What would be the tax treatment of ELSS funds for the year 2013-14? How will the direct tax code treat ELSS funds. I am planning to start a three-year SIP in Canara Robeco ELSS fund this year. I expect DTC to be in effect within three years and want to know if ELSS schemes will continue to be tax exempt.
-Mahesh S
According to current tax laws, investments in tax-saving mutual funds (and some other asset types) are tax exempt under section 80C of the Income Tax Act. And the gains are also tax free being an equity fund.
In the final draft of Direct Tax Code (DTC), only the retirement oriented investments have been listed as eligible tax exempt investments. ELSS is not listed as an eligible investment in it. However, DTC provides for tax exemption of long-term capital gains from equity funds. Hence, gains from all investments made in ELSS even after DTC becomes effective will also be tax free.
This article was originally published on May 14, 2013.
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