Prajna Capital

BANK FDs & NSCs Tax Saving 2016

Posted: 07 Feb 2016 05:34 AM PST

Though bank fixed deposits and NSCs are ultra-safe and offer assured re turns, there is a heavy price to be paid for this safety and surety of returns. The interest earned on the deposits is fully taxable, so the post-tax returns are not very lucrative (see table). Those in the highest 30% tax bracket (taxable income of over `10 lakh a year) should not invest in these deposits.They are best suited to taxpayers in the 10% bracket (taxable income of less than `5 lakh a year) or senior citizens who have already exhausted the `15 lakh overall investment limit in the Senior Citizens' Saving Scheme.

Don't let the high interest rates offered on the 5-year and 10-year NSCs mislead you.Since the interest is fully taxable, the post-tax yield is far lower. In the 30% tax bracket, it is close to 6% (see table). The tax-free PPF is a far better option than these instruments.

The positive feature of bank deposits and NSCs is that they are straightforward instruments and don't require a multi-year commitment. If you don't have time to study the fine print of other options and the deadline is nearing, invest in fixed deposits.

They are also widely available. Just walk into any bank branch or Post Office branch and invest. Of course, you will have to comply with the KYC norms while doing so.

One ticklish area is the TDS rule. If the interest income exceeds `10,000 in a year, the bank will deduct TDS. Some investors try to avoid the TDS by splitting their investments across 2-3 banks. This is not a good idea because one has to pay tax on this income. In fact, the TDS is only 10% on the interest earned. If the taxpayer is in the higher income slab, he will have to pay more tax.

On the other hand, some retired taxpayers are subjected to TDS even though they are not liable to tax. Since their total income from interest exceeds the threshold, they have to first pay tax and then claim it back after they file returns. This problem needs to be fixed.

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Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds
Top 10 Tax Saving Mutual Funds to invest in India for 2016
Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund
2. Axis Tax Saver Fund
3. Franklin India TaxShield
4. ICICI Prudential Long Term Equity Fund
5. IDFC Tax Advantage (ELSS) Fund
6. Birla Sun Life Tax Relief 96
7. DSP BlackRock Tax Saver Fund
8. Reliance Tax Saver (ELSS) Fund
9. Religare Tax Plan
10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online
Invest Online
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For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
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Reliance Top 200 Fund

Posted: 06 Feb 2016 06:43 AM PST

Reliance Top 200 Fund - Invest Online

Picture courtesy - PIXABAY

Reliance Top 200 Fund delivered very strong Systematic Investment Plan returns over the last 5 years. If you started a monthly SIP of र 5,000 in the Reliance Top 200 Fund (Growth Option) five years back in November 2010, you would have made a profit of nearly र 170,000 on an cumulative investment of र 300,000 only, implying an SIP return of close 18% on a compounded annual basis. Morningstar has a 4 star rating for this fund. The chart below shows the trailing annualized returns of the fund versus the large cap equity mutual funds category.

Source: Advisorkhoj Research

We can see that fund has outperformed the large cap funds category across 1 year, 3 year and 5 year investment horizons.

Fund Overview

Reliance Top 200 Fund was launched in August 2007 and has nearly र 2,000 crores of Assets under Management (as of end of October 2015). The expense ratio of the fund is 2.48%. The fund has delivered strong outperformance since its inception. Rolling returns is the best measure of a fund's performance in terms of consistency. Trailing returns have a recency bias and point to point returns are specific to the period in consideration. Rolling returns, on the other hand, measures the fund's absolute and relative performance the timescale in question, without bias. The chart below shows the 3 year rolling returns of the Reliance Top 200 Fund since its inception. Rolling returns are the absolute returns of the scheme taken for a specified period on every day/week/month and taken till the last day of the duration. We have chosen 3 years as the rolling returns time period because it is always recommended that long term investors should hold equity funds for at least 3 years. In this chart we are showing returns on every day during the specified period and comparing it with the benchmark. The orange line shows the 3 year rolling returns of the Reliance Top 200 Fund (Growth Option) and the black line shows the 3 year rolling returns of the benchmark BSE 200 index. We can see that the fund has been to beat the benchmark very consistently from 2009 onwards. The fund has given more than 75% absolute 3 year returns (more than 20% on an annualized basis) since the middle of 2011.

Source: Advisorkhoj Research

The fund is managed by veteran fund managers Shailesh Raj Bhan and Ashwani Kumar.

Portfolio Construction

The Reliance Top 200 Fund has a bias for the large cap, growth oriented stocks. Large cap stocks comprise over 80% of the fund portfolio. In terms of sectoral composition, the fund also has a strong bias for cyclical sectors. Around 80% of the portfolio stocks in terms of value belong to cyclical sectors while about 20% of the portfolio is accounted for by defensive sectors like IT, Pharmaceuticals and FMCG. The fund is well diversified from the perspective of company concentration with the top 5 companies accounting for only 27% of the portfolio value.

Risk and Return

From a volatility perspective, the standard deviation of monthly returns of the Reliance Top 200 fund is slightly on the higher side relative to the large cap funds as a category. However, in terms of risk adjusted returns, as measured by Sharpe Ratio, it has clearly outperformed the large cap funds category.

The chart below shows the returns of र 5,000 invested monthly through Systematic Investment plan (SIP) route in the Reliance Top 200 Fund (growth option) since inception. The SIP date has been assumed to be the first working day of the month.

The chart above shows that a monthly SIP of र 5,000, started since the inception of Reliance Top 200 Fund (growth option) would have grown to over र 9.2 lacs by November 20 2015, while the investor would have invested in total less than र 5 lacs.

Conclusion

Reliance Top 200 Fund has completed over 8 years of strong performance. This fund is suitable for investors looking for high capital appreciation over a long time horizon, for long term financial objectives, such as retirement planning, children's education etc. Investors can consider investing in the scheme through the systematic investment plan (SIP) or lump sum mode with a long time horizon. Investors should consult with their financial advisors, if Reliance Top 200 Fund is suitable for their investment portfolio.

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Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds
Top 10 Tax Saving Mutual Funds to invest in India for 2016
Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund
2. Axis Tax Saver Fund
3. Franklin India TaxShield
4. ICICI Prudential Long Term Equity Fund
5. IDFC Tax Advantage (ELSS) Fund
6. Birla Sun Life Tax Relief 96
7. DSP BlackRock Tax Saver Fund
8. Reliance Tax Saver (ELSS) Fund
9. Religare Tax Plan
10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online
Invest Online
Download Application Forms
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
---------------------------------------------
Leave your comment with mail ID and we will answer them
OR
You can write to us at
PrajnaCapital [at] Gmail [dot] Com
OR
Leave a missed Call on 94 8300 8300

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