Understanding Tax Deductions on Mutual Fund Investment

Hello and welcome to Part 11 of the income tax education series brought to you by H&R Block, the global leader in filing income tax returns. Today we will understand whether mutual fund investments can qualify for a tax deduction.

The answer is Yes. Mutual funds do qualify for a deduction under section 80C of the Income Tax Act. However you should be careful while purchasing a mutual fund if you intend to save taxes as well as earn money on investments. This is because only the Equity Linked savings schemes under mutual funds qualify for deductions from taxable income. These are the savings schemes that generally have a lock in period of 3 years. This means that these mutual fund instruments cannot be sold for 3 years from the date of purchase. In this case you can claim a deduction of Rs. 1,50,000 under the 80C limit of deductions. E.g. if you invest Rs. 1,00,000 in ELSS scheme for the financial year 2015-16 then you may claim this entire amount as a deduction u/s 80C as it is within Rs. 1,50,000.In this case you just need to make sure that the scheme in which you invest qualifies for a deduction and is eligible to be claimed u/s 80C. This can be known from either your tax advisor or from the investment advisor.

At H&R Block we make sure that you claim only those deductions that you are eligible for and hence calculate an accurate tax liability.

I hope you found this useful. If you have any further questions on this topic, please feel free to ask us using #AskBlock.
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