What is ELSS Funds?
ELSS funds are equity funds, which invest a major part of their corpus in equity or equity related instruments. ELSS funds are also called tax saving schemes as they also offer to claim tax deduction up to Rs 150,000 under Section 80C of the Income Tax Act. As the name indicates, ELSS fund is an equity based scheme with a mandatory lock-in period of three years. In recent years, many taxpayers have turned to ELSS schemes to avail tax exemptions. If you invest in ELSS schemes, you can avail tax deduction on the amount invested up to a limit of Rs 1.50 lakh. Remember, the benefit you get from this scheme at the end of the three-year period will be treated as Long Term Capital Gain (LTCG) and will be taxed at 10 per cent (if the income is more than Rs 1 lakh).
Features of ELSS Mutual Funds (Some important features of ELSS Mutual Funds are as follows)
- Minimum 80 percent of the total investable corpus is invested in equity or equity related instruments.
- Funds invested in equity are diversified across all market capitalizations, themes and sectors.
- There is no minimum investment period. However, the lock-in period is three years.
- The benefit of tax deduction on the amount invested is available under section 80C of the Income Tax Act.
How much to invest in ELSS?
There is no capping on the investable amount with ELSS. However, the tax benefit limit is Rs 1, 50,000 per annum. You can consider making full use of your section 80C limit by investing Rs 1.5 lakh per annum.
How to show else in 80C?
Taxpayers can claim deduction under section 80C of the IT Act when they file their income tax return for a particular year. All supporting documents and relevant forms must be filled and all information provided must be accurate and up-to-date.
What are the disadvantages of investing in ELSS?
The biggest disadvantage of investing in ELSS is its lock-in time. Once invested, the invested money can be returned only after 3 years. If you have invested through SIP then you can stop it. But the investor gets the already invested amount only after 3 years. Therefore, whenever you invest in ELSS, do it very carefully.
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