Is this the right time to invest in ELSS in 2017
What is ELSS?
ELSS stands for the equity linked saving scheme. It is a tax saving tool. You can invest in ELSS even without brokerage.Direct scheme is also available where there will be no brokerage. Investments in ELSS are eligible for exemption under section 80C of Income tax in India. It has the minimum lock in period of three years. This lock in period is least in comparison to other tax saving products. In the recent past it has fetched the best returns. You can also invest in these funds via an SIP that is systematic investment plan.
Why Should I invest in ELSS now for tax savings?:
Returns in ELSS are directly connected to the equity market. With a recovery in some days it has shown a strong signal. There are reasons in coming future to give strength to the equity markets in India. Some of the factors to impact the markets in short term are:
- Trump card may play a positive. The stimulus is expected from Trump. This will help Indian markets also to gain upward movement.
- Cool down of effects of demonetization will also help in boosting the equities. It is expected that there will be some relief in budget. This will also help in faster recovery in economy.
- Moody has kept the Indian outlook positive even after demonetization. This will definitely help markets to have a bull phase.
- Elections in some of the states will also be an important factor.
Top performing ELSS as on January 2017:
This is the list of best performing schemes for 2017. (Source: Money control)
| Mutual Fund Scheme | 1yr return |
| Mirae Asset Tax Saver Fund – DP (G) | 24.3 |
| HDFC Long Term Advant. – Direct (G) | 21.1 |
| Motilal MOSt Long Term Fund -DP (G) | 22 |
| DSP-BRTax Saver Fund -Direct (G) | 19.3 |
| Sundaram LT Tax Advantage- Sr-I – DP (G) | 20.3 |
| Sundaram LT Tax Advantage- Sr-I – RP (G) | 19.9 |
| HDFC Tax Saver – Direct (G) | 18.4 |
| SBI Tax Advantage Sr-2 (G) | 20 |
| Motilal MOSt Long Term Fund -RP (G) | 20 |
| Quantum Tax Saving Fund (G) | 18.8 |
You can see by this return table that even when the equities were down due to demonetization ELSS fetch a fair return.
Top ranked ELSS as on 11th January 2017
Following table have the top ranked ELSS as on 11th January 2017 (Source: Money control)
| Mutual Fund Scheme | Crisil Rank | 1yr return |
| HDFC Long Term Advantage (G) | Rank3 | 20.3 |
| DSP-BRTax Saver Fund (G) | Rank1 | 18.4 |
| HDFC Tax Saver (G) | Rank5 | 17.6 |
| Kotak Tax Saver – Regular (G) | Rank3 | 16.1 |
| L&T Tax Advantage (G) | 15.8 | |
| Sundaram Tax Saver (G) | 14.3 | |
| Principal Tax Savings | 14.8 | |
| Franklin India Tax Shield (G) | 11.5 | |
| Reliance Tax Saver (ELSS) (G) | 13 | |
| ICICI Pru Long Term Equity (Tax Svng)-G | 10.1 | |
| Birla SL Tax Relief 96 (G) | Rank2 | 9.7 |
| Birla Sun Life Tax Plan (G) | 9.2 | |
| Principal Personal Tax Saver | Rank3 | 11.1 |
| UTI LTEF (Tax Saving) (G) | Rank4 | 10.5 |
| Invesco India Tax Plan (G) | Rank2 | 10.8 |
| IDFC Tax Advantage (ELSS)-RP (G) | Rank4 | 8.4 |
| SBI Magnum Tax Gain (G) | 9.1 | |
| Can Robeco Eqty TaxSaver (G) | Rank5 | 6.5 |
| Axis Long Term Equity Fund (G) | Rank3 | 3.7 |
| BNP Paribas Long Term Equity (G) | Rank4 | 0.9 |
What will be the tax implication if I invest in ELSS?:
If you invest in equity linked scheme you will be eligible for exemption u/s 80C. Also the gains arising from the scheme will be long term capital gain. STT paid long term capital gain in exempt in income tax. Thus it will fetch you double benefit. The 80C exemption plus the exempted capital gains.
Please read the related documents before investing. Also consult your financial adviser before taking any decision.
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