Skip to main content

Best Stock Market Tax Saving Investments for 2016

Invest Tax Saver Investments Online
 
Tax Planning Strategies article in Advisorkhoj - Best market linked Tax Saving Investments

Best Tax Saving Investment Options: An Objective Review  - In the first part of this series, we compared and contrasted the different 80C Fixed Income on some important parameters like returns, liquidity, capital safety and taxability of income / returns. In this part we will review the market linked investments allowed under Section 80C. These are like ELSS, ULIP, Life Insurance Premiums, Pension Fund and National Pension Scheme.

  • Equity Linked Savings Scheme (ELSS):

    An ELSS is a diversified equity scheme with a lock in period of three years from the date of the investment. If you invest in an ELSS through a systematic investment plan (SIP), each investment will be locked in for 3 years from their respective investment dates. There are both growth and dividend options for ELSS. Compared to other tax saving instruments under Section 80C like PPF, NSC, and Tax saving Bank FDs ELSS has a much lower lock-in period and has the potential of offering superior returns over the long term. The added advantage of ELSS is that dividends and capital gains from ELSS are tax free. However, as with all equity investments ELSS are subject to market risk. While over a 3 year period top ELSS funds have provided annual returns of nearly 7 – 12% a lot of schemes have also disappointed and average returns are quite low. However over the long term ELSS can generate very attractive returns. The table below lists the schemes which have generated highest annualized returns over a 5 year period.
    Equity Linked Savings Scheme
    While weakness shown by Sensex in the last few days due to global cues, maybe a cause of trepidation for potential investors, one must note that equity mutual fund investments are essentially long term in nature. Most experts agree that the market is bottoming out, and as such this is a good time for investments in ELSS. While historical return is an important parameter for selecting mutual funds, there are other important considerations like the track record of the Asset Management Company (AMC) and the fund manager.

  • Life Insurance Premiums

    The most important thing to note about life insurance is that objective is to provide life cover, not to generate the best investment return. In fact, investment returns of premiums for life insurance policies is one of lowest in the entire spectrum of 80C investments, with average annual returns over a 5 year period in the range of 5 – 6% . The only way 80C status benefits life insurance investment is that, it reduces the cost of insurance, since insurance premiums are deductible from taxable income, up to the overall cap specified under 80C of Rs 1 lakh. The maturity proceeds from life insurance is tax exempt as per the provisions of Section 10 (10D), as long as the premium payable for any of the years does not exceed 20% of the actual capital sum assured. However, the amount received on death is entirely tax free. While even on tax adjusted life insurance policy may not be as attractive as some of the other tax saving investment options, it is very important, from financial planning perspective, that one be adequately insured.

  • Unit Linked Insurance Plan (ULIP):

    ULIP is probably the most controversial investment product in the recent history. It was marketed aggressively by the insurance companies, and there was low awareness among investors about the fee structures. Under the revised IRDA guidelines the fees have been revised and ULIPs are now more attractive as investment option, than in the past. ULIPs are combined investment and insurance plans. The investors may choose between equity and debt allocations of their premiums, depending upon their financial planning considerations. ULIP also offers life cover of a minimum 5 times your annual premium (however investors can opt for higher life covers). ULIPs have a five year lock in period. The maturity proceeds from ULIPs are tax exempt under Section 10 (10D). In terms of gross investment returns ULIPs have performed comparably with mutual funds over a 5 year period, with top ULIPs giving annualized returns of 16 – 18%. However, net returns to investors would be very different due to various applicable charge structure (see below):

    • Premium allocation charges: While some companies offer zero premium allocation charges, on an average it is 7 – 8%. This would be deducted upfront, before the units are allotted

    • Policy administration charges: While it differs from company to company, it can range from 0.5 – 1.5%, of your premium amount

    • Mortality charges: It is the fee for your insurance cover. It depends on the age of the investor and the amount of cover. For example for a 30 year old, it can be Rs 1.3 – 1.4/- for Rs 1000 of sum assured

    • Fund Management charges: It is capped at 1.35% of the NAV, levied on the entire corpus

    • Surrender charges: If you are unable to pay the premium within the lock in period of 5 years, then surrender charges would apply for encashment of the units

    • Other charges may also apply
    Therefore, one should read the product document very carefully to clearly understand the charges, before investing. Suffice to say, if you have relatively short term horizon, say 5 years, ULIPs will provide much lower returns than comparable ELSS, due to the above charges. Even on a longer term basis, if you solely have an investment perspective, mortality charges in ULIPs will reduce your returns compared to mutual funds. Also, one should never substitute term life insurance with ULIPs, since term insurance gives a much higher life cover compared to ULIPs. However, for some long term investors with specific income and tax situations, ULIPs may be good investment choice under Section 80C. You should consult with your financial planner, if ULIPs are suitable for you

  • National Pension Scheme

    This scheme is in general, a better option for investors saving for retirement, compared to other pension plans offered by insurance companies. It is low cost product (fund management charges are capped at 25 basis points). To invest in this scheme you need to apply for a permanent retirement account number (PRAN), through point of presence service providers. Once you receive your PRAN card, you can invest in a fund of your choice. There are 8 pension fund managers under this scheme, LIC, UTI, SBI, ICICI Prudential, HDFC, Reliance Capital, Kotak Mahindra and DSP Blackrock. You can invest in two accounts:
    National Pension Scheme
    The investor can opt for active and auto allocation options. In the active allocation option the investor can opt for asset classes based on equities (E), corporate bonds (C) or Government Securities (G). Asset allocation to equities and corporate bonds are subject to market and credit risk. In the auto allocation option, the investments will be allocated to different asset classes based on pre-determined (age based) allocation criteria. Under current tax laws, the maturity proceeds are taxable, though this is likely to change in the future. In terms of recent investment track record, National Pension Scheme funds have given lower returns than comparable ELSS investments, example average 3 year for E class funds is only 4.2% compared to 7 – 12% for top ELSS funds. Therefore savvier investors with well defined retirement and smart asset allocation through mutual funds systematic investment plans may be able to generate higher returns compared to National Pension Scheme.

  • Pension Plans offered by Insurance Companies:

    These are offered by Life Insurance companies, and are similar in nature to the National Pension. However a lot of these Pension Plans are very new and have no track record. The pension plans offered by the insurance companies also have much higher fund management costs (3 – 4% compared to 0.25% for NPS), which will impact the net investor returns. These pension plans, at this point of time, is not a good investment choice for tax planning

  • Pension Plans offered by Insurance and Mutual Fund Companies:

    Pension plans offered by Mutual Funds do not get as much of mention, compared to the other retirement planning and tax savings solutions like PPF, Insurance Plans etc. UTI Retirement Benefit Pension Fund was the first fund to be launched in this space in 1994 followed by Templeton India Pension Plan in 1997. After a gap of 15 years, Tata Mutual Fund came out with a retirement savings fund in November 2011. UTI and Templeton have balanced fund for retirement planning with 40% allocation to equity and 60% allocation to debt. Tata MF has three options, conservative, moderate and progressive, with increasing allocation to equity in the 3 options.
    Comparison of Investment Returns
    Market linked investments
-----------------------------------------------
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saving Mutual Funds to invest in India for 2016

Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

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

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...

ICICI Prudential Value Fund Series I

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   Performance of the scheme will be benchmarked to the S&P BSE 500 index ICICI Prudential Value Fund is a closeended equity scheme. The scheme will have tenure of three years (1095 days) from the date of allotment of units. Units of the scheme will be fully redeemed at the end of the maturity period, unless rolled over. NFO PERIOD:   The NFO is open from October 18 to 28. The minimum subscription during the NFO period is Rs 5,000. SCHEME OBJECTIVE:   The scheme aims to provide long-term capital growth by investing in a well-diversified portfolio of equity and equity-related securities. INVESTMENT STRATEGY:     The fund proposes to invest in stocks that are trading at a huge discount in the BSE 500 index and plans to book profit and distribute dividen...
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