How to invest in ELSS to save tax
An essential requirement for investing in mutual funds is KYC compliance by providing proof of address and identity which is mandatory for ELSS too.
An essential requirement for investing in mutual funds is KYC compliance, and this is mandatory for ELSS too. Proof of address and identity, along with an in-person verification process, must be completed before investing.
Investment can be made either directly or through a mutual fund distributor/adviser. The investor application form can be obtained from the AMC or distributor or downloaded from the mutual fund website
The minimum amount that a person can invest in an ELSS, to start with, is Rs 500. There is no maximum limit. However, tax deduction will be available only up to Rs 1.5 lakh, or the amount invested in the financial year, whichever is lower.
Modes of investing
One can make a lumpsum investment in ELSS. Alternately, the investor can opt for a systematic investment plan (SIP). In the case of latter, every month a specifi ed amount is debited from the investor’s bank account and invested in the scheme.
Once the investment is completed, a statement of account is sent by the AMC, which can be kept as a record of investment made for tax purposes.
Points to note
- ELSS invests in equity and equity-oriented securities that are prone to market ups and downs.
- Redemption from ELSS (since it is compulsorily held for three years) is subject to long-term capital gains taxable at 10%.