Best ELSS Mutual Funds to Invest in 2024: As the financial year comes to a close, it’s time to explore avenues for maximizing tax savings while building long-term wealth. One of the most effective strategies to achieve this is by investing in tax-saving mutual funds, also known as Equity Linked Savings Schemes (ELSS). Let’s delve into the best tax-saving mutual funds for 2024, the benefits of investing in them, and how to get started on your investment journey.
Best ELSS Tax-Saving Mutual Funds for 2024
- Axis Long Term Equity Fund: With a strong track record of delivering consistent returns, this fund focuses on investing in a diversified portfolio of equity and equity-related securities, making it an ideal choice for long-term wealth creation while saving taxes.
- Mirae Asset Tax Saver Fund: Known for its prudent investment approach and robust performance, this fund invests in high-quality growth-oriented companies across sectors, offering investors the potential for capital appreciation along with tax savings.
- Aditya Birla Sun Life Tax Relief 96 Fund: This ELSS fund follows a blend of growth and value investment strategy, aiming to generate long-term capital appreciation while providing tax benefits under Section 80C of the Income Tax Act.
Benefits of Investing in Tax-Saving Mutual Funds
- Tax Savings: Investments in ELSS funds qualify for deduction under Section 80C of the Income Tax Act, allowing investors to save up to ₹1.5 lakh annually on their taxable income.
- Potential for Higher Returns: ELSS funds predominantly invest in equities, offering the potential for higher returns compared to traditional tax-saving instruments like Fixed Deposits or Public Provident Fund (PPF) over the long term.
- Professional Fund Management: ELSS funds are managed by experienced fund managers who employ rigorous research and analysis to identify lucrative investment opportunities, thereby maximizing returns for investors.
How to Invest in Tax-Saving Mutual Funds
Investing in tax-saving mutual funds is a simple and straightforward process:
- Choose the Right Fund: Select a tax-saving mutual fund that aligns with your investment goals, risk tolerance, and time horizon.
- Complete KYC: Fulfill the Know Your Customer (KYC) requirements by submitting necessary documents such as PAN card, Aadhaar card, and proof of address to the chosen mutual fund provider.
- Investment Method: You can invest in tax-saving mutual funds either through lump-sum investments or Systematic Investment Plans (SIPs), depending on your preference and financial situation.
Best Platform to Start Investing in Tax-Saving Mutual Funds
Several online platforms and mutual fund distributors offer convenient and user-friendly interfaces for investing in tax-saving mutual funds. Some popular options include:
- Mutual fund platforms like Zerodha, Groww, Scripbox and ET Money.
- Online investment portals provided by leading banks and financial institutions.
Redemption of Tax-Saving Mutual Funds
ELSS funds come with a mandatory lock-in period of three years, during which investors cannot redeem their units. However, upon completion of the lock-in period, investors can redeem their units either partially or fully based on their financial needs.
Why Invest in Tax-Saving Mutual Funds Over Life Insurance Policies Under Section 80C?
While life insurance policies offer tax benefits under Section 80C, tax-saving mutual funds provide the dual advantage of tax savings and wealth creation through equity investments. ELSS funds typically offer higher potential returns compared to traditional life insurance policies, making them a more attractive option for long-term wealth creation.
Alternatives to ELSS Mutual Funds for Tax Saving
Besides tax saving mutual funds other investment avenues to save tax include:
- Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF)
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Tax-saving Fixed Deposits (FDs)
Story: Two Employees, Two Paths to Tax Savings
Meet Sarah and Michael, two employees eager to save taxes while building wealth. Sarah decides to invest in an ELSS mutual fund, while Michael opts for a Unit Linked Insurance Plan (ULIP). Over the years, Sarah’s ELSS investment outperforms Michael’s ULIP, generating higher returns and greater wealth accumulation.
In conclusion, investing in tax-saving mutual funds offers a compelling opportunity to save taxes while potentially generating superior returns over the long term. By selecting the right fund, adhering to disciplined investment practices, and staying committed to your financial goals, you can embark on a journey towards financial freedom and prosperity.
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