Are you looking for tax-saving investment options? If so, then you should consider mutual fund investments. Mutual funds offer several tax-saving opportunities to help reduce your tax amount each year. In this blog post, we will discuss how you can save tax with mutual fund investments. We will also provide tips on getting the most out of your tax savings!
Let’s get started.
What are Tax Saving Mutual Funds?
Tax saving mutual funds are investment vehicles designed to help you save on taxes. They work by investing in various tax-advantaged assets, such as government bonds and tax-exempt securities. Investing in these types of investments can minimize your tax liability.
You can invest in ELSS mutual funds to lower your tax liability. ELSS funds invest primarily in stocks. Thus, they offer the potential for higher returns. Hence, ELSS funds can provide higher returns as well as reduce your tax amount.
Ways to Save Tax with Mutual Funds Investment
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Tax Deductions
The first way to save tax with mutual funds is by taking advantage of tax deductions. Many investors are unaware that they can deduct the cost of their investment from their taxes. This can include the cost of purchasing the fund, as well as any fees associated with it. This can save you a significant amount of money on your taxes.
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Tax Exemption
You can get tax deductions on your investments in tax-saving mutual funds under Section 80C. One of the most popular tax-saving mutual funds is ELSS (equity-linked savings scheme).
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Indexation
Under indexation, the capital gains are indexed to inflation. This way, the tax liability on LTCG (long-term capital gains) from equity mutual funds is significantly reduced. To avail the indexation benefit, you must hold your units for at least 12 months before selling them. Short-term capital gains (STCG) from equity mutual funds are taxed at 15%, while LTCGs are taxed at 10% after indexation.
The Bottom Line
Tax saving mutual funds are a great way to save on taxes. There are different tax-saving mutual funds available, so it’s important to do your research and choose the right one for you. With a bit of planning, you can save a lot of money on your taxes with mutual fund investments.
