Did you know that you can save taxes on the Rs 1 lac limit (the limit under Section 80C) yet invest much less than that? Sounds impossible, doesn’t it? I have done the same last year and will be doing the same this year.
Year-end is around the corner, and you must be scrambling to invest your money to save your tax. And what else can be a better opportunity than putting your money in equity-linked saving schemes or ELSS as they are popularly known?
The markets may have been volatile in the last one month, but ELSS schemes seem to have been performing better than the markets in terms of returns delivered to investors.
Those who have not taken the step from the last year April for tax planning will have only two options left. Either allow vast chunks of their salary to get deducted or invest hurriedly in one of the tax-saving options to escape the tax net at the last minute.
Did you know that you can save full tax on the Rs 1 lac limit (the limit under Section 80C) yet invest much less?
Sounds impossible?
I have done the same last year and will be doing the same this year.
Here is my last year’s TAX planning of one lac where I invested much less than one lac. (It has been scaled up to one lac)
On 12-Feb-2007
| I bought HDFC Tax Saver Fund | 1,00,000 |
| The price of HDFC TAX SAVER – DIV PLAN | 70.319 |
| Number of Units received | 1422.090 |
Now the Dividend of 7.5 Rs was announced on 15th March 2007 and so got back 10665.675 (Scaled up) Rs back which is Tax-Free Income. So the net investment becomes 100,000 – 10665.675 = 89,334.325 and can get a Tax benefit of 1 lac.
Now there are many funds this year as well which will be declaring the dividend in the coming few days. Invest in them. Also as the market is bit volatile and choppy, you even have the golden chance of getting into the market as well with more upside and return possibility.
Hi Shabbir,
I had lost 28k last year as IT. I don’t want the same to happen the next time as well. Already the tax cut has started for this year to the tune of 3.5k P.M.So if you were in my shoes, what would you do ? Is it the right time to invest in ELSS (Canara Robeco (D)). Now if i check the NAV, it was around 26 in 2008, went to 9 in 2009 and now 16.5. What does these mean ? During which time is it prudent to enter and when to exit ? Usually do you exit the fund after the 3 yr lock in period ? Any advice in this regard is most welcome.
Thanks in advance.
Good Day..
Naveen
i’m investing for my baby future purpose… pls guide me how to proceed .. as i asked u earlier what do u mean by investment horizon ? i could not get it..
Sukanya, investment horizon means how much time you can remain invested.
Hello,
I’m planning to invest in Mutual funds(about 50k), is this the right time , which funds to invest.. how can i know which funds are doing best? could u please guide me..
Sukanya, time to invest depends on your risk appetite and your investment horizon and I am not in a position to comment on them. Regarding suggestions of best funds what is your investment objective?
Dear Shabbir,
I want to invest for my child future purpose , this year i can invest 50k on my baby. could u suggest some good returns plan for long term of about 10-15 years. what kind of investment plan i should go for ? either MF or child policy or any other …
Sukanya, I am not an investment expert but more of a equity trader but I know for sure that child policies are complete crap. Before you start with the investment I woudl recommend you to read this book
Shabbirji
You are only financial expert for us,
Gajanan, that is so kind of you.
Dear Shabbir
I have some ULIPS, 3 years are completed, My questions
1. What will happen if I stop my ECS
2. Should I stop ULIP and start another option of Investment you suggested?
Gajanan, what will happen to ULIPs depends on the policy and so I am not the right person to comment what could happen.
I am more of an equity investor and for investment suggestion I would recommend you consult a financial advisor.
Hi Shabbir,
I think going forward ELSS schemes may be stopped under the new DTC. Probably the incentives on employee’s contribution to Provident Fund may get some attraction. I have written an article on PF out here. http://insight.banyanfa.com/?p=212
Yes and you can also see the same on my blog as well.
http://shabbir.in/new-direct-tax-code-hits-badly-to-mutual-fund-investors/
http://shabbir.in/impact-of-dtc-on-elss-funds/
did i choose for sip or lump sum investment in Elss mutual fund at present
Depends on your finances. I will suggest SIP would be better option in current market scenario.
i had made a sip last year in icici pru tax saving fund of Rs 1000 with growth. i did not know the dividend option is also thre. my agent did not tell me like any thing this, he said this is the best option for long term capital gain. now this year again m thinking of starting a new sip of 1000. could you please suggest some good fund name.and also how dividend bring more profit for me.
as well as the effect of new DTC on SIP. i want to know that if i look for the long term gain in ELSS Mutual fund then would i go foe lum sum investment or i stay in sip
Rizwan See – http://shabbir.in/best-tax-saving-funds/
Hi Shabbir,
Hope you are doing good!
I have a question on ELSS funds!
Do we have Fund Switch option in ELSS schemes as these funds have 3 yers locking period?
Many thanks in advance for all your help!
Regards,
Lreddy
No, we cannot switch funds.
Hello Shabbir,
i have not invested much towards my 1 lakh investment for the year
(except follwing-23 k(Term insurance)+ 15 k(long term infra bonds-L & T)+ 12 k(education loan interest))
upon advice from colleauges,invested 50 K in HDFC top 100 MF,but that does not come under 80-C deduction.
My issue is crunch of liquidity at this point of time
pls advice me how to complete my slab of 1 lakh investment.
Mridul
Your HDFC top 100 is not locked and so if you want, you can liquidate that fund.
Hi shabbir,
I am just 6 months into my first job. The previous financial year was a one without taxes for me. Starting this year, i want to aim full tax saving. As you have correctly pointed out that SIPs are time independent, can you please suggest a couple of tax saving SIPs. At the most i see myself investing 17-20k. Is there a dividend on SIPs too, is it also non taxable?
Thanks.
Rajat See http://shabbir.in/best-tax-saving-funds/
Hi Sir,
Well i wanted to invest 3,000 per month in a best Tax saving plan as well as 3,000 in Equity Mutual fund Can you suggest a good one?
I want to invest for regular 3 years.
Nitin, See http://shabbir.in/best-tax-saving-funds/ but remember when we have DTC ELSS funds will not save you tax. See http://shabbir.in/new-direct-tax-code-hits-badly-to-mutual-fund-investors/
Hi …….. I am new to MF i would like to invest monthly 5000 in MF for tax saving for the year 2011-2012. So please suggest me how can I invest every month and best schemes
Thanks
Phani
Phani see http://shabbir.in/best-tax-saving-funds/
I wish to invest about my plan is
1. HDFC LT Advantage fund per month 2000/- SIP time line 3year
2. HDFC Tax saver fund per month 2000/- SIP time line 3year
3. Fidelity Tax Advantage fund per month 2000/- SIP time line 3year
I should go with SIP in present scenario? and I should i go for “Growth” or “Dividend” option
The time for SIP is gone for you because ELSS is only available till March 2011. See http://shabbir.in/new-direct-tax-code-hits-badly-to-mutual-fund-investors/
Hi , ABHIJEET , since now I hav invested in Birla SL Tax Relief 96 (D),DSP-BRTax Saver Fund (D),Franklin India Tax Shield (D),HDFC Tax Saver (D)HDFC Top 200 Fund (D)Taurus Tax Shield (D),ALL SIP OF 500 EACH. TELL ME HOW IS THE PORTFOLIO ? , I WANT TO INVEST MORE IN M.F ?
PLZ SUGGEST ME GOOD FUND TO INVEST NOW FOR RS.5K AS FULL YR INVESTMENT ? I WANT TO PUT 20K IN 4 DIFF M.F ? PLZ ?
I wish to invest about 40K to save income tax during FY 2010-11. I request u to please guide about investment which can give good return.
I wiswh to invest about Rs 40K to save tax during FY 2010-11. I request u to kindly advice investment plan for good return.
Check out my list of best tax saving funds.
Hi Shabbir,
I haven’t seen any posts in your web-site for the F&O section for a long time. I am investor who is willing to learn more about the Derivatives market. It would be great for me, if you provide some knowledge over the Derivatives.
Thanks,
Chandra Kiran.
Chandra, Thanks for pointing that out but as I do not prefer to share trading ideas here and so F&O is something I have missed but I will have that in mind.
HI MY NAME IS ABHIJEET 22YRS OLD WANNA INVEST IN MUTUAL FUND SIP for TAX SAVINGS HOW DO I GO ABOUT IT AND WHICH MF TO FOLLOW GUIDE FOR 5k IN BREAK IN 2-3 MF PER MONTH
See http://shabbir.in/best-tax-saving-funds/
Hi Shabbir,
found ur articles very informative. m just new to this field. wanna know how r we supposed to invest in MF. i mean the procedural part.
the other thought crossing my mind was dat if dividend option gives u advantage ( as frequently mentioned in ur articles.)over others den y one goes for other option like growth options in MF.
Thanks and Regards,
Avantika, The procedure to invest in MF is as simple as filling up a form and writing a cheque.
Now about the Dividend I always like it for Tax Saving only and not for investment into other funds. Check out http://shabbir.in/growth-or-dividend/
For last six month I am investing in following five funds (SIP):
DSP-BR Top 100 Equity – RP (G) ———–Rs.5000/-
HDFC Top 200 Fund (G) ———–Rs.5000/-
Reliance Growth Fund – RP (G) ———–Rs.3000/-
SBI Magnum Tax Gain (G) ———–Rs.5000/-
UTI Opportunities Fund (G) ———–Rs.2000/-
Are the above funds are good on long term basis and should I continue with these
Plan to invest 10K more. Please suggest some good funds.
Arun, See http://shabbir.in/best-midcap-funds/
Hi Shabbir,
To my understanding, only invested money declared under 80c will be deducted from 80C. Consider if you invest 80k in ELSS, the deduction under 80c is only 80k to arrive at the taxable income, not 1Lac even if u get dividend of 20k next within 1 mth. So rest is taxable. So when did you save taxes on the Rs 1 lac limit (the limit under Section 80C) yet invest 80k (which is actually deducted) much less than that.
If you rather say, u get income from investing in ELSS, then that’s what they have been doing for years now.
Hariharan, I invested 100k but got back as return. Its not that I invested less.
dear sir, what do u think about LIC ulip plans? should i invest or not?
thanks n regards
Rashmi
Rashmi, Read http://shabbir.in/better-way-to-save-tax/
Hi Shabbir Sir, i would like to invest 30k in HDFC ELSS but i m new in this field .plz guide me how to invest .
thanks ®ards
Rashmi
Visit HDFC Bank and they will guide you in all respect but be certain to Invest in HDFC ELSS fund and not in any insurance because sales person would push for insurance and not in mutual fund.
Hi Shabir thanks for reply.
Actually I am new be to MF.
After reading your 3 article (about tax saving & MF)I change my investment amount from 20k to 50k its for tax saving.
Now , As I read you suggest Dividend plan rather then Growth. so i am planning something like this.
10K -> Birla SL Tax Relief 96 (G)
10K -> Birla SL Tax Relief 96 (D)
15K -> SBI magnun tax gain(D)
15K -> HDFC Tax saver.
is this planning is sound good or whats your idea ? is need to change in any script?
now other question is when it to buy? this month , or next or what is better after all it need to buy before this financial closing?
Chetan, Allocation is good enough and instead of buying now or next month divide them into small tranches in each week. I am sure this will help
hello,
Yet i have to invest 80k before this march whats is the best option you can suggest ? can i plan to buy Birla sunlife tax relief of 20k and sbi magnun tax of 20k. i have allready LIC of 20k per annum thats pension plan.
So please reply with good guidance.
Thanks
-CC
Chetan, See http://shabbir.in/best-tax-saving-funds/
Hello,
I want to make fresh elss investments. This is my first time so i m thinking of starting with 10-15k. Can you suggest some good funds to invest in?? Also, please suggest whether I should go with one tym investment or SIP in present scenario?
See Best Tax Saving ELSS Funds.
hello sir,at first thanks for ur honest suggestion and ur e-book is really valuable for the beginners secondly i have started a weekly STP from debt to equity in 4 schemes viz. birla sl frontline equity,reliance growth,sbi contra,icici dynamic fund plz suggest me whether iam going right or not?and also to invest in sundaram psu or skip the nfo?awaiting for ur reply……..
Suni, you are going right to an extent and so NFO is a skip for me.
Hey thanks for a quick response. I still want to know that should i go for “Growth” or “Dividend” option
and should i buy 1 elss scheme or 2?
Read the following
http://shabbir.in/dividend-or-return-tax-saving-funds/
and also
http://shabbir.in/best-tax-saving-funds/
Hey, i want to invest around 50k in elss. should i buy in lump sum or should i go for SIP. Also suggest me that should i go for “Growth” or “Divident” Option. And should i but 1 elss or should i diversify my portfolio
I guess you should go for a SIP but as March is approaching your SIP would be higher this year.
Also investing in more than one fund is not actually any diversification.
Dear Shabbir sir,
My taxable income comes to Rs.1 lacs after deducting of HRA and tax exemption how much should I invest to avoid this and which mutual fund do you suggest.
Thanks and regards
Prasidhya
Prasidhya, How much you should invest is not what I can suggest but you should target close to full Tax saving. Also for funds suggestion see Best Tax Saving Funds
hello sir,i have been an investor in mutual funds since past 6 yrs need your advise, when is the right time to start offloading the portfolio? Are we going to enter a new bull run the coming year2010?
Switch to Dividend mode rather and you would get some good benefits in the coming time. Also if you have made some good gains you can book partial profits.
In this month I want to invest in Fidelty & HDFC Tax Savers as these are the best according to you. But I just want to know that is this the right time to invest or should I do it later ? If later please let me now when I should invest.
I think you still have time for saving tax and I would suggest to divide your investment in 3 to 4 amounts instead of one. Preferably one in each month till March 2010
Thanks, for your reply & would appreciate for the same response in near future.
Getting in touch with you could help me lot to understand the matters related to finance.
And also pls advice about good stocks for future which can give good returns as well as have consistent track record in terms of Profit & Stability considering future prospects of Companies.
Thanks & Regards,
Sanjay Singh
Follow the blog as I share most of them here and I am most of the time available.
As i have asked question on 16 Oct, i didn’t get any resolution regarding tax treatment for the ELSS Mutual Fund.
What somebody would get if he invest for long period, say 10 years from now with starting amount of Rs.1000 through SIP in any ELSS Scheme.
Thanks,
Sanjay Singh
Sanjay, You haven’t read and followed the comment I gave on 17th. See its answered.
The invest can expect to be close to 15-20% if done in good funds and you do good amount of tracking.
Hey Thanks Ya!!!
Some great information about ELSS funds on your site. I’m impressed. Keep me updated about your postings….
Farooq
As per the proposed DTC code, investors getting benefit in ELSS schemes would not enjoy this benefit from next financial year.would this not hit the MF industry as ELSS schemes are mostly popular among the various groups in terms of lockin period of three years & good returns in long run.
As other conventional products do not have these features.Why government is supposed to take back this exemption from ELSS schemes.
Throw some light on this.
Sanjay, I have already done that here and here
Though, Most Elss Tax Saving funds have given good dividend in the recent past & also declared dividend till date with positive returns. But what guarantees that these fund would perform better in future, taking all the things into consideration.
However, they have lockin period of three years. Would dividend to be declared in these 3 year’s attract the tax liability or not.Is it exempted from tax.
What somebody would get if he invest for long period, say 10 years from now with starting amount of Rs.1000 through SIP in any ELSS Scheme.
There is no guarantee of future returns but overnight nothing can change and on average if mutual funds for tax saving have given good returns they would give in future as well.
I would vote for Fidelity and HDFC Tax Savers
I WANT TO INVEST MONEY AROUND 40K IN MUTUAL FUND(ELSS). HOW CAN I GET MAX RETURN OUT OF IT.WHICH COMPANY’S ELSS WOULD BE THE BEST PROFITABLE.
Ranjith,
I have not being Tracking new funds but I know HDFC TAX SAVER has given the dividend.
Thanks
Shabbir
could you mention some good ELSS funds which have not yet anounced Divident
Yes thats a good return back
Yes, interesting…
Its good option for tax saving.
My father invested 40000/- in Birla MF taxsaver 96 and got 16000/- as a divident within 1.5 months.