I have a bit confusion related to mutual funds and tax..
If we hold our investment upto 3 years then the returns of equity mutual fund is tax - free is it so? or we have to pay tax on it?
and there is a category of ELSS which is called as tax saving fund
Kindly explain the relation of tax and mutual fund and if the return is tax free after 3 years then why this ELSS?
3 Answers
Hi,
If units of Equity mutual funds are held for minimum 1 year (12 months), any long term capital gains made at the time of sale of units, are tax-exempted.
ELSS funds have lock-in period of 3 years, so automatically the units have to be held for more than 12 months, hence gains (if any) tax-free.
Read:
https://www.relakhs.com/best-elss-funds-2017-2018/
https://www.relakhs.com/mutual-funds-taxation-rules-capital-gains-tax-rates-on-mfs-fy-201516/
hi i got your point about ELSS. But all equity based funds are tax free if we hold them more than 1year. so what this ELSS does?
Its useful because of LOCK IN ? our money is locked in for 3year and this makes the investment tax free?
So the only purpose of ELSS is make us hold our investment for 3years to save our tax? which we can do the same if we invest in non-ELSS and hold it for > 1 year
Hi,
Kindly note that investments of up to Rs 1.5 Lakh, made in ELSS funds can be claimed for tax deduction under Section 80C. That's why they are termed as tax saving mutual fund schemes.
However, same is not the case with other Equity oriented funds.
You are referring to Gains on sale of units, which are tax-free for all equity oriented funds including ELSS funds, if units are held for minimum 12 months.
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