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How to invest in tax saving mutual fund schemes

These schemes are equity-oriented schemes and are specifically designated as tax saving schemes known as equity linked savings schemes (ELSS).

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Last Updated: Jan 17, 2020, 10.58 AM IST
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ELSS have a lock-in period of at least three years from the date of investment.
Certain mutual fund schemes offer tax deduction under section 80C of the Income Tax Act, for investments upto Rs 1,50,000 in a financial year.

These schemes are equity-oriented schemes and are specifically designated as tax saving schemes known as equity linked savings schemes (ELSS).

Amount
Though tax benefit is available for investments upto Rs 1.5 lakh only, one can invest more than Rs 1.5 lakh for the purpose of wealth creation through equity investments. These investment can also be made in the form of monthly SIP installments instead of a lump sum investment.

Form
To invest in a mutual fund scheme, the investor should be KYC compliant. If the investor is KYC compliant, he can fill up a physical form along with the payment instrument or can make an online investment in the fund of his choice.

Cut off timings
Since ELSS is an equity oriented fund, all applications of less than Rs 2 lakh, if the application is submitted before 3 pm on a business day, the NAV of that day (which is calculated and published at the end of the day) is applicable. If submitted after 3 pm, the NAV of the next business day is applicable. For applications of Rs 2 lakh and above, the NAV is determined at the time when the funds are credited in the fund house’s account.

Liquidity
Equity linked savings schemes have a lock-in period of at least three years from the date of investment. No redemption or switch is allowed during this period. Lock-in period is reckoned on FIFO basis in case of multiple investments into the folio over a period of time.

Points to note
  • It is important to make sure that the scheme is a designated ELSS, if you want to avail tax benefits.
  • Once the folio has been created, the investor needs to make investments for every financial year to avail tax benefit for that financial year.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
Click here for all the information and analysis you need for tax-saving this financial year
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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