Best Income Tax Saving Mutual Funds

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• Hi Pankaj,

  I want to know that if we invest in a tax saving MF now, then we shall stop getting Tax benefit from March 2012... But our money would be lockedin for 3 years... So keeping that in mind is it right option now ?

  And also in some of your post you mentioned "high expense ratio"... what exactly it means....??

  • @Shubham
    Most probably tax saving mutual funds will be converted to equity diversified mutual funds after March 2012. But lock-in of three years will remain on earlier investments.
    Amount investment in these will be safe and there is no harm in investment in these.
    Expense ratio is percentage of AUM (assets under management) amount, mutual fund companies charges for managing mutual fund. This amount is used in fund manager's salaries, operational expenses, marketing cost, agent's commissions etc. NAV (net assert value) is automatically adjusted accordingly.

    • Thanks for the response Pankaj.

      Can you pls also help me that how can I invest in different MFs online (as I am relatively new) do I have to take a Broker online account like sharekhan, reliance money or can I do with my online banking account (HDFC, ICICI)..??

      • @Shubham
        If you don't have demat account already, there is no need to open a demat/online trading account for transacting in mutual funds.
        You can also open an investment account (mutual fund only) with HDFC (ICICI not sure) by filling up a form. Read more here: http://www.hdfcbank.com/personal/investments/mutual_funds/mutual_funds_buysell.htm
        They may charge you on transactions towards services fees.

        If you want better way to buy/sell mutual funds online, read one of our other article: http://www.pankajbatra.com/india/how-to-transact-mutual-funds-online-directly/

• Hi Pankaj,
  I want to purchase Spicejet shares.Is it good share to invest.I have heard next three years it will give good returns.Now it is trading at 23 rs.When it will reach rs 50.Its top value in 52 weeks is Rs 90.

  • @Santosh
    We don't provide stock tips. Nobody can tell what returns a stock can give in future.
    Return on stocks is a function of multiple parameters like global market conditions, inflation, political conditions, growth and consumption rate etc.

• And also ur suggestion whether it is right time to invest in Share market now,since market is going up due to purchase of Bluechip companies shares or should i wait for some time for market decline.

  • @Santosh
    If you want to invest for a long period, say 10 years, you can buy large cap stocks now as market is bearish.

    • Hi pankaj,
      I am following some shares 1. canara bank 2. corp bank 3.ongc 4. ioc 5.tata steel 6.ntpc. I am having 70,000 with me.
      1. will i invest in shares or mutual funds? In which i will gain more?
      2. how abt my choice of shares?Am looking for long term only.should i need to focus in two or three instead of seven?
      3. i studied abt stp. pls explain that.
      4.My mother is not having any inccome,she is having all the prrofs(pan card).is it better to invest this in her name?

      Thank u so much

      • @Vignesh
        1. We cannot forecast the gains on mutual funds or shares. It all depends on market conditions and stock/mutual fund you buy. Mutual funds are better if you want to play safe and have little time to research and stocks. As mutual fund manages your fund on your behalf it does not need your time. If picked correctly and timely, stocks may generate more returns than mutual funds but they also carry high risk too.
        2. We cannot suggest shares at the point as we don't do much research in that area.
        3. STP is systematic transfer plan in which you invest into a mutual fund and systematically (monthly/quarterly etc) some units are redeemed and invested in other mutual fund. Its good when you want to start SIP in equity funds but already have some corpus. You can invest as lump-sum in a liquid/debt fund and start STP to a equity fund.
        4. If you invest your money in your mother's name (who does not have income), the gains will be taxable in your hands only and not on your mother's.

• Hi Pankaj,

  I am investing in SBI Magnum tax saver through SIP. From past few months its not performing well. Should i stop sip in this fund and move to any other good tax saving fund or continue in SBI only.

  • @Divya
    Since last few months, market is also not doing well because of bad economical conditions. This is one the reason for equity mutual fund's bad performance.
    However SBI is not best among tax saver funds and you can consider shifting to a better fund like Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver or Fidelity Tax Advantage.

• Hi Pankaj,

  I would like to ask what is a good Pension Plan option. I want to know if it is better to invest in a Mutual Fund SIP or if I need to take a traditional Pension Plan Insurance that is being offered by LIC, Bharti AXA, HDFC and other companies

  • @Ameet
    If you invest with discipline then a mixture of EPF/PPF, New pension scheme and Equity mutual funds will be best option for your retirement.
    Traditional pension insurance plans are not really good products from investment perspective. You should keep insurance and investment separate. For insurance needs, buy a term insurance.

• Hi pankaj,
  I want to start sip in mutual funds...But dont know my selection is worth investing
  1.Reliance Banking fund- Growth ----1000(I guess in future Banking is goi to increase)
  2.HDFC Top 200----------------------------2000
  3.Idfc small and midcap--------------------2000/ Idfc premier equity( I have confusion in selecting between these two)
  4.ICICI Prudential FMCG Fund-----------2000 /SBI Magnum Sector Umbrella - FMCG Fund(once again confusion in selecting between two)
  5Hdfc equity------------------------------------2000
  6.Birla Sun Life Dividend Yield Plus - Growth----1000

  I need your guidance......

  • Hi pankaj
    I got your reply ..It went to spam that s y i posted here also.. sorry for asking the same question twice..

    Thanks a lot

• Hi Pankaj,
  Currently I am investing 20,000 per month in SIP(Growth funds(HDFC , Black Rock. IDFC). Is it the good time to still continue with the SIP or just hold back for sometime till the time the market became stable

  Regards
  Rohit

  • @Rohit
    SIPs are evergreen form of investment as it just averages out cost of buying. In some months market may be up, in some it may be down.
    So you should continue investing into SIPs without fearing about market volatility.

    • Hi Pankaj,
      Currently I am having a SIP of 5K each in the below funds. Please let me know is the selection is good. Please suggest any other good fund if you think any..

      IDFC Small & Midcap Equity (SME) Fund:- 5000
      IDFC Premier Equity Fund - Plan A Growth:-5000
      HDFC Top 200 Fund – Growth:- 5000
      DSP BlackRock Equity Fund - Regular Plan – Growth:- 5000

      Regards
      Rohit

      • @Rohit
        Both IDFC Small & Midcap Equity (SME) Fund and IDFC Premier Equity Fund – Plan A Growth are small and mid cap funds. I would advise you to drop IDFC Small & Midcap Equity (SME) Fund and pick a large cap fund to reduce portfolio risk. In large cap you may choose from DSPBR Top 100 equity and Franklin India Bluechip.
        This will also make sure that you have one fund each from categories: Large cap, Multi cap, Large & mid cap and mid & small cap.

• Dear Pankaj,
  Hope you are doing good. Its time to seek your valuable advise once again for current FY tax savings & investments.In regards to the Rs. 1.20 lakh limit for tax exemption,my contributions so far for this year are
  1. LICs Jeevan Anand - Rs.10,500 approx
  2. LICs New Bima Gold -Rs.26,800 approx
  3. Employee PF - Rs.38,600 approx. The total adds to Rs.76000 approx.

  FYI : Last year based on your suggestions I had invested in CanRobecco,
  DSPBR & HDFC Tax saver funds (10k each) apart from LIC & PF and Rs.25k in
  IDFC infrastructure bond.

  1.Please advise and let me know the options for tax saving/investing the
  remaining Rs.44000/-for this year??

  2.Since ELSS will not be considered for tax exemption from next year, will it impact the performance / NAV of the tax saver funds? (Considering people might look
  for alternate options for investment / tax saving)

  Best Regards
  Nagarajan

  • @Nagarajan
    You may invest in same tax saving mutual funds as you did last year. It will be better if you invest through SIP rather than lum-sum. ELSS performance should not be impacted with discontinuation from next year. They would be converted to normal equity mutual funds next year most probably.
    Max exemption limit in Infra bonds is 20,000 so there is no point investing 25,000 in that as you did last year.

• Hi Pankaj,

  I am new to Mutual fund invetsment. This year i want to invest around 50k in MF for tax savings. Can you suggets me which MF i need to invest. I am looking for good returns in 5 years. Else is investing in NSC better for returns in 6 yrs? Please advice.
  Thanks,
  Shilpa

  • @Shilpa
    Returns from tax saving mutual funds are not fixed. It may have pretty good returns or even may have negative returns.

    If you wish to invest in tax saving mutual funds, you can invest into Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver or Fidelity Tax Advantage.

    If you want fixed return, then tax saving fixed deposit of five years would be better choice. You will get around 9-9.5 p.a. rate of interest at this point.

    • Hi Pankaj,
      I am new to Mutual fund invetsment. This year i want to invest around 50k - 60k in MF for tax savings. Can you suggets me which MF i need to invest.
      Since for this i cant do SIP, i'm planning to go with single time investment. Is it good option? Please guide.

      Thanks,
      Deepu

      • @Deepu
        You can choose among: Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver and Fidelity Tax Advantage
        Still there are six months left in current financial year, you can start a SIP for 6 months. Or you can yourself invest 10,000 for next 6 months.

• Thank you Pankaj!!

  Very Best
  Nagarajan