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Investing in Mutual Funds: The best way to save money on taxes

Mutual Funds investment not only brings you high returns but also helps you to save tax on your income. If you make investments in the Tax Saver Funds then you can claim deductions under section 80C of the Income Tax Act while computing your annual income. These funds give you a high return on investment with tax benefits. You can invest in the Tax Saver Mutual Funds and earn a good return on it. Therefore, here you must explore the tax benefits you can avail of through these funds and the types of tax saver mutual funds in which you can invest. You can also see the name of the top 3 mutual funds that can help you to enjoy tax benefits.

Tax Benefits of Tax Saver or ELSS Mutual Funds

Here you can explore the various tax benefits of investing in mutual funds:-

  • Get tax benefits under Section 80C of the Income Tax Act, 1961. 
  • According to Section 80C of the Income Tax Act, if you invest up to INR 1,50,000 in a financial year in Tax Saver mutual funds then you qualify for tax exemption. 
  • It can help you to save on taxes on your annual income. 
  • You can save up to INR 46,800 in a year on taxes if you invest in Tax Saver mutual funds. 
  • An additional investment over and above INR 1,50,000 per year does not qualify for deductions under Section 80C.

Mutual Fund Options

There are two options available in the Tax Saver Funds and you can explore them below:-

Growth Option

In the growth funds, the return you earn on investment is not given as dividends and they are reinvestment in the funds again. When you redeem the mutual funds and sell them then the profit will be realized. 

Dividend Option 

In the Dividend funds, the return you earn on investment is given as dividends on an annual, quarterly, or half-yearly basis and they are not reinvestment in the funds again. The amount of dividend you receive is not fixed and it is only given if the mutual fund generates profit. You should invest in the best mutual funds to generate a good profit every year.

Types of Tax Saver Plans

Here you can explore the name and some important details of the top 3 tax saver mutual funds that can help you to save taxes on your income.

HDFC Long Term Advantage Fund

  • You will need a minimum investment of INR 500 monthly.
  • The Expense Ratio of this Mutual Fund is 2.25.
  • The Risk is Moderately High in this Plan.
  • 2.27 is the Sharpe Ratio of this Fund.
  • The AMC of this mutual fund is HDFC Asset Management Company Limited.

BOI AXA Tax Advantage Fund

  • You will need a minimum investment of INR 500 monthly and it is one of the best mutual funds for SIP.
  • The Expense Ratio of this Mutual Fund is 2.56.
  • The Risk is Moderately High in this Plan.
  • -2.21 is the Sharpe Ratio of this Fund.
  • The AMC of this mutual fund is BOI AXA Investment Managers Private Limited.

PGIM India Tax Savings Fund

  • You will need a minimum investment of INR 500 monthly.
  • The Expense Ratio of this Mutual Fund is 2.46.
  • The Risk is Moderately High in this Plan.
  • 0.35 is the Sharpe Ratio of this Fund.
  • The AMC of this mutual fund is Pramerica Asset Managers Company Limited.

Conclusion

You have the best mutual fund to invest today and they will help you to save money on taxes. These mutual funds bring savings on taxes with a good return on investment. An investment for a long period of time in these funds can be beneficial for you.

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