Know the Taxation of ELSS and How to claim tax deduction with ELSS

Every Indian citizen is obliged to pay taxes based on their revenue to the government. But not all Indians earn the same amount; pay the same tax — because by following some simple measures, it is possible to save the taxpayer a large sum of revenue.

With the right investment, which is taxed, the amount of income can be drastically reduced. These reductions in the total taxable amount come in the form of the Income Tax Act, 1961 “sections.” For instance, under Section 80C, by investing it in certain designated avenues-one of these avenues is ELSS-and sum of Rs.1, 50,000 can be made entirely tax-free.

The most significant advantage of ELSS over periodic equity mutual fund schemes is that in a specific financial year if invested in ELSS, Rs 1, 50,000 can be saved from taxation. All ELSS plans have a mandatory lock-in period of 3 years. While this is a tax saving scheme for mutual funds, some taxes apply in some instances.

After three years, is ELSS taxable?

If in a financial year they are Rs. above Rs 1, 00,000, then ELSS schemes are currently taxed at 10 per cent (without indexing benefit). The reintroduction of LTCG Tax (Long Term Capital Gains Tax) much-confused ELSS investors. However, if the returns in a financial year under Rs. 1,00,000, then there is no tax on the returns on ELSS mutual fund schemes. After staying in ELSS, you can claim a deduction of Rs 1, 50,000 towards your taxable income.

Tax saving investment under Section 80C of Income Tax Act, 1961:

Under Section 80C, several tax-saving investments are possible, and a maximum of Rs 1, 50,000 can be invested individually or together. Even if a person chooses multiple investment opportunities in Section 80C in different amounts, Rs 1, 50,000 out of the total investment will be treated as investment in tax savings only.

How to claim tax deduction with ELSS?

Below is a step by step guide on how to save taxes with online ELSS mutual fund investments. Assuming that Rs 1, 50,000 has been invested in the entire section 80C quota in ELSS:

Step1. Go to your selected online income tax e-filing portal and log in to file an income tax return.

Step2. Upload the Form 16 given by your employer or enter Form 16 in PDF form and upload it on the online portal for tax filing.

Step3. See “Deduction under Section 80C” and “ELSS” or “Mutual Fund” after the relevant information is auto-populated.

Step4. Enter the amount invested (in this case, Rs. 1, 50,000) and submit the button. The online tax filing platform will register the same and display your taxable annual revenue with a tax liability reduced by Rs.1, 50,000.

Step5. The platform will also inform you whether you are eligible for the income tax return that year or whether you still have tax liability outstanding.

Step6. According to the indications received from the tax filing website, finish filing the tax and wait for confirmation of email from the Income Tax Department as soon as they receive your file.

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