The Unit Linked Savings Schemes (ELSS) are equity-oriented Mutual Fund (MF) schemes that not only provide investors a superior return in the extended term, but also provide tax positive aspects u/s 80C of the Income Tax Act, up to the present limit of Rs 1.5 lakh in a economic year.
Even the gains from ELSS investments up to Rs 1 lakh on redemptions made in a economic year are tax-free of charge. Above the Rs 1 lakh limit, 10 per cent capital get tax is applicable.
Due to tax positive aspects and the prospects of creating a larger extended-term return, ELSS is one of the most common tax-saving schemes amongst the investors.
However, a 3-year lock-in period is applicable on ELSS – as the schemes qualify for tax deductions u/s 80C, which is lowest amongst the tax-saving investments.
So, an investor may well redeem the units on all enterprise days topic to the completion of a lock-in period of 3 years from the date of allotment of units, as prescribed below the ELSS recommendations.
“Investment in ELSS is governed by the Equity Linked Saving Scheme, 2005 which sets out the provisions relating to the procedure and the conditions for investment in the scheme. Investing in ELSS helps an investor to take advantage of the high returns of the stock market at minimised risk. Also, investments in ELSS are allowed deduction from taxable income for the purpose of Income Tax u/s 80C of the Income Tax Act, 1961 up to Rs 1,50,000 subject to certain conditions. One such condition is that investments in ELSS are subject to a lock-in period of three years from the date of allotment of ELSS units. The ELSS units can be redeemed, transferred, assigned or pledged only on expiry of the lock in period of 3 years,” mentioned Dr. Suresh Surana, Founder, RSM India.
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However, due to a spate of deaths due to the ongoing Covid-19 pandemic, investors have turn out to be apprehensive about their investments and get started asking many concerns about what would come about following their deaths.
One of such concerns is – if the nominees have to wait for 3 years to redeem the ELSS units following the deaths of investors.
A nominee or legal heir, even so, needn’t wait for 3 years and may well redeem the units following one year from the date of allotment of units to the deceased unit holder on production of requisite documentary proof to the satisfaction of the Asset Management Company (AMC).
“To provide relief to nominees in case of death of the original investor, the nominee or legal heir can redeem the investment before the expiry of lock in period of 3 years but only after the completion of 1 year from the date of allotment to the original investor in accordance with Rule 3 of the Equity Linked Savings Scheme, 2005,” mentioned Dr. Surana.
Moreover, the Trustee of an AMC reserves the appropriate to modify the lock-in period prospectively from time to time, in the occasion of amendment(s) in the ELSS recommendations with respect to the lock-in period.