- Good returns with tax savings in ELSS funds
Mumbai: Mutual funds are becoming a popular investment medium in India like in developed countries. Due to very good returns as compared to traditional investment channels and strict monitoring of the regulator ‘SEBI’, the retail investors of the country are getting stronger in the mutual fund companies and investors are looking for their schemes. funds) are attracted. This is the reason that the management corpus of mutual funds has crossed Rs 38 lakh crore.
However, all schemes of mutual funds do not get Income Tax Rebate on investments like other investment instruments like Life Insurance, Bank Fixed Deposit, Small Saving Schemes. Income tax exemption is available in only one scheme. Which is called Equity Linked Saving Scheme (ELSS) i.e. Tax Saving Equity Fund. Investments up to Rs 1.50 lakh annually in this scheme of mutual funds get the benefit of tax exemption under section 80C of the Income Tax Act. There are total 45 mutual fund companies in India and a mutual fund company is allowed to operate only one ELSS fund.
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Returns dependent on market volatility
If you have not yet started investing for tax saving for the financial year 2021-22, then investing in ELSS funds can prove to be beneficial for you, as they have better returns than other tax saving avenues. is being received. Because ELSS funds are invested in the stock market. Therefore, their returns depend on the ups and downs of the market. Currently, the bullish phase in the stock market is going on. So they are getting good returns. Returns are also reduced in recessionary times, or due to more recession, returns are not available in any year. It is also a risk. But in the long term, most ELSS funds have had decent average returns. Most of the funds have provided double digit returns over the past two decades.
Strong returns even in the long term
In this article, we are giving information about the returns of top 15 ELSS funds (growth option). These funds have given strong returns ranging from 30% to 60% in 2021. Whereas in the last three years it has provided good returns ranging from 16% to 34%. And if we look at the figures for 5 years, then they have got returns from Compound Annual Growth Rate (CAGR) ranging from 13% to 26%. That is, investors have got double digit returns. Among them, the performance of Quant Mutual Fund has been the best. In its Quant Tax Fund scheme, investors have earned a whopping 60% in 12 months, 34% in 3 years and 26% in 5 years.
Smart fund managers pay more
Fund managers operating ELSS funds, who are smarter in investments, are able to generate higher returns than the market with their savvy. An example of this is the ELSS tax saving scheme of Mahindra Manulife Mutual Fund. Whose return was only 18.2% and 13.1% in 3 and 5 years respectively, but in the last one year it has given a strong return of 39%. The reason for this is its new fund manager Fatima Pasha. Fatima Pasa, who joined Mahindra Manulife from iPro Life, has dazzled the performance of Mahindra Manulife Mutual with a complete restructuring of the portfolio of ELSS Tax Savings Scheme.
Lock-in period of 3 years
ELSS funds have a lock-in period of 3 years. That is, the savings that you will invest in it can be withdrawn only after 3 years. This is another feature of ELSS. The lock-in period of ELSS is very less as compared to other tax saving schemes. However, investors can continue with it even after 3 years, as investing in ELSS for a longer period of time is considered more beneficial.
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No tax on gains up to Rs 1 lakh
An annual investment of up to Rs 1.50 lakh in ELSS funds gets the benefit of tax exemption under section 80C and the income earned on investments in these is also tax free. Earnings up to Rs 1 lakh in a year from ELSS funds are exempted from long term capital gains. Any profit above this has to be taxed at the rate of 10%. One can start investing in ELSS funds through a Systematic Investment Plan (SIP) with as little as Rs 500. While there is no maximum limit. There are two types of options in ELSS. The first is Growth Option and the second is Dividend Option. In growth option, the money stays in the scheme continuously. In dividend option, mutual funds distribute profits in the form of dividends from time to time. Dividend option schemes also offer 10% TDS deduction on dividends exceeding Rs 5,000 in a year.