What if your efforts to save tax help you earn decent returns too in the long run? The Quant Tax Plan – Direct Plan-Growth, an equity-linked savings scheme, is listed among mutual funds with a dynamic outlook. This fund comes with a mandatory lock-in period of three years, though one can stay invested in it for a prolonged period.
Like most other funds in the ELSS funds category, this is an open-ended mutual fund and has a major portion of its investments in Indian stocks. This fund is deemed best for investors who wish to park their money in mutual fund investments for a minimum of three years to avail of the benefits of saving on their taxes. Besides, the investors’ expectations regarding returns are pretty high, thus, serving them the dual benefits of earnings along with savings on taxes.
As per the guidelines stipulated by the Securities and Exchange Board of India (SEBI), investments in this fund come under the “Very High Risk” category.
Quant Tax Plan – Direct Plan-Growth
Launched on January 01, 2013, the current assets under management (AUM) amount to ₹1,166 crores. The risk factor of investing in this fund is high considering a major portion of the investment is parked in equity instruments. This medium-sized debt fund charges a 0.58 per cent expense ratio.
The fund is benchmarked against the NIFTY 500 Total Return Index and can be bought to earn long-term returns. Considering the relatively low expense ratio charged by this fund, the returns from this debt to medium to long-duration fund are a bit higher compared to other funds in this category.
The minimum amount you can invest in this fund is ₹500 in a lump sum while you can make an added minimum investment of ₹500 in a lump sum in this fund. The minimum investment you can make through SIPs is ₹500. This fund does not attract any exit load, which means that investors have nothing to lose post-fund redemption.
Many investors inquire why they must invest in this fund more than any other. A comparative analysis of most income funds in this category underscores the exceptionally high returns that investors have earned by investing in it.
|Scheme Name||3-year Returns|
|Quant Tax Plan – Direct Plan-Growth||38.10%|
|HDFC Long Term Advantage Growth Direct Plan||21.20%|
|PGIM India ELSS Tax Saver Growth Direct Plan||20.07%|
|Mahindra Manulife ELSS Kar Bachat Yojana Growth Direct Plan||18.94%|
|Principal Personal Tax Saver Growth Direct Plan||17.21%|
The compounding effect is palpable for those who choose to stay invested in this fund for a long period. Just like other mutual funds, you may either invest in a lump sum or through systematic investment plans (SIPs) for an extended period ranging from 10 to 15 years.
Roughly 90.16 per cent of the fund’s holdings are in Indian stocks of which 44.32 per cent of the money is invested in large-cap stocks, 18.03 per cent in mid-cap stocks and 18.31 per cent is allocated to small-cap stocks.
The returns factor
The scheme earns around 5.69 per cent returns in a year while the absolute returns over five years are 7.16 per cent. Since its inception, investors have earned 9.21 per cent returns.
You cannot sell your investments in this fund for three years from the date of purchase. However, redeeming your investment post three years will invite long-term capital gains tax. This means that if your long-term capital gain exceeds ₹1,00,000 in any financial year, you will be subject to a 10 per cent tax on the amount over and above the ₹100,000 limit, sans inclusion of any cess or surcharge.
Also, dividends received on your ELSS investments are added to your total income and taxed at existing income tax slab rates. Also, since it is a tax-saving instrument, you can claim a deduction on your taxable income under Section 80 on the investments made in this fund for the first three years.
Disclaimer: Mutual funds are subject to market risks. Please read the offer document carefully before investing. Also, the Securities and Exchange Board of India has stipulated the latest guidelines categorising this fund under the “Very High Risk” category.