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Mutual Fund Investment: Don't Confuse ELSS With SIP, Here's Why

Mutual fund investment: Financial planners advise considering a few things before making a decision
Mutual fund investment: Financial planners advise considering a few things before making a decision

Many investors looking to invest in mutual funds are quick to take the ELSS or ELSS via SIP route. Reason: ease of use and, most importantly, tax benefit. Investors often confuse SIP with ELSS. While ELSS or Equity-Linked Saving Scheme is a type of mutual fund that is eligible for tax exemption under Section 80C of the Income Tax (I-T) Act, SIP or Systematic Investment Plan is only a way of investing in a mutual fund. Simply put, the option of SIP enables an investor to schedule parking of a fixed amount of money in an instrument on regular intervals. For example, Rs 1,000 every month. But how should you select a mutual fund, or invest in it? What are the factors you should keep in mind while investing a mutual fund? NDTV.com here gives you a lowdown on everything you should know about mutual funds:

How to select a mutual fund

Financial goal
Risk appetite
Expense ratio
Historical performance
When to invest in mutual funds through ELSS
Parameters Tax after Investing in ELSS
under Section 80C
Without Investing in Tax Saving
Investments under Section 80C
Gross Total Income of the person Rs 9,00,000 Rs 9,00,000
Tax Exemptions under section 80C Rs 1,50,000 0
Total Income Rs 7,50,000 Rs 9,00,000
Tax on Total Income Rs 51,500 Rs 95,275
Amount of Tax Saved Rs 43,775 0
Note: Assumed no other deduction from gross income. Tax is calculated including applicable cess.