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Why Investment In Mutual Funds Is A Great Tax Saving Option

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Why Investment In Mutual Funds Is A Great Tax Saving Option

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Why Investment In Mutual Funds Is A Great Tax Saving Option

Mutual funds are professionally managed investment schemes that trade in diversified holdings and are funded by a number of investors sharing a common investment objective. There are several different types of mutual funds to choose from, so depending upon your investment objective select a mutual fund wisely.

There are plenty of advantages to investing in mutual funds, one of them being tax saving. However, not all types of mutual funds offer tax saving. Under Sec 80c of the Income Tax Act 1961, Equity linked saving schemes or ELSSs qualify for tax saving up to Rs 1.5 Lakhs. Although there are other ways to save taxes like, FD, PPF or National Saving Certificate (NSC). But, the main difference between such investments and mutual funds is that mutual funds not only help save on taxes but, also enable you to earn high returns, about 10 – 15%, on your investments. One such great equity fund ELSSs offering promising returns and tax advantage is Axis Long – term mutual funds saving scheme.

The other advantages of investing in taxing saving ELSSs over other traditional tax saving schemes is that ELSSs like Axis Long – term mutual funds saving scheme, offers the shortest lock in period of 3 years as compared with FD (which needs 5 to 12 years), PPF (lock in period is of 15 years) and NSC ( 5 years lock in period).

Even after the compulsory 3 year period Axis Long – term mutual funds saving scheme allows you to either liquidate your investment or stay invested. Financial experts believe that a person should take a long term view and stay invested for like 5 years in ELSSs as it lets your money compound.

Tax saving mutual funds also does not have any maximum investment period and the capital gains made on the investment are counted as Long – term Capital Gains (LTCG) and is tax free.

The next big advantage of tax saving mutual funds is that they invest nearly 80% of the money in stock markets, making it a lucrative investment option to accumulate wealth over a long period of time. And the mandatory three year lock – in period actually serves as a major advantage in tackling the volatility of the stock market.

Investing early in tax saving mutual funds also helps a person in better planning their SIP or systematic investment plan to avoid cutting corners in a liquidity crunch scenario. SIPs help a person to be disciplined about their finances and avoid feeling the pinch.

Tax saving mutual funds also has their shortcomings but, the benefits of such scheme far outweighs any risks involved with it and are a great way to start investing. Taking calculated risks and earning high returns is always advisable than letting your money sit idle. So research properly and start investing in tax saving mutual funds to save and gain money simultaneously.

Muhammad Mubeen

Muhamamd Mubeen is Onwer of Strong Article. I quickly figured that I wanted my work to matter. To make a difference in somebody's life. That is why I've devoted myself to helping entrepreneurs market in relevant way, because those deeper connections with prospects and leads will turn into more customers. That added value to your business enables you to go out and create an even bigger impact and the value you've provided your customer enables them to do the same.

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