Query on Tax Saving ELSS Mutual Funds/FD

Query on Tax Saving ELSS Mutual Funds/FD

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Missing
Deal Cadet
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Hi Dimers,

I want to invest in ELSS Mutual funds for tax saving under 80C, can some one throw some light on Where and how to invest and what are the best/stable ELSS Mutual funds to opt for.

I found option in phonepe App to purchase through app. can i purchase through app or through any other website?

Also if i invest this month Jan 2020 amount of 90k as yearly amount then can i declare entire amount 90k for this fiscal year Apr-2019 to Mar 2020 during IT return or only amount for (Jan,Mar,Feb) which is around 30k for above period?

Thanks.

41 Comments  |  
14 Dimers
Missing
Deal Cadet
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U can invest until 31st march 2020, even if you put entire amount on last day, it is valid for whole finanacial year
I suggest wait for a month i feel markets will fall
You can register on zerodha till then n keep for investment
Invest in axis long term elss or adiya birla tax relief

Missing
Deal Cadet
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Note →
1. ELSS mutual funds have a lock-in period of 3 years for each investment (recurring ones too)
2. ELSS mutual funds tend to go up during feb-march as most people are looking for tax saving investment (demand is up value go up )
3. See the companies in the mutual fund and the fund manager (Don’t trust anyone with your money, even not me0
4. Go for direct funds via Paytm Money, Groww, ET Money (It has higher return by 1%)
5. If some advisor is investing on your behalf/ creating an account for you, most probably your investment in regular investment
6. Mutual funds are for long term investments, it does not matter with short time falls.
7. I haven’t invested yet in mutual funds but will invest in 2020

Missing
Deal Lieutenant
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The investments under 80C is considered on annual basis and not on pro-rata basis. However, to ensure that the amount gets duly credited tot he final form of investment, it is essential that the payments are completed before Feb end.
Before going for ELSS, evaluate the risks and also decide what you really require as well as the amount you require to invest.
Remember that the limit of 80C is 1.50 Lakhs, applicable across all products including EPF and life insurance. An additional 0.50 L is applicable only exclusively for NPS.
Since you intend to go for ELSS, obviously you are a tax payer also possibly a salaried employee.
For a salaried employee, the first thing to do is to take a Term Insurance policy of adequate value. The earlier you take, the lower will be the premium.
Also, remember that every year, your salary will increase and with that the EPF contribution will also increase. Since the total limit of 80C normally remain same for a number of years, it would mean that the balance amount after EPF and insurance, on which benefit can be availed under 80C will continuously come down. So if you want to go for ELSS, do not go for any thing that requires a minimum monthly/annual commitment. Only opt for one that has the flexibility of investing different amounts in different years.
As you go up the ladder, your income and tax liability will increase and 1.50 Lakhs may not be enough. In most cases, as salary will be increasing, you will not really need the invested money for a long time and in such a case ELSS may end up to be a burden as the lump sum received on maturity will have to be reinvested properly. Considering these two factors, NPS with active choice may be a better option than ELSS, giving you the additional benefit of going upto 2.00 L instead of 1.50 L. Do remember that all mutual funds have administrative charges and NPS has the lowest Admin charges whereas ELSS charges are relatively higher.
Since you have opted for ELSS, I am assuming that you are willing tot take risks, so not considering PPF.

Missing
Deal Lieutenant
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@riser I would suggest to only go for direct plans through the website of various fund houses. Investing in direct plans through their websites is always better. You can register on the websites of the fund houses without much issues.

Also from next year on if your are willing to take the risk involved with stock market go the SIP way and start investing from the month of april in the ELSS funds you choose.

Missing
Deal Cadet
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  1. Do your research through any of the apps to find the right fund but I would suggest to invest directly through CAMS or KARVY (depending on the MF you choose) as these are the registrars. Avoid any MF app as you never know when they will shut down and then you have get in touch with your MF to get credentials to manage fund directly. Both CAMS and KARVY have a good simple interface to manage your investments and offer DIRECT plans.
  2. If investing in ELSS, be ready to give time of altleast 7 yrs to get a healthy return. Lock in is 3 years but stay invested.
  3. If you need to check ratings, returns of mutual funds use Value Research.
Missing
Deal Lieutenant
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MTRIP wrote:
  1. Do your research through any of the apps to find the right fund but I would suggest to invest directly through CAMS or KARVY (depending on the MF you choose) as these are the registrars. Avoid any MF app as you never know when they will shut down and then you have get in touch with your MF to get credentials to manage fund directly. Both CAMS and KARVY have a good simple interface to manage your investments and offer DIRECT plans.
  2. If investing in ELSS, be ready to give time of altleast 7 yrs to get a healthy return. Lock in is 3 years but stay invested.
  3. If you need to check ratings, returns of mutual funds use Value Research.

If one invests through CAMS or KARVY it would be regular plan right ? Regular plans have the commission fee added to it so isn’t it always better to go for direct plans through the MF house?

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rsai01 wrote:

If one invests through CAMS or KARVY it would be regular plan right ? Regular plans have the commission fee added to it so isn’t it always better to go for direct plans through the MF house?

No, CAMS and KARVY offer direct plans. They are the registered transfer agencies for the fund houses listed on their websites. Any investment even if directly done on the mutual fund websites goes through them.

If you have been investing directly with fund houses (even I do) then just sign up on CAMS or KARVY. You will see all your existing investments listed there.

Missing
Deal Cadet
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@panchabhut thanks for detail information, i got some info and i’m totally a newbie to this.

My temporarily purpose for current year 2019-2020 is save tax on my salary for 80c, i was thinking of either ELSS (One time and take risk) / 5 year FD of around 1L.

currently under my 80c declarations i have 50k( pf+life insurance) so for remaining 1L in order to save some tax i want invest 1 time in either ELSS funds(One time investment for this year only)/FD of 1L .

I will opt for NPS and term insurance plans to save more tax for 2020-2021 year as i will be falling under increased tax bucket for 2020-21 year.

so can you suggest based on my above requirements.
if ELSS can you share some info where to buy i do have hdfc/icici bank accounts can i directly invest from them or through zerodha/paytm/etmoney?

Thanks

Missing
Deal Cadet
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@MTRIP I want an ELSS tax saving fund, are they tax saving if so, investing through CAMS/KARVY have any additional / account creation charges? . I see PAYTM/Zerodha/Etmoney are free

Missing
Deal Newbie
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@riser Do not go for famous platforms like Paytm/Phonepe. Kuvera and Goalwise these platforms offer direct plans( less commission than regular plans, so more returns ). Kuvera and Goalwise offer more features like tax saving, exit-free redeeming, suggest good fund recommendations based on analysis and all. I prefer and recommend Goalwise, because these features are entirely free, whereas in Kuvera they charge for these features, but both platforms offer direct plans. Check out reddit/r/indianinvestments subreddit there users are much more active and more informed. You can PM for referral for these platforms. And check out freefincal blog it is one-stop solution for mutual funds and personal finance.

Missing
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riser wrote:

@MTRIP I want an ELSS tax saving fund, are they tax saving if so, investing through CAMS/KARVY have any additional / account creation charges? . I see PAYTM/Zerodha/Etmoney are free

No charges. Please use either CAMS/KARVY depending on the fund house you want to invest with or even direct mutual fund websites if you want to. Always ensure the plan you choose has Direct in it’s name.

Any ELSS scheme will do for showing as tax saving investment. It forms a part of 80C limit of 1.5L along with EPF, PPF, Tax FD etc.

Check here for list of ELSS funds and also see more info – https://www.valueresearchonline.com/funds/sav...x/

Missing
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riser wrote:

@panchabhut thanks for detail information, i got some info and i’m totally a newbie to this.

My temporarily purpose for current year 2019-2020 is save tax on my salary for 80c, i was thinking of either ELSS (One time and take risk) / 5 year FD of around 1L.

currently under my 80c declarations i have 50k( pf+life insurance) so for remaining 1L in order to save some tax i want invest 1 time in either ELSS funds(One time investment for this year only)/FD of 1L .

I will opt for NPS and term insurance plans to save more tax for 2020-2021 year as i will be falling under increased tax bucket for 2020-21 year.

so can you suggest based on my above requirements.
if ELSS can you share some info where to buy i do have hdfc/icici bank accounts can i directly invest from them or through zerodha/paytm/etmoney?

Thanks

I would still suggest that you go for term plan this year itself as your annual premium will increase with every year you delay, plus your risk cover will also be delayed.
again, if you plan to go for NPS next year then opt for it right now as the commission and admin charges of NPS is lowest among all mutual funds and in the long run, the cumulative effect can be significant. NPS investments are considered both for normal as well as special limits so you can invest only as much as will be required for tax saving purpose.
ELSS is not really beneficial unless held for at least 8-10 years. Always invest directly with the fund houses and not through any intermediary. CAMS/KARVY are registrars/depository but if you invest through them, then they also function as brokers only.

Babys%2001
Deal Subedar
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Everyone is advising for direct plan forgetting that everyone is not master in it. For someone newbi who has no knowledge of mf, going for regular plan (who understands his risk appetite & advise him periodically) might be better than direct plan.

For stalwarts ofcourse direct plan is better…

Missing
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panchabhut wrote:

I would still suggest that you go for term plan this year itself as your annual premium will increase with every year you delay, plus your risk cover will also be delayed.
again, if you plan to go for NPS next year then opt for it right now as the commission and admin charges of NPS is lowest among all mutual funds and in the long run, the cumulative effect can be significant. NPS investments are considered both for normal as well as special limits so you can invest only as much as will be required for tax saving purpose.
ELSS is not really beneficial unless held for at least 8-10 years. Always invest directly with the fund houses and not through any intermediary. CAMS/KARVY are registrars/depository but if you invest through them, then they also function as brokers only.

No, you get the option of purchasing the Direct plans. Any direct plan does not have commissions of any kind irrespective of the medium you choose to invest.

Coming to NPS, it is a different investment product altogether. It cannot be compared with MF’s. It has its own pros and cons.

P.S. – I invest in NPS as well.

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MTRIP wrote:

No, you get the option of purchasing the Direct plans. Any direct plan does not have commissions of any kind irrespective of the medium you choose to invest.

Coming to NPS, it is a different investment product altogether. It cannot be compared with MF’s. It has its own pros and cons.

P.S. – I invest in NPS as well.

NPS is a combination package of 3 Mutual Funds, Equity MF, Corporate Debt MF and Govt Debt MF, offered through 7 different MF houses, through a single window service, where the subscriber decides the MF house through which to invest and the ratio in which to invest among the 3 Funds.
So NPS can definitely be compared with Mutual Fund.

Missing
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panchabhut wrote:

NPS is a combination package of 3 Mutual Funds, Equity MF, Corporate Debt MF and Govt Debt MF, offered through 7 different MF houses, through a single window service, where the subscriber decides the MF house through which to invest and the ratio in which to invest among the 3 Funds.
So NPS can definitely be compared with Mutual Fund.

It is not three different “MFs”. They are schemes which are allowed to invest in equity and debt.

  • NPS locks in money till retirement. Not everyone wants that. ELSS gives better control. I can switch, redeem.
  • NPS is a product aimed at securing post retirement life. ELSS is not.
  • I don’t want to go with equity, debt mix and want to go full equity. NPS does not let me do that (max 75% with self allocation). MF’s let me go full 100% into equity. I already have EPF which is 100% debt.
  • One should exhaust 80C limit through ELSS etc., then look at corporate sector NPS for additional benefits.
Missing
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drjpatwa wrote:

Everyone is advising for direct plan forgetting that everyone is not master in it. For someone newbi who has no knowledge of mf, going for regular plan (who understands his risk appetite & advise him periodically) might be better than direct plan.

For stalwarts ofcourse direct plan is better…

Do you think you can easily find “someone” who would act in your interest? Unless you can find a good financial advisor (whom you can talk face to face) for a fee none of the other agents would work for your goals/interests. Also many of these platforms which offer MF products don’t do anything other than providing the convenience to buy and monitor mutual funds from different fund houses in a single platform. If one needs this single platform convenience they can do on CAMS/Karvy as was suggested above.

Also how long would one want to be a ‘newbie’? At some point they have to learn to manage their own finances. In India it is tough to rely on any advisory services due to the lack of regulations and enforcing them.

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MTRIP wrote:

It is not three different “MFs”. They are schemes which are allowed to invest in equity and debt.

  • NPS locks in money till retirement. Not everyone wants that. ELSS gives better control. I can switch, redeem.
  • NPS is a product aimed at securing post retirement life. ELSS is not.
  • I don’t want to go with equity, debt mix and want to go full equity. NPS does not let me do that (max 75% with self allocation). MF’s let me go full 100% into equity. I already have EPF which is 100% debt.
  • One should exhaust 80C limit through ELSS etc., then look at corporate sector NPS for additional benefits.

The three components are not “schemes”. They function as independent individual MF with individual NAV. The subscriber has the option to switch between Fund Houses as will as between Funds. Yes, the lock in period for withdrawal (no lockin for switch) is applicable. But as indicated in my earlier post, under normal employment scenario, a person rarely require the funds invested as “tax savings”.
But that does not change the basic character of NPS which is a retirement product based on a combination of accumulation through Mutual Fund and pension through Annuity.
Again as already indicated in original post, the limit of 1.5 L is across multiple items including EPF and insurance and ELSS is just another product in that basket. However, NPS unique as both as part of that basket and also in a separate basket with its own 50K limit. Further, since NPS has a statutory authority in the form of PFRDA, it is a little more secure in terms of functioning than normal MF.
Also, the original reply was given to someone else who asked for suggestion, to help him make a conscious choice. Your individual requirement can definitely be otherwise.

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rsai01 wrote:

Do you think you can easily find “someone” who would act in your interest? Unless you can find a good financial advisor (whom you can talk face to face) for a fee none of the other agents would work for your goals/interests. Also many of these platforms which offer MF products don’t do anything other than providing the convenience to buy and monitor mutual funds from different fund houses in a single platform. If one needs this single platform convenience they can do on CAMS/Karvy as was suggested above.

Also how long would one want to be a ‘newbie’? At some point they have to learn to manage their own finances. In India it is tough to rely on any advisory services due to the lack of regulations and enforcing them.

To add, distributors often push funds which give them the max commissions. Some of the highest selling / most pushed mutual funds have given less than FD returns for last few years.

Missing
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panchabhut wrote:

The three components are not “schemes”. They function as independent individual MF with individual NAV. The subscriber has the option to switch between Fund Houses as will as between Funds. Yes, the lock in period is applicable. But as indicated in my earlier post, under normal employment scenario, a person rarely require the funds invested as “tax savings”.
But that does not change the basic character of NPS which is a retirement product based on a combination of accumulation through Mutual Fund and pension through Annuity.
Again as already indicated in original post, the limit of 1.5 L is across multiple items including EPF and insurance and ELSS is just another product in that basket. However, NPS unique as both as part of that basket and also in a separate basket with its own 50K limit.
Also, the original reply was given to someone else who asked for suggestion, to help him make a conscious choice. Your individual requirement can definitely be otherwise.

Agreed. My only point is MF’s and NPS cannot be compared.

MF’s will tend to have a higher return than NPS when properly managed. And mandatory annuity purchase in NPS is a negative for me considering the current landscape of annuity schemes in India.

The term MF cannot be tagged to NPS. SEBI regulates mutual funds. NPS has pension fund providers and asset choices and is regulated by PFRDA. The terminology matters and there is a reason why they are named so.

Missing
Deal Newbie
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This is very informative.
I have a few queries wrt taxes, and insurance.

My LIC agent fooled me into taking a endowment policy which has a premium of 1.5lakhs.
I have already paid it for this year as i wasnt fully aware of term insurance.
Is there anyway I can get my money back and terminate this policy and move to term insurance?
Wrt. Tax saving. What’s the best way to save taxes when your annual base is 9lakhs

Missing
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MTRIP wrote:

Agreed. My only point is MF’s and NPS cannot be compared.

MF’s will tend to have a higher return than NPS when properly managed. And mandatory annuity purchase in NPS is a negative for me considering the current landscape of annuity schemes in India.

The term MF cannot be tagged to NPS. SEBI regulates mutual funds. NPS has pension fund providers and asset choices. The terminology matters and there is a reason why they are named so.

Functionally, NPS is also MF. That nature can not be changed. only for regulatory purposes, the NPS MFs are under PFRDA and not SEBI. NPS has Fund Managers and Pension providers. The Fund Managers are purely MF Houses and function for investment. The Pension providers come in after exit from NPS to provide the annuity. “Asset allocation” is only the procedure to divide the investment into the different MFs.
And based on my personal experience, certain NPS MFs performed better than most MFs including ELSS.
Also, 60% of NPS value can be withdrawn and only 40% is required to be converted to annuity and not 100% is to be converted.

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panchabhut wrote:

Functionally, NPS is also MF. That nature can not be changed. only for regulatory purposes, the NPS MFs are under PFRDA and not SEBI. NPS has Fund Managers and Pension providers. The Fund Managers are purely MF Houses and function for investment. The Pension providers come in after exit from NPS to provide the annuity. “Asset allocation” is only the procedure to divide the investment into the different MFs.
And based on my personal experience, certain NPS MFs performed better than most MFs including ELSS.
Also, 60% of NPS value can be withdrawn and only 40% is required to be converted to annuity and not 100% is to be converted.

Functionally same products cannot be treated at par with each other. Problem comes when we mix the intended use of the investment products on our own. Like calling insurance as investment.

A good portfolio needs to have both in the right allocation mix. If we treat both as same, it will not be a good investment decision.

Also, that mandatory 40% will not be a small amount when the actual time comes to exit from NPS. As I have said before, I do invest in NPS and would love to see it evolve as a more flexible and simplified product.

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sj260498685 wrote:

This is very informative.
I have a few queries wrt taxes, and insurance.

My LIC agent fooled me into taking a endowment policy which has a premium of 1.5lakhs.
I have already paid it for this year as i wasnt fully aware of term insurance.
Is there anyway I can get my money back and terminate this policy and move to term insurance?
Wrt. Tax saving. What’s the best way to save taxes when your annual base is 9lakhs

Any form of life insurance other than term insurance only benefits the insurance company and the agent, but definitely not the subscriber. make sure you do not deal with that agent again.
All insurance policies has a look-in period during which you can get full refund. but if that is over, you can only get surrender value which will be less than what you have paid. still, in the long run, that loss would be compensated if you take a term policy and then invest the remaining amount in proper pure investment products.
tax planning depends upon individual situations and can not be generalized. however, as thumb rule, first consider the mandatory EPF contributions and life insurance. after than consider other investment products, depending upon your ability to take risk. you can consider ppf, elss or nps. if you are married and have a girl child, consider sukanya samriddhi instead of ppf. remember that for other than nps, the limit on which tax benefit is calculated is 1.5 L whereas nps can come both within that 1.5 L and also has a special additional limit of 50k.
if your employer does not provide medical or if you have senior citizens to take care of, go for Mediclaim policies for which separate tax benefits are available.

Missing
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panchabhut wrote:

Any form of life insurance other than term insurance only benefits the insurance company and the agent, but definitely not the subscriber. make sure you do not deal with that agent again.
All insurance policies has a look-in period during which you can get full refund. but if that is over, you can only get surrender value which will be less than what you have paid. still, in the long run, that loss would be compensated if you take a term policy and then invest the remaining amount in proper pure investment products.
tax planning depends upon individual situations and can not be generalized. however, as thumb rule, first consider the mandatory EPF contributions and life insurance. after than consider other investment products, depending upon your ability to take risk. you can consider ppf, elss or nps. if you are married and have a girl child, consider sukanya samriddhi instead of ppf. remember that for other than nps, the limit on which tax benefit is calculated is 1.5 L whereas nps can come both within that 1.5 L and also has a special additional limit of 50k.
if your employer does not provide medical or if you have senior citizens to take care of, go for Mediclaim policies for which separate tax benefits are available.

Thanks a lot for this!
So out of 9, i can get 1.5 from 80C (since the insurance itself is 1.5l this year)
and then additional 50k if i get into NPS

So remaining balance is 7lakhs
Anyway to get this below 5lakhs so that i dont have to pay any tax at all?

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MTRIP wrote:

Functionally same products cannot be treated at par with each other. Problem comes when we mix the intended use of the investment products on our own. Like calling insurance as investment.

A good portfolio needs to have both in the right allocation mix. If we treat both as same, it will not be a good investment decision.

Also, that mandatory 40% will not be a small amount when the actual time comes to exit from NPS. As I have said before, I do invest in NPS and would love to see it evolve as a more flexible and simplified product.

the intended use of NPS MF is fund accumulation. same as normal MF.
also, the additional limit of 50K makes it the first investment choice where someone has money to invest beyond the normal 1.5L basket.
For someone in 20% bracket, 50K gives direct tax savings of 10.4K and for someone in 30% bracket, it gives 15.6K. So the return investment even with 30 year horizon becomes more than 20% p.a for someone in 30% tax bracket.

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sj260498685 wrote:

Thanks a lot for this!
So out of 9, i can get 1.5 from 80C (since the insurance itself is 1.5l this year)
and then additional 50k if i get into NPS

So remaining balance is 7lakhs
Anyway to get this below 5lakhs so that i dont have to pay any tax at all?

as already indicated, Mediclaim premiums are separate from this 2 L under sec 80D. if you have senior citizen parents, you can claim deductions upto 75K.
but if your total income is 9L then your taxable income will be a little less. also, your tax will be calculated at marginal rate so even for 7L, your total tax will be about 55K.
you can further reduce the tax impact if you go for a housing loan.

Missing