Tax Planning with ELSS Fund

ELSS or Equity Linked Saving Scheme is an investment option for individuals, HUFs and NRIs that want to invest in Indian Equities as well as gain the benefit of tax saving from the investments made up-to a maximum of INR 150,000 under section 80C of the Income Tax Act, 1961.


What the investor must understand is that ELSS is primarily an investment product. Its added advantage is that it also offers tax benefits. It is an open-ended mutual fund. This means investment into any ELSS scheme can be made at any given time. Though, the trend has been to make such investments during the year end, one should look to make these investments with the objective to achieve growth as well as tax benefits. Therefore choosing the right product becomes utmost importance. There is a famous saying that “Research reaps the best returns” and this holds true for all products that don’t assure a fixed return.

Investments into ELSS mutual funds can be started with a minimum investment of INR 500. There isn’t an upper cap on these mutual funds. These funds, akin to other mutual funds provide flexible investment options through a SIP or through a lump sum. It is solely the discretion of the investor to take the call as what suits his/her needs. In case of systematic investment plans each SIP is treated as a separate investment.

All ELSS Funds have a lock-in period of 3 years. For any lump sum investment the lock in period is calculated from the date of the investment. On the other hand, in case the investor has chosen the SIP route, each SIP is considered a separate investment and each will have a lock in period of 3 years. As a professional tip, one should look to invest in 2-3 ELSS funds for the diversification of risk.


Income Bracket Tax Bracket Benefits (if investment to INR 150,000 have been made in ELSS)
Below INR 250000 0% Not Applicable
INR 250000- INR 500000 10% Max tax benefit of INR 15000 (person earning INR 500,000)
INR 500000-INR 1000000 20% Max tax benefit of INR 30,000
INR 10,00,000 above 30% Minimum tax benefit of INR 30,000


So Invest in Equity linked saving Scheme – ELSS Fund & get the benefit of tax saving.

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