If you want to get big returns with tax-saving then you can invest in ELSS. On March 31, the tax-saving season is coming to an end and many taxpayers are looking to invest in Equity Linked Saving Schemes (ELSS) to save tax for the financial year 2020-21. While choosing ELSS, many investors can choose the scheme based on recent performance and ignore the longterm performance of the scheme. Let’s know everything about it.
However, today’s top ELSS funds may not be able to give much returns next year, but can give returns after 3 to 5 years from now. Therefore, it is better to invest in 2-3 ELSS schemes based on your market cap and have exposure in different sectors and industries.
The average returns of ELSS category in one and three years are about 40 per cent and 11 per cent respectively. The lock-in period in ELSS is of 3 years. Many investors exit the scheme or redeem their ELSS units. It is suggested by financial planners not to exit the scheme after the lock-in period ends.
Investments can continue even after the lock-in period ends
After the end of the lock-in period, if the returns are reduced due to weakness in the market, then investors can continue it without exiting the scheme. When the market grows, the NAV of the scheme increases, then it can be redeemed. Investors can continue to invest in open-ended schemes in ELSS and use the fund for their medium term goals.
ELSS funds are available in both regular and direct plans and comes with growth and dividend options. The average returns over a period of 5 years and 10 years are 15 per cent and 13 per cent respectively.
You can invest in these ELSS funds
Axis Long Term Equity Fund – 5 years CAGR – 18.26 percent
BOI AXA Tax Advantage Fund – 5 years CAGR- 20.04 percent
Canara Robeco Equity Tax Saver Fund –
5 years CAGR – 19.55 percent
DSP Tax Saver Fund – 5 years CAGR- 18.34 percent
Mirae Asset Tax Saver Fund – 5 years CAGR – 24.16 percent