When we do financial planning, we also think about tax-saving options along with investments, because the biggest benefit of tax-saving is that it helps you meet your mid-term and long-term financial goals. But do you know that you can take advantage of tax savings through mutual funds? In Jagran Business's "Finance Ke Funde" program, Anil Kumar Jhanwar (GL Jhanwar Investments) discussed this topic in detail. During the program, he also shared some important information.

What are tax-saving mutual funds?

There are many types of mutual funds, such as growth funds, equity funds, debt funds, index funds, and hybrid funds. One of these is also a tax-saving fund, called Equity-Linked Saving Scheme (ELSS) fund. According to Anil, "Through this scheme, the investor can avail tax deduction under Section 80C of the Income Tax Act. 80C provides tax exemption of up to Rs 1.5 lakh, and almost 100% of the money is invested in equities."

Lock-in period and market performance

It is important to understand that investments in ELSS funds have a mandatory lock-in period of three years, which is the lowest among all tax-saving investment options. According to Anil, "Today, even the government says that mutual funds are right", because its returns are very good.

Difference between tax-saving and regular mutual funds

The biggest comfort for the investor is that his money is invested in low-risk stocks. ELSS funds invest primarily in large-cap stocks. Large-cap stocks are blue-chip companies, which have less risk and more stability than mid and small-caps. Even if the equity market falls, there is relatively less impact on their shares.

Tax on mutual fund returns

We know that short-term capital gain tax and long-term capital gain tax are levied on equity and mutual funds. There is no tax on earnings up to ₹ 1.25 lakh per year in ELSS funds.

If the profit is more than this, then a 12.5% ​​tax has to be paid. On this, expert Anil Kumar Jhanwar says, "Except PPF, all other investment options are tax-free. There is a tax on it, but there is a possibility of getting more returns in ELSS than PPF."

SWP for retirement

Retirement planning is also an important part of our financial planning. If you regularly do SIP (Systematic Investment Plan) in mutual funds, then you can create a regular income source after retirement. It works like a Systematic Withdrawal Plan (SWP). If your investment reaches crores, then you can withdraw a fixed amount every month, which will keep you getting continuous income.

How to avoid mistakes in mutual fund investment?

According to Anil Kumar Jhavar of GL Jhavar Investments, "Equity market gives good returns in the long run. We are investing, not gambling." This is correct! If you are investing, then it is very important to maintain discipline. There can be losses in the pursuit of making quick profits, so it is necessary to remain invested for a long time.

SIP and Tax Benefits

SIP contributions also offer tax benefits. It is eligible for an 80C deduction, but note that there is a lock-in period of three years for each SIP installment. This does not mean that you will get all the money at once after three years.

Growing investment culture in India

Today everyone is talking about Systematic Investment Plan (SIP). It is a method in which investors invest in mutual funds in a disciplined and systematic way. Today's investors are gradually becoming smart, and SIP is emerging as a preferred investment medium. According to Anil, "Earlier we were dependent on other countries, but now we have our strength. That's why money is constantly coming into mutual funds."

Tax-saving mutual funds offer benefits in two ways - tax savings and wealth creation in the long term. However, investors should invest with a long-term perspective and avoid making hasty decisions based on short-term market fluctuations.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.