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Best Mutual Funds for Tax Savings: Maximize Your 80C Deductions

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by Admin

05-October-2024

When the financial year starts ending, most of them begin to look for measures of minimizing tax payments. To achieve this the following measures could be taken, perhaps the best way to achieve this measures is by investing in Equity Linked Savings Schemes (ELSS), which is a mutual fund that is allowed under Section 80C of the income tax laws. In this blog let’s understand the available ELSS Mutual Fund with examples and how to make the most of your 80C investments.

Understanding ELSS and 80C Deductions

What is ELSS?

Equity Linked Savings Scheme (ELSS) gives a way to invest in mutual funds. It gives people tax breaks while also allowing their money to grow through stock market investments. Investors in ELSS can claim tax deductions under Section 80C. This allows you to cut up to Rs. 1 Lakh from your taxable income. The basic tax exemption, which used to be Rs. 1,20,000, will now be Rs. 5 lakh from your taxable income.

Why Choose ELSS?

While all ELSS funds allow you to offset taxes, they also offer you the prospect of growing your money in the long term. Such other tax-saving products as PPF or NSC are not expected to give higher yields than ELSS as they are dependent on the equity market. However, it is to be stated here that ELSS funds attract a lock-in period of three years – the lowest among all those instruments that provide tax exemption under 80C.

Top ELSS Funds for Tax Saving in 2024

Here are some options in the sector that have given investors high returns in India.

We've picked those benchmarks that have shown the best performance , with the right level of risk-adjusted returns

1. Mirae Asset Tax Saver Fund

  • Fund Overview: Well, Mirae Asset Tax Saver Fund has performed well as an Equity Linked Saving Scheme or ELSS. It's a diversified equity fund that follows value style and focuses on choosing high quality stocks, no matter what their market size are.
  • Returns (as of July 2024):
    • 1-Year: 16.3%
    • 3-Year: 20.4%
    • 5-Year: 18.9%
  • Expense Ratio: 0.58%
  • Why Invest: The best feature of the fund is longevity and the low expense that comes with this product; thus, it is a significant investment opportunity for long-term investors intending to enjoy their 80C provisions and reasonable returns.

2. Axis Long Term Equity Fund

  • Fund Overview: The other best ELSS Mutual Fund is Axis Long Term Equity Fund proposing good stock selection and longer only capacities of large-cap stocks. The returns of the fund have been relatively constant in the many years that it has been existing which makes it preferred by conservative investors.

  • Returns (as of July 2024):

    • 1-Year: 15.8%
    • 3-Year: 19.6%
    • 5-Year: 17.2%

  • Expense Ratio: 1.69%

  • Why Invest: Good for clients who seek low risk or more conservative profile on their investments. The large-cap biased of the fund minimizes the risk hence is less risky as compared to other instruments meant for tax saving.

3. Canara Robeco Equity Tax Saver Fund

  • Fund Overview: This fund stands out in the ELSS market. It has performed well. Its portfolio mixes large cap and mid cap stocks. One of the noteworthy features of the fund is that it is quite safe or, in other words, it takes minimal risks.
  • Returns (as of July 2024):
    • 1-Year: 14.7%
    • 3-Year: 18.3%
    • 5-Year: 16.8%
  • Expense Ratio: 0.74%
  • Why Invest: However, since this fund in divided into different subcategories to cater for various client’s needs this fund is deemed to cater for moderate risk investment.

4. Invesco India Tax Plan

  • Fund Overview: Invesco India Tax Plan again is accused of being very aggressive about their investment style because of their predominance in mid-cap and small-cap stocks. This fund is riskier that the prior fund; however, it offers average returns and best suited for those investors with a relatively higher risk taking ability.
  • Returns (as of July 2024):
    • 1-Year: 18.1%
    • 3-Year: 21.2%
    • 5-Year: 19.5%
  • Expense Ratio: 0.88%
  • Why Invest: For individuals who are a little more adventurous and eager to undertake certain level of risks, the Invesco India Tax Plan provides a higher scope to earn and bring in maximum long term benefits as well as tax savings.

5. DSP Tax Saver Fund

  • Fund Overview: DSP Tax Saver Fund is a popular name in ELSS mutual funds especially because of its good track record for its investment and emphasis on policies of high growth. The fund over the years has produced steady performance and therefore makes it a worthy candidate for tax saving investments.
  • Returns (as of July 2024):
    • 1-Year: 16.7%
    • 3-Year: 20.1%
    • 5-Year: 18.7%
  • Expense Ratio: 0.90%
  • Why Invest: The company's long experience and sector diversification making the fund well positioned, and also suitable investment tool for those who are desiring to save taxes while investing.

Detailed Comparison of Top ELSS Funds

Fund Name 1-Year Return 3-Year Return 5-Year Return Expense Ratio Risk Best Suited For
Mirae Asset Tax Saver Fund 16.3% 20.4% 18.9% 0.58% Moderate Long-term wealth creation with low costs
Axis Long Term Equity Fund 15.8% 19.6% 17.2% 1.69% Low to Moderate Conservative investors seeking stability
Canara Robeco Equity Tax Saver Fund 14.7% 18.3% 16.8% 0.74% Moderate Balanced risk-return profile
Invesco India Tax Plan 18.1% 21.2% 19.5% 0.88% High Aggressive investors aiming for high returns
DSP Tax Saver Fund 16.7% 20.1% 18.7% 0.90% Moderate Investors seeking diversified growth

How to Maximize Your 80C Deductions with ELSS

1. Start Early

For the highest benefits from the ELSS investments, begin your investment in the initial months of the financial year. This enable an individual to stagger his/her investments throughout the year so as to avoid market risks associated with timing and last minute rush in making investment for the sake of tax saving.

2. Consider SIPs for Consistency

ELSS funds are best bought through Systematic Investment Plans (SIPs). Lump-sum investment can result into market timing which is very dangerous, but when you invest a fixed amount in every meeting, you stand to gain from rupee cost averaging. For instance, 12 monthly instalments of Rs. 12,500 invested in Mirae Asset Tax Saver Fund will take the total to Rs. 1. Invest within 5 lakh limit under section 80C of IT act before the end of this year.

3. Diversify ELSS Investments

The case with ELSS is no different; during a specific period, it is possible to make money using one or two ELSS funds but using a range of ELSS funds helps to combat risk. Invest in two or three ELSS funds which have different investment approach so that they can diversify the risk. For instance, you may have staking a regular earner such as Axis Long Term Equity Fund alongside Teh with a riskier fund such as Invesco India Tax Plan.

4. Align Investments with Your Financial Goals

They said that before checking out the ELSS funds, one must ensure that they are in harmony with your objectives at investment. If you are in it for the long haul, money that is the money to create wealth in the long run, then you better delude yourself with high performing mutual funds for at least five to ten year period. While on the other hand if your risk tolerance is low you should go with funds that provides stability and slightly lower return. One of the best ways of saving tax and at the same time building wealth is through investing in ELSS funds. If you select those funds, begin your investment early and also, invest in a disciplined manner, then you would get the maximum benefits regarding the deduction under the 80C provision and for long-term wealth creation.

Conclusion

Investing in ELSS funds is one of the smartest ways to save taxes while also growing your wealth. By choosing the right funds, starting early, and investing systematically, you can maximize your 80C deductions and set yourself up for long-term financial success.

For more detailed information and tools to compare ELSS funds, visit IpoTec. Our Mutual Funds Screener can help you find the best funds that suit your investment style and financial goals.

Disclaimer: The performance data provided is based on historical returns and is not indicative of future results. Investors should consult with a financial advisor before making investment decisions.

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