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ELSS funds are one of the best avenues to save tax under Section 80C. This is because along with the tax deduction, the investor also gets the potential upside of investing in the equity markets. Also, no tax is levied on the long- term capital gains from these funds. Moreover, compared to other tax saving options, ELSS has the shortest lock- in period of three years. Going by its name ELSS invests a majority of its corpus in equity and equity related products. An investment in ELSS comes with a lock in period and has tax benefits attached to it. It is suitable for investors having a high risk profile as returns in ELSS fluctuate depending upon the equity market and there are no fixed returns. ELSS schemes are open ended, that is, investors can subscribe to the fund at any day. NAV or the price of the fund is declared on every business day. Mutual funds Vs ELSS ( difference between ELSS and Mutual fund) Tax Free: There is no ceiling for investments in ELSS however investments in ELSS qualify for tax deductions under sec 80C of the income tax act subject to a maximum of Rs 100,000 in a financial year whereas investments under normal mutual fund do not qualify for income tax deductions. Any dividend received or long term capital gain earned by the investor is tax free. Long term capital gain arises on selling units of mutual fund after 1 year of purchase. Since there is a lock in period of 3 years every investor will realize long term capital gain/ loss on selling their holdings. Lock – In:- ELSS has a lock in period of 3 years unlike other kinds of mutual funds. Options while making an investment in an ELSS Growth option – In growth option income earned by the fund is not distributed to unit income/ profit earned by the fund increases the NAV of the fund and vice versa. Whenever the investor sells its holdings he will realize long term capital gains. Dividend option – In this option the fund distributes income earned by the fund to the investors as dividends. The date of distribution is declared by the fund, however if the fund has negative income it will not distribute any dividend. Any dividend received by the investor is not liable for tax in the hands of investors. Dividend reinvestments option – If the investors chooses this option the dividends declared by the fund are reinvested. For example, an investor is holding 10,000 units of a fund and the fund declares dividend @ 1.5 per unit, the total dividend of 15,000 (10,000x1.5) will be reinvested on behalf of the investor as a fresh purchase. The investor can claim deductions to the tune of dividend received which is Rs 15,000 in this case. Monthly investment in ELSS Monthly investments on a pre specified date in mutual funds is possible through systematic investment plan ( SIP). An investor has the option of investing monthly in equity linked savings schemes with a minimum investment of Rs 500. This type of investment is better suited to small investors who cannot invest a lump sum amount. SIP has the benefit of averaging out the cost of investors. As the amount of investment is fixed the units purchases every month varies depending upon the NAV of the fund. At a higher NAV the investor gets fewer units and more number of units at a lower time. How to Apply for ELSS To apply for ELSS an investor needs to comply with KYC regulations, Know your customer ( KYC) is mandatory whereby investor needs to provide some personal details like PAN no etc. KYC helps in reducing financial fraud. After complying with KYC the investor can approach to Asset management companies for subscribing to ELSS, Investor has to provide a photocopy of PAN Card along with the subscription form; the form should be filled properly and signed by the investor. The subscription form and a cheque leaf of the investment amount should be submitted with the AMC. In case of SIP ( systematic investment plan) one additional form should be filled and signed by the investor. The Investor has to select a date of SIP from the options provided in the form. The Installment amount will be deducted from the investor's bank account on that day of every month till further notice from the investor. | ||
1.ICICI Prudential Tax Plan
2.Reliance Tax Saver (ELSS) Fund
3.HDFC TaxSaver
4.DSP BlackRock Tax Saver Fund
5.Religare Tax Plan
6.Franklin India TaxShield
7.Canara Robeco Equity Tax Saver
8.IDFC Tax Advantage (ELSS) Fund
9.Axis Tax Saver Fund
10.BNP Paribas Long Term Equity Fund
You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds
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