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Monday, February 29, 2016

Mutual Fund ELSS SIPs have created wealth for investors in last 12 years

Invest in Mutual Fund ELSS SIPs Online
 
Mutual Funds article in Advisorkhoj - How Mutual Fund ELSS SIPs have created wealth for investors over the last 12 years

In our previous articles, How Mutual Fund SIPs have created wealth over the last 15 years: Large Cap and Diversified Equity and Mutual Fund SIPs have created wealth over the last 10 years: Small and Midcap funds, we had discussed how Systematic Investment Plans (SIPs) in good large cap, diversified equity and small & midcap funds have created wealth for the investors. In this article, we will discuss how Equity Linked Savings Schemes have created wealth for the investors in the last 12 years. Equity Linked Savings Schemes (ELSS) offer twin benefits of wealth creation and tax savings under Section 80C of the Income Tax Act. Investment in ELSS of up to Rs 1 lakh each year is eligible for deduction from your taxable income when assessing your income tax obligation for the year. From a fund portfolio perspective, an ELSS is essentially a diversified equity scheme with a lock in period of three years from the date of the investment. Each SIP investment in an ELSS will be locked in for 3 years from their respective investment dates. Therefore, if you started a monthly SIP of Rs 5000 in an ELSS from May 2014, your first SIP of Rs 5000 made in May 2014 will be locked in till May 2017. Your second SIP of Rs 5000 made in June 2014, will be locked in till June 2017. You should note this when you redeem your units in ELSS SIPs and plan accordingly. The lock in period is somewhat of an advantage for ELSS fund managers, because they are free from redemption pressures in the first three years and therefore can focus on managing a portfolio that gives good returns in the long term. There are both growth and dividend options for ELSS. For tax purposes, dividends and capital gains from ELSS are tax free. Compared to other tax saving instruments under Section 80C like PPF, NSC and life insurance premiums, ELSS has a much lower lock-in period and has the potential of offering superior returns over the long term. However ELSS is subject to market risks, like other mutual funds.

In this article, we will discuss how SIPs in tax saving funds or ELSS, have created wealth for their investors. For our discussion, we have selected 5 tax saving (or ELSS) funds that have given good returns in the last 12 years. This is, by no means, a comprehensive list of all the ELSS funds that gave good returns in the last 12 years. We should also note here, some of these funds, based on their last 1 to 3 year performance, may not be the top performing ELSS. To review the top performing ELSS based on CRISIL's December 2013 ranking, please visit our article,Tax Planning: Review of Top 6 Mutual Fund ELSS Schemes. This article aims to illustrate of how long term investments in SIPs, have created wealth for investors in ELSS funds, by leveraging the power of compounding. Each of the funds in our selection has created wealth for investors by giving compounded annual SIP returns of nearly 20% over the last 12 years. Since SIP investments are made over a period of time, the method of calculating SIP returns is different from that of Lump Sum investments. SIP returns are calculated by a methodology called XIRR, which is a variant of Internal Rate of Return (IRR). XIRR is similar to IRR, except XIRR can calculate returns on investments that are not necessarily strictly periodic.

For our examples, we have assumed a monthly SIP of Rs 3000 only, made on first working day of every month in the ELSS funds that we will discuss. Let us assume the SIP start date was 12 years back in May 2002. Over this period, the investor would have invested Rs 4.4 lakhs in SIPs of the following mutual funds. Let us see how much wealth would they have accumulated, by investing in the following funds.

  • Franklin India Tax Shield:

    The Franklin India Tax Shield fund, a tax saving scheme from the Franklin Templeton stable, one the oldest private Asset Management Companies in India, was launched in Apr 1999. The fund has just covered 15 years, and has given good returns during this period. The fund has an AUM base of over Rs 980 crores and is managed by Anand Radhakrishnan. The chart below shows the SIP returns of the Franklin India Tax Shield fund, growth option, over the last 12 years.

  • If you had started a monthly SIP of Rs 3000 in Franklin India Tax Shield fund back in May 2002, by now you would have accumulated nearly Rs 14.7 lakhs corpus, with an investment of only Rs 4.4 lakhs. You would have accumulated a corpus of Rs 5 lakhs by the end of 2007 and despite the severe financial crisis in 2008, a corpus of Rs 10 lakhs by the end of 2011. Over the 12 year period the compounded annual tax free returns on your SIP investment in this fund would be nearly 19%.

  • HDFC Long Term Advantage Fund:

    The HDFC Long Term Advantage Fund was launched in January 2001. This fund, from India's largest Asset Management Company, has an AUM base of over Rs 850 crores and is managed by Chirag Setalvad. The chart below shows the SIP returns of the HDFC Long Term Advantage Fund, growth option, over the last 12 years.

  • If you had started a monthly SIP of Rs 3000 only HDFC Long Term Advantage Fund back in May 2002, by now you would have accumulated a corpus of nearly Rs 15.5 lakhs, with an investment of only Rs 4.4 lakhs. You would have accumulated corpus of Rs 5 lakhs by the end of 2006 and beginning of 2007 and despite the severe financial crisis in 2008 / 2011, a corpus of Rs 10 lakhs by the end of 2011. Over the 12 year period from 2002 to 2014, the compounded annual tax free returns on your SIP investment in this fund would be close to 20%.

  • HDFC Tax Saver Fund:

    The HDFC Tax Saver Fund was launched in December 1995. This fund, from India's largest Asset Management Company, has a large AUM base of nearly Rs 3500 crores and is managed by Vinay Kulkarni. The chart below shows the SIP returns of the HDFC Tax Saver Fund, growth option, over the last 12 year.

  • If you had started a monthly SIP of Rs 3000 only in HDFC Tax Saver Fund back in May 2002, by now you would have accumulated a corpus of nearly Rs 17 lakhs, with an investment of only Rs 4.4 lakhs. You would have accumulated corpus of Rs 5 lakhs by the end of 2006 and despite the severe financial crisis in 2008, a corpus of Rs 10 lakhs by the middle of 2010. You would have crossed the 15 lakhs mark by the end of last year. Over the 12 year period from 2002 to 2014, the compounded annual tax free returns on your SIP investment in this fund would be nearly 21%.

  • ICICI Prudential Tax Saving Plan:

    The ICICI Prudential Tax Saving Plan, widely renowned as one of the best ever tax saving plans, was launched in August 1999. This fund from the ICICI stable has an AUM base of nearly Rs 1550 crores and is managed by Chintan Haria. The fund has been ranked, a good performer by CRISIL, in their latest mutual fund rankings. The chart below shows the SIP returns of the ICICI Prudential Tax Saving Plan, growth option, over the last 12 years.

  • If you had started a monthly SIP of Rs 3000 only in the ICICI Prudential Tax Saving Plan back in May 2002, by now you would have accumulated a corpus of over Rs 17 lakhs, with an investment of only Rs 4.4 lakhs. You would have accumulated corpus of Rs 5 lakhs by the end of 2006 and despite the severe financial crisis in 2008, a corpus of Rs 10 lakhs by the middle of 2010. You would have crossed the 15 lakhs mark by the end of last year. Over the 12 year period from 2002 to 2014, the compounded annual tax free returns on your SIP investment in this fund would be well over 21%.

  • SBI Magnum Tax Gain 93 Scheme:

    The SBI Magnum Tax Gain 93 scheme has given the highest compounded annual returns over the last 10 years, among all tax saving schemes. This fund was launched in March 1993 and has a large AUM base of over Rs 4100 crores. The fund is managed by Jayesh Shroff. The chart below shows the SIP returns of the SBI Magnum Tax Gain 93 scheme, growth option, over the last 12 years.

  • If you had started a monthly SIP of Rs 3000 only in the SBI Magnum Tax Gain 93 scheme back in May 2002, by now you would have accumulated a corpus of nearly Rs 19 lakhs, with an investment of only Rs 4.4 lakhs. You would have accumulated corpus of Rs 5 lakhs by the middle of 2006 and a corpus of Rs 10 lakhs by the end of 2007 and beginning of 2008. Despite a sharp fall in NAV due to the severe financial crisis in 2008, the fund recovered by 2009 – 2010. Your corpus in the fund would have crossed the Rs 15 lakhs mark by the middle of 2013 and by now you would be in touching distance of the Rs 20 lakhs mark. Over the 12 year period the compounded annual returns on your SIP investment in this fund would be nearly 23%. Surely, no tax saving investment would have been able to give such returns, in the last 12 years.

    Conclusion

    In this article, we have seen how SIPs in ELSS funds over the long term have created wealth for the investors. SIPs benefit from the power of compounding, and therefore the earlier we start our SIPs in ELSS, the greater is the potential for wealth creation. In addition, you can save taxes by investing in ELSS. However, tax saving should not be the only criteria for investing in ELSS. As discussed in this article, systematic investment plans in ELSS can create long term wealth for you. It is important, however, to select a good ELSS fund for your SIPs. Your financial advisers can help you select good ELSS funds that are suitable for your risk profile. As your risk profile changes over time, you should re-balance your portfolio to align with your risk profile. Tomorrow, we will discuss about SIPs in another category of mutual funds, balanced funds, which are inherently less risky than the equity oriented funds discussed so far.

 
 
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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

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HDFC Top 200 Fund Dividend

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Dividend declaration in  HDFC Multiple Yield Fund - Plan 2005 and HDFC Top 200 Fund.

Record Date : Thursday, March 03, 2016
 
Name of the Scheme / Plan/Option Amt of Dividend ( Rs / unit) # Dividend Rate Fave Value Record Date NAV as on Feb 25, 2016 ( Rs / Unit) Dividend Yield
HDFC Multiple Yield Fund - Plan 2005 -   Dividend* 0.72 7.20% 10.00 Thursday, March 03, 2016 11.761 6.14%
HDFC Multiple Yield Fund - Plan 2005 - Direct -   Dividend* 12.4081 5.82%
HDFC Top 200 Fund - Dividend 3.50 35.00% 10.00 39.582 8.84%
HDFC Top 200 Fund - Direct -Dividend 40.418 8.66%
# The Dividend will be subject to the availability of distributable surplus and may be lower, depending on the distributable surplus available on the record date.
* Dividend amount mentioned is applicable for Individuals and HUF, For other it is 0.6692/unit.
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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

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

Reliance Regular Savings Fund – Debt Option

Invest Reliance Regular Savings Fund – Debt Option Online
 The Reliance Regular Savings Fund – Debt Option is a low duration, credit opportunities Fund which may be ideal for investors seeking relatively higher returns than traditional fixed income investments such as FDs, and is capable of generating higher post-tax returns. Analysis of 3 years average rolling return shows that the fund has generated nearly 3% return per annum (nearly 10% additional return on the original investment over a period of 3 years). i.e., On an investment of Rs. 10 Lakhs, the additional return has been nearly Rs. 1 Lakh over 3 year time periods.
 
 
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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

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Budget 2016 - Additional 5% tax on all taxable services under Krishi Kalyan Tax for benefit of farming community

 The finance minister Arun Jaitley announced an additional five per cent tax on all taxable services under the new Krishi Kalyan Tax aimed at benefiting the farming community.

This tax will be over and above the service tax already levied on services.

However, the finance minister did not explain the channel or area for usage of the corpus collected under this scheme. 

 
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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

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

Reliance Regular Savings Fund – Balanced Option

Invest Reliance Regular Savings Fund – Balanced Option Online
 
Balanced Funds offer the triple benefits of wealth creation through equity exposure, stability and therefore, lower volatility through the debt exposure and tax efficiency of equity-oriented funds. By combining Systematic Withdrawal Plans (SWP) in Balanced Funds, investors could choose to get regular cash flows as well, which could compare favorably over propositions such as Post Office Monthly Income Schemes. The average rolling return in RRSF – Balanced has been 14% compounded over different periods of 3, 5 and 7 years. If any investor had invested Rs. 10 Lakh and done a SWP @9% for a period of 5 years, the investor would have not only ensured regular cash flow of Rs. 7500 per month (Rs. 90,000 per year / Rs. 4.5 Lakhs in 5 years), the original investments also would have grown in value.
 
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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

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

Budget 2016 - First time home buyers to get additional deduction of Rs 50,000 on interest for loan upto Rs 35 lakh

 By introducing an additional deduction of Rs 50,000 in the Budget 2016 proposal, Finance Minister Arun Jaitley has given some reason to cheer to the first time home buyers.

This additional deduction has been given on interest for loan up to Rs 35 lakh, provided the house value doesn't exceed Rs 50 lakh.

An additional deduction was much awaited as the costs of housing units have increased much over the recent years. 
A home buyer in India is entitled to claim both the interest and principal components of home loan repayments for tax benefits. Currently interest payable on a 'self-occupied' house is subject to a maximum deduction of Rs 2 lakh under the head 'Income from House Property', under Section 24(b).

Taxpayers and industry experts were expecting the government to increase the tax deduction limit for housing loans, especially in metropolitan cities, by about Rs 1 lakh to Rs 3 lakh as the current limit of Rs 2 lakh is insignificant.

Besides interest, the portion of one's EMI which goes towards principal repayment is allowed to be claimed under Section 80C. This amount can be claimed within the overall limit of Rs 1,50,000 under Section 80C.

Tax experts and home buyers were also urging the government to look at carving out a separate deduction for principal re-payment of housing loan, as the principal paid is currently clubbed under Section 80C with other tax-saving instruments, which effectively does not provide significant tax relief to the home buyer. The demand, if met, would leave behind a higher disposable income in the hands of the borrowers of home loans and also encourage investment in the realty sector. 

 
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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

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

Budget 2016 - Withdrawal from NPS on maturity made tax-free upto 40%

 In Budget 2016, the finance minister has made withdrawals from NPS on maturity tax free upto 40% of the total corpus accumulated. Currently, none of the withdrawals were tax-free unlike other competing instruments such as PPF and EPF where the total withdrawal was tax -free. This is a major step towards making the NPS scheme more attractive and bringing it on par with the other EEE pension schemes. 

This has implicitly made it attractive for investors to withdraw the corpus after 60 years (and not before) as any withdrawal before 60 years requires the utilisation of 80% of the corpus for purchasing annuity. This means that only 20% can be withdrawn before 60 years. Hence for getting the maximum tax benefit, it seems prudent to withdraw after 60 years. This is because after 60 years you can withdraw upto 60% of the corpus and out of this as per the new proposal 40% will be tax-free. 


As per current tax laws, under Sections 80 CCD (1) and 80CCE an investment of up to 10% of Basic Pay plus Dearness Allowance or a maximum of Rs 1.5 lakh, whichever is lower, is deductible from gross taxable income. A self employed person can also claim tax deduction up to 10% of his gross income under Section 80 CCD (1) within the overall ceiling of Rs 1.5 lakh under Section 80CCE. However, the total deduction from gross taxable income that can be claimed is capped at Rs 1.5 lakh under Section 80CCE. However, the total deduction from gross taxable income that can be claimed is capped at Rs 1.5 lakh for all investments under Section 80CCE which includes investments under section 80C. 

National Pension System (NPS) is a voluntary defined contribution retirement savings scheme. On turning 60, an investor can exit from the NPS but 40% of the pension wealth has to be utilised for purchase of an annuity. If an investor withdraws the corpus before reaching 60 years of age, he will have to invest 80% of the accumulated corpus for buying an annuity. These exit conditions only apply to NPS Tier I account which is a pre-requisite for having a Tier -II account in NPS. 

For an NPS investor in the highest tax bracket, this currently means that almost one third of the corpus is eroded by way of tax. The amount that is used to buy the annuity is however not subject to tax. This means that if an investor uses 100% of the accumulated corpus for buying an annuity then he won't be subject to taxation. Only the pension income that he gets will be taxed like any other pension. 

 
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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

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

Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now
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