As this fiscal year draws to a close, tax planning is now an important concern for a lot of people. Section 80C of Income Tax Act allows tax payers to claim deductions from their taxable income by investing in certain instruments. Equity Linked Saving Schemes (ELSS) is one of the most popular investments allowed under Section 80C, since the investors can avail three benefits - capital appreciation, tax free dividends and tax savings. An ELSS is a diversified equity scheme with a lock in period of three years from the date of the investment. If you investment in an ELSS through a systematic investment plan (SIP), each investment will be locked in for 3 years from their respective investment dates. There are both growth and dividend options for ELSS. For tax purposes, returns from ELSS are tax free. Compared to other tax saving instruments under Section 80C like PPF and NSC, ELSS has a much lower lock-in period and has the potential of offering superior returns over the long term. However ELSS is subject to market risks, like other mutual funds.

In this article, we will review the top performing ELSS. As with all mutual fund investments, recent performance may not always be sustained in the future. One needs to look at a number of parameters to compare and rank schemes, relative to their peer group. CRISIL ranks ELSS based on several parameters like average 3 year annualized returns, volatility, portfolio concentration risk (both industry and company) and portfolio liquidity risk. On each of these parameters, each scheme is accorded a cluster rank (from 1 to 5) relative to its peer group. To derive a composite cluster rank, CRISL has assigned different weightages to each parameter, with average 3 year annualized return given the highest weightage at 50%, volatility 30%, industry concentration risk 10%, company concentration risk 5% and liquidity risk 5%. Here is the list of top 6 ELSS on the basis of annualized 3 year returns:-

1. Axis Long Term Equity Fund (CRISIL Rank 1):

   This scheme has provided the highest 3 year annualized return at 12.2%2. It has consistently outperformed all its peers in terms of annual returns over the 3 years period. Volatility of returns is low relative to its peers, as per CRISIL ranking. Its portfolio is sufficiently diversified, with a large cap bias, with HDFC bank, TCS, L&T, Kotak Mahindra and ITC accounting for nearly 31% of its portfolio. However, the overall portfolio is sufficiently diversified with the top 10 stocks accounting to just over 51% of the portfolio. The fund is well diversified across sectors with the top 3, Banking / Finance, IT and Pharma accounting to just over 50% of the portfolio.



2. BNP Paribas Tax Advantage Plan (CRISIL Rank 1):

   The scheme's 3 year annualized return stand at 9.4%2, while 1 year and 2 year annualized returns stand at 1.98% and 13.9% respectively outperforming ELSS as a category over each of these periods. Volatility of returns is quite low relative to its peers, as per CRISIL ranking. In terms of portfolio composition, the fund has a large cap bias with HDFC Bank, Bharti Airtel, Infosys, ITC and TCS accounting for nearly 25%, the fund is well diversified with top 10 stock accounting for only 43% of its overall portfolio. In terms of industry concentration, Banking / Finance, IT and Telecom account for 45% of portfolio.



3. IDFC Tax Advantage Fund (CRISIL Rank 2):

   The 3 year annualized return of this fund is 7.4%2. While the volatility of returns is higher relative to its peer set as per CRISIL ranking, it has provided high annualized returns relative most peers, over 1 and 2 periods, at 6.3% and 16.3% respectively. The fund portfolio has balanced large cap and mid cap mix. The top 5 companies, Infosys, Biocon, Tech Mahindra, L&T and HCL account for 23% of the portfolio value. In terms of sectoral allocation Banking / Finance, Consumer Cyclicals and IT account for about 54% of portfolio.

Top 10 Tax Saving Mutual Funds to invest in India for 2016

Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300