The period from January to March is the time when the sales of insurance companies rise and Equity Linked Saving Schemes (ELSS) get the most inflows. The reason being, it is the end of the financial year and everyone is scrambling to fulfil their obligations under Section 80C.
This year, we have observed that a number of tax-saving funds are throwing in new bait — an insurance cover. At present, there are five tax saving funds doing so: HSBC Tax Saver Equity Fund, DWS-Tax Saving Fund, Birla Sun Life Tax Relief '96 Fund, Reliance Tax Saver Fund and Baroda Pioneer ELSS 96. DWS Tax Saving Fund and Reliance Tax Saver provide a life insurance cover, Birla Sun Life Tax Relief Fund and HSBC Tax Saver Fund provide a critical illness cover and Baroda Pioneer Equity Linked Saving Scheme provides an accidental death insurance cover.
Baroda Pioneer ELSS and HSBC Tax Saver Equity Fund will recover the premium charges under their annual recurring expenses. DWS Tax Saving Fund, Birla Sun Life Tax Relief 96 and Reliance Tax Saver Fund are paying out of their own pocket.
Investors in Birla Sun Life Tax Relief '96 and DWS — Tax Saving Fund will need to provide a medical certificate or a good health declaration.
But don't opt for a fund just because of the insurance cover. Take a good look at past performance too. And on that front, none of them seem to be all that impressive.
None of the schemes have a five – or four-star rating and two are still unrated. We looked at the three-year return of the funds which existed for that long. Reliance Tax Saver (-6.37%), Birla Sun Life Tax Relief 96 (-5.79%) and Baroda Pioneer ELSS (-8.95%) all delivered below category average returns (-4.83 per cent) (as on January 31, 2009).