Top ELSS funds to save taxes under Section 80C

You have a little over a month left to finalise your tax saving investments in this financial year. Though mutual fund managers and advisors always repeat the advantages of starting tax planning in the beginning of the financial year, many taxpayers finalise their tax saving plans only in the last two months of the financial year. You need to invest in specified investments before March 31 if you want to save taxes under Section 80C of the Income Tax Act in this financial year. You can make your investments and save taxes of up to Rs 1.5 lakh in a financial year.

Equity Linked Savings Schemes or ELSS invest in stocks. These schemes are extremely risky because of this investment strategy. However, they also have the potential to offer superior returns over a long period of time. For example, the ELSS or tax saving mutual fund category offered returns of over 14.21% over a 10-year period. Assuming an annual return of 12%, you can hope to create a corpus of 29 lakhs if you invest Rs 1.5 lakh every year for 10 years.

That brings us to the most important point you should remember if you’re investing in these tax saving mutual fund schemes. Sure, everybody will tomtom about the shortest mandatory lock-in period of three years. However, you should get into these schemes only if you have an investment horizon of at least five to seven years.

That means you should include ELSS investments in your long-term investments. ELSS funds or any equity funds should be only used for your long-term goals as equity can be extremely risky in the short term. There will also be volatile periods. That is why ELSS schemes are recommended only to individuals who are ready to take risk and have a long investment horizon.

Readers Also Like: Small cap category lost 3.19% in the January-March quarter

If you fit the bill, here are toppers in the ELSS category.

Top ELSS funds in three years