How Much Returns can I Expect in ELSS Mutual Funds?

Investing in equities is one of the riskiest categories, but the yields are also high. One such scheme that generates high returns and helps you save tax is ELSS mutual funds or equity linked saving scheme. It invests the majority of the corpus in equities and the rest in other securities. You can either invest via a Systematic Investment Plan (SIP) or a lump sum.With the lock-in period of three years, it offers better returns and liquidity than the Public Provident Fund and National Savings Scheme. Most investors prefer to invest in ELSS mutual funds as it qualifies for tax deduction under Section 80C of the ITA, where taxpayers can claim 1.5 lakh in a financial year. Let's get to know how ELSS is beneficial in terms of returns.

One way to know the best ELSS fund is to know a mutual fund's performance in the past five years. For instance, Aditya Birla SL Tax Relief 96 Fund has given returns of 22.72% in the past five years. It is important to note that past performance cannot help you identify the future returns capability, but it can be considered one indicator of how good the fund scheme is.If you're looking to earn high returns, it is best to stay invested in ELSS for more than three years. Keeping aside the lock-in period, you can continue with the scheme as long as you want.

As a large asset allocation of ELSS mutual funds is in equities, the returns are not fixed. In order to set a return expectation from ELSS, make sure you look at the annualised returns generated by the top four funds in the past 1, 3, and 5 years.

In the end, whichever ELSS mutual funds you pick, make sure you're investing in the scheme with a long-term investment horizon. This magnifies the returns potential. Regarding returns, note that if you're holding the mutual funds for more than three years, it is categorised as Long-Term Capital Gains or LTCG. If the LTCG exceeds Rs.1 lakh, you are liable to pay the LTCG tax, which currently stands at 10%.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.