Which mutual fund investment is tax free?
Mutual funds invested in government or municipal bonds, also called munis, are often referred to as tax-free or tax-exempt funds because the interest generated by these bonds is not subject to income tax.
Dividends paid by equity mutual funds are tax free in the hands of the investor but the AMC pays dividend distribution tax (DDT) at the rate of 11.648%.
As per the amendments made in the Union Budget 2020, dividends offered by any mutual fund scheme are taxed in the classical manner. That is, dividends received by investors are added to their taxable income and taxed at their respective income tax slab rates.
SIPs can be one of the best tax-saving instruments with high returns on your investments. You can claim a deduction of up to Rs. 1.5 lakh from your taxable income for investing in ELSS through SIPs under Section 80(C) of The Income Tax Act, 1961.
Long term capital gains of up to Rs. 1 lakh a year from ELSS mutual funds are exempt from income tax and long-term capital gains above Rs. 1 lakh are taxed at 10%.
Which SIP is tax free under section 80c? 80C allows deduction upto Rs 1.5 lakh for investment made in ELSS (equity linked savings scheme). You can also start SIP for ELSS mutual funds for which deduction upto Rs 1.5 lakh will be available u/s 80C.
- Reduce Your Taxable Income by Up To Rs 1.5 Lakhs (Section 80C, 80CCC, 80CCD) ...
- Additional Reduction of Up To Rs 50,000 for NPS Investors (Section 80CCD. ...
- Reduce Your Taxable Income by Up To Rs 75,000 (Section 80D) ...
- Reduce Your Taxable Income by Up To Rs 2 lakhs (Section 24)
The Long-Term Capital Gains on ELSS are tax-exempt up to Rs 1 lakh, and dividend received is tax-free in the hands of investors. You can continue to invest in this scheme even after the completion of the lock-in period of three years.
No, all mutual funds do not qualify for tax deductions under Section 80C of the income tax Act, Only investments in equity-linked saving schemes or ELSSs qualify for tax deduction under section 80C. Investors can invest in ELSSs and claim tax deductions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act.
Distributions and your taxes
If you hold shares in a taxable account, you are required to pay taxes on mutual fund distributions, whether the distributions are paid out in cash or reinvested in additional shares. The funds report distributions to shareholders on IRS Form 1099-DIV after the end of each calendar year.
How can I avoid capital gains tax on mutual funds in India?
Tax Harvesting is the strategy of selling some of your Equity Mutual Fund units every year to book long-term gains and then reinvesting the proceeds into the same fund. Now if you redeem your investments on 1st March 2021, you won't have to pay any Capital Gains Tax because the gains are Rs. 75,305 and gains up to Rs.
| Fund Name | 3-year Return (%)* | |
|---|---|---|
| Mirae Asset Emerging Bluechip Fund Direct-Growth | 20.27% | Invest |
| SBI Focused Equity Fund Direct Plan-Growth | 15.67% | Invest |
| Quant Focused Fund Direct-Growth | 21.50% | Invest |
| Axis Bluechip Fund Direct Plan-Growth | 12.65% | Invest |
- Public Provident Fund.
- National Pension Scheme.
- Premium Paid for Life Insurance policy.
- National Savings Certificate.
- Equity Linked Savings Scheme.
- Home loan's principal amount.
- Fixed deposit for a duration of five years.
- Sukanya Samariddhi account.
Tax on Equity Mutual Funds
Equity investments that are redeemed after one year are considered long-term capital gains (LTCG). The LTCG of up to Rs. 1 lakh is tax-free, whereas gains over Rs. 1 lakh is subject to LTCG tax of 10% (plus 4% cess) without any indexation benefit.
Yes, the PPF amount that is received on maturity is tax-free. Under Section 80C of the Income Tax Act, 1961, any investment made towards the PPF account is tax-free.
When you invest in SBI MF ELSS Funds, you become eligible for a tax deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. In this, the amount invested by you gets deducted from your taxable income.
- Aditya Birla Sun Life Digital India Fund. ...
- Franklin India Technology Fund. ...
- ICICI Prudential Technology Fund. ...
- PGIM India Global Agribusiness Offshore Fund. ...
- SBI Technology Opportunities Fund. ...
- TATA Digital India Fund.
ELSS mutual funds are the only class of mutual funds that are covered under Section 80C of the Income Tax Act, 1961. By investing in an ELSS, you are entitled to claim a tax rebate of up to Rs 1,50,000 a year. This helps you save up to Rs 46,800 a year in taxes.
However, PPF offers much lower returns over a longer time horizon than ELSS. The tax benefits and capital safety are more in favour of PPF; ELSS certainly is an option for better returns. It depends on whether you have the appetite for market volatility or not.
ELSS funds are tax saving mutual funds, in which majority of the funds are invested in equity schemes. ELSS has a lock-in period of 3 years.
Which ELSS fund is best in 2021?
- Quant Tax Plan. Consistency. ...
- Mirae Asset Tax Saver Fund. Consistency. ...
- Canara Robeco Equity Tax Saver Fund. ...
- PGIM India ELSS Tax Saver Fund. ...
- Kotak Tax Saver Fund. ...
- IDFC Tax Advantage (ELSS) Fund. ...
- DSP Tax Saver Fund. ...
- UTI Long Term Equity Fund.
...
| Taxable income | Tax Rate |
|---|---|
| Up to Rs. 10,000 | 10% |
| Rs. 10,000 to Rs. 20,000 | 20% |
| Above Rs. 20,000 | 30% |
- Include all those components that are tax-free.
- For availing most of the benefits or HRA, HRA should be ideally 50% of the Basic Salary (40% HRA if an individual has rented a house in a non-metro)
- Contribute significant amounts to retirement savings plans.
- Participate in employer sponsored savings accounts for child care and healthcare.
- Pay attention to tax credits like the child tax credit and the retirement savings contributions credit.
- Tax-loss harvest investments.
- Limited total benefits. Tax benefits for a particular financial year are available only to the tune of ₹150,000 under section 80C, irrespective of the total amount of investment in an ELSS fund. ...
- Tax benefits are limited.
SBI Magnum Taxgain Scheme is an open - ended Equity Linked Savings Scheme which offers you tax benefits on investments up to INR 1.5 Lakhs. Invest in SBI Magnum Scheme and don't let tax bite off your returns. SBI Magnum Balanced Fund.
| Fund Name | 1Y CAGR 3Y CAGR 5Y CAGR Till Date CAGR | Till Date CAGR |
|---|---|---|
| Axis Long Term Equity Fund (G) | 12.3% | 15.8% |
| Nippon India Tax Saver ELSS Fund (G) | 10.5% | 12.6% |
| Parag Parikh Tax Saver Fund (G) | - | 23% |
| Principal Personal Tax Saver Fund (G) | 16.8% | 19% |
- Low lock-in period of 3 years, which is considerably less than any other investment option under Section 80C.
- Investors can avail of tax deduction up to Rs. ...
- Any gains earned through ELSS Mutual Funds are exempt from tax.
If you have made your ELSS Mutual Fund investment via the lump sum route, i.e., at one go, all your units will be allotted on the same day. And therefore, once the 3 year lock-in period is over, you can redeem your entire ELSS investment in one go.
If your mutual fund buys and sells dividend stocks often, more than likely any dividends you receive are taxed as ordinary income. For example, assume you receive $1,000 in dividend payments from your actively managed fund. If you are in the 24% income tax bracket, you pay $240 at tax time.
How do I avoid capital gains tax?
- Invest for the long term. ...
- Take advantage of tax-deferred retirement plans. ...
- Use capital losses to offset gains. ...
- Watch your holding periods. ...
- Pick your cost basis.
Short Term Capital Gains on Mutual Fund: Equity Schemes
For instance, if you generated ₹1,30,000 STCG from an equity-oriented scheme in a financial year, your tax will be calculated on ₹1,30,000 at 15% (plus cess and surcharge as applicable), regardless of your income tax slab.
If a SIP of an equity fund is held for less than 12 months, there will be short-term capital gain taxable at 15%. But if a SIP of an equity fund is held for 12 or more months, then there will be long term capital gain taxable at 10% in excess of Rs. 1,00,000/-.
Mutual fund dividends are subject to TDS at the rate of 7.5% for dividends in excess 1to Rs 5,000. 2. TDS is applicable to dividend payout, dividend reinvestment and dividend transfer plan.
| Fund Name | Category | 1Y Returns |
|---|---|---|
| Quant Focused Fund | Equity | 9.8% |
| Axis Growth Opportunities Fund | Equity | 9.7% |
| Axis Midcap Fund | Equity | 9.3% |
| Mirae Asset Emerging Bluechip Fund | Equity | 8.9% |
| Mutual fund | 5 Yr. Returns | 3 Yr. Returns |
|---|---|---|
| ICICI Prudential India Opportunities Fund Direct Plan Growth | -- | 20.08% |
| Aditya Birla Sun Life CEF - Global Agri Plan - Growth-Direct Plan | 13.83% | 19.67% |
| IDFC Government Securities Fund - Constant Maturity Regular - Growth | 9.56% | 11.2% |
...
Tata Liquid Fund Direct Growth.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹13,843 Cr |
| 1Y Returns | 3.5% |
How to Pay Zero Tax With Rs. 15 Lakh Income? - YouTube
- Investments in PPF (Public Provident Fund)
- Investments in EPF (Employee Provident Fund)
- Investments in ELSS funds (Equity-Linked Savings Scheme)
- Investments in NSC (National Savings Certificates)
- Payment of premiums against Life Insurance Policies.
What is the tax on 9 lakhs? If your taxable income is Rs 9 lakh per annum, you will fall into the tax slab of Rs 7.5 lakhs-10 lakhs. As per the new Tax rate post the budget 2020, 15% of your taxable income is liable for a tax deduction.
How much capital gain is tax free in India?
Residential Indians between 60 to 80 years of age will be exempted from long-term capital gains tax in 2021 if they earn Rs. 3,00,000 per annum. For individuals of 60 years or younger, the exempted limit is Rs. 2,50,000 every year.
An individual is not liable to pay tax on the dividend received from mutual fund if the amount is below Rs. 10 lakh. But if the amount exceeds this limit the investor has to pay 10% of the total earnings as tax during a particular year.
