Invest in Best ELSS Funds in India 2024
Discover the best ELSS Funds in India for 2024. Learn who should invest, key benefits, risks, and find the top performing ELSS funds.
What are ELSS Funds?
Equity Linked Savings Schemes (ELSS) is diversified equity funds where 65% of their investment is invested in equity and the remaining are invested in fixed-income securities.
It is the only mutual fund that is eligible for tax deductions under Section 80C. You can claim a rebate upto Rs. 1, 60,000 and save upto Rs. 46800 every year in taxes.
Who Should Invest in ELSS Funds?
- Tax Savers: Individuals who are looking to save tax under Section 80C.
- Long-Term Investors: ELSS come with a lock-in period of three years, this lock-in period ensures you stay invested for a period of three years atleast.
- Equity explorers: Investors who are comfortable with the equity market risks
- First-Time Investors: New investors who are looking to try out equity markets with tax benefits
Best Performing ELSS Funds
| Fund Name | Category | Risk | 6-Month Return | 1-Year Return | Rating | Fund Size (Cr.) |
|---|---|---|---|---|---|---|
| ITI ELSS Tax Saver Fund | ELSS | Very High | 23.21% | 56.18% | 5363.38 | |
| HDFC ELSS Tax Saver | ELSS | Very High | 20.60% | 47.68% | 515674 | |
| SBI Long Term Equity Fund | ELSS | Very High | 26.21% | 56.85% | 525738 | |
| Franklin India ELSS | ELSS | Very High | 19.00% | 46.44% | 46815 | |
| Quant ELSS Tax Saver Fund | ELSS | Very High | 23.45% | 59.27% | 410527 |
Factors to Consider While Investing in ELSS Funds
- Lock-In Period: ELSS funds have a mandatory three-year lock-in period, during which it is impossible to withdraw any money
- Historical Performance: Review the historical performance of the fund to assess the returns generated by the fund. Review and then invest
- Expense Ratio: Lower expense ratio leads to higher returns
- Tax Benefits: Ensure you are utilizing the tax-saving potential of ELSS funds under Section 80C.
Major Benefits of ELSS Funds
- Tax Savings: Investments up to ₹1.5 lakh are eligible for tax deductions under Section 80C.
- Lock- in period: Unlike other investment schemes that comes with a longer lock-in period like PPF, ELSS mutual funds come with a short lock-in period
- Potential for High Returns: Unlike depositing in fixed income instruments like FD which provide small returns, ELSS diversifies its investment in Equities and securities, giving a higher potential for returns
- Disciplined Investing: The lock-in period encourages long-term, disciplined investing, patience, all of which are key aspects to build a solid corpus.
Risks Involved in ELSS Funds
- Market Risk: Since they are market-oriented, the value of fund fluctuates accordingly. There’s a chance you may suffer losses during the period of economic downturns
- Lock-In Period: The Lock-in period restricts liquidity and flexibility
- Performance Risk: The returns are dependent on the fund manager’s decisions
- Sectoral Risk: Overexposure to certain sectors can cause losses, if that sectors performs poorly.
Frequently Asked Questions (FAQs) about ELSS Funds
What is the lock-in period for ELSS funds?
ELSS funds have a mandatory lock-in period of three years, during which you cannot withdraw any investments
Can I invest a lump sum in ELSS funds?
Yes, you can invest a lump sum in ELSS funds. Alternatively, you can also opt for a Systematic Investment Plan (SIP).
Are the returns from ELSS funds tax-free after three years?
The returns from the ELSS fund minus the 1.5 lakhs eligible for tax deduction under 80(C) will be taken into consideration for taxation
How do I choose the best ELSS fund?
Consider factors like historical performance, your risk tolerance, expense ratio, fund manager’s track record, and your investment goals before choosing the fund. You can seek the assistance of Fincover, whose MF experts would consider you pick the best ELSS Fund in the market
Can I withdraw my investment in ELSS funds before three years?
No it is not possible to withdraw any investment before three years when invested in an ELSS