Tax Saving Mutual Funds Investment Plans- Reduce your tax

18 December 2024

381 18 minutes read

Tax Saving Mutual Funds (ELSS) offer shorter lock-ins, high returns, and making them a smart choice for tax benefits and wealth creation. Read more now

Table of Contents

Overview

Tax-saving mutual funds, also known as Equity-linked Savings Schemes (ELSS), are investment vehicles designed to help individuals save on taxes while potentially generating substantial returns. These funds primarily invest in equities, offering the dual advantage of capital gain tax benefits under Section 80C of the Income Tax Act in India and the potential for capital appreciation. With a lock-in period of three years, ELSS funds provide flexibility compared to other tax-saving instruments. Investors can benefit from long-term wealth creation and reduced tax liability, making them a popular choice for those seeking tax-efficient and growth-oriented investments.

What are Tax Saving Mutual Funds?

Mutual funds that provide investors both tax savings and possible capital appreciation fall under the category of tax-saving mutual funds, sometimes referred to as Equity-linked Savings Schemes (ELSS). Section 80C of the Income Tax Act in India allows tax deductions for monies that are principally invested in shares.

Three years is the statutory lock-in period for ELSS funds, which is comparatively shorter than those of other tax-saving options like National Savings Certificates (NSC) or Public Provident Fund (PPF). Investors may be able to lower their overall tax obligation while potentially benefiting from long-term capital accumulation up to a certain maximum, which is eligible for tax deductions. ELSS funds are becoming more and more well-liked as a growth-oriented, capital gain tax-efficient investment choice.

How do Tax Saving Mutual Funds work?

Investors allocate funds to ELSS schemes
ELSS primarily invests in equities, aiming for capital appreciation
Investments up to a specified limit are eligible for Section 80C deductions
ELSS comes with a mandatory lock-in period of three years
Funds dividend investments across various stocks, reducing risk
Investors may benefit from long term capital gains and dividends
ELSS provides tax benefits while aligning with long-term wealth goals
After the lock-in period, units can be redeemed or continued for further growth
ELSS offers the potential for higher returns, but market risk is involved.

Types of Equity-linked Savings Scheme (ELSS)

Tax saving mutual funds offer two types of schemes: dividend schemes and growth schemes. In dividend schemes, investors have the opportunity to receive additional income in the form of dividends declared by the fund house periodically, based on the availability of distributable surplus. Dividends are not subject to tax or lock-in periods and can be withdrawn or reinvested in the fund, making them eligible for tax benefits. On the other hand, growth schemes aim to generate long-term capital appreciation for investors, which can be redeemed at the end of the maturity period. Unlike dividend schemes, growth schemes do not offer provisions for tax benefits or dividend payouts.

Features of Tax Saving Mutual Funds

ELSS investments qualify for tax deductions under Section 80C of the Income Tax Act in India, with a maximum limit
ELSS primarily invests in equities, offering the potential for capital appreciation over the long term
ELSS funds come with a mandatory lock-in period of three years, which is shorter than many other tax-saving options
Investors can opt for SIP facility to invest in ELSS regularly, promoting disciplined savings
ELSS portfolios are diversified across various stocks, reducing risk
Investors may benefit from potential capital gains and dividends from the equities
ELSS carries market risk due to its equity exposure, and returns are not guaranteed
After the lock-in period, units can be redeemed or continued for further growth
ELSS funds are governed by professional management by experienced fund managers who make investment decisions
ELSS is designed for long-term wealth creation while providing tax benefits, making it a popular choice among investors.

Benefits of Tax Saving Mutual Funds

Shorter Lock-In Period: ELSS comes with a mandatory lock-in period of just three years, making it the shortest among tax-saving investment options. This shorter lock-in period provides investors with enhanced liquidity and flexibility. Unlike other tax-saving instruments like PPF or NSC, ELSS allows you to access your investments sooner, should the need arise

Potential for Higher Returns: ELSS predominantly invests in equities, offering a significant exposure to the stock market. This equity exposure presents the potential for higher returns compared to traditional tax-saving instruments. Over the long term, equities have historically outperformed fixed-income options, making ELSS an attractive choice for those seeking the potential for capital appreciation.

Tax-Efficient Wealth Creation: ELSS not only aids in tax savings but also serves as a tool for long-term wealth creation. By investing in equities, ELSS aligns your financial goals with the power of compounding and capital appreciation. This dual advantage allows investors to create wealth over the years while optimising their tax liability.

Systematic Investment: ELSS provides investors with the option to leverage Systematic Investment Plans (SIPs). SIPs enable you to invest a fixed amount at regular intervals, ensuring disciplined savings. This strategy leverages rupee cost averaging and the power of compounding, allowing you to benefit from market volatility and potentially lower the average cost of your investments over time.

Professional Management: ELSS funds are managed by experienced and skilled fund managers who are well-versed in market dynamics. Entrusting your investments to professionals means that your money is in capable hands. Fund managers analyse market trends, perform research, and make investment decisions on your behalf, potentially leading to better investment outcomes.

Choosing the Right ELSS Fund

Review the fund’s historical returns and consistency
Assess the experience and track record of the fund manager
Ensure the fund’s objectives align with your financial goals
Match the fund’s risk profile with your own risk tolerance
Lower expenses can lead to better returns over time
Confirm the fund’s diversification across different sectors and stocks
Understand the three-year lock-in commitment
Be aware of any exit loads associated with early redemptions
Consider the current economic and market conditions
Seek professional advice to make an informed choice.

ELSS for Goal-Based Investments

ELSS provides tax deductions under Section 80C, making it an attractive option for tax planning while working towards your financial goals
With a lock-in period of just three years, ELSS offers liquidity and flexibility, allowing you to access your investments relatively quickly
ELSS primarily invests in equities, offering the potential for higher returns over the long term, which can help you achieve your financial goals faster
Systematic Investment Plans (SIPs) in ELSS allow for regular, disciplined investments, which is beneficial for reaching your goals
ELSS funds typically spread investments across various stocks, reducing risk, and ensuring that your portfolio is well-diversified.

Tax Saving Mutual Funds ELSS vs PPF vs FD

Particulars	ELSS	PPF	FD
Investment Eligibility	Any Individual Taxpayer including NRI’s	Resident Indian individuals	Any Individual Taxpayer including NRI’s and HUF
Investment Amount	₹ 500 up to No Limit	₹ 500 up to ₹ 1.5 lakh	₹ 100 to up to ₹ 1.5 lakh
Lock-in-Period	3 years	15 years	5 years
Tax on Returns	Tax-free	Tax-free	Taxable
Expected Returns	10% to 15% (market-related)	No Return	No Return
Investment Option	Medium to Long Term	Long Term	Medium to Long Term
Loan Facility	Partial loan after completion of 3 years	Loan available after completion of 3 years	No loan available
Risk Factor	Risk associated	No Risk	No Risk
Tax Saving Benefit	₹ 1.5 lakh as specified under Section 80C of Income Tax Act, 1961	₹ 1.5 lakh as specified under Section 80C of Income Tax Act, 1961	₹ 1.5 lakh as specified under Section 80C of Income Tax Act, 1961

Top 10 Tax Saving Mutual Funds in India

Funds	1-Year Returns (%)	3-Year Returns	5-Year Returns
IDFC Tax Advantage (ELSS) Fund Growth	23.1	11.7	22.3
Tata India Tax Savings Fund Growth	14.6	12.3
L&T Tax Advantage Fund Growth	16.2	13	20.3
Aditya Birla Sun Life Tax Relief 96 Fund Growth	19.3	12.1	23.5
Aditya Birla Sun Life Tax Plan Growth	18.9	11.6	22.6
DSP BlackRock Tax Saver Fund Growth	9	11.4	21
Axis Long Term Equity Fund Growth	18.1	9.3	24
Kotak Tax Saver Fund Growth	-4.79	10.25	17.66
Invesco India Tax Plan Fund Growth	0.6	11.1	19.0
HDFC TaxSaver Fund	-11.1	8.5	15.0

IDFC Tax Advantage (ELSS) Fund: The IDFC Tax Advantage (ELSS) Fund is a mutual fund offered by IDFC Mutual Fund. It is an open-ended scheme that primarily invests in equity and equity-related instruments with the objective of achieving long-term capital appreciation. The fund aims to create a diversified portfolio by investing in stocks of fundamentally strong companies that are reasonably valued. It also allocates a portion of its portfolio to money market and debt securities. The IDFC Tax Advantage Fund has a statutory lock-in period of 3 years. It was launched in December 2008 and is managed by Mr. Daylynn Pinto.

Tata India Tax Saving Fund: The Tata India Tax Saving Fund is a mutual fund provided by Tata Mutual Fund. It is an open-ended scheme that primarily invests a major portion of its portfolio in equity-related instruments of established companies. The fund aims to achieve long-term capital growth while also providing tax benefits under Section 80C of the Income Tax Act, 1961. Investments made in this scheme are subject to a statutory lock-in period of 3 years. The fund was launched in March 1996 and is managed by Mr. Rupesh Patel.

L&T Tax Advantage Fund: The L&T Tax Advantage Fund is a mutual fund provided by L&T Mutual Fund. It is an open-ended scheme that aims to generate long-term capital growth for investors. The fund achieves this by investing in a diversified portfolio that primarily consists of equity and equity-related securities, along with other money market instruments. Investments made in this scheme are subject to a statutory lock-in period of 3 years. The fund was launched in February 2006 and is managed by Mr. Soumendra Nath Lahiri.

Aditya Birla Sun Life Tax Relief 96 Fund: The Aditya Birla Sun Life Tax Relief 96 Fund is a mutual fund provided by Birla Sun Life Mutual Fund. It is an open-ended scheme that aims to generate long-term capital growth for investors. The fund achieves this by investing primarily in a diversified portfolio of equity and related securities. Additionally, it allocates a portion of its corpus to money market and debt instruments. Investments made in this scheme are subject to a statutory lock-in period of 3 years. The scheme was converted to an open-ended scheme in March 1996 and is currently managed by Mr. Ajay Garg.

Aditya Birla Sun Life Tax Plan Growth: The Aditya Birla Sun Life Tax Plan Fund is a mutual fund provided by Birla Sun Life Mutual Fund. It is an open-ended scheme that offers tax deduction benefits under Section 80C of the Income Tax Act, 1961. The fund aims to generate long-term capital growth for investors by primarily investing in equity and equity-related securities. It follows a bottom-up approach to investing. Investments made in this tax-saving scheme are subject to a statutory lock-in period of 3 years. The fund was launched in February 1999 and is managed by Mr. Ajay Garg.

DSP BlackRock Tax Saver Fund: The DSP BlackRock Tax Saver Fund is a mutual fund offered by DSP BlackRock Mutual Fund. It is an open-ended scheme that provides investors with the opportunity to benefit from long-term wealth creation while also enjoying tax deductions on their total income, as permitted under the Income Tax Act, 1961. The fund’s objective is to generate capital appreciation over a medium to long period by investing in a diversified portfolio of equity and equity-linked instruments of various companies. It was launched in January 2007 and is managed by Mr. Rohit Singhania.

Axis Long Term Equity Fund: The Axis Long Term Equity Fund is a mutual fund offered by Axis Mutual Fund. It is an open-ended scheme that provides tax benefits to investors within the specified limits of Section 80C of the Income Tax Act, 1961. The fund has a statutory lock-in period of 3 years. Its primary objective is to generate capital growth by predominantly investing in equity and equity-related instruments of various companies. The fund was launched in January 2016 and is currently managed by Mr. Jinesh Gopani.

Kotak Tax Saver Fund: The Kotak Tax Saver fund is a mutual fund provided by Kotak Mahindra Mutual Fund. It is an open-ended scheme that has a statutory lock-in period of 3 years. The objective of the scheme is to achieve capital appreciation for investors over the long term by investing in a diversified portfolio of equity and equity-related securities. The capital gains and dividend income generated through this scheme are fully exempt from taxes. The fund was launched in November 2005 and is managed by Mr. Harsha Upadhyaya.

Invesco India Tax Plan Fund: The Invesco India Tax Plan Fund is a mutual fund provided by Invesco Mutual Fund. It is an open-ended scheme that aims to generate long-term capital growth for investors. This is achieved by investing in a diversified portfolio primarily composed of equity and equity-related securities of midcap companies. The fund follows a bottom-up approach and invests across various market capitalisation sectors. The number of stocks the fund can invest in is limited to a range of 20 to 50. The fund was launched in December 2006 and is managed by Mr. Amit Ganatra.

HDFC Tax Saver Fund: The HDFC Tax Saver Fund is a mutual fund offered by HDFC Mutual Fund. It is an open-ended scheme that features a statutory lock-in period of 3 years for investments. The fund primarily invests in a well-balanced portfolio consisting of equity and equity-linked securities of mid-cap and large-cap companies. The main objective of the fund is to generate capital appreciation for investors over a long-term investment horizon. The fund was launched in March 1996 and is managed by two experienced fund managers, Mr. Vinay R. Kulkarni and Mr. Rakesh Vyas.

News About Mutual Funds

SEBI Asks Mutual Funds and AMCs to Conduct System Audit on Yearly Basis

The Securities and Exchange Board of India (SEBI) has updated the guidelines for conducting system audits by Asset Management Companies (AMCs) and mutual funds (MFs). This revision by the market regulator reflects the recognition of the importance of system audits in technology-driven asset management activities. The SEBI aims to standardise and enhance the system audit process, as mentioned in its circular. Additionally, AMCs and MFs are required to establish a technology committee responsible for reviewing the cyber resilience and cybersecurity framework of AMCs and MFs. According to SEBI, this committee should include technology experts, with at least one independent external expert possessing substantial experience in the mutual funds or BFSI industry. Furthermore, SEBI has instructed AMCs and MFs to conduct annual system audits conducted by qualified independent auditors. The audit should encompass systems and process-related aspects, including fund accounting systems for the computation of Net Asset Values (NAVs), reporting systems, and financial accounting for AMCs.

SIP Mutual Funds Register a 38% Growth in Collections Despite Market Volatility

According to data released by the Association of Mutual Funds in India (AMFI), Systematic Investment Plans (SIPs) in mutual funds witnessed a remarkable 38% growth in collections year-on-year, despite the volatility in the equity market. From April to March FY18, SIPs gathered a total of ₹ 67,190 crore. The data also revealed that the mutual fund industry added an average of 9.13 lakh SIP accounts per month, with each account having an approximate size of ₹ 3,070. Currently, the Indian mutual fund industry has around 2.62 crore SIP accounts through which investors participate in mutual fund schemes. Investors are displaying maturity and knowledge by continuing to embrace SIPs despite market fluctuations. The success of SIP flows can be attributed to investor education initiatives undertaken by fund houses and the AMFI. SIPs enable investors to average their costs over time, allowing them to acquire more units when prices are low and fewer units when prices are high.

Senses and Nifty Index Witness Gains Led by Tata Steel, Cadila Healthcare, etc.

The domestic benchmark indices displayed positive trading activity, with the Sensex recording a gain of 95 points and the Nifty gaining 17 points. The Nifty index was observed trading at 11,683, while the Sensex was trading at 38,957. The Nifty Pharma and Nifty Metal sectors both witnessed an increase of around 0.5%. However, the Nifty Metal sector faced some downward pressure due to declines in Tata Steel, Jindal Stainless, JSW Steel, SAIL, and Jindal Steel and Power. In the pharmaceutical segment, Aurobindo Pharma, Cadila Healthcare, Piramal Enterprises, and Lupin emerged as the top gainers. The Bank Nifty also experienced positive trading, driven by gains from State Bank of India, HDFC Bank, IDFC First Bank, Kotak Mahindra Bank, and Punjab National Bank. Conversely, oil & gas stocks faced declines, with HPCL and BPCL both experiencing losses of over 2%. Reliance Industries and Indian Oil Corporation also witnessed declines. In the real estate sector, Indiabulls Real Estate stocks plunged by 11%, followed by Sobha, Prestige Estates, and Sunteck Realty. The top performers in the Nifty were Power Grid, Zee Enterprises, JSW Steel, and Hindustan Unilever.

Stocks of Godrej Properties, Eicher Motors, PVR, etc., in News

Stocks of Godrej Properties finds a place in the news as the company managed to make a sale of more than 2,900 homes in the fourth quarter with a booking value that exceeded ₹ 2,100 crore. On the other hand, there was a dip in the sales of Eicher Motors by 20% with a sale of just 60,831 units as compared to the previous 76,087 units. The company also had a new Chief Executive Officer (CEO) of Royal Enfield in the form of Mr. Vinod K Dasari. The stocks of PVR also buzzed due to the opening of 4 screens multiplex in Punjab and 5 screens in Assam. Dr. Lal Pathlabs has given a nod for the acquisition of Bawankar Pathology by company unit. The stocks of Hero MotoCorp were in the news as the company posted sales of 5,81,279 units. In the meantime, Centrum Capital sells its complete equity holding in its subsidiaries Centrum Infrastructure Advisory Limited and Centrum Defense System Limited. Meanwhile, IDBI Bank is on a lookout for a transaction advisor for stake divestment in IDBI Asset Management.

IPO of Rail Vikas Nigam Opens for Subscription

Godrej Properties’ stocks made headlines as the company successfully sold over 2,900 homes in the fourth quarter, with a booking value exceeding ₹ 2,100 crore. However, Eicher Motors experienced a 20% decline in sales, with only 60,831 units sold compared to the previous 76,087 units. Notably, Royal Enfield, a subsidiary of Eicher Motors, welcomed Mr. Vinod K Dasari as its new Chief Executive Officer (CEO). PVR’s stocks gained attention due to the opening of a 4-screen multiplex in Punjab and a 5-screen multiplex in Assam. In other news, Dr. Lal Pathlabs approved the acquisition of Bawankar Pathology by one of its company units. Hero MotoCorp’s stocks were in focus as the company reported sales of 581,279 units. Meanwhile, Centrum Capital divested its complete equity holdings in its subsidiaries, Centrum Infrastructure Advisory Limited and Centrum Defense System Limited. Additionally, IDBI Bank is actively seeking a transaction advisor for the divestment of its stake in IDBI Asset Management.

Transfer of Mutual Fund Units of Dalmia Cement Likely to Have Minimal Impact

India Ratings and Research, a rating agency, has stated that the unauthorised transfer of mutual fund units of Dalmia Cements by the depository participant is expected to have a minimal impact on the company’s credit profile and liquidity. The value of the transferred units amounted to ₹ 344 crore, and even in the event of a complete write-off, Dalmia Cements’ overall transfer would not have been significantly affected. Dalmia Cement East Ltd. and OCL India Limited have recently merged with Dalmia Cement (DCBL). According to the rating agency, DCBL has maintained a high level of cash reserves and equivalent buffer, which is sufficient to fulfil its debt obligations for the next 12 to 18 months, excluding the transferred mutual fund units, totaling approximately ₹ 1,900 crore. The incident of the illegal transfer of mutual fund units has been reported by ODCL to the Securities and Exchange Board of India (SEBI), the National Stock Exchange, and the National Securities Depository Limited. The case is currently under investigation by the Economic Offences Wing (EOW) and SEBI, with appropriate actions being taken.

With $127 Billion Market Cap, Reliance Industries Continues to be India’s Largest Listed Firm

Reliance Industries, the oil and telecom giant, has maintained its position as the largest listed company in India, reaching a market capitalisation of $127 billion during intraday trading on March 20th. This achievement is noteworthy considering the prevailing strong market conditions. On the Bombay Stock Exchange (BSE), the shares of Reliance Industries closed at ₹ 1,375.60, recording a marginal gain of 0.03% after reaching an intraday record high of ₹ 1,386.60. Over the past three months, the company’s shares have outperformed the previous year, exhibiting a growth of 24% in 2019, surpassing the 22% growth seen in 2018.

Currently, Reliance Industries holds a market capitalisation of ₹ 8,74,739.75 crore, equivalent to $127 billion. This market capitalisation surpasses that of TCS and HDFC Bank, with TCS valued at ₹ 7.6 lakh crore and HDFC Bank at ₹ 6.2 lakh crore. The company has been successful in providing robust returns to its shareholders, thanks to consistent growth in its retail and telecom sectors, as well as steady progress in its oil segments and refinery. These factors have contributed to the significant market capitalisation of Reliance Industries, which is owned by Mukesh Ambani.

Stocks of IT Continue to be Attractive; Pharma Stocks May Bottom Out

The economic outlook of India is showing strength, leading to a favourable impact on the rupee in recent months. The correction in crude oil prices and the recovery of foreign equity flows have contributed to the strengthening of the rupee. Market experts have observed attractive valuations in the IT sector, along with a visible growth in earnings, which bodes well for investors in the short to medium term. In comparison to other sectors, the IT sector has demonstrated superior performance in the past year. Furthermore, the option of buybacks enabling shareholders to receive cash will further bolster the positive prospects of this sector.

Conversely, the pharma sector could experience a turnaround as the regulatory challenges linked to the USFDA subside and the US base business stabilises. Although demonetisation and the implementation of GST might temporarily hinder domestic operations, the sector is anticipated to rebound and report double-digit growth. As long as the rupee valuation remains stable at its present levels, the earnings are not expected to be significantly affected. Meanwhile, metal stocks are currently trading below their replacement value, but the situation is projected to improve in the future.

IPO for Embassy Office Parks REIT Opens for Subscription

The Embassy Office Parks REIT has launched its Initial Public Offering (IPO), marking the first-ever IPO by a Real Estate Investment Trust in India (REIT). The subscription for the IPO is open from 18th March to 20th March 2019. Following the IPO, the shares of Embassy Office Parks REIT will be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in the first week of April. The IPO is being managed by leading firms including Credit Suisse Securities (India), Axis Capital, Goldman Sachs (India) Securities, Deutsche Equities India, IIFL Holdings, Capital Markets (India), Nomura Financial Advisory & Securities (India), and JM Financial.

The Embassy REIT, registered with the Securities and Exchange Board of India (SEBI) on 3rd August 2017, operates as a real estate investment trust under the provisions of the Indian Trusts Act. It is sponsored by Blackstone Sponsor and the Embassy Sponsor. The management of the REIT is entrusted to Embassy Office Parks Management Services Pvt. Ltd., while Axis Trustee Services serves as its Trustee. The company’s portfolio includes four prominent office buildings located in city centres and seven top-notch office parks situated in Bengaluru, Pune, Mumbai, and Noida. As of 3rd December 2018, the market value of the portfolio amounts to ₹ 31,480 crore.

Types of Mutual Funds Tax Benefits

Equity Mutual Funds: Equity mutual funds invest in stocks, and they can provide a great way to earn long-term capital gains. Long-term capital gains are taxed at a lower rate than short-term capital gains, so holding your equity mutual funds for at least one year can help reduce your tax bill.
Debt Mutual Funds: Debt mutual funds invest in bonds, and they can provide a source of regular income in the form of interest payments. Interest from debt mutual funds is taxed as ordinary income, which can be higher than the tax rate on long-term capital gains. However, some debt mutual funds also offer tax-free interest income, which can be a great way to reduce your tax bill.
Tax-Saving Mutual Funds (ELSS): Investments in stocks that provide tax benefits under Section 80C of the Income Tax Act are called Tax-Saving Mutual Funds (ELSS). You can claim a tax deduction of up to Rs. 1.5 lakh by investing in ELSS funds, which can help lower your taxable income and reduce your tax bill.
Retirement Funds: Depending on how you plan on investing your retirement funds, such as the National Pension System (NPS) and the Employees’ Provident Fund (EPF), may also provide you with tax benefits. Investments in these funds can be claimed as a deduction under Section 80C, and the interest earned is tax-free. Additionally, the maturity amount of an NPS account is also tax-free, which can provide a great way to reduce your tax bill in retirement.
Dividend Mutual Funds: Dividend mutual funds pay regular dividends to their investors, which can provide a source of income. The dividend income from mutual funds is taxed as ordinary income, but some mutual funds offer tax-free dividends.

Conclusion

ELSS (Equity-Linked Savings Scheme) is a versatile investment tool that not only helps you save on taxes but also empowers you to pursue and achieve your financial goals.

With a short lock-in period, potential for high returns, disciplined investing through SIPs, and professional management, ELSS stands as a tax-efficient and goal-oriented choice for individuals looking to secure their financial future and realise their aspirations, whether it’s education, a new home, or retirement. By incorporating ELSS into your investment portfolio, you can align your tax-saving efforts with your long-term financial objectives, creating a pathway to financial security and prosperity. Reach out to Vakilsearch to get more tailor made insights on the same.

FAQ’s About Tax Saving Mutual Funds

How should I make payments towards mutual funds?

Investments in mutual funds can be made through either cheque payments or direct debit. For those who have opted for a Systematic Investment Plan (SIP), the direct debit option is the most convenient. With this option, you give permission to the mutual fund provider to directly debit the SIP amount from your account every month, simplifying the investment process.

When should I pay for my SIP?

When you enrol in a Systematic Investment Plan (SIP) with a specific fund house, you will receive information about the payment dates. You have the flexibility to choose a payment date that suits your convenience. For instance, if you have invested in ICICI Mutual Fund, you can make payments on the 1st of the month, the 10th of the month, or towards the end of the month.

Is there a minimum investment requirement for ELSS?

Yes, there is a minimum investment threshold for ELSS. While the specific minimum investment amount varies across different mutual fund providers, typically it is approximately ₹ 5,000.

What is NAV or Net Asset Value of a fund?

The Net Asset Value (NAV) of a mutual fund represents the price of each unit on a specific day. When an investor requests a withdrawal from a fund house, the number of units eligible for withdrawal is multiplied by the current NAV price, and the resulting amount is credited to the investor's account.

How is NAV calculated?

The Net Asset Value (NAV) of each unit in a fund is determined by deducting the liabilities from the total asset value and dividing the result by the number of outstanding units on the valuation day.

The amount that I got was less than what the NAV promised when I checked the statement. How is that possible?

Since the Net Asset Value (NAV) of a fund can vary daily, the NAV considered for processing withdrawal requests is based on the day of request processing, rather than the date when the statement is issued.

Does a high NAV mean the fund is good?

A high Net Asset Value (NAV) does not guarantee the quality of a fund. To assess the performance of a fund, it is more reliable to examine its historical returns. Evaluating a fund's track record and consulting credit rating agencies like CRISIL can provide further insights into its performance and reliability.

Should I invest in an ELSS in lump sum or in instalments?

Given that both of these investment options are offered by mutual funds, the choice between a lump sum investment or periodic instalments depends entirely on your preference. Opting for systematic monthly instalments in an ELSS has the benefit of mitigating the risk of potential losses on the entire investment amount due to market volatility.

What is the maximum amount that can be withdrawn?

The maximum withdrawal amount is determined based on the NAV and the number of units available within the scheme.

What is the minimum amount that can be withdrawn?

The minimum withdrawal amount is typically around ₹ 1,000, although it may vary from company to company.

If I invest ₹ 2 lakh in a tax saving mutual fund in a year, can I claim tax benefits for the entire investment?

No, you can only avail income tax benefits up to ₹ 1 lakh to ₹ 1.5 lakh in an equity-linked savings scheme (ELSS).

How much tax will I have to pay on my long-term capital gain?

The greatest benefit of investing in tax-saving mutual funds, such as ELSS funds, is that the long-term capital gains generated from these funds are tax-exempt.

Can I switch from one fund to another?

Yes, when investing in an ELSS, you have the flexibility to switch between funds. It's important to note that you can only switch a portion of your investment and not the entire amount.

How do I know where the money is being invested?

If you're interested in understanding the precise allocation of your funds in an ELSS, you can request the portfolio of the scheme, which provides a detailed breakdown of the investments. Additionally, the portfolios of the schemes can be accessed on the official website of the company.

Can I withdraw my investment during the lock-in period?

No, it is not possible to withdraw your investment during the lock-in period. Once you invest in an ELSS, the funds cannot be withdrawn until the lock-in period has elapsed.

Can an NRI invest in ELSS?

Non-resident Indians (NRIs) are eligible to invest in tax saving mutual funds such as ELSS.