What Makes Equity Linked Saving Schemes A Better Option Than Other Saving Instruments?

The answer is really very simple. When you invest in ELSS mutual funds, you not only save the amount permissible by the government, you also stand to gain from it, because of the high rate of return.

There are, of course, many reasons why you should go the ELSS way.

• The returns are really very good – the year ending 2005 saw ELSS as the best performing in the mutual fund category, showing returns of nearly 60%. In fact, a number of funds have appreciated by more than 80% in their three-year period. However, though in the past few years things have not been so good due to the economic downturn and recession effects, remember equities are long term investments that yield better in the long run ( a span of 10-12 yrs)
• These funds have a lock-in period of three years, which prevents you from unnecessary withdrawals and spending and helps earn a return over time. However, remember to stay invested for longer periods of time to the tune of 10-12 years to reap the best of returns.
• Also, the lock in gives fund managers the freedom to take sector and stock bets, which they are not able to do in the regular equity schemes.
• The dividends you earn will be tax free.
• When you sell the units of these funds, you can avail of the long-term capital gain for which there is no tax. If you sell after one year, you pay no tax. 

Invest in Equity Linked Saving Schemes Online or Download Equity Linked Saving Schemes Application Form Below

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What Are Equity Linked Saving Schemes? - ELSS Mutual Funds

These are mutual funds that invest in the stock market and give the tax benefit under Section 80C of the Income Tax Act. How this works is that the fund manager will invest in shares of various companies across various industries. So, in fact, it is a normal equity diversified fund. But there is the added tax benefit which a normal diversified equity fund will not have. This sets it apart. And currently, if you invest in such funds, you get a rebate. This is the immediate plus of the ELSS mutual fund.

These funds have a lock-in period of three years. irrespective of the income, the maximum deductions that can be made from your taxable income are up to Rs 1 lakh 

Invest in ELSS Mutual Funds Online or Download ELSS Mutual Funds Application Form Below

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HDFC Tax Saver Fund - Best Performing Tax Saving Mutual Fund

The HDFC Tax Saver Fund launched in March 1996 under the erstwhile Zurich India Mutual Fund umbrella of schemes, has a corpus of Rs 2,789 crore as of December. Investments in it are eligible for deduction (up to Rs1 lakh) under Section 80 C of the Income Tax Act. It should be noted however that according to the New Direct Tax Code, fresh investments made in ELSS may not be eligible for deduction under Section 80C after April 1, 2012.

The fund has remained in the top 30 percentile (Crisil Mutual Fund Rank 1 and Crisil Mutual Fund Rank 2) for seven consecutive quarters.

Performance In absolute terms, an investment of Rs 1,000 in the fund at the time of its launch in March 1996 would have growth to Rs 17,940 as of February 9, 2011 vis-àvis its peer set and benchmark (S&P CNX 500) which would have appreciated to Rs 9,057 and Rs 4,874 respectively during the same period.
The fund's two-year return in terms of a compounded annual growth rate is 51 per cent vis-à-vis 39 per cent and 37 per cent by the peers and benchmark. Even on a one-year, threeyear and five-year basis, the fund has been able to outperform both the peers and benchmark.

Risk The fund has demonstrated its performance over the last five years with lower volatility vis-à-vis its peer set and benchmark index. The superior performance coupled with lower risk is an indicator of better riskreturn rewards.

Diversified portfolio The fund is highly diversified in its exposure per stock. The fund's portfolio held an average 50 stocks in a three-year period. In industry concentration, it is highly concentrated amongst few sectors. The exposure to the top three sectors over three years amounts to nearly 44 per cent.
Investment style HDFC Tax Saver Advantage Fund's average equity exposure over the last three years is close to 94 per cent while cash and cash equivalents has been less than 5 per cent. The fund's churning over the last one year has been amongst the lowest in the category. 

Over the last three years, financial services have been the most preferred sector for the fund with an average exposure of around 22 percent over this period. The fund has been overweight in this sector vis-à-vis the benchmark. Pharmaceuticals and industrial manufacturing followed with an average exposure of 12 and ten percent respectively. The fund has also been overweight in both these sectors vis-à-vis the benchmark. The fund has been underweight in energy, metals and telecom over the last three years. 

Invest in HDFC Tax Saver Fund Online or HDFC Tax Saver Fund Application Form Below

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Union KBC Taxsaver - A New Tax Saving Mutual Fund

Union KBC Mutual Fund has launched the Union KBC Taxsaver, an equity linked savings scheme (ELSS). This is the second offering from the fund house in equity funds space.
The scheme is an open-ended scheme that aims to generate income and longterm capital appreciation by investing in a portfolio of equity and equity-related securities. Under section 80C of the Income-Tax Act, investors can claim tax deductions on investments up to . 1 lakh in the scheme. The investments in this scheme are locked in for three years from the date of allotment of units.

The fund can invest 80% to 100%of the money in equity and equity-related instruments and up to 20% in debt and money market instruments. The investment team shall follow an active strategy to manage the assets of the fund keeping in mind the composition and performance of the benchmark. The BSE 100, a fairly diversified index, will be the benchmark for the scheme.

Ashish Ranawade will be the fund manager. A combination of bottom-up and top-down approaches will be used while making investments for the scheme. The minimum investment in the scheme is . 500 and in multiples of Rs 500. It also offers the systematic investment plan option. There is no entry load or exit load. First-time mutual fund investors investing more than Rs 10,000 will be charged Rs 150 towards transaction cost. Investments of over Rs 10,000 will also attract a transaction charge of Rs 100. You can choose between the growth and dividend options. The NFO closes on December 16 and the scheme will re-open for investment on December 23.
You can consider them scheme if you are looking to invest in equities with a long-term view and want capital appreciation along with tax-savings.

The scheme invests in equities and that adds to the risk of an investor's portfolio. The scheme invests in equities and that adds to the risk in investor's portfolio. Also, there are other taxes saving schemes with proven track record.

Invest in Tax Saver Mutual Funds