A tax saving mutual fund is a type of investment that offers investors benefits under Section 80C of the Indian Income Tax Act. In most cases, these funds invest in growth-oriented equity markets. While choosing a tax saving mutual fund, investors should consider several factors, including its risk grade, expense ratio, AUM, and rating. The best way to select the right tax saving mutual fund is to be patient, rather than chasing after returns that may not happen in the short-term.
In general, ELSS funds offer excellent returns, as they give investors a tax deduction under Section 80C of the Income Tax Act, 1961. Tax saving mutual funds have a three-year lock-in period, which may be a significant advantage for some investors. ELSS funds can be liquid compared to other Section 80C investments. There are several tax saving mutual funds, but not all of them provide good returns.
The best Tax Saving Mutual Fund is an Equity-Linked Savings Scheme (ELSS) that carries a three-year lock-in period, which is the minimum among all 80C eligible investment products. ELSS funds are known for their high long-term returns, and they can save you as much as Rs 46,800 a year in taxes. Investments can be made monthly or yearly, and depending on your goals and financial status, you can choose between a monthly investment plan or a one-time investment.
In terms of five-year annual returns, the Mirae Asset Tax Saving Fund ranks 2nd. Since 2013, it has consistently outperformed the category median. Over the last six years, it has never fallen below the bottom quartile. Compared to other mutual funds, this means that the fund has consistently outperformed its category average, so it may be a good choice for many investors. So which tax saving mutual fund should you choose?
The key to choosing the best tax saving mutual fund depends on your personal goals. The best mutual fund should provide regular dividend income, even during the lock-in period. Dividends from an ELSS fund can earn as much as 2X as traditional instruments. With these tax-saving options, the lock-in period is the lowest among all tax saving mutual funds. This makes ELSS the best choice for investors who want to invest regularly for several years.
The best tax saving mutual funds invest at least 80% of their assets in equities. These types of investment vehicles are also known as equity-linked saving schemes. They offer investors the opportunity to save up to 1.5 lakh dollars under Section 80C of the Income Tax Act. This makes it an excellent choice for those seeking tax relief and high returns. But be warned – equity investing is not for everyone. Equity investments carry a higher risk than fixed-income investments.
When choosing a tax-saving mutual fund, it is important to consider several factors. While performance is a primary consideration, many other factors are equally important. Expense ratio is a critical metric, as it shows how much is spent managing the funds. The lower the expense ratio, the higher the return. A fund with a lower expense ratio is a better investment option, but it’s important to keep in mind that past performance is not necessarily indicative of future performance.