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PUBLIC MARKS from nag_sunny with tag insurance

27 November 2007 13:00

Tax Saver Fund vs Unit Linked Equity Schemes

According to the prevailing tax laws, one can save tax on the investments in noted mutual funds, insurance, ULIPs upto Rs. 1 Lakh. ULIPs are work as mutual funds exception, they provide insurance also. However linking the insurance with the investment is debatable. In my view insurance should be taken by everyone but at the same time it should not combined with investment. Investments are something different to the insurance. Another point to be noted here is all the ULIPs charge 20% to 40% of the investment as administration and other charges at the initial stages. So we cannot expect the high returns until and unless we continue investing atleast 5 years. For instance the ULIP companies charges 20% for the first year, around 12% in the next year, 4% afterwards (Applicable for some schemes only, may vary for each scheme). Coming to the mutual funds, the total charges must not cross 2.5% of the total investment. The investments may have to keep for 2-3 years. Tax saver funds provide the advantage of investing in equity apart from the tax benefit with much lesser administration charges. So I believe the tax saver funds beat the ULIPs. I believe the invester should make wise decision when starting his investment in the equity. Both have their own advantages and disadvantages.

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