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4 Tips to save tax with mutual funds investment

When it comes to tax-savings schemes investors prefer ELSS funds over other investment options under section 80C. ELSS has unique advantages of mutual funds beyond tax-saving. Not only ELSS is the only viable tax-saving option but it also gives the benefits of high equity returns.

ELSS funds investment for better tax-saving benefits

ELSS funds couple the benefits of low-cost investment and a lower lock-in period of 3 years. For the beginners who want to have the taste of the equity market and first mutual funds investment, ELSS serves a better option. ELSS provides dual benefits – higher returns from the equity market at the same time security and low-risk investment of debt funds.

Financial advisors have often observed new investors turning to ELSS for mere the purpose of tax saving. However, the fabulous benefits of these schemes have investors continue to invest beyond the tax-saving purpose.

Plan your investments for tax-savings for the year

For better tax-saving benefits you should always start planning at the beginning of the financial year. Early planning will give you ample time to invest right and gain higher returns over the longer investment horizon.

Also Read: Things to know before investing in ELSS

Remember, even though you’re planning investments for mutual funds tax saving, it should be of additional benefit and not the only goal of your investments.

Simple tips to plan your tax-savings with ELSS mutual funds India:

Understand your investment appetite

Check your current tax-saving expenses such as insurance premiums, EPF contribution, and home loan installments. Understand how much amount you can invest in ELSS schemes that’ll give tax benefits and ample returns over the longer investment period.

Analyze the risk and calculate the investment amount

Choose tax-saving schemes based on your investment goals and risk appetite. Deduct this amount from the tax exemption limit of Rs 1.5 lakh. This will help you figure out how much amount you should invest to get the tax benefits under 80C.

Avail the combined benefits of ELSS and PPF

For the greater benefits and lucrative returns take the combined advantage of ELSS and PPF. This coupled together gives the stability of PPF and higher –returns through the equity market.

Consider continuing ELSS investments for better returns

You can keep investing in ELSS after the 3-year lock-in period for better returns. This continued investment will help you meet your financial goals along with gaining tax benefits in the long run.

Also Read: Fastest Way to Lose Money

Figure out how you can exhaust your 80C investment limit. Plan your financial goals and invest in diversified sectors to lower the market risks. Don’t wait until you reach the quarter of the financial year to plan your tax-saving investments. You may end up investing in wrong schemes in haste and suffer potential losses in the future.

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

1 Comment

  • In mutual funds,  you can save taxes under sec 80C by investing in ELSS funds. There the maximum deduction that you can get is up to 1.5 lakh per financial year, which results in saving tax of 45,000 (Excluding cess), if you come in 30% tax bracket

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