All You Need to Know About Tax Saving Mutual Funds

Tax saving mutual funds in India - benefits
Tax saving mutual funds offer significant benefits for investors.

Citizens of any country have to pay a percentage of their income in tax. That tax contribution goes towards the development of their country. However, just because you pay taxes does not mean that you cannot create an investment portfolio and secure your wealth. Such financial instruments as tax saving mutual funds can help reduce your tax burden while at the same time increasing your personal wealth.

Many of us are confused about taxes. However, there is a basic principle that all governments abide by: whenever we earn an income, there will be tax to pay.

To reduce our tax burdens, financial experts have come up with an effective solution in the field of mutual funds. These funds can help reduce your tax bill. How much tax you save depends on the type of mutual fund investments you choose. Tax rates vary from person to person.



Concept of Equity on Equity Funds

We refer to the capital gains in the equity fund of tax saving mutual funds investment as long-term gains. This is because you have to hold them for twelve months. If you opt for this type of tax saving mutual fund in India, your long-term gains will be completely devoid of tax. In other words, holders of tax saving mutual funds in India are not liable for long-term capital tax gains.

Pros of Tax Saving Mutual Funds

We have listed below some major benefits of tax saving mutual funds. These benefits can help people regardless of their financial status:



  • Exposure – There is hardly any better alternative than ELSS to cope with the ever-rising inflation rate. ELSS funds hold fewer risk factors at the time of getting equity exposure. Moreover, these tax saving mutual funds with high returns have a greater degree of equity compared to other assets over the long-term.
  • Tax Saving under 80C – The legal framework enables people to save up to Rs. 1,50,000 with these tax saving mutual funds. You can get discounts of up to around 5%, 20% & 30% which can lead to savings of up to Rs. 7,500, Rs. 30,000 and Rs. 45,000, respectively.
  • No Tax on Returns – Mutual fund investments are generally tax-free, high returns on tax saving mutual funds are free, and the investment of these tax saving mutual funds online can be redeemed only after 36 months.

Apart from these three benefits, mutual fund investments offer the lowest lock-in option for around three years, which is significantly less than other mutual fund investment options. You can also make mutual funds investments online where you can purchase ELSS funds by creating a SIP (systematic investment plan).

Popular Tax Saving Mutual Funds

Several financial institutions offer higher returns and take care of people’s finances on a large scale.



  • Axis Long Term Equity Fund – In order to generate long-term capital gain and help you gain a diversified portfolio of equity, this particular mutual fund investment can be helpful on a large scale. Focusing on the stocks of the organization with quantifiable business growth, it can offer high returns along with a steady income. However, the performance of this mutual fund declined slightly over the past few years because it reduced investments in cyclical sectors and stocks. Fund size is Rs. 15,408 crores – risk levels for consumers are relatively low.
  • IDFC Tax Advantage ELSS Fund – Initially providing 22% returns, this mutual fund has finally made its mark in the highly competitive market. If you invest Rs. 1,000 every month through the SIP mode, your investment amount would be Rs. 60,000 within five years. According to Crisil Mutual Fund Ranking, this mutual fund has made its rank in the lowest category. Through Crisil Mutual Fund Marketing, the fund investment has secured the lowest position where the fund size is sRs. 800 crores.

Apart from these two funds, you can go for Tata Tax Advantage Fund, Franklin India Taxshield Fund, DSP BR Tax Saver Fund, and Invesco India Tax Fund, which are popular tax saving mutual funds among users. Nonetheless, consulting with agents will give you a a better understanding of the benefits of specific mutual funds.

There are definitely high returns from investments in mutual funds, as well as significant tax-savings. However, to stay updated regarding the benefits of tax saving mutual funds, keeping in touch with agents is crucial. In this context, you should know that in the Budget 2018 proposal, the short-term gains can be redeemed before one year. Hence, your focus should be on choosing the best tax saving mutual funds, i.e., those that give you the greatest savings.