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

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...

Nifty F&O

  1. What is a straddle? A strategy using Nifty options usually before a major event or when one is uncertain of market direction. Comprises purchase of a Nifty call and put option of the same strike price. Usually strikes are purchased closer to the level of the underlying index. 2. What is better ­ buying or selling a straddle? It depends.Implied volatili ty of options, or near-term expectations of price swings in an un derlier like Nifty , usually peaks before an event and falls when the outcome plays out ­ like Infy re sults in past years. However, once the event plays out, a sharp rise or fall in Nifty could result in price of the straddle rising ­ benefiting buy ers. But, normally , those who sell or write options charge hefty premiums from buyers in the hope that fall in volatility would ensure the options end out-of-the-money, hurting buyers. 3. So, do straddle sellers end up winning most of the time? Yes. That's invariably the case when market volatility is trending on the...

JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund

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 JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund    The new fund offer opens for subscription on 16 th June and closes on 30 th June. JP Morgan Mutual Fund today announced the launch of its open end fund of fund called Emerging Markets Opportunities Equity Offshore Fund. The fund will invest in an aggressively managed portfolio of emerging market companies in the underlying fund - JPMorgan Funds - Emerging Markets Opportunities Fund, says a JP Morgan press release. Noriko Kuroki, Client Portfolio Manager, Global Emerging Markets Team (Singapore), JPMAM said, "Emerging markets have been out of favour for several years, as growth decelerated and earnings struggled. However, in a world of globalisation, we believe that EM will eventually re-couple with DM, leading to the long-aw...

Good time to invest in Infrastructure Funds

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   Good time to invest in infrastructure The Sensex has gained almost 10 per cent from May 15 till date, while the CNX Infrastructure Index has gained almost 17 per cent in the period. The price to earnings ( P/ E) ratio of the BSE Sensex is 18.96; for the CNX Infrastructure Index, it is 24.57. The estimated P/ E for next year is 14.04 for the Sensex. Of the 24 companies that make up the CNX Infrastructure Index, six have a P/ E higher than 20. Does this mean infrastructure is fairly valued? Or, has it run up quite a bit? According to experts, barring stray companies, the infra sector is fairly valued and it is a good time to invest. Even if some companies are facing debt restructuring problems, once interest rates come down and regulatory norms become flexible, they will start giving good re...

Mutual Funds: Past Performance is not just everything

Many a times your agent / distributor / relationship manager tries to push you some mutual fund schemes by enticing you with a typical sales pitch…"Sir, this scheme has generated 20% returns in the past one year." And this sales pitch often gets louder when the market conditions have been favourable. Some of the agents / distributors / relationship managers have another unique way of luring you. They say, "Sir / madam this scheme has been awarded the best scheme award in the past by a leading business channel"... And hearing all these sales talks you investors very often get attracted and sign a cheque in favour of the respective scheme.   But please ask yourself do you hear these sales talks when the capital markets turn turbulent? Why is it so that your agent / distributor / relationship manager avoids talking to you during turbulent times of the capital markets and doesn't boast about returns generated by the respective funds or awards being conferred on t...
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