This is the time of the year when employees are busy submitting investment proofs to their employers. Essentially, investments are meant to be declared to the respective employers during the year and one must submit the proof of investment in order for the employer to deduct TDS (tax deducted at source) accordingly.
Meanwhile, there are a number of tax-saving investments that one can opt for. These include PPF, NSC, NPS, among others. Meanwhile it is vital to note that most of these tax-saving options are available in the old tax regime and not in the new tax regime. And since the New Tax Regime is the default regime, taxpayers are meant to opt for the old tax regime in order to claim these tax exemptions.
Besides, one can also invest in equity mutual funds to save tax. These tax saving mutual funds are known as equity linked savings schemes (ELSS).
What is ELSS?
Equity linked savings schemes (ELSS) invest at least 80 per cent in stocks in accordance with Equity Linked Saving Scheme, 2005, notified by the Ministry of Finance. These mutual funds have a lock-in period of three years (shortest amongst all other tax-saving options).
These schemes, as mentioned above, are eligible for deduction under Sec 80C of the Income Tax Act upto a maximum of ₹1,50,000 in a financial year.
Here, we list out the top 10 schemes based on past one year returns.
(Source: AMFI; Returns as on Dec 20, 2024)
As we can see in the table above, the top 10 schemes delivered exceptional returns in the range of 25 to 51 percent per annum. Motilal Oswal ELSS Tax Saver Fund gave 51 percent whereas Quantum ELSS Tax Saver Fund gave over 25 percent return in the past one year.
Other top-performing ELSS funds include SBI Long Term Equity Fund, Bank of India ELSS Tax Saver Fund, HSBC ELSS Tax Saver Fund and Baroda BNP Paribas ELSS Tax Saver Fund.
Notably, the past returns do not guarantee a scheme’s future returns. In other words, just because a scheme has performed exceptionally well in the past does not mean it will continue to perform in the future as well.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.