Top 10 Tax Saving Mutual Funds for the Financial Year 2022-23

April 14, 2023

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Table of Contents

Introduction:

As the financial year 2022-23 begins, taxpayers look for investment opportunities that not only provide high returns but also help them save tax. Mutual funds offer a great investment option for those looking to save tax as they offer tax benefits under Section 80C of the Income Tax Act, 1961. In this blog, we will discuss the top 10 tax-saving mutual funds that you can consider for the financial year 2022-23.

Axis Long Term Equity Fund: This is a popular tax-saving mutual fund that has delivered consistent returns over the years. The fund invests in a mix of large-cap and mid-cap stocks and has a three-year lock-in period. The fund has generated an average return of around 18% in the last five years.
Mirae Asset Tax Saver Fund: This fund has a diversified portfolio of large-cap and mid-cap stocks that have the potential to generate high returns. It has a lock-in period of three years and has delivered an average return of around 21% in the last five years.
ICICI Prudential Long Term Equity Fund: This fund has a well-diversified portfolio of large-cap and mid-cap stocks and has a lock-in period of three years. The fund has delivered an average return of around 16% in the last five years.
Aditya Birla Sun Life Tax Relief 96: This fund has a diversified portfolio of large-cap and mid-cap stocks and has a lock-in period of three years. The fund has delivered an average return of around 15% in the last five years.
DSP Tax Saver Fund: This fund has a well-diversified portfolio of large-cap and mid-cap stocks and has a lock-in period of three years. The fund has delivered an average return of around 18% in the last five years.
Franklin India Taxshield Fund: This fund has a well-diversified portfolio of large-cap and mid-cap stocks and has a lock-in period of three years. The fund has delivered an average return of around 13% in the last five years.
HDFC Tax Saver Fund: This fund has a diversified portfolio of large-cap and mid-cap stocks and has a lock-in period of three years. The fund has delivered an average return of around 15% in the last five years.
Nippon India Tax Saver Fund: This fund has a well-diversified portfolio of large-cap and mid-cap stocks and has a lock-in period of three years. The fund has delivered an average return of around 16% in the last five years.
SBI Magnum Tax Gain Fund: This fund has a diversified portfolio of large-cap and mid-cap stocks and has a lock-in period of three years. The fund has delivered an average return of around 17% in the last five years.
Tata India Tax Savings Fund: This fund has a well-diversified portfolio of large-cap and mid-cap stocks and has a lock-in period of three years. The fund has delivered an average return of around 18% in the last five years.

Conclusion

Investing in tax-saving mutual funds is an excellent way to save tax while also generating high returns. The above-mentioned funds have a track record of delivering consistent returns and can be considered for investment for the financial year 2022-23. However, it is important to do your own research and consult with a financial advisor before investing in any mutual fund.

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Frequently Asked Questions (FAQs)

Q1. What are tax-saving mutual funds?
A1. Tax-saving mutual funds are mutual funds that offer tax benefits under Section 80C of the Income Tax Act, 1961. These funds invest in a mix of equity and debt instruments and have a lock-in period of three years.

Q2. How do tax-saving mutual funds help in saving tax?
A2. Tax-saving mutual funds offer tax benefits of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961. This means that investors can claim a deduction of up to Rs. 1.5 lakh from their taxable income by investing in tax-saving mutual funds.

Q3. Can I invest in tax-saving mutual funds at any time?
A3. No, you can only invest in tax-saving mutual funds during the financial year for which you want to claim tax benefits. The investment needs to be made before March 31st of the financial year to claim the tax benefit for that year.

Q4. What is the lock-in period for tax-saving mutual funds?
A4. Tax-saving mutual funds have a lock-in period of three years. This means that investors cannot redeem their investments before the completion of the lock-in period.

Q5. What is the average return generated by tax-saving mutual funds?
A5. The average return generated by tax-saving mutual funds varies from fund to fund. However, most tax-saving mutual funds have delivered an average return of around 15% to 18% in the last five years.

Q6. Are tax-saving mutual funds risky?
A6. Like all mutual funds, tax-saving mutual funds are subject to market risks. However, investing in tax-saving mutual funds can help investors mitigate their tax liability and generate high returns in the long run.

Q7. Can I invest in multiple tax-saving mutual funds?
A7. Yes, you can invest in multiple tax-saving mutual funds to diversify your investment portfolio. However, it is important to keep in mind the overall investment limit of Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961.

Q8. How do I choose the right tax-saving mutual fund?
A8. Choosing the right tax-saving mutual fund requires careful consideration of various factors such as past performance, fund manager experience, investment philosophy, and expense ratio. It is recommended to consult with a financial advisor before making any investment decision.

Q9. Can I withdraw my investment after the lock-in period?
A9. Yes, you can withdraw your investment after the completion of the lock-in period. However, it is important to keep in mind the tax implications of withdrawing your investment.

Q10. Are dividends received from tax-saving mutual funds taxable?
A10. Yes, dividends received from tax-saving mutual funds are taxable. However, investors can claim a tax credit for the tax deducted at source (TDS) on dividends received.