Why should Tax Saver Mutual funds be your first mutual fund?

Discover the power of Tax Saver Mutual Funds – your ultimate choice for first-time investments. Maximize savings and tax benefits with expert guidance. Start your financial journey with ELSS Mutual Funds today!

If you're contemplating your first mutual fund investment and wondering which fund to start with, we have the right answer for you. The ideal category to consider is the Equity Linked Savings Scheme Mutual Fund, also known as ELSS mutual fund.   

Let's delve into the reasons why this fund category should be your top pick:  

  • Significantly Reduce Taxes: Through ELSS investment, you can lower your taxes by up to Rs. 46,800 annually. This deduction is applicable under section 80C, allowing you to lower your taxable income and, consequently, pay a reduced amount of tax. However, it's essential to note that there is a maximum limit of Rs. 1.5 lakh per financial year for claiming tax benefits, which coincides with the 80C limit. Hence, investing in ELSS funds can cover your entire tax-saving requirement. Another advantage is that ELSS funds have the shortest lock-in period of 3 years, providing quicker access to your invested capital.  

  • Invest in Diversified Equity Tax Saver Mutual funds are typically structured as multi-cap funds, meaning they invest in companies of various sizes and across sectors, resulting in a well-diversified portfolio. This approach grants the flexibility to adjust the portfolio composition based on market conditions, allowing for better utilization of emerging opportunities. The diversified nature of these funds not only enhances potential returns but also mitigates risk by spreading out investments. Consequently, multi-cap funds are highly suitable for first-time investors.  

  • Combine Tax Savings with Long-Term Investment: With ELSS funds, you no longer need to choose between reducing tax liability and investing for future goals. Unlike traditional tax-saving options like PPF and NSC, which offer minimal returns that barely surpass inflation, ELSS funds generate returns that comfortably outperform inflation in the long run, thanks to their equity-driven potential. This enables you to align your investments in ELSS funds with long-term objectives such as retirement planning or funding your child's education.   

  • Monthly Investment Option: ELSS mutual funds provide the flexibility of investing through a systematic investment plan (SIP). With a SIP in Tax Saver Mutual funds, you can contribute a fixed sum every month to the ELSS mutual fund of your choice. This approach fosters the habit of saving regularly and instils discipline in your investment routine.  

To summarize, ELSS funds offer a multitude of benefits: you invest towards your financial goals, enjoy tax exemptions on your investments, and benefit from an investment strategy tailored for first-time investors. By considering ELSS as your primary mutual fund investment, you set yourself on a path towards financial growth and security. 

Disclaimer: Mutual Fund investments are subject to market risks. Please read all scheme-related documents carefully before investing

Akshay Sharma

3 Blog posts