How mutual funds save tax?

April 06, 2017 InstaEMI 0 Comments

Equity linked savings scheme (ELSS) are the open-ended equity mutual funds with dual benefit of growth and tax saving. ELSS can be classified into two types as dividend scheme and growth scheme.

Features:

1. The minimum amount of investment depends on AMC but in general it can be around Rs.500
2. These plans allow SIP.
3. You can withdraw only after the lock-in period of 3 years is completed.
4. The return is not fixed and varies with the market situation.
5. Everyone having a taxable income can invest in ELSS to save tax.

Benefits:

1. Investments are eligible for tax benefit under Sec 80C of Indian Income Tax up to Rs. 1,50,000.
2. Long term capital gains from ELSS are exempt from tax.
3. You can withdraw dividends even during the lock-in period which is not subject to tax.
4. NRIs can also invest is ELSS.
5. When compared to other tax savings options such as ULIPs, NSC & NPS, ELSS give higher returns & lock-in period is shorter.

Before investing you must look at the long term performance, fund manager, portfolio of the fund, expense ratio of the fund and volatility of the fund in the past. Consult a financial advisor to know the best ELSS mutual funds.

Instead of large investments at the end of financial year, you can start a SIP in ELSS mutual funds.

Crunch your tax numbers.otherwise the tax monster might munch on them. Start Invest with www.InstaEMI.com