| Prior to opting for a tax saving mutual fund, it is | | | | of a fund in the market. Good returns on Mutual |
| important that the investor consider certain | | | | Fund NAV’s (net asset values) can be |
| important factors such as performance, | | | | achieved by pursuing an aggressive investment |
| investment style, expenses(entry load & exit | | | | strategy. Investing in tax-saving funds that have |
| load) and other critical parameters. This is done to | | | | rewarded investors more per unit of risk taken |
| ensure that the investor will start treating the | | | | by them is suggested. Managing other costs and |
| fund at par with regular diversified equity fund | | | | expenses like a fund manager’s salary, |
| which could lead to improper asset allocation. | | | | marketing/advertising costs, administering costs is |
| Despite of the current financial crisis that the | | | | to be maintained. The cost of investing in a |
| market is going through, investors are advised to | | | | mutual fund is measured by the expense ratio. |
| invest in funds where the underlying assets are | | | | The ratio represents the percentage of the fund's |
| mainly equity funds. If you invest in a rising | | | | assets that go purely towards the cost of running |
| market, the more risk you are willing to take will | | | | the fund. |
| get you more returns. It means if you have more | | | | According to SEBI (securities & exchange |
| equity funds in your investment portfolio or if you | | | | board India), taxes that are implied on your annual |
| invest in more aggressive Mutual Fund, you are | | | | salary will be exempted if you invest in tax saving |
| bound to make money compared to a moderate | | | | mutual funds. Moreover the returns that you earn |
| investor. | | | | aren’t taxable. Tax Saving Mutual Funds in |
| The prime criteria that an investor will have to | | | | India generally maintain the following rules while |
| consider prior to opting for a tax saving mutual | | | | granting tax benefits on their schemes: 1) Any |
| fund will be the performance of that particular | | | | special tax benefits for the mutual fund company |
| fund in the recent past. Performance is critical | | | | and its shareholders (only section numbers of the |
| parameter, through which a fund must re-deem | | | | Income Tax Act and their substance should be |
| itself before it could be considered to for | | | | mentioned, without reproducing the text of the |
| investing. Practically all equity linked investments | | | | sections). 2) Tax benefits are to be declared |
| are considered with a 3-5 year period investment | | | | under the column of "objects of the offering". |
| horizon. While evaluating the performance of a | | | | Some excellent tax saving mutual funds in India |
| fund importance on premium on consistency | | | | are: a) SBI Mutual Funds, b) Prudential ICICI, c) |
| across market phases is to be kept. Opting for | | | | Franklin Templeton Mutual Fund India, d) Standard |
| tax-saving funds that have put in a reasonable | | | | Chartered Mutual fund India, & e) Bajaj |
| show during the upturns and downturns of the | | | | Capital. As stock markets turn more volatile, and |
| market consistently during the last 5 years | | | | the choice of funds increases, it will become |
| (approximately) is a good idea. Volatility and return | | | | pertinent to make the right investment decision to |
| along with proper investment planning is another | | | | start with. Going forward, & opting to invest |
| important aspect of a mutual fund. Usually it is a | | | | in a fund that not only provides you tax relief but |
| fund manager, who determines the performance | | | | also good returns is advisable. |