I am looking for investments that can help me save tax with the minimum investment tenure and which can also get some return on it. So I wish to know about the options available for me to invest. Could you give some recommendation / suggestions on tax saving instruments?
-Shailendra Koshle
Though there are different tax-saving instruments available, you can choose one depending on the time period for which you intend to remain invested and also on the basis of your return expectations.
Equity Linked Savings Schemes (ELSS) have the shortest lock-in period of three years. But a three year investment is not recommendable for any equity investment. These funds can also generate better returns than other tax saving instruments in the long run but three year holding can also prove disappointing. You can choose from well-rated ELSS funds like Magnum Taxgain, Principal Tax Savings, Sundaram BNP Paribas Tax Saver etc.
The relatively less riskier option are the mutual funds’ pension plans. The two existing funds- Templeton India Pension and UTI Retirement Benefit Pension are hybrid debt oriented funds. They are less risky than ELSS funds due to limited exposure to equity and hence the returns are also not as high as in ELSS.
Apart from mutual funds, there are other tax saving instruments like bank fixed deposits, post office time deposits, Senior citizen savings scheme, NSC, public provident fund etc, though the minimum holding period is higher in this case. Also one must bear in mind that the returns would not be very impressive.
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This article was originally published on November 18, 2008.
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