Two top rated ELSS mutual funds from Morningstar for tax savings as well as wealth creation

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Updated: Mar 06, 2018 5:31 PM

Even as we come to the last month in the financial year, and investors look to plan their finances for to save tax and grow their money at the same time, an ELSS mutual fund may come in handy. We take a look at two top rated mutual funds from Morningstar.

cash, economy, gst, demonetisation, indian economyThere is no maximum investment limit to invest into ELSS funds, however, investments only up to Rs 1.50 lakh are eligible for a tax break. (Image: Reuters)

Even as we come to the last month in the financial year, and investors look to plan their finances for to save tax and grow their money at the same time, an ELSS mutual fund may come in handy. An ELSS or Equity Linked Savings Scheme seeks to achieve the twin goal of tax savings and wealth creation. Under this plan, unlike regular equity funds which are taxed, ELSS provides an equity exposure but also provides a tax benefit under the Income Tax Act, as it qualifies as one of the designated investments are eligible for a tax deduction. There is no maximum investment limit to invest into ELSS funds, however, investments only up to Rs 1.50 lakh are eligible for a tax break. This limit is inclusive of the overall limit under Section 80C. Further, ELSS has a lock-in period of 3 years. Accordingly, investors cannot sell units before the completion of this period. While investors may be mulling whether to invest into this category of mutual funds, we take a look at two top rated mutual funds from Morningstar.

Axis Long Term Equity Growth

Among the seven ELSS funds under coverage, Morningstar has rated Axis Long Term Equity Growth has rated it 4-stars. Morningstar says that this is the largest Tax Savings (ELSS) fund in the category. The fund has returned more than 24% in the last one year. Notably, it has consistently outperformed its benchmark in the one year, three-year and five- year periods. The fund has considerable exposure to the shares of Kotak Mahindra Bank, HDFC Bank and HDFC with more than 6% each of the total assets invested into these companies.  The fund commands an AUM of more than 16.5 crores and has an expense ratio of 1.97%.

Franklin India Taxshield

Morningstar has given the fund a four star rating. While the fund has underperformed in the last one -year time frame with returns of 12.5%, the fund has beaten the benchmark in the 3-year and 5-year period. The fund had an AUM of Rs 3,543 crore and an expense ratio of 2.41% as on January 31, 2018.

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