People smartly invest a portion of their savings into Equity Linked Saving Scheme (ELSS) to reap the benefits of a tax deduction under Section 80C of the Income Tax Act, 1961. The maximum deduction one can claim under Section 80C for a given financial year is Rs. 1,50,000.

What makes tax saving mutual funds stand out from other tax saving options is the fact that it provides high returns and has a relatively shorter lock-in period of three years. Post-lock-in, one can conveniently redeem their investments from their ELSS Mutual Funds and pay long term capital gain tax or keep the investment as is.

When choosing an ELSS Mutual Fund, an investor should analyze and compare the various parameters of the fund as well as know your own investment goals, investment time horizon, and risk appetite. Let’s look at the top seven best performing ELSS Mutual Funds for the year 2019-20 over a five year period.

Scheme Name

Asset Allocation (%)AUM (In Crore)Launch Date

Mirae Asset Tax Saver Fund – Direct

Large Cap₹ 2,465

28th December 2015

Axis Long Term Equity Fund – Direct

Large Cap₹ 21,49229th December 2009

Aditya Birla Sun Life Tax Relief 96 – Direct

Mid & Small Cap₹ 9,814

29th March 1996

ICICI Prudential Long Term Equity Fund – Direct

Large Cap₹ 6,525

19th August 1999

Tata India Tax Savings Fund – Direct

Large Cap₹ 2,009

31st March 1996

Kotak Tax Saver Fund – Direct

Large Cap₹ 987

23rd November 2005

Motilal Oswal Long Term Equity Fund – DirectLarge Cap₹ 1,584

21st January 2015

 

  1. Mirae Asset Tax Saver Fund – Direct

Mirae Asset Tax Saver Fund is handled by the renowned fund manager Neelesh Surana. The fund does not have a long track record, and despite that, it has become a popular option amongst investors as the fund is consistently generating high returns.

The fund has managed to successfully beat its peers and outperform its benchmark with a high margin.

The fund holds 71 percent of its portfolio in large-cap while the remaining 29 percent is allocated to mid-cap and small-cap. The portfolio holds 59 stocks of which the top 5 stocks make up 30 percent of the portfolio. This indicates that the assets of the portfolio have been well diversified.

Holding market leaders like HDFC Bank, ICICI Bank, and Reliance Industries will ensure that the fund remains stable during times of turmoil.

If we look at the trailing returns, we can see that the fund has outperformed the S&P BSE 200 TRI.

Returns

1 year3 year5 year
Mirae Asset Tax Saver Fund16.63%17.85%

S&P BSE 200 TRI13.22%14.39%

Source:  Value Research, Data as on 25th November 2019

  1. Axis Long Term Equity Fund – Direct

Ever since its inception, Axis Long Term Equity Fund has been an investor’s favorite in the tax-saving space. Year after year, it has been a top performer continuing to beat its peers and grow in size and popularity.

The asset allocation of the fund is segregated as 75 percent in large-cap, 23 percent in mid-cap and 2 percent in small-cap which indicates that there is a degree of safety in case of market volatility.

The fund has 32 stocks with the top 5 stocks constituting nearly 40% of the portfolio as a whole. The concentrated strategy adopted by fund manager Jinesh Gopani is unique to his style reflecting his research and convictions.

Returns

1 year3 year5 year

Axis Long Term Equity Fund

18.02%16.35%

11.59%

S&P BSE 200 TRI13.22%14.39%

9.26%

Source:  Value Research, Data as on 25th November 2019

  1. Aditya Birla Sun Life Tax Relief 96 – Direct

Since launching in 1996, this fund has given a return of 23.71 percent. What this means is that Rs. 1,00,000 invested at inception will now be worth Rs. 1,33,44,754.

Ajay Garg, a well-experienced fund manager, has been with this fund since 2006. The asset allocation of the fund leans stronger towards mid and small-cap with a total of 51 percent in the same.

The fund has 45 stocks with the top 5 stocks constituting nearly 40% of the portfolio as a whole.

For those willing to take on a reasonable amount of risk, this slightly aggressive fund is a great bet for 2019-20.

Returns

1 year3 year

5 year

Aditya Birla Sun Life Tax Relief 96

7.87%13.12%

10.76%

S&P BSE 200 TRI

13.22%14.39%

9.26%

Source:  Value Research, Data as on 25th November 2019

  1. ICICI Prudential Long Term Equity Fund – Direct

With a return of 19.75 percent since launch and 12.95 percent over a 10 year period, ICICI Prudential Long Term Equity Fund has been one of those in the tax saving mutual funds category that provides consistently high returns.

The five years and one year return of the fund is lower than that of the benchmark and in hopes of a revival, Sankaran Naren, the Chief Investment Officer of ICICI AMC, in November 2019 took over as the fund manager.

73 percent of the assets of the fund are parked in large-cap with the remaining distributed between mid and small-cap. Those seeking a more conservative tax saver scheme this year, look no further as this one is the best.

Returns1 year3 year

5 year

ICICI Prudential Long Term Equity Fund

10.09%10.75%

7.90%

S&P BSE 200 TRI

11.68%13.60%

8.94%

Source:  Value Research, Data as on 25th November 2019

  1. Tata India Tax Savings Fund – Direct

This fund is considered to be moderately high risk and has beaten the benchmark in both the 3 year and 5 year periods.

The fund has 80 percent of its assets invested into large-cap stocks, 14 percent in mid-cap and 7 percent in small-cap. The focus of the fund is to provide medium to long term returns all the while keeping an emphasis on capital appreciation.

The fund managers Rupesh Patel and Ennettee Fernandes together bring more than 28 years of experience that has led to the fund’s outstanding performance.

Returns

1 year3 year

5 year

Tata India Tax Savings Fund

14.30%12.44%

16.38%

S&P BSE Sensex TRI17.24%9.03%

13.53%

Source:  Value Research, Data as on 25th November 2019

  1. Kotak Tax Saver Fund – Direct

A star-rated fund, Kotak Taxsaver is considered to be a moderately high-risk bet and is suitable for those who have a long term horizon of more than 5 years.

The fund follows a bottom-up stock picking strategy with an emphasis on higher earnings and growth.  The fund has outperformed the benchmark in the 1 and 5 year time horizon but was unable to beat the benchmark in the 3 year time horizon.

Mr. Harsha Upadhyaya has been managing the fund since 2015 and has rich experience in the field of fund management.

Returns

1 year3 year

5 year

Kotak Tax Saver Fund15.41%12.32%

9.68%

S&P BSE 500 TRI

11.68%13.60%

8.94%

Source:  Value Research, Data as on 25th November 2019

  1. Motilal Oswal Long Term Equity Fund – Direct

This fund is a relatively new entrant into the tax saving mutual fund space but has emerged as a top-rated tax saver fund in India.

The scheme has outperformed the benchmark in the three year period but has demonstrated underperformance in the one year time horizon. The portfolio assets are distributed amongst large, mid and small with 71 percent, 28 percent, and 2 percent in each respectively.

The stance of this fund is slightly aggressive and is suitable for those who willing to take on moderate to high-risk investments. The focus of the stocks picked by the fund managers are in the key domestic sectors and they have hedged the investments in these sectors by increasing their international exposure.

Returns

1 year3 year5 year

Motilal Oswal Long Term Equity Fund

15.42%14.11%

S&P BSE 500 TRI

11.68%13.60%

Source:  Value Research, Data as on 25th November 2019

A comprehensive view of the fund you are looking to invest in is important to determine whether the same is suitable for you or not. You will be able to take the information provided above and make a more informed choice when investing.

Happy Tax Saving Season!