There are many schemes which give tax advantage on
investments .e.g.:
- Insurance
- NSC/KVP
- Bank fixed deposits of 5 years & above
- RBI deposit schemes
- PPF
- Tax saving schemes of mutual funds
Most of the above schemes give an average return of 7-9 % over long
time periods . Lock-in time also varies from 3-7 years. As per historic
data the best returns were given by tax saving schemes of mutual funds
with a lock-in of only 3 years which is the minimum for a tax saving
scheme. Therefore it is suggested that tax saving money should be
invested in Tax saving mutual funds for best returns along with tax
benefit on investment amount as well as on the return on investments
i.e. dividends which is completely tax free . Following tax saving
schemes are doing very good performance:
- HDFC tax saver
- Prudential ICICI tax saver
- Franklin India tax shield
- Birla Eqity fund
- Tata tax saving fund
- Reliance tax saver (elss) fund
- SBI tax saving fund
A return of 15-20% p.a. should be achieved comfortably in a tax
saving scheme of mutual fund as the funds are invested for a min.period
of 3 years i.e. the lock in period.
