Can I Withdraw Money in Reliance Tax Saver only after Six Years?

Facts about Reliance Tax Saver

The Reliance Tax Saver is an ELSS scheme and is different from other similar schemes. Firstly, this scheme can invest across various market segments. And furthermore, it has a concentrated portfolio, investing in stocks that tend to have lesser liquidity.

Performance of the Reliance Tax Saver

Long-term capital appreciation is one of the primary goals of the scheme. This scheme invests prominently into equity and other related instruments. The fund gives a three-year return of 6.48 %, a five-year return of 16.48 %, a ten-year return of 15.4 % and has given returns of 13.66 % since it came into play. The fund is highly volatile, but it has outperformed the category benchmarks as well as the category average.

Basic Facts about the Reliance Tax Saver

The Reliance Tax Saver started as an equity ELSS fund in September 2005. There's no exit load, and the fund has a NAV of Rs. 57 in the growth option and Rs. 20 in the dividend option. The minimum investment amount for the Reliance Tax saver stands at Rs. 500. The fund carries an expense ratio of 2.23 % as of 2018. Mr. Ashwani Kumar has been the manager of the fund for over 12 years.

The fund invests in mid- and small-cap sectors including financial, automobile, metals, engineering as well as the construction sectors.

Should an Investor Consider the Reliance Tax Saver fund?

The fund has an affinity towards investing in only small- and mid-cap segments. At the start of the current year, it has got off to a rough start. The fund tends to invest more in its top performing sectors and has a highly biased portfolio.

The fund currently invests rather heavily in the automobile as well as engineering and metal sectors. The fund shifts its investments according to the existing market conditions and hence, so far, it has been able to deliver higher returns than its counterparts, and this is mostly when the markets are heading north.

The returns are devastating when the markets tend to tumble. Volatility to this degree may not be sustainable for every investor out there.

How does the Reliance Tax Saver Compare to its Peers?

As stated earlier, the year 2019 hasn't been off to a good start for the Reliance Tax Saver Fund. However, this fund has been seen to underperform ever since its launch. For example, the five-year performance of this fund stands at 17.15 % as compared to the Invesco India Tax Plan, which was started in December 2006 and has performed way better, currently standing at over 18 % five-year returns.

Likewise, if you compare the Reliance Tax Saver Fund to the JM Tax Gain Fund, the five-year return stands at 17.53 %, higher than the Reliance Tax Saver Fund, which stands at 17.15 %. However, when you compare the Reliance Tax Saver Fund to the L&T Tax Advantage Fund, the three-year returns are still way higher at 15.28 %. However, the five-year returns of the L&T Tax Advantage stand at 16.1 %, lower than what the Reliance Tax Saver gives in five-years.

Reliance Tax Saver Fund: Should you go for Dividend or Growth Option?

The Reliance Tax Saver Fund is an open-ended fund, and it has a lock-in period of three years. The fund is a great investment for all those who want to save taxes. And as such, the fund comes with three investment options for the investors' satisfaction.

Long-Term Capital Growth with the Direct Plan

The Reliance Tax Saver Fund is an open-ended fund in the direct plan whose objective is to create long-term growth. It invests most of the funds into equities and related instruments. Investors should prefer this option due to its low expense ratio. And this low expense ratio has nothing to do with the high Net Asset Value or NAV. Therefore, the fund generates higher returns for long-term investments.

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Direct Plan not your Cup of Tea? Go for the Dividend Option

As the name suggests, the investor receives certain amounts of dividends on his or her investments through this option and that too if the Reliance Tax Saver Fund declares it. There's also a payout sub-option in the dividend option, which directly pays out the dividend accumulated through the investment to the investor's bank account. The reinvestment sub-option reinvests the accumulated dividend by converting units of same value and adding them to the existing fund units.

Reinvest with the Growth Option

In the growth option, there's no dividend payout, and the funds gained are reinvested back into the scheme. This is bound to increase the NAV or Net Asset Value of the scheme, thereby increasing capital appreciation. The investors can then redeem this capital appreciation as per their requirements.

Reliance Tax Saver: A Safe and Transparent Scheme

The Reliance Tax Saver fund has been around for a while in the markets now and is considered a safe and transparent fund to invest in. It is an ELSS scheme with no hidden costs and no worry of incurring huge losses.

The Fund Poses Minimal Risks

Like any other open-ended equity funds, the Reliance Tax Saver fund too has come with its own set of risks on market conditions and volatility. But rest assured, they are minimal, and the long-term capital gains are bound to make it worth taking risks.

Minimal Formalities Involved

The formalities involved in processing the application for investing in the Reliance Tax Saver Fund are done online and are hassle-free.

Save Money on Capital Gains Tax

The Reliance Tax Saver fund is one of the most popular funds because it helps the investors save on tax and primarily the capital gains tax. The capital gains tax amounts some money and is paid for every sale of a commercial or residential building. So, by investing in the Reliance Tax Saver plan, the investor can save up to 50 % on the capital gains tax.

Smooth Investments with SIPs

The investments can be structured by going for SIPs or the Systematic Investment Plans. With the Systematic Investment Plan in place, an investor can make monthly, quarterly, half-yearly or yearly investments, as per his or her convenience. What's more? These SIPs or Systematic Investment Plans can be started or stopped at any time during the investment.

People of any age can Invest

This is perhaps one of the most vital features of the Reliance Tax Saver Funds, as it allows for people of every age to invest and benefit out of it. It even helps people who have invested in the fund save on taxes.

Quicker Payouts

The payouts for the dividend option of the Reliance Tax Saver are faster than most other funds of similar nature. The dividends are paid to the investors in every financial quarter. The dividends come to the bank accounts of the investors through ECS or electronic checks.

Free access to the ELSS Fund Calculator

The mutual fund calculator is a free and easy-to-use tool for the Reliance Tax Saver Fund. Therefore, investors can make use of them at any time to find out how many returns they would get out of their investments.

An Easy and Efficient System of Signup

The process for signing up for investing in the Reliance Tax Saver Fund is quick, easy and accurate. There's instant processing of applications, and those who are eligible to invest in the fund are given their login details without any hassles. However, applicants are advised to share their investment history openly without hiding anything. But if the authorities find anything suspicious or if any foul play is detected, then the applicant is eligible for termination, and can't invest in the fund ever again.

So, in all, the Reliance Tax Saver is a gem of a fund to invest in. Coming with a lock-in period of three years, the investor can hold his or her investments up to five years before withdrawing them if invested in Systematic Investment Plans or SIPs. The Reliance Tax Saver fund comes with many such advantages including saving on capital gains taxes for the investor as well as a smooth investment, not to mention, investment procedure.

Furthermore, long-term investments into the scheme can generate higher returns, as with all other open-ended funds. However, the fund does come with its own set of risks. But these are minimal compared to other funds in the same category. So, investing in the Reliance Tax Saver for the long-term can prove to be beneficial for the investor regarding the returns generated.

Helpful Resources: Online Income Tax Calculator