Investing in tax saving schemes of mutual funds : Paper work Required By CA Sayan Ghosh


Certain mutual fund schemes offer tax deduction under section 80C of the Income Tax Act 1961, for investments upto Rs.1,50,000/- in a financial year. These schemes are equity oriented schemes and are specifically designated as tax savings schemes known as equity linked savings schemes (ELSS).
  • Though the tax benefit is available for investments upto Rs. 1.50 Lakh, one can invest more than Rs. 1.50 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 the lump-sum investment.
  • To invest in a mutual fund scheme, the investor should be KYC complaint. If the investor is KYC complaint, he can fill up a physical form along with the payment instrument or can make an online investment in the fund of his choice.
  • Since ELSS is an equity oriented fund, all applications of less than Rs. 2.00 lakh, if the application is submitted before 3.00 P.M 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 3.00 P.M, the NAV of the next business day is applicable. For applications of Rs. 2.00 lakh and above, the NAV is determined at the time when the funds are credited in the fund house's account.
  • 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.
Some points to remember
  • 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.

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