The current financial year is about to close in some weeks and the “Tax-Saving” will start acting to dominate everyone’s mind during filing income tax online. Mutual fund investments have always been a concern for the investors in the context of tax savings. Investors choose to invest in mutual funds to make sure that they will get tax benefits for the specified amount. According to section 80C of Income Tax Act, taxpayers can avail a deduction up to INR 1.5 lakhs against the amount invested into any ELSS or Mutual fund.
Now what is ELSS or Mutual fund is and what are the exact benefits you will be availing by investing in it. ELSS stands for Equity Linked Saving Schemes and this type of mutual fund qualifies the tax exemption bar. It comes in with the lock-in feature for 3 years and the maximum benefits, i.e. INR 1.5 lakhs can be availed during filing income tax online only by investing in ELSS. Even after completion of the 3 years lock-in period, the fund can be held or continued as long as you want and it will still offer you dividends and further growth options. There are three growth option from which you can choose the one you need. The three options are Grwoth Option ELSS, Dividend Option ELSS and Dividend reinvestment option.
As a tax saving instrument during filing income tax online, it is the most usable instrument due to its lower lock-in period and long term capital gains. Investments can be done easily through the SIP or Systematic Investment Plan Route. Once invested, you can generate income from the invested amount even during the lock-in period. Also, the dividends earned by this scheme are tax- free and TDS is not applicable to them. The only disadvantage that ELSS has, is the return amount of this scheme is subject to equity market performance.
Claiming the benefits can be done while filing income tax online through the official site or through any intermediary sites.