An equity fund held for more than 1 year is exempted from long term capital gains tax. So what is the necessity of ELSS funds?
- Niladri Shekhar Dey
Yes, long term capital gain arising out of equity fund held for more than 1 year is tax free. But all ELSS comes with a lock-in period of three years. ELSS funds fall under the exempt-exempt-exempt (EEE) category. The necessity or importance comes through the fact that ELSS can get you an income tax exemption of upto ₹1.5 lakh under Section 80C. The capital gains generated by the fund are also exempt from tax.
However, while evaluating the Equity Linked Savings Scheme (ELSS), you should factor in the higher risk profile due to its equity orientation. Also, any investment has to first make sense as an investment, and only incidentally be a tax-saver.