Mutual fund investment hotspots refer to areas or sectors where mutual fund investments have a high potential for growth and returns. There are a lot of hotspots for mutual fund investments currently, but one that seems to be attracting a lot of attention is the Equity Linked Saving Scheme (ELSS).
ELSS mutual funds are tax-saving mutual funds, which invest a minimum of 80% of their assets in equity and equity-related instruments. ELSS mutual funds have a lock-in period of three years, which makes them a great investment option for people looking for tax-saving instruments, along with high returns.
India’s mutual fund industry has seen remarkable growth over the last decade, with the ELSS segment being one of the most popular categories. According to the Association of Mutual Funds in India (AMFI), the ELSS category had an Assets Under Management (AUM) of Rs 1.09 lakh crore as of March 2021, which is a significant increase from the AUM of Rs 46,000 crore in March 2014.
There are multiple reasons why ELSS mutual funds have become one of the most popular hotspots for mutual fund investments in India. Here are a few factors contributing to the rise of ELSS mutual funds:
Tax Benefits
ELSS mutual funds are a tax-saving investment option, and investments of up to Rs 1.5 lakh in ELSS can be claimed as deductions under Section 80C of the Income Tax Act. This means that investments in ELSS mutual funds can help investors save tax up to Rs 46,800 per annum (assuming the highest tax bracket of 31.2% for FY 2020-21).
Short Lock-in Period
ELSS mutual funds have a lock-in period of three years, which is relatively lower than other tax-saving investment options like Public Provident Fund (PPF) and National Savings Certificate (NSC), both of which have lock-in periods of 15 years and five years, respectively. This shorter lock-in period makes ELSS mutual funds a more attractive investment option, especially for young investors looking for tax-saving instruments with high returns.
Potential for High Returns
ELSS mutual funds invest predominantly in equities, which are known to generate high returns over the long term. The returns on ELSS mutual funds are not only tax-free but also have the potential to outperform traditional tax-saving investments like PPF and NSC. You can compare the returns of all the top tax-saving mutual funds through the SIP return calculator.
Top ELSS Mutual Funds in India
Now that we have discussed the factors contributing to the popularity of ELSS mutual funds let’s also look at some of the best ELSS mutual funds in India that investors could consider.
Axis Long Term Equity Fund
Axis Long Term Equity Fund is one of the most popular ELSS mutual funds in India that has consistently outperformed its benchmark in the long term. This fund invests predominantly in large-cap stocks and has yielded returns of 11.36% in the last five years.
Mirae Asset Tax Saver Fund
Mirae Asset Tax Saver Fund is another popular ELSS mutual fund in India that seeks to generate long-term capital appreciation by investing in a diversified portfolio of equity and equity-related securities. This fund has yielded returns of 14.4% in the last three years and is ideal for investors with a moderate risk appetite.
Aditya Birla Sun Life Tax Relief 96
Aditya Birla Sun Life Tax Relief 96 is a highly-rated ELSS mutual fund in India that has performed consistently over the years. This fund invests primarily in large-cap stocks and has yielded returns of 10.21% in the last five years. With a track record of over 25 years, this fund is an ideal option for risk-averse investors.
SBI Magnum Tax Gain Fund
SBI Magnum Tax Gain Fund is an ELSS mutual fund in India that aims to provide long-term capital appreciation by investing in a diversified portfolio of equity and equity-related securities. This fund has a track record of over 25 years and has yielded returns of 6.96% in the last five years.
