Updated March 22nd, 2024 at 18:46 IST

Looking for tax-saving investment tool? These ELSS funds outshine with best 10-year returns

ELSS schemes have recorded a compounded annualised return of 13.6% over the past decade, surpassing the Nifty 500 – TRI's 12.8% return.

Reported by: Business Desk
Top 10 ELSS funds | Image:Pixabay

Tax-saving investment tool: Seeking a reliable avenue for tax-saving investments? Look no further than Equity-Linked Savings Schemes (ELSS), say financial experts. These schemes are not only designed to help individuals save on taxes but also offer the potential for substantial long-term returns, making them an appealing option for investors keen on building wealth while minimising tax liabilities.

ELSS schemes have consistently demonstrated their ability to outperform other equity funds over extended periods. "Delving into the data, it becomes evident that ELSS schemes have delivered compounded annualised returns of 13.6 per cent over a decade, surpassing the returns of benchmark indices such as the Nifty 500 – TRI, which stood at 12.8 per cent," said Agam Gupta, Executive Director, Share India Fincap.


Dual benefits: Tax & growth

What sets ELSS apart is not just their performance but also their tax-saving benefits under Section 80C of the Income Tax Act. By investing in ELSS, individuals can avail themselves of tax deductions of up to Rs 1.5 lakh per financial year, thereby reducing their taxable income. However, the benefits of ELSS extend beyond mere tax savings. These schemes offer investors exposure to the equity market, allowing them to participate in the potential upside of stocks while enjoying the benefits of professional fund management.


Which ELSS funds lead the pack in performance?

Amongst the myriad ELSS options available in the market, certain funds have stood out for their exceptional performance and sizable assets under management (AUM). For instance, the Axis ELSS Tax Saver Fund has emerged as a frontrunner with an average 10-year rolling return (CAGR) of 16.9 per cent and corpus of Rs 33,562 crore. Similarly, the DSP ELSS Tax Saver Fund boasts a CAGR of 15.6 per cent and a substantial corpus of Rs 13,846 crore, cementing its position as a top-performing ELSS fund.


Other notable ELSS schemes include the Quant ELSS Tax Saver Fund, boasting an average 10-year rolling return (CAGR) of 15.6 per cent and a latest corpus of Rs 7,238 crore, and the Bandhan ELSS Tax Saver Fund, which has recorded an average 10-year rolling return (CAGR) of 15.3 per cent with the latest corpus of Rs 5,976 crore. 

Additionally, investors have shown interest in the Invesco India ELSS Tax Saver Fund, delivering an average 10-year rolling return (CAGR) of 15.2 per cent and managing the latest corpus of Rs 2,517 crore. Meanwhile, the Tata ELSS Tax Saver Fund has demonstrated stability with an average 10-year rolling return (CAGR) of 14.7 per cent and a latest corpus of Rs 3,987 crore. 


Not to be overlooked, the ICICI Pru ELSS Tax Saver Fund has maintained a competitive average 10-year rolling return (CAGR) of 14.4 per cent and boasts a substantial latest corpus of Rs 12,586 crore.

Investor due diligence

However, while past performance is indicative of a fund's potential, investors must exercise due diligence and consider various factors before making investment decisions, say experts.

"Factors such as risk tolerance, investment objectives, and market conditions should all be taken into account before selecting an ELSS scheme. Additionally, investors should assess the fund's investment strategy, portfolio composition, and track record to ensure alignment with their financial goals,"Gupta added.

Equity-Linked Savings Schemes (ELSS) present an opportunity for investors seeking tax-saving avenues with the potential for long-term wealth creation. With their track record of delivering returns and tax benefits, ELSS schemes continue to get attention from investors looking to optimise their investment portfolios and achieve financial security in the years ahead.


Published February 26th, 2024 at 10:08 IST