123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Stock-Market-Future-Market-Commodity-Market >> View Article

Insights Into Tax Saving Mutual Funds

Profile Picture
By Author: Shreya
Total Articles: 5
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

Tax Saving Mutual Funds, popularly known as Equity-Linked Savings Schemes (ELSS), offers a dual advantage of potential returns and tax benefits. They provide an opportunity for capital appreciation and enable investors to save taxes under Section 80C of the Income Tax Act. However, there are other things an investor should know about them before investing.


So, here is a quick guide covering valuable insights into Tax Saving Mutual Funds to expand your understanding.

Tax Benefits under section 80C

Tax Saving Mutual Funds offer investors the benefit of tax exemption, as mentioned in Section 80C of the Income Tax Act. It allows them to deduct investments up to Rs. 1.5 lakh from their taxable income. This reduces the overall tax liability, providing an avenue for tax planning while fostering wealth creation. By investing in ELSS, individuals can lower their tax burden and simultaneously participate in the potential growth of the equity markets.

Lock-in period

Unlike traditional tax-saving instruments like ...
... Fixed Deposits or Public Provident Funds (PPF), Tax Saving Mutual Funds have a lock-in period. Investors cannot redeem their investments before the completion of three years. It is essential to know this lock-in period and plan investments accordingly. While it restricts liquidity in the short term, the lock-in period helps align investors' interests with long-term wealth creation, encouraging a disciplined approach to investing.

Potential for capital appreciation

Tax Saving Mutual Funds predominantly invest in equity instruments, aiming for long-term capital appreciation. They expose the stock market's growth potential, making them suitable for investors with a higher risk appetite and a long-term investment horizon. By investing in well-managed funds with a track record of delivering consistent returns, investors have the potential to earn higher returns compared to traditional tax-saving instruments.

SIP option

SIPs offer a convenient way to invest in Tax Saving Mutual Funds. By investing a small, fixed amount at regular intervals, investors can benefit from rupee-cost averaging and potentially reduce the impact of market volatility. They also allow investors to stagger their investments over the year, mitigating the risk of investing a lump sum during uncertain market conditions. In this manner, the SIP option ensures a disciplined and consistent investment approach.

Consideration of risk

Tax Saving Mutual Funds, being equity-oriented, carry a certain level of risk. The value of investments can fluctuate based on market movements, impacting the overall returns. Investors must understand their risk appetite and choose funds accordingly. Diversification across different funds and sectors can help mitigate risk. Additionally, a long-term investment horizon allows investors to ride out short-term market fluctuations and potentially benefit from the compounding effect, reducing the impact of volatility.

Monitoring and reviewing

Investors should keep track of the fund's performance, fund manager changes, and changes in their financial goals. The periodic review ensures that the chosen funds are aligned with the investor's risk profile and financial objectives. It also allows you to rebalance the portfolio, if need be, depending on changing market conditions or personal circumstances.

Total Views: 135Word Count: 507See All articles From Author

Add Comment

Stock Market/Future Market/Commodity Market Articles

1. Zero Fuel Aviation Market Research Report: Industry Insights And Growth
Author: Delvens

2. Lung Cancer Surgery Market Research Report: Industry Size And Trends
Author: Delvens

3. Automotive Conformal Coatings Market Research Report: Size And Growth
Author: Delvens

4. Collision Avoidance System Market In Mining Sector: Research Report Size, Growth, And Industry Insights
Author: Delvens

5. Building Envelope Adhesives & Sealants Market Research Report: Examining Revenue Trends
Author: Delvens

6. Lithium Cobalt Batteries Market Research Report: Industry Growth Forecast
Author: Delvens

7. Plastic Surgery And Integumentary System Market Research Report: Industry Report On Size And Growth
Author: Delvens

8. Outage Management System Market Research Report: Size, Growth, And Revenue Trends 2028
Author: Delvens

9. Enterprise Resource Planning (erp) Market Research Report: Size And Growth Trends
Author: Delvens

10. Plant Factory Market Research Report - Key Trends And Forecast Analysis
Author: Delvens

11. Icici Bank – Record-breaking Growth In Digital And Payments Platform
Author: andy

12. Unlock Your Potential In The Stock Market India
Author: Wizprout Digital

13. Experience The Power Of Play-to-earn With Free Axie Infinity Clone Script
Author: esila

14. User What Is Stock Exchange?
Author: Rahul Varma

15. How To Grow Your Business With Digital Payments?
Author: Pooja loganathan

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: