A mutual fund is a collective investment that is professionally managed by a fund manager. Investing in mutual funds should ideally be about maximising savings as well as getting hefty returns. As an investor, you must identify your needs and goals for the investment. Is it for a secondary income source, to fund your child’s education, or for your retirement? Knowing this will allow you to choose the most appropriate investment options and reap fantastic benefits.

Diversify your portfolio with Bajaj Finserv to enjoy tax benefits and favourable returns at the best interest rates.

A Look at the Top Tax-Saving Mutual Funds in India

Tax-saving mutual funds are also known as Equity Linked Saving Schemes (ELSS). The primary objective of these funds is to provide a tax rebate under section 80C of the Income Tax Act. They are also exempt from long-term capital gains taxes.

The Government of India increased the tax rebate from INR 1 lakh to INR 1.5 lakhs in 2015. For an ELSS, the minimum investment period is 3 years and, if the fund does well, it offers benefits of up to INR 1 lakh. ELSS funds offer 13% to 22% returns per annum averaging at 17.5%. Owing to these reasons, ELSS is one of the top tax-saving mutual funds of 2015.

Other popular tax saving investments include:

  • Tax-Saving Fixed Deposits – With these, you can benefit up to INR 1 lakh but the interest earned from fixed deposits is taxable.
  • Home Loan Principal – Under section 80C, the principal amount on a home loan is eligible for a maximum deduction of INR 1.5 lakhs. This is, however, not applicable for properties under construction and commercial properties.
  • National Savings Certificate (NSC) – These allow investments as low as INR 100 with a rate of interest at 8.5% for 5 years and 8.8% for 10 years. You can save up to INR 1 lakh under this scheme.
  • Rajiv Gandhi Equity Saving Scheme (RGESS) – This is a good option for first-time investors as it offers tax savings of up to 50% of the invested amount for the first year. The maximum deduction is INR 50,000 and can only be claimed by individuals whose annual income is below INR 10 lakhs. Read More: Few Important Things About Mutual Funds

Due to its relatively minimal lock-in period of 3 years, ELSS is a better investment over Public Provident Fund (PPF) which is locked in for 15 years, National Savings Certificate (NSC) which is locked in for 6 years, and fixed deposits which are locked in for 5 years. Also, ELSS might offer better returns over the long term as it is an investment in equity markets. Read More: Reliable Investment Through Mutual Funds

5 Things to Consider Before Investing in Mutual Funds

An intelligent investment is one where you are well-informed of the risks and expenditures associated with mutual funds.

  1. Consider the current financial situation of the market that you are investing in.
  2. Choose an experienced fund manager with a consistent record of delivering good results. A good fund manager will keep you informed about the anticipated trends and prospects of the fund in the market.
  3. The current performance of the mutual fund should be investigated to reduce possible risks. Look for the premium, mutual fund rates, and consistency of the fund in the market.
  4. Compare the returns of the fund with other tax-saving investments.
  5. Explore hidden expenses such as the fund manager’s commission, marketing expenses, etc.

Easily invest in mutual funds with Bajaj Finserv to avail of a professional, transparent, and diverse portfolio that is customised to suit your needs. Bajaj Finserv has a distribution tie-up with 14 renowned asset management companies (AMCs) that you can choose from when investing in mutual funds.

Investing in mutual funds need not be an overwhelming task. Knowing your goals and the risks involved is the primary step to profitable investments. But remember that you aren’t in direct control of the fund, so a knowledgeable and competent fund manager will increase your chances of getting substantial returns.

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