Saver Fund is another best ELSS fund. The fund launched on 2^nd Jan 2013 and manages assets worth Rs. 3,518 crores as on 30^th June 2022.

This fund invests around 75% in large cap stocks and the rest in midcap stocks. The fund is well diversified and invests in a mix of cyclical, sensitive and defensive stocks. It also invests in companies with a higher competitive advantage than the category average.

Around 28% of the time, the fund has given returns in the 8-12% range. However, if we see the lower end of the returns range, the fundâ€™s negative returns are pretty on the lower side.

Scheme / Category Name	Less than 0%	0 – 8%	8 – 12%	12 – 15%	15 – 20%	Greater than 20%
Canara Robeco Equity TaxSaver Reg Gr	0.22	10.88	28.4	22.42	26.55	11.53
Equity: ELSS	9.22	24.89	26.06	14.41	19.07	6.36

Conclusion:

These were six of the top 10 ELSS Funds that have delivered consistent returns over the long run.

Do note that some popular ELSS funds like Axis Long Term Equity, Invesco India Tax Plan, BNP Paribas Long Term Equity, ICICI Pru Long Term Equity and HDFC Long Term Advantage do not figure in the most consistent list. The reasons for omission are likely to be the lack of the desired level of consistency in performance.

It is important to understand that past performance does not impact future performance. Please seek professional help before investing in mutual funds.

Tax saving options for those in the 30% tax bracket

The primary tax deductions that every taxpayer claims are those under Section 80C of the Income Tax Act, 1961. Under this section, you can claim deductions of up to Rs. 1.5 lakh, and if you are in the 30% tax bracket, you can save up to Rs. 46,800 (including cess) by investing in the approved tax-saving options.

Eligible investments in the 80C basket include:

Equity-Linked Savings Schemes (ELSS)
Life Insurance Premiums
National Savings Certificate (NSC)
Public Provident Fund (PPF)
Five-Year Notified Tax Saving Bank Deposits
Senior Citizensâ€™ Savings Scheme (SCSS)
Sukanya Samriddhi Yojana (SSY), and
Employeesâ€™ Provident Fund (EPF)

Among others.

You could also claim expenses and outflows, such as your childrenâ€™s tuition fees and home loan principal repayment. Among these investments, the interest earned on your contribution towards EPF, PPF and SSY accounts is tax-free. You can either invest the entire Rs. 1.5 lakhs in one investment or diversify across multiple options.

Most of the time, those in the highest tax bracket quickly exhaust their 80C limit. Thatâ€™s why they need to look beyond 80C to save more taxes. Apart from deductions under section 80DDB for expenses incurred on specified illnesses and tax-saving deductions on interest paid on education loans under Section 80E, here are other tax deductions that you could claim if you belong to the 30% tax bracket.

Section 80D – For Tax Saving

Using this tax-saving option, you can save significantly on the health insurance premium you pay. For the premiums that you might be paying for yourself, your parents, spouse and dependent children, you can claim a maximum deduction of Rs. 25,000 in a financial year.

Moreover, if your parents are below 60 years of age, you get an additional deduction of Rs. 25,000. However, if your parents are above 60 years of age, the maximum deduction you can claim is Rs. 50,000 in a single financial year.

You can maximise tax saving options under this section if both you and your parents are over the age of 60 years. In that case, you can claim a total deduction of Rs. 1 lakh in a financial year.

Letâ€™s understand this better with an example. If you are below 60 years of age and your parents are senior citizens, you can claim a deduction of Rs. 75,000 (Rs 25,000 + Rs 50,000) in a financial year. If your net taxable income comes under the 30% tax bracket, you can save tax worth Rs. 23,400 (including cess).

You can get a benefit of Rs. 5,000 for preventive health check-ups within the maximum limit of Rs. 25,000 or Rs. 50,000. For instance, if you pay a premium of Rs. 20,000 towards health insurance and undergo a health check-up costing Rs. 5,000, you can claim a total of Rs. 25,000 under Section 80D.

Section 80CCD (1B) For Tax Saving

Here is another one of significant tax saving option you can try. If you have contributed to the National Pension Scheme (NPS), know that it is also tax deductible. However, if you claim it under section 80 CCD, the limit will be only up to Rs 1.5 lakhs which will be included with your 80C deductions.

Also, considering that it is one of the best tax saving options for salaried, the deduction will be capped at 10%. However, if you are a self-employed person, the deduction will be at 10% of the total gross income.

You can claim an additional deduction of Rs. 50,000 over and above the Rs. 1.5 lakhs for your contribution made to NPS under Section 80CCD (1B). This can be availed whether or not any deduction is claimed under section 80CCD. Being in the 30% tax bracket, the maximum tax that you can save under section 80CCD (1B) is Rs. 15,600.

Section 24

Section 24 is one of the highly regarded tax-saving options other than 80C. The reason behind this is that presently, for self-occupied homes, you can avail yourself of tax benefits on the principal repaid as well as on the interest amount. If you are planning to invest your money in property, know that you can also save taxes through this method. However, to do so, a ready-to-move-in property could be better than buying an under-construction one, despite the former being a bit more expensive than the latter.

You can claim a tax deduction of up to Rs. 1.5 lakhs only under section 80C for the principal amount repaid. However, the interest paid of up to Rs. 2 lakhs per year can be claimed as a tax deduction under section 24.

Note that for an under-construction property, the principal repaid does not get any tax benefit, and you can avail of tax benefits on the interest paid in five annual instalments after the possession of the property.

Most of the time, people generally pay off their home loans first and then take another loan to complete the renovations of their existing property. If you have done so as well, know that you can claim tax deductions of up to Rs. 30,000 on interest paid on this loan.

Under the 30% tax bracket, the maximum tax you can save under section 24 (for interest deduction of up to Rs. 2 lakhs for a self-occupied house) is Rs. 62,400.

This table will help you understand how much you save.

Tax Deduction	Tax savings for those in the 30% tax bracket (Rs.)
Section 80C	46,800
Section 80D	23,400
80CCD (1B)	15,600
Section 24	62,400
Total tax saved	1,48,200

Conclusion

Out there, you can find plenty of tax saving schemes other than 80C. All you would have to do is stay a bit more cautious and informed. To save more tax, choose investments that come with EEE status. EEE benefit implies exempt- exempt- exempt status on the income earned, principal invested and the maturity amount.

Are you yet to exhaust your 80C limit? Consider ELSS mutual funds. If you are confused with the same and need help,Â Wealthzi.comÂ can help you pick the right ones.

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What are ELSS funds and how you can invest in them?

Equity Linked Saving Schemes (ELSS) or tax saving mutual fund schemes as they are called, help investors to save taxes. This is because investments in ELSS funds qualify for a tax deduction. However, this is possible only if you choose the old tax regime. You can invest in ELSS funds without any tax benefits if you choose the new tax regime.

The investments in ELSS are subject to a lock-in period of three years. ELSS is considered as one of the best options to save taxes and create wealth in the long run. Here is all the information you need on ELSS funds.

Benefits of investing in ELSS

Higher returns

Although the risks are higher, investments in ELSS funds have the potential to deliver significantly higher returns when compared to traditional tax saving investments. While PPF and NSC give you 7.9% per year, the five-year post office deposits give only up to 7.7%. Even the 5-year bank fixed deposits give you much lesser return. However, ELSS can provide you with much more returns than these traditional schemes. For instance, the Axis Long Term Equity Fund which is an ELSS fund has provided annualised returns of 16.7% every year for the last three years. The ten-year return of this fund is at 17.89%. Since ELSS funds are essentially equity schemes, they are able to deliver exponential returns in the long run if you stay invested in them.

Tax exemption

The Income Tax Act allows taxpayers to invest in specific securities and taxpayers can claim it as a deduction from their taxable income. ELSS is one of the approved securities under Section 80C of the Income Tax Act, 1961. Others include Public Provident Fund (PPF), postal savings like National Savings Certificate (NSC), tax-saving fixed deposits and National Pension Scheme. So, investments of up to Rs. 1.5 lakh in these schemes, which includes ELSS, is eligible for tax exemption.

Lower tax

The returns from this fund are taxed like gains from any other equity mutual fund scheme. When you sell your ELSS funds, only long-term capital gains of over Rs 1 lakh are taxed at 10%. So, if your capital gains are less than Rs 1 lakh, you don’t need to pay any tax. Suppose an investor has made a capital gain of Rs 1.2 lakhs on the investment in this scheme, and withdraws the amount after three years, capital gains tax of 10% will be levied on Rs. 20,000. The tax payable will be just Rs 2,000.

Lesser lock-in period

While PPF has a maturity tenure of 15 years, NSC has to be held for five years. ELSS has the shortest lock-in period of three years among all 80C investments.

Possibility of income

You can opt for dividend pay-outs if you want to receive regular income. You get this income whenever the fund declared dividends even during the lock-in period.

Lower costs

ELSS mutual funds do not have any entry or exit load (but remember there is a 3-year lock-in).

Who can invest in ELSS?

Any one including Non-Resident Indians (NRI) can invest in ELSS funds. However, if you are a resident of the United States of America (USA), investing in Indian mutual funds is not recommended because of Passive Foreign Investment Company (PFIC) related taxation and reporting problems.

ELSS is suitable for investors with a long-term investment horizon of more than three years. As the underlying assets mostly comprise of equity securities which are quite volatile, it is important that the investor have a high-risk appetite.

How much can you invest?

You can invest as little as Rs. 500 in an ELSS fund. While you can claim tax benefits of only up to Rs.1.5 lakhs, you are free to invest as much as you want in ELSS funds.

How to invest in ELSS funds?

You can invest in ELSS like you do for any other mutual fund. The easiest way is online investing. You can invest in ELSS seamlessly through online platforms such as Wealthzi.com or directly through the websites of the Asset Management Companies (AMCs) whose funds you want to purchase.

If you want the conventional mode of investment, you will need to fill a form and submit it at the nearby branch of the fund house.

You can make ELSS investments either as a lumpsum or using the Systematic Investment Plan (SIP) route. Note that each SIP you make will have a lock-in of three years. If you want to redeem your funds after three years, it is best to make a one-time investment. Looking for the best ELSS funds? Get in touch with the wealth consultants at Wealthzi.

Check out our selection of ELSS Funds.

How to invest in mutual funds for financial goals

You might have heard financial experts tell you that you can invest in mutual funds for goals such as your retirement or your kid’s education. This is because over long periods, equities have the potential to outperform every other asset class. However, you can use mutual funds for short term goals like saving up for your dream vacation or that SUV you always wanted to buy. Here’s how to invest.

The basics

While drawing up a mutual fund portfolio, keep these basic rules in mind: know the broad categories of schemes in the market, their purpose and how they work. For instance, knowing the difference between income funds and gilt funds—where they invest, their portfolio and what kind of returns they are likely to generate- will help you choose the right fund.

Ensure that the mutual fund you choose matches your risk profile and investment objective. Let’s say you know that you need to invest in equity mutual funds for your retirement. However, you have a low risk appetite. In that case, you will be better off investing in index funds rather than actively managed mutual funds. So, respect your risk-taking capacity. Do not go overboard on equities if you are not comfortable taking on the risk.

Earmark funds for each of the goals. Let’s say you are investing in ELSS mutual funds for your kid’s education that is 15 years away. ELSS funds have a lock-in period of 3 years. Once the lock-in is done, ensure you reinvest the money in another investment. Linking your investments to your goals will help ensure that you don’t use the money for other purposes before you achieve the goal.

As you move closer to your goals, start moving your money from equity mutual funds to debt oriented mutual funds. Say your kid is in class 10 and will go for engineering course after he completes schooling. Since you have only two years in hand, you should choose debt-oriented funds such as bond or short-term funds that will be available at any time. You also preserve your capital gains from equities if you move to debt mutual funds.

The ideal way to build an adequate corpus for your goals is to go step by step. Earlier you start, the better money you will be saving. Of course, you also need to stop along the way occasionally to make sure things are happening as planned. The closer you get to your destination, the more careful you need to be.

Choosing the fund

Have a mix of large- medium- and small-cap equity schemes if you are investing for long term goals. If you will need the funds in about 8-9 years from now, opt for mid and small cap funds. However, if the goal is five years away, you may want to stick to large-cap funds as they invest in well-established, top-rung companies and are, therefore, less volatile. They give reasonable gains when equity markets rise and are also comparatively less volatile when equity markets fall.

High risk funds like thematic funds can be considered to get the kicker in returns only if you have a higher risk profile. The idea is to take the equity advantage and yet control the risks you take. Choose well-performing equity schemes with established track record.

If you are investing for the short term which is more than one year, choose from a range of income funds, credit risk, dynamic bond funds, duration funds and bond funds. If you can take higher risks, you can invest in thematic debt funds such as Sundaram Banking & PSU Debt Fund. If you need to invest for less than a year, you could invest in liquid funds and short-term debt funds.

Diversification across funds

Diversify across and within mutual funds. Don’t diversify for the sake of diversification or over-diversify within asset classes. You can invest in up to three schemes in a category at most. Remember, one of the reasons you have opted for mutual funds is because you do not want to spend a lot of time on your investments. But you might spend more time on your mutual funds if you scatter your money across too many schemes. The rule holds true whether you are investing in the equity or the debt market. If you invest in too many schemes with the same or similar style, you could end up investing in same stocks through multiple funds. Even though there is no fixed number as to how much one should hold in one’s portfolio, it can be at the most 7-10 schemes. This makes it easy to manage your portfolio.

Portfolio review

If you think that your job is done once you have put your money in mutual funds, think again. Your portfolio may contain star performers, but just a couple of oversights could affect their performance. So, track your scheme’s Net Asset Value (NAV) on a monthly/quarterly basis. Look for changes in the scheme’s portfolio. Compare the scheme’s performance with that of the benchmark, or similar schemes of other mutual funds. Ensure that the fund is adhering to the fund objectives stated in the offer document. Read all those various periodic statements such as newsletters, and half-yearly and annual reports. Make sure you track your fund at least every 18-24 months.

Choosing the right mutual funds for each of your goals will help you achieve them without hassles and in right time.

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Benefits of investing in ELSS

Higher returns

Tax exemption

Lower tax

Lesser lock-in period

Possibility of income

Lower costs

Who can invest in ELSS?

How much can you invest?

How to invest in ELSS funds?

The basics

Choosing the fund

Diversification across funds

Portfolio review

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