How To Make The Most Of Tax Advantages Of Mutual Funds
1202
Many of us are aware of the tax deduction one gets for investing tax saving mutual funds. Equity Linked Savings Schemes (ELSS) and mutual fund pension fund investments are eligible for tax deduction of upto Rs 1.5 lakh under Section 80C.
However, if you invest smartly, you can take advantage of other tax provisions that can reduce reduce tax and enhance the growth of your money. Here’s how to go about it.
Equity mutual funds
All equity funds provide high returns in periods of 8-10 year or more. What adds to this growth are tax provisions.
No long-term capital gains tax This is true for investments more than one year old.
Tax-free dividend income Here, we are referring to the dividend income in the hands of the investors. So, well-performing schemes providing dividends regularly can become another source of regular income.
Debt mutual funds
Long-term capital gains tax edge Long-term capital gain of 20 per cent with indexation benefits, are applicable if your debt fund investments are more than three years old. Inflation indexation benefits effectively reduces the capital gains that is taxable since it tries to account for the negative impact of inflation. For a person in the highest tax bracket, this has an edge over an investment like fixed deposit where interest gets added to the income and gets taxed.
Of course for debt investments of less than three years, capital gains are added to your income and get taxed accordingly.
We hope you found this useful. For more, download our mobile app, visit our website www.fundoomoney.com and subscribe to our YouTube channel and digital magazine FundooMoney Indian. Also, follow us on Instagram, Pinterest and Slideshare.
