Tax-saving mutual funds or Equity Linked Savings Scheme (ELSS) funds are mutual funds that offer tax-saving benefits, with most funds predominantly investing in large-cap stocks. Now the deadline to complete tax-saving investments for the ongoing financial year is March 31, 2024.
Under the old tax regime, ELSS will give tax-saving benefits with a maximum deduction of Rs. 1.5 lakh under Section 80C. They yield higher returns than conservative options like PPF or NSCs, but obviously with higher risk. The minimum investment is typically Rs. 500, with a three-year lock-in period. Except very rarely, when investing over 3 years, many larger equity indices have seen money invested in their funds go down. So this lock-in period of 3 years is indeed a boon for investors to stay invested for a long time in discipline.
ELSS funds must allocate at least 80 per cent to equity and can invest in large-cap, multi-cap, or mid-cap stocks but most funds invest predominantly in large caps. Long-term gains up to Rs. 1 lakh annually are tax-free, while gains exceeding this limit attract a long-term capital gains tax of 10 per cent.
The three-year returns are most relevant as the fund comes with a 3-year locking period. So this is the primary factor taken for comparison.
Quant ELSS Tax Saver Fund
Quant ELSS Tax Saver Fund has shown the best performance over the past three years, providing investors with a whopping return of 30.94 per cent. With the second-highest return of 49.70 per cent return in the last year alone, the fund demonstrates consistent growth over different tenures. The five-year return stands at 31.65 per cent and the fund has a considerable AUM of Rs 8,138 crore.
SBI Long-Term Equity Fund
SBI Long Term Equity Fund stands out with the second-highest 3-year return of 25.34 per cent and the highest one-year return of 56.32 per cent. Thus the fund indicates both stability and growth potential. Managed by one of India's leading fund managing houses, the fund has the highest AUM of Rs 20,984 crore, reflecting the investors' trust in the fund house.
HDFC ELSS Tax Saver Fund
HDFC ELSS Tax Saver Fund also delivers consistent growth with a notable 24.95 per cent return over the past three years. With a daily AUM of Rs 13,660.44 crores, HDFC ELSS Tax Saver Fund has given a whopping 45.50 per cent return in one year and the 5-year return is 18.09 per cent.
