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. 76.47Risk 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. 179.05Risk 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. 114.99Risk 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. 61.65Risk 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. Read More!
