1. The Public Provident Fund (PPF) Scheme
The Public Provident Fund (PPF) Scheme, is a tax-exempt investment fundpath that was presented by the Ministry of Finance (MoF) in India in the year 1968. Premium earned on deposits in the PPF account are tax free. This makes the PPF Scheme a standout amongst the most expense effective instruments in India.
Table 1: Last 10 years of interest rate returns in PPF scheme
| Financial Year | Interest rate (p.a.) |
|---|---|
| 2008 – 2009 | 8.00% |
| 2009 – 2010 | 8.00% |
| 2010 – 2011 | 8.00% |
| 2011 – 2012 | 8.60% |
| 2012 – 2013 | 8.80% |
| 2013 – 2014 | 8.70% |
| 2014 – 2015 | 8.70% |
| 2015 – 2016 | 8.70% |
| 2016 – 2017 | 8.10% |
| 2017 – 2018 | 7.90% |
Source: Ministry of Finance
2. SIP (Systematic Investment Plan)
A sort of venture conspire offered by common reserve organizations. Utilizing SIP one can contribute little sum periodically (week after week, month to month, quaterly) into an account.
They offer tax breaks under the Section 80C of Income Tax Act 1961. ELSS (Equity Linked Savings Scheme)can be contributed utilizing both SIP and single amounts venture alternatives. There is a 3 years secure period, and in this manner has better Liquidity contrasted with Public Provident Fund.
Table 2: SIP Mutual Funds to invest in 2017 and their returns
| Mutual fund scheme | Assets under management (Rs. Crores) | 3 months | 1 year | 3 year | 5 year |
|---|---|---|---|---|---|
| Birla SL Frontline Equity | 13,634 | 10.60% | 19.30% | 19.70% | 18.00% |
| ICICI Pru Top 100 Fund | 1,457 | 13.60% | 23.80% | 21.90% | 17.00% |
| ICICI Pru Focused Bluechip Equity | 11,868 | 10.50% | 17.50% | 22.20% | 16.30% |
| Franklin (I) Smaller Cos | 3,494 | 12.90% | 26.40% | 46.80% | 29.00% |
| DSP-BR Micro Cap Fund | 3,399 | 12.60% | 26.60% | 54.40% | 28.00% |
| Mirae Emerging Bluechip Fund | 2,122 | 15.30% | 25.50% | 46.40% | 28.00% |
| Kotak Select Focus Fund | 5,481 | 13.20% | 19.60% | 29.70% | 19.70% |
| Principal Emerging Bluechip | 586 | 17.00% | 23.00% | 42.40% | 26.00% |
| ICICI Pru Balanced Fund | 3,477 | 12.00% | 18.00% | 25.00% | 17.80% |
| HDFC Balanced Fund | 6,657 | 8.70% | 15.50% | 27.80% | 17.00% |
Disclaimer: Please note that these mutual funds are ranked and recommended on their past performance and based on our understanding of the stock market, below we mention the returns yielded for the past 5 years.
Scenario analysis of the returns; if you had invested Rs. 1,000 every month for 5 years equaling Rs. 60,000, the investment would have grown to:
| Mutual fund scheme | Amount after 5 years |
|---|---|
| Birla SL Frontline Equity | 97,000 |
| ICICI Pru Top 100 Fund | 91,500 |
| ICICI Pru Focused Bluechip Equity | 91,400 |
| Franklin (I) Smaller Cos | 134,000 |
| DSP-BR Micro Cap Fund | 142,000 |
| Mirae Emerging Bluechip Fund | 132,000 |
| Kotak Select Focus Fund | 104,000 |
| Principal Emerging Bluechip | 124,000 |
| ICICI Pru Balanced Fund | 96,400 |
| HDFC Balanced Fund | 97,000 |
Source: Moneycontrol.com, NSE, BSE
3. ELSS (Equity Linked Savings Scheme) Funds
The fund comes with a lock-in period of three years and is categorized under EEE tax rule(Exempt-Exempt-Exempt). With no limits for investments under Section 80C, however the maximum tax benefit is limited to Rs 1.5 lakh. The fund provides a fair chance to get better returns to overcome inflation over a period of time.
The average returns for the last 5 years is around 12%, let us showcase the top 5 ELSS mutual fund schemes:
Table 3: Top 5 ELSS mutual fund schemes 2017-2018
| ELSS tax saving mutual funds | Inception date | Last 5 years returns in % | Last 10 years returns in % |
|---|---|---|---|
| DSP Blackrock tax saver fund | 2007 | 20.6 | 15.6 |
| Birla sunlife tax paln | 1999 | 19.4 | 12 |
| Birla sunlife tax relief 96 | 1996 | 20.1 | 12.6 |
| Franklin India taxshield fund | 1999 | 18.3 | 15.3 |
| Axis long term equity fund | 2009 | 22.5 | Not available |
Source: Moneycontrol.com
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