Best Income Tax Saving Mutual Funds

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• Hi Pankaj,

  I am looking to invest around 1 lakh in tax saving mutual fund. However, I do not want to take the risk of equity. My investment horizon will be 3-6 months. If required, I can make a premature withdrawal also. Kindly suggest a suitable debt or money market scheme. Also advise, what will be the implications, if I make a premature withdrawal.

  • @Aditya
    Tax saving mutual funds are equity based and contains risk. Also there is a lock-in for three years. There is no premature withdrawal.
    For such small investment period, you should invest in FMP (Fixed maturity plans) or Liquid/Liquid Plus mutual funds.
    FMP may have exit load if funds are redeemed before the end date. Most of the Liquid and liquid plus mutual funds do not have any exit load.

• Hi Pankaj,

  I have investment in two SIPS plans: ICICI discovery and DSP Blackrock Small and Mid-cap. However, my portfolio manager has gone for the dividend option in ICICI and dividend reinvestment option in DSP instead of growth. I wasn't sure if the dividend portfolios in these funds will be the same as the growth portfolio. I had the following questions:

  1. Will the companies invested in differ between the growth and dividend options? If not, should the dividend reinvestment and growth yield the same result in the long run?

  2. If I am looking to invest 3 lacs in a mutual fund considering the markets are at a low, which 100% equity fund would you suggest and why?

  Thank you.

  Regards,
  Dino

  • @Dino
    There won't be any difference in mutual fund portfolio in case of growth and dividend options. dividend reinvestment and growth will give same result in long rum.
    Please don't invest this huge sum as lump-sum in market. Better you can invest in MIP and slowly do transfer to equities through STPs.

• Hi Pankaj,

  My age is
  Currentlt I am investing in

  LIC-Jeevan anand and Bhima gold-36K per annum

  I want to invest 2000 per month in two different ELSS,which gives good return.

  Kindly suggest.

  • @Banti
    You can choose from Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver and Fidelity Tax Advantage

• Hi,my annual ctc is 301500(270000+11500 gratutity)...i also deduct 2000 to my food card to save tax .so how much I can invest to save tax and if I want to spend on elcc,where I should go,i m very new to all these

  • @Pankaj
    Please read answers to similar questions here:
    http://www.socialfinance.in/questions/7/tax-saving
    http://www.socialfinance.in/questions/46/investment-suggestions
    http://www.socialfinance.in/questions/45/investment-advise
    http://www.socialfinance.in/questions/82/tax-exemption-component-for-salaried-employee
    http://www.socialfinance.in/questions/118/tax-saving
    http://www.socialfinance.in/questions/178/investment-advise

• How is the AXIS Tax Saver MF?

  • @Sudip
    There are many better funds available in the market. Why you want to go with Axis Tax saver.

    • Because this fund have allocated their asset maximum in Banking & Finance Sector (abt 22%) and Technological sector (mainly software firms), which may be the frontrunner in future growth of nation.

      • @Sudip
        Axis tax saver fund is relatively new (just over a year old).
        Although it has given maximum return in tax saver category in last one year, but still fund does not have a long term records.
        There are other funds in tax saving categories which have seen good and bad times of market and yet came out with a good record.

        Regarding portfolio of this fund, around 40% is invested into Banking/Finance and Tech sector. Other good funds too have similar portfolio.

• Hey Pankaj,

  Thanks for helping out last time around when I posted in December last year. Per your recommendations I invested around 80k (40k each, lumpsum) in HDFC and Canara Robeco Taxsaver schemes. However, both these funds are in the red, the NAVs are lower than what I invested at then. I need to do another investment (again around 80K). Though this time I'll def go for an SIP. What taxsaver schemes would you recommend? Do these two (HDFC and CanRob) still hold? And, considering that I already have 80k invested in them, would it make sense to diversify into other ELSS schemes?

  • @SC
    Markets have not been performing very well for last six months. If you see, most of the tax saving funds are negative in last six months. Equity investments are riskier but generally over a long period of time (> 5 years), they generate better returns than other forms of investments.

    These funds are still one of the better funds available in the market. If you would have invested through a SIP, cost would have averaged out and the portfolio would have been showing green (or very small red).

    I would still recommend you to pick from these funds: Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver and Fidelity Tax Advantage

    • Great. I agree that lumpsum investment wasn't prob a good idea. Thanks for the advise pankaj, much appreciated!

• HIi Pankaj,

  I am considering Quantum Long term fund. I am not invested in any other fund as of now. Please advise me on this fund. For tax saving I am going for Can Robecco.

  Thanks

  • @Shalabh
    In the same category as Quantum Long term, I would advise you to choose HDFC Equity fund.
    I would also suggest you to compare other funds like Birla Sunlife Frontline equity fund, HDFC Top 200 Fund, DSP Blackrock Top 100 fund, Reliance Regular Savings – Equity and
    ICICI Pru Discovery Fund.

• Dear Pankaj,
  I have decided to invest INR 5000 in any tAx saver mutual fund, I have shortlisted two funds - either Can Robeco or Fidelity tax advantage. Pls suggest which one should I go for the investment.

  • @Sudip
    Both are equally good funds. If you have to choose one, go with Fidelity Tax advantage.

• what are the best tax saving techniques you suggest for sir??

  • @Khushwant Singh
    Please read answers to similar question here:
    http://www.socialfinance.in/questions/7/tax-saving
    http://www.socialfinance.in/questions/45/investment-advise

• Hi Pankaj, I want to invest a lum sump amount of around 1 lakh in mutual funds, so which are the good mf for that. And is it a good option to invest lum sum? I'm currently having one ELSS and 2 SIP (DSP black rock top 10 & HDFC top 200) of 2000 each, so shall i go for sip or there are some mf for one time investment? Thanks in advance!!

  • @Nitin
    If you want to invest into equity based mutual funds, lump-sum is not a good idea. You can put money into a liquid/debt fund and start a STP (systematic transfer plan) to move investment into equity gradually.
    Also, for how long, you want to remain invested in this investment. If its less than three years, better not to invest into equities.

    • Thanks Pankaj. Actually I want this investment for 2-3 years only as I'm planning to have few more SIP for my long term investments. Then is Gold EFT a good investment at this time as I was thinking of investing this amount in Gold EFTs in a 6-12 month SIP? I was thinking of SBI and GOLDBEES. Are there any other better options also?

      • @Nitin
        Gold is not a good option at this point as rates may fall sharply.
        Its better that you put your investment into balanced mutual funds or FMP, in case investment period is 2-3 years only.

        • Thanks a lot Pankaj for the valuable advise. :o)