I hear such type of queries from clients who are new to mutual fund investments; as they want to invest in mutual funds so that they get tax benefit (deductions from income), or they invested in some mutual funds but not sure whether they get tax benefit or not??
Yes Tax benefit is available when you invest in Mutual funds schemes but that tax benefit is available when you will invest or have Invested in Equity Linked Savings Schemes (ELSS Funds) or Pension Plan scheme of Mutual Funds in that financial year.
ELSS Fund (Equity Linked Saving Schemes)
Tax benefits are available under 80C
But this is going to be last year for ELSS Funds as from April 01, 2012 ELSS Schemes will be removed from 80C (as per direct tax code)
Maximum Limit for investing in ELSS Funds
Maximum Limit – Rs. 1 lakh.
Lock in Period:
Lock-in period – 3 years, but if you are investing in ELSS Fund through SIP route then your EACH sip will be locked for 3 years.
Explained here:
Explain Lock in Period if investment is in ELSS Funds Through SIP (Systematic Investment Plan)
Pension Plans of mutual Funds
Pension Plans are central government notified pension scheme from the private sector. The pension funds are basically balanced funds i.e upto 40% of its assets in equities and the remaining in fixed income instruments. Investments in the fund are eligible for tax benefits under Section 80C.
Lock in Period
when you will reach 58 years but premature withdrawal is allowed in pension plans after 3 financial years at nominal charge on NaV.
Maximum Limit for investing in ELSS Funds
Maximum Limit – Rs. 1 lakh.
Please note that the total deduction u/s 80C and 80CCC can not exceed Rs. 1 Lakh.
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What is lock in period for income tax purpose??
ReplyDeleteHi Vishal,
DeleteLock in Period means the amount you are investing in particular scheme is locked(blocked) and you can't get that money before the lock in period.
When you claim tax deduction, you show the details in which tax savings option you used for savings.
and you get tax benefit.
Different investment option have different lock in period
say for example ELSS funds are locked in for three years.
PPF investment is locked in for 5 years and where as maturity period is 15 years.