Top 5 tax saving funds with consistent returns

Investors usually invest into tax-saving funds at the end of the year that in the last 3-4 months of the financial year to receive a tax shield. Usually, tax-saving funds are utilised for the purpose of tax saving only. But these funds are also equity-linked and even they can reap better returns in the longer run.

Equity-linked saving schemes were previously tax-free, however, post-union budget 2018 these funds are also taxed at 10 per cent on account of long-term capital gains tax and 15 per cent on account of short-term capital gain tax. These funds invest 65 per cent of their corpus in the equity and equity-related instruments so these funds are taxed as equity funds.

Still, these funds stand as a great option for tax saving as well as for return purposes. There are some tax-saving funds who have garnered good returns to the investors. So in the equity mutual fund category, these funds are one of the best options for the investor as these are capable of serving both the interest of investors that is tax efficiency and return yield.

To determine best performing schemes among these categories we have gone through all the schemes under this category and their returns in the longer run. The time horizon considered is 5 years as usually these funds have a lock-in period of 3 years. So for investors, it is important to know the long-term return visibility from these funds to stay invested in them for more than three years.

According to our data analysis, below-mentioned schemes are the top performers in the tax saving category which have fared well in the long run. The performance of these schemes also suggests consistency in their performance, indicating that even the funds in tax saving category can provide returns comparable to pure equity funds if invested with a long-term outlook.