How to Save Tax Through Mutual Funds?
Investing in mutual funds can offer several tax-saving opportunities. Here are some strategies to save tax through mutual funds: ELSS (Equity Linked Savings Scheme): ELSS mutual funds are specifically designed for tax-saving purposes under Section 80C of the Income Tax Act. Investments in ELSS funds are eligible for a deduction of up to ₹1.5 lakh from taxable income in a financial year. Additionally, ELSS funds have a mandatory lock-in period of three years, which promotes long-term wealth creation. Dividend Option in Equity Funds: If you're in a lower tax bracket, opting for the dividend option in equity mutual funds can be beneficial. Dividends from equity mutual funds are tax-free in the hands of the investor. However, it's important to note that the mutual fund company deducts a Dividend Distribution Tax (DDT) before distributing dividends to investors. Systematic Withdrawal Plan (SWP): Instead of opting for dividends, you can choose a systematic withdrawal plan (SWP) f...