Many taxpayers are looking to invest in Equity Linked Saving Schemes (ELSS) to save tax. While opting for ELSS, many investors may choose the scheme on the basis of recent performance and ignore the long term performance of the scheme. Let's know everything about it.
What is ELSS?
A Tax saving mutual fund, also known as Equity Linked Savings Scheme (ELSS), is a mutual fund scheme that invests in equity & equity related securities.
However, it may possible that the present ELSS fund might not give you the same return in next year but it can give you return after 3 to 5 years. So, it is necessary that you should invest in 2 to3 ELSS schemes which exposure in different sectors and in industry.
ELSS lock-in period
The average returns of ELSS category in one and three years are around 40 per cent and 11 per cent respectively. The lock-in period in ELSS is 3 years. Many investors exit the scheme or redeem their ELSS units. However, the financial planners suggest not exiting the scheme after the lock-in period is over.
Investors can continue their investment after lock-in period
After the lock-in period is over, investors can continue without exiting the scheme if the market volatility reduces the returns. When the market rises, the NAV of the scheme increases, then it can be redeemed. Investors can continue to invest in open-ended schemes in ELSS and utilize the fund for their medium term goals.
ELSS funds are available in both regular and direct schemes and come with growth and dividend options. The average returns over a period of 5 years and 10 years are 15 per cent and 13 per cent respectively.
One can invest in these 5 ELSS funds
Axis Long Term Equity Fund- 5 years CAGR– 18.26 per cent
BOI AXA Tax Advantage Fund- 5 years CAGR- 20.04 per cent
Canara Robeco Equity Tax Saver Fund-5 years CAGR- 19.55 per cent
DSP Tax Saver Fund- 5 years CAGR- 18.34 per cent
Mirae Asset Tax Saver Fund- 5 years CAGR – 24.16 per cent