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80C Investment Planning for Financial Year 2011-2012 (ELSS )

Sohil 
on 22 August 2011

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Note: This being my first article and also I am being fairly new in this line. I am writing this article as first person and being me as reference. Articles content is true upto my knowledge with small niggles here and there if so but I am sure how it works. Also there might be some grammatical mistakes. If so please forgive the same as I was always weak in grammer.
 
The purpose of this thread is just to make people aware of investing early in 80C tax saving instrument for the present running financial year 2011-2012.

Last year as always I was late in tax planning hence wasn't able to use 80C to its maximum limit but completed 96% of my investment limit.

This year touchwood I started early and also because of market negative sentiments. I have already completed 85% of my investment limit.

70% of 1 lakh rupee limit in PPF 15% so far in ELSS(this year being final year of ELSS being part of 80C I went with it).Total limit  for 80C is 1 lakhs with infra bonds too added for 20000.I am keeping that out as i plan to write about it in next article. SO main purpose is the 1 lakh limit right now.

Last year, I managed to invest only 16% into ELSS after that market turned positive and the NAV of the funds went high from my past buying price and I was not interested in averaging high out.

I chose following ELSS for investment (They have a good past track record from inception as well as last 5 years track record as well as companies in which they invest).

1. Fidelity tax advantage
2. Canara Robecco equity tax saver
3. ICICI prudential tax saver
4. HDFC long term advantage
5. HDFC tax saver

All growth option.

My thought was to invest 30% into ELSS and use the limit completely but after 16% investment(which i started in last month) i had no option left as market turned positive and i have an old ulip policy(which too counts into 80C deduction) 6 years old and fortunately giving me somewhere around 14-15% CAGR so far I invested in it.

I was thinking to redempt my ulip  and use 30% this season into ELSS but than I wasn't sure of taxation treatment of same.

Than I came to know ill need to pay taxes on all deduction I took so far into it for all past financial year on total value. So say if my present ulip value was 1 lakh and if I fall under 10% tax bracket than I need to pay tax for all the 7 years in which I claimed deduction on the overall amount(not just for the 10k invested).So 10k tax on it.

So this year too I might have to continue the ulip unless and until market turns positive.

The only bad thing about this ulip is the manager doesn't invest the amount into ulip if I invest early say now and the money remains with them on their side as dummy(which can be seen in their online statements track on their sites)  and just when the last date of payment comes that day its invested into market.
 
I have seen it online that money being shown at side and as just last day passes the same day the whole amount is invested but they do cut all the charges monthly regularly.

They use the money for their sake and invest according to their need. So even if I know market is down and I invest now still they will use the money on my due date which will be march 2012.Might the market turn high than than what is my mistake and why should I pay for their deed.

Anyways Also I have to do tax planning for my mother. As this year limit of exemption increased to 2.5 lakhs as see will turn senior citizen this financial year and age of senior citizen reduced to 60 from 65 in this financial year.

70% invested into PPF and may be coming weeks ill start less investment into her account too.

I just wanted to bring to you people notice. The plus point of ELSS is the minimum investment even for first time is just 500 rupees. Not like equity plans in which first minimum investment is 5000 and than on 1000 and so on.

So if one planning to enter can invest 500 rupees into the ELSS on the day when market is down before 2 pm. Because if done after 2 pm the transaction will be done in next day trading session where the market might have turned positive and NAV going high and people getting less units.

I guess the time is right to enter as market is going down right now and one can invest according to his convenience and can avoid SIP and VIP route as they happened on pre-determined dates in which case on that day NAV might be high if market is Up.

I started into HDFC tax saver at 220 levels. Than its NAV went upto 238 levels. Than as it started going down I have started re-entering at lower NAV with my final investment at 209 NAV. So in my last investment i definitely might have got few more units plus my rates have been average down which is better than lump sum payment and I can  still get positive returns too my investment even though on sites like mutual funds of India and value research, 1 year returns show negative as they track from date to date say 1st January to 1st January difference in NAV. IT might so happened that you invest on 3rd  January when there might have been say 1000 points of fall in market and so on.
 
As you invested when there was blood on the streets or atleast you'll have better negative return (less negative if the whole year markets were down) than the 1 year returns shown.

Hope this thread help people to start early into investing in 80c instruments.
 
Moral of the story: The market is  down .And one should start investing into ELSS from now on rather than waiting till March ending. And as it takes just 500 rupees one can do the same at his own convenience as well as can out-smart the market according to his own comfort.
 
Only thing is if you find investing a boring subject please stick to 2 or maximum 3 ELSS funds. Also important note this is the final year to invest  into ELSS as they wont be part of tax savings in DTC regime(NPS will replace them).



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