Top 10 Tax Saving Mutual Funds

According to Sec 80C of the Income Tax Act, 1961, there are certain investments you’re your taxable income wherein you can claim deductions. One such investment is the Equity Linked Savings Scheme (ELSS) or tax saving mutual funds. This is the best investment avenue as the investor can earn benefits of tax exemption as well as capital appreciation.

There are many benefits of investing in ELSS as this tax saving mutual funds has the lowest lock-in period, which consists of three years, as compared to other avenues under Sec 80C. There are also no taxes applicable during the phases of contribution, accumulation, and withdrawal of the fund. The investor can avail a maximum tax benefit of Rs. 1 lakh, irrespective of the amount invested. Though there are several ELSS funds available, here are the top 10 tax saving mutual funds:

Axis Long-term Equity Fund

This is an open-ended ELSS with a lock-in period of 3 years. It can be either a 3-5 year investment or more with a diversified portfolio of equity related instruments. The investor can enjoy tax benefits of up to Rs. 46,350.

Franklin India Tax Shield Fund

The objective of this ELSS, having a lock-in period of 3 years, is to offer long-term capital growth and a tax rebate of around 80%, allocated to equities. Tax deduction till about Rs. 1.5 lakhs can be availed by investors. With this fund a steady growth across a diversified portfolio of market cap range and equities can be maintained. Investors can create wealth over a long term using tax savings.

        ICICI  Prudential Tax Plan – Regular Plan

The tax-saving mutual fund offered by ICICI consists of medium and large-sized stocks that have long=term growth and capital appreciation. With a lock-in period of 3 years, the fund manager can help the investor make long-term, strategic investments in a varied portfolio.

Reliance Tax Saver (ELSS)

Under Reliance Tax Saver (ELSS), an amount of Rs. 1 lakh can be invested for a lock-in period of 1095 days. The returns of this fund qualify for tax deduction under Sec 80C of the IT Act, 1961. Minimum one time investment for this ELSS is Rs. 500 with a minimum SIP of Rs. 100 every month.

Birla Sunlife Tax Plan

This is an open-ended equity linked savings scheme offered by Birla Sunlife. Under this tax-saving mutual fund plan, investors can save up to Rs. 1 lakh in tax deductions.  With a 3-year period, there is a potential of superior growth opportunities and higher returns, in comparison to debt instruments.

BNP Paribas Long Term Equity Fund

The objective of this investment scheme is to generate long-term capital growth from a diversified and portfolio of equity and equity related securities. This actively managed account also offers tax rebate,

Canara Robeco Equity Tax Saver Fund – Regular Plan

With this regular plan of Canara Robeco equity tax saver fund, investors can investment in a minimum amount of Rs. 500, with subsequent purchases of Rs. 500, in multiples of Rs. 1.00.

Religare Invesco Tax Plan

With this ELSS, long-term capital growth can be generated using equity and equity-related instruments. Despite the short-term lock-in period of 3 years, this scheme has the potential to increase wealth

Tata Tax Saving Fund

With effect from August 10, 2015, Tata Tax Saving Mutual Funds has been renamed as Tata Long Term Equity Fund. Exempted from tax under Sec 80C, this scheme offers long-term growth in capital with 80% of the investments in equity and 20% in other market instruments.

HDFC Tax Saver

An open-ended tax saving mutual fund scheme, with a lock-in period of 3 years, HDFC tax saver ELSS is an investment for capital growth in the long term. There are two plans – HDFC Tax Saver and HDFC Tax Saver Direct – offering dividend and growth options.

ELSS funds, just like equity funds, have dividend as well as growth options. After the expiry period of three years, investors can get quite a lump sum amount. However, it is essential to do a proper research before investing in an ELSS fund.  Apart from the fund’s portfolio, expense ratio, investment approach, and past volatility, it is also important to check out the fund’s long-term performance, before investing in it. It is also beneficial to consult a financial advisor while making investment plans, be it long-term or short-term.