5 Best ELSS Tax Saving Mutual Funds to invest in 2020

With the start of the New Year 2020, it’s time to start planning your tax-saving investments. Therefore, let’s take a look at 5 Best ELSS Tax Saving Mutual Funds to invest in 2020.

There are various tax savings instruments available to you. However, ELSS mutual funds stand out the best because ELSS doesn’t just help you to save tax but also gives you an opportunity to grow your money. 

ELSS is a category of mutual funds that played a significant role in increasing the popularity of mutual funds in India. Some ELSS mutual funds have given good returns in the last five and seven years.

In this post, I will discuss, what ELSS mutual funds are, why you should invest in ELSS mutual funds, and which are 5 Best ELSS Tax Saving Mutual Funds to invest in 2020.

These ELSS schemes are shortlisted based on several key parameters.

What are ELSS Tax Saving Mutual Funds?

ELSS mutual funds are open-ended diversified equity mutual funds that invest primarily in equity and equity-related products. The investment made in ELSS tax saving mutual funds is eligible for tax deduction under Section 80C up to Rs. 1.5 lakh. These ELSS tax saving mutual funds have a lock-in period of 3 years.

ELSS mutual funds don’t just help you to save tax but also give you an opportunity to take advantage of the equity market. Since ELSS mutual funds are equity-based funds, the returns from these ELSS funds reflect the returns from equity markets.

Why should you invest in ELSS Tax Saving Mutual Funds?

There are various reasons that make ELSS Tax Saving Mutual Funds a great investment option. ELSS is one of the best investment options to save tax under Section 80C. An investment up to Rs. 1.5 lakh in ELSS is eligible for tax deduction under Section 80C.

These tax-saving funds also give you an opportunity to grow your money from the potential of the equity market. Moreover, compared to traditional tax saving instruments like PPF, NSC, and Tax Saver Fixed Deposits, the lock-in period of ELSS mutual funds is much lower.

ELSS funds have a lock-in period of three 3 years. You can also choose the dividend option and get some gains even during the lock-in period of 3 years.

Disadvantages of ELSS Tax Saving Mutual Funds

ELSS mutual funds are risky because they invest primarily in equity and equity-related products. Remember that all the risks associated with equity investments applicable to ELSS Tax Saving Mutual Funds.

The amount you invest in ELSS Tax Saving Mutual Funds is locked for a period of three years. That means you cannot withdraw your money before the completion of three years.

How these ELSS Tax Saving Mutual Funds are shortlisted?

These ELSS mutual funds are shortlisted based on the following key parameters.

1. Fund Performance: These ELSS mutual funds are shortlisted on the basis of 3, 5, 7 and 10 years performance.

2. Assets Under Management (AUM): Shortlisted ELSS mutual funds have AUM of more than Rs. 500 Crores. Higher Assets Under Management shows investors’ confidence in the fund.

3. CRISIL Rating: These ELSS funds are rated as Rank-1, Rank-2, and Rank-3 by CRISIL. Rank1 is the highest rank.

4. Value Research Rating: Value Research rated these ELSS mutual funds as 5 stars and 4 stars. Higher is better.

5. Four funds out of these five ELSS funds are already recommended by us in the year 2019. Hence if you have already invested in these funds last year then it could be repetition for you.

5 Best ELSS Tax Saving Mutual Funds to invest in 2020

On the basis of the above parameters, here are 5 Best ELSS Tax Saving Mutual Funds to invest in 2020.

1. Axis Long Term Equity Fund

2. Mirae Asset Tax saver Fund

3. DSP Tax Saving Fund

4. Invesco India Tax Plan

5. Aditya Birla Sun Life Tax Relief 96

Scheme Name	Returns in Percentage*					AUM (Rs Crores)	Crisil Rank (Sep 30, 2019)	Value Research Rating (Out of 5)
	1 Year	3 Years	5 Years	7 Years	10 Years
Axis Long Term Equity Fund	14.69	17.44	11.31	18.61	17.27	21160	1	5
Mirae Asset Tax Saver Fund	14.21	18.17				2877	1	5
DSP Tax Saver Fund	14.65	13.11	10.89	15.27	13.18	6186	2	4
Invesco India Tax Plan	9.08	13.6	9.91	15.33	13.4	977	2	4
Aditya Birla Sun Life Tax Relief 96	4.3	12.53	9.97	15.32	11.45	9998	3	4
*As on 01/01/2020  Data Source: Value Research Online

1. Axis Long Term Equity Fund

Axis Long Term Equity Fund is one of the Best ELSS Tax Saving Mutual Funds with Rs. 21,160 Crores worth of assets under management. The objective of this ELSS fund is to generate long-term capital growth from a diversified portfolio of equity and equity-related securities. The fund is suitable for an investment horizon of 5 years or more.

This ELSS tax saving mutual fund has been consistently performing well since its inception. The fund has generated a return of 17.44% and 11.31% in the last three and five years respectively. Crisil rated this ELSS fund as Rank-1 (Lower is better) and Value Research Online rated as 5 Stars (5 out of 5).

2. Mirae Asset Tax saver Fund

Mirae Asset Tax saver Fund is also one of the Best ELSS Tax Saving Mutual Funds. This fund has been consistently performing well since its inception in December 2015.

The objective of the fund is to generate long-term capital appreciation from a diversified portfolio of equity and equity-related instruments. This ELSS fund is suitable for investors who are seeking long-term wealth creation solutions.

This ELSS fund has given a return of 14.20% and 18.17 to the investors in the last one and three years respectively. Value Research Online rated this fund as 5 Stars (5 out of 5). CRISIL rated this fund as Rank-1 (Lower rank is better).

3. DSP Tax Saving Fund

The objective of this ELSS is to generate medium to long-term capital growth from a diversified portfolio constituted of equity and equity-related securities. This ELSS fund is also performing well and has given a return of 15.27% and 13.18% in the last 7 and 10 years respectively.

The fund has given a return of 13.11% and 10.89% to the investors in the last 3 and 5 years respectively. CRISIL rated this ELSS fund as Rank-2 (Lower is better) and Value Research Online rated this ELSS fund as 4 Stars (4 out of 5).

4. Invesco India Tax Plan 

The objective of this ELSS fund is to generate long-term capital growth from a diversified portfolio of equity and equity-related securities. This ELSS fund is suitable for investors who are seeking capital appreciation over the long term. This ELSS fund has been consistently performing well for the last 10 years.

This ELSS fund has given a return of 15.33% and 16.40% in the last 7 & 10 years respectively. The fund has given a return of 13.60% and 9.91% in the last 3 and 5 years respectively. CRISIL rated this fund as Rank-2 (Lower is better). Value Research Online rated this fund as 4 Stars (4 out of 5).

5. Aditya Birla Sun Life Tax Relief 96 

Aditya Birla Sun Life Tax Relief 96 is one of the oldest and Best ELSS Tax Saving Mutual Funds in India to invest in. The objective of this fund is to save tax while growing your money through equity investments. This tax-saving fund is suitable for investors who are seeking long-term capital growth. This fund has also been consistently performing well since its inception.

This ELSS fund has given a return of 15.32% and 11.45% to the investors in the last seven and ten years respectively. The last three and five years' returns of this fund are 12.53% and 9.97% respectively. Value Research rated this fund as 4 Stars (4 out of 5). CRISIL rated this fund as Rank-3 (Lower is better).

Disclaimer: This post is strictly for informational purposes only. ELSS mutual funds do not guarantee any returns. Past performance of an ELSS tax saving mutual fund may or may not repeat in the future. There are risks associated with investing in ELSS Tax Saving Mutual Funds. Please consult a mutual fund advisor or a financial planner before making any investment.

Also, read: How to invest in mutual funds online? 

Also, read: Benefits of SIP | Advantages of SIP

Also, read: All about ELSS | Equity Linked Savings Scheme

Also, read: Debt Funds - Types of Debt Funds 

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Note: This post was originally published on January 3, 2020.

5 Best ELSS Tax Saving Mutual Funds to invest in 2020