Skip to main content

ELSS to save on tax

How an equity-linked saving scheme works



An equity-linked saving scheme (ELSS) is an excellent avenue if you are looking at investing in the equity markets, and saving on tax. As the investments are locked in for a period of three years, the returns are also good in these schemes. Further, considering the tax advantages, the yield on investments is generally high.



ELSS is a type of diversified equity fund. Investing in ELSS is deductible under Section 80C of the Income Tax Act. ELSS is like any other equity fund. However, the lock-in period is three years. These funds come with all the usual trappings of an equity fund, which includes choice between dividend and growth options, and systematic investment plans.



The amount you plan to invest in an ELSS should be in multiples of Rs 500 with a minimum of Rs 500. The fund allots units to all complete applications, made in the specified form, not later than March 31 every year. Further, the plan should be open for a minimum period of three months. Investments in the plan will have to be kept for a minimum period of three years from the date of allotment of units. After the lock-in period of three years, you will have the option of tendering the units to the fund for repurchase. In case of death of the investor, the nominee or legal heir, will be able to withdraw the investment only after the completion of one year from the date of allotment of the units to the investor or anytime thereafter. The units issued under the plan can be transferred, assigned or pledged after three years of its issue.



Under the IT Act, investors investing in an ELSS can claim benefits under Section 80C. The limit under this Section is Rs 1 lakh. The dividends earned in an ELSS are tax-free. The returns on maturity are also tax-free.



The funds collected by the fund are invested in equities, cumulative convertible preference shares, fully convertible debentures and bonds of companies.

Investments may also be made in partly convertible debentures and bonds including those issued on rights basis subject to the condition that the non-convertible portion of the debentures so acquired will be disinvested within a period of 12 months. The fund needs to ensure that that the funds of the plan remain invested to the extent of at least 80 percent in securities as specified. The investments should be made within a period of six months from the date of closure of the plan in every year.



For short terms, the fund may invest the funds in short term money market instruments or other liquid instruments. After three years of the date of allotment of the units, the fund may hold up to 20 percent of net assets of the plan in short-term money market instruments and other liquid instruments to enable them to redeem investments of those unit holders who would seek to tender the units for repurchase.



The fund announces the repurchase price one year after the date of allotment of the units and thereafter on a half yearly basis. After a period of three years from the date of allotment of units, when the repurchase of units is to commence, the fund will announce a repurchase price every month or as frequently as may be decided by them.



To arrive at the repurchase price, the fund will take into account the unrealized appreciation in the value of investments made. While calculating the repurchase price, the fund may deduct such sums as are appropriate to meet management, selling and other expenses including realization of assets. Such sums should not exceed five percent per annum of the average net asset value of a plan. The repurchase of units will be at the repurchase price prevailing on the date the units are tendered for repurchase.



The investments made in any plan by an investor will be acknowledged by the fund through a certificate of investment or a statement of account. A plan operated by the fund would be terminated at the close of the tenth year from the year in which the allotment of units is made under the plan. If 90 percent or more of the units under any plan are repurchased before completion of 10 years, the fund may terminate that plan even before the stipulated period of 10 years and redeem the outstanding units at the final repurchase price to be fixed by them.

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...

Birla Sun Life MIP II Savings 5

  Birla Sun Life MIP II Savings 5 - Invest Online   Have you traditionally been a debt investor but now wish to test waters in equities? Then, debt-oriented funds such as Birla Sun Life MIP II Savings 5 (Birla Savings 5), which have limited exposure to equities, may fit your requirement. With a five year return of 10.5 per cent compounded annually, the fund managed a good 3-3.5 percentage points more than its benchmark Crisil MIP Blended Index, as well as its category average. The fund appears well poised to capitalise on a falling interest rate scenario and has increased the average portfolio duration of its debt instruments in recent times. Suitability Birla Savings 5 is suitable only for conservative investors. If you want to make a beginning in equities and cannot take any short-term declines in your stride, then this fund will suit you. If you are already an equity investor and want to use a debt-oriented fund merely as a diversifier, then you may prefer peers from the HDFC and Re...

SBI MAGNUM MIDCAP ONLINE

Invest SBI MAGNUM MIDCAP ONLINE   SBI MAGNUM MIDCAP fund didn't fare well in its initial years but, in recent years, has steadily improved its performance under the capable hands of its current fund manager. Although investing predominantly in mid-cap stocks, the average market capitalisation of its portfolio is lower than other category peers.   Although the stock selection approach is mostly bottom-up , the fund manager doesn't shy away from taking bold sector bets , as is reflected in its large exposure to the healthcare sector. She is equally adept at handling performance across market cycles--the fund has captured more of the upside during market upticks and contained the downside during downturns in a better manner than its peers.   Given its superior risk-reward equation, the fund is a worthy pick in its category.     ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing EL...

Lump Sum or SIP?

Invest Mutual Fund Online     You have a lump sum in hand and you wish to invest in equity funds. However, you have heard a lot of talk about investing in equity funds through Systematic Investment Plans (SIPs) because they help average costs, ensure you do not ill-time the market, and help you invest in small sums, besides giving you many other advantages. So, should you invest the money you have in hand in one go, or let it remain in your bank account and then do an SIP? There is no harm in investing a lump sum amount. For all you know, compounding, over the long term, could work better with lump sum. However, make sure you fulfill all of these three criteria if you want to invest in one go. Else, SIP is the way to go. #1: You invest for the long term According to past data, ideally, if you have a time frame of 12 years or more, you can consider lump sum investing (provided you satisfy the other two conditions that follow). So, what is the sanctity behind 12 years? Is it because only...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now