Skip to main content

ELSS and PPF for Tax Saving Option

 
Invest for Tax Saving Online


In the long run, these assets also create wealth as average yearly returns are higher than comparable assets
 
Two weeks from now, we would be entering the crucial January-February-March (JFM) months, the time when a large number of taxpayers rush to complete their investments which would lessen their tax burden for the current fis cal. Although ideally tax planning and tax-related investments should b done right from the be ginning of the financia year, but often people kee it pending for the majo part of the year and rush in to invest only when it becomes urgent during th last few months.

Financial planners an advisors suggest that tw popular and easy to un derstand products whic are also rewarding in lon term could be used to effi ciently meet the obliga tions for tax related in vestments which will lessen the tax burden of individual taxpayers These are equity linked savings schemes (ELSS) floated by mutual funds and the public provident fund (PPF), which is man aged by the government PPF has a 15-year lock-in from the year you start in vesting while ELSS has a three-year lock-in for each individual investment.

Depending upon the age of the investor, he advises them to invest in ELSS and PPF in a particular ration. If the tax payer is an young individual, I suggest 30% of the in vestible corpus to go into PPF and the balance 70% in ELSS. On the other hand, if the tax payer is a 50 year old individual, I suggest him to divide the total investment corpus equally. I usually follow the rule that says that the percentage of investment into equity should be 100 minus your age, and the balance into debt.

The advan tages of such a mix are manifold. For one, both of fers tax ad vantages under t h e cur rent taxa tion rules. Both the investments also help in building capital in the long run. In the long run, while the in vestment in PPF gives the stability to the port folio, ELSS helps in capital building. This also helps in asset allocation in a very efficient manner. And all the returns are tax free in the long run.

Even If done for the purpose of saving taxes, there should be a goal for which the investment is be ing made. In other words tax saving itself should never be an objective to in vest. Dalal, who also ad vises his clients on investment related matters, prefers a combination of ELSS and PPF for saving taxes, although he believes that in the last few years, since the time government linked the rate of returns in PPF to 10-year government bonds, PPF has become slightly less lucrative an investment than earlier.

ELSS has given an average annual return of 15%, which is very good. Even going forward, 15% CAGR (compounded annual growth rate) in ELSS is very much possible. On top of it, one could also enjoy the tax advantages. In the long run, equity usually outperforms debt and so the three year lock-in in ELSS for saving taxes is a blessings in disguise.

If someone is for the long term, ELSS should be the top priority. If the investor is conservative and risk averse in nature, then I would suggest him to invest more in PPF, because unlike equities this is not a volatile investment.

According to fund industry officials, a systematic investment plan (SIP) in an ELSS can take care of investors' need for regular and disciplined savings that also allows himher the option to lessen their tax burden. In addition, investing through ELSS also allows investors to build wealth over the long run and volatility, that is usually associated with equities, also reduces if one is willing to stay invested over the long run, that is 10, 15 or 20 years.

 
 
 

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. IDFC Tax Advantage (ELSS) Fund

4. ICICI Prudential Long Term Equity Fund

5. Religare Tax Plan

6. Franklin India TaxShield

7. DSP BlackRock Tax Saver Fund

8. Birla Sun Life Tax Relief 96

9. Reliance Tax Saver (ELSS) Fund

10. HDFC TaxSaver

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Good Returns by Investing in ELSS Mutual Funds Online

Invest in 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

Equity investors should track market developments

The stock markets have been volatile over the last few days. They are in a sideways movement and trying to find the bottom after a fall of 20 percent a week ago. The market sentiments are not very positive at the moment and the recent developments are expected to dampen them further. Globally, governments and central banks are trying to cut rates and announce packages to improve business sentiments. These are some of the major developments in the markets last few month: A) Global On the global front, another large US bank went into a financial crisis. The US government took quick measures to avoid the spread negative sentiments in the markets. The US government announced a bail-out package and agreed to shoulder the losses on the bank's risky assets. China announced a large cut in interest rates and reserve ratio to boost the investor sentiments in the markets. Recently, the World Bank announced China's growth rate next year will come down to 7.5 percent. The European ...
Read more

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
Read more

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...
Read more

Gold: It is safe & secure

RETURNS ON GOLD & ITS ETF’s RISE WHILE most of the popular asset classes are going through bad times, the yellow metal shines on. In fact, in the last one year, gold has given a return of more than 25% and currently trades at Rs 14,695 per 10 gm. Even gold exchange traded funds ( ETFs ) have appreciated substantially. Gold Gold Benchmark Exchange Traded Scheme ( BeES ) and Kotak Gold ETF have given more than 25% returns each in the last three months. Even as the equity markets have taken a hit with the Sensex losing around 46% in the last one year and real estate prices also witness a correction, investors’ preference has shifted to safe havens such as gold. On an average, most of the diversified equity mutual funds have fallen and real estate developers are offering discounts. Thus gold remains the safest bet. The appreciation in the gold prices is mainly due to its safe haven status. The key reason for gold to go up is lack of other investment opportunity. There is also a risk in...
Read more

Alpha - The relative performance

Alpha, the net performance of a component against the benchmark is an overlooked tool   Absolutely speaking, any bounce back now on markets should be the last for the year. We offcourse can be wrong and prefer to be judged on alpha (relative performance) as relative accountability is fine with us. According to Alpha India, the top outperformers in the weeks ahead should be Reliance Communications, Reliance Infrastructure, SBI, HDFC, ONGC, Larsen, Jaiprakash Associates, Maruti, Bharti and DLF. On the short side (reduce side), we have Ranbaxy, ACC, Sail, Tata Steel, Wipro, Tata Motors, Sun Pharma, TCS, M&M and Infosys.   Performance like everything follows the 80-20 rule, 80 per cent of your gains are going to come from 20 per cent of your portfolio. So why not give it a thought? The importance of alpha If alpha was so important, then why don ' t newspapers and websites publish it? Why alpha gets featured annually but not as intraday or daily event? Why don ' t we c...
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