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If you think mutual funds<\/a> help generate wealth by offering substantial returns, that’s not all they do. A certain type of MF also helps you save tax. Sounds unfamiliar? Allow us to weigh in! While it’s true that returns from most MFs are taxable, the ones from equity-linked savings schemes present a different story.<\/p>\n\n\n\n We’re not saying these funds are entirely tax-free, but you can claim a substantial tax deduction on them, the details of which are explained below.<\/p>\n\n\n\n Also called tax saving MFs<\/a>, the equity-linked savings scheme invests its majority corpus in equity or equity-linked instruments. What makes this fund popular is that you can claim a tax rebate of up to Rs. 1,50,000 on it. You can file the exemption under Section 80C of the Income Tax Act<\/a> (ITA).<\/p>\n\n\n\n This tax saving mutual funds comes with a mandatory lock-in period of three years. If you think this is a bothersome restriction, think again. Countless investors have found that this mandate has allowed them to inculcate financial discipline.<\/p>\n\n\n\n Anyway, market experts advise you to stay invested in this type of MF for at least 5 to 7 years. Why? Since these funds invest most of their stake in equity or stocks, they offer a moderate to high risk exposure.<\/p>\n\n\n\n To balance this out, a long-term investment is ideal. Several investors have observed that a long-drawn deposit in this MF offered them substantial returns compared to other tax-deductible instruments under Section 80C.<\/p>\n\n\n\n Additional Read: What Are ELSS Funds?<\/a><\/p>\n\n\n\n Tax-saving mutual funds are ideal for individuals looking to combine tax benefits with wealth creation. If you fall under a taxable income bracket and wish to save taxes<\/em> under Section 80C of the Income Tax Act, these funds are a great choice.<\/p>\n\n\n\n ELSS is particularly suitable for long-term investors<\/em> willing to accept a moderate level of risk, as it primarily invests in equities. Those planning for future financial goals<\/em>, like education or retirement, can also benefit from the dual advantage of tax savings.<\/p>\n\n\n\n Tax-saving mutual funds offer a dual advantage of tax deductions and wealth generation. With a relatively short lock-in period of three years, ELSS provides greater flexibility compared to other tax-saving options.<\/p>\n\n\n\n The potential for higher returns through equity investments further enhances its appeal for long-term financial growth.<\/p>\n\n\n\n ELSS (Equity Linked Savings Scheme) funds primarily invest in equities, offering potential long-term growth along with tax benefits. Here’s how they function:<\/p>\n\n\n\n Investing in tax saving mutual funds is simple and straightforward. You can invest directly through a fund house or via online platforms like Tata Capital Moneyfy to research and invest in funds of your choice. <\/p>\n\n\n\n Once you complete the KYC process, you can select a suitable fund based on your objectives and risk tolerance.<\/p>\n\n\n\n Before extending your financial portfolio to include this type of MF, make sure you know the following:<\/p>\n\n\n\n Additional Read: When is the Right Time to Sell Your ELSS Investment?<\/a><\/p>\n\n\n\n Investing in tax-saving mutual funds, like ELSS, offers multiple advantages-<\/p>\n\n\n\n Tax Benefits \u2013<\/strong> Investments up to Rs 1.5 lakh per year qualify for deductions under Section 80C of the Income Tax Act.<\/p>\n\n\n\n Short Lock-In Period \u2013 <\/strong>ELSS funds have a three-year lock-in, the shortest among all 80C investment options.<\/p>\n\n\n\n Flexible Investment Options \u2013 <\/strong>You can invest through a lump sum or via a SIP in weekly, monthly, or quarterly intervals.<\/p>\n\n\n\n Potential for Growth \u2013<\/strong> These funds invest primarily in equities, which may offer reasonable long-term returns compared to traditional tax-saving options.<\/p>\n\n\n\n Wealth Creation \u2013<\/strong> Over time, equity-linked investments may help build wealth while offering tax benefits.<\/p>\n\n\n\n Financial experts consider equity-linked funds as a great way to dabble into equity MFs. Due to a 3-year lock-in, it provides you with an initial taste of market volatilities and risk factors. Often, investors gain valuable experience of the equity market through these funds and go on towards investing in high risk and return equity MFs.<\/p>\n\n\n\n Want to start your Mutual fund portfolio online? If yes, then partner with Tata Moneyfy’s Mutual Fund app.<\/a> We provide a user-friendly digital portal through which you can compare and apply for MFs, SIPs and other financial instruments.<\/p>\n\n\n\n Click here to read about our services or start an investment now!<\/p>\n\n\n\nWhat is an Equity-linked Savings Scheme (ELSS)?<\/strong><\/h2>\n\n\n\n
Who Should Invest in a Tax Saving Mutual Fund?<\/strong><\/h2>\n\n\n\n
Why Should You Invest in a Tax Saving Mutual Fund?<\/strong><\/h2>\n\n\n\n
How Does ELSS Funds Work?<\/strong><\/h2>\n\n\n\n
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How to Invest in a Tax Saving Mutual Fund?<\/strong><\/h2>\n\n\n\n
Features of Equity-linked Savings Scheme (ELSS)<\/strong><\/h2>\n\n\n\n
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Benefits of Tax-Saving Mutual Funds<\/strong><\/h2>\n\n\n\n
The Bottom Line<\/strong><\/h2>\n\n\n\n