Due to its lock-in period of 3 years and higher potential returns as compared to other tax-saving schemes like PPF, tax-saving fixed deposit, National Savings Certificate (NSC), and others Tax saving option under 80CEquity Linked Savings Scheme (ELSS) is the most popular option for claiming tax deduction under Section 80C. ELSS are basically flexi cap funds which allow tax deduction of up to 1.5 lakh annually. These funds are ideal for portfolio diversification as the fund manager invests in large-cap, mid-cap and small-cap stocks without any limit. One can get a tax deduction of up to Rs. 1,50,000 and save up to Rs. 46,800 per annum in taxation by investing in ELSS Mutual Funds if they are in the higher tax bracket of 30% which allows tax savers to build wealth over a long period of time without much tax burden.
The best performing ELSS fund can be selected on the basis of several factors, which include historical returns, AUM should be high, rolling return, which is the annual return of the scheme for the target investment period, and past return, which is how well . A mutual fund has managed to deliver returns over time. In addition to the parameters mentioned above, investors should also consider other ratios such as the expense ratio, the portfolio turnover ratio, which shows how often a fund’s managers buy or sell securities during a specified period, and the Sharpe ratio, It measures potential risk-adjusted returns and helps to understand a fund’s ability to generate returns over a specified period of time. Here are the best 3 ELSS funds that are open-ended, direct plans, and have a 5-star rating from Value Research in the light of the above criteria.
Mirae Asset Tax Saver Fund
Based on the parameter of net assets, the fund has the highest net asset value 11,495 crore in addition to a 5-star rating from Value Research. And on the basis of 3 year returns, the fund has given a return of 19.61% and a 5 year return of 15.93%. On an annual or calendar return basis, the fund has given 37.15 per cent lower returns as compared to Quant Tax Plan and Bank of India Tax Advantage Fund. However, Mirae Asset Tax Saver Fund has a 1-year rolling return of 18.6%, which is higher in comparison to its peers like Quant Tax and Canara Robeco Equity Tax Saver Fund. The fund has an expense ratio of 0.57 percent lower than other ELSS funds, and its NAV is 31.7. The top five holdings of the fund are HDFC Bank Ltd., ICICI Bank Ltd., Infosys Ltd., Reliance Industries Ltd. and Axis Bank Ltd. The fund’s investments are distributed throughout the financial, technology, energy, health care and automobile industries. , The investment pattern of the fund is 59.94% large-cap companies, 11.56% are mid-cap stocks, and 6.57% are small-cap stocks.
Canara Robeco Equity Tax Saver Fund – Direct Plan
Based on 5-star rated ELSS fund by Value Research, the AUM of Canara Robeco Equity Tax Saver Fund – Direct Plan is 3602.19 crore which is the second largest in the list. The fund has given returns of 18.96% in 3 years and 15.36% in 5 years. On an annual or calendar return basis, the fund has earned 36.81 per cent lower than Quant Tax Plan and Bank of India Tax Advantage Fund. However, the average rolling return of the fund is 15.3% higher as compared to the Quant Tax plan. The fund has an expense ratio of 0.66 per cent, which is lower than majority of other ELSS funds and the current NAV is 114.82. The top five holdings of the fund are ICICI Bank Ltd., Reliance Industries Ltd., Infosys Ltd., HDFC Bank Ltd. and State Bank of India. The fund’s asset allocation is spread across the financial, technology, energy, capital goods and automobile sectors. The fund’s investment contribution is 61.46% in large-cap companies, 15.9% in mid-cap stocks and 5.65 in small-cap stocks.
Quant Tax Plan Direct-Growth
Apart from the 5-star rating, the AUM of the fund is 1,359 crore is much higher than Bank of India Tax Advantage Fund. On the basis of long term returns, the fund has generated the highest in the category with 33.69% in 1 year and 21.05% in 5 years. The fund also has the highest calendar return of 63.27% and an average rolling return of 20.7% in 1 year, which is much higher than the above two funds. However, the fund has a Sharpe Ratio of 1.10 higher than Canara Robeco Equity Tax Saver and Mirae Asset, which indicates that the fund is outperforming its peers. The fund has an expense ratio of 0.57 per cent, which is lower than other funds in the same category and the current NAV is 226.97. The top 5 holdings of the fund are ITC Limited, State Bank of India, ICICI Bank Limited, Patanjali Foods Limited and Adani Enterprises Limited. The fund’s asset allocation spans the services, financials, consumer staples, health care and materials sectors. The fund’s investment pattern is 18.61% mid-cap stocks, and 12.42% small-cap stocks.