Go for debt funds over fixed deposits | Value Research Fixed deposits are not very tax efficient as the interest is added to your income and taxed as per the applicable tax slab
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Go for debt funds over fixed deposits

Fixed deposits are not very tax efficient as the interest is added to your income and taxed as per the applicable tax slab

I am 35. I work in the IT sector, draw a salary of ₹65,000 per month. I have ₹17 lakh in fixed deposit in two banks. Since I come under 20 per cent income tax slab, I had to cough up around ₹25,000 additional amount in 2014-15 FY.
My other yearly savings are:
₹40,000 in Sukanya Samruddhi Yojana (started this year)
₹19,000 in money back plan (LIC)
₹85,000 in ULIP-SBI Smart performer-5 year term. Advise whether I should continue with this.
Please suggest a best way to save tax. I am new to Mutual Funds. Wondering which is the best ELSS these days. I want to invest for a long term.

- Hrushi

Fixed deposits are not very tax efficient as the interest is added to your income and taxed as per the applicable tax slab. Consider shifting the money to debt mutual fund schemes for better tax-adjusted returns.

We only recommend term insurance for the purpose of buying life cover. They are the cheapest and the best way to buy a life insurance cover. We typically advise investors to stop continuing with bad investments. The advice applies to your insurance policies.

Money back plans and Unit Linked Insurance Plans are not the best way to buy insurance cover or build long-term wealth. They are insurance polices with investment component in them. They offer very small life insurance cover and they also fail as investment vehicles because a part of the premium goes towards buying life insurance cover and administration of the policy and only the rest is invested.

Equity Linked Savings Schemes (ELSS or tax planning schemes) are the best way to save taxes. These schemes have a comparatively lower lock-in period of three years and they also have the potential to offer superior returns over a long period as they invest mostly in stocks. We have recently recommended these plans: Axis Long Term Equity, BNP Paribas Long term Equity, Franklin India Taxshield, HDFC LT Advantage, ICICI Prudential Long Term Equity Fund, Quantum Tax Saving and Religare Invesco Tax Plan.


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