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The most popular tax-saving alternative under Section 80C is the equity-linked savings scheme (ELSS), which has a track record of producing alpha returns over the long run and the shortest lock-in period among all tax-saving instruments of three years. With the additional benefit of tax advantages, ELSS Funds are diversified equity funds that invest in companies with a range of market capitalizations, including large, mid-cap, and small-cap companies. Financial gurus only advise having a long time horizon while investing in ELSS since doing so would enable you to take advantage of ELSS’ potential to give the highest returns among any 80C option and save up to ₹46,800 in taxation annually. Here, we’ve used the HDFC Taxsaver Fund as an illustration, which has completed its 26 years of inception and hence made investors crorepati.
HDFC Taxsaver Fund
Launched on March 31, 1996, the HDFC Taxsaver Fund Regular Plan – Growth Option has now been around for 26 years. As of March 31, 2022, the fund has produced SIP returns of 21.27%, outpacing the performance of the NIFTY 500 TRI benchmark at 15.45% and the NIFTY 50 additional benchmark at 14.35% during that time. A total investment of ₹31.20 lakh achieved through the systematic monthly investment of ₹10,000 made in HDFC TaxSaver since the fund’s inception, would have given you an investment return of ₹9.39 crore by March 31, 2022.
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The fund has produced a 1-year return of 26.05% as of March 31, 2022, which is higher than the benchmark performance of 22.29%, returns of 11.64% in the previous three years, and returns of 9.44% in the previous five years. Since the fund’s inception, it has produced an annualized return of 22.24%, which is higher than the benchmark performance of 14.25%, hence an investment of ₹10,000 made in the fund from its initial stage of the fund would now have given you an investment return of ₹1,857,705.
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Key takeaways of HDFC Tax Saver Fund
As of June 30, 2022, HDFC Taxsaver-Growth had assets under management (AUM) totalling ₹9,788 Crores, and as of September 26, 2022, the fund’s NAV was ₹766.63. The fund has an expense ratio that is higher than the majority of other ELSS funds at 1.79%. In the last year, HDFC Taxsaver-Growth returns have been 4.76%, and since its debut, it has generated average annual returns of 23.19% based on the NAV as of September 26, 2022.
The fund holds a sector allocation strategy ranging from financial, automobile, energy, healthcare, to technology industries. ICICI Bank Ltd., HDFC Bank Ltd., State Bank of India, Bharti Airtel Ltd., and Hindustan Aeronautics Ltd. are the top 5 holdings of the fund. In domestic equities, the fund has a 95.52% exposure, of which 84.71% are large-cap companies, 7.56% are mid-cap stocks, and 3.25% are small-cap stocks.
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