Tax Saving Solution

Tax saving solution includes Equity Linked Savings Scheme (ELSS). ELSS is an equity oriented mutual fund that comes with a lock-in of 3 years and provides tax saving benefits under section 80C of the Indian Income-tax Act, 1961.

Investing in ELSS can reduce your taxable income by up to INR 1,50,000. This can provide you with a direct tax benefit of up to INR 46,800* per year u/s 80C of the Income-tax Act, 1961.

While tax saving is an important goal of this fund, the USP of ELSS is that it actually provides a dual benefit of tax saving along with capital growth of your investment.

ELSS is suitable for you if you are looking out for a tax saving investment avenue which can also provide you potential capital appreciation on your investment over the long term.

ELSS can be beneficial in the following ways –
• Lower lock-in period of 3 years vis-à-vis 5 years in most other tax saving instruments
• Higher potential for returns – active, market linked returns
• Possibility of earning dividends; if dividend option is selected

No. ELSS is subject to a lock-in of 3 years, thus is it cannot be redeemed after a year.

No. The 3-year lock-in period is the minimum time frame for which you need to stay invested. You can continue to stay invested in the ELSS even after completion of the lock-in period. In fact, as it is an equity-oriented fund, it has the potential to earn better returns over a longer time period.

The taxation of these funds is the same as the taxation of equity funds. As they can only be redeemed after 3 years, only long-term capital gains (LTCG) tax shall apply. LTCG tax is only applicable if the gains exceed INR 1 lac – being taxed at 10%.