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What are tax benefits in a mutual fund?


Mutual funds are one of the easiest ways to invest your money. It does not only offer security to the investor but it also offers major tax exemptions. Every one of us wants to save the tax as much as possible. Saving money is something that everybody desires. Hence, it is important to invest intelligently to get major tax exemptions on the invested money. Now, you can choose to invest in the bonds or shares but that can take a wrong turn at any time. So, it is always better to invest your money in top SIPs.

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What are the tax benefits that you can get from the mutual funds? Well, let’s find out!

  • Section 80C Income Tax Benefits: The first and foremost of all are the Income Tax benefits. A good percentage of our income goes to the government in the form of Income Tax. Hence, we always look for the opportunities to save income taxes. Well, Mutual Funds can help you out with that very easily. As per the directions are given in section 80C of the Income Tax Act of 1961, the mutual funds are eligible to offer major tax exemptions on the money that is invested. But that does not end there; the return that you get from the mutual fund will also be exempted from the Income Tax. So, with the help of Mutual Funds, you can actually save a considerable amount of money that you lose as Income Tax.
  • Capital Gain Tax Benefits: For how long do you plan to invest in a mutual fund? Maybe 5 years or 10 years? And why do you want to invest your money for such a long time? Well, the answer is simple; you want to earn the capital gain benefits on the long-term investment. But what about the capital gain tax? Obviously, this is a valid question that you might ask. But the best part of investing in the mutual funds is that you do not need to pay anything as the tax for whatever you receive as capital gain. As per the norms of the section- 111A of the Income Tax Act, the capital gain dividends will be exempted from any kind of taxation.
  • Wealth Tax Benefits: Several people have misconceptions about the mutual funds. Most of the people think that the mutual funds are considered as wealth. But that is a myth and it has no true value to it. Unlike other investment options available, mutual funds are not treated as wealth as clarified by Section 2 (ea) of the Wealth Tax of 1957. So, any amount of money that you invest in a mutual fund will not be liable to the wealth tax.
  • Gift Tax Benefits: What happens when you gift someone few units from your mutual fund? Do you get taxed for it? Well, previously gifting mutual fund units was liable to gift tax as per the Gift Tax Act of, 1958. But after October 1, 1998, the gift tax has ceased to apply to the Mutual fund policies. Hence, you can gift units from your mutual fund easily without any hassle.
  • Miscellaneous: Investing in the units of the Mutual funds will be considered as an investment under the Section 11(5) of the Act along with Rule 17C of the Income-tax Rules, 1962. Hence, you will get you will get major tax exemptions at your source of income.

The tax benefits that mutual fund offers are unparalleled to any. That is exactly why; people vouch for mutual funds over other investment options. Invest in a good mutual fund policy and enjoy a life without getting harassed from paying the taxes.

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