Up to Rs 1.5 lakh investment is eligible for the tax benefit, however, investors can invest more than Rs 1.5 lakh in the scheme.
People have now started looking for investment options to save tax. If you are also looking for some options, there are certain mutual funds that offer tax deductions under Section 80C of the Income Tax Act. Investments up to Rs 1.5 lakh in a financial year is eligible for tax deduction u/s 80C.
Under mutual funds, equity-linked savings schemes (ELSS) are equity-oriented schemes that are specifically designed for tax saving. However, note that ELSS comes with a 3-year lock-in period from the date of investment. Hence, if you want to avail tax benefits make sure that the scheme that you choose is an ELSS scheme.
Here are some points to keep in mind while investing in equity-linked savings schemes;
– Investors have to be KYC compliant, to invest in mutual fund schemes. After being KYC compliant the investor can start making an investment in the fund of his/her choice either online or can also fill up a physical form along with the payment instrument, to start investing offline.
– Up to Rs 1.5 lakh investment is eligible for the tax benefit, however, investors can invest more than Rs 1.5 lakh in the scheme. Experts suggest it can be for the purpose of wealth creation through equity investments.
– Investments under this scheme can be made either as lump sum investment or in the form of monthly SIP instalments.
Note that, once a folio is created, investments need to be made every year for every year by the investor to avail tax benefit for that financial year.
– With ELSS the cut-off timings for your investment are important, as it is an equity-oriented fund. For funds less than Rs 2 lakh, if the application for it is submitted before 3 pm on a business day, the NAV (net asset value) of that day is applicable, which is calculated at the end of the day. However, if the application is submitted after 3 pm, the NAV of the next business day is applicable.
– For investments above Rs 2 lakh, the net asset value is determined at the time when the funds are credited in the fund house’s account.
– Be aware of the liquidity option before investing in equity-linked savings schemes. ELSS comes with a lock-in period of a minimum of 3 years from the date of investment. During the tenure of investment redemption or switching of funds are not allowed.