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What are the features of tax saving mutual funds?

elss                    27,100
elss mutual funds                    22,200
tax saving mutual funds                    14,800

Tax saving mutual funds are similar to any other mutual fund, but it comes with an additional benefit – tax savings under Section 80C. The special feature and major attraction for investors here is that investments made in these mutual funds are eligible for tax benefits under Section 80C of the Income Tax Act 1961. ELSS schemes, which have a lock in period of 3 years, make investments in equities and can be treated as diversified mutual fund schemes.

Big or small, everyone has financial goals that they want to accomplish, be it buying luxury items, wealth creation, buying a house, buying a car, foreign education, child’s higher education or any other goals. There are some goals you are able to fulfil with your current income but others, you may not be. However, with bit of planning, disciple investing and patience, all of these can be achieved.

Savings on their own, are not enough. And mostly investors, get attracted to do so in a hurried manner and invest without any planning. When the markets looks good, they follow the market trends and invest with a herd mentality. Likewise, when the markets become volatile, they worry about their investments and take investment decisions without understanding much about it. With the right planning and responsible investing, dreams can be fulfilled, goals can be achieved and commitments can be taken care of. Today you be able to meet your expenses, but given inflation, are you prepared for tomorrow or the near future? The secret to fulfil most goals and dreams lies in your finances, how you invest and how patient you are throughout the process.

If your goal happens to be long term wealth creation and you also want to save taxes, then ELSS mutual funds, is the best avenue to choose.

What are the feature of ELSS funds?

Let us take a look at some of the important features of this mutual fund investment

  • A minimum of 80% of the total investible corpus is invested primarily in equities and equity-related instruments.
  • There is no limit on the investment tenure. But, there is a lock-in period of three years, during which the investors cannot redeem the funds.
  • Tax exemption is prevalent on the investment amount of Rs 150,000 under Section 80C of the Income Tax Act 1961.
  • Profits are treated as long term (applicable to equity mutual funds) as the investment period is 3 years.
  • ELSS mutual funds as a category has given excellent returns historically. In the last 3, 5 and 10 years period, ELSS schemes as a category has given over 14.5%, 9% and 14% annualized returns respectively, which is quite higher than traditional tax saving investments (Source: – returns as on Dec 24, 2022)

The examples above prove that ELSS mutual fund investments help investors to get higher returns, save taxes and continue the process hassle free and devoid of any direct risks. Apart from these benefits, they also have the shortest lock in period, as compared to other tax saving instruments in the market. Also, you can start investing with as low as minimum Rs 500 to start with, and also you can invest through SIP or through one-time investment.

ELSS mutual funds are an attractive investment option for investors who want to enjoy both tax savings and create wealth in the process. In this read, we focused on some general features of ELSS mutual funds as well as its benefits.

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