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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  1. Hi Pankaj,

    I want to invest 1Lac in Axis tax saver fund, (which is now Axis Long term equity fund) for tax saving purpose. Could you suggest if my choice for the fund is correct? As I have analysed the fund, it has given good returns in last 6 months…..

    Also plz advice, is it a good decision to invest in NFOs for tax saving fund? Currently Union KBC tax saver fund is open…..

    • @Saurabh
      Please compare fund performance for a longer period (5,3,1 year) too. If a fund has been among top in all these years, select that fund.
      Don’t go with a NFO at this point.
      Some of the best performing funds in tax saving category are: Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver and Fidelity Tax Advantage.

    • @Ram
      There is not much difference among bonds offered by different companies like IDFC, L&T, PFC, IFCI etc.
      You should pick only one with maximum rate of interest.
      As of now, issues for L&T and IDFC are open with both offering 9% rate of interest.

  2. Hi pankaj,

    My Salary package per annum is 364000 …

    I have already invested 10,000 in Fidelity Mutual fund and i have started SIP for 6 months from nov – april (monthly 5,000) in Canara Robeco Tax Saving Mutual Fund.
    Total investment in Tax Saving Mutual fund is 40,000.

    I have opted for LIC Jeevan anand last year 25000 each year. til now i paid 50000 in LIC.

    Still i thought of to invest 15000 in some MutualFunds or bonds or NSC or PPF or FD.

    Kindly advise me which one shud i prefer and also shall i continue with LIC or i quit LIC and opt for Term Insurance.

    Thanks in advance,


    • @Silambarasan
      Its not a good idea to buy insurance policies for investment needs. Insurance and investment should be kept separate.
      As you already have invested in equities for long term through tax saver mutual funds, I would advise you to either invest in PPF or get a pure term insurance.

        • @Silambarasan
          Jeevan anand is not a good policy from insurance perspective. If you are ready to suffer loss for already paid premium, you can quit Jeevan Anand.
          There won’t be much amount returned in case you decide to quit this policy now.
          You must take term insurance for sure, with or without Jeevan Anand thats your call.

  3. Hi Pankaj,
    i am 24 yrs old and earning a little over 5 lpa. i need to invest 1lac to save tax. now as far as i know, i could invest in ppf, nsc fd or elss for tax exemption undr section 80c. since i am young, my risk apetite is between average and aggressive. thus, i thought to invest in elss for two reasons:1- least lock in period of 3 yrs, 2- income from these funds is tax exempted too as apposed to interest from fd and nsc. please suggest that if my decision is correct or not. specially when the global economic scenario is not very encouraging and the markets might further go down in recent years to come and thus i might loose in elss as it is equity related.
    also which elss schemes should i invest into?

    we all here really appreciate your guidance in the issues of utmost importance. thanks in advance!


    • @Ashish
      You decision of investing into ELSS is good.
      If you choose to invest for long term, equity would generally give better returns (after tax) from other forms of investment.
      Don’t pull out investment after three years, unless you really need that amount and keep it invested even after lock-in period is over.

      ELSS won’t be available for tax saving from next financial year, so you have only three months to invest into tax saving mutual funds.
      if you choose to stay invested for long period 5-6 years, current market conditions should not be a worry.
      You can pick from Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver and Fidelity Tax Advantage.

  4. Hi Pankaj,
    I need to show 1 lakh for tax savings by feb 1st week. In the earlier years, I already invested in the funds suggested by you in previous years. I started investing from last 3 years 25k on each policy mentioned below:

    2009 – SBI Life insurance (ULIP), SBI Magnum Tax Gain Scheme 93 – Growth, Sundaram BNP Paribas Tax Saver (Open-Ended) – Growth
    2010 – SBI Life insurenace (ULIP), HDFC TaxSaver – Growth, Canara Robeco Equity Tax Saver – Growth
    2011 – SBI Life insurenace (ULIP), DSP BlackRock Micro-Cap Fund – Growth, Fidelity Tax Advantage Fund – Growth

    I am in a confusion, on what should I show the savings this year. Please suggest me how should I go ahead.


  5. My gross salary is Rs300000/- and monthly salary is Rs25000/- Well I do not know in what instruments and in what way I should invest and save my tax which will be more in next FY12-13. Kindly suggest with example for my easy understanding.

  6. Dear Pankaj, now I understand where I should invest but I am still confused as I am poor in calculation that how much I should invest to save tax. If you don’t mind then send details that in which instrument and how much I can invest to save tax. My salary breakup is as follows: Basic Salary is 10000, HRA is 6000, CCA is 1000, Medical Allow is 5000, Conveyance is 6000, Telephone Aloow is 1000. It means my monthly salary is Rs.34000/- and Gross salary is Rs. 408000/- kindly reply soon as I am confused to invest in.

  7. Hello Pankaj,
    I have to invest around Rs. 40,000 for tax savings. I don’t want to go for any Insurance Policy this year, as I want to get a better understanding of all this about returns etc.
    I have a ULIP policy of Rs. 15,000 already and have to invest 40 K more.
    Can you please suggest me to which option should I go for, Mutual Funds/PPF/Bonds of Post Offices etc./Gold ETF.
    And which bank has good returns on those. Thanks.

  8. Can you pls update about PPF.
    Its very difficult to open a PPF account.
    None of the SBI branch is aggree to open PPF ac without opening a savings account on their brach.Is this mandatory.
    Please help me out on the same.

    • @Chandar
      Its not mandatory to open a savings bank account for PPF account. They generally force it.
      If there is issue, you can try opening with other nationalized bank or post office.

  9. Hi Pankaj,
    I want to invest in Axis Long Term Equity Tax Saver-G = 1000 per month, Canara Robeco Equity Tax Saver = 1500 per month, Religare Tax plan = 1500 per month, Fidelity Tax Advantage=1500 per month, HDFC long term growth = 1000 per month.
    Is this my fund selection is good? i want to invest for next 5 to 7 year. will it give a good return in next 5 – 7 years?

    • @Satya
      These funds selected by you are good. You may also consider replacing Axis LTETS with Franklin India Taxshield.
      Nobody can say how much return it would generate in future as equity returns are market linked and there is no guarantee.

  10. Hi Pankaj

    Thank you for your assistance always..

    I have invested in HDFC Top 200 G,Fidelity Equity Growth and IDFC Premier Equity Fund…

    Just wanted your opinion if i should stick to HDFC Top 200 as it has been doing averagely..
    Also i Have 5k odd that i would like to invest every month..what would be good options?Mutual funds.PPF,Fixed Deposits that will give me returns in the next 2- 3 years or so ?

    Is this the right time to buy gold as an investment?

    • @Ronette
      HDFC Top 200 is still one of the best fund in its segment.
      For 2-3 years investment term, I would advise to stick to safer options than equities. Debt mutual funds, Fixed maturity plans, Fixed deposits would be better to invest into for this period.

      Gold is not really a good investment product. It works well only when economies are under performing. I would not advise you to invest into Gold for more than 10-15% of your portfolio.

  11. Hi Pankaj,
    Is DTC is been passsed in Budget 2012?.Now can i continue to invest in tax saving mutual fund from April 2012 ?

  12. Hi Pankaj,
    I’m sandeep.
    My total earing in this 2011-12 yr is 4.25 Lkhs.
    I want to invest nrly 1.5 lakhs to save tax.
    Just I want to knw hw much is a max limit for PPF, Tax saving FD’s, Tax saving MF, Tax saving Insurance etc..
    thank u.


  14. Hi Pankaj,
    Sandeep here. I have invested in mutual funds with an SIP of 6000/- pm. Funds composition is as follows:
    HDFC Equity Fund: 1000/-
    IDFC Premier Equity Fund Plan A: 2000/-
    ICICI Focused Bluechip: 1000/-
    DSP Black Rock small and midcap Fund Regular Plan: 1000/-
    Reliance Regular Savings Fund – Equity Plan : 1000/-

    Can you please suggest me whether I need to switch to any other fund or should I continue with the same fund composition.
    Thanks and regards,

    • @Sandeep
      Funds selected by you are good but its more investing into small and mid cap category which is riskier.
      You need to add large cap (like DSPBR Top 100 equity, Franklin India Bluechip) into portfolio.

  15. Hi Pankaj
    I’m new to MF and after consulting some person I want to invest in ELSS. HDFC tax saver – 1,000 + Canara Robeco Equity Tax Saver (D) – 1000.

    Can you please suggest me whether these are good or I have to change it.

  16. Pankaj,

    Is it better to invest 6000 per month, splitted across different mutual funds or invest it in PPF?


    • @Sanjiv
      There would not be much difference if you split across multiple tax saving mutual funds as most of them have same underlying investments.
      You may pick one or two best funds and invest into them.
      PPF is different from mutual funds, so you can divide amount between PPF and mutual funds.
      PPF have a maximum 15 years lock in and have safe and fixed returns.

  17. Pankaj,

    I have not been able to invest in any tax savings scheme for the year 2011-12 as I bought a flat of my own with my payment going upto Rs 2.5 Lakh while the balance being taken as a Home loan for which the repayment started only in the month of March 2012. Insurance, mediclaim etc put together comes to only Rs 40,000/-! Will I be able to get the exemption of Rs 1 Lac from the advance paid for the flat while filing the IT returns?

    • @Suresh
      There is no tax benefit on advance payment for house purchased.
      80C deduction of 1 lakh is only applicable on insurance, PPF, EPF, NPS, pension plans, Tax saving mutual funds, tax saving fixed deposits, home loan principal repayment, NSC etc.