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How the National Pension System gives you an added tax benefit

The Government of India has launched various savings and investment schemes which help you to save and create a financial corpus and also get tax benefits. The National Pension System (NPS) is one such saving scheme which allows you to create a corpus for your retired life. Let’s understand what this scheme is all about and the tax benefits that it promises –

What is the National Pension System (NPS)?

The NPS scheme is a market-linked saving scheme wherein you can invest and create a retirement corpus. The investments that you make into the scheme are invested in the market as per your investment preference. Thereafter, when you retire, you can use the funds accumulated under the scheme to fund your retirement.

Investment into the NPS scheme

Resident Indians, as well as NRIs, can invest in the NPS scheme if they are aged between 18 and 60 years. You can invest in the scheme through authorized banks and non-banking financial companies. Both online and offline investments into the National Pension System are allowed. An application form needs to be filled and submitted along with the following documents –

  • Proof of identity
  • Proof of address
  • Proof of age

There are two types of investment accounts under the NPS scheme. One is the Tier I account which is compulsory in nature and the other is the Tier II account which is voluntary. The minimum annual investment in the Tier I account is INR 1000, wherein each contribution needs to be a minimum of INR 500. For the Tier II account, however, the minimum investment is INR 250.

Withdrawal and maturity of the NPS scheme

Partial withdrawals from Tier I account are allowed only on specific instances like marriage, medical emergencies, buying a home or if you are unemployed for 60 days or more. Tier II account, on the other hand, is flexible and you can withdraw from the account any time that you want. Partial withdrawals are allowed from the third year of opening the account. A maximum of 25% of the balance can be withdrawn at once. If you withdraw from the scheme fully, 20% of the fund value would be given in lump sum while the remaining 80% would have to be used to avail annuity incomes.

The NPS scheme matures when you attain 60 years of age. You can postpone the maturity date by 10 years and avail the corpus at 70 years of age. On maturity of the scheme, 60% of the corpus would be allowed to be availed in a lump sum while from the remaining 40% you would be paid annuities.

Tax benefits of National Pension System

The National Pension System is favoured by investors for the tax benefits that it provides. You can avail the following tax deductions under the scheme –

  • Salaried employees can invest up to 10% of their basic salary (including dearness allowance) towards the NPS scheme and claim a deduction under Section 80 CCD (1) of the Income Tax Act, 1961. For self-employed individuals, investments up to 10% of the annual income would be allowed as a deduction. The maximum limit of deduction is INR 1.5 lakhs which includes deductions under Section 80C
  • If the employer contributes 10% of the basic salary of the employee (including dearness allowance), such contribution would be allowed as a deduction under Section 80 CCD (2). This deduction is also available to salaried employees under the new tax regime where other deductions are disallowed.
  • Contribution to the NPS scheme, up to INR 50,000, can be availed as an additional deduction under Section 80 CCD (1B). This deduction would be allowed in addition to the deduction of INR 1.5 lakhs under Section 80C
  • 60% of the corpus which you receive in a lump sum on maturity would be tax-free in your hands. Moreover, if you close the scheme before maturity, 20% of the corpus which you receive in a lump sum would also be tax-free
  • Similarly, partial withdrawals of up to 25% of the fund value are completely tax-free.

Thus, the National Pension System is quite beneficial in terms of the tax advantages it provides. The investments allow you additional deductions under Section 80 CCD (1B) and even if you choose the new tax regime mentioned in the Union Budget 2020, you would be able to claim a deduction under Section 80 CCD (2) if your employer contributes to the NPS scheme on your behalf. Given the tax benefits, you should invest in the NPS scheme and build yourself a market-linked retirement corpus while saving tax at the same time.

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How much term life insurance do I need?

Life Insurance: Term life insurance is the simplest, most effective way to secure your family’s future. It ensures your family can take care of themselves in case anything happens to you. However, to ensure this happens properly, you need to have the right cover.
5 Steps to calculate the term insurance coverage :
1: Factors in your dependent’s monthly expenses
2: Factor in the liabilities
3: Include life event and goals
4: Factor in retirements corpus for your spouse
5: Factor in your age and wealth

Face Off: Mutual Funds vs Real Estate | Which is better?

Face-Off: Mutual Fund vs. Real Estate | Which is better?

Real estate is considered as a safe and convenient option for investment. But how does it fare against mutual funds? In this video of our face-off series, we pitch real estate against Mutual Funds. We compare them to the key parameters and give them a score on each of them. Want to know the result of this face-off? Well, watch the video now! To invest in Direct Plans of top Mutual Funds for free, download the ETMONEY app: https://etmoney.onelink.me/unJQ/5ca1ae3b

Mutual Fund Review: ICICI Prudential Bluechip Fund Analysis | Biggest Large Cap Mutual Fund in India

Bluechip comprise india’s largest company which are valued around over 20,000 cr in the Indian stock exchange ,they have india’s biggest and most popular brands and the products are used by most of us in everyday life ,these are products from companies like HDFC Bank, Reliance Industries Ltd ,Maruti Suzuki ,SBI etc.A large cap fund consist of these bluechip companies.ICICI Prudential Bluechip Fund was launched in 2008 and has grown to become one of the biggest fund in large cap category
Allocation of Acids by sector
Financial: 33%
Energy : 13%
Technology : 10%

Mutual Fund Review: Kotak Standard Multicap Fund | Best Multi Cap fund Analysis | Should you invest?

Multi cap funds are all rounder in mutual funds ,in Multi cap funds the fund manger has flexibility to invest seamlessly in large cap, small cap and mid cap companies ,this flexibility allow fund manager to aim for better returns at lower risk.
Kotak Standard Multicap Fund is most popular and biggest fund in multi cap category , the fund was started in 2009.The Kotak Standard Multi-cap Fund has a high asset allocation towards the financial sector where it has deployed over 36% of its assets. Energy and Information Technology are the next preferred sectors for this fund with 12% and 8% allocation.

SBI Mutual Funds Review | Everything you need to know- Company, Management Team, Top Funds

SBI Mutual Fund is one of India’s top 5 AMC Companies .It is joit venture of SBI and Amundi , and established in 1987 and today it manage more than Rs 3 Lakh Assets worth over
SBI Mutual fund remain first in many things : like it was first AMC to launch a contra fund which called SBI Contra fund.
In SBI there are India’s top fund managers of the country
Following are top performing funds of SBI mutual fund :
SBI Blue chip Fund
SBI Small cap fund
SBI Magnum multi cap fund
SBI Focused equity fund

Goal Based Mutual Fund Investment for Beginners | How to select Mutual fund for First Time Investors

Things to keep in mind and take care before investing:
1: What is your goal?
2:Why are you investing?
Some goals are short term goals , some are medium term and some are long term.First we have to identify our goal and then can decide how much risk we can take .We can invest in mutual fund through debt and equity ,In debt fund we can invest for short terms , for medium term we can invest in Hybrid fund and for long term we can invest in equity funds

How to find the best Tax Saving option?

How to find the best Tax Saving option?
We have lots of tax savings options today like NSE,PPF,PF ,ELSS.What benefits you will get on investing ELSS Fund


Three parameters of investments: Risk,Return and Lock-in
According to return,Long time investment in equity funds give more returns
According to Risk ,Equity Market are volatile for short term investment ,therefore higher in risk ,when you invest for long term in equity fund your risk will get reduced and returns increased .If you invest in short term equity funds, risk increased and returns also less
ELSS lock in period is very less as compared to other tax saving fund

Canara Robeco Bluechip Equity Fund Analysis and Review

Poker and investments have one thing in common – the value of blue chips! Bluechips are stocks of companies which are market or sector veterans. They are reliable, well-recognized and have a history of robust financial performance, Canara Robeco Bluechip Equity Fund is no different. 

This is one of the strongest schemes available in the market. This Canara Robeco Bluechip Equity Fund Analysis will solve all your queries.

  1. Fund Details

Canara Robeco, a joint venture between Canara Bank and Robeco Group launched the Canara Robeco Bluechip Equity Fund in August 2010. The fund predominantly invests in stocks of companies with a large market capitalization. These stocks comprise of the top 150 stocks in the Indian market. The core investment objective of this open-ended scheme is to offer capital appreciation to investors through investment in blue-chip stocks. The top holdings consist of well-known market players such as HDFC Bank, ICICI Bank, Infosys, Reliance Industries, Kotak Mahindra Bank, L&T, HUL, etc. As on 30th November 2019, the AUM of the fund stood at Rs. 253.07 crores. The minimum investment required is Rs. 1000 (SIP) or Rs. 5000 (Lumpsum). There is no lock-in period in this fund.

  1. Fund Managers

The Fund is managed by two well-experienced and skilled fund managers – Mr Shridatta Bhandwaldar and Mr Sanjay Bembalkar. The Canara Robeco Bluechip Equity Fund Analysis is done by them before investing.

  1. Asset Allocation

The fund has allocated 93.43% of the corpus in equity instruments. One noticeable factor is that unlike its other counterparts, it has made zero investment in debt instruments.

  1. Portfolio Allocation

The Canara Robeco Bluechip Equity Fund portfolio is spread across 12 major industries. The top three sectors consist of more than half of the total portfolio – Financial (37.4%), Technology (8.8%) and Construction (8.62%). 

  1. Risk Quotient

As the fund invests predominantly in equity or equity-related instruments, the associated risk is considered moderately high. 

  1. Performance Highlights

A batsman is as good as his batting scorecard. Similarly, the true test of a fund lies in its performance numbers. Since its inception in 2010, Canara Robeco Bluechip Equity Fund has generated returns (CAGR) of 11.35%. In absolute terms, if you had invested Rs. 10,000 at the launch of the fund, today you would have Rs.26820 in your wallet.

Canara Robeco Bluechip Equity Fund Analysis of its Benchmark Performance:

This fund has consistently outperformed the benchmark (S&P BSE 100 TRI) across various time periods.

 Canara Robeco Bluechip Equity FundScheme Benchmark
1-Year19.07%13.18%
3-Year18.32%14.51%
5-Year11.30%9.17% 

The returns generated by Canara Robeco Bluechip Equity Fund are not just higher than other large-cap equity funds but other investment avenues as well. For instance, here is a yield comparison, if you had invested in a monthly SIP of Rs. 5,000 for a period of five years.


Total valueNet Gains
Canara Robeco Bluechip Equity Fund4.21 Lakhs1.21 L
Category Average3.92 Lakhs0.92 L
Fixed Deposits with banks3.58 Lakhs0.58 L
Gold3.73 Lakhs0.73 L

The fund has also demonstrated high capability to generate risk-adjusted returns and minimize losses during a bearish market phase. 

  1. Overall review

The Canara Robeco Bluechip Equity Fund is a good choice for investors who are on the lookout for capital appreciation and have a long term investment horizon. The fund has been highly consistent in generating returns. In spite of being heavily invested in equities, it has displayed better immunity towards excessive market fluctuations. So, if you want to invest in Canara Robeco Bluechip Equity Fund, you can do it online without any charges and grow your wealth faster with this Fund. After all, it is the second best-ranked fund in its category.

Why you should choose Invesco India Tax Plan for tax-saving investments

ELSS is a variable income product, which helps the investors obtain better long-term returns compared to other alternatives along with tax-savings option which greatly reduces the tax burden from the investments.


Given these factors, it makes sense for conservative investors to opt for ELSS plans. Among several available plans, investors may also consider the Invesco India Tax Plan, which is a popular scheme due to its multi-cap strategy.

The fund managers Amit Ganatra and Dhimant Kothari maintain a 60/40 ratio in large limits and other actions. This multi-cap approach has been a key factor in the constant performance of the fund across all market conditions. The Invesco India Tax Plan Fund has distributed its assets as 96.67% in Indian equities, of which 61.99% is in large-cap companies, 17.61% in mid-cap stocks and the rest 6.07% is in small caps. The Invesco India Tax Plan was launched on 29th December 2006. 

To consider a tax saving mutual fund, it is important to not just keep an eye on its section 80C applicability but also at long-term returns which will grow your investment corpus. 

In the past one year, three-year and five-year periods, the scheme has given 8%, 12% and 9% returns while its benchmark BSE 200 index has given 10%, 13% and 8% returns in the same period, respectively. In general, ELSS schemes on an average have given 5%, 10% and 15% returns in the past one-year, three-year and five-year periods respectively. 

In the last six months, fund managers have increased their exposure to well-established companies that have been attractive for two reasons: a solid business model (demand in the industry, high cash flow) and a decline in the markets. These companies include the likes of Bajaj Finance and Zee Entertainment Enterprises.


Returns

FundS&P BSE 200 TRINifty 50 TRI
8.14%10.40%12.38%
12.53%13.79%15.12%
9.73%8.92%  8.39%

The expense ratio is  2.23% as declared on 30-Nov-2019 whereas the average is 2.12% as of 30th November 2019. 

The AUM of this Invesco India Tax Plan is Rs. 976.92 crores as of 30th November 2019. Yearwise total AUM of Invesco India Tax Plan from 2014 are as follows:

Invesco India Tax Plan

YearTotal AUM (Rs. Crores)
2014212.62
2015257.71
2016319.89
2017514.66
2018686.49
2019976.92

PERFORMANCE

1 Year2 Year3 Year5 Year
10.04%4.19%13.80%10.20%
12.78%7.87%14.40%8.24%
11.09%5.79%14.75%
9.81%
6.91%-1.35%11.43%8.73%

As seen in the above comparison, the 1-year return on Invesco India Tax Plan is 10%  whereas the average return of the category is 6.91%. For a 5-year investment horizon, the fund gives you a 10% return on investment whereas the average return of the category is 9%. The return on benchmark indices S&P BSE 200 for 5 years is 9% and for NIFTY 50 is 8%. Invesco India Tax Plan gives the highest return on 5-year investment as compared to the category average, NIFTY 50 and S&P BSE 200. This makes it a good choice for investors looking for stable returns along with tax savings. 

The SIP performance of Invesco India Tax Plan Fund has been great too.

SIP Performance (₹1000 invested every month)

1 Year3 Year5 Year10 Year
₹12,000₹36,000₹60,000₹1,20,000
12862.5441118.3877479.62250214.08
7.19 %14.22 %29.13 %108.51 %
13.52 %8.82 %10.16 %14.06 %

The absolute return on Invesco India Tax Plan for 1 year is 7.19%. For 10 years, it is 108.51%. In other words, if you invested for 10 years in Invesco India Tax Plan, your money would have been more than doubled.