Which are the best tax saving mutual funds? Are tax saving mutual funds better than endowment policies,ULIPs, PPF? What is the lock period in tax saving mutual funds?
The tax savings season has begun!!!
This is the time of the year where you will be receiving umpteen numbers of calls from many agents to sell their tax savings instruments. While it is good to save tax, most important thing is to check whether the instrument you choose will give you a decent risk adjusted returns. Premium paid for traditional life insurance policies will help you save tax, but the returns from such policies will be hardly 5-6% on a long term. PPF will be a much better if you can wait for a long term.
If you are a bit aggressive, then you have another Tax saving investment option under Section 80C. It is the Equity Linking Savings Scheme of mutual funds (ELSS) which is also known as tax saving mutual funds.
What are Tax Saving Mutual funds?
Tax saving mutual funds are diversified equity mutual funds with a 3 year lock in period. You cannot sell the units within 3 years of the investment. In fact this 3 year lock in is the lowest lock in period among all other Section 80C investments.
Let us see some of the best performing Tax Saving mutual funds:
Canara Robeco Equity Tax Saver Regular
This fund is one of the oldest Tax Savings mutual funds in the country. Started in 1993, it has given a CAGR of 15%, which is one of the best returns in this category. As on 11th January. 2013, it has given a CAGR of 10.20% for the last 3 years. This fund is bench marked to BSE 100.
ICICI Prudential Tax Plan
Launched in 1999, this fund has given a CAGR of 23% from inception. This 13 year track record is excellent for a tax savings mutual fund. It is benchmarked to S&P CNX 500 and has given a CAGR of 9% for the last 3 years. This is a good fund among the tax savings mutual funds.
HDFC Tax Saver
This tax savings mutual fund is in existence for the last 17 years and has given an impressive CAGR of 21%. Benchmarked against CNX 500, it has given a CAGR of 7.3% for the last 3 years.
Franklin India Tax Shield
Launched in April 1999, this tax savings mutual fund has given a CAGR of 26% for the last 13 years. This is benchmarked against CNX 500 and has given a 3 year CAGR of 10%.
Religare Tax Plan
Launched in December 2006, this fund is benchmarked against BSE 100. It has given a CAGR of 12% for the last 6 years. The 3 year CAGR is 8.3% for this plan and is a fund worth investing. Though this tax saving mutual fund is only 6 year old, it is worth considering.
Tax Saving Mutual funds – Better option in Section 80C
Though the mandatory lock in period is only for 3 years, you can continue to invest in these funds after reviewing their performance after the 3 year lock in.
Although there are other tax saving mutual funds also, which have given decent return in 3-5 years
The above discussed tax saving mutual funds have given excellent returns over a period of 6-10 years.