Investors are legally allowed to save tax by investing in a type of mutual fund known as Tax Saving Funds.
Investing in mutual funds like this one can help an individual save up to ₹1.5 Lakhs in tax!
In this article, we will cover the best tax-saving mutual funds in 2024. Before that let’s understand what is tax savings mutual funds.
What are Tax Savings Mutual Funds?
Tax saving funds are a type of mutual fund that allows investors to save tax under Section 80C. These funds invest at least 80% of the corpus into equities.
The official term for tax-saving mutual funds is ELSS Funds, but investors use either term interchangeably. By the way, ELSS stands for Equity Linked Savings Scheme.
Section 80C of the Income Tax Act allows investors to claim a tax deduction of up to ₹1.5 Lakhs by investing the same amount in ELSS Funds.
While providing tax benefits, these funds carry a mandatory lock-in of 3 years.
This means that an investor won’t be able to withdraw their capital for at least 3 years, the duration of which will earn them returns based on the performance of the fund’s stock holdings.
Best Tax Savings Mutual Funds
Here are some of the best tax saving schemes for you:
1. Quant ELSS Tax Saver Fund Direct-Growth
The scheme was started on 7th Jan 2013 with an aim to generate capital appreciation by investing in a well-diversified portfolio of equity shares. It is presently managed by Ankit Pande and Vasav Sahgal.
- NAV: ₹406.86
- Fund Size: ₹8,341.96 Cr
- Expense Ratio: 0.77%
- 3-Year Return: 28.65%
- 5-Year Return: 34.75%
2. Bank of India Tax Advantage Fund Direct-Growth
The fund has around 87.15% investment in domestic equities and 6.94% in Debt instruments. Some of the top stocks in the portfolio are State Bank of India, Reliance Industries Ltd, Larsen and Turbo Ltd etc.
- NAV: ₹179.17
- Fund size: ₹1,210.15 Cr
- Expense Ratio: 1.19%
- 3-year return: 25.04%
- 5-year Return: 27.61%
3. SBI Long-Term Equity Fund Direct-Growth
The scheme has S&P BSE 500 TRI as the benchmark index. It is currently managed by the fund manager Dinesh Balachandran. The scheme has invested in some of the top stocks like Bharti Airtel, Torrent Power, ICICI Bank Ltd and GAIL India Ltd.
- NAV: ₹412.24
- Fund size: ₹21,976.30 Cr
- Expense Ratio: 0.96%
- 3-Year return: 28.17%
- 5-Year Return: 23.33%
4. HDFC ELSS Tax Saver Fund Direct-Growth
The fund has around 91.62% of the overall investment in domestic equities. Nifty 500 TRI is the benchmark index of the scheme. Some of the top stocks in the portfolio are HCL Technologies, Cipla Ltd, Axis Bank, ICICI Bank etc. The fund manager Roshi Jain is currently managing the scheme.
- NAV: ₹1,272.89
- Fund size: ₹13,990.30 Cr
- Expense Ratio: 1.14%
- 3-Year return: 26.93%
- 5-Year Return: 19.11%
5. Bandhan ELSS Tax Saver Fund Direct-Growth
The scheme came into existence on 2nd Jan 2013. Daylynn Pinto is the current fund manager of the scheme. The fund has a benchmark index as S&P BSE 500 TRI.
A total of around 94.7% of the investment of the scheme is in domestic equities. Tata Motors, Infosys, Reliance Industries, and TCS are some top companies where fund managers have invested capital.
- NAV: ₹157.81
- Fund size: ₹6,252.84 Cr
- Expense Ratio: 0.53%
- 3-Year return: 22.27%
- 5-Year Return: 21.98%
6. DSP ELSS Tax Saver Fund Direct-Growth
The scheme has Nifty 500 TRI as the benchmark index. Out of the total investment in the scheme, around 95.14% has been invested in domestic equities.
Some of the top scrips in the portfolio of the scheme are Power Finance Corporation, Mahindra & Mahindra Ltd, HDFC Bank Ltd, HCL Technologies etc.
- NAV: ₹129.61
- Fund size: ₹14,075.60 Cr
- Expense Ratio: 0.79%
- 3-Year Return: 21.34%
- 5-year Return: 21.38%
7. Franklin India Taxshield Direct – Growth
The fund has around 97.75% of the investment in domestic equities. It has invested in some of the leading companies like Infosys, United Spirits, HDFC Bank, Axis Bank etc. The fund managers appointed to manage the scheme are Rajasa Kakulavarapu and R. Janakiraman.
- NAV: ₹1,431.56
- Fund size: ₹6,179.88 Cr
- Expense Ratio: 1.13%
- 3-Year Return: 23.04%
- 5-Year Return: 19.51%
8. Motilal Oswal ELSS Tax Saver Fund Direct-Growth
This is a relatively new scheme which was launched on 21st Jan 2015. Currently, it has fund managers Niket Shah and Rakesh Shetty. The fund has around 99.15% investment in domestic equities, out of which 23.33% is in large-cap stocks.
- NAV: ₹49.10
- Fund size: ₹3,205.13 Cr
- Expense Ratio: 0.67%
- 3-Year Return: 26.58%
- 5-year Return: 23.02%
Benefits of Tax Savings Mutual Funds
Some of the benefits of Tax savings mutual funds are as under.-
- The investments in Tax savings mutual funds qualify for tax deduction under Section 80C up to ₹1.50 lakhs.
- The fund has the shortest lock-in period among all 80C investments.
- You can invest in tax savings mutual funds either in lumpsum amount or through the SIP route.
- As here the major investment takes place in equities, so there are more chances of higher returns in the long run.
- You can easily invest in these mutual funds from AMC’s website or from an investment platform like Dhan.
Conclusion
Tax savings funds help give the benefit of tax deduction as well as provide good returns in the long run. However, they invest in equity and thus can carry market risk.
In this blog, we have listed some of the best tax-saving mutual funds for you. You can go through it if you are planning to invest in a tax savings fund.
