Tax saving SIPs are effective investment options which enable investors to build a substantial corpus and save taxes at the same time. As per the provisions of Section 80C of Income Tax Act (ITA), you can claim a tax deduction of maximum ₹1,50,000 on the total taxable income if you invest in one of the best tax saving SIPs in 2023. What’s more, you can even save up to ₹46,800 in a financial year.
As part of this blog, we will discuss the top 10 best tax saving SIPs based on their features, benefits, taxation and more!
10 Best ELSS Fund to Invest Through SIP to Save Tax
The table below provides the list of the top 10 ELSS funds or tax-saver SIP plans 2023 to invest via SIPs:
| ELSS Funds | 5-Year Returns |
| Quant Tax Plan – Direct Plan – Growth | 21.68% |
| SBI Tax Advantage Fund – Series III – Direct Plan – Growth | 21.51% |
| Canara Robeco Equity Tax Saver Fund – Direct Plan – Growth | 15.79% |
| Mirae Asset Tax Saver Fund – Direct Plan – Growth | 15.14% |
| SBI Long Term Advantage Fund – Series III – Direct Plan – Growth | 15.02% |
| SBI Long Term Advantage Fund – Series II – Direct Plan – Growth | 14.37% |
| Bank of India Tax Advantage Fund – Direct Plan – Growth | 13.66% |
| SBI Long Term Advantage Fund – Series I – Direct Plan – Growth | 13.66% |
| IDFC Tax Advantage (ELSS) Fund – Direct Plan – Growth | 12.95% |
| Navi ELSS Tax Saver Fund – Direct Plan – Growth | 9.96% |
So, these are the top SIPs that you can invest through SIP to save taxes. But before investing in any of these, let’s check out the features, advantages and other related information.
10 Best ELSS Funds 2023 – Tax Saving SIPs Detailed Overview
1. Quant Tax Plan – Direct Plan – Growth
Quant Tax Plan – Direct Plan is one of the best tax saver SIP plans which invests in domestic equities at a rate of 99.89%, with 63.33% in large cap stocks, 10.82% in mid cap stocks, and 9.61% in small cap stocks. Investors who intend to invest money for at least three years and seek additional benefits such as income tax savings in addition to higher expected returns. At the same time, these investors should be prepared for moderate losses in their investments as well as a three-year lock-in period.
- NAV: ₹247.94
- AUM: ₹2506.48 Crore
- Expense Ratio: 0.57%
- Minimum Investment: SIP ₹500, Lump Sum ₹500
- 3-Year Returns: 36.07%
- 5-Year Returns: 21.68%
2. SBI Tax Advantage Fund – Series III – Direct Plan – Growth
The ELSS fund invests 93.17% of its assets in domestic equities, with 43.41% in Large Cap stocks, 9.12% in Mid Cap stocks, and 19.82% in Small Cap stocks. This fund is suitable for investors who want to invest for at least three years and want to benefit from income tax savings in addition to higher returns.
- NAV: ₹63.76
- AUM: ₹30.57 Crore
- Expense Ratio: 2.6%
- Minimum Investment: SIP ₹0, Lump Sum ₹500
- 3-Year Returns: 27.19%
- 5-Year Returns: 21.51%
3. Canara Robeco Equity Tax Saver Fund – Direct Plan – Growth
Canara Robeco Equity Tax Saver Fund is designed for investors who want to benefit from tax breaks while also participating in India’s growth story through a diverse equity portfolio. This product is appropriate for investors seeking long-term capital appreciation in equity and equity-related securities with a statutory lock-in period of three years and a tax benefit.
- NAV: ₹125.93
- AUM: ₹4562.79 Crore
- Expense Ratio: 0.61%
- Minimum Investment: SIP ₹500, Lump Sum ₹500
- 3-Year Returns: 18.52%
- 5-Year Returns: 15.79%
4. Mirae Asset Tax Saver Fund – Direct Plan – Growth
Mirae Asset Tax Saver Fund seeks to invest in equity and equity-related instruments across market capitalisation, themes, and investment styles in order to generate long-term appreciation and wealth while providing tax savings under Section 80C of the Income Tax Act of 1961. The fund invests 99.29% of its assets in domestic equities, with 55.97% in Large Cap stocks, 12.16% in Mid Cap stocks, and 7.04% in Small Cap stocks.
- NAV: ₹34.26
- AUM: ₹14020.27 Crore
- Expense Ratio: 0.57%
- Minimum Investment: SIP ₹500, Lump Sum ₹500
- 3-Year Returns: 18.91%
- 5-Year Returns: 15.14%
5. SBI Long Term Advantage Fund – Series III – Direct Plan – Growth
The goal of SBI Long Term Advantage Fund – Series III is to generate capital appreciation over a ten-year period by investing primarily in company equity and equity-related instruments, while also receiving an income tax benefit. The fund invests 92.25% of its assets in domestic equities, with 40.36% in large cap stocks, 6.63% in mid cap stocks, and 17.01% in small cap stocks.
- NAV: ₹28.98
- AUM: ₹59.79 Crore
- Expense Ratio: N/A
- Minimum Investment: SIP ₹0, Lump Sum ₹500
- 3-Year Returns: 24.80%
- 5-Year Returns: 15.02%
6. SBI Long Term Advantage Fund – Series II – Direct Plan – Growth
The fund has 94.14% investment in domestic equities of which 39.13% is in Large Cap stocks, 7.38% is in Mid Cap stocks, 17.42% in Small Cap stocks. Investors who are seeking high returns for a long term investment can choose this fund.
- NAV: ₹28.75
- AUM: ₹31.57 Crore
- Expense Ratio: N/A
- Minimum Investment: SIP ₹0, Lump Sum ₹500
- 3-Year Returns: 24.02%
- 5-Year Returns: 14.37%
7. Bank of India Tax Advantage Fund – Direct Plan – Growth
Bank of India Tax Advantage Fund is an Equity – ELSS fund with an AUM of 692.94 (Cr). It is an open-ended scheme. The fund invests 99.82% of its assets in domestic equities, with 48.25% in Large Cap stocks, 18.58% in Mid Cap stocks, and 16% in Small Cap stocks. The fund has a 0.08% investment in debt, with 0.08% in government securities.
- NAV: ₹112.68
- AUM: ₹692.94 Crore
- Expense Ratio: 1.16%
- Minimum Investment: SIP ₹500, Lump Sum ₹500
- 3-Year Returns: 20.07%
- 5-Year Returns: 13.66%
8. SBI Long Term Advantage Fund – Series I – Direct Plan – Growth
SBI Long Term Advantage Fund – Series is an SBI mutual fund that invests 92.76% of its assets in domestic equities, 39.37% in Large Cap stocks, 7.31% in Mid Cap stocks, and 17.14% in Small Cap stocks. Suitable for investors who are willing to invest for at least three years and are looking for other benefits such as income tax savings in addition to higher expected returns. At the same time, these investors should be prepared for the possibility of moderate losses in their investments as well as a three-year lock-in period.
- NAV: ₹27.47
- AUM: ₹37.55 Crore
- Expense Ratio: N/A
- Minimum Investment: SIP ₹0, Lump Sum ₹500
- 3-Year Returns: 23.73%
- 5-Year Returns: 13.66%
9. IDFC Tax Advantage (ELSS) Fund – Direct Plan – Growth
IDFC Tax Advantage (ELSS) Fund is an Equity Linked Savings Scheme (ELSS) that aims to generate long-term capital growth from a diversified equity portfolio and allows investors to deduct their total income as allowed by the Income Tax Act of 1961. The tax-saving fund with a multi-cap approach that believes in growth at a reasonable price.
- NAV: ₹112.87
- AUM: ₹4025.95 Crore
- Expense Ratio: 0.74%
- Minimum Investment: SIP ₹1000, Lump Sum ₹500
- 3-Year Returns: 22.22%
- 5-Year Returns: 12.95%
10. Navi ELSS Tax Saver Fund – Direct Plan – Growth
The Navi ELSS Tax Saver Fund invests 96.11% of its assets in domestic equities, with 45.56% in large cap stocks, 12.36% in mid cap stocks, and 18.6% in small cap stocks. This is an option for investors looking for long-term returns as well as additional tax benefits.
- NAV: ₹23.08
- AUM: ₹59.45 Crore
- Expense Ratio: 0.4%
- Minimum Investment: SIP ₹500, Lump Sum ₹500
- 3-Year Returns: 11.78%
- 5-Year Returns: 10.10%
Also Read
Features of ELSS Mutual Funds
Here are the features offered by top ELSS Mutual funds:
1. Low Lock-in Period
If you compare different tax saving schemes, ELSS mutual funds have the lowest lock-in period. The period extends up to 3 years, after which you may redeem your investment.
2. Tax Saving Benefit
There is a maximum tax benefit of Rs. 1,50,000 as mentioned under Section 80C of the Income Tax Act. As a result, investors can save tax and reap better returns. In other words, you get more income due to the deduction claimed at the time of tax calculation.
3. Two Modes of Investment
ELSS Mutual Funds offer two modes of investment, including lump sum and SIP. However, many investors choose SIP over lump sum due to additional benefits, which is discussed in the following sections.
4. Professional Management
Under this scheme, investors get professional assistance. In other words, their investment is managed by experienced individuals who know the ups and downs of the market. They are also called the fund manager.
Benefits of Investing in ELSS Mutual Funds Through SIPs
1. Power of Compounding
One of the top benefits of availing best tax-saving SIPs is the compounding effect. Compounding begins when your investment starts earning returns for you. For example, when you invest via SIP, the returns you gain on your previous investment get reinvested, thus increasing your potential return manifold. Moreover, if you want to achieve the maximum, you can extend the period of staying invested.
2. Minimum Initial Investment Amount
An investor can start with just Rs. 500 per month in mutual funds through SIP. Thus, it will avoid any financial pressure on your wallet. Later, when you feel you can increase your monthly investment amount, you can increase the SIP amount gradually. Also, Mutual fund houses offer investors a top-up system to reach their investment goal easily.
3. Rupee Cost Averaging
By availing best tax saving SIPs, investors also benefit from rupee cost averaging. It is a concept where some investors buy more units when the NAV or Net Asset Value of a fund is low and a lesser amount of units when it is high. As a result, over an extended period, the purchasing cost of the investment balances out. So, you don’t need to worry about timing the market.
4. Convenient Investing
A systematic Investment Plan or SIP is a convenient mode of investment. Most investors do not have time for market research and extensive analysis to balance their portfolios. In SIP, after you invest in a good fund, you can just instruct the bank, and SIP will take care of the rest of your investment.
So if you want to enjoy the benefits of investing in the best tax saving SIPs, Navi offers investors the option of Navi ELSS Tax Saver Fund Direct-Growth. With this fund, individuals can save tax and claim a deduction of Rs. 46,800 under Section 80C of the Income Tax Act.
Things to Consider Before Investing in Tax Saving SIPs
1. Investment Horizon
Time horizon is an essential factor to consider while investing in an ELSS fund as they come with a lock-in period of three years. So, the investors cannot redeem their investment before the said period expires.
2. Expense Ratio
Expense ratio is the annual charge that you need to pay to the AMC for fund management and operations. If the expense ratio is lower, it will allow the investors to earn an increased return on their investment. On the other hand, a high expense ratio results in reduced gains on investment.
3. Fund’s Past Performance
Investors should look into the history of the fund performance, including their 3-year and 5-year returns. It gives an insight into how you can expect a fund to perform in the future and whether it will reach the investment objective. However, remember that past performance does not necessarily determine its future performance.
Who Should Invest in Tax Saving Funds Through SIP
An investor with the following goals can consider investing in the best tax saving SIPs:
- Individuals having a long term investment horizon of at least 3 years.
- Investors who want to invest in equity instruments primarily.
- Individuals or HUF who wish to enjoy tax-saving benefits.
Taxation on ELSS Mutual Funds
The taxability of ELSS Mutual funds is similar to any other equity class of funds. In other words, it is taxable at the hand of the investors. However, remember since there is a lock-in period of three years, there is no window to gain short term capital gains.
On the other hand, long term capital gains of investors up to Rs. 1,00,000 is tax exempted. However, an amount that exceeds this limit is taxable at 10% with no indexation benefit.
Equity linked saving schemes are taxed the same way as equity mutual funds. A major benefit of investing in ELSS funds is that these saving schemes are eligible for tax benefits under Section 80C of Income Tax Act of India (ITA).
To know more about taxation of ELSS funds, take a look at the following points:
- If the holding period of ELSS investment is less than 12 months, then the capital gains will be classified as short term capital gains (STCGs) and it will be taxed at 15% plus 4% cess.
- But, if you redeem your ELSS investment after 12 months, then the capital gains will fall under long term capital gains (LTCGs) which will be taxed at 10% plus 4% cess.
An important characteristic you need to be aware of is that ELSS is referred to as a tax-saving mutual fund because as per the provisions of ITA, you can avail tax deduction for up to maximum ₹1.5 lakh. In other words, you can save ₹46,800 every year which will contribute significantly to building a substantial corpus.
Final Word
You can find the details of the top ELSS funds in this guide that would let you save taxes through some of the best tax saving SIPs 2023. However, make sure to consider your risk appetite, investment goals and other vital factors to make the most of your investment.
Investing is not rocket science! Take your first step towards investing with Navi Mutual Fund in a hassle-free manner with SIP just Rs. 10!
FAQs
Is it compulsory to open a Demat account for investing in ELSS Mutual funds?
No, investors do not need a Demat account to invest in ELSS Mutual Funds. Many other options are available for investment such as via AMC, stock exchange broker, online distribution, or offline distributor. However, the process may vary.
What is the best time to start tax saving SIPs?
There is no good or bad time for starting a tax-saving SIP since you are investing monthly, weekly or quarterly through an SIP as per your preference. Therefore, it balances out the purchasing cost for you. So, you can select any date of the month and continue your investment regularly.
What is the difference between ELSS SIP and the standard one?
In a systematic investment plan, individuals invest a fixed amount regularly. But in ELSS funds, these regular investments get locked in for three years which the investors cannot break if they want to enjoy the tax benefit.
What is the process to start your best tax saving SIPs?
The process of starting with your best tax saving SIPs is quite simple. You just need to follow the below steps:
1. Complete ‘Know Your Customer’ or KYC process
2. Set your investment goal
3. Choose with which ELSS Mutual Fund you want to start your SIP with
Invest in it
Is it risky to invest in ELSS Mutual funds?
Like any other equity investment, ELSS Mutual Funds also come with a certain degree of volatility. It is because their performance varies on market movement. However, there is also a high potential to earn good returns compared to other tax-saving funds.
Which SIP is tax-free under 80C?
If you invest in an equity linked savings scheme, you can claim a tax deduction of up to maximum ₹1,50,000 in a financial year as per Section 80C of ITA. It will enable you to save the tax amount which will be instrumental in growing your corpus.
Is tax saver SIP good?
A systematic investment plan inculcates financial discipline and if you choose this investment mode for investing in your preferred ELSS, you will receive important tax-saving benefits.Tax saver SIP is one of the most effective investment instruments as it enables people to grow their wealth and save taxes in a disciplined way.
Which type of SIP gives the highest return?
You can consider investing in equity linked saving schemes to earn high returns. As mentioned above, you can claim tax deductions up to ₹1,50,000 for long term capital gains earned from ELSS investment. As a result, you can save up to ₹46,800, a significant amount that you would otherwise have to pay as taxes. These benefits associated with ELSS help people to earn high returns from their investment.
Is SIP better than PPF?
The answer to this cannot be an objective one as it will depend entirely on an investor’s financial goals and risk profile. So, while PPF is a more ideal investment option for risk-averse investors, people who are willing to take risk can consider investing in ELSS.
Is monthly SIP tax-free?
In India, taxes are applicable only on redemption of mutual fund investments and not on investment modes. The capital gains earned are classified either as short term or long term capital gains and taxes are applicable accordingly. When you invest in an equity linked savings scheme, capital gains up to ₹1.50,000 are tax-free.
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