Looking for the Best Performing Tax Saving Investment Option? Reliance Tax Saver (ELSS) Fund-Growth Plan-Growth Should Be Your Pick
Planning for taxes at the eleventh hour is never advisable. If you are a sincere and prudent employee, your tax planning should start well ahead of time. you should make investments in schemes that allow you to claim for tax deductions under section 80 C of the Income Tax Act. Now, although there are many such schemes and plans that help you save taxes, ELSS or Equity Linked Savings Scheme stands out with its unique offerings.
Wondering why we call ELSS the best tax saving investment avenue? Here are the reasons -
- Tax Benefit -
One of the most important reasons why people invest in ELSS is tax benefit. And this benefit can be reaped under section 80 C of the Income Tax Act of 1961.When you make an investment in ELSS, you can minimise your tax liability by deducting up to INR 150000 of your taxable income.
- Returns are impressive -
ELSS is one of those rarest investment avenues that claim to offer inflation beating returns. But for this, you must invest in an ELSS product that has a great track record. Nevertheless, even the average performing products possess the potential to trigger wealth creation. And this potential is higher than what other comparable tax saving products in the market possess. So, all gain, no pain!
- Dual benefits –
Now, comes the real exciting advantage. For a lot of employees, income tax is a nightmare. That is why the tax period is the time they hate most. But ELSS being one of the best tax saving investment options, helps investors save taxes in the most efficient manner. The best thing about ELSS is that it is immensely helpful in long term wealth creation besides being a powerful tax saving option. So, ELSS is an equity linked mutual fund that offers dual benefits of wealth creation and tax saving to investors.
- The lock-in period is the shortest -
The lock in periods for most tax saving instruments available in the market start from five years. On the other hand, ELSS has a lock in period of only three years, which is definitely the lowest. Now, this short lock in period of three years is not just beneficial for the investors but for the fund managers as well. Both of these entities have sufficient time at hand to assess the risks and counter market volatility effectively.
We all know that equities offer great returns over the long term. And since ELSS has most of its funds parked in equities, the investors get significantly higher returns, which beat inflation. But one thing that investors need to keep in mind is that the lock period of three years starts from the day the units are allotted to them, and not from the day when they start investing in the fund.
People with financial goals such as retirement planning and children’s higher education can benefit immensely from this fund.
- A variety of options at disposal, to choose from -
There are various ELSS products available in the market. An investor can make comparison among different funds and then invest in the one that they think suits their financial goals the best.
- Investment in ELSS is easy -
There are two modes of investment available to an ELSS investor - SIP and lumpsum. In case of ELSS, lumpsum is not advisable as it fails to beat volatility and doesn’t offer purchase cost averaging. SIP is the best investment approach in this case. SIP inculcates in an investor the habit of saving, by helping them take a disciplined investment approach. The SIP investment approach is a boon to risk averse investors, as it helps them avoid making an entry into the market at the wrong time, probably when it’s facing a dip.
- Cent percent tax-free returns -
There is no dearth of tax saving investment products in which when you invest, your returns become taxable. But this is not the case with ELSS. ELSS helps you save taxes, besides offering you tax free returns, landing you in a win-win situation.
- Free insurance cover -
A lot of mutual fund companies are coming up with schemes that provide free life insurance cover without any additional cost. That means it’s the mutual fund company that bears the premium. A specific percentage of the SIP account is covered by them. Hence, making the insurance cover available for paying the SIP amount. The cap on insurance cover is less than 20 lakhs. So, if you do not have a life insurance policy, you can consider investing in one of these funds.
- Limitless investment -
As already discussed, you can make an investment in an ELSS fund, either through the SIP approach or the lumpsum mode. And irrespective of which out of these two you choose, you will not have any upper ceiling on your investment amount.
- Performance tracking is a breeze -
The portfolio in which the fund has made investments in is released every month by the AMC. This acts as a guide for the investors. They can check the number and kind of stocks in which they have their money parked.
If you look at the options available in the market, you will realise that there is simply no shortage- you can choose any ELSS fund of your choice. But making a random choice is never healthy. You should always zero in on the product that you think could fulfil all your financial goals. And if you are thinking about returns, then there is no other product that can offer what the Reliance Tax Saver (ELSS) Fund-Growth Plan can. So, let’s delve deeper into this ELSS product, and see how its performance has so far been.
Reliance Tax Saver (ELSS) Fund-Growth Plan -
This is an open-ended growth fund, launched on Aug 23, 2005. The main aim of the fund is long term capital appreciation. The majority of the corpus remains parked in equities and equity linked instruments. If you want to invest in this scheme, you can start as low as INR 500.
To assess the performance of the fund since its inception, let’s have a look at the scheme performance table below. Here, we can see that the scheme offered a return of 35.3% in the first year of its launch against 25.5% offered by other comparable funds in the market, in that year. In the third year of the launch of the scheme, it marked a return of 14.4%, while the market-average that year was 14.43%. Now, let’s look at the fifth year’s performance. In the fifth year, the scheme offered a return of 23.12% as opposed to 19.21% return offered by other equity linked savings schemes in the market. In the tenth year, reliance offered 13.9% return, while other comparable funds offered a return of 9.41%. This brings us to the total since-launch returns offered by the reliance scheme and other equity linked savings schemes. While Reliance offered 16.91% return since inception, 17.35% is what other comparable funds in the market offered gave, over the years.
Source: Swaraj Wealth Research
SIP Investment in Reliance Tax Saver (ELSS) Fund-Growth Plan -
As it has been already discussed that you can choose the SIP mode to invest in this scheme, let’s see how much you would have earned had you started investing in it on 06-12-2016. We will look at the performance of the scheme over a year.
Let’s suppose you invested an amount of INR 10000 on 06-12-2016 and you continued to invest this amount monthly in the fund for a year. By 06-11-2017, you would have received a profit of INR 22494, which is indeed substantial. That means, your total invested amount of INR 120000 would have become INR 142494, and the return percentage you would have earned is 43.65%, which is way higher than what other comparable funds in the market, on an average, would have returned i.e. 29.95%. If you saved in any other scheme, you would have received a profit of INR 15731, as compared to INR 22494 provided by other comparable funds in the market, on an average.
Source: Swaraj Wealth Research
If you look at the graph below, you will see that the returns offered by Reliance Tax Saver (ELSS) Fund-Growth Plan as on 6th November 2017 is INR 1,42,493 which is indeed impressive.
Source: Swaraj Wealth Research
ELSS definitely has the merits that make it one of the most sought-after investment avenues available in the market. And about Reliance Tax Saver (ELSS) Fund-Growth Plan, it is simply one of the best. Hence, whether you are looking to create wealth or are interested in saving taxes, investing in Reliance Tax Saver (ELSS) Fund-Growth Plan would be the best bet for you. And this is not something we claim, this is what all the above graphs and tables have indicated. So, be wise and make your income tax-free by making the right move. Happy investing!