Microreviews

Come February and everyone is looking for avenues to save tax on his hard earned money. Over the years ELSS (equity linked saving schemes) has become a reasonable avenue for tax saving. ELSS is a mutual fund scheme investing not less than 80 % in equity. In addition it also invests in debt and money market instruments not more than 20%. Money invested in ELSS is tax deductible under section 80C of income tax act. Maximum limit for 80C for a financial year is 1 Lac. This instrument has minimum lock in period of 3 years. Lock in for other options are 5 years for fixed deposits, 8 years for NSC and 15 years for PPF. Historical data show that ELSS has given double digit return annually over the years whereas other instruments give single digit return. The return form ELSS in hand of investors is also tax free. Return from other instruments after maturity is taxable. Mutual fund companies offering ELSS are well regulated by SEBI ensuring greater transparency.

There are about 34 ELSS schemes available in market today. I am writing about few funds which have good performance over the bulls as well as bears.

Canara Robeco Equity Tax saver: This fund has returned 26.10% annually over 5 year period. This is a mid cap heavy fund making it a little risky for bear markets.

Franklin India Taxshield: This fund has returned 18.40% annually over 5 year period. This fund has very good track record in bear market because of its conservative portfolio. But in bull market it fails to deliver stellar performances. Over a long term it does beat the category average. It is an offering for risk averse investors. This fund is good to provide stability to your portfolio.

HDFC Tax Saver: This fund from one of the finest fund house in country is a champion in both good and bad times. Smart stock picks and sector moves over last 10 years has shown its ability to manage downside as well as riding upside. This can be a core holding in your equity portfolio. Over the period of 5 years this fund has returned 24.49% annually.

Sundaram BNP Paribas Tax Saver: This is the most actively managed fund amongst good ELSS. This fund adapts quickly to market situations and does not hesitate to take risk if an opportunity is foreseen. This fund has returned 23.9% annually over the period of 5 years.

(5 year period starts from 03-Feb-2005 and ends at 03-Feb-2010)

Enjoy Tax Saving!!

Mail Me here.

Related posts:

1. Investing through Mutual Funds and SIPs
2. NHPC IPO – Post listing strategy. Sell/Hold/Buy? Listing Price Predictions
3. NSE – Online Mutual Fund Platform Debut’s Today
4. Reliance Infratel, Next Big IPO in Pipeline.
5. Starters guide to investing through IPOs

Tags: 80C, Add new tag, Collective investment scheme, ELSS, Investing, Tax Saving