What is the difference between the equity mutual fund & tax saving mutual fund? Which gives us maxium gain?

I wish to invest into any mutual fund. Let me have the fact of beneficial mutual fund.

Equity mutual funds: it usually refers to funds that hold only stocks, any type of stock. These are taxable.

Tax saving mutual funds: which I think are the Tax exempt mutual funds, are funds that invest mostly in treasury bonds, though it might hold some stocks. They pay you back a certain amount of interest and are tax free.

Better returns? That really depends, equity funds usually has a faster return since its mainly invested in stocks, but its volatility it's higher than tax exempt funds. Tax exempt funds gives you a slower return because of the maturity term of the bonds; but it pays you back interests.

If you are new to investment, and you want to hit the stock market, I believe that mutual funds are the best choice.

Hi, i suggest a great site with plenty of Issues related to your Investing and everything around it. it also provide clear and accurate answer to many common questions.

I am sure that you can get your answers in this website.

http://investing.sitesled.com/

Good Luck and Best Wishes!

in equity mutual fund you can invest anytime and redeem at anytime but investment is subject to income tax conditions apply.You cannot claim exemption over this investment and there is no lock in period.Bu it tax saving funds there is lock in period during which you cant come out of it,but investment in this scheme is eligible for claiming exemption.Apart from this both will yield best returns depends upon the fund management coy.Generally mutual fund is the best for those who doe snot want risks comparatively investment in stocks.For detailed analytics lo gin www.easymf.com.

they r almost similar. they r both diversified equity funds. in equity funds u do not get any income tax benefit for the amount of investment but in tax saving funds there is a lock in period of 3 years (u can not withdraw money before completion of 3 years) and u r eligible for deduction of ur invested amount upto Rs 1 lac, alongwith other eligible investmens e.g. life insurance premia, PF contribution etc.. max amount upto one lac for all these investments taken together is exempt from income tax. for dividends & capital gains the provisions r same for both type of funds. as i m an investment advisor, u can contact me for further info if u so wish (nirmaljain@india.com)

Under section 80, Indians can invest upto Rs 1 lakh in ELSS (Equity Linked Saving Scheme, also commonly known as Tax Saver schemes) funds per year/per individual. The amount invested in a ELSS/Tax Saver scheme is Tax deductible on your tax return.

E.g.,

Say you are a male and earned Rs 2 lakh. You invest Rs 1 lakh in a ELSS fund, such as HDFC Tax Saver fund.

Your taxable income in this case would be: Rs 2 lakh - Rs 1 lakh = Rs 1 lakh.

For a taxable income of Rs 1 lakh, there is ZERO tax.

Had you "NOT" invested in the HDFC Tax Saver fund, then your taxes are

Your taxable income in this case would be: Rs 2 lakh

For a taxable income of Rs 1 lakh, there is a tax of Rs 15,000/-.

Therefore, in this scenario, you save Rs 15,000/- in taxes by investing in a ELSS scheme.

Now, what is the catch for investing in a ELSS scheme.

(a) Your invested money is LOCKED for a period of 3 years. i.e., Once invested in a Tax Saver fund, your money cannot be taken out for a period of 3 years. But this is a blessing in disguise, because Tax Saver funds generally yield healthy returns during a 3 year period.

(b) Except for the Pension plan funds which usually locks the money until the age of 58 or so, all ELSS schemes invest upto a 100% in equities/stocks. Therefore, inherently investing in a ELSS is risky.

Comparing equity mutual fund and a tax saving one, I would say Tax saving funds generally perform better because there is less pressure on the Tax Saving fund manager to SELL during down markets for redemption to unit holders.