The USPs of investing in mutual funds is the fact that there
are schemes to cater every type of investor. No matter if you are aiming for
long-term wealth investment or stable income from the investment, there are
different types of mutual fund schemes to match your investment goals. Now
there are some schemes to help you save taxes Popularly known as tax-saving
funds or Equity Linked Savings Schemes (ELSS).
Equity Linked Savings Schemes (ELSS) are eligible for income
tax deduction under Section 80C of the income tax -IT Act. Let us have a
detailed look at what is ELSS funds and their tax benefits.
Equity Linked Savings Scheme is a type of diversified mutual
fund. While these schemes have exposure in equity and equity-related
instruments mostly , and some part of
the investment is made in the debt .
Just like other types of mutual funds, an investor can
either invest a lump sum amount in an ELSS fund of their choice or start a SIP.
These funds have a lock-in period of 3-years, and an investor must remain
invested throughout this period to claim the tax deduction.
Tax Saving with ELSS
As mentioned above, ELSS funds are eligible for a tax
deduction as per the IT Act, Section 80C. A maximum deduction of up to Rs.
1,50,000 is allowed in a financial year by investing in these funds. With the
majority of the investment in equity, ELSS funds are known to offer the dual
benefits of long-term wealth creation and tax benefits.
But note that the tax benefits will be reversed if an
investor withdraws the ELSS investment before the mandatory lock-in period of
3-years.
Tax Saving with ELSS SIP
A lot of ELSS investors often get confused about how to
claim a tax deduction if they have started a SIP in an ELSS fund. But no matter
if you invest a lump sum amount or start a SIP in ELSS, the maximum deduction
will be Rs. 1,50,000 in a financial year.
It is up to you whether you want to invest Rs. 1.5 lakhs at
once or invest Rs. 12,500/month for 12 months. You are eligible for a tax
deduction in both cases as per Section 80 of the IT Act. But do note that the
lock-in period of every SIP will be 3-years from when you invest the amount.
Taxation of Capital Gains from ELSS
As ELSS mutual funds are equity-oriented funds, they are
taxed as any other equity fund. LTCG of 10% without the indexation benefit is
applicable when you redeem your ELSS investment after the lock-in period of
3-years and your gains for the year are above Rs. 1 lakh.
But as ELSS funds have excellent long-term wealth creation
potential, most investors generally do not redeem their investment even after
the lock-in period. A tax-saving mutual fund scheme like ELSS has the shortest lock-in period of just three years. This makes ELSS one of the best ways to save taxes as well as create wealth over the long term.
Tax deduction under section 80C of up to Rs. 1,50,000 per
year
Lower lock-in period and higher return potential in
comparison to other 80C investment options such as Tax-saving FD, PPF, NPS, and
NSC.
Freedom to invest a lump sum amount or start SIP with as
little as Rs. 1,000/month
Dividend option if you want to earn a regular income from
your ELSS investment
Professional fund managers make investment decisions on
behalf of the investors
Now that you know what is ELSS mutual funds, it shouldn’t be
difficult for you to decide whether or not they are an excellent choice for
you. These funds are generally recommended for individuals who want to save
income tax and are aiming for long-term financial growth.
Must Remember that as these funds have higher equity exposure,
they are volatile and not recommended for someone wanting stable returns.
#MUTUALFUNDSSAHIHAI
MUTUAL FUND CALCULATOR
#MUTUALFUNDSSAHIHAI
MUTUAL FUND CALCULATOR
No comments:
Post a Comment
Enter your comment here