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Twin benefits of Wealth Creation and Tax Savings

Twin benefits of Wealth Creation and Tax Savings 1

ELSS funds are a category in the mutual fund product basket which allows the investors to reap the multiple benefits of investing. ELSS Mutual Funds are best known for the tax benefits they provide. Further, the advantages of investing in an equity securities are also added to it. Most people compare them with other tax saving instruments like PPFs, NSC, FDs, etc., primarily because of providing similar tax benefits. But, ELSS offers multiple benefits with that of the other tax instruments. While, ELSS enables for deduction of up to Rs. 1.50 lakhs on total taxable income each financial year, it may also provide benefit of wealth creation to fulfil one’s future requirements/goals. Also, ELSS comes with a Lock-in period of 3 years only. Which may minimise the risk of market volatility in the short term.

UTI Long Term Equity Fund (Tax Saving) is one such offering which is creating wealth for its investor since Dec-1999. The Fund is an Equity Linked Saving Scheme (ELSS) providing dual benefits of sound returns potential by investing in equity securities and also savings on taxes. The Fund has AUM of over Rs. 1,600 Crores with over 1.70 lakhs unit holder accounts as of January 31, 2021. The Fund attempts to invest in businesses having healthy return ratios, cash flows and run by sound managements, with an aim to provide superior risk adjusted return.

The Fund invests across the market capitalization spectrum of large, mid and small with a blend approach of investing in both growth and value stocks. The Fund has about 65% invested into Large Caps and remaining in Mid & Small caps as on January 31, 2021. The scheme’s top holding consists of HDFC Bank Ltd., Infosys Ltd., ICICI Bank Ltd., HDFC Ltd., Bharti Airtel Ltd., Axis Bank Ltd., ITC Ltd., Crompton Greaves Consumer Electrics Ltd., L&T Infotech Ltd. and Bajaj Finance Ltd. which accounts for over 43% of the portfolio’s corpus.

 UTI Long Term Equity Fund (Tax Saving) may be suitable for investors looking for funds that are not large cap biased as the lock-in period of 3 years the fund allows for a longer investment horizon for the portfolio, thus raising the probability of generating higher risk-adjusted returns. Further, investment of up to Rs. 1.50 lakhs in this scheme is eligible for tax benefits under sec 80C of the Income Tax Act 1961.

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