Top Tax Mutual Funds in India

ELSS or Tax-Saving Mutual Funds are a great tax-efficient saving scheme that carry exposure to equity. Their exposure to equity makes them risk and are therefore suited to investors who have a high capacity for risk. These funds carry a maximum tax deduction of Rs. 1.5 lakh but have no upper limit for investments. Each Mutual Fund house is allowed to create one ELSS, these are the best ELSS on the market today.

Top Funds
FUND 3Y RET. 5Y RET. RATING
ICICI Prudential Long Term Equity Fund (Tax Saving) Direct Plan11.64%11.6%3
L&T Tax Advantage Fund Direct Plan11.36%12.03%5
Aditya Birla Sun Life Tax Relief 96 Direct Plan11.86%14.17%5
Tata India Tax Savings Fund Direct Plan14.45%11.6%5
Axis Long Term Equity Fund Direct Plan14.83%15.58%5
IDFC Tax Advantage (ELSS) Fund - Direct Plan13.94%13.98%5

Tax Funds : Basics, Types, Benefits and More

What are Tax/ELSS Funds?

Section 80C of the Income Tax Act allows for a deduction of up to Rs. 1.5 lakhs from an assessee’s taxable income if the assessee invests in any of the instruments mentioned under this section. There are various instruments that can avail the benefits of Section 80C, like, Public Provident Funds (PPF), National Savings Certificates (NSC), Fixed Deposits (FD) and the latest, fast-growing Equity Linked Saving Schemes (ELSS). Among all these investments the ELSS has the shortest lock-in period of 3 years and, even though they carry higher risk, can reward the investor handsomely. Here are some things to keep in mind while investing in ELSS:

Proof of Identity (KYC)

Any investment in mutual funds requires the investor to be KYC compliant, this stands true for ELSS as well. It is mandatory for the investor to provide a proof of address and proof of identity, an in-person verification also has to be completed before investment.

Amount

Investments in ELSS can be as low as Rs. 500 and there is no upper limit to investment. Even though there is no upper limit to investment, a maximum deduction of Rs. 1.5 lakh will be available on the investor’s income.

Investment Methods

Investors can invest in an ELSS through either a lump sum investment or through a Systematic Investment Plan (SIP). A SIP deducts a predetermined amount from the investor's bank account periodically to invest in an ELSS.

Statement of Account

After an investment is made in an ELSS, the Asset Management Company sends the investor a Statement of Account to verify that the investment has been made. The Statement of Account can be used as Proof of Investment for taxation purposes.

Lock-in Period

An ELSS comes with a minimum 3-year lock-in period and the amount invested cannot be withdrawn or transferred during this time. If an investor invests through SIP in ELSS they can stop the SIP at any time and the units purchased will mature three years from the date of purchase. So if an investor makes an investment in three installments through SIP in January, February, and March 2018, the units will mature in January, February, and March of 2021 respectively.

Taxation

A maximum deduction of up to Rs. 1.5 lakhs from the investors’ income is allowed for investments in ELSS. During redemption, long-term capital gains will be taxed as prescribed in the Income Tax Act @ 10%.

ELSS are suited to investors seeking long-term capital appreciation as the mandatory lock-in period for these funds is 3 years. As these are equity-linked they carry a considerable amount of risk, investors in such schemes should have a high tolerance for risk.

Top Tax Funds

All Tax Funds
ICICI Prudential Long Term Equity Fund (Tax Saving) Direct Plan
3Yr. ret11.64
5Yr. ret11.6
L&T Tax Advantage Fund Direct Plan
3Yr. ret11.36
5Yr. ret12.03
Aditya Birla Sun Life Tax Relief 96 Direct Plan
3Yr. ret11.86
5Yr. ret14.17
Tata India Tax Savings Fund Direct Plan
3Yr. ret14.45
5Yr. ret11.6
Axis Long Term Equity Fund Direct Plan
3Yr. ret14.83
5Yr. ret15.58
IDFC Tax Advantage (ELSS) Fund - Direct Plan
3Yr. ret13.94
5Yr. ret13.98