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Tax-Saving Mutual Fund: The only mutual fund plan that saves tax and also has the lowest lock-in option.
Tax-Saving Mutual Fund Plan: Here’s a mutual fund investment that allows you to claim a tax deduction under Section 80C of the Income Tax Act, and the lock-in period is the shortest among all tax-saving strategies available under this section. Read the details.
Tax-Saving Mutual Funds: Investing in the equity market can yield good returns, and conservative investors often incorporate equity market exposure into their portfolios through mutual funds. However, one drawback is that investments in these schemes offer no tax deduction, except for one option. Here, we’ll discuss one mutual fund option, ELSS (Equity Linked Savings Scheme), which can yield good returns. While tax benefits are available, returns aren’t necessarily inferior to other mutual fund options; rather, strong returns can be achieved while beating inflation. Furthermore, another notable feature is that this scheme has the lowest lock-in period among all the tax savings available under Section 80C of the Income Tax Act in the old tax regime.
What are the tax benefits of investing in ELSS?
Under the old tax regime, one can claim deduction on investments up to ₹1.50 lakh in a financial year under Section 80C of the Income Tax Act on investments in ELSS mutual funds.
On redeeming holdings of more than one year, i.e. Long Term Capital Gain (LTCG) with profit exceeding ₹1 lakh, tax will be levied at the rate of 10%, while on redeeming holdings of less than one year, i.e. Short Term Capital Gain (STCG) at the rate of 20%.
There is no TDS (Tax Deducted at Source) on redemption of ELSS units.
Apart from tax benefits, what are the other features?
ELSS is the only mutual fund plan that offers tax benefits.
Another important thing is that among all the investment options under Section 80C, this one has the shortest lock-in period. For example, PPF has a lock-in of 15 years, while tax-saving FD has a lock-in of five years, but in the case of ELSS, it is only three years.
There will be no exit load on selling units in ELSS after the lock-in period is over.
In this, if you want, you can invest lump sum or by doing SIP i.e. by investing little by little at regular intervals, you can create a good fund in the long run.
How is it in terms of returns?
ELSS also offers strong returns. Based on just three years, Motilal Oswal ELSS Tax Fund Direct Growth has grown at an annualized rate of 23.84%, ITI ELSS Tax Saver Fund Direct Growth has grown at an annualized rate of 19.45%, Whiteoak Capital ELSS Tax Fund Direct Growth has grown at an annualized rate of 18.63%, HSBC ELSS Tax Saver Fund Direct Growth has grown at an annualized rate of 18.34%, and JM ELSS Tax Saver Fund Direct Growth has grown at an annualized rate of 18.27%.
Disclaimer: The information provided here is for informational purposes only. Always seek expert advice before investing. Moneycontrol never recommends investing in any investment.
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The post Tax-Saving Mutual Fund: The only mutual fund plan that saves tax and also has the lowest lock-in option. first appeared on informalnewz.
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