Financial planning remains a crucial part of an investor’s life.
Avoiding tax is always high on the list of any investor. There are a number of
tax saving plans and schemes available, it is possible for investors in the
country to save a lot of their money.
Tax planning is a very important aspect in the lives of every
Very often, investors may find themselves going to any extent to
merely save on taxes. While there may be some individuals who invest more than
the required amount to save on taxes, others may also park their money in wrong
There are a number of tax-saving mutual funds that are available
to investors. These play a very important role in financial planning. There are
also a number of tax discounts which are offered by the Government of India. These
tax-saving mutual funds are also known as ELSS – Equity Linked Savings Schemes.
Besides that, there are
also a number of other tax-saving options such as PPF, insurance plans, NSCs
(National Savings Certificate), etc. where an investor can save on tax.
is an ELSS – Equity Linked Savings Scheme?
An ELSS is a type of mutual fund wherein you can save on tax, i.e.
they are equity liquid saving schemes and locked in for a period of three
years. You can start your investments with as low as INR 500 per month or even
1 lakh per year.
There are a number of diversified equity mutual funds under the
ELSS which offer relief from income tax and also provide the dual advantage of
tax benefits as well as capital growth. Deductible under section 80 C, ELSS
mutual funds save you INR 100,000 deduction form income (those taxes which are
calculated after this deduction) These type of funds are subject to both growth
and dividend options.
These tax saver funds basically refer to those mutual fund schemes
which invest in equity and/or equity related securities. Usually these funds
are locked in for a period of three years and cannot be redeemed during this
It is important in today’s fast-paced time and age to effectively
plan your financial year and not engage in any hasty, last minute investment decisions.
Some of the best tax saver funds India include DSP
BlackRock Tax Saver Fund, HDFC Tax
Saver Fund, Religare
Tax Plan, Franklin
India Tax-Shield, SBI Magnum
Tax Gain, ICICI
Prudential Tax Plan and Axis Long
There is a plethora of tax saving mutual funds that are available
in the country.
Investors need to bear in
mind the current performance of the specific fund, which is often observed
after a period of 3-5 years (of its investment period). This means that the
investor needs to evaluate the fund on NAV returns. It is a very critical
parameter, on which a fund must redeem itself.
You should always look out for a solid performance along with a
benchmark index (BSE 200, Index Nifty, etc.).
You also need to keep in mind the investment style and approach of the
fund manager. Strong systems and processes indicate a good performance of the mutual fund (tax saver fund).
Another key important factor that investors should keep in mind is
the amount of returns that the particular fund offers in comparison to other
tax saving funds. Usually aggressive investment approaches yield decent