What Should ELSS Investors Do After LTCG Reinstatement On Equities In Budget 2018?

Subscribe to GoodReturns
For Quick Alerts
For Daily Alerts

    If the proposal of LTCG tax of 10% on equity capital gains of more than Rs. 1 lakh made in the Budget 2018 goes through then even the equity linked saving schemes (ELSS) which until now fetched tax free returns will also be taxed for long term capital gains @ 10% on redemption. So with this, going forward the tax-free label for ELSS is set to change soon.

    What Should ELSS Investors Do After LTCG Reinstatement On Equities?

    ELSS are tax-saving mutual funds which qualify for deduction under Section 80C of the Income tax act. An individual by investing in an ELSS scheme can claim a maximum deduction of upto Rs. 1.5 lakh in a financial year. Further, till now returns from such schemes were tax free in the hands of investors after a lock-in period of three years.

    So what should investors be doing now?

    Experts in the mutual fund industry are of the opinion that investors in ELSS should avoid any immediate panic though the reintroduction of LTCG tax on equity capital gains shall be a blow to them. Nonetheless, the grandfathering clause in respect of LTCG has come as a big saviour which exempts taxation of all gains before the cut off date of 31st January, 2018 for investors. So, existing investors in ELSS schemes need not to worry for now.

    For others who were considering an investment in ELSS, you can still park your money in these tax-saving mutual funds as the LTCG clause will apply only to capital gains of over Rs. 1 lakh.

    Another point that could be noted here is that of all the tax-saving instruments eligible for tax deduction u/s 80C, ELSS have the shortest lock-in period of three years.

    Read about How to calculate LTCG on equity and MF products in FY 2018-19

    So, for dual benefits of calculated risk-adjusted returns from equity schemes and tax-saving benefits, investors can remain invested in ELSS which given the current scenario has potential to provide double digit returns post LTCG tax @ 10%.


    Read more about: elss mutual funds ltcg equity
    Story first published: Saturday, February 3, 2018, 13:02 [IST]
    Company Search
    Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

    Find IFSC

    We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more