Equity Linked Savings Scheme(ELSS) is a kind of mutual fund. It can be considered as a diversified equity fund with tax benefits. Under Section 80C an individual can claim tax deduction by investing a maximum of Rs. 1 lakh in ELSS.
Advantages of ELSS are:
Lock in period is only 3 years while other tax saving instruments are having longer lock-in period. NSC - 6 years, PPF -6 years, Bank FD - 5 years.
Dividend option is available. If opted, the investor will get periodic dividends. Most of the fund houses declare dividends annually. Some funds offer dividends even twice a year. By using this option the investor can unlock a part of his investment even before the lock-in period. Another benefit is that dividend is not taxable.
Earning potential is high. Since the investments are made in the stock markets, the returns will depend on the performance of the stock market. Equity is the only investment which can beat the inflation. Even though there is a market risk, the returns will be maximized and the losses will be minimized by the skill of the fund manager. Top 10 ELSS have given 17% -23% returns for the last one year. NSC and PPF offers 8% returns only while 5 year Bank FD offers 8.5%.
Returns are not taxable. Returns from ELSS are treated as long term capital gains and they are not taxable. But returns from NSC and Bank FD are taxable.
SIP is available. The investor can select Systematic Investment Plan (SIP) route for investing in this fund. The minimum amount of SIP is Rs.500 only.
Performance of Top 10 ELSS funds are given below: (NAV as on 25.1.2011 )
Performance of Top 10 ELSS funds are given below: (NAV as on 25.1.2011 )
Rank | Scheme | Date | Performance | |||
1 month% | 3 months% | 6 months % | 1 year % | |||
1 | Fidelity Tax Advantage Fund - Growth | Jan 25, 2011 | -4.25 | -7.50 | 4.21 | 23.44 |
2 | Quantum Tax Saving Fund - Growth | Jan 25, 2011 | -4.07 | -5.70 | 7.45 | 22.67 |
3 | Axis Tax Saver Fund - Growth | Jan 25, 2011 | -3.95 | -6.32 | 5.12 | 22.43 |
4 | HDFC Long Term Advantage Fund - Growth | Jan 25, 2011 | -5.42 | -7.15 | 6.13 | 21.71 |
5 | HDFC Taxsaver - Growth | Jan 25, 2011 | -4.36 | -8.22 | 3.65 | 19.83 |
6 | JPMorgan | Jan 25, 2011 | -5.27 | -6.54 | 5.00 | 19.46 |
7 | Canara Robeco Equity Taxsaver - Growth | Jan 25, 2011 | -3.66 | -7.99 | 1.42 | 18.89 |
8 | ING Tax Saving Fund - Growth | Jan 25, 2011 | -5.08 | -7.22 | 4.41 | 18.19 |
9 | Jan 25, 2011 | -3.59 | -10.08 | 2.17 | 17.90 | |
10 | Franklin India Taxshield - Growth | Jan 25, 2011 | -4.19 | -6.14 | 5.82 | 17.83 |
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