Assets under management (AUM) is the total market value
of assets managed by the mutual fund.
9AM - 9PM
4 Yrs 5 Mo
Past Portfolio Performance
For a sum of Rs.1,00,000 invested for 5 Years
Assuming 30% tax bracket
|Where will your money be invested?|
|Amount to be Invested||15,000|
|Investment||After 5Yrs||Lockin Period||Pre-tax Returns||Tax Applicable|
|ELSS||3.29L*||3 Years||16-23%||No Tax|
|5 Year Bank FD||1.91L*||5 Years||7.10%||Interest is Taxable|
|PPF||2.2L*||15 Years||8.1%||No Tax|
|NSC||2.19L*||5-10 Years||7.90%||Interest is Taxable|
|Life Insurance||1.91L*||5 Years||0-7%||No Tax|
ELSS funds stand for Equity Linked Savings Schemes. It is one of the best ways to save income tax. ELSS mutual funds are eligible for tax deductions under Section 80C. An investment of up to ₹1.50 lakh in ELSS can be claimed as a deduction from taxable income in India.They are diversified equity mutual funds that have a majority of its assets in equities. As per SEBI guidelines, ELSS mutual funds have to invest 80% or more of their assets in equities. ELSS mutual funds have a lock-in period of 3 years. If a lumpsum amount is invested in ELSS mutual funds it is locked in for 3 years from the date of investment. If a SIP is done in ELSS, then each investment will be locked in for 3 years from the investment date.
Returns from ELSS funds are market-linked.There are no assured returns. Yet, historically average ELSS funds have generated healthy returns of ~15% over the long-term while the good ones have given 20%! One can expect 12–15% returns from ELSS funds if remaining invested for 7–10 years. Yearly investment of ₹1,50,000 in Aditya Birla Sun Life Tax Relief 96 since the launch of the fund in March 1996 has generated high annualized returns of 21.60% depicting consistency over the long-term. An overall investment of ₹33 lakh spread over the last 22 years has become a whopping ₹5.67 crores as of 30 Oct 2017.
Investment in ELSS funds should be ideally done through a monthly SIP (Systematic Investment Plan) to reduce market risk and increase the chances of a higher return. Investments in ELSS funds should be done with a long-term view of 5–10 years so that the dual benefits of compounding and capital appreciation can be reaped in.
Section 80 C of the Income Tax Act, exempts certain investments and expenditures from being taxed. It allows deductions up to Rs 1,50,000, irrespective of your tax bracket. Small investments in savings schemes like PPF, Life Insurance, NSC, ELSS, Pension Plans and Infrastructure Bonds qualify for deduction under 80 C.
Tax-saving ELSS Mutual funds are eligible for tax deductions under Section 80 C. These funds invest in stocks and are hence linked to stock markets. These funds have a lock-in period of 3 years (lowest of any tax-saving option) and hence the investors can not withdraw their money before the 3-year period. These are the only Mutual funds that have a lock-in.
PPF is a small savings scheme offered by the government of India through banks. Investments made in PPF have a lock-in of 15 years and give a fixed return according to the interest rate published by the Ministry of Finance every quarter. The interest rate on PPF stands at 8% effective from 1st October 2018 as per the latest govt. notification.
EPF is a deduction that the employer makes from your salary, this contribution forms part of 80 C.
Fees paid towards full-time education of your children can be claimed as part of 80 C deduction. This means fees paid to an educational institution, college or school. This deduction can be availed for a maximum of 2 children. And not for, your own education or your spouse’s education.
Principal amount repayments on your housing loan are deducted under 80 C.
Life insurance premium paid in the year can be claimed for deduction. Premium paid for yourself, your spouse or your children can be claimed under 80 C. You can have more than one life insurance policy and premium paid for all are eligible for deduction.
Tax-saving FDs are a special category of FDs which have a 5-year lock-in period. Unlike regular FDs, premature withdrawals are NOT allowed from Tax-saving FDs. They qualify as an 80 C tax-saving instrument and thus investments up to Rs1,50,000 p.a. are exempt from income tax. However, the interest on these FDs remains taxable as per your income at marginal income tax rate. TDS of 10% also applies.
ULIPs are a variant of traditional endowment plan. ULIPs have a high premium. They offer investment in mutual funds along with insurance, therefore, there are many charges towards these. The charges on ULIPs are funds allocating charges, fund management fee, policy administration fee, fund switching charges, and agent fees.
ELSS mutual funds are the best tax saving option because:
1. ELSSs come with a shortest mandatory lock-in period of three years. Other investment options like National Savings Certificate and Public Provident Fund permitted under Section 80C have a longer lock-in period.
2. ELSSs invest mostly in stocks which make them ideal for long-term wealth creation. The mandatory lock-in can actually be a blessing as it helps many investors, especially the new ones, to weather the volatility in the stock market. Out of all the schemes available under 80 C, ELSS funds prove to be the best.Investment in ELSS mutual funds should be ideally done through a monthly SIP (Systematic Investment Plan) to reduce market risk and increase the chances of a higher return. Investments in ELSS should be done with a long-term view of 5–10 years so that the dual benefits of compounding and capital appreciation can be reaped in.
Though the upper limit of 80c investments is 1.5 lakhs, you should check how much you need to invest in ELSS Mutual Funds and also how much you can reduce in taxes with this investment. You can never time the market. You are better off with investing in a monthly manner so that you can average out your costs on the ELSS funds.
Let us see how Upwardly ELSS Calculator helps you in tax saving:
Assuming your income is Rs 10,00,000 per annum.
Also, assuming that you do not have investments in any of the schemes that qualify under Sec 80 C.
You have an opportunity to save tax up to Rs 30,900.
As seen above, you can start investing in ELSS funds using Upwardly Tax Saving Solution above. Just enter your a few details and Upwardly tells you how much you should invest for the current year. You can also setup an SIP in ELSS mutual funds. An SIP of ₹10,000 or ₹12,500 per month is a fantastic method of investing and tax saving at the same time. SIP in ELSS mutual funds will also generate a lot of wealth in the long term. Upwardly tax saving solution allows you to do both SIP and lump sum.
Below is the portfolio allocation of ELSS funds that help you save tax for the financial year. The example is for lump sum investments. You also have an option to split the investment into SIPs for remaining months of the year.
Equity-linked saving schemes (ELSS) allow tax saving under Section 80C of the Indian Income Tax Act. An investment of up to Rs 1,50,000 in ELSS funds can be claimed as a deduction from taxable income in India.
Despite the introduction of LTCG tax of 10%, ELSS funds remain to stand as a number one tax saving investment. The LTCG tax of 10% is on gains above Rs 1,00,000 in a year. The impact of this tax on small investors is minimal to nothing. The exemption of Rs 1 lakh will come very handy if you have been making your investments based on goal planning. This means, you would get this exemption every time your goal gets accomplished and you redeem your investments over the years.
The ideal way to invest in tax saving instruments is to start investing early in the year. Make a list of your expenses that qualify for 80 C deductions and see how much has to be invested in tax saving funds to be eligible for an entire Rs 1,50,000 tax exemption (max limit on 80c investments) and start investing at the beginning of the year.
ELSS funds are fundamentally attractive because they are a much better option to save taxes under Section 80 C as compared to any other option in the peer group (see comparison). They have the lowest lock-in and highest return!
|Income Slab||Tax Rate|
|Income up to Rs 2,50,000||No Tax|
|Income between Rs 2,50,000 - Rs 5,00,000||5%|
|Income between Rs 5,00,000 - Rs 10,00,000||20%|
|Income more than Rs 10,00,000||30%|
|Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.|
Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.
|Cess: 3% on total of income tax + surcharge.|
|*Income tax exemption limit for FY 2017-18 is up to Rs. 2,50,000 for individual & HUF other than those covered in Part(II) or (III)|
*Comparing returns for ₹ 1,00,000 invested 5 years back
This fund is ranked as one of the top funds by Upwardly in the tax saving investments category. The fund’s returns for one, three and five-year are -2.9%, 8.7%, and 19.1%. The fund follows both top-down and bottom-up approach for stock selection. The fund manager emphasizes on companies that are leaders in their respective segments with limited competition, strong brand, having low debt and have been existent for a long duration to have seen different economic cycles. The fund’s strategy is to look at the companies which are fundamentally strong that would perform well across different business cycles. The fund outperformed its category average by 1-9 percentage points in the 3 and 5-year returns and benchmark by 6 percentage points in the 5-year return. A SIP of Rs 5,000 in this fund started 5 years ago is worth Rs 4.07 lakhs now.
Ranked 2nd by Upwardly, this fund manages worth Rs 16K crore. It is a high-risk tax saving fund in the multi-cap category. The fund’s returns for one, three and five-year are 3%, 11.4%, and 20.2%. The fund’s investment strategy focuses on buying quality growth stocks. While selecting stocks, the fund looks for superior and scalable businesses, a high return on capital and secular growth. It invests in quality businesses for the long-term through bottom-up stock picking. The fund outperformed its category average by 4-10 percentage points in the 3 and 5-year returns and benchmark by 1-7 percentage points in the 3 and 5-year return. A SIP of Rs 5,000 in this fund started 5 years ago is worth Rs 4.27 lakhs now.
Upwardly ranked this fund 3rd among the tax saving investments category. The fund’s returns for one, three and five-year are 0.9%, 8.8%, and 16.4%. The fund follows a multi-cap portfolio with a blend of large, mid and small cap stocks. The fund being one in the ELSS category enables the fund manager to concentrate on long-term while picking stocks with no short-term redemption pressures. This provides an opportunity for earning higher potential returns. The fund focuses on the fundamentals of the business like industry structure, quality of management, sensitivity to economic factors, the financial strength of the company and the key earnings drivers. The fund outperformed its category average by 1-6 percentage points in the 3 and 5-year returns and benchmark by 3 percentage points in the 5-year return. A SIP of Rs 5,000 in this fund started 5 years ago is worth Rs 3.97 lakhs now.
Ranked 4th by Upwardly this fund is an established fund in the ELSS category. The fund’s returns for one, three and five-year are -3.8%, 8.1%, and 16.8%. The fund predominantly invests in large caps. The fund's year-to-year performance doesn’t always beat its peers but its performance adds up to the long-term returns. The fund avoids momentum stocks and sticks to bottom-up stock picking based on fundamental analysis. It is value conscious and believes in staying invested through the cycles. The fund outperformed its category average by 1-6 percentage points in the 3 and 5-year returns and benchmark by 3 percentage points in the 5-year return. A SIP of Rs 5,000 in this fund started 5 years ago is worth Rs 3.91 lakhs now.
This fund consistently stayed in the Upwardly’s top 5 rankings of tax saving investments. The fund’s returns for one, three and five-year are -0.1%, 11.3%, and 18.9%. This ELSS tax saver is a diversified portfolio of equity securities. It is dominated by large and mid-caps which are growth oriented. The fund predominantly invested in mid-caps until late 2015, but later changed its strategy and cut down on mid-caps and increase its allocation to large caps. The fund outperformed its category average by 4-8 percentage points in the 3 and 5-year returns and benchmark by 1-5 percentage points in the 3 and 5-year return. A SIP of Rs 5,000 in this fund started 5 years ago is worth Rs 4.20 lakhs now.
Aditya Birla Sun Life Tax Relief 96 Fund is one of the oldest funds in the ELSS category and an industry veteran with a credible track record. The fund’s returns for one, three and five-year are -2.9%, 11.8%, and 19.8%. The fund gave 24.49% return since its inception in March 1996. The fund follows a combination of a top-down and bottom-up approach for picking stocks. It follows a multi-cap strategy.
The manager focuses on macroeconomic factors, economic changes, and trends, key policy changes, infrastructure spending for the top-down approach analysis. To identify companies he analyses companies based on high profitability and scalability supported by sustainable competitive advantage. The fund outperformed its category average by 4-9 percentage points in the 3 and 5-year returns and benchmark by 1-6 percentage points in the 3 and 5-year return. A SIP of Rs 5,000 in this fund started 5 years ago is worth Rs 4.27 lakhs now.