There is hardly any individual who is not concerned about his tax saving. As per the income tax structure, every individual has to pay a certain amount of tax as per the bracket he falls in. The government of India has certain slabs decided as per which one has to pay the tax. For an individual who wants to save on tax amount, there are a few tools available that can help him. Among these tools, the mutual fund is considered as the best one as it saves tax and also helps to have a good return on the invested amount. Hence one can have dual benefits if the amount is invested in ELSS mutual fund which is for the tax saving only.
The tax savers:
The mutual funds also have a number of types from which one can invest in the type that is most suitable to his needs. The ELSS is also known as the tax saver mutual funds which can help one save the amount and invest in the mutual fund. The main condition here is one cannot withdraw the amount from the fund for three years. Hence it is a close-ended option where the investor cannot withdraw before the expiry of the given time frame. For new investors in the market, it is necessary to understand what is mutual fund and how it works.
The mutual fund:
The mutual fund is a tool where one can start investing with a small amount such as 500 a month also. There are open and close-ended funds in which one can invest. The investor is offered with a folio and number of units with the purchase price. The unit price is known as NAV which keeps on changing. One can know the NAV of his fund in a number of ways. The investment in tax saver mutual funds or general mutual funds can be done by offline as well as online modes. Usually, in this era, people prefer to have an online investment as it proves convenient.
How the ELSS differ from normal mutual funds?
Well, the ELSS is a close-ended fund, and hence one cannot withdraw the amount as mentioned earlier. As it has a considerable period invested the return on the same is also good, and at the same time, it also helps one to save tax up to the income of 150000 in accordance with the section 80c. Once the said period is over, one can also have the option of withdrawing the partial amount also. The amount which is not withdrawn can keep on earning from the market.
For a retail as well as a big investor the mutual fund can be the best option as it is free from risk and also fetching best return. There is also a systematic investment plan with the help of which one can invest in MF by small amounts and avoid the payment of tax with a single shot. Overall one can say that the mutual fund is the most feasible option for every investor irrespective of his type or requirements.