• Tax Saving Mutual Funds India!

    Mutual Funds – what’s the point?

    As hard as it sounds, let’s forget tax for a minute. Investors often ask the question ‘Why mutual funds?’ The answer is simple.

    Unless you are a financial planner, a broker, a funds manager or a banker, the chances of you being aware of all the investment instruments available in the market are slim.

    Forget that, do you even have the time and resources to follow the market, trends and performances continuously every day? We doubt it.

    That is where mutual funds come in the picture. As we all know, mutual funds are a collective investment where monies of all investors are pooled to invest in equity and a range of other instruments. We’ve highlighted some key advantages of using mutual funds below.

    • Mutual funds are professionally managed
    • Worry free investments – especially for people who have the ‘invest, forget and watch it grow’ attitude.
    • Mutual funds offer diversification.
    • Tax saving options are available.
    • Types of mutual funds are many and offer options that suit the needs of almost all investors.

    Equity Linked Savings Scheme (ELSS)

    Okay, now getting straight to the point, let’s find out what drives the concept of ‘tax saving mutual funds’. As per section 80C of the Income Tax Act 1961, investment up to Rs. 1 lakh into funds that match criteria of ELSS will be deductible against your taxable income.

    Of course there are no free lunches so the catch is that Rs. 1 lakh is the maximum you can invest in the AY and the investment should have a lock-in period of 3 years from the date of purchase. You should also note that:

    • Re-invested dividend will also have a lock-in period of 3 years.
    • The government is planning to phase out the ELSS as it introduces the Direct Tax Code.

    Top Tax Saving Mutual Funds in India

    Now that you know what ELSS is all about, here is a snapshot of some of the best tax saving mutual funds in the market right now, not in any particular order.

    NamePerformance (%)
    (12 Months)    		Performance (%) (Since Inception)
    Axis Tax Saver Fund – Growth
    • New player in the market since 29 Dec 2009
    • Open ended scheme, exposure to equity
    • Fund size Rs. 104.48 Cr as at 29 April ’11
    		14.83

    15.44

    Franklin India Taxshield – Growth
    • Open ended scheme, exposure to equity
    • Fund size Rs. 837.04 Cr as at 29 April ’11
    		15.3728.39
    HDFC Long Term Advantage Fund – Growth
    • Open Ended scheme, exposure to equity
    • Fund size Rs. 956.68 Cr as at 30 April ’11
    		15.0528.44
    Religare Agile Tax Fund – Growth
    • Close ended scheme, exposure to equity
    • Fund size Rs. 11.2 Cr as at 31 March ’11
    		12.61

    -8.91

    ICICI Prudential Right Fund – Growth
    • Close ended, exposure to equity
    		14.5112.40
    Fidelity Tax Advantage Fund – Dividend
    • Open ended scheme, exposure to equity
    • Fund size Rs. 1280.88 Cr as at 31 March ’11
    		12.5715.08

    These were some of the top performing tax saving mutual funds in the last 12 months. The options are vast and investment opportunities are immense. And if you have been following the markets recently, you should know that the numbers are down and stocks are not doing great. We don’t think there is a better time to buy.

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