tax saving mutual funds offer investors an excellent way to reduce their taxable income while building long-term wealth. These funds fall under the Equity-Linked Savings Scheme (ELSS) category and provide tax benefits under Section 80C of the Income Tax Act.
What Are Tax Saving Mutual Funds?
ELSS funds are diversified equity funds that invest primarily in stocks and have a mandatory lock-in period of three years. These funds not only help investors save on taxes but also offer high growth potential.
Benefits of Investing in Tax Saving Mutual Funds
- Tax Deductions: Investors can claim a deduction of up to ₹1.5 lakh under Section 80C.
- Higher Returns: ELSS funds generally offer higher returns than other tax-saving instruments like PPF and FD.
- Short Lock-in Period: Compared to PPF (15 years) and NSC (5 years), ELSS has the shortest lock-in period of just three years.
Top Performing Tax Saving Mutual Funds
Some of the best-performing tax saving mutual funds include:
- Axis Long Term Equity Fund
- Mirae Asset Tax Saver Fund
- ICICI Prudential Long Term Equity Fund
- Aditya Birla Sun Life Tax Relief 96
- SBI Long Term Equity Fund
Conclusion
Investing in tax saving mutual funds is a smart way to reduce tax liability while growing wealth. However, choosing the right fund based on risk appetite and financial goals is essential.
