Best Tax Saving Mutual Funds in 2020 - Best Performing Tax Saving Mutual Funds in India
Best Tax Saving Mutual Funds - Consider the best performing tax saving mutual funds to invest in 2020 with Scripbox.com. Find the list of best tax saving mutual funds in India on the basis of Returns, Latest Nav, Ratings, Performance etc
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Best Tax Saving Mutual Funds
Better than FD
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Lower tax if you withdraw after 3 years
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Scripbox pre-selects the 3 best debt mutual funds for you from over 5900 debt mutual fund schemes.
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Motilal Oswal Long Term Equity Fund - Regular Plan - Growth
Scripbox Recommended- EQUITY
- Tax Saving
₹ 1,411.09 Cr
Fund Size₹ 500
Min Investment5+ Yrs
Age-3.47%
Return (3yr) -
Mirae Asset Tax Saver Fund -Regular Plan-Growth
Scripbox Recommended- EQUITY
- Tax Saving
₹ 3,184.25 Cr
Fund Size₹ 500
Min Investment4+ Yrs
Age1.03%
Return (3yr)
Tax Saver Plan
Better than Insurance, FD-
12-14%Growth Rate
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3 Years lock-in
Downloadable investment proof
Scripbox pre-selects the 2 best ELSS mutual funds for you from over 145 ELSS mutual fund schemes
What are Best Tax Saving Mutual Funds?
Tax saving mutual funds are just like any other mutual fund with the only difference of bearing a tax benefit. An investment made towards a tax saving mutual fund is allowed as a deduction under section 80C of the Income Tax Act, 1961.
Majorly tax saving mutual funds are ELSS wherein the investment is equity-oriented and the lock-in period is 3 years.
How do Tax Saving Mutual Funds Work?
The process of investing in a mutual fund can be listed in just 4 steps
- Step1- Investors pool their investments with a fund manager
- Step2- The fund manager invests the pool of investment in various securities
- Step3- These securities generate returns for the investors
- Step4- The returns are paid back to the investors or invested back in the fund, as chosen by the investors
The securities selected for investment belong to different industries and sectors. This is done to ensure even if one industry generates low or no returns, other industries can balance the expected returns.
| Industry | % of the total investment |
| Automotive | 23% |
| Banking/td> | 24% |
| Power | 17% |
| FMCG | 19% |
| Hospitality | 17% |
Tax saving mutual funds have a lock-in period of 3 years from the investment until the maturity of the funds. In case the investment is made through SIP, the lock-in period is calculated for every installment of investment.
ExampleIf SIP is made monthly from January 2020, then the installment of January 2020 will be matured in January 2023. For then the installment of February 2020 will be matured in February 2023
The redemption of investments is possible only for the unlocked units at the current NAV price for the units available for redemption at maturity. The investor needs to submit a withdrawal form to the fund manager and the amount will be credited to the account.
Features of Best Tax Saving Mutual Funds
Tax saving mutual funds or ELSS are a better option of investments than other tax saving schemes. The features of ELSS are listed below.
Tax saving mutual funds are Equity Linked Mutual Funds (ELSS) and open-ended in nature These mutual funds are exposed to market fluctuations and are risky. However, the risk level depends on the investor and his understanding of risk. Risk is a factor which is dependent on what is the limit of an individual given his spending, cost of living and income.The lock-in period for the investment made is 3 years
No limit on Maximum Investment. Minimum Investment Amount differs for fund houses. However mostly the minimum investment amount is Rs 500 only An entry load and exit load applies to ELSS schemes. These are fees charged by the fund managers on purchase/sale/redemption/transfer of the fund units by the investors. Deduction on investment is allowed under section 80C up to Rs 1.5 lakhBenefits of Investing in the Tax Saving Mutual Funds
Equity-linked saving scheme (ELSS) is an ideal investment option for investors who wish to save tax and earn a higher return at the same time.
The key benefits of investing in ELSS are listed below:
Invest in equity while saving
ELSS allows an investor to benefit save money and enjoy the growth and returns associated with securities in the ELSS portfolio. While other saving schemes offer an average of 8% returns, ELSS provides better returns being a good portfolio with diverse and quality stocks.
Inspire saving habit
ELSS allows an investor to invest as low as Rs 500 per month, turning small savings into an investment developing habit of continuous savings.
Tax Benefit
One of the major reasons to invest in ELSS is the tax benefit it carries. The principal amount of investment is allowed as a deduction u/s 80C along with tax benefits of maturity amount and returns earned.
Other Benefits
ELSS allows an investor to invest monthly through SIPs and thus eliminating the need to invest a huge amount at once.
These investments are managed by professional fund managers, hence a layman having less knowledge about the market and its trends can invest freely.A portfolio of various securities from different industries and sectors is made, hence minimizing the market risk of investing in the equity market
Taxation on Best Tax Saving Mutual Funds in India
The principal amount invested in ELSS is allowed as a deduction under section 80C up to Rs 1.5 lakh of the Income Tax Act, 1961.
Long-Term Capital Gains (LTCG) tax is applicable on ELSS funds as the lock-in period is 3 years. LTCG @ 10% is levied on the capital gain earned over Rs 1 lakhTax Saving Mutual Funds ELSS vs PPF vs FD
| Particulars | ELSS | PPF | FD |
| ELIGIBILITY | An Individual taxpayerincluding NRI | Resident Individual taxpayer | An individual taxpayer including NRI and HUF |
| Minimum amount | Rs 500 | Rs 500 | Rs 100 |
| Rate of interest | 12% to 14% | 8.10% | 7% to 9% varies Bank to Bank |
| Risk | Depends on market fluctuation | No-Risk | No-Risk |
| Lock-in Period | 3 years | 5 years | 5 years |
| Tax Implication | Principal amount deductible u/s 80C deduction up to Rs 1.5 lakh Returns- 10% LTCG | Principal amount deductible u/s 80C deduction up to Rs 1.5 lakh interest- Taxable | Principal amount deductible u/s 80C deduction up to Rs 1.5 lakh Interest- Taxable |
Top 2 Best Tax Saving funds
| Fund Name | 3 years |
|---|---|
| Mirae Asset Tax Saver Fund (G) | 10.14% |
| Motilal Oswal Long Term Equity Fund - Regular Plan-Growth | 11.17% |
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Frequently Asked Question
An investor who has a tolerance for risk and a long-term financial goal to save taxes should consider investing in ELSS. An investor who wishes to invest a fixed or variable amount monthly can also choose to invest through SIP.
ELSS tax saving mutual funds are exposed to market fluctuations and are risky. However, the risk level depends on the investor and his understanding of risk. Risk is a factor which is dependent on what is the limit of an individual given his own spending, cost of living and income.
There is no upper limit for investing in ELSS. But which considering tax savings, an investment in ELSS tax saving mutual funds are allowed as a deduction up to Rs 1.5 lakh only
Yes, withdrawal of tax saving mutual funds is allowed at the maturity of the funds. The units available for redemption can be redeemed. But a premature withdrawal of funds before 3 years of lock-in period is not allowed
Equity-linked mutual funds ELSS are the funds which are allowed as a deduction up to Rs 1.5 lakh and the capital gains up to Rs 1 lakh are tax-free.