Top 5 Tax saving Mutual Fund Schemes

Invest in these Schemes for best of Safety and Returns

Most of us have received emails from our HR/Admin asking us to submit the proof of Investments for the purpose of Tax Savings before a specified date and I am sure a lot of us are still in thinking mode as to where to invest for Tax savings. I had written a post last year (How to Invest for Tax Savings?) on the various avenues of tax savings and one more post on Top 5 tax saving funds. Well things have changed from last year in terms of stock market performance and it's right time to review which tax saving or ELSS (Equity linked saving schemes) should we invest in. Well, when I compared the tax saving schemes last year, I concentrated on the Top performing funds over a 5 year and 3 Year timeframe. We are currently going through such a phase in the stock markets which makes us think of saftey of our investments too. Hence I have introduced one more filter in terms of Risk profile of each fund (based on Standard deviation) and Yes, there are new entrants this time and postions have shuffled. Though we normally look at a Three year reutrn for determining which fund to invest in for tax saving purposes, I would suggest that we give some weightage to 1 year return also this time around. Why ? Because, this year had a good mix in terms of both sharp upside moves and sharp downside moves. So position as of 5th February would give an idea of how successful was the fund to manage this situation. we will have an idea of how the fund was able to withstand bouts of volatility. So let's have a look on the top 5 tax saving funds worth investing for purpose of claiming tax benefit under Sec. 80C of Income tax Act.

No. 5 Franklin India Taxshield


NAV : Rs. 174.1
Risk Rating : 3
Overall rating : 5




This is a new entrant in our Top 5 pipping Sundaram BNP on acount of excellent Risk Rating.
The fund has above 35,000 crore Avg. Mkt. capitalisation and equity exposure is more tha 97& of the assets. Top holdings include Reliance Industries, HDFC, L&T, ICICI Bank and Bharti Airtel. Financial Services, Technology and Energy are the top sectors where the fund is invested.

No. 4 Birla Equity

NAV : Rs. 76.47
Risk Rating : 5
Overall rating : 4





Another new entrant in our list of Top 5 tax saving schemes. Birla Equity offers excellent returns from all parameters,but standard deviation of 24.42 , this growth comes with comparatively high risk. The fund has 9394 crorr of AMC with high exposure in Engineering, Services and Financial service sectors. Top holdings include ABB, TRF, Gammon India, Welspun Gujarat and Goodyear India. Top 5 holdings constitutes 20% of its portfolio.

No. 3 HDFC Tax Saver


NAV : Rs. 179.05
Risk Rating : 4
Overall rating : 3





This fund was at No. 2 in the last year Top 5 funds ranking of Investment Guru. But has slipped to No. 3 this year. Well, the fund is second best in terms of 5 year return but scores poorly on 1 year return. Moreover, the Risk rating at 4 is the major reason for it slipping to No. 3 slot. So new filters had a impact on its ratings.

With Avg. market capitalisation of Rs. 23204 crore, the fund has top holdings in Basic Engineering, Financial Services and Energy sectors. Top 5 holdings include ICICI bank, L&T, ITC, Crompton greaves and Reliance Industries.

No. 2 HDFC Long term Advantage Fund


NAV : Rs. 114.99
Risk Rating : 1
Overall rating : 2





Well this chap has overshdowed its elder brother " HDFC Tax saver funds" and has emerged as the star performer from the HDFC stable. Top holdings include ICICI Bank, Reliance Industries, Blue Star, SBI and Crompton Greaves. But why, HDFC Tax saver fund has better 5 Year, 3 year and 1 Year retrun than this scheme, so why Long term Advantage fund at No. 2 ? Well in the year when investors are realising that saftey of investmnet is as important as the return, why would a fund that has got "THE BEST" risk rating should not stand at No. 2 in our rankings. With standard deviation of 19.84 this scheme has outperformed all the others in Top 5 by a big margin. So for those of us, who places safety as the utmost important factor, HDFC Long term Advantage fund offers the best place to invest. But wait, what if you are OK with second best in Safety and No. 1 in returns ......read on


No. 1 SBI Magnum Taxgain

NAV : Rs. 61.65
Risk Rating : 2
Overall rating : 1





The True leader in its class, SBI Magnum Taxgain has managed to remain at No. 1 even this year. With Standard deviation of 22.13 it has managed to be second best in terms of satefy of returns. In terms of performance it has beaten its nearest rival HDFC or any of the Other 4 Top picks by a big margin.

With Avg. mkt. cap of above 27000 crore and with equity to debt mix of 88:12, the fund has Reliance Industries, JP Associates, Welspun Gujarat, Reliance Communications and L&T as its major holdings. The Top Three sector in which the fund has exposure are Energy, Financial Services and Diversified.

My advice would be to go for SBI Magnum tax gain for claiming tax benefits under sec. 80 C of the Income Tax Act. The fund not only provides excellent safety in terms of "Low" risk but also offers highest return on all parameters among the Top 5 schemes.

For those who want capital appreciation can go for Growth option. Those like me who are willing to get regular liquidity in form of tax free dividends, opt for Dividend Payment option.

25 comments:

Anonymous said...

Hi Rajesh
what is the limit upto which one can invest in tax saving funds?

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Kirti said...

Dear Rajesh,
Is it possible to apply for mutual funds through icici direct and claim Tax rebate? can i have mutual funds into my demat account?

Kindly advice
thanks
Kirti

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david hepworth said...

hi there, this is a very helpful list. another site which helps with this is www.indiafund.net thank you, have a nice day!

KK said...

Hi Rajesh
Not seen a new post for more than a month. Sir please guide us on the current market scenario. The markets are falling day by day. Till when it will continue ?

Tnnx
KK

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Shankar said...

Hi Rajesh,

This is a good list of mutual funds. I was wondering if you have something on the best MF to invest in .. given the currently volatile market. Safety of capital will be more important than excessive returns.

Warm Regards
Shankar
http://scrip-tures.blogspot.com

Aanchal said...

Hi Rajesh,
I must say that your blog was very informative.

I am planning to invest 10 k in SBI magnum Taxgain(Growth) plan. Please provide me your insight into the same, if this is the right time to invest?
Also, should I invest in Growth or Dividend plan ?

Regards,
Ekta Grover
ekta1007@gmail.com

Charu Bahri said...

Hi,

I'd like to connect with you for an input for an article I am writing on Warren Buffet's investment style.

Could you please email me ASAP at charubahri at gmail dot com so that I may email you a question. I'm working on this article for an Indian business digest - businessgyan.com

Best regards,

Charu

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Anonymous said...

hello rajesh sir,

not seen any post from you since long time ? we are eagerly awaiting an update on current market and some investment ideas.

amit sharma

Rajesh Soni said...

Dear Friends,

Apologies not replying to your messages in time as I was out of the blogging sphere. Let me see if I can quickly reply to few of the queries. Regarding updates on blog it will take some more time till I settle down in the new Job.

Anonymous : Yes, you can invest Rs. 1 Lac and claim expemption under tax saving clauses.

Kirti : Yes, it's possible to do so.

KK : Markets are in consolidation phase. Will reamin there for 2-3 months. This phase is slightly dull.

Shankar : The list provided in the blog post takes care of safety and return.

AAnchal: Since you are investing in tax schemes which have 3 years time frame, it think this is a reasonably good time to invest.

Charu : You can write to me on rajesh_soni@aol.in

Amit Sharma: Will see some post soon...couple of weeks..thanks for the patience.

lokesh said...

Hi Rajesh,
What are your views on Aksh optifibre ? Is it a good buy at current price ? I already have a long term position of 500 shares. Thanks for your help.

lokesh kumar

Anonymous said...

Dear sir,
Is it the right time to invest in mutual funds ? If yes, please suggest some good mutual funds wher I can put around 2 Lac for a period of 1 year and generate around 25% annual return.

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gouravkiet said...

Thanks for detailed description on the vital topic. I do believe to avail Tax deduction from total income as allowable in Income Tax Act, investment u/s 80c is a pivot investment avenues &/or contributions.

Anita Sharma said...

Tax Saving Schemes is a great way to lessen the Tax burden of people, especially of middle class who undergo the heat of paying heavy taxes and intensified tax structure.There are various schemes to save tax which comes under Sec 80C and 80D.

Suresh anthwal said...

Thank you for your post. This is excellent information. It is amazing and wonderful to visit your site. It really gives me an insight on Mutual Fund Schemes in India.

Tax Saving Mutual Fund said...

Thanks for the useful information about mutual funds!!

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Ritika Shah said...

Thank you for sharing such great information. It is informative, can you help me in finding out more detail on Best Tax Saving Plan, i am interested and would like to know more about this field and wanted to understand the basics of Best Tax Saving Plans

RR Finance said...

I have been reading your blog, you have written more relevant information for those who are taxpayers. All 5 tax saving schemes have good historical returns records. The average returns of these schemes 15% to 17% from last 3 years. So everyone should invest in this scheme to save their taxes.