Thursday 2 June 2016

How To Choose The Best Tax Saving Mutual Funds In India

When it comes to money saving, tax saving investment schemes helps a lot in saving as much as possible. Tax planning is very important while deciding your monthly and annual house budget. If you are earning a taxable amount then you can take benefit of sec 80 C of the Income Tax Act which allows some tax relief if you invest into certain investment schemes. Best Taxsaving mutual funds or Equity Linked Saving Scheme (ELSS) is one of the popular investment schemes to yield the tax deductions.

What is tax saving mutual fund or ELSS?

This is an investment scheme which offers you twin benefits i.e. money growth and tax benefits. Since the equity market is growing therefore there is an increase in investment in ELSS.

Features of ELSS
·     
    It is a diversified equity mutual fund means your money will be invested in different government securities, bonds and stock but majority of the capital goes to equities. The maturity amount will reflect the returns from the equity markets.

·         It has a lock in period of 3 years from the date of investment.

·         One can exit ELSS by selling it after the lock in period (i.e. 3 years)
·         It has both dividend and growth options

·         Investors get a lump sum amount when lock in period is over in the growth scheme
·         In dividend scheme, investor get a regular income whenever dividend is declared even during the lock in period.

·         Returns from this scheme is tax free and you can claim up to 1 lakh of this investment as a deduction from your total taxable income in financial year under the Sec 80C of IT Act.

What to look for in an ELSS fund?

Since this is an equity mutual fund therefore you should do a thorough research before investing in any such fund. Here are some important things you should focus on:

·         Long term performance of the fund in market
·         Essential fund details like

§  Investment approach of the fund manager

§  Portfolio of the fund

§  Fund's expense ration

§  Volatility history of the fund

Benefits of ELSS as compared to other tax saving approaches (PPF, FDs, NSC)

§  small lock in period

§  gives you better returns

§  offers you an option of investing in SIP

Shortcomings of ELSS

§  Subjected to market risk

§  Can't withdraw the money before maturity date


If you are ready for investment and seeking more details along with financial expert's comments then visit fundsindia.com to see the list of top Indian mutual funds and the related information. Invest smart and stay happy!!

No comments:

Post a Comment