Benefits of Tax Saving Mutual Funds

mutual funds

A prudent investor looks for three main benefits in every investment viz. saving, security and profits. As, the fiscal year ends, investors look for tax saving instruments, which is the best legal approach towards saving tax. According to SEBI, taxes implied on annual salary of a person are exempted if he/ she invest in tax saving mutual funds. Moreover, returns earned on such investments are also non taxable.

Advantages of tax saving mutual funds

Investing in equity linked saving schemes of tax saving mutual funds provides you twin benefits of return on investment and tax exemptions. It is great instrument of tax planning in which investment up to Rs 1 lakh is exempted from income under section 80C; however there is a lock in of three years before which investors can not withdraw invested amount. Apart from it, dividends received by investors are also tax free. Such investment is great for those looking for high returns through long term investment avenues. These investments are professionally managed by fund managers who invest it in a mix of large and medium sized stock having potential of long-term capital appreciation and growth.

Parameters for investment

Mutual fund investment is subject to market risks and one should consider following parameters to make right judgment for investment.

Performance of mutual fund: While investing in any tax saving mutual fund, it is essential to analyze the performance of investment on the basis of premium and consistency of the fund in the market within 3-5 year of its investment period.

Amount of return in comparison to other funds: Consider the amount of returns that the fund offers in comparison to other tax saving funds.

Hidden expenses: Investors should be aware of hidden expenses such as fund manager's income, marketing expenses, managing expenses, etc. to avoid overall losses on account of expenses.

Choose the most rewarding mutual fund: One should choose the investment which has highly rewarded its investors on per unit of risk taken by them.

Read and understand risk factors: Investment in mutual funds is affected by fluctuations in market. It is advisable to read and understand risk factors before taking any investment decision. If you want to know more about mutual funds investing. If you want to know more about fixed income fund, equity fund,private equity and other invetment plans pleas visit us at:-
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