Save your taxable income with DSP Tax Saver Fund this year

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If you look at returns from your traditional tax-saving products, this tax-saving season, your choice may be narrowed. With the EPF, 5-year tax-saving NSCs, FDs, and PPFs all look at interest rate declines over the past year (which may go down again), market-related products such as tax-saver funds (DSP Tax Saver Fund) will now score more than a mile.

The DSP tax saver fund has been a steady performer but has moved up my list in the last few quarters. The fund’s return in the past year was 13.8%; since the category managed only 7% in this period.

Along with their tax-saving needs, investors with moderate risk tolerance should consider investing in DSP tax saver fund. Investment in the fund will provide you a deduction of up to Rs 1.5 lakh from your taxable income as per Section 80C of the Income Tax Act. Capital gains from these assets are tax-free. Given the tax deduction benefit available under Section 80C, ELSS funds have a lock-in period of just three years.

DSP tax saver fund suitability

Like all other tax-saving ELSS funds, DSP tax saver fund is an equity fund. It mainly invests in large-cap stocks, with a market cap and mid-cap and the remaining small stocks with a 70 to 75 percent stocks.

It carries a slightly higher risk to this extent than Franklin India Taxshield (which is a high risk for large-cap stocks), while both of these funds are in our medium-risk category. Investors with a lower risk tolerance would particularly like the Franklin Fund if they are new to equity funds.

DSP tax saver fund Performance

The DSP tax saver fund has a very consistent track record of beating the benchmark, which is the Nifty 500, with 100 percent of its returns assumed for a one-year time frame (for the last three years) and a 3-year time frame (over the previous five years).

It gives you confidence that you will get great returns in any time frame. Also, you can see fund returns in 10 years. This shows how consistent the fund has been for many years. The fund has consistently given 23.68%, 19.87%, 14.54% and 15.48% returns in 3, 5, 7 and 1o year timeframes.

In other schemes like NIFTY, Gold, and PPF, you can also test your returns; here, you will notice that you are getting almost double the profits than any other investment option.

The DSP tax saver fund managed this calendar better than many other funds. The fund mainly invests in quality large-cap stocks with an allocation of 73.7%, followed by small-cap – 10.7%, mid-cap 8.8%, and micro-cap 6.8%.

The fund is substantial for the current best-performing sectors, such as banking/finance (25.19%) and automotive (10.26%). In the competitive market of 2016, by holding the best midcap stocks — be it Finolex cables or IndusInd Bank or large-cap stocks like Maruti Suzuki India or State Bank of India – the fund gets its stock picks right, in the volatile market of 2016.

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