Best Income Tax Saving Mutual Funds

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• Dear Pankaj,

  I have invested in LIC Money plus (ULIP) in 2007 yly 10000/- .Three years i have paid the premium regularly.That means upto 2009 i have paid.My Tenure is for 10 yrs.Later on if i do not pay premium,does it mean my policy is lapsed or i will not get my money back that i have invested.If i asked my LIC agent,then he will say to pay regularly,because he get the comission on that basis.

  So im confused whether to continue or not.Im worried if i not payed the premium ,my money will be loss.Kindly suggest.

  • @Santosh
    Your agents has already earned huge commission and he won't push you further for investment.
    ULIPs had maximum commissions in initial 3 years only.

    You may continue your policy without paying further premium: As per LIC website, If atleast three years’ premiums have been paid under the policy, the policyholder may opt for continuation of cover even beyond the revival period without reviving the policy and paying any further premiums. This option shall be required to be exercised atleast one month before the completion of the revival period. If this option is availed, the cover under the policy shall continue by deduction of relevant charges out of policy fund. This option shall continue till the Policyholder’s Fund Value reaches one annualized premium. No further premiums shall be allowed to be paid after the revival period is over.

    • Is Diversified mutual funds comes under 80c, if yes, which is the best option for investment? or how can divide my investments between those two types? I am planning to invest around 40000 in mutual funds.

      • @Ram
        There is separate category of mutual funds available for tax saving. Investment under normal equity diversified mutual funds are not available for exemption under 80-C.
        You may choose among: Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver and Fidelity Tax Advantage; If you want to invest in tax saver mutual funds.

    • I have not understood ur quote below.Can u clarify again.Whether i should continue in this fund without any further investment or pull out of this.If yes,will there will be any deduction.And also is there any major reason behind closing of tax saving schemes(ELSS) schemes from 2012 onwards.

      (This option shall be required to be exercised atleast one month before the completion of the revival period. If this option is availed, the cover under the policy shall continue by deduction of relevant charges out of policy fund. This option shall continue till the Policyholder’s Fund Value reaches one annualized premium. No further premiums shall be allowed to be paid after the revival period is over.)

      Read more: http://www.pankajbatra.com/finance/best-tax-saving-mutual-funds/#ixzz1EK9EIsMZ

      • @Santosh
        Earlier statement means that, if you decide to continue policy without further investment, insurance and other management charges will continue to be debited from balance until this balance will be more than a year's premium. But at the same time, policy will continue to have its benefits and returns on NAV.

        You can continue with this policy without further investment.
        You can inquire about surrender value (after all deductions etc.) from LIC customer care or agent. If are getting an acceptable return on the money investment, you can also pull out your money.

        From 1st April, 2012, Direct tax code will be applicable and most of the tax exemptions under 80-C have been removed. Retirement and pure insurance plans have been focused on in new rules.

• hi pankaj,
  i need to invest (tax saving) Rs 100000/- each for four of my family member. i am confused where to invest i.e elss or debt instrument. if mutual fund
  1. HDFC TAX SAVER.........RS.8000 PM
  2. ICICI PRU TAX PLAN.....RS. 8000PM
  3. BIRLA 96 TAX RELIEF(G) RS.8000PM

  Apart from that i want to invest in
  1. HDFC TOP 200
  2. BSL FRONTLINE EQ
  3. BSL DIVIDEND YIELD PLUS(G)
  4. RELIANCE RSF FUND(G)

  Also recommend any best fund for midcap and small cap

  • @Mukesh
    I would advise you to divide your tax saving investment into following options:
    1. Term Insurance (for sum assured at-least 10 times your annual salary)
    2. Medical Insurance (for you, your family and parents)
    3. Employee provident fund (EPF), or Public provident fund PPF (in case you are not contributing to EPF)
    4. New pension scheme
    5. SIP in Tax saver mutual fund (ELSS)
    6. Long term infrastructure bond (In case your income falls in maximum slab of 30% income tax rate)

    Regarding 5th option, you may choose to invest among: Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver and Fidelity Tax Advantage.

    For diversified equity, you can invest in Birla Sunlife Frontline equity fund, HDFC Top 200 Fund, DSP Backrock Top 100 fund and Reliance Regular Savings – Equity.

    For small and midcap, choose among ICICI Pru Discovery Fund, DSP Blackrock small and midcap fund, Sundaram Select Midcap, HDFC Equity Fund and Sundaram S.M.I.L.E Fund

• Pankaj,,there are these various investment cos that promise 12% a month and one of them is even regd and has its shres in the market. its called imtsons. Is it wise to invest with them? or would you know of others who are trustworthy and offer good returns?

  Thanks

  • @Siddharth
    Don't invest into such un-regularized companies. No company can guarantee such a high return.
    There is no quick route to earn returns.

• Dear sir, i am beginner and would like to invest Rs 1000-1500 thr SIP. Plz suggests some mutual funds.
  Is Reliance gold saving fund a good option, he yes then which plan will be better Growth or dividend- payout/reinvest?
  Thanks.

  • @Siddharth
    I would advise you to start SIP in any of the equity diversified funds: Birla Sunlife Frontline equity fund, HDFC Top 200 Fund, DSP Backrock Top 100 fund and Reliance Regular Savings – Equity.

    Reliance Gold savings fund is a open ended mutual fund (you may purchase and redeem anytime) that will invest into Gold.
    There is no entry load on investment, but there is an exit load of 2% if redemption/switch is done before one year.

    Till now, Gold could be bought through ETF (exchange traded funds) or e-gold, both of which needs demat account to transact. Also there was no option for a SIP in these methods.

    If you want to diversify your portfolio by adding gold investment, this fund will be good option.

    But as its a new fund, there is no history of performance and as of yet it cannot be compared with returns from Gold ETFs. Only time will tell its performance.

    If you already have a demat account, I would advise you to invest in Gold ETFs, as they directly move with gold prices and there are not much management charges.

• Dear sir,
  thanks a lot for valuable advise. In the funds mentioned by you, which plan: growth or dividend would be better?? I have read your blog abt the difference between these plans(I think growth suits me), but I am bit confused abt tax benefit part??
  And what should be the lockin period? Plz suggest! !
  Thanks.

  • @Siddharth
    Growth plans are best ones generally.
    But in case of tax savers, dividend reinvestment plans are better as all reinvestments from dividends are also considered as separate investment and can be claimed for tax exemption.
    Let say, you invested 10000 in tax saving mutual funds Mar 2010 (div reinvest) and shown the same investment for tax exemption for FY 2009-10.
    Then in 2010-11, you further invested 10000 in tax saving mutual funds and also got 3000 as dividend from earlier investment. Now for tax exemption purposes, 13000 will be considered for FY 2010-11.

    Lock-in for tax saver mutual funds is for 3 years from the date of purchase of units. Say, if you bought 10 units for 1000 Rs in Jan 2010, 11 units for 1000 Rs in Feb 2010 and 12 units in Mar 2010; Then 10 units can be redeemed after Jan 2013, total 21 after Feb 2013 and all 33 after Mar 2013.

    Lock-in period for dividend reinvestment will be 3 years from date of dividend declared as new units are bought on same day.

• I want to invest 5000 rs per month in PPF, mutal funds .Can you suggest me what should be the % of investment in PPF and mutal funds and which are the best mutual funds.Presenly i am investing 2000 in LIC MOney Plus ULIPand 1000 in HDFC TOP 200 per month.pls suggest me.

  • @Mukesh
    Investment ratio in equity and debt based products should be based on investor's age.
    For a young person, more money should be put into equities as risk appetite is more. One can earn better return in a long term with equities.
    As one move towards retirement, investment should be done in safer avenues as money guarantee is more important.

    If you are below 35 years of age, I would advise you to invest 3500 into mutual funds and 1500 into PPF.
    You can choose to invest in Birla Sunlife Frontline equity fund, HDFC Top 200 Fund, DSP Backrock Top 100 fund and Reliance Regular Savings – Equity

• Hi Pankaj,

  Thanks for sharing useful information.

  I need a term insurance. Please suggest me one as per my requirement. I am 26 old now.
  I need pure term insurance upto my 60 or 65 years with 30 lakhs coverage. Please suggest which are the plans suit for me.
  As we are taking long term insurane i have doubt that whether private insurance are reliable or not? My personal opionion LIC is better. Please suggest me.
  Thanks in advance.

  • @Mothilal
    You can buy LIC Amulya Jeevan for 30 Lakhs. Max Policy term will be 35 years (you will be covered till 61 years of age) and annual premium comes out as Rs 9270. You can also get this policy in a single premium for 1,34,800 Rs.

    LIC has a less claim rejection ratio than all other private players, so you can go for LIC. Private players are not that bad too, but most of them are new and have to prove themselves first.

• Thanks a lot sir! You are really doing a great job by making beginners like me financially knowledgeable .
  Please explain step wise how to invest in gold ETF? Whom to approach? When to buy or sell? Where to open demat account? Is broker must? Is gold BeES best indian ETF? Thanks

  • @Siddharth
    You can open demat account and online trading account with any of the companies like Kotak Securities, ICICI securities, Reliance Money, India Infoline, IndiaBulls, ShareKhan, Religare securities etc. Just compare there fixed charges as well as brokerage fees and choose whichever suits you.

    Once your online trading account is activated, you would be able to buy or sell gold ETFs like other stocks online. There is no broker/middleman needed here.

    Price of the Gold ETFs moves up/down as per current gold prices and most of the ETFs have similar prices at any time. Gold BeES is older one and has most of investment dones till yet out of all gold ETFs available.

• please advice mutual fund good return in my children education and marriarge now she is studying 3rd std. and in my age 46

  • @Sankar
    You should divide your investment in Equity and debt funds in ration like 80:20 or 70:30.

    Some of the good diversified equity funds, you can invest in are: Birla Sunlife Frontline equity fund, HDFC Top 200 Fund, DSP Backrock Top 100 fund, Reliance Regular Savings – Equity, ICICI Pru Discovery Fund.

    You may also choose balanced funds (mix of equity and debt) like HDFC Prudence and Reliance Regular Savings – Balanced.

• Hi,

  When to choose a divident or growth option for investing in ELSS schemes, could you pl. clarify.

  Thanks,

  • @Sandeep
    Regarding which option to choose, Please read this article: Mutual Fund investment options: Growth, Dividend Payout, Dividend Reinvestment