Who Should Invest in SBI Tax Saver Mutual Fund?
- SBI Tax Saver Mutual Fund or ELSS is an equity-oriented mutual fund that invests in equity securities listed on the stock exchange.
- Hence, Tax Saver Mutual Funds are suitable for investors who seek long term wealth creation through investment in equity or securities. In addition to long term wealth creation, tax saving and lock-in period are other factors for investors to consider while investing.
- SBI Tax Saver Mutual Fund suits investors who wish to grow their capital and save taxes. Moreover, these investors do not have immediate liquidity needs for 3 years.
- However, tax savings should not be the only reason for investing in SBI Tax Saving MF schemes.
- Hence, SBI Tax Saving Fund is not suitable for investors who seek regular income and liquidity in the form of a zero lock-in period.
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Things To Consider Before Investing in SBI Tax Saver Mutual Fund
- Investment Objective: SBI Tax Saver Mutual Fund is an open-ended equity scheme with an investment objective of delivering long term wealth creation and tax saving. The scheme facilitates tax saving under section 80C of the Income Tax Act, 1961. However, there is no assurance that SBI Tax Saver schemes would be achieved.
- Investment Strategy: The corpus is created by keeping a long term perspective.SBI Tax Saver Mutual Fund invests in a diversified portfolio of companies with growth potential and sustainable business models. The portfolios will be constructed utilising a bottom-up stock selection process that emphasises the underlying potential of individual stocks.
The fund managers of SBI Tax Saver Schemes will evaluate the fundamentals of the businesses while selecting the stocks of companies. Moreover, specific focus will be on the industry structure, financial health, growth driving factors, and response to economic factors. SBI Tax Saver Fund will employ sufficient measures to minimise and control the risks involved in building a portfolio.
- Associated Risks: SBI mutual fund’s Tax Saving schemes involve associated risks including liquidity risks, default risks, market risks, and settlement risks. The value of the investment in the Scheme may go up or down depending on the numerous circumstances and forces affecting the capital markets and money markets, similar to any other investment in stocks, shares, and securities. However, the principal amount invested will be very high risk. SBI Tax Saver Fund has the potential to deliver higher returns against the associated risks involved.
- Tax: The tax treatment of SBI Tax Saver Mutual Fund is similar to that of an equity mutual fund. The returns earned on the fund are taxable at the time of redemption or sale of such units. The taxability is under the head capital gains depending on the period of holding. On sale of units of SBI Tax Saver Mutual Fund before 12 months short term capital gain arises. The STCG is taxable at a flat tax rate of 15%. A long term capital gain will arise on sale after 12 months from the date of allocation of these units. The LTCG of up to Rs 1 lakh is tax exempt. Any LTCG on SBI Tax Saving Mutual Fund scheme is taxable at 10% without the benefit of indexation.
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