Investors are often worried with regards to whether their investments would fetch them any tax benefits or not. These essential steps will help them find the right answer.

In any given scenario, investments are made with the basic motives of return and tax deduction. However, some homework is essential on the part of investors for getting insights into the availability of tax benefits pertaining to their investments in fixed deposits, shares, bonds, mutual funds, insurance and other financial instruments. Here’s our take on the tax benefits of investments in general and what should be your role before going in for the same.

Do Some Homework before you Invest!

Identifying the right time for conducting the research on prevailing mutual fund options is essential. And, the important thing is that investors should initiate this process way before the investments are actually made. The best time to carry on the research is when the investment decision is in its planning stage because this would allow you to completely discard a plan in case of any problematic issue. Once you have made the investment, it is not viable to discard the option, as this would lead to financial losses and your entire tax planning may suffer as well.

Understand the Importance of Category

You need to check the type of mutual fund that you intend investing in thoroughly; this is because clear distinctions are provided amongst various mutual funds types and you should be able to assess them before moving ahead. Alongside, this process will make it easy for you to identify the funds that are actually covered under the preview of the required tax benefits.

In this regard, one point can be made that the tax benefits are available to Equity Linked Savings Scheme (ELSS) instruments; which are specifically equity funds having access to tax benefits. However, there are funds such as the equity diversified funds that are not linked to any tax benefits. For those who are investing in equity funds under Rajiv Gandhi Equity Savings Scheme for the first time, do know that there is a onetime tax deduction facility available on them only.

Go through the Details Minutely

Don’t be misled by the words of a few intermediaries who verbally claim that a particular investment scheme has an associated tax benefit. As a wise investor, you should not simply trust their words; rather, you should thoroughly read the details of every scheme in which you are planning to invest. A simple move towards the process can be with regards to looking at the names of the funds that provide tax benefit descriptions as they would bear words such as tax shield, tax saver, tax funds, and so on. Here, you may also like to check upon the category details to identify whether the fund is classified under ELSS or RGESS category.

Availability of Pension Plans

You can also find a couple of pension plan funds that are covered under Section 80C. These funds are actually classified under a different category but the tax benefits are precisely available in their case. The aim of these kinds of investment plans is to create a regular payment structure when the working life of the investor ends, and hence, these funds are considered to be long term investments. These funds are not pure equity funds as they are composed of both debt and equity.

Way Forward

Go ahead; find your most appropriate investment schemes by acquiring ample knowledge on your selection. With the right research and expert opinions in place, you will be in a position to extract the maximum tax benefits from your investments– go for it!