ELSS Tax Exemption – Complete Guide to Section 80C Benefits

Key Insights 

1. You can save on taxes by investing in ELSS mutual funds. By claiming up to ₹1,50,000 under Section 80C, you lower your taxable income and increase your yearly savings.

2. ELSS mutual funds offer the chance for market-linked returns and require you to stay invested for at least three years. This lock-in period helps you invest regularly and build wealth over time.

3. Keep your investment receipts, report your ELSS investment under Section 80C in your tax return, and track any capital gains. This will help you claim your tax exemption smoothly.

Are you searching for a way to save on taxes and build your wealth? Equity Linked Saving Schemes (ELSS) can help you get tax benefits under Section 80C and may also give you returns linked to the market. 

So, what is ELSS funds, and how might they work for your investment portfolio?

ELSS works like a financial multi-tool. ELSS funds help you save on taxes, grow your money, and start investing in the market. These equity-linked savings schemes have a lock-in period that encourages consistent wealth.

I put ₹1,50,000 into an ELSS fund, staying within the ELSS tax exemption limit. By following the ELSS tax exemption rules, I saved ₹46,800 in taxes and saw my investment grow by 12% over three years, which was better than other tax-saving options.

Bonus Tip: Do you know? Long-term capital gains (LTCG) apply when you hold units for more than one year. Any amount above ₹1,25,000 each year is taxed at 12.5%.

Deduction Limit Under ELSS Tax Exemption 

Are you looking to save more on taxes with ELSS? Learn about the deduction limits that can help you get the most from your investments and lower your tax bill.

Here is the list of the deduction limit under the ELSS tax exemption:

1. You can invest any amount in ELSS, but the tax deduction under Section 80C is capped at ₹1,50,000 per financial year. This limit includes all eligible investments like PPF, life insurance premiums, and tax-saving fixed deposits.
2. If you invest more than ₹1,50,000 in ELSS, you will not get a tax benefit on the amount above ₹1,50,000.
3. This deduction lowers your taxable income by up to ₹1,50,000, which helps you save on taxes.
4. ELSS is one of the Section 80C options and has a mandatory lock-in period of three years.

You can invest up to ₹1,50,000 in ELSS to make the most of your 80C deduction, reduce your taxable income, and take advantage of possible long-term growth.

Bonus Tip: Do you know? If you sell equity fund units within one year, short-term capital gains (STCG) will apply, and these gains are taxed at 20%.

How to Claim ELSS Deduction in ITR?

Want to save on taxes with ELSS? This simple guide will help you declare your investments and claim your deduction in your ITR the right way.

1. Invest in eligible funds:

• Make sure the mutual fund you choose is an ELSS that qualifies under Section 80C of the Income Tax Act, 1961.
• Look up details on the fund house’s website or ask your financial advisor for help.

2. Maintain investment proofs:

• Save your receipts or statements from the fund house as proof of your investment.
• If you are salaried, give these proofs to your employer before the financial year ends to avoid higher TDS deductions.

3. File ITR correctly:

• When you file your ITR, show your ELSS investments under Section 80C of the Income Tax Act. Choose ITR-1 if you do not have capital gains, or ITR-2 if you have sold units and made gains. Gains.

4. Track capital

• If you sell your units after three years, make sure to calculate your long-term capital gains correctly.

5. Automate with tools:

• Use tools such as capital gains statements from investment platforms to help you calculate accurately.

Just follow these steps to declare your ELSS under Section 80C in your ITR. This will help you get your tax deduction and keep track of your long-term capital gains.

Conclusion

ELSS funds help you save on taxes while investing for your future. You can claim up to ₹1,50,000 under Section 80C and also grow your money through equity investments. 

If you invest carefully and keep your paperwork well organised, you can reduce your taxable income and build wealth. This makes ELSS a good option for tax planning.

FAQs

Switching to a new tax regime. Should I continue investing in ELSS?  

You can keep investing in ELSS after moving to the new tax regime, but you will not get tax deductions under Section 80C. Consider investing in ELSS if your goal is long-term wealth growth, not just tax savings.

How much of the amount invested in ELSS is allowed for Tax exemption?  

You can claim a tax exemption on investments in ELSS of up to ₹1,50,000 under Section 80C of the Income Tax Act. This limit also includes other investments and expenses like life insurance premiums, PPF, and home loan principal payments.

Why is tax exemption given on an ELSS mutual fund? 

Tax exemption on an ELSS (Equity Linked Savings Scheme) mutual fund is provided under Section 80C of the Income Tax Act, 1961. This allows you to claim a tax deduction of up to ₹1,50,000 on your total taxable income for investments made in ELSS, which reduces your overall tax liability. 

Will I get tax exemption for all 3 years if I start investing in ELSS mutual funds through a SIP from May 2017 for 3 years?  

Yes, you can claim a tax exemption on the amount you invest each year under Section 80C if you use the old tax regime. The exemption applies only to the principal you invest, not to any returns you earn. Also, each SIP instalment is locked in for three years.

What is an ELSS scheme?

ELSS stands for Equity Linked Savings Scheme. It is a type of mutual fund that invests mainly in stocks and helps you save on taxes.
 

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.