What Are Tax Saver Mutual Funds

13 May, 2024

Synopsis

• Tax Saver Funds (ELSS Mutual Funds) offer tax deductions under Section 80C, allowing investments up to ₹1.5 lakhs for potential growth.

• Invest in equities through a mutual fund structure with a 3-year lock-in to encourage long-term investing.

• HDFC Bank SmartWealth App simplifies investing in tax saver funds, helping you save taxes and potentially grow wealth.

Turn Tax Pain into Investment Gain: The Tax Saver Fund Secret Revealed!

It was March, and the tax filing deadline was approaching. Like many others, Akash was struggling to find good options to invest and save taxes when his friend Sonam, a finance professional, came for help.

Akash: I'm so confused about what I can do to save taxes. Any good investment options you can recommend?

Sonam: Have you considered tax saving mutual funds? They are a great tax planning instrument.

Akash: What are tax saving mutual funds? I've never invested in them before.

Sonam: Sure, let me tell you! Tax-saver funds are equity mutual funds that offer tax deduction benefits under Section 80C of the Income Tax Act. These are known as Equity Linked Savings Scheme (ELSS) Mutual Funds.

Akash: Oh, but how much can I invest in them?

Sonam: Under 80C, you can claim a full tax deduction on investments up to ₹1.5 lakhs in a financial year.

Akash: That sounds great! But how exactly do these funds work?

Sonam: Tax saver funds are ELSS schemes that invest at least 80% in equities and have a 3-year lock-in period.

Akash: Got it, so I can't withdraw for 3 years. But I guess that's the trade-off for the tax benefit.

Sonam: Correct. The lock-in encourages long-term equity investing.

Akash: Please suggest an excellent platform to simplify the process.

Sonam: Bro, you can use the HDFC Bank SmartWealth App. It's simple and user-friendly.

1. Login to your SmartWealth account on the mobile app.

2. Go to the 'Explore & Invest' section and select the 'Tax Saver Funds' tile.

3. Browse and shortlist a fund from recommended ELSS schemes based on your preference and investment appetite.

4. When ready, tap 'Add' and enter the investment amount -. You can invest in lumpsum or set up a SIP.

5. You can just ‘Add to cart” and proceed.

6. Confirm the transaction with Single OTP to digitally complete your tax saver fund investment.

7. You will receive an SMS/Email with a confirmation immediately upon placing your transaction.

Akash: Super easy process! And can I show this investment while filing returns?

Sonam: Yes, you'll get a statement to claim the deduction for the amount invested.

Akash: Thanks a million, Sonam for explaining tax saver funds and investing in them using the HDFC Bank SmartWealth app.

Sonam: You're most welcome, Akash! Smart investing for tax planning is important. Start now!

FAQ

What are tax saver funds?

Tax saver funds, commonly known as equity-linked savings schemes (ELSS), are mutual funds that offer tax benefits. They allocate at least 80% of their assets to equities and offer tax advantages under Section 80C of the Income Tax Act of 1961.

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