Saving tax on mutual funds can be achieved through several strategies:
- Invest in ELSS: Equity Linked Savings Schemes (ELSS) qualify for tax deductions under Section 80C, allowing you to invest up to ₹1.5 lakh annually.
- Long-Term Investments: Holding equity mutual funds for over a year can reduce capital gains tax to 10% on gains exceeding ₹1 lakh, instead of the higher short-term rate.
- Utilize Indexation: For debt mutual funds held over three years, you can benefit from indexation, which adjusts the purchase price for inflation, lowering taxable gains.
- Tax-Loss Harvesting: Offset gains by selling underperforming funds at a loss, which can help reduce overall tax liability.
- Choose Direct Plans: These typically have lower expense ratios, allowing you to retain more of your returns.
Always consult a tax advisor for personalized advice tailored to your financial situation.
