It is better for the salaried class to invest in such schemes, where tax benefits can also be available along with the scope of higher returns.
Tax Saver Mutual Funds/ELSS: Along with saving and investing, intelligent tax planning is also necessary, especially for the salaried class. It is better to invest in such schemes, where along with the scope of higher returns, tax benefits can also be available. There are many such schemes in the market to save tax. There are some schemes, where returns are guaranteed, but this return will be in single digits only. At the same time, there are some schemes, where there is some risk as compared to the schemes with guaranteed returns, but the returns can be double or even triple. Among these, Equity Linked Savings Scheme (ELSS) of mutual funds is an option. This can help in creating a bigger corpus for the investors in the long run. Let us have a look at some of the top performing income tax saver funds.
SBI Long Term Equity Fund
20 year SIP return: 17.16 per cent
Value of 1 lakh investment in 20 years: 43.23 lakh
Value of 6000 Monthly SIP in 20 years: 1.03 crores
Minimum investment: Rs 500
Minimum SIP: Rs 500
Total Assets: 9878 crore (as on 30th June, 2022)
Expense Ratio: 1.77% (as on 31st May, 2022)
ICICI Pru LT Equity Fund
20 year SIP return: 17%
Value of 1 lakh investment in 20 years: 40.89 lakh
Value of 6000 Monthly SIP in 20 years: 1.02 crores
Minimum investment: Rs 500
Minimum SIP: Rs 500
Total Assets: 9072 crore (as on 30th June, 2022)
Expense Ratio: 1.91% (as on 31st May, 2022)
HDFC Taxsaver Fund
20 year SIP return: 16%
Value of 1 lakh investment in 20 years: 37.24 lakh
Value of 6000 Monthly SIP in 20 years: 87.50 Lakh
Minimum investment: Rs 500
Minimum SIP: Rs 500
Total Assets: 8716 crore (as on 30th June, 2022)
Expense Ratio: 1.83% (as on 31st May, 2022)
Tata India Tax Savings Fund
20 year SIP return: 15.6%
Value of 1 lakh investment in 20 years: 29.18 lakh
Value of 6000 Monthly SIP in 20 years: 85.20 Lakh
Minimum investment: Rs 500
Minimum SIP: Rs 500
Total Assets: 2743 Crore (As on 30th June, 2022)
Expense Ratio: 1.78% (as on 31st May, 2022)
Benefits of investing in ELSS
AK Nigam, director, BPN Fincap, says that while most schemes in this category have a lock-in period of 3 years, the returns are high as compared to other tax-saving schemes. At least 80 per cent of ELSS exposure is in equities. Because of this, the scope for higher returns increases. This has made it a popular tax saving option. Looking at the returns of ELSS, investors have got 12 to 18 percent returns in many schemes in 5 years. The good thing is that even after the completion of the lock-in period, you can continue investing as long as you want. That is, it also promotes long-term investment, through which financial stability can be found in the future.
One can also opt for Systematic Investment Plan (SIP) in ELSS. The profit on investment in ELSS and the amount received from redemption is completely tax free. Long Term Capital Gains (LTCG) are exempted from income tax on returns up to Rs 1 lakh in 1 year through ELSS. However, profit above this limit is taxed at the rate of 10 percent.
(Disclaimer: The information here is based on mutual fund performance and expert interaction. Investments in the market are subject to risk. Hence, consult your advisor before investing.)
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