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Need suggestions on HDFC ProGrowth Special -II

Date: 07 Feb 2016   Posted By: ranjith     Group: Finance and Investments    Category: Tax Planning   

Just 2 days back I have taken the "HDFC SL ProGrowth Super II" savings-cum-insurance unit linked plan worth of Rs 80000 to get tax benefits.For tax saving, this option is advisable for me? Please tax experts, tell me whether to invest in such type of plan or not?

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Author: Poulami    15 Mar 2016      Member Level: Bronze     Points : 4  (Rs 4)    Voting Score: 0

If you don't mind some harsh criticism of your investment decision, sir, let me tell you that a unit-linked insurance plan (ULIP) is not a good tax-saving product. In the terminologies of personal finance, ULIPs are 'complex products'. They offer insurance on the one hand, and investment on the other. Such products are never good.

For risk cover, always go to the plain vanilla term insurance policies. For wealth creation, invest in diversified equity mutual funds.

Now let us come to tax-saving. Under section 80C of the Income Tax Act, 1961, you can save tax in various products. If you pay premium for your life insurance (and remember to buy term insurance always), a portion of it can be deducted. If you invest in ELSS funds (Equity Linked Savings Scheme), it can be deducted. But if you follow my recommendation, I would say you should go for the PPF.

Given the E-E-E tax status, PPF is an excellent tool to handle the debt part of your retirement corpus. That way, you save tax on the one hand, and keep building your retirement kitty on the other.

You have not mentioned your age. If you are below 35-40 years of age, use a combination of ELSS and PPF for tax saving. If you are above that, max out your PPF (Rs 1.5 lacs p.a. as of now) which will take care of the debt part of your retirement portfolio. For the equity part, go to a diversified equity MF.

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