Which are Top 5 Best ELSS Tax Saving Mutual Funds 2018 to invest in India? How can we shortlist among the so many ELSS or Tax Saving Mutual Funds? Let me ease your work.
Recently I wrote a post Top 10 Best SIP Mutual Funds to invest in India in 2018. In that post, I have not covered ELSS or Tax Saving Mutual Funds. Because yearly I used to write a separate for ELSS Funds. Hence, following the trend, I am writing this post.
Before proceeding further, let us first recap the recommendations of 2017. Last year I wrote a post on this (Top 5 Best ELSS Tax Saving Mutual Funds to invest in 2017). Hence, it is mandatory to review the funds.
You notice from above table that DSPBR Tax Saver Fund (G) has not beaten the benchmark since a year and ICICI Pru Long Term Equity Fund (G) since two years. However, when you look at their 5 years and 10 years returns, then easily beaten the benchmark.
# You must have long-term holding period to invest (strictly not less than 5 years).
# You must invest in such funds only if you have a proper financial goal.
# You must do the proper asset allocation between debt and equity or among other assets based on the time horizon of your financial goal.
If the goal is below 5 years-Don’t touch equity product. Use the debt products of your choice like FDs, RDs or Debt Funds.
If the goal is 5 years to 10 years-Allocate debt:equity in the ratio of 40:60.
If the goal is more than 10 years-Allocate debt:equity in the ratio of 30:70.
# You must have proper return expectation of your OWN before jumping into investment.
# You must know what is your portfolio return expectation when you combine both debt and equity.
# Finally, if you are feeling the shortfall in tax saving benefit under Sec.80C limit.
Notice that I gave the priority of tax saving the LEAST. So understand first then jump into investment.
ELSS or Tax Saving Mutual Funds are considered as equity mutual funds for tax treatment. Hence, they are taxed accordingly. I tried to explain the same in below image.
The rate of taxation is as below for the current FY.
Also, refer the applicable DDT rates for Equity and Debt Funds after the Budget 2018.
Hope taxation part is clear to all of you. If you still have doubt, then refer my latest post “Budget 2018 – Mutual Fund Taxation FY 2018-19“.
I will first screen the top 10 funds based on their returns to benchmark since inception. The funds who consistently beaten the benchmark are listed in that 10. Once I have the list in my hand, then I select the funds based on Risk-Return Analyzer.
Many simply select the funds based on eye-catching returns. However, at what cost the fund is giving you a better return? To what extent it protects my investment during a downturn is what differentiate from good fund to bad fund.
Again, I am not saying that these 5 funds alone be considered as “Top 5 Best ELSS Tax Saving Mutual Funds 2018”. There may be fewer other funds, which are good to compete with these funds. However, I may be biased towards few Mutual Fund Companies (purely on their size and how long they are in MF business in India). Below are the metrics I used to arrive at finally selecting the funds.
If the fund cleared all these tests and given me around a minimum of 80% score since inception, will be added to my list.
Below are my Top 5 Best ELSS Tax Saving Mutual Funds 2018
Below are the 10 ELSS Tax Saving Mutual Funds under my radar. Based on these I shortlisted Top 5 Best ELSS Tax Saving Mutual Funds 2018-2019.
Among these 1o funds, I have selected the Top 5 and listing them as below.
You noticed that I did only one change. I removed ICICI Prudential Long Term Equity Fund due to it’s consistently 2 years underperformance to it’s benchmark and added Tata India Tax Saving Fund.
However, those who are investing in ICICI Prudential Long Term Equity Fund may continue as usual for few more days by keeping an eye on the fund performance. For fresh investors, I am suggesting Tata India Tax Saving Fund over ICICI Prudential Long Term Equity Fund.
Let me know if you have any doubts.
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View Comments
Sir, Thanks a lot for such an informative write up,its really very useful.
Please keep it up
Dear Chander,
Pleasure :)
Hello Basu,
Can you please advise as from when we would able to see the ELSS Mutual fund recommendation for 2019.
Thanks a lot
Dear Vijay,
I will publish it soon.
Hi Basu,
I am eagerly waiting of ELSS and top 10 Mutual fund recommendation for 2019. In one year of time span most of the equity fund are in negative. So i also want to know upto what time should i watch fund before making any decision. My plan is long term of 10 Years or more.
Also can you posts regarding Index Fund?? Advantage & Disadvantage.
Thanks a lot.
I am following you and reading all posts since 2015.
Dear Pranav,
I will definitely publish the post. This time my idea is to include Index Funds.
Dear Sir,
Aditya Birla TAX SAVING PLAN merged with TAX RELIEF 96. So better you can change first ELSS fund in given list as Aditya Birla Sun Life Tax Relief '96 instead of Tax Plan.
Please check below notification:
The fund house released a notice announcing the merger of Aditya Birla Sun Life Tax Savings Fund into Aditya Birla Sun Life Tax Relief '96. Both the schemes were tax-saving or ELSS schemes with a three-year lock-in period. The effective date of this merger will be May 21.Apr 20, 2018
With Regards
Srinivasa Vutukuri
Dear Srinivasa,
I am aware of this and this post was published a year back. Please wait for my 2019 recommendations.
Sir, I am a new investor and I have started my investment in ABSL tax relief 96- direct growth with 1500/month.
Can you suggest a value fund/ or any Elss fund which would give me similar returns at par with ABSL Tax Relief-96 but is less volatile ?
I have a time horizon of 6 yrs and expect an absolute return of 20% or more.
My Plan is to save tax and use this corpus for my child admission to a good school after 6 yrs and other expenses.
Dear Paresh,
If your goal is 6 years away, then stay away from equity products.
Thanks basu for getting back.
As I have already invested in an Equity, so what are the less risky ways of getting 20% return and how much would I need to invest to get to some 5 lacs in 6 yrs
Dear Paresh,
20% return expectation within 6 years???? Only GOD or some cheaters can guarantee you this.
Your blog is one of the best things to happen to beginners who are learning about Finance.
I just had one doubt regarding ELSS.
You have mentioned that,
"There will be tax benefit during investment, no tax on whatever you earn and no tax at the time of withdrawal"
But there's also mention of taxation at the end of this article.
Which one applies?
Dear Vineeth,
The taxation rules of later part apply as new rules started from the current financial year.
Hi - I would like to make a SIP of 20k per month in ELSS funds ( Reason for ELSS funds is - Me and spouse are tax payers. So, 10k per month on each of us will suffice the 80c needs). My investment horizon will be a minimum of 15 years (specifically for my child's education/marriage expenses). I feel it would be better to choose 3 to 4 funds (may be 5k each) with different risk combinations. Can you suggest the funds that I can start with now?
Dear Hari,
What risk varies by selecting the different funds?
Hi - Something like choosing the funds with different risk profiles. few may have more mid or small caps with high risk, few other funds may have large caps with moderate risk. I would like to choose 3 or 4 funds with different risk profiles. This is my assumption with limited knowledge. You can feel free to suggest any funds that best suites my goal.
Dear Hari,
For equity, you just need one large cap and one mid cap (if you are high risk taker then a small cap in small proportion).
Hello ,
Is it advisable to continue investment in ELSS if I have cross the 1.5 lac limit in 80c or i can discontinue the fund ?
Dear Tanuj,
Better to stop as the liquidity is an issue.
Hi Basavaraj,
i too have same question but i couldn't understand what is issue here.
what do you mean by liquidity is an issue?
could you please explain.
Dear Muralisankar,
Irrespective of the fund performance, you have to stick to the fund for 3 years. Is it not an issue?
Hi ,
Am i right in understanding that ELSS Investments are part of 80C deductions of 1.5 Lakhs.?
As i am filing my return , isaw a section in ITR 1 Form , which says Section 80ccg - to show investments in ELSS which is over 1.5 Lakhs .
So where should i show my ELSS Investments ? 80 C or 80ccg ?
Please Advise.
Thanks,
Neethan
Dear Neethan,
ELSS are part of Sec.80C. Sec.80CCG is for Rajiv Gandhi Equity Savings Scheme, which is now not available.
Hi Basavaraj
Thanks for the detailed explanation.
This is my portfolio. All are Direct Growth only.
Could you please let me know can i continue the same.
I am investing from past 3 years
Axis Long Term Equity – 2500
Franklin India Tax Shield – 2500
DSP BR Midcap – 3000
DSP BR Equity Opportunities – 2000
L&T Mid Cap – 2000
SBI Blue Chip – 2000
One time inestment of 25000 in below 4 funds
Canara Robeco Dynamic Bond Fund – Direct Plan (G)
ICICI Prudential All Seasons Bond Fund – Direct Plan (G)
Reliance Gilt Securities Fund – Direct Plan (G)
UTI Bond Fund – Direct Plan (G)
Dear Siva,
Without knowing your financial life and goals, how can I blindly assume and suggest you?