Skip to main content

ELSS Mutual Fund is best Tax Saving investment option over 3 - 5 years

 

Nobody loves to pay taxes. Unfortunately there is no way you can avoid it. Once, you cross a certain income level, you have very few ways to save taxes. That explains people's obsession with the overcrowded section 80 C of the Income Tax Act.

 

It covers scores of avenues employee's provident fund, public provident fund, tax saving schemes from mutual funds, national savings scheme, five-year fixed deposits and so on, which allows one to invest up to Rs 1 lakh and claim tax deduction.

Among these, tax saving schemes for mutual funds (also known as equity linked savings schemes or ELSSs) was the in-thing among "yuppie'' investors till a few years ago.

 

However, the scenario is a little different this year. The depressed stock markets, coupled with economic uncertainties, both on the domestic and overseas front, have forced many bravehearts to reconsider their decision to park money in ELSSs.

 

Even before the beginning of the financial year, my customers have been calling up to say that they don't want to renew their systematic investment plans (SIPs) in ELSSs this year.

The stock market has given huge negative returns in the last year and all equity schemes, including tax saving ones, were down 35-50%. People don't have the stomach to lose capital in the current environment, be it even for a short period.

Thanks to the revival of the stock market lately, some investors are rethinking, while a small section has already resumed its SIPs, say some investment consultants. And they aver that it is the right thing to do. If you have a 3-5 year timeframe in mind, you should go for ELSSs. The market may be down in the short term, but you still have the potential to earn better returns in a long period. If you have decided to invest in equity as per your asset allocation plan, then you should go ahead and put the money in tax saving schemes.

 

According to financial experts, there are many advantages of ELSS tax saving option. To begin with, the SIP option would help you start tax planning from the beginning of the financial year. It also imparts a certain financial discipline to your life.

For most people, tax planning is a last-minute rush in March, just before the end of the financial year. They also put money arbitrarily without giving much thought, mostly influenced by the market conditions at that time. If they start the process in the beginning of the year, they don't have to scramble for funds in the last minute. They will also benefit from downward movement in the market.

 

One can also hope to pocket superior returns vis-a-vis others in the section 80 C basket. Other options like EPF, PPF, five-year FD, among others, offers fixed rate of return (currently around 8%,), whereas ELSSs (at least in theory ) can give you nearly 15%.

 

One year, stocks may be down 50%, but over a period of 3-5 years you can hope to get an average return of 15%,. This is because historical data indicates that stocks have the potential to outperform all other asset class in the long run. ELSSs also beat other equity MF schemes, as they have a mandatory 3-year lock-in period.

 

This gives us freedom to invest in stocks with huge potential and wait for unlocking of value, whereas in an open-ended fund this is not possible. Though ELSSs didn't outperform the last rally, on previous occasions the category has managed to outperform other equity schemes.



Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax PlanInvest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

    ----------------------------------------

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap FundsInvest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap FundsInvest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap FundsInvest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap FundsInvest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector FundsInvest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...
Read more

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...
Read more

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...
Read more

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...
Read more

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now