Are All Mutual Funds For Equities Tax Saving?

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By utilising the skills and knowledge of qualified investment managers, these investment solutions allow investors to participate in various financial instruments. The best feature of these investing tools is that they provide higher returns than traditional investment options like FD.

Equities Tax Saving

What are Tax Saving Mutual Funds?

A mutual fund is a particular kind of business that gathers and pools money from different investors with similar investment goals and then invests it in various financial instruments, such as stocks and bonds.

Like other mutual funds, tax-saving mutual funds have an additional advantage. Section 80C of the Indian Income Tax Act allows an individual to take advantage of tax benefits on certain mutual funds. You will have a double benefit from investing in tax-free mutual funds because you will not only be able to earn larger returns but also have your tax liability reduced.

Are all equity funds ELSS schemes?

ELSS is the only equity mutual fund programme whose investments may be used as evidence of investment for tax benefits. However, long-term capital gains from equities mutual funds are exempt from taxation if they are less than Rs. 1 lakh. Additionally, a 15 per cent tax on all short-term capital gains is applied to other equity funds.

Similar to equity mutual funds in general, ELSS offers a variety of investment alternatives. You can start a monthly SIP or make a one-time lump sum contribution at the start of the investment cycle, depending on your risk tolerance, investment objective, and income flow. Anyone who intends to instil the discipline of frequent investing may find that a systematic investment plan is the best course of action.

An investor can use SIP to keep investing in any scheme of mutual funds of their selection until their investment goal is met.

A systemic investment plan is a method for making frequent, small-scale ELSS fund investments. With SIP, you can save tax and steadily amass wealth as you will be investing for a least 36 months.

Additionally, investors are welcome to use the SIP calculator, a free and open-access online tool, to acquire a ballpark estimate of the returns they will receive after finishing their investing trip. SIPs are adaptable since you can change the amount you invest each month, skip a month, or do both.

Features of ELSS funds

The primary characteristics of ELSS mutual funds are as follows:

  • Under Section 80C, they provide tax breaks of up to Rs 1,50,000 annually.
  • 3 years is the lock-in period for ELSS funds, and there are no provisions for an early withdrawal.
  • There is no maximum investment amount in ELSS, but different fund firms have other minimum investment requirements.
  • The only tax-saving asset that has a chance of providing returns that can outpace inflation is an ELSS fund.
  • Tax deductions and wealth building are two advantages of investing in ELSS funds.
  • An ELSS fund’s portfolio is primarily made up of stocks, while they also have some access to fixed-income assets.


Many fund houses provide tax-saving mutual funds, but choosing the right one for your needs and goals requires expertise, so naming one mutual fund as the ideal tax-saving mutual fund would only be fair to some.

Before choosing a mutual fund, one should consider their time horizon, investing goal, and risk tolerance. Before making a choice, one should also remember to look into the following characteristics of the mutual funds:

Assets Under Management (AUM), Historical returns: The greater, the finer; Portfolio Turnover Ratio, Expense Ratio: The lower, the better, Sharpe Ratio: The higher, the better; and Portfolio Concentration are all positive indicators. 


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