ELSS Funds-Tax Saving Mutual Fund Investment|SBI MF (2024)

FAQs

What is the difference between tax saving MF and ELSS? ›

Investment in ELSS qualifies for tax deduction under Section 80C of the Income Tax Act, 1961. Investment in mutual funds doesn't qualify for a tax deduction. The investment is locked in for a tenure of three years. There is no lock-in on the investment.

You can save up to ₹ 1.5 lakhs a year in taxes by investing in ELSS, which is covered under Section 80C of the Income Tax Act, 1961. However, you can choose to invest more than ₹ 1.5 lakhs, but the excess will not qualify you to avail the tax benefits as per the provisions of Section 80C.

ELSS funds qualify for tax exemptions under Section 80C of the Income Tax Act. Deductions of up to Rs. 1.5 lakh can be availed on the amount invested on ELSS funds. Supporting documents have to be provided by the policyholder to claim deductions.

Investments in an ELSS fund are tax deductible under Section 80C of the Income Tax Act of 1961. While there is no upper limit on the amount that can be invested, the IT Act allows for a tax deduction of up to Rs. 1.5 lakh.

After the three-year lock-in period, investors can redeem their investment or stay invested. But the investor must note that the investment after the deductions is still subjected to 10% tax, though ELSS can give high returns in the long term.

Any individual or HUF looking to save up to Rs 46,800 a year on taxes can consider investing in ELSS. However, these funds are suitable only for those who are willing to take some risk and can stay invested for at least the mandatory lock-in period of three years should invest in ELSS.

These equity-linked instruments have the potential to offer higher returns and are an ideal choice of investment for the long term. ELSS holds its ground, even with its returns being taxed, with higher post-tax returns than any other Section 80C investment options such as Public Provident Funds (PPFs) and ULIPS.

There is no condition about the number of ELSSs to qualify for the tax deduction. In short, you can invest Rs 1.5 lakh in a single ELSS and claim tax deduction on the entire amount. Similarly, you distribute Rs 1.5 lakh among four ELSSs and claim tax deduction on Rs 1.5 lakh under Section 80C.

Which bank is best for ELSS? ›

Yes it will be advisable to invest more than 2 elss fund for tax deduction and wealth creation but you will be get only tax deduction up to 1.5 lakh only .

How much to invest in ELSS? There is no capping on the investible amount with ELSS. However, the tax benefits are capped at Rs 1,50,000 a year. You may first consider making full utilisation your Section 80C limit by investing Rs 1.5 lakh a year.

Why ELSS is tax-free? The redemption proceeds of ELSS are not entirely tax-free. The long-term capital gains of up to Rs 1,00,000 a year are tax-free, and any gains above this limit attract a long-term capital gains tax at the rate of 10% plus applicable cess and surcharge.

You can invest in ELSS the same way that you invest in any Mutual Fund. The easiest way is through an Online Investment Services Account. You can invest either as a lump sum or via the SIP (systematic investment plan) route.

The major difference between ELSS and any other equity mutual fund is the tax benefit and the lock-in period. ELSS attracts many investors as it provides tax benefits under section 80C. No doubt tax planning and saving is a better way of managing your finances.

When you invest in ELSS, you can reduce your taxable income up to Rs 1.5 lakh annually under Section 80C of the Income Tax Act,1961. This means you can save up to Rs 46,800 in taxes each year. But you must remember that ELSS is unlike other open-ended mutual funds where you can withdraw your money anytime.

The only difference is that there is a 3-year lock in for these funds. That means once you are invested in these funds then you cannot redeem them for a period of 3 years from the date of investment. For all practical purposes, the portfolio of an ELSS is exactly like a normal equity funds.

Benefits of tax-saving mutual funds

Investments in tax-saving mutual funds like ELSS qualify for tax deduction up to 1.5 lakh per annum under Section 80C of the Income Tax Act. These funds carry one of the shortest lock-in period among all 80C investments.