Which Are The Best Tax Saving Mutual Funds In India?

In the realm of investment, the best tax-saving mutual funds have become the beacon for savvy investors in India. With their dual promise of high returns and enticing tax deductions, they’re an enticing blend of growth and savings.

In this article, we look at how these instruments help save tax on your investments, the best mutual funds to do so, the benefits of tax-saving mutual funds in India and alternative tax-saving investments.

How Mutual Funds Can Help Save Tax In India

Mutual funds, particularly Equity Linked Saving Schemes (ELSS), have emerged as a popular instrument for tax saving in India. Investing in these funds can provide tax benefits under Section 80C of the Income Tax Act, reducing your taxable income and thereby your tax liability.

These tax-saving mutual funds not only amplify your wealth but also shrink your tax liability. These mutual funds, particularly ELSS, are seen as a preferred choice for tax saving, offering deductions under Section 80C of the Income Tax Act. This feature can reduce your taxable income and, subsequently, your tax liability. You also have the potential for high returns on your investment, making them one of the best tax-saving mutual funds 2023 has to offer.

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How Tax-Saving Mutual Funds Work

The working principle behind tax-saving mutual funds is quite straightforward. Investors put their money into these funds, which the fund manager then invests in a diversified portfolio of equities. The aim is to generate high returns over the long term.

In terms of tax benefits, investments in ELSS funds are eligible for tax deductions up to ₹1.5 lakh under Section 80C. Plus, the long-term capital gains (LTCG) from these funds, up to ₹1 lakh, are completely tax-free. Anything above that is taxed at a mere 10%, making ELSS mutual funds a great way to save taxes while also delivering high returns.

The Best Tax-Saving Mutual Funds In India

If you’re keen on finding the best tax-saving mutual funds in 2023, we’ve curated a list of the top ELSS funds in India, considering their past performance, the fund manager’s reputation, and their potential for returns. These top-performing ELSS funds should be on your investment radar:

Fund NameCurrent Price (₹)Returns 1YrReturns 3YrReturns 5Yr
SBI Tax Advantage Fund70.2824.0736.3425.72
Quant Tax Plan274.6423.942.225.27
Mirae Asset Tax Saver37.3121.6227.4817.88
Canara Robeco Equity Taxsaver136.323.0527.0717.54
Kotak Tax Saver93.0126.127.1416.88
Sundaram LT Tax Ad19.9936.445.6916.7
Bank of India Tax Advantage122.9326.9429.0816.69
DSP Tax Saver96.6222.2826.6216.38
Bandhan Tax Advantage (ELSS)124.4827.234.1916.34
Source: Trendlyne

These are some of the best ELSS funds to invest in 2023 as they have consistently provided strong returns over the last five years.

Benefits of ELSS Funds

Tax-saving mutual funds, particularly the top ELSS funds, are known for their distinct features, which help investors in a variety of ways:

  1. Dual Benefits: They offer the potential for high returns along with substantial tax savings.
  2. Lock-in Period: They come with a minimum lock-in period of three years, the shortest among all tax-saving investment options.
  3. Flexibility: Investors have the flexibility to make lump-sum or SIP investments.
  4. Diversification: ELSS funds invest in a diversified portfolio of equities across sectors and market capitalizations.

Other investment options that help save tax

While the best ELSS funds to invest in 2023 offer a compelling avenue to save tax and earn returns, they aren’t the only options. Other tax-saving instruments include Public Provident Fund (PPF), National Savings Certificate (NSC) and tax-saving fixed deposits, among others. Make sure to do your research and figure out which investments are best for you and deliver the best returns for your investments.

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