There are certain benefits that ELSS offer in tax .
Thereby following you can find the tax benefits .
- Investments in ELSSs fall under Section 80C.
- The limit under this section is Rs 100,000.
- This is irrespective of how much you earn and under which tax bracket you fall.
- Also, there are no sub-limits under this overall Rs 100,000 amount.
- So, if you choose, you can invest the entire amount in ELSS or infrastructure bonds. How you utilise the limit of Rs 100,000 is entirely up to you.
- The dividends you earn in an ELSS are tax free.
- When you sell the units of these funds, you can benefit from long-term capital gain, under which you don’t have to pay capital gains tax.
- Till 2005, the tax benefit on investment in ELSS was to the tune of Rs 10,000 per annum under Section 88. However, under Section 80 C one can claim deduction against an investment in ELSS up to Rs 1 lakh.
While this is good news for investors, by offering this benefit to only investments in existing and new close-ended ELSS, the CBDT has done great harm to both investors and floaters of open-ended schemes in particular, and the equity market in general.
The CBDT has also reversed its 1998 notification, which had made all such schemes open-ended. There are 33 ELSS schemes in operation with a total corpus of Rs 3,102 crore (Rs 31.02 billion). Out of these, Rs 2,033 crore (Rs 20.33 billion) belongs to 22 open-ended schemes and Rs 1,069 crore (Rs 10.69 billion) to 11 close-ended schemes which were floated before 1998.
In 1992, when the finance ministry gave its nod to the floatation of ELSS, the idea was to encourage retail investors’ interest in equity funds, with a tax incentive thrown in.