ELSS (Equity Linked Savings Schemes) or tax saving mutual funds are the investment instruments to go for, if you are looking for combined advantage of tax benefits and wealth creation. You can claim tax deduction up to Rs.1.5 lakh if you invest in an ELSS fund. Besides this, such type of equity-based mutual fund is capable of generating a substantial amount of profit on a long-term basis.
ELSS funds come with a lock-in period of three years, which means you can redeem them only after 3 years. This works to your benefit, because the fund manager is in a position to take the best picks and channelize your investments in the best stocks for optimal returns.
Here are the 5 best ELSS funds for the year 2016 –
- Birla Sun Life Tax Relief 96 – One of the oldest tax saving mutual funds launched on March 29, 1996, it has delivered a handsome 26.14 percent return per annum since its launch. The returns for the 3, 5 and 10 years are 27.73 percent, 20.41 percent and 12.71 percent per annum The fund invests in financial, automobile, services, healthcare and FMCG as its top five sectors. The fund invests 55 to 60 percent in large cap funds, with the rest of the allocation being pooled in mid-caps and small caps. The expense ratio for Birla Sun Life Tax Relief 96 is 2.42 percent.
- DSP BlackRock Tax Saver Fund – The fund has returned 26.71 percent per annum in a 3-year period and 21.19 percent per annum in a 5-year period. The top five sectors where the fund invests are financial, energy, healthcare, construction and automobile. The fund was launched in 2007 and has delivered 14.63 percent return per annum since its launch. The expense ratio for the fund is 2.53 percent.
- Franklin India Taxshield Fund – The Franklin India Taxshield Fund was launched on April 10, 1999 and has a proven ten-year record like Birla Sun Life Tax Relief 96 Fund. It has delivered 24.84 percent, 18.51 percent and 14.64 percent return per annum in a 3, 5 and 10-year period. The expense ratio for the fund is 2.41 percent. It invests in financial, automobile, technology, healthcare and engineering as its prized sectors. The fund has delivered 24.58 percent return per annum since its launch. The fund with an average of 75 percent allocation in large caps is a safe choice for investors. The risk-averse approach has helped the fund stay solid in bear markets.
- Axis Long Term Equity Fund – The fund has given 22.41 percent and 28.51 percent returns per annum on a 5 year and 3-year basis. Axis Long Term Fund is a multi-cap fund with an average of 70 percent of its assets in large caps, while the remaining is pooled in mid-caps and small caps. The fund launched in 2009, delivered 19.59 percent return per annum since inception. The fund invests in financials, automobile, healthcare, chemicals and technology, as the top five sectors. The expense ratio for the fund is 1.98 percent. The fund looks for companies that deliver high returns on investment and have solid and sustainable business models.
- Reliance Tax Saver Fund – The fund has been one of the top performing funds in the ELSS category since its launch, with 34.04 percent, 19.16 percent and 15.34 percent returns per annum in a 3, 5 and 10-year period. Reliance Tax Saver Fund was launched in 2005 and since inception, has delivered 15.65 percent return per annum. The fund has an aggressive approach because unlike Axis Long Term Equity Fund and other such funds with a large cap bias, this one keeps the large cap exposure to 40 percent with higher exposure to mid-caps and small caps. Reliance Tax Saver Fund invests in financial, automobile, engineering, services and diversified as its top five sectors. The expense ratio for the fund is 2 percent.