Tax-saving: How to select the right ELSS mutual fund

ELSS is a tax-saving equity mutual fund. The majority of these funds are invested in equities. The lock-in is period is three years and the investment in such funds is tax-exempt up to a limit of 1.5 lakh under Section 80C. ELSS is one such mutual fund, where one can save tax and also gain good returns.

Money9 Helpline hosted the founder of Complete Circle, Kshitij Mahajan to explain how to select the right ELSS fund and resolve all related queries.

Edited excerpts

Teena Jain Kaushal: How much return can I expect in an ELSS?

Mahajan: The lock-in period is three years but on average, we consider around 5 years. So ELSS over 5 years will give 12-20% returns on compounding, which is really a good return if you compare it to any other tax-saving investments options like PPF, NPS, etc. So, no other investment instruments are able to beat the returns given by the ELSS fund. Even the lowest-performing ELSS gives a return of 12%, and on average ELSS gives 16-17%. The rate at which GDP grows will also be in alignment with the returns generated from ELSS.

Ashish Darji: Mirae asset tax saver or Quant tax plan, Which one is better?

Mahajan: You should assess that on the basis of your goals and how these instruments are performing in the market. Quant is fairly a new AMC with a small corpus so you should invest after evaluating the returns it will give. My own portfolio consists of a mix of Mirae, IDFC, etc.