Best Tax Saving Mutual Funds in India

Best Tax Saving Mutual Funds in India

Tax saving mutual funds also known as Equity-linked Savings Schemes (ELSS) are one of the most popular investment options available to the local users in India. By investing in mutual funds, basically a person is getting exposed to the market. And one of the major reasons why investors want to invest in these funds is because of the overall reduced tax liability. Owing to all these benefits, these tax saving funds are completely safe and a must have investment, especially for retail investors.

List of Best Tax Saving Mutual Funds 

Fund Name

Minimum Investment

Current Value

AUM

Quant Tax Plan

₹ 500

₹ 12.66 LAKH

₹4,925 Crs

Bank of India Tax Advantage Fund

₹ 1000

₹ 10.48 LAKH

₹889 Crs

SBI Long Term Equity Fund

₹ 500

₹ 10.21 LAKH

₹15,587 Crs

Kotak Tax Saver Fund

₹ 100

₹ 9.84 LAKH

₹4,089 Crs

Mahindra Manulife ELSS Fund

₹ 500

₹ 9.83 LAKH

₹656 Crs

JM Tax Gain Fund

₹ 500

₹ 9.79 LAKH

₹92 Crs

Motilal Oswal Long Term Equity Fund

₹ 500

₹ 9.78 LAKH

₹2535 Crs

Mirae Asset Tax Saver Fund

₹ 500

₹ 9.77 LAKH

₹17,630 Crs

HDFC Tax Saver Fund

₹ 500

₹ 9.76 LAKH

₹11,286 Crs

Union Tax Saver (ELSS) Fund

₹ 500

₹ 9.71 LAKH

₹696 Crs

Features of the Tax Saving Mutual Funds

By investing in mutual funds, one gets to enjoy several key features which, in the first place, make mutual funds a great investment option. Here are some of the features of tax saving mutual funds you should consider.

  • Tax Benefits: With mutual funds, the investors get to enjoy tax deductions up to INR 1.5 lakhs under the Section 80C of the income tax act.
  • Equity Exposure: These kinds of funds target the equity market. Because there is a market involved, there is a potential for higher returns compared to traditional tax-saving methods.
  • Lock-In Period: These ELSS funds come with a mandatory lock-in period of three years.
  • Diversification: The fund managers of these ELSS funds diversify their respective portfolios across various stocks, sectors. With this, one gets to minimise the risk factor and market volatility.
  • Flexibility: Investors have flexibility in choosing the investment amount, which can be as low as Rs. 500.

Who Should Invest in Tax-Saving Mutual Funds?

Investing in tax-saving mutual funds, or Equity-linked Savings Schemes (ELSS), can be a suitable option for a specific category of investors:

  • Tax-Conscious Individuals: People who are risk averse and who want to optimise their tax savings must invest in such schemes.
  • Long-Term Investors: Tax saving mutual funds are an ideal investment option for investors who want to lock in their money for the long term. For instance 3-5 years.
  • Diversification Seekers: For those investors who want to diversify their respective portfolios, tax saving mutual funds are an ideal investment option.
  • Moderate to High Risk Tolerance Investors: Investors who have moderate to high risk tolerance should invest in tax saving mutuals funds.
  • Systematic Investment: Those who wish to invest regularly on a monthly basis should invest through SIPs. Goes without saying, SIPs enable disciplined and systematic wealth creation.
  • Capital Appreciation Seekers: ELSS funds are growth-oriented investments. If your primary objective is capital appreciation rather than regular income, the growth option of ELSS funds can help your investments grow over time.

Best Tax Saving Mutual Funds Advantages

  • Tax Benefits: For the unversed, investors now can claim a total deduction of upto INR 1.5 lakh from their respective taxable income.
  • Higher Potential Returns: Mutual funds are an ideal option if you are looking for higher returns over a prolonged period of time.
  • Fund Management: The best part about investing in mutual funds is that all the fund management is done by professional fund managers. So, a retail investor doesn’t need to worry about managing their respective funds.
  • Investment Flexibility: Investors have the freedom to choose the amount they want to invest in ELSS funds, making it accessible to a wide range of investors, from beginners to experienced individuals.

How Tax Saving MF is Different from Other Investment Options?

The ELSS funds are majorly designed for wealth creation over the long term. Here is how tax saving mutual funds are different from other investment options available for the investors. 

  • Investing in Equity: ELSS (Equity-Linked Saving Scheme) stands distinct for its core investment in stocks and equity-associated instruments. This focus on equities allows for a potentially higher yield, distinguishing it markedly from the more traditional, fixed return avenues like Fixed Deposits, Public Provident Funds, and National Savings Certificates.
  • Shorter Lock-in Horizon: ELSS funds are characterized by a condensed three-year lock-in period, offering a degree of liquidity that’s unparalleled among its tax-saving counterparts. It caters to those seeking quicker access to their investments without a prolonged waiting phase.
  • Expert Portfolio Management: ELSS underscores a dynamic approach to investment, orchestrated by seasoned fund managers. Unlike passive investment domains like PPF and SCSS, ELSS is hallmarked by an active, expert-guided strategy aimed at optimizing returns. These adept professionals meticulously navigate the equity landscape, executing informed decisions to potentially amplify the investors' capital.
  • Flexible Investment Tiers: ELSS is synonymous with adaptability, offering investors the latitude to invest an amount that aligns with their financial contours. In contrast, several other tax-saving mechanisms prescribe a rigid ceiling on the deposit amount, limiting the investors’ leeway to modulate their investments.

How to Pick the Best Tax-Saving Mutual Funds in the Market?

Selecting the best tax-saving mutual funds (Equity-linked Savings Schemes or ELSS) in the market requires careful consideration of various factors to align your investment with your financial goals and risk tolerance. Here are the key factors that you need to consider before picking any tax saving mutual fund. Firstly, define your financial goals, assess your risk tolerance, check the funds historical performance and the fund manager’s track record. Factoring in all these points will help you pick the best tax saving mutual funds in the market.

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