Exploring Tax Saving Opportunities with Mutual Funds

Everyone likes an efficient tax system when investing and saving on life’s journey. As you grow your capital, why not save on your taxes, too? Regarding this, one of the most popular options to save taxes is the tax saving mutual funds. They are also called Equity Linked Saving Schemes or ELSS. They are responsible for giving you tax benefits and enough market exposure, which will allow you to maximize your tax liabilities. So, let’s discuss all about tax saving opportunities with mutual funds in detail. 

What are Tax Saving Mutual Funds?

Tax-saving mutual funds are quite similar to ELSS, which offers the benefit of saving tax. These funds help all types of investors, including HUF and individuals, to save taxes under the Income Tax Act 1961, section 80C. Some of the benefits of tax-saving mutual funds are: –


  1. The biggest benefit that you get is a reduction of up to Rs. 1.5 Lakh on your investment with a tax-saving mutual fund. 
  2. Since these mutual funds are very versatile, they offer various investment options to select from. This means by analyzing your investment risks and goals, you can choose the options that suits you.
  3. All your Tax Saving Mutual funds are articulated by professional managers. Hence, when you are investing your money, you need not worry. The professionals ensure you gain quality market exposure and check your investments regularly.
  4. The fun part about these tax-saving mutual funds is that they are liquid. Which means you can buy or sell assets anytime you wish to. 
  5. Since Tax Saving Mutual funds do not have too much expense ratio, you can easily keep a hefty return to yourself.

Types of Tax Saving Mutual Funds

  • ELSS or Equity Linked Schemes

The ELSS is all about investments. With this option, you can invest in different shares of different companies. They promise a higher return rate over a longer period. With ELSS, you also benefit from the shortest lock-in period, which is just three years and the foremost advantage is that you can also avail tax benefits from them.

  • Debt Oriented Tax Saving Mutual fund

If you are looking for a more compact and conservative investment approach then the Debt Oriented Tax Saving funds are perfect. This allows you to legally invest in debt bodies like security and corporate bonds. They provide stable returns and a lock-in period of three to 3 years. This type of fund investment is less risky, but it also generates comparatively lower returns.

  • Index Funds 

If you are investing in Index Funds or exchange-traded funds, you will notice that these are pretty tax-efficient. Even though they have lower turnover and a lower capital gain, it still helps a lot. If you are capable of holding them for over a year, the EFTs will gain you long-term capital gains of Tax rates.

The Bottom Line

Saving costs on tax is a pretty popular goal of the leading generation, and hence, before doing so, one needs to be familiar with the entire concept. So, it is advisable to go through all the available information and then also take proper advice from professionals in the field. They are capable of helping you to align your tax goals, tolerance, and situation to provide you with optimized returns. Since laws keep on changing, it is important to stay up to date or avoid any misinterpretations.