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Top 5 ELSS funds to Invest in 2022

  • Rudri Rawell
  • Jan 12 2022
  • 6 minutes
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ELSS (equity linked savings schemes) mutual funds provide investors with the dual benefit of tax deductions and long-term wealth creation. These come with a lock-in period of three years, which is the shortest among all tax-saving instruments. ELSS are preferred by investors since these have the potential to generate the highest returns among all 80C options. 

Here, we will provide a brief explanation on ELSS funds for beginners and share top 5 fund recommendations in the ELSS category.

What is ELSS?

ELSS funds or Equity Linked Savings Scheme are equity funds that invest the corpus collected from investors, mainly in equity or equity-related instruments. ELSS are primarily tax saving schemes as investors can avail a tax exemption of up to Rs. 1.5 lakhs from their yearly taxable income as per Section 80C of the Income Tax Act.

ELSS mutual funds follow an asset allocation strategy comprising 65% of equity and equity-linked securities, such as listed stocks. Some funds also invest in fixed-income securities to a certain extent. 

Top 5 ELSS funds to invest in 2022 

  1. Axis long term equity 

About the Fund

The objective of the scheme is to generate regular long-term capital appreciation through a diversified portfolio of equity and equity-related securities. It primarily invests in companies that have a strong growth & sustainable business model.

Inception DateJanuary 01, 2013
Benchmark NameS&P BSE 200 Total Return Index
Fund ManagerJinesh Gopani
Expense Ratio0.80%
Fund typeOpen-ended
Risk Medium-High

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
51.47%22.28%16.68%17.74%20.64%

2. Kotak Taxsaver Fund

About the Fund

Kotak Taxsaver fund aims to fetch long-term capital appreciation through a diversified portfolio comprising equity and equity-related securities. Through this investment, investors can avail of income tax deduction of up to Rs. 1.5 lakhs under Section 80C depending on prevailing tax laws. The fund has a statutory lock-in period of 3 years to ensure wealth accumulation combined with tax benefits. 

Inception DateJanuary 01, 2013
Benchmark NameNIFTY 500 Total Return Index
Fund ManagerHarsha Upadhyaya
Expense Ratio0.73%
Fund typeOpen-ended
Risk Very High

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
32.06%22.78%19.85%17.33%12.86%

3. Mirae Asset Tax Saver Fund

About the Fund

This ELSS fund aims to earn long-term capital growth for investors by setting up a diversified portfolio primarily consisting of equity and equity-related instruments. The scheme has a statutory lock-in period of 3 years. Through ELSS funds, investors can aim for long term wealth accumulation combined with the benefit of tax saving. These investors are eligible for a tax deduction of up to Rs 1.5 lakhs as per Section 80C of the Income Tax Act 1961.

Inception DateDecember 28, 2015
Benchmark NameNifty 500 Total Return Index
Fund ManagerNeelesh Surana
Expense Ratio0.43%
Fund TypeOpen-ended
RiskVery High

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
36.85%28.72%24.84%23.78%22.30%

4. Canara Robeco Equity Taxsaver Fund

About the Fund

This scheme is ideal for Investors who are looking to fetch higher returns by investing for at least 3 years combined with tax-saving benefits. The scheme’s objective is to achieve long term capital appreciation by investing mainly in equities across primary and secondary markets combined with investment in overseas equity markets including ADRs/GDRs.

Inception DateJanuary 02, 2013
Benchmark NameS&P BSE 500 Total Return Index
Fund ManagerShridatta BhandwaldarVishal Mishra
Expense Ratio0.76%
Fund TypeOpen-ended
RiskVery High

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
36.80%31.16%25.06%22.13%17.04%

5. IDFC Tax Advantage (ELSS) Fund

About the Fund

The objective of the IDFC tax advantage ELSS scheme is to build a diversified portfolio of stocks belonging to companies that have strong fundamentals with reasonable valuations. The scheme mostly invests in equities and equity-related instruments with a small portion of the portfolio allocated towards debt & money market instruments. The scheme has a statutory lock-in period of 3 years to avail benefits of tax savings.

Inception DateJanuary 01, 2013
Benchmark NameS&P BSE 500 Total Return Index
Fund ManagerDaylynn Gerard Paul Pinto
Expense Ratio0.74%
Fund TypeOpen ended
RiskVery High

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
49.76%33.16%22.61%21.36%18.74%

6. Invesco India Tax Plan

About the Fund

This tax plan aims to generate long-term capital growth using a diversified portfolio consisting mainly of equity and equity-related securities. With a well-researched and concentrated portfolio, the scheme aims to invest across different market capitalisation sectors in approximately 20 – 50 stocks by adopting the bottom-up approach. The scheme has a mandatory lock-in period of 3 years after which investors can claim a tax deduction of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act.

Inception DateJanuary 01, 2013
Benchmark NameS&P BSE 500 Total Return Index
Fund ManagerAmit NigamDhimant Kothari
Expense Ratio0.88%
Fund TypeOpen ended
RiskVery High

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
33.59%25.75%21.08%19.98%18.94%

Conclusion

Like all mutual fund investments, ELSS comes with many benefits and disadvantages. An investor must try to align personal investment goals with the fund objective. It is important to carefully consider individual risk appetite and investment horizon against the scheme’s risk levels and investment duration. Investments made after conducting basic research can help investors get maximum benefits.

Incentives like tax saves, benefit of small monthly investments and potential to generate long-term wealth are some of the main reasons why ELSS makes for a good investment choice for new investors. 

FAQs

  1. How do I redeem my ELSS after 3 years?
    To redeem your ELSS after the 3-year lock-in period, you can reach out to your agent, broker or directly contact the AMC. ELSS redemption can only be done after completing the mandatory 3-year lock-in period. But, if you are not in need of the amount, you can continue to hold your ELSS funds for any number of years.
  1. Can I invest more than 1.5 lakhs in ELSS?
    If the main objective of investing in an equity-linked savings scheme (ELSS) is to claim the tax benefit under Section 80C of the Income-tax Act, 1961, then you must invest marginally more than the stipulated limit of Rs 1.5 lakh in a financial year. For example, you may have to invest at least Rs. 500 over the Rs.1.5 lakh required.
  1. Is ELSS risk free?
    ELSS funds are diversified equity funds and have a similar risk as equity funds due to the exposure to equity markets. Apart from the implied equity risk component, ELSS funds come with a three year lock-in period during which the investment cannot be taken out.
  1. How to invest in ELSS?
    To invest in ELSS, you can download the Finity app on your smartphone. The app allows a seamless investment process by looking at various fund options, fund performance statistics, investment time horizon, and selecting a convenient mode of investment. 
  1. Can I invest in both PPF and ELSS?
    The net tax benefit under Section 80C of the Income tax act is Rs. 1.5 lakhs. Therefore, even if you invest in both PPF and ELSS, you will still get a maximum tax deduction of Rs. 1.5 lakhs. Depending on your investment goals, you can divide the investment among PPF and ELSS or invest in either of these options.

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