A STUDY OF TAX SAVING SCHEMES IN MUTUAL FUNDS IN

INDIA

Presented by-

AMAR SHAKTI KUMAR

Mutual fund• A mutual fund is an investment vehicle that is made

up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.

Types of mutual fundsMutual funds

Open-endedDebtgiftFlexible bond

Long term fond

Short term bond

Ultra Short term bond

Money market/Liqu

id

Equity

Sectoral

Index

Tax Saver or ELLS

Mid cap/ Small Cap

Diversified

Balanced

Mid or Hybrid

Closed-endedCapital

protection

Fixed maturity Plan

Interval fund

Some Mutual Fund Industries

• HDFC Mutual Fund• ICICI Prudential mutual fund• IDFC Mutual Funds• DSP Black Rock Mutual Fund• Motilal Oswal Mutual Fund• Franklin Templeton Mutual Fund• Fidelity Mutual fund• Birla Sunlife Mutual Fund

What are Tax Saving Mutual FundsTax saving mutual funds are just like any other mutual funds with the added bonus that investments made in them are eligible for tax benefits under section 80C.

How do Tax Saving Mutual Funds work

When an investor invests their money in mutual funds, the funds are added to the pool. The funds are then invested in the equity markets in such a way that even if one investment incurs losses, the other investment manage to mitigate the loss.

Objectives of the study

• To find out various tax saving schemes in mutual funds in India• To analyze the performance of various mutual

funds schemes and suggests the best one.• To assemble in descending order by high to low tax

saving mutual funds schemes.

Need of the study

• Many mutual fund scheme available in market, which one is for tax saving or which is for investment and which one is both that is difficult to understand. Which mutual fund is public and which one is private? So everyone who pays tax to Government of India should know about this.

Limitations of the Study

• All tax saving schemes of mutual fund included which is currently available in market

Research methodology

• Sources of data:• The study will be based on secondary data. All data

will be collected from the internet.

Review of literatureSr. No

.

Name Year Description

1 ICICI prudential life insurance co ltd.

2014 Study of tax saving schemes in mutual funds ICICI prudential life insurance co ltd.

By this study we conclude that the minimum Tax saving of and individual is Rs 1000 and the maximum Tax saving is 30000. An Individual can take an advantage of this funds and schemes to save tax by investing maximum of Rs 1, 00,000.

2 Joy Das & Subir Kumar Sen

2014 A Study on the Performance of Selected Tax Saving Mutual Fund Schemes During 2007-2012

A wide variety of mutual funds schemes have also been developed by the fund-managers to attract the investors. Tax-saving mutual funds are one of this types which attracts the customers where the tax-payer gets a deduction under section 80C of Income Tax Act.

3 Surbhi Singhal 2014

Tax benefits from investment in mutual funds

Under Section 80C of the Act, an amount equal to the investment in Equity Linked Savings Scheme is deductible from the taxable income of an assessee subject to a maximum limit of Rs. 1,00,000/- (such limit is inclusive of other deductions offered under Section 80C, 80CCC and 80CCD).

4 Parsha 2014 Best Tax saving mutual funds schemes in India – Top ELSS schemes

A mutual fund is one of the best venues to get exposure in the equity markets. It is an ideal route for people who do not have the knowledge or discipline to pick quality stocks and stay the course. Tax savings mutual funds provide you the double advantage of saving taxes and enhanced return.

5 Mr. Lalit Nambiar

2015 UTI Equity Tax Savings Plan The funds collected under the scheme

shall be invested in equities, fully convertible debentures/ bonds and warrants of companies. Investment may also be made in issues of partly convertible debentures/bonds including those issued on rights basis subject to the condition that, as far as possible, the non-convertible portion of the debentures/bonds so acquiredor subscribed shall be disinvested within a period of twelve months from their acquisition.

Current market situation of Tax Saving Funds

Source: moneycontrol.comhttp://www.moneycontrol.com/mutual-funds/performance-tracker/returns/elss.html

Note : Returns have been calculated based on NAV's as on May 16, 2016 & Index values as on May 16, 2016

effective from quarter ending December 31, 2010

Income Tax Deductions and Exemptions (2016)

Income Tax Section Gross Annual Salary How Much Tax Can You Save?

Sec. 80C Across all income slabs Up to Rs. 46,350/- saved on investment of Rs. 1,50,000/-

TAX ADVANTAGEParticulars Without ELSS/ 80C Tax

Saving Investment With ELSS / 80C Tax Saving Investment

Gross Total Income Rs.5,00,000 Rs.5,00,000

Exemption Under Section 80C Nil Rs.1,50,000(1,50,000 investment in

ELLS)

Total Income Rs.5,00,000 Rs.3,50,000

Income Tax Rate (2015-16) 10% 10%

Tax on Total Income Rs.50,000 Rs.35000

Income saved on investment Nil Rs.1,50,000

Tax Saved on Investment Nil 15,000

Tax saving mutual funds ELSS Vs PPF, NSC and FD

particular Mutual Funds Public Provident Fund

National Savings Certificates

Fixed Deposits

Minimum investment

Rs.500.00 Rs.500.00 Rs.100.00 Rs.100.00

Maximum investment

Unlimited Rs. 1.5 lakhs per year

Unlimited Determined by bank

Returns Not guaranteed Guaranteed Guaranteed GuaranteedROI Determined by the

market situation8.70% per

annum (approximate)

8.50% per annum

(approximate)

Up to 9% per annum

Income tax benefit

Yes Yes Yes Yes

Taxation for interest

Dividend and capital gain tax

free

Tax free Tax free Taxable

Tax on returns None for long term capital gains

None Yes Yes

Amount eligible fordeduction under Section 80C

1,50,000 1,50,000 1,50,000 1,50,000

Safety Risky Safe Safe SafeLock in period 3 years 15 years 6 years 5 yearsPremature withdrawal

Not allowed Partial withdrawal after

6 years

Not allowed Allowed with penalty

Findings

• I found various tax saving mutual funds and its performance like market price, fees, rate.• I found that all tax saving MF invest their amount in

equity market.• I have included a table which completes my third

objective which was to assemble in descending order by high to low tax saving mutual funds schemes.• *(it changes day by day in stock market)

SuggestionWhen you invest in an ELSS fund. You must look at

the long term performance of the fund before putting your money in it. Also remember to look at the fund details like the fund manager's investment approach, portfolio of the fund, the expense ratio of the fund and how volatile the fund has been in the past.

Conclusion• You can claim up to Rs. 1.5 lakh of your ELSS

investment as a deduction (46350) from your gross total Sec 80C of the Income Tax Act.

THANK YOU