/Mutual funds to claim tax deduction of Rs 40,000

Mutual funds to claim tax deduction of Rs 40,000

My main purpose is to save tax. I am looking for a plan, which will help me to claim exemption for Rs 40,000. Also, give good returns in future. Could you please suggest some good plans?
-Mukul Verma

It seems, you are looking for tax saving mutual funds that help you to save taxes of up to Rs 1.5 lakh under Section 80C of the Income Tax Act.

Since you have not offered any personal details, here are some points you should consider before investing ELSS or tax saving mutual funds. ELSS or Equity Linked Saving Schemes mostly invest in stocks. And stocks are risky and volatile in the short term. So, you should invest in them only if you have a high risk tolerance level and ability to withstand volatility.

Also, ELSS funds come with a mandatory lock-in period of three years. However, you should not get into them with a three-year horizon in mind. As said earlier, equity can be risky and volatile in the short term. You should invest in equity schemes, including ELSS funds, only if you have an investment horizon of at least five to seven years. This extremely important in the current market scenario.

If you continue to invest and hold your equity mutual fund investments irrespective of the market conditions, they can offer superior returns over a long period. For example, the ELSS category has offered an annual return of around 8.22% over the last 10 years. The returns might seem modest because of the sharp fall in the stock market after the Covid-19 pandemic.

Here are our recommended tax saving mutual funds: Best ELSS funds to invest in 2020

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