Best Income Tax Saving Mutual Funds

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• Hi Pankaj,

  I am going to take PPF and NPS. Can I save tax after taking both things?

  Mayank

  • @Mayank
    Yes, exemption can be availed for both under Section 80C (subject to max limit of 1 lac)

• I want 2 invest in ELSS for 1 year. which one will be d best one with an assured gain? and whether such an investment is at all a good decision for this volatile market??

  • @Smita
    ELSS have lock-in period of three years and you cannot invest for just one year.
    These are equity linked and depends on share market conditions. There is no assured return. You might get a high return or you may also incur loss as well.
    Investment in equities is for long term and it generates better return in longer run.
    If you invest through SIP (monthly), you can invest anytime as cost of buying will average out.

• Hi Pankaj,
  I wanted to know how the lock-in period of SIP based ELSS Mutual Fund plan works?

  • @Rahul
    Lock-in on equity linked tax saver mutual funds is of 3 years from date of buying units.
    In case of SIP, lets say, x units were bought for P rupees in April 2010, y units were bought for P rupees in May 2010 etc. Then x units will be locked till 31st Mar 2013, y units till 30th April, 2013.

• Pankaj ji

  which is the best ELSS fund to invest in?

  - chintu

  • @Chintu
    You may choose among: Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver and Fidelity Tax Advantage.

• Hi Pankaj,
  I am planning to buy a Term Insurance plan. Can you please suggest me a best plan?

  Also if I take cover for 30 years, do I have to pay premiums for 30 years?

  Thanks,
  Rahul

  • @Rahul
    You may choose among LIC Amulya Jeevan, ICICI Pru iProtect, Kotak e-Preferred Term plan and Metlife Protect.
    Term insurance can be bought either with single premium (you will have to pay only once) or with regular premium till policy period (yearly/monthly/quarterly). So either you have to pay once or for 30 years.

• Hi Pankaj,

  Hats off to you for all the information you provide and a special thanks for replying to all the queries. I would request you to please give me your valuable suggestion in planning the investments.

  For last year (2010), I had invested in Reliance Tax Saver-Dividend Plan for Rs.26000 (SIP) and HDFC Tax Saver-Dividend Fund for Rs.17000 (SIP). Then, I invested lumpsums in HDFC Long Term Advantage Fund (Rs.5000), Franklin Mutual Fund (Rs.5000) and Fidelity Mutual Fund (Rs.5000). Apart from Mutual Fund investments, I've also taken a term insurance with SBI for a premium of Rs.10000. I still need to invest another Rs.32000. Could you please suggest some good options? I don't want to invest in mutual funds anymore and at the same time, am not interested in infrastructure bonds or postal schemes with a longer lock-in period.

  Also, how should I plan my investments for this current year(2011)? I reckon no tax exemptions are given for Mutual Funds from this FY. Please give your valuable suggestions.

  Thank You in advance.

  Regards,
  Gowri Shankar

  • @Gowri

    Thanks for all these good words.

    Apart from Tax saving mutual funds, infra bonds and NSC, For 80-C saving You may choose from 5-year tax-saver bank Fixed deposits, PPF or New Pension Scheme (NPS).
    In case you are employed and there is EPF deduction from salary, then Employees contribution towards EPF is also included in this 1 lac 80-C limit.
    You may also consider buying another term insurance, in case sum assured as of now is less than 10 times your annual salary.

    Other than 80-C, there is more to tax saving which can be done. Read more at http://www.socialfinance.in/questions/7/tax-saving

    There won't be exemption on tax saving mutual fund and most the other investments from financial year 2012-13, when DTC comes into play. Term insurance, NPS and PPF will continue to provide benefits.

    On a side note, I really liked you blog. I am also a software engineer by profession and an amateur photographer :)

    • Thanks a lot Pankaj ! It's great to know that both of us have similar profession and interests :) I'll probably look into the infrabonds and NSCs to cover my tax exemptions. Thank u once again!! Keep up the good work....

      • Hi Pankaj,

        What is your opinion on Reliance Gold Savings Fund NFO? I know there is no tax benefits, but still is it a good fund to invest? I also heard that there are no lock-in periods like Mutual Funds. In that case, when can I redeem it?

        • @Gowri
          Reliance Gold savings fund is a open ended mutual fund (you may purchase and redeem anytime) that will invest into Gold. You can start a SIP as well.
          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.

        • Thanks a ton Pankaj! Am now interested in opening a demat account and start investing on Gold ETFs. Is e-Gold and Gold ETFs same? I would also like to ask you who is the best demat account provider in India. I have SB Accounts with SBI and HDFC, but i have done all my mutual fund investments through Bajaj Capital. It's convenient for me to open an account with them as they are easily approachable to me.

          Is Bajaj Capital good? Please advice.

        • @Gowri
          Please read mode about Gold ETF and e-Gold here: http://answers.pankajbatra.com/finance/stock-market/what-is-the-difference-between-gold-etf-and-e-gold/
          Bajaj capital does not have demat account facility. They are just like an mutual fund agent.

          You may open demat account with IndiaBulls, ShareKhan, Kotak Securities, ICICI, Religare, Reliance etc.

        • Hi Pankaj,

          Bajaj Capital offers demat account services @Rs.1500 lifetime charges. If not Bajaj Capital, please tell me a good provider for demat acc. I wish to do trading in future as well

        • @Gowri
          You may choose among IndiaBulls, ShareKhan, Kotak Securities, ICICI, Religare, Reliance etc.
          All have similar services. Compare their brokerage and annual fees and choose whichever is economical.

• i hv invsted 5000 in sbi magnum tax gain scheme
  i was unware that it has 3 years lock in
  do i have to give more money into the fund or its ok to avoid this for 1 year?

  • @MJ Singh
    Mutual funds is not a recurring investment (unless SIP has been started)
    If you have invested 5000 now, there is no need to put more money into same fund again.
    Lock-in means that you cannot redeem these units back until three years have finished.

• i want to invest Rs 10000 per month in mutual fund for long time can u suggest me any good equity funds. I also have reliance regular saving SIP (1000 Rs), HDFC Top 200 (2000Rs SIP), Sundaram Smile SIP 1000 Rs and other one time purchased mutual funds.

  • @Rajesh
    Funds selected by you are good too.
    Apart from these, you may also consider Birla Sunlife Frontline equity fund, DSP Backrock Top 100 fund, ICICI Pru Discovery Fund, Sundaram Select Midcap and HDFC Equity Fund.

• Hi Pankaj. From April 2012 DTC wil come into effect and ELSS wil no longer come under tax exemption. Can i invest in ELSS via SIP from feb 2011 untill march 2012. If yes then how wil tax exemtion wil be calculated, say iam investing 2000 per month.

  • @Pravin
    Yes, you can invest in tax saving mutual fund via SIP until march 2010.
    If you put 2000 per month starting from Feb 2011, 4000 (feb-march 2011) will be counted in FY 2010-11 income tax exemption under 80-C.
    And 24000 will be counted towards income tax saving for FY 2011-12.

• Hi Pankaj,

  I need to invest 50k for tax savings. I need to show the proofs by monday in our company. I think this is the right time to invest in mutual funds. Please suggest me the good mutual funds to scatter 50k amount based on current market situations.

  Thanks,
  Sreelatha

  • @Sreelatha
    You can choose to invest among:
    Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver and Fidelity Tax Advantage

    Also considering buying a term insurance for sum assured at-least of 10 times your annual salary.