Whenever you invest somewhere, you expect more returns on it. On the other hand, if you are making this investment in mutual funds, then the expectation increases even more. But sometimes, you must also pay income tax on the amount invested. In such a situation, you look for such options for investment, where you get tax exemption as well. However, some equity mutual funds also meet your expectation of tremendous returns to a great extent. But now the question is whether you must pay tax on it.
Let us tell you that by investing in equity mutual funds, you may or may not get tax exemption. It means you do not get tax exemption in all mutual fund schemes. But by investing in a special type of mutual fund, i.e. Equity Linked Savings Scheme (ELSS), you get tax exemption and tremendous returns.
Under Section 80C, you will get a rebate of up to Rs 1.5 lakh
if you invest in Equity Linked Savings Scheme, you get a tax rebate of up to Rs 1.5 lakh annually under Section 80C of Income Tax. If your investments under 80C are not being completed in a financial year, then this is a great option for you to invest. If you haven’t added it to your portfolio yet, you can include it in your planning for this financial year.
Take double advantage of ELSS in this way,
even after investing in Equity Linked Savings Scheme, you get returns like other mutual funds. But ELSS is different from other ordinary mutual funds. Because 80 per cent of its investment is in equity shares. At the same time, you do not get tax exemption for investing in all mutual fund schemes. Whereas ELSS is a tax-saving equity mutual fund. Whether you invest in it every month through SIP or deposit the amount at once, you can claim tax exemption under section 80C of Income Tax in both cases.
It is very important to know this before investing.
If you plan to invest in ELSS to save tax, you must first know that it has a lock-in period of 3 years. After investing in it, you cannot withdraw it for 3 years. On the other hand, if you invest in it through SIP, then every SIP will mature in a cycle of 3 years; that is, after 3 years, one SIP will mature every month.
Do this to save capital gains tax. Let us
tell you that for investing in ELSS, you should use the same amount, you will not need for at least the next 5 years. At the same time, you should withdraw the money as soon as its 4 years are completed. In this way, keep withdrawing the funds deposited every year on completion of 4 years. This way, you can save capital gains tax. Let us tell you that if your gain is more than 1 lakh, then a long-term capital gain tax of 10% will have to be paid on it. ELSS is a mutual fund with an EEE category in a way. That is, the amount invested in it, the return received on it, and the money received on maturity will be tax-free. Thus, it works like PPF in terms of tax exemption.