DON’T JUST SAVE TAX! Create Wealth — Here’s How

Equity Linked Savings Schemes (ELSSs) are a category of diversified equity mutual funds that qualify for tax exemption under Section 80C of the Income Tax Act.

Over the past three-years, top ELSSs have generated a return between 12%-20% compounded, which is better than any other tax-saving investment product.

Here are the 5 key benefits of saving tax via ELSSs:

1. Long Term Wealth Creation

Equity is the key to long-term wealth creation for investors. Under Section 80C, only three products provide access to the equity markets—Tax-saving Mutual Funds, ULIPs & NPS. Long-term average returns from equity funds is in the range of 11%-14% (post-tax). The key is to invest long-term for 3-5 years or more.

2. Shortest Lock-in period

Tax-saving mutual funds or ELSSs have the shortest lock-in period when compared to other investment options under Section 80C.

Investment Product Under Section 80C Lock-in Period
National Pension Scheme (NPS) Till retirement
Sukanya Samriddhi Scheme 21 years
Public Provident Fund 15 years
National Savings Certificate / Tax-saving Bank Fixed Deposits / Post Office Time Deposit / ULIPs / Senior Citizens Savings Schemes /HUDCO and NHB 5 years
Mutual Fund Retirement /Pension Plans 5 years
Equity Linked Savings Schemes (ELSS) 3 years

3. High Exposure to Equity

ELSSs invest over 80% of their assets in equity. In other equity-linked tax-saving schemes like NPS, the equity allocation is capped at 75%. Other schemes, such as MF Retirement Plans, ULIPs, do not have an upper limit on equity investment, but have a 5-year lock-in period. Thus, you can gain the maximum wealth generating potential of equities.

4. Tax-efficient Returns

ELSSs not only provide the wealth creation potential of equity, the returns are tax efficient too! Long Term Capital Gains are taxed at 10% without indexation. In comparison, interest income earned on tax-saving fixed deposits is taxable at a rate based on your I-T slab. Thus, ELSSs provide better post-tax returns for those in the higher tax slabs.

5. Ease of investments

Investing in ELSSs is hassle free. You can invest in top ELSSs through your stockbroker through either the offline or online route. No further KYC or documentation required. You can invest via a Systematic Investment Plan (SIP) with a minimum investment of just Rs 500/month.

Top Tax-saving Mutual Funds (ELSSs)

Scheme Name Fund Manager Managing Since AUM (Rs Cr) 1 Year (%) 2 Years (%) 3 Years (%) Expense Ratio
Axis Long Term Equity Fund(G) Jinesh Gopani Jan-13 17,852 2.67 18.76 11.89 2.08
ICICI Pru LT Equity Fund (Tax Saving)(G) George Heber Joseph Oct-15 5,486 0.50 12.52 9.58 2.27
Aditya Birla SL Tax Relief ’96(D) Ajay Garg Apr-07 7,220 -5.29 16.38 11.88 1.91
*Data as on December 31, 2018

To invest in ELSSs, mail us at In case of any queries, feel free to get in touch with Deepak Chellani (Product Head) – 022 – 6632 2285 or Jason Monteiro (AVP-MF Research) – 022 – 6632 2469

Leave a Reply