ELSS or Equity Linked Savings Scheme is also known as Tax saving mutual Funds. As the name suggests, these funds are meant for tax saving purposes.

So, if your investment objective is both tax saving as well as huge wealth creation, ELSS is undoubtedly your best bet.

However, there are a few important things you need to know about ELSS before you start investing.

Salient features of ELSS

Here are a few most important features of ELSS:

  1. There is a lock-in period of 3 years in ELSS. Fund liquidation begins only after the 3rd year completion. And, if you want to withdraw the entire invested amount, you
  2. will have to wait till the completion of the fourth year.
  3. ELSS comes under EEE tax rule. EEE (Exempt-Exempt-Exempt) tax rule means there will be tax exemptions on what you invest, whatever you earn and when you withdraw. Moreover, the dividends declared from ELSS are also non-taxable.
  4. There is no maximum limit to invest in ELSS while the minimum amount is Rs.500.
  5. As per section 80C of the IT Act, the minimum Tax Benefit on ELSS is Rs. 150, 000.
  6. Since it’s an Equity linked scheme, you need to stay invested at least 5 years to get a really good return.
  7. Under ELSS, your money will be invested in various funds according to the fund mandate. So, it is necessary to understand the ELSS port folio before you start investing. 

Best ELSS Funds to Invest in 2018

Knowing about the best ELSS funds for 2018 will help you invest more wisely. The following is a list of top 10 ELSS funds for 2018:

  1. Franklin India Tax Shield

1st Year Return: 24%

3rd Year Return: 10.45%

5th Year Return: 18%

  1. Birla Sun Life Tax Plan

1st Year Return: 37.73%

3rd Year Return: 14.74%

5th Years Return: 20.70%

  1. Tata India Tax saving fund

1st Year Return: 38.92%

3rd Year Return: 16.59%

5th Years Return: 20.53%

  1. Birla sun Life Tax Relief 96

1st Year Return: 38.63%

3rd Year Return: 15.37%

5th Years Return: 21.47%

  1. DSP Black Rock Tax Saver Fund

1st Year Return: 29.33%

3rd Year Return: 14.25%

5th Years Return: 19.90%

  1. Canara Robeco Equity Tax Saver 

1st Year Return: 31.50%

3rd Year Return: 10.00%

5th Years Return: 14.90%

  1. Axis Long Term Equity Fund

1st Year Return: 37.10%

3rd Year Return: 13.80%

5th Years Return: 22.60%

  1. BNP Paribas Long Term Equity Fund

1st Year Return: 41.70%

3rd Year Return: 13.10%

5th Years Return: 18.60%

  1. L&T Tax Advantage Fund 

1st Year Return: 40.50%

3rd Year Return: 16.70%

5th Years Return: 19.10%

  1. IDFC Tax Advantage (ELSS) Fund

1st Year Return: 52.00%

3rd Year Return: 18.80%

5th Years Return: 21.40% 

How to Invest in ELSS

Here’s a detailed description on how to invest in ELSS:

You can register with any fund company and start investing through the company’s website. Both lump sum and SIP investment are allowed in ELSS. However, systematic Investment Plan (SIP) is more recommended. Keep in mind, every SIP will be considered a new investment and each SIP will carry a lock-in period of 3 years.

Step 1:  Select a suitable Scheme for you

Step 2: ELSS often allow you to choose from 2 schemes- regular mutual fund and tax saving mutual fund. Choose the option that suits you best.

Step 3:  Open a Bank Account where the dividends will be credited.

Step 4:  Select an intermediary to manage your funds professionally.

Step 5: Research and choose the mutual Fund distributor wisely. You can also go for online Distributor.

Step 6: Choose your funds from the best ELSS Funds for 2018 as listed above.

Step 7: Start investing.

 

Now that you know where and how to invest in ELSS, it’s now time to start the actual investment. Remember, your money will be locked in for at least 3 years. So, if you want to enjoy a good return, the earlier you invest the better!


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