Why is tax saving mutual funds best?

For an average middle class salaried employee, investments are a scary concept and many people tend to lose their money while making investment. Nonetheless, with the introduction of mutual funds, small investors can put their money in large market where chances of losing money are very low. Along with making investments there are certain best tax saving mutual funds, which exempt investors from paying a definite portion of income tax.

A tax saving fund is also known as Equity Linked Saving Scheme (ELSS), in which a mutual fund scheme invests in equity related securities and equity. It has to be locked for a period of 3 years. Consequently, investments made in this scheme cannot be used for a period of 3 years.

According to section 80C income tax act, an individual can invest up to Rs. 1.5 lakh in tax saving instruments, which will be deducted from the gross total income. Tax saving mutual fund or ELSS, PPF, insurance plans and NSC are some of the areas where an investor can choose to invest and save tax.

Advantages of ELSS funds

Tax saving fund schemes are equity-oriented mutual funds that have tax benefits. They are best over any tax saving investment products in some matters. In comparison to other mutual funds they have the lowest lock in a period of 3 years and being linked with market, they have the capability of generating good return over the long term. Investors that have a moderate to high-risk appetite should certainly consider investing in this type of funds.

Where can you find tax saving fund?

Almost all companies offering mutual funds offer tax saving mutual funds as part of their group of fund offerings. There are various tax saving funds available for you to invest in. The names of these schemes are long term equity fund, tax saver fund, tax relief 96 and tax shield fund.

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