ELSS investment.

This query is : Resolved

Share Report Follow Query Ask a Query

Querist : Anonymous

Querist : Anonymous (Querist)

07 October 2010 Hi ,
Can i claim the ELSS investment which i made using my wife's Demat Acc for IT benefit under 80C?

Ajay Mishra

Ajay Mishra (Expert)
Follow

08 October 2010 Hi

The provision for deduction under Section 80C of the Income-Tax Act in Equity Linked Savings Scheme (ELSS) opened up a great opportunity for taxpayers to reap the twin benefits of earning appreciation by investing in the capital market, along with reaping valuable income-tax saving.

Investment in ELSS bears a lock-in period of three years. Thereafter, the investor has the option to exit at any period of time of his choice. Apart from the benefit of deduction under Section 80C, which can offer a straight return of up to 30.9% right away in form of income-tax saving in the year of investment, dividends declared on ELSS units are tax free under Section 10(35) during the period of holding and the long term capital gains earned on sale of units at the time of exit are further tax exempt under Section 10(38).

ELSS has emerged as an amazing new investment option, offering you the golden opportunity to reap healthy returns through equity investment via mutual funds, coupled with valuable tax saving benefits. If the choice is judicious, the timing is right and lady luck smiles on you, ELSS can be a champion winner all the way.

Even if PPF continues to be your first choice for investment up to Rs 70,000, you may still like to consider the balance Rs 30,000 for ELSS investment, which in all probability can fetch you a healthy return and that too tax exempt!

Case Study: Mr Smart had invested Rs 1,00,000 on January 1, 2005 in the SBI Magnum Tax Gain Scheme notified as ELSS. At the then prevailing Net Asset Value (NAV) of around Rs 15.57 per unit, he was allotted 6,422 units. Being a taxpayer in the top bracket, Mr Smart saved income-tax of Rs 30,600 in the year of investment itself by availing the benefit of deduction of Rs 1,00,000 in ELSS under Section 80C.

Post investment, he received dividends of Rs 10.20 per unit in June, 2005, Rs 15 per unit in March 2006, Rs 11 per unit in March 2007, Rs 11 per unit in February 2008 and Rs 2.80 per unit in May 2009. Thus in 60 months, Mr Smart received total dividend of Rs 3,21,100 (6,422 units x Rs 50 per unit), which has been totally tax-free under Section 10(35).

Mr Smart being eligible to redeem his holding of 6,422 units anytime after the three-year lock-in period of ELSS, he decides to redeem the units on December 31, 2009 at the then prevailing Magnum Tax Gain NAV of Rs 57.77. The appreciation as on that date, which works out to Rs 2,71,008, at Rs 42.20 (57.77–15.57) per unit, being long term capital gains (LTCG) on redemption, will be fully exempt under Section 10(38).

Look out for a notified ELSS with a good track-record. It needs to be borne in mind that not every equity scheme of a mutual fund is an eligible ELSS. Only such schemes duly notified as ELSS are eligible for the benefit of deduction under Section 80C. Moreover there is a minimum lock-in period of three years.

Almost all leading mutual funds offer ELSS. It would be worthwhile to analyse their performance track-record of returns and growth before locking up your investment under the scheme.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Join the CA Students WhatsApp Community for ICAI Updates, Trending Courses & Notes!

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

DHANASHRI KARMARKAR

CA Aakarsh Jain

Michael & Co.

divakar podaturu

sachingurav

Subscribe Now

ELSS investment.

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

Senior Executive

Manager- Finance and Compliance

GST CONSULTANT

GST CONSULTANCY

Accountant

CA Final

Article Assistant

Associate CA