Equity Linked Saving Scheme is an open-ended equity growth scheme that
is offered by mutual funds in line with existing ELSS guidelines. The
investments under this type of scheme are subject to a lock-in period of
3 years and, as per the Finance Act 2005, are allowed the benefit of
income deduction up to Rs. 1,00,000 under Sec
80C of Income Tax ACT .
Currently, ELSS comes under "EEE"(Exempt, Exempt, Exempt) method of taxation — wherein
it is exempted at the points of investment, in the entire tenure of the
investment and as well at the time of withdrawal.
ELSS = Tax Benefits + Long Term Capital Appreciation
How:
1. When you make investment in ELSS Fund
Your taxable income is reduced by the amount of investment made subject to a maximum investment of Rs. 100,000,means you get tax deduction under section 80C of income tax act.
2. When you earn income in the form of Dividend
Dividends received from ELSS funds are also exempt from tax, as ELSS Funds are mainly Equity Schemes, so there is no dividend distribution tax, so dividend is tax free in the hands of investors.
AS you know ELSS Funds are locked in for three years, so after three year when you sell ELSS units, they are considered as Long Term investment and currently long term capital gains are tax free.
Also refer
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ReplyDeleteThank for good information provided form your side.Tax Treatment for Equity Linked Savings Scheme.Thank you so much
I invested Rs 50000 in 2009, now my investment market value is Rs 80000. Rs 30000 is non taxable because it is long term capital gain.
ReplyDeleteHow about my investment of Rs 50000. Do I have to now declare it as taxable income since I did not pay tax on this income in 2009 when I claimed it under Sec 80 C.
No tax is to be paid for redemption of units of an equity scheme held for over a year. Elss comes under lock in period of 3 years, so no tax on principal amount or on capital gain on sale of those units.
ReplyDeleteIf you want to mention in return file, no harm in it as will not attract any tax.