Income Tax: Investing the equity proceeds in ELSS before March 31 will save you tax. 5 key provisions explained
Equity linked savings scheme (ELSS) mutual funds come with a three-year lock in period and give equity exposure while offering tax benefits, at the same time, to investors. Under section 80C of the Income Tax Act, investors are entitled to claim income tax exemption of up to ₹1,50,000 against the investment made in ELSS funds. “Investors with moderate to high-risk appetite are encouraged to consider ELSS as a viable investment option since it not only helps them save income tax, but also facilitates wealth creation," says Deepak Aggarwal, a Delhi-based chartered accountant.
There are a total of 42 ELSS mutual funds with total assets worth ₹2.04 lakh crore. These mutual fund schemes, as a category, have delivered one-year returns of 37.83 percent in the past one year. In the past two years, this category has delivered an annualised return of 19.50 percent, MorningStar data shows as on Feb 22, 2024.
ALSO READ: Mutual Funds: How to open an SIP account online? A step-by-step guide If you are planning to invest in equity linked savings schemes (ELSS) after redeeming your current equity investment, make sure you are aware of these key provisions: 1 If you sell your equity investment prior to March 31, 2024 which you purchased less than a year ago, the capital gains will be taxed as per short term capital gains (STCG) tax. 2. If your current equity investments are more than one-year old and you redeem them before March 31 this year, the gains will be taxed as per the provisions of long-term capital gains (LTCG) tax i.e., at the rate of 10 per cent.
If you want to claim indexation, the applicable tax rate will be 20 percent. ALSO READ: Best 9 ELSS Mutual Funds to buy in 2024; check here 3. The LTCG is applicable only when the
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