The last date for calculation of the income tax is 31st March, 2010.  Some employees must have already submitted  the reports, to their employers, on their savings under section 80C.  We all know that the maximum for tax exemption under section is Rupees One Lakh. Still so many people have to save under section 80C and may be the employers are asking them for the details of their savings under 80C.  Whether for employees or business people, those who are in dilemma where to save for getting the tax benefit, I herewith give you some idea on the tax saving mutual funds, which I gathered the information from various financial newspapers and magazines.  Hope this will be useful to our boddunan members as well as the other readers.

Every one knows what a mutual fund does.  A mutual fund collects investments from the public and invests that amount in stocks.  Depending upon the performance of the investment made by the mutual fund, the returns would be positive or negative.  But comparing to other funds, the tax saving funds or equity linked savings schemes(ELSS) have given decent returns over the past five years.  But first of all, we have to keep in mind that the investment in the mutual funds is nothing but the investment in the stock markets, where there is always the risk involved.  And there is also a lock-in-period of three years in ELSS.  The brighter side of our mutual funds is, if you observe the data of these ELSS funds for the past five years, though the relative period has seen so much of volatility and uncertainty in the markets and economies across the globe, the returns they gave to the invesotrs are pretty reasonable and decent.  They earned about 23 to 25 per cent on average and this is better than any bank deposit, which gives no exemption from the income tax.  Moreover, the returns on these funds for the last one year are around 80 to 100 per cent.  Only the drawback with these ELSS funds is there would not be any assurance on the returns.


The ELSS funds come under diversified equity category.  All these are open ended funds.  That means the schemes are always open for the subscription and any one can buy them at any time.  But as said earlier, there will be a lock-in-period of three years. After investing in these funds, the investors can not take back their money before 3 years.  Since they have a good reasonable period of three years, the fund managers of the funds would be able to get good returns out of the investments made by the investors during this time.  Though there will be risk of getting negative returns also, the chances of occurance of this is less and most of the ELSS schemes generally give good returns.  Even a span of three years investment in a mutual funds gives a negative return, on waiting for one year or more, the investors get back their money along with reasonable returns.


During the December and January every year many ELSS funds come up with declaring dividend.  In some funds, you see the dividend even upto 60%!  In fact, the dividend is not the amount which the fund manager gives you from other avenues.  It is nothing but from your investments.  The declared dividend is reduced from the value of your fund and after the dividend is paid to you or reinvested in the fund again, as per your option, the value(net asset value, ie., the price of each unit of your fund, which is declared every day, based on the movement of the stocks, in which the fund has invested) gets reduced accordingly. So be careful in choosing the funds.  Declaration of the dividend is not only the criterion for choosing a good ELSS fund, for that matter, any other mutual fund.


*Upto one lakh you can get exemption for the income tax on investing in ELSS funds.

*There will not be any tax on the dividends you get from these funds.

*The three year lock-in-period gives you good long term profits.

*The investment is a solution for the increasing inflation.


*There will not be any guarantee on the returns.

*Some times, you may get negative returns.

*Can not come out of the funds immediately whenever money is required, due to the lock-in-period.




This fund is the one of few funds, which is performing well right from the launch.  The fund started in 1993 and has now assets of Rs.4999.93 crores.  Since from inception, the fund gave 19.82% on average to the investors.  The fund has been paying 100% dividend every year since 2005.  This year in May, it declared 28% of dividend.


Started in 1999, the fund has given a return of 23.46% on average per year.  It has assets worth Rs.1214.02 crores.  The fund declares dividend every year, ranging from 15 to 20 percent.  Last year in September, the fund gave 10% dividend.


The fund was launched in 1996 and today the owner of assets worth 2202.26 crores.  It has given a return of 35.4% on average, from the beginning.  The fund is a good dividend payer and has been paying not less than 50% every year since 2005.  The dividend declared in this year March is 50%.


The scheme was operative from 1999 and has the assets worth of Rs.989.89 crores.  The scheme is the best performer of the year and from its inception it gave a return of 27.03% on average.  The fund has been declaring the dividend not less than 35% every year from the last three years.  This year it declared a dividend of 40%.


This fund also was launched in 1999 and it has assets worth Rs.718.03 crores.  It recorded a return on average, 30.74%.  The fund paid the highest dividend of 160% in 2007.  It gave a dividend of 30% in 2008 and for this year not announced yet.


The investment in mutual funds is subject to market risk.  So consult your financial advisor and take decision before making investment.  Also please read the offer document of the funds and clarify.

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