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ELSS mutual funds that offer tax benefit
This story is from December 11, 2019

ELSS mutual funds that offer tax benefit

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NEW DELHI: ELSS, known as Equity Linked Savings Scheme, is a diversified type of equity mutual fund that is certified for tax exemption under Section 80C of the Income Tax Act. ELSS is the most preferred mutual fund amongst investors as it offers tax benefits and increase in the price or value of assets.
ELSS has a lock-in period of three years, which means that one cannot sell these funds before three years from the date of purchase.
Deductions of up to Rs 1.5 lakh can be availed on the amount invested on these tax savings funds. One is required to submit the supporting documents to claim deductions.
What are the tax benefits under Section 80C?
Under Section 80C of the Income Tax Act, one can avail tax benefits from his/her gross total income. If one has invested in ELSS mutual funds then he/she is eligible to avail tax deductions of up to Rs 1.5 lakh on the invested amount. Besides, one can invest in other mutual fund schemes to avail tax deductions as per the Section 80C of the Income Tax Act.
Why choose ELSS?
Reasons to invest in ELSS mutual funds are as follows:
  • The tenure of the scheme is shorter as compared to PPF (Public Provident Fund), NSC (National Savings Certificate) and bank fixed deposits
  • ELSS makes investment in equity markets. Making long term investment in equity markets can help you earn high returns in comparison to the returns offered from other assets
  • One can choose the SIP investment and improve his/her habit of regular investing
  • By selecting a dividend scheme, one can get income from his/her investment amount in the lock-in period
  • The dividend earned from ELSS fund is exempted from tax
  • The dividend that you receive or the amount that you pay at the time of redemption is free from tax
  • Capital gains made from ELSS funds at the time of redemption are tax free. Moreover, Securities Transaction Tax is charged at 0.001% on the total value of redemption
  • There are three options that one can choose from ELSS funds. These options are Growth option ELSS, Dividend option ELSS and Dividend reinvestment option

Tax benefit under Section 80C of the Income Tax Act can be claimed during a financial year, i.e. if you invest in ELSS mutual fund in July 2020, you can claim a deduction for the financial year 2020-21. You can make the investment declaration either at the beginning of a financial year at the end of the financial year. While doing the same, all supporting documents and relevant forms must be filled out and all information provided should be accurate and up-to-date.
  1. What is ELSS mutual fund?
    ELSS is also termed as Equity Linked Savings Scheme. This is an assorted equity mutual fund that is accredited for tax exemption under Sectio 80C of the Income Tax Act.
  2. Why is ELSS popular amongst investors?
    Investors prefer the ELSS or Equity Linked Savings Scheme is preferred because of its benefits and hike in the price or value of assets.
  3. What is the lock-in period for ELSS?
    There is a three-year lock-in period for ELSS. This means that you cannot sell these mutual funds before three years from the date of purchase.
  4. Is there any tax benefit for ELSS under Section 80C?
    Yes, under Section 80C, if you have invested in ELSS, then you are eligible to avail deductions of up to Rs 1.5 lacs on the investment amount.
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