Best Tax Saving Mutual Funds 2018

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Tax Savings Mutual Funds

With the ever-rising inflation rate, there is no denying the fact that the value of our savings is steadily declining. Thankfully, we have the option of investments to grow our money when our savings are not working as we expected them to.

Getting your money to work for you is the new mantra and that’s why mutual funds are in high demand these days. However, nothing comes for free – not even investments made in mutual funds. You have to account for the fees & charges associated with your mutual funds, in addition to keeping an eye on the inflation and return rates in the market. After taking all these factors into consideration, comes the hurdle of taxes.

There are certain mutual funds that levy taxes on the returns you earn; on the other hand, there are some schemes that offer tax deductions or rebates to their investors, and are hence known as tax saving mutual funds. Section 80C of the IT Act (Income Tax), India allows these tax saving mutual funds to qualify for an income tax rebate to a maximum of Rs 1, 50,000. Equity Linked Savings Schemes (ELSS) mostly fall under this category of tax saving mutual funds.

These mutual funds work by collecting money from different investors and investing it in the equity or debt market in the right proportions to generate profit. The institutions that offer mutual funds, employ financial professionals so investors can benefit from their knowledge and experience and get the best returns on their investments.

As an investor, you have many options to pick from. It is wisest to invest in a mutual fund that supports and meets your set of goals and requirements. Thus, you can choose to invest in an open or close ended mutual fund scheme, or a mix of both. Likewise, you have an option to choose a mutual fund from the low-risk, medium risk, and high-risk categories.

The high risk mutual fund will give you high returns, the low medium risk fund will offer medium returns, while the low risk mutual fund scheme majorly focuses on keeping your principal amount safe. Let’s have look best mutual funds to invest in 2018 for tax savings.

Top 5 best tax saving mutual funds to invest in 2018: 

IDFC Tax Advantage (ELSS) Fund

Inception Date

26th Dec 2008

Objective

To generate long-term oriented capital growth from a diverse range of majorly equity-based and equity-related securities.

Net Assets

Rs 798 Crores

6 Months Return

18%

1 Year Return

46.5%

3 Years Return

17%

5 Years Return

21.5%

 Aditya Birla Sun Life Tax Relief '96

Inception Date 6th Mar’2008
Objective To provide a long-term growth option to the unit holders for their capital. This ELSS fund has a target allocation of 20% debt & money market securities and 80% of equity-based securities.
Net Assets  Rs 4,349 Crores
6 Months Return 13.8%
1 Year Return 37.3%
3 Years Return 15.1%

Aditya Birla Sun Life Tax Plan

Inception Date

01st Oct 2006

Objective

To provide an open-ended ELSS scheme to the investors along with an added benefit of income tax deduction

Net Assets

Rs 650 Crores

6 Months Return

13.7%

1 Year Return

36.8%

3 Years Return

14.5%

5 Years Return

21.1%

 L&T Tax Advantage Fund

Inception Date

27th Feb 2006

Objective

To generate long-term oriented capital growth from a diverse range of majorly equity-based and equity-related securities.

Net Assets

Rs 2,762 Crores

6 Months Return

15.1%

1 Year Return

39%

3 Years Return

16.3%

5 Years Return

19.7%

 Tata India Tax Savings Fund

Inception Date

13th Oct 14

Objective

To offer medium to long-term gains to its unit holders, along with the benefit of income tax deduction. This fund also places special emphasis on keeping your capital safe.

Net Assets

Rs 981 Crores

6 Months Return

13%

1 Year Return

37.9%

3 Years Return

17.5%

5 Years Return

Not Applicable

 

10 Beneficial aspects of investing your money in tax saving mutual funds:

  • The first and foremost benefit associated with these mutual funds is that your investments are eligible for an income tax rebate of up to Rs 1.5 lakhs. 
  • The next advantage you get is that your long-term gains are tax exempted. 
  • Investments in these mutual funds schemes can help you with your short-term goals such as arranging the down-payment for your new house, buying your new car, paying for your kids’ higher education fees, etc. 
  • You don’t have to worry about investing your money in one go. With these tax-saving mutual funds, you can invest in monthly instalments via SIP (Systematic Investment Plan), rather than worrying about investing all your money. 
  • These funds work on the mechanism of diversified portfolios; hence, effectively minimising the risk of any massive loss. 
  • The lock-in period in these mutual funds is of 3 years compared to other investment options that offer 6 to 15 years’ lock-in period. 
  • Even if you cannot withdraw the principal amount, you can still withdraw the profit earned on the principal amount (even during the lock-in period). 
  • As these are open-ended schemes, you can make your investment at any time around the year.  
  • These funds are managed by professionally qualified fund managers; hence, you don’t have to worry about not having any knowledge of mutual funds and equity market. 
  • Even if you don’t withdraw your investment, your money is safe as it will keep on growing (depending upon the return rates available in the market).

Wrapping it up:    

You can always opt to invest in these tax savings mutual fund schemes if you are looking for tax-saving investment options for tax-planning as well as growing your money. However, it’s advisable to do a thorough research before you make the final decision to park your money in these schemes.