Buy Mutual Funds - Avoid Paying Heavy Taxes

Avoid paying heavy taxes. Buy mutual funds

Whoever it may be that is earning an income is surely liable to pay a portion of that income to the state by way of tax. No doubt paying tax is necessary for the development of the country you live in. At the same time not everyone wants to pay high taxes and struggle for monetary assistance throughout one’s life.

Everywhere people are finding ways and means to reduce paying high taxes and save more money for their future. You surely are looking for a good tax break so that your funds are parked safely. For this the best method is investing in mutual funds.

These mutual funds are those that are created by companies. Customers buy their securities or shares from the respective companies which in turn offer high dividends.
 

Types of mutual funds:

Mutual funds are varied like stocks, hybrid funds, bond, equity funds etc. Each fund has a NAV or net asset value which is also known as the rate per share or unit. Mutual fund investors usually pay premiums amounts regularly or in intervals till the maturity level of the fund.

Functioning of mutual funds:
When the returns are higher than the actual amount spent on buying the bond it is considered as capital gain that gets taxed as investments. Since capital gains are taxable for the investors, there are a few exceptions. If you invest in a short term mutual fund that is redeemed within one year, you are liable to pay tax.

On the other hand if it is held for over a year then the tax on the capital gain is reduced significantly. This is the same when you hold equity funds as well. However, dividends earned from both these funds are not taxable.

Important points in tax saving funds:

When you are looking at ways of saving tax with making investments you should make sure you are investing in the right company. Whatever it may be debt or equity you should plan whether you are going to hold the fund for a short term or a long term.

You also should be certain whether your income is capital gains or dividend. In certain cases the capital gains are re invested in order to save on tax. This factor should also be clear and not overlooked.

For all this you should do some research online and make sure you read the fine print that appears in all these terms and conditions.

Finally you can choose the fund of your liking and that which suits your investment plan.

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