The document discusses various tax-saving investment options in India, ranking them based on factors like returns, safety, flexibility, liquidity, costs, transparency and taxability. Equity-linked savings schemes (ELSS) are ranked highest as they offer high returns but also carry equity risk. Ulips are ranked second due to flexibility in switching funds. National Pension System (NPS) is third thanks to changes improving returns from equity funds. Public Provident Fund (PPF) and Senior Citizens' Savings Scheme also make the top rankings. Traditional insurance plans are ranked lowest due to very low returns and high charges. The article provides analysis of pros and cons of different options.

1. Babar.Zaidi@timesgroup.com
NewDelhi:Tax plans of mutual
funds are the best way to save
tax in 2016, while traditional
insurance policies remain the
worst tax-saving instrument.
ET ranked all tax-saving in-
struments on the basis of seven
key parameters — returns,
safety, flexibility, liquidity,
costs, transparency and taxa-
bility of income.
Equity-linked savings schemes
(ELSS)toppedtheranking.They
are high on risk but can offer
high returns. They are also very
transparent and have a three-
year lock-in period, the shortest
among all Section 80C options.
Traditional insurance plans
are ultra safe, but give very low
returns, levy high charges, have
anopaquestructureandofferlit-
tle flexibility and liquidity. On
the other hand, Ulips, the mar-
ket-linkedsiblingsof traditional
insurance plans, are at second
place in our ranking. Unlike
ELSS funds, where the invest-
ment cannot be touched before
three years, Ulip investors can
switch their corpus from equity
to debt and vice versa. What’s
more,thereisnotaximplication
on the gains made from such
switching because like all insur-
ance plans, Ulips enjoy exemp-
tion under Sec 10(10d).
The National Pension System
(NPS) is at third place, thanks
largely to recent changes in in-
vestment mandate and tax laws.
Though investors still can’t put
more than 50% in equities, NPS
fund managers have been freed
from following a passive invest-
ment strategy. They can now in-
vest in a larger universe of
stocks and in the proportion
they deem fit. “This is a signifi-
cant change and will get reflect-
edinthereturnsof equityfunds
of the NPS in the coming
months,” says Dhirendra
Kumar, CEO of mutual fund
tracker Value Research.
Moreover,lastyear’sbudgetan-
nounced an additional tax de-
duction of up to `50,000 for in-
vestments in the NPS under the
new Section 80CCD(1b). This ex-
clusive benefit has made NPS
more attractive as a tax-saving
tool, though concerns remain
about the taxability of the cor-
pusandtheannuityincomeafter
the investment matures. Right
now, the income from annuity is
taxed at a normal rate. News re-
ports say the government is con-
sidering tax exemption to pen-
sion from annuity. If this
proposal finds place in the budg-
et and is eventually passed, the
NPS may become the preferred
way to save for retirement.
The old-time favourite, Public
Provident Fund (PPF), is at
fourth place. It suits conserva-
tive investors who don’t mind
earning less as long as the re-
turns are assured. However, for
some investors, a better alterna-
tive has emerged in the Sukanya
Samriddhi Yojana. Launched by
the government last year, the
scheme is open only to girls be-
low 10. If you have a daughter
below 10, the Sukanya scheme is
a better option. In 2015-16, it will
give 9.2% tax-free returns com-
pared to 8.7% from the PPF.
The Senior Citizens’ Savings
Scheme is the best tax-saving in-
strument for retirees. At 9.3%, it
also offers the highest interest
rate among all post office
schemes.However,theincomeis
fully taxable, which is a damper.
Similarly, bank fixed deposits
andnationalsavingscertificates
are ultra-safe and offer assured
returns, but the post-tax returns
are not very lucrative. In the
highest 30% tax brackets (taxa-
ble income of over `10 lakh a
year), the post-tax returns are
barely6%.Butthesearestraight-
forward instruments and don’t
require a multi-year commit-
ment. Invest in them if you don’t
have time to study the other op-
tions and the investment dead-
line is very near.
Pension plans from insurance
companiesdonotenjoythesame
tax benefits as the NPS and their
charges are significantly high,
which is why they figure so low
in the ranking. Similarly, Rajiv
Gandhi Equity Savings Scheme
(RGESS) funds are only for first-
time investors and offer lower
deduction. But they are still bet-
ter than insurance policies as
tax-saving instruments.
ET
Ranking
Tax-saving
Instrument
What’s
Good
What’s
Not
1 ELSS funds High returns
and liquidity
Carry equity risk
2 Ulips Flexibility to
switch
Long-term
commitment
3 NPS Good returns,
higher
deduction
Locked till
retirement,
annuity is taxable
4 PPF Assured returns,
tax-free income
Returns can’t beat
inflation
5 Sukanya
scheme
Higher returns
than PPF
Only for girls
below 10
6 Senior Citizens’
Saving Scheme
High returns for
retirees
Interest is fully
taxable
7 Bank FDs and
NSCs
Easy to invest,
widely available
Interest fully
taxable
8 Pension plans Allow higher
equity exposure
High charges,
annuity is taxable
9 RGESS funds High returns
and liquidity
High risk, lower
deduction
10 Insurance
policies
Assured returns,
tax-free income
Very low returns,
opaque structure
and low liquidity
Reducing the Tax Burden
From
Biocon
The company’s cash pile along with
thevalueof itsinvestmentinitsclini-
cal research arm Syngene is nearly
70% of its market cap. A slew of fac-
torslikecommercialisationof insulin
glarginefromitsMalaysiafacility,in-
creased investment in research and
progress in its biosimilars pipeline
point to Biocon’s performance im-
provinginthequartersahead.Thisis
likely to result in appreciation in the
company’svaluations.
MuthootFinance
A slowdown in small business loans
and fall in gold prices led to subdued
growthinAUMinlastfiscal.However,
the largest gold loan financer will be
one of the chief beneficiaries of a
turnaround in the economy. In addi-
tion to this, an increase in gold loans
will lead to improvement in its asset
qualitygoingahead.
Smallcaps
OrientPaper
OrientPaper’splantodemergeitspa-
per business will unlock value of its
consumer business. It is one of the
leading fan manufacturing com-
panyiesandwillbenefitwiththegov-
ernment’s thrust to rapidly electrify
villages. Sales of its consumer busi-
ness is expected to be around `1,100
croreandaone-timesaleswouldgive
theconsumerbusinessavaluationof
`1,100 crore. Havells India, its peer, is
trading close to 4 times sales. The pa-
per business may get a valuation of
around`200crorebasedonpeervalu-
ation comparison. At present,
Orient’smarketcapisonly`600crore.
HydroS&S
HydroS&S,apolymersuppliertoau-
to-makers, reported net profit in
September2015quarterafterposting
lossesinthetwelvequartersoutof the
past fourteen. The Chennai-
headquartered company was ac-
quired by China-based plastic com-
panyKingfaSci&Techin2013,which
nowowns75%stake.Aftertherecent
infusionof fundsbythepromoter,the
companyislikelytobedebtfree.Inthe
lastfiscal,itincurredinterestexpense
of `8crore,thusentireinterestsaving
will directly add to the bottom line
fromthesecondhalf of currentfiscal.
Inaddition,automakersaregradual-
ly replacing metals with polymer for
better fuel efficiency and emission
control,thiswillhelptodrivevolume
growth.
JamnaAuto
JamnaAuto,supplierof leaf suspen-
sion to commercial vehicle makers,
will be a key beneficiary of double-
digit growth in medium and heavy
commercial vehicles sales volumes
for the current and next fiscal year.
TheDelhi-headquarteredcompanyis
a market leader in conventional leaf
springs segment. Its focus is to im-
proveitscontentpervehiclesbyforay-
ing into air suspension and lift axles
segment, which is a higher margin
segment.Withtheimplementationof
thegoodsandservicetax(GST),after-
marketsegmentwillofferanopportu-
nity that is four times of the current
supplytoCVmakers.
SnowmanLogistics
Snowman Logistics is a leading
playerinprovidingcoldchainserv-
ices to FMCG, food processing and
diary industries. By FY18, the com-
pany is planning to double its cold
chain capacity.
ET SHOWCASES options based on —
returns, safety, flexibility, liquidity,
costs, transparency and taxability
FundamentalStrengthofCompaniesKey
If there’s money left in your bank account, after
allocating enough to traditional asset classes
such as equities, bonds and real estate, you may
consider adding a few exotic alternatives to
your portfolio.
You may join a thoroughbred consortium to
part-own a race-horse or buy a few pieces of
art. If you believe money begets money, you
may also buy a few Moghul mohur (coins) or
some diamonds. Some of these may yield better
returns than your conservative investments, but
these are fraught with liquidity and counterfeit
risks.
“These investments are targeted at ultra-HNIs.
They’re passionate about such investments and
they know how to distinguish between fake and
genuine pieces,” said Prateek Pant, executive
director – products & services, RBS Private
Banking.
“Collectors of such items are al-
ways aware of prospective buy-
ers in the marketplace. This, in a
way, takes care of the liquidity
risk,” Pant added.
Exotic Alternatives
BEING ARTY
Art has been the most exotic of alternative
asset classes over a period of time. The
practice of viewing art as an investment
option started in 2007 with the launch of
funds like the Osian Art Fund. The interest
soon waned off as a good number of these
funds failed to get exits on their investments.
Bullish trends returned to art market only
in late 2014. By the second-half of 2015,
Indian masterpieces began selling at record
prices. At a recent Christie’s auction, an oil
painting by Gaitonde was sold for
`29 crore. According to art collectors,
quality art pieces appreciate 10–12% every
year, which makes it a good investment
option for rich investors interested in
art.
INVEST IN GLITTER
Affluent investors have also started buying
diamonds as prices have corrected in the past few
months. Diamond prices on Divine Solitaires Price
Index slid from `3.78 lakhs per carat in January
to `3.61 lakhs per carat by October-end before
moving up to `3.73 lakh per carat, currently.
“I think prices will be firm in 2016, mainly because
of low supply. That said, we may not see any
phenomenal price increase this year,” said Jignesh
Mehta, MD of Divine Solitaires.
JINGLE ALL THE WAY
Another theme worth considering is coins.
Numismatics has moved on from being a mere
hobby to becoming a cash-ringing investment
opportunity. A British Indian mohur, valued at
`25,000 per piece in 2004, is currently selling at
about `2 lakh. A William Gold mohur, which bore
a price tag `2.5 lakhs in 2004, is now being sold
at about `15 lakhs.
“Coins with a lot of historical backing are in great
demand among collectors,” said Girish Vira of
Oswal Antiques. “People buying rare coins should
be wary of fakes. They should buy these from the
right source.”
HORSE SENSE
While thoroughbred investing is not yet
popular in India, HNIs in Mumbai,
Bengaluru and Chennai
have started participating
in consortiums (about 5–10
joint owners) that bid for
high quality blood mares.
The idea is to partake in
the horse’s prospective race
winnings and future bloodline sales.
Well-bred horses are valued in the
range of `40–60 lakhs. The owner
will have to spend about `30,000
every month for the upkeep of the
animal.
“It’s not become a full-blown
investment as yet. That said we’re
seeing a lot of HNIs participate in
consortiums to buy horses,” says
Vivek Jain of Royal Western India
Turf Club. “People may suffer losses
if they start buying horses purely for
investment reasons. The reason for
this is, there’s no fixed price for
any horse.”
Text: Shailesh Menon
Illustration: ANIRBAN BORA
SBI Bluechip Fund
FUNDMANAGER SohiniAndani AUM `3,302Crore
KEYHOLDINGS HDFC BANK, RELIANCE, INFOSYS, SUN PHARMA, MARUTI
1-YEAR RETURN 8.22% | 3-YEAR RETURN 19.51%
EXPERTOPINION SACHIN JAIN, RESEARCH ANALYST, ICICI SECURITIES
Thefundmanagerhasbeenoneoftheearlybirdsinpursuingaqualitystockportfoliostrategywhich
themarketshaverewardedintherecentyears.Thefundmanagerdoesnothesitateintakingarela-
tivelyhighcashcalloractivelymanagingmidcapexposure,dependinguponmarketdevelopment
Franklin India Prima Plus Fund
FUNDMANAGER AnandRadhakrishnan
&RJanakiraman
AUM `6,145Crore
KEYHOLDINGS HDFC BANK, INFOSYS,
ICICI BANK, INDUSIND BANK, BHARTI AIRTEL
1-YEAR RETURN 4.63%
3-YEAR RETURN 19.97%
EXPERTOPINION VISHALDHAWAN,CFP,
PLANAHEADWEALTHADVISORS
Withlarge-capslookingrelativelyundervalued
vis-a-vismidcaps,animpendingrecoveryin
corporateearningscouldseelargercompanies
benefitovermidsizedcompanies.Withits
growth-orientedapproach,consistenttrack
recordoveralongperiod,andaverystablefund
managementteamfocusedonbottomupstock
picking,thisfundshouldbeabeneficiaryofan
impendingeconomicboom.
Mirae Asset India Opportunities
FUNDMANAGER Neelesh Surana &
Sumit Agrawal
AUM `1,406Crore
KEYHOLDINGS HDFC BANK, ICICI BANK,
INFOSYS, MARUTI, RELIANCE
1-YEAR RETURN 4.28%
3-YEAR RETURN 19.96%
EXPERTOPINION VIDYABALA,
HEAD(RESEARCH),FUNDSINDIA.COM
Thisfundcaninvestacrossmarketcaps,buttends
toholdahighershareoflarge-capstocksandis
benchmarkedagainsttheBSE200.Acrossmarket
cyclesfromitsinceptioninearly2008,thefund
hascomfortablybeenaheadofitsbenchmark.
Comparedtotheaveragereturnsofitscategory
too,thefundsportsashiningrecordofconsistency
indoingbetter.Itisalsolessvolatilethanitspeer
average,andrequiresamoderateriskappetite.
HDFC Capital Builder Fund
FUNDMANAGER ChiragSetalvad
AUM `1,059Crore
KEYHOLDINGS ICICI BANK, HDFC BANK, SBI,
RELIANCE, TATA MOTORS
1-YEAR RETURN 4.81% | 3-YEAR RETURN 20.47%
EXPERTOPINION MANOJNAGPAL,CEO,
OUTLOOKASIACAPITAL
Anoptimalfundtobenefitfromthemacroeconomic
revivalwhichisexpectedtokickin2016.Wherethis
funddifferentiatesitselffromothermacroplayfundsis
thatitmaintainsafinebalancebetweenmacrorevival
deepvaluestocks,growthstocksandasprinklingof
alphastockpicks.
Birla Sunlife Frontline
Equity Fund
FUNDMANAGER MaheshPatil
AUM `10,290Cr
KEYHOLDINGS HDFC BANK, INFOSYS,
ICICI BANK, RELIANCE, ITC
1 YEAR RETURN 1.34% | 3 YEAR RETURN 16.73%
EXPERTOPINION SACHINJANI,RESEARCHANALYST,
ICICISECURITIES
Thefundistimetestedwelldiversifiedstableperforminglargecap
orientedfund.Theconsistencyinfundmanagementwithrespect
tostickingtoitsphilosophyandstayingawayfrommarketmo-
mentumisthemainstay.Thefundmanagermaintainsabench-
markhuggingstrategytomaintainconsistencyinperformance.
Kotak Select Focus Fund
FUNDMANAGER HarshaUpadhyaya
AUM `3,827Crore
KEYHOLDINGS HDFC BANK, INFOSYS, MARUTI,
ULTRATECH, LARSEN & TOUBRO
1-YEAR RETURN 3.68% | 3-YEAR RETURN 19.81%
EXPERTOPINION ANUPBHAIYA,MDANDCEO,
MONEYHONEYFINANCIAL
Withaportfoliotilttowardslarge-caps,thefundisagood
picktotidethroughvolatiletimes.Ithasalargecapfocus
with75%ofitscorpusinlargecapstocks,withthebalance
inmidandsmallcapstocks.Thefundmanagerhasper-
formedwellinhismandatetoselectsectorsthatarelikely
tooutperformthebroadermarketatvariouspointsoftime.
BNP Paribas Equity Fund
FUNDMANAGER ShreyashDevelkar
AUM `1,127Crore
KEYHOLDINGS HDFC BANK, BHARTI AIRTEL, IDEA
CELLULAR, INDUSIND BANK, KOTAK MAHINDRA
1-YEAR RETURN 5.26% | 3-YEAR RETURN 19.15%
EXPERTOPINION ASHISHSHANKER,
HEAD(INVESTMENTADVISORY),
MOTILALOSWALWEALTHMANAGERS
Thefundmanagerfollowsablendedstyleofmanage-
menti.e.amixofgrowthandvalue.Thefundinvests
incompaniesbasedonthetrackrecordoftheman-
agement,businessstability,futuregrowthandscal-
ability,financialdisciplineandrelativevaluation.
Motilal Oswal Most
Focussed Multicap 35 Fund
FUNDMANAGER TaherBadshah
AUM `3,006Crore
KEYHOLDINGS HDFC BANK, EICHER MOTORS,
MARUTI, INDUSIND BANK, INTERGLOBE AVIATION
1-YEAR RETURN 16.1% | 3-YEAR RETURN NA
EXPERTOPINION RAJATDHAR,
COGENTADVISORY
Giventhatstockpickingwillbeimportantinthe
comingyear,amulticapfundlikethisislikelyto
givehigheralphatotheportfolio.Withthefundman-
ager’sstrategyofavoidingtroubledsectorsandopt-
ingforgrowthsstocks,thisfundcouldbeawinner.
ICICI Pru Focused Bluechip Equity
FUNDMANAGER Manish Gunwani
AUM `9,896Crore
KEYHOLDINGS HDFC BANK, INFOSYS, ICICI BANK,
AXIS BANK, RELIANCE
1-YEAR RETURN 0.1% | 3-YEAR RETURN 15.63%
EXPERTOPINION VIDYABALA,HEAD(RESEARCH),
FUNDSINDIA.COM
Giventhatlarge-capstockshavecorrectedsharply,
theyoffergoodentryopportunities.Thismaybea
goodtimetoaddorupexposureinthiscategory.This
purelarge-cap,lowvolatileequityfundissuitablefor
thosewithmoderateriskappetite.Large-capstocks
aremorestableandlessriskythanstockswithlower
marketcapitalisations(mid-capandsmall-capstocks).
Source: Value research —Prashant Mahesh
here should I invest to create a corpus for my
child’s education? That’s a question wealth
managers are inundated with these days as
equities gain traction as an asset class for
wealth creation in the long run. But investors are confused
about where to put their money with various pockets
of the market such as mid- and small-caps running up
sharply in recent months. Historically, mid-caps have
mostly traded at a discount to blue chips. At this
juncture, financial advisors recommend a mix of
multi-cap funds and large-cap funds to help you reach
your goals. Multi-cap funds, which invest about 75%
of their corpus in blue chips and the balance 25% in
mid- and small-cap stocks, could be an ideal
way to lay the base for meeting long-
term goals.
Here’s How to
Build Wealth
for Long-term
Financial Goals
Reliance
Regular
Savings Equity
FUNDMANAGER
OMPRAKASH
KUCKIAN
AUM `2,774Cr
KEYHOLDINGS
HONEYWELL
AUTOMATION, HDFC
BANK, DIVIS LAB,
BOMBAY BURMAH,
INFOSYS
1YEARRETURN 6.6%
3YEARRETURN 16.65%
EXPERTOPINION
ANUPBHAIYA,MD,MONEY
HONEYFINANCIAL
Anaggressivemulti-cap
fund,ithastraditionally
takenbetsonmid-and
small-capstocks,to
propupreturns.Ability
toidentifyqualitymid
capstockshashelped
thefunddeliverextra
returnsoveritsbench-
mark.
LARGE&MULTI-CAPFUNDSCOMBOTOPPICK
W SavingTaxa
Priority?Mutual
Funds’TaxPlans
YourBestBet
D-STREETNOTTHEONLYPLACETOMAKEMONEY
ANIRBANBORA
8 THE ECONOMIC TIMES | MUMBAI | MONDAY | 4 JANUARY 2016Where to Invest in 2016
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