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Tax Saving - ELSS vs Fixed Deposit

Discussion in 'Investment Analysis' started by naveen1241, May 21, 2013.

  1. naveen1241

    naveen1241 Responder

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    Which is better and why is my query ? Appreciate simple explanations or article references. One of my friends asked this question and to be frank I'm short of convincing answers

    Thanks
    Naveen
     
    naveen1241, May 21, 2013
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  2. shabbir

    shabbir Administrator Staff Member

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    Depends on your objective and for me it is always the tax savings and so here are the reason

    1. Always ELSS because it gives you dividend and so you don't need to invest full amount to get a full tax savings. See how here http://shabbir.in/full-tax-saving-without-investing-one-lac/

    2. Returns on FD is taxable but return of ELSS funds is tax free.
     
    shabbir, May 21, 2013
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  3. naveen1241

    naveen1241 Responder

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    Thank you Shabbir...

    One more doubt. I saw the following in your write up.
    On 12-Feb-2007



    I bought HDFC Tax Saver Fund

    1,00,000



    The price of HDFC TAX SAVER – DIV PLAN

    70.319



    Number of Units received

    1422.090


    Now the Dividend of 7.5 Rs was announced on 15th March 2007 and so got back 10665.675 (Scaled up) Rs back which is Tax Free Income. So your net investment becomes 100,000 – 10665.675 = 89,334.325 and can get a Tax benefit of 1 lac.

    After 3 year lock in or when u withdrew. How much appreciation did you manage to get for the 89,334.325 investment ?

    Now when i checked, the NAV 3yrs back was 56 and now its 48, so the capital got depreciation right ? Or am I wrong some where ?

    Thanks
    Naveen
     
    Last edited: May 21, 2013
    naveen1241, May 21, 2013
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  4. shabbir

    shabbir Administrator Staff Member

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    Once the dividend is announced the price of the NAV falls by that much and it is market related fund, prices can go down as well.
     
    shabbir, May 21, 2013
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