Key Points on Understanding Contra Mutual Funds

1. Contrarian Strategy: Invests in undervalued, underperforming stocks for potential high returns.
2. Long-term Focus: Requires patience as returns materialize over several years.
3. Diversification: Spreads investments across various sectors to mitigate risk.
4. Active Management: Relies on fund manager’s expertise to select promising stocks.
5. Higher Risk: Involves higher risk due to investment in underperforming stocks.

Equity-Linked Savings Schemes (ELSS) offer tax benefits while investing primarily in equities. Here are five key points about ELSS:

• Tax Benefits: ELSS investments provide tax deductions of up to ₹1.5 lakh under Section 80C, reducing taxable income.
• Short Lock-in Period: ELSS has a three-year lock-in, the shortest among Section 80C options, encouraging medium-term investment discipline.
• High Return Potential: With a focus on equities, ELSS can deliver higher returns compared to traditional tax-saving instruments.
• Flexibility in Investment: Investors can choose between lump sum and SIP (Systematic Investment Plan) options, ensuring investment flexibility.
• Wealth Creation: ELSS promotes long-term wealth creation through compounded growth, benefiting from the potential appreciation of equity markets.

Key Points on Mutual Fund Taxation in India

• Equity Funds: STCG at 15%, LTCG over INR 1 lakh at 10%.
• Debt Funds: STCG per slab, LTCG at 20% with indexation.
• Dividends: Taxed per slab, TDS at 10% if over INR 5,000.
• ELSS Funds: Section 80C benefits, LTCG over INR 1 lakh at 10%.
• Hybrid Funds: Taxation based on equity exposure; follows equity or debt rules.