Tax planning tips for mutual fund investments

Posted On Friday, Jan 31, 2014

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With the tax planning season about to end and a deadline to file your taxes fast approaching, some of you must be in panic mode to make investments to minimize your tax liabilities. However, in a rush to ensure that you meet the deadline and save tax, you may end up investing in the wrong instruments and paying more tax and charges in the long run. Remember a good chunk of your hard earned money could be eaten up by the charges.

Here are a few ways which can help you to minimize your tax liabilities:

ELSS

Tax saving mutual funds, also known as Equity Linked Savings Schemes (ELSS) offer the investor twin benefits of tax saving and the potential for wealth creation by investing in equities for the long term. All ELSS schemes have a 3 year lock in period, which means that your money is effectively locked away for 3 years, a decent time frame to earn returns from the market. Thus ELSS schemes offer you the convenience of saving taxes along with the advantage of investing in equities, rather than just an equity scheme which only gives returns without the tax saving benefit.

ELSS = Tax Benefits + Long Term Capital Appreciation


What are the other benefits of investing in ELSS?

Your Gross Total income is reduced by the amount of investment made subject to a maximum investment of Rs. 100,000* (along with other prescribed investments) under section 80C of the Income Tax Act, 1961.
Dividends declared by the scheme are tax-free.
An ELSS scheme has a three-year lock-in period, which allows the fund manager remain fully invested in equities, and maintain lower cash levels as there are no redemption pressures during this period, which in turn gives the fund manager the flexibility to invest for the long term.
All capital gains will be long term and therefore tax-free.



*In view of individual nature of tax consequences, please consult with your financial advisor/ tax consultant.

At Quantum, we understand the need to preserve your hard earned money, that`s why our tax saving fund could be the answer to your tax saving needs.

The Quantum Tax Saving Fund* (QTSF) will help you save tax and help build a corpus as investments in Quantum Tax Saving Fund earn you tax exemption from your gross total income along with other prescribed investments of up to Rs. 1,00,000 under section 80C of the Income Tax Act, 1961. Quantum Tax Saving Fund is an open ended Equity Linked Saving Scheme, where your money gets locked in for a period of 3 years. Units issued under the Quantum Tax Saving Fund will not be redeemed until the expiry of 3 years from the date of their allotment. This helps you to maintain your investments even if market movements might tempt you to redeem.

Here is a look at the past performance of the Quantum Tax Saving Fund. It is being managed by Mr. Atul Kumar – Head - Equity Funds. He also manages Quantum Long Term Equity Fund (QLTEF) ^.

Performance as on December 31, 2013
Quantum Tax Saving Fund

December 31, 2012 to December 31, 2013December 30, 2011 to December 31, 2012December 31, 2010 to December 30, 2011Since Inception**

Absolute Returns (%)Absolute Returns (%)Absolute Returns (%)CAGR Returns (%)Current value of standard investment of Rs.10,000/-(INR)
Quantum Tax Saving Fund (Growth Option)8.89%31.36%-20.92%21.92%27,080
Scheme Benchmark
(S&P BSE 30 TRI)
10.70%27.99%-23.64%18.56%23,532
Additional Benchmark
(S&P BSE Sensex)
8.98%25.70%-24.64%16.83%21,855


#Quantitative data as on 31 December, 2013         Standard Deviation: 15.85%         Beta: 0.65         Sharpe Ratio: 1.53


Past Performance may or may not be sustained in the future and may not necessarily provide a basis for comparison with other investments.



(Please refer below for performance of Quantum Long Term Equity Fund)

Hence, if you are looking for an option to cut down your taxes and earn returns, you can consider the Quantum Tax Savings Fund as an investment option to enjoy the double benefits of tax saving and investing your hard earned money to help you achieve your financial goals.

RGESS (Rajiv Gandhi Equity Savings Scheme)

The RGESS allows one time deduction for Income Tax purpose to new retail investors having gross total income up to Rs 12 lakh for the financial year in which the investment is made, an additional tax saving under the newly introduced Section 80 CCG. Hence, you can claim a deduction of 50 per cent of the invested amount. However, the maximum investment amount is Rs 50,000, so the maximum deduction availed of can be Rs 25,000. This deduction is over and above the Rs 1 lakh limit available under Section 80C. Know more about Rajiv Gandhi Equity Savings Scheme (RGESS).

Tax saving is not complex. There are many alternatives and options available for tax saving like PPF Accounts, NSCs, KVPs, tax saving FDs etc., but you have to choose the right investment avenues. You have to understand the available options thoroughly and choose the ones that match your requirements. Remember, you should consult your financial advisor/ tax consultant for guidance before you decide to take the plunge and make any financial investments.



^Performance of Quantum Long term Equity Fund

Performance as on December 31, 2013
Quantum Long Term Equity Fund

December 31, 2012 to December 31, 2013December 30, 2011 to December 31, 2012December 31, 2010 to December 30, 2011Since Inception**

Absolute Returns (%)Absolute Returns (%)Absolute Returns (%)CAGR Returns (%)Current value of standard investment of Rs.10,000/-(INR)
Quantum Long Term Equity Fund (Growth Option)9.16%31.21%-20.16%13.77%27,400
Scheme Benchmark
(S&P BSE 30 TRI)
10.70%27.99%-23.64%10.58%21,936
Additional Benchmark
(S&P BSE Sensex)
8.98%25.70%-24.64%8.99%19,596

#Quantitative data as on 31 December, 2013         Standard Deviation: 20.25%         Beta: 0.70         Sharpe Ratio: 0.74

Past Performance may or may not be sustained in the future and may not necessarily provide a basis for comparison with other investments.

 (BROWN) - High risk:  Quantum Long Term Equity Fund
This product is suitable for investors who are seeking to achieve long term capital appreciation by investing in equity and equity related securities of companies in S&P BSE 200 index. Investors should consult their financial advisers if in doubt whether the product is suitable for them.

 (BROWN) - High risk:  Quantum Tax Saving Fund
This product is suitable for investors who are seeking to achieve long term capital appreciation by investing in equity and equity related securities of companies in S&P BSE 200 index and to save tax u/s 80C of the Income Tax Act. Investments in this product are subject to lock in period of 3 years. Investors should consult their financial advisers if in doubt whether the product is suitable for them.

Risk may be represented as:


 (BLUE) investors understand that their principal will be at low risk.

 (YELLOW) investors understand that their principal will be at medium risk.

 (BROWN) investors understand that their principal will be at high risk.



Disclaimer, Statutory Details & Risk Factors:
The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors.

Above article is authored by Quantum.

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