in Finance, Income Tax, Investment, Mutual Funds |

Best Income Tax Saving Mutual Funds

I compared ELSS (Equity Linked Saving Scheme) mutual funds on the basis of their AUM (assets under management) size and past performance in 6 months, 1 year, 2 years and 3 years.

Finally following funds were found to be good.

Canara Robeco Equity Tax Saver, Sundaram BNP Paribas Taxsaver, HDFC Taxsaver, SBI Magnum Tax Gain Scheme 93 – Dividend, Franklin India Taxshield – Growth, DSPBR Tax Saver, Fidelity Tax Advantage

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Jack of multiple trades. A generalist! Founder of Sparse Labs. Find me at FB, Twitter or LinkedIn .

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665 Comments

  1. Hi Pankaj,

    It happened that I came across your articles on investments. These articles provides a good insight into investments. Thank you for that.

    I wanted to start investing into Equity viz., buying shares directly over online and also investing in MF (buying directly online). As per my knowledge I need to open a DeMat account and Online Trading account for this, which I have to apply yet.

    Here I have a question. For any banking needs, I prefer SBI which is a government bank for various reasons like low fees..for eg: Lower interest rates on loans.

    So, is it good to open a DeMat account and Online trading account with SBI rather than HDFC Bank(i have a salary account with this bank) so that I will be charged low fees like entry and exit loads while I do online trading and buy online MFs.

    Could you kindly answer my query?

    I am willing to take high risk. Could you please suggest me the portfolio (MF + Stock) into which i should invest.

    Thanks,
    Sunil.

    Reply to Sunil

    • Hi Sunil,

      Thanks for the appreciation.

      For trading in equities, I would suggest not to go with SBI trading account as their trading platform is not that good, you might face issues while using their site. You may go with any of the account from Kotak Securities, ICICI Direct, IndiaBulls, Sharekhan or Reliance Money, whichever gives you best brokerage deal.

      For investing in mutual fund, I would suggest you not to invest thru trading website as they will levy entry load. Rather do it directly with AMC. It will be a bit complex but will save 2.25% of your money. Read these article for more details: http://www.pankajbatra.com/2008/09/05/mutual-fund-investment-with-zero-entry-load/ and http://www.pankajbatra.com/2008/09/05/best-way-to-apply-in-sip/. Apply first time thru hard copy forms along with application for PIN; after that you may do it online from Mutual fund websites.

      Regarding your portfolio, I would suggest you to divide your investment into multiple plans.
      First of all, I would suggest you to buy a Term insurance plan for sure. This will give you coverage of 50,00000 for around 12000 Rs a year. Its like a car insurance, nothing will be returned in case you complete policy period but if something happens before that your family will get huge insurance amount (50 Lacs in this case). This comes under tax saving investment. For rest of the tax saving, buy ELSS (equity linked mutual funds) and a medical insurance. Don’t go for ULIPs.

      Secondly, Keep at least 6 months of your salary as a backup as liquid for bad times. You may keep this amount in Liquid Mutual Funds. Read here for more about them. http://www.pankajbatra.com/2008/09/23/liquid-mutual-fund-saving-account/

      Now whatever is left with you after all monthly expenses (personal, saving to liquid funds, TDS, EPF etc), you should divide into different funds or equities. You must go with diversified mutual funds or Top 100 companies for equities.

      Hope this helps.

      Best
      Pankaj Batra

      Reply to Pankaj

  2. Hi Pankaj,

    Too Good.
    Your reply was so detailed and will really help me in proceding further with my investment plan.

    Thanks a lot Pankaj. Will keep in touch.

    All the Best.

    Regards,
    Sunil

    Reply to Sunil

  3. Hi Pankaj
    Your site is really good.
    I need some help on TOP ELSS & non Tax savings scheme too.

    & also let me know buying MF’s through Reliance money or HDFCMF online have entry load.
    can we buy other MF’s from HDFCMF

    Regards
    Aryan

    Reply to Aryan

  6. Hi Pankaj,
    You are very informative and apt.
    I invested some amount in Reliance Natural Resources Fund, NFO. I now feel that it was not a wise selection to invest and wish to exit. What would you suggest? Which ELSS fund should I opt for, now?

    Reply to Suresh

    • @Suresh
      Reliance Natural Resources Fund has recovered very well in past one month and currently at the same level as of NFO price.
      As metal is performing well, this fund is also doing well. This will rise further as soon as fight between Ambanis end over oil prices.
      For ELSS, Sundaram BNP Paribas Taxsaver, SBI Magnum Tax Gain Scheme and Franklin India Taxshield are good.

      Reply to Pankaj

  7. Hi Pankaj,

    I have lost some money by investing in Franklin prima plus. Please suggest me some funds in order to save the tax and also for good returns.
    Regards,
    Murthy.

    Reply to murthy.v

  8. Hi Pankaj,

    I have just stepped into the world of stockmarkets, and a friend has persuaded me to start my trading account with Angel trading (angelbroking.com). In your valued opinion, how wise is it to go ahead with them?
    Also, for a medium capacity investor, it seems SBI Magnum is a good option for good returns. Correct me if I am wrong …. thanks so much!

    Reply to Innocent

  9. Incase of Tax Saver MFs whether I should opt for With divdend or without dividend scheme. If Iopt for dividend payout, the same,I can reinvest in Ta x saver fund and thus can have a addl.tax saving or vice versa
    Regars
    S C Arora

    Reply to s

    • @S C Arora
      If you going with ELSS just for tax saving and want money back as soon as purpose is solved, then dividend is better option.
      But if you want good return on investment, growth schemes are good.
      When dividend is declared value of your funds also gets adjusted accordingly and your get some money back from your account.

      Reply to Pankaj

  10. I want to invest in mutual fund through SIP. I am prepared to take high risk . On the basis of previous track record i have listed some equity diversified funds and ELSS for investment as follows
    1. HDFC Equity fund
    2. HDFC Top 200
    3. BSL mid cap fund.
    4. BSL frontline equity
    5. Reliance growth
    6. HDFC Prudence .
    7.HDFC tax saver
    8. Sundaram Tax saver
    9. SBI magnum taxgain.

    I am planning to invest in these funds for log term(8 to 10 years). what is your opinion.is it ok or i should look out for some other mutual funds.

    Reply to Thakur

  11. Hi Pankaj,

    I have Sharkhan trading account and I called up their customer support and they told me that if I buy any mutual fund that will be zero entry load. I have question if I invest in ELSS funds for tax saving through Sharkhan, Do I get any thing as proof (Whcih eventally I need to submit with my company) or the statement will work. Thank you in advance. Thanks.

    Sunil

    Reply to Sunil

    • @Sunil
      Entry load is scrapped from all mutual fund so no entry load will be charged no matter you apply through any broker/agent.
      But broker(sharekhan in your case) or agent may charge brokerage/service fees for transaction. Ask them for service charge details.
      If you invest through any broker or agent, you can get your mutual fund statement from mutual fund company (in which you are invested in) by providing folio number. This statement can be shown as a proof of investment.

      Reply to Pankaj

  12. Hi Pankaj

    i want to invest monthly 3000Rs in SIP,can u suggest me 1 or more mutual funds wherein the returns are good.
    also please let me know which schemes are good,growth and divident for long duration like 5 years or so.
    Note: I want good returns with Tax saings also.

    Reply to biren

      • Hi Pankaj,

        This is truely a very appreciative job u are performing helping everyone with the crucial info.Great going Sir…I just wanted to ask u is it that after april 2012 whatever u are investing in the mutual funds will nt save ur taxes.Kindly reply.Thanks Charan.

        Reply to Charanjeet

  14. Hi pankaj
    thanks for the advice

    have one more query though.
    every month i have with me some surplus funds (varying from 500-2000),is there any scheme wherein i can invest this amount for shorter period of time (i mean i can withdraw any time) and also in the process earn some returns.

    Thanks in advance !

    Reply to Biren

  15. Re-Your recommendation about best tax savings fund.
    Do u rate HDFC-G, ICICI Pru tax plan-G; Can Robeco Eq(G), higher or equal to the above?

    Reply to Surendra

  16. Hi Pankaj,

    I want to invest my money in either shares or mutul funds. I see a NFO of Sundaram BNP Paribas PSU Opportunities Fund. Is it good fund to invest? I always go with your words as I also earn profile in previous to do so. Please suggest. Thank you in Advance.

    Sunil Bansal

    Reply to Sunil

    • @Sumit
      In spite of NFOs, I would suggest you to invest in old funds which have proved themselves in past.
      Some of the good equity funds (Non tax savings) are HDFC Top 200 Fund, ICICI Pru Discovery Fund, Sundaram S.M.I.L.E Fund, HDFC Equity Fund and Sundaram Select Midcap. You may choose among them.
      Also, do your research also before investing; as this will give you more confidence in where you are putting your money.

      Reply to Pankaj

  17. Happy New Year Batra,
    My take homes around 50K, Need to invest 1 Lackh on Tax-Saving funds, and another 1 lackh as investment long-term (Say 10 years). I need to accomodate both as (SIP),
    Kindly advice me a portfolio (Both for tax saving and Investment purpose on monthly basis).
    Thanks,
    Narayanan

    Reply to M

    • @Mr Narayanan
      Happy new year to you as well.
      for tax savings, Franklin India Taxshield, Sundaram BNP Paribas Taxsaver, Birla Tax Relief and HDFC Tax saver are good funds.
      for long term investment, you may invest in HDFC Top 200 Fund, Sundaram S.M.I.L.E Fund, HDFC Equity Fund, ICICI Pru Discovery Fund or Sundaram Select Midcap.

      Reply to Pankaj

  18. Hi Pankaj,
    I am investing 2k per month in IDFC mutual fund – ELSS – SIP with 3 years locking period. Is it good to continue?

    Also I need to invest around 20 k to save tax for current financial year. Is it better to invest in PPF or any other tax saving mutual fund.

    Reply to Prasad

    • @Prasad
      You must divide investment money into debt and equity investments. If already do not have investment in PPF/EPF or fixed deposit then you should invest in ELSS mutual funds for long term.
      IDFC ELSS is good fund and have good returns so far. You have also invest in Franklin India Taxshield, HDFC Tax saver or SBI Magnum tax saver for better returns.

      Reply to Pankaj

  19. Hi Pankaj,

    I am planning to invest 50 K in SBI Magnum Tax gain as tax saver next month.
    What would be your suggestion, whether I want to invest full 50 K with magnum tax gain or divide into other funds like Franklink india, magnum tax gain, sundaram etc….

    Thanks a lot in advance.

    Best Regards,
    Remya Rahul

    Reply to Remya

  20. Thanks for the reply Pankaj.

    One more doubt I have. Can I join to these plans from any of the banks? Do I want to pay any entry load for doing like this?

    Best Regards,
    Remya Rahul

    Reply to Remya