Everything You Need to Know About Tax Saving Funds in 2025 – Plan Now
At the beginning of the year, many people are preparing to file their 2025 annual tax returns. This is a routine task for salaried employees or anyone with taxable income. Everyone is entitled to claim deductions and tax allowances, such as personal allowances, child allowances, support for their parents or spouse’s parents. etc. Additionally, those who invest in certain funds can also claim tax deductions. These funds are known as tax saving fund, such as the Provident Fund (PVD), Retirement Mutual Fund (RMF), Super Savings Fund (SSF), or ThaiESG Fund. Each fund provides different tax benefits. Now, let’s explore which funds offer tax deductions that best suit individual needs.
Contents
2. When should you invest in a tax saving fund?
3. How to choose a tax saving fund in 2025?
4. Investment precautions for tax saving funds
1. What is a tax saving fund?
A tax saving fund is a fund promoted by the government to encourage people to save for the future while also providing tax benefits.
Why should you invest in a tax saving fund?
A tax saving fund is an essential tool for tax deduction because it is designed by the government to encourage both saving and investment. It provides tax benefits by allowing deductions from personal income tax, reducing the overall tax burden. The advantages of investing in a tax saving fund include:
● Tax savings: This is the primary reason many people invest in tax saving funds. Investing in these funds helps reduce tax payments as they are tax-deductible up to the allowed limit. The more you invest, the greater the tax savings.
● Saving for the future: Investing in tax saving funds ensures that you save your money regularly. The invested money is allocated into assets such as stocks or bonds, offering growth potential and helping your money increase over time. It is ideal for long-term saving, such as retirement planning.
● Risk diversification: Investing in funds spreads the risk compared to investing in a single asset. Funds allocate capital into various assets, reducing the overall risk.
2. When should you invest in a tax saving fund?
It is advisable to purchase a tax saving fund before the end of the tax year to qualify for tax deductions in that year. This timing is crucial in maximizing tax benefits. The reasons to buy before year-end include:
● To qualify for tax deductions: The law requires that tax saving fund units must be purchased within the calendar year for which you wish to claim a deduction. For example, to claim a deduction for the 2025 tax year, units must be purchased before 31 December 2025.
● To have time for investment planning: Buying units in advance allows time to research and select suitable funds based on investment goals and risk diversification.
● To let investments grow longer: Investing early in the year provides more time for capital growth, as stock markets fluctuate throughout the year.
3. How to choose a tax saving fund in 2025?
Each year, choosing a tax saving fund is an important decision. Besides tax savings, these funds serve as investments for the future. However, with many options available, selecting the right fund can be confusing. Here are some examples of promising tax saving funds.
Retirement Mutual Fund (RMF) for tax deduction
Starting with a tax saving fund that many are familiar with: The RMF or Retirement Mutual Fund. This fund promotes saving for retirement. RMF investments can be made in a variety of asset types, including stocks, bonds, real estate, and gold, both domestically and internationally. In recent years, regulations have been revised to provide greater tax benefits for investors. Here are the key points:
● Investors can purchase fund units for tax deductions of up to 30% of assessable income, but not exceeding 500,000 Baht. The total contribution, when combined with other retirement savings, must not exceed 500,000 Baht.
● The investment must be held for at least 5 consecutive years, and units can only be redeemed at the age of 55 or older.
● Investments must be made continuously or every other year at a minimum. Skipping more than one year violates the conditions.
● There is no minimum annual investment
requirement, but investors must purchase units continuously each year (or at least every other year).
Provident Fund (PVD) for tax deduction
Another well-known tax saving fund among salaried employees is the Provident Fund (PVD). This is a fund jointly established by employees and employers to encourage long-term savings, ensuring that employees have savings for retirement. It also serves as financial security for families in case of health issues, work-related injuries, retirement, fund withdrawal, or death. The Provident Fund is highly beneficial for long-term financial planning. Its key features and benefits include:
● The fund consists of contributions from employees, known as the "employee’s contribution," which is legally mandated. Each company allows employees to contribute between 2–15% of their salary.
● Employers also contribute a portion, called the "employer’s contribution," on a monthly basis. Employers match the "employer’s contribution" at a rate of 2–15%, equal to the employee’s contribution.
● Contributions can be used for annual tax deductions based on actual payments, up to 15% of wages and not exceeding 500,000 Baht.
ThaiESG Fund for tax deduction
The ThaiESG Fund, or Thailand ESG Fund, is a mutual fund that focuses on investing in Thai-listed companies that consider environmental, social, and governance (ESG) factors. This investment approach has gained global popularity and provides an additional option for investors seeking tax deductions. This is the latest tax saving fund, introduced in 2023, offering tax deduction benefits of up to 300,000 Baht. However, many investors may still have questions about the tax deduction conditions of the ThaiESG Fund. Here are the details:
● Investments in the ThaiESG Fund are eligible for tax deductions of up to 30% of taxable income, but not exceeding 300,000 Baht per year.
● Investors must hold the ThaiESG Fund units continuously for at least 5 years from the purchase date.
4. Investment precautions for tax saving funds
Although tax saving funds are an excellent way to save money and reduce taxes, there are important considerations to keep in mind before investing:
1. Understanding tax deduction conditions
● Deduction limits: There is a maximum tax deduction limit. Any investment exceeding this limit will not receive additional tax benefits.
● Holding period: Fund units must be held for the legally required duration. Selling units before the required period may result in the loss of tax benefits.
● Fund types: Only approved funds qualify for tax deductions.
2. Investment risks
● Market volatility: The value of fund units may rise or fall depending on market conditions.
● Interest rate risk: Changes in interest rates may affect fund returns.
● Liquidity risk: Selling fund units during market fluctuations may result in unfavorable prices.
3. Fees
● Transaction fees: Costs incurred when buying or selling fund units.
● Management fees: Fees paid to fund management companies for administering the fund.
4. Choosing the right fund
● Fund research: Study details such as investment policies, past performance, and fees before investing.
● Fund comparison: Compare funds from various asset management companies to find one that suits your risk tolerance.
● Consulting experts: Seek advice from financial experts for investment planning that aligns with your financial goals.
5. Do not invest beyond your means
● Invest according to financial capability: Do not invest beyond your risk tolerance.
● Maintain an emergency fund: Ensure you have an emergency fund for unforeseen expenses before investing.
6. Regularly monitor investment performance
● Review your investment portfolio: Regularly check your investment portfolio to track the fund’s performance.
● Adjust your investment portfolio: Adjust your investment portfolio when necessary, such as when investment goals change or market conditions shift.
Investing in tax saving funds is a long-term commitment that requires patience and an understanding of capital markets. Studying investment information and consulting experts before making decisions will help you select the most suitable fund. Apart from tax saving funds, another popular way to maximize tax deductions is purchasing lump sum health insurance, which provides lump sum benefit ranging from 200,000 to 100 million Baht. This insurance ensures financial relief for medical expenses while also allowing tax deduction benefits.
● Please study the details of coverage, conditions, and exclusions before making a decision to purchase insurance.
Sources: Retrieved on 14/01/25