Best ELSS funds - Tax Saving Funds to Invest in 2023 (2023)

FAQs

Best ELSS funds - Tax Saving Funds to Invest in 2023? ›

Since ELSS funds are locked-in for three years, there is no possibility of realising short-term capital gains. Therefore, you can realise only long-term capital gains. These gains of up to Rs 1 lakh a year are made tax-free, and any gains above this limit attract a long-term capital gains tax at 10%.

Since ELSS funds are locked-in for three years, there is no possibility of realising short-term capital gains. Therefore, you can realise only long-term capital gains. These gains of up to Rs 1 lakh a year are made tax-free, and any gains above this limit attract a long-term capital gains tax at 10%.

You can definitely invest in more than one ELSS. The only thing to remember is that you can only save upto Rs 1.5 lakh under section 80C. If you are already saving 1.5 lakh, you can choose another equity scheme rather than going for another ELSS. Invest in ELSS only if you want to save taxes.

U.S. equities may disappoint in 2023, but patient investors can find potential income and returns in other markets. A grueling bear market, touched off by decades-high inflation and an aggressive Federal Reserve response, made 2022 one of the most challenging years for investment returns in the last half century.

How do I choose a good ELSS fund? ›

Checking The Consistency Of ELSS Funds

In the case of ELSS, there is a lock-in of 3 years while it is advisable to hold a fund for at least five years as short-term investments in equity could be risky. Therefore, you need to evaluate how the fund has done over the long term.

Risks of ELSS

All mutual funds are subject to market risks, especially equity funds and so is ELSS. These funds do not offer guaranteed returns as they are high-risk-return investments investing in market-linked instruments and depending on the performance of underlying securities.

You can save up to ₹ 1.5 lakhs a year in taxes by investing in ELSS, which is covered under Section 80C of the Income Tax Act, 1961. However, you can choose to invest more than ₹ 1.5 lakhs, but the excess will not qualify you to avail the tax benefits as per the provisions of Section 80C.

In this article, we compared and contrasted ELSS versus PPF on several parameters. Both PPF and ELSS are very tax friendly investments. Though ELSS investments are subject to market risks, they offer superior wealth creation potential and more liquidity compared to PPF.

Index mutual funds & ETFs

Index funds—whether mutual funds or ETFs (exchange-traded funds)—are naturally tax-efficient for a couple of reasons: Because index funds simply replicate the holdings of an index, they don't trade in and out of securities as often as an active fund would.

Investments of up to 1.5 lakhs done in ELSS schemes are eligible for tax deduction under Section 80C of the Income Tax Act. The advantage ELSS has over other tax-saving instruments is the shortest lock-in period of three years. This means you can sell your investment only after three years from the date of purchase!

ELSS funds are a good option for investors with a long-term investment horizon looking to seek exposure to the stock markets and save taxes. There are various ELSS funds available. Research your options and ensure that you choose a fund that syncs with your financial plan while helping you reduce your tax liability.

Why 2-3 Funds is The Ideal Number of ELSS Funds? Investment in an ELSS or tax-saving fund is eligible for tax deduction up to Rs 1.5 lakh per annum. This is given under Section 80C of the Income Tax Act, 1961. ELSS funds are required to invest at least 80% of their assets in equities (stocks).

You can redeem all your ELSS units in one go after 3 years, that is, on 11th September 2025 when the lock-in period ends. You can redeem your ELSS lump sum investments in two ways. One, you can raise a request online, by login into the mutual fund website and raising a redemption request.

How do you avoid double taxation on mutual funds? ›

Hold Funds in a Retirement Account

The easiest way to manage any form of capital gains tax is to hold your investments in a qualified retirement account. As a general rule, the IRS does not consider the sale or management of these assets a tax event until you make a withdrawal from the account.

If a SIP of Rs 10,000 had been started in it 5 years ago, today this amount would have been Rs 12.72 lakh. The fund has given an annual return of 30.62 percent in these five years.

To triple your money in five years, you must earn an annualized 24.6% return. That's a tall order. Out of 4,817 stock and bond funds in Morningstar's database, just 127 managed to hurdle that bar over the past five years. (All fund-performance data is to March 1.)

Which is the best ELSS fund in Morningstar? ›

Mirae Asset Tax Saver Fund stood out from the pack. It received the highest net inflow in CY 2021 at Rs 2,866 crore. Canara Robeco Equity Tax Saver received the second-highest net inflow at Rs 1,188 crore. UTI Long Term Equity stood at the third position by receiving net inflows of Rs 807 crore.

Equity Linked Savings Scheme (ELSS) is one product which has gained acceptance among investors choosing to save tax under Section 80C. ELSS offers dual advantage. You save on taxes and the equity exposure provides an opportunity for wealth creation.

If your investment horizon is only 3 years.

The units are free for redemption after 3 years. This leads some investors to think that the time horizon for an ELSS fund is just 3 years, but that's not true, and one shouldn't invest in ELSS if the investment horizon is only 3 years.

In terms of returns (XIRR), once-a-year lump sums and Jan-Feb-Mar investments have done better than monthly SIPs. However, in terms of the final corpus, monthly SIPs have done better.

ELSS can be an excellent way to benefit from tax deductions. At the same time, it helps you earn inflation-beating returns. If you want to increase your returns while enjoying tax benefits, you can choose to invest in ELSS. If you want the benefits of both, you can choose to invest in ELSS via SIPs.

Here we would discuss one of the best tax saving options: tax saving or tax planning mutual funds or Equity Linked Saving Schemes (ELSS) that have offered investors around 13.35% returns over a long period of 10 years. For late comers, you can save income taxes of up to Rs 1.5 lakh in a financial year.

In the case of ELSS, all capital gains will be long term capital gains. In the case of equity funds, gains after 1 year will be LTCG. These LTCG gains will be taxed at 10% flat beyond an exempt capital gain on equities limit of Rs. 1 lakh.

Unfortunately, there is no option to withdraw your ELSS investment before the lock-in period of three years. While other funds allow you to take a loan against securities, this option is not available with ELSS funds.

Can I have both PPF and ELSS? ›

Equity Linked Savings Scheme and Public Provident Fund are savings schemes for tax benefits. As an investor, you can invest in either of the schemes or both.

There are a few methods that you can use to reduce your taxable income. These include contributing to an employee contribution plan, such as a 401(k), contributing to a health savings account (HSA) or a flexible spending account (FSA), and contributing to a traditional IRA.

Tax-Exempt Accounts

The primary advantage of this type of structure is that investment returns grow tax-free. Popular tax-exempt accounts in the U.S. are the Roth IRA and Roth 401(k).

The 2023 tax year—the return you'll file in 2024—will have the same seven federal income tax brackets as the 2022-2023 season: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your filing status and taxable income, including wages, will determine the bracket you're in.

Yes, we are talking about debt mutual funds here, not equity mutual funds. Debt mutual funds are likely to offer better returns in 2023. They will offer even higher returns when the RBI starts cutting interest rates.

ELSS fund has the shortest lock-in period among all tax-saving investment options. The units are free for redemption after 3 years. This leads some investors to think that the time horizon for an ELSS fund is just 3 years, but that's not true, and one shouldn't invest in ELSS if the investment horizon is only 3 years.

The five most common asset classes are equities, fixed-income securities, cash, marketable commodities and real estate.

The best performing Asset Class in the last 30 years is US Technology, that granded a +13.50% annualized return. The worst is US Cash, with a +2.20% annualized return in the last 30 years.

What is the best asset class after a recession? ›

Recessions are periods of widespread economic downturn. Cash, large-cap stocks and gold can be good investments during a recession. Stocks that tend to fluctuate with the economy and cryptocurrencies can be unstable during a recession.

Assuming an annual return of 12%, you need to invest around Rs 21,500 every month to create Rs 50 lakh in 10 years. Similarly, you need to invest around Rs 39,500 every month to create Rs 2 crore in 15 years. Do not think round figures like Rs 50 lakh or Rs 1 crore will be enough to achieve your long term goals.

Higher studies

i is the annual interest rate. Applying the formula, the cost of higher studies after 20 years will be : 20 lakh (1+0.09)20 that comes to 1.12 crores.

Risks of ELSS

These funds do not offer guaranteed returns as they are high-risk-return investments investing in market-linked instruments and depending on the performance of underlying securities. However, if invested for the long term, they can beat market instability to offer good returns to the investors.

What are the Disadvantages of ELSS Funds? High risk ELSS Funds: ELSS mutual funds have a huge exposure to equity markets. Equity related instruments are highly susceptible to market volatility. Hence, due to this ELSS mutual funds carry high risk.