Many investors looking to invest in mutual funds are quick to take the ELSS or ELSS via SIP route. Reason: ease of use and, most importantly, tax benefit. Investors often confuse SIP with ELSS. While ELSS or Equity-Linked Saving Scheme is a type of mutual fund that is eligible for tax exemption under Section 80C of the Income Tax (I-T) Act, SIP or Systematic Investment Plan is only a way of investing in a mutual fund. Simply put, the option of SIP enables an investor to schedule parking of a fixed amount of money in an instrument on regular intervals. For example, Rs 1,000 every month. But how should you select a mutual fund, or invest in it? What are the factors you should keep in mind while investing a mutual fund? NDTV.com here gives you a lowdown on everything you should know about mutual funds:
How to select a mutual fund
Financial goalRisk appetiteExpense ratioHistorical performanceWhen to invest in mutual funds through ELSSlost their tax-free status| Parameters | Tax after Investing in ELSS under Section 80C | Without Investing in Tax Saving Investments under Section 80C |
|---|---|---|
| Gross Total Income of the person | Rs 9,00,000 | Rs 9,00,000 |
| Tax Exemptions under section 80C | Rs 1,50,000 | 0 |
| Total Income | Rs 7,50,000 | Rs 9,00,000 |
| Tax on Total Income | Rs 51,500 | Rs 95,275 |
| Amount of Tax Saved | Rs 43,775 | 0 |
| Note: Assumed no other deduction from gross income. Tax is calculated including applicable cess. | ||
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