Introduction
Saving tax is an essential aspect of financial planning, and mutual funds offer several tax-saving opportunities. Here are the details on how mutual funds can help you save tax:
Invest in Equity-Linked Saving Schemes (ELSS)
ELSS mutual funds are equity-oriented mutual funds that invest a significant portion of their corpus in equity and equity-related instruments. ELSS funds come with a lock-in period of three years, and investments in these funds qualify for tax deductions under Section 80C of the Income Tax Act, up to a limit of Rs. 1.5 lakh. ELSS funds have the potential to generate higher returns in the long term, making them an attractive option for tax-saving investments.
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Save tax on long-term capital gains
ELSS mutual funds are equity-oriented mutual funds that invest a significant portion of their corpus in equity and equity-related instruments. ELSS funds come with a lock-in period of three years, and investments in these funds qualify for tax deductions under Section 80C of the Income Tax Act, up to a limit of Rs. 1.5 lakh. ELSS funds have the potential to generate higher returns in the long term, making them an attractive option for tax-saving investments.
Use dividend payout option to save tax
Investors can opt for the dividend payout option in mutual funds to save tax. Dividends received from mutual fund investments are tax-free in the hands of the investor. However, it is essential to note that dividends received from mutual funds are subject to a dividend distribution tax (DDT) of 10%.
Invest through Systematic Investment Plans (SIPs)
Systematic Investment Plans (SIPs) are an effective way to save tax through mutual fund investments. Investors can invest a fixed amount at regular intervals in mutual funds through SIPs, and each SIP investment qualifies for tax benefits under Section 80C of the Income Tax Act. Moreover, SIPs help inculcate the habit of regular savings, which is beneficial in the long term.
Save tax on interest income with debt mutual funds
Investments in debt mutual funds can help investors save tax on interest income. Interest income received from investments in debt mutual funds is taxed at the investor’s slab rate, which can be higher than the tax rate on long-term capital gains. However, investments in debt mutual funds held for more than three years qualify for long-term capital gains, which are taxed at a lower rate than interest income.
Conclusion
mutual funds offer several tax-saving opportunities that can help investors save tax and achieve their long-term financial goals. At Glucks Wealth, our financial advisors can help you choose the right mutual fund schemes that match your tax-saving goals and investment horizon. Contact us today, and let us help you plan your tax-saving investments.
