How are LTCG tax calculated for ELSS Mutual fund – On selling Equity Linked Saving Scheme or ELSS mutual fund anytime after 3 years incur long term capital gain tax.
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What are ELSS Mutual Fund?
ELSS fund is a type of diversified equity mutual Fund which offers tax deduction ( up to 1.5 lac )under section 80C of Income tax act 1961. These tax saving funds have a lock in period of three years.
These tax saving funds invest in equity or equity related instruments. ELSS funds are also called tax saving schemes because they offer exemption up to Rs. 1.5 lakh from your annual taxable income under section 80C.
ELSS Mutual Fund one can redeem after completion of 3 years only therefore long term capital gain will be applicable.
How to Calculate LTCG tax on ELSS Mutual Funds?
Since there is a lock in time of 3 year, the gain is taxed as long term capital gain. As per the equity taxation law – LTCG tax on Equity MF is 10% on the gains above Rs 1 lac. Please refer below tables.
LTCG Tax Calculations
| LTCG Tax Calculation for ELSS Mutual Fund | ||
| Suppose you bought ELSS mutual fund today | Rs. 1,50,000 | |
| Sold it after completion of 3 years Rs 2,50,000 | Rs. 3,00,000 | |
| Capital Gain 2,50,000 – 1,50,000 | 3,00,000- 1,50,000 | |
| tax free amount 1,00,000 | 1,00,000 | |
| Tax on remaining 50,000 @10% Nil | 5000 |
Suppose you invested 1.5 lakh in tax saving fund and sell it for Rs. 3 lacs after completion of 3 year. Here, the capital gain will be 3 – 1.5 lakh equal to 1.5 lakh. Since 1 lac capital gain is exempt from tax thus the taxable portion amount is only Rs 50K. Now the tax on 50000 is 10% of 50000 i.e. 5000 only.
Now suppose your gain is only 1 lac than there is NIL tax for you.
Is ELSS taxable on maturity?
Mutual funds are not taxable on maturity but are taxable when you sell it. You have to pay tax , when you sell ELSS mutual fund units, but not before that.https://bestinvestindia.com/how-to-withdraw-sell-exit-mutual-fund/
Also Read : How to withdraw exit Redeem Mutual Funds
Is ELSS taxable after 3 years?
No, ELSS Mutual funds are not taxable after 3 years but are taxable on selling units. There is no tax applicable on mutual funds until you sell it.
ELSS tax exemption Under which section?
Equity linked Saving Scheme is eligible for tax deduction up to 1.5 lac in a financial year under section 80C.
Also read: Last minute tax Saving – Should you invest in ELSS MF amid Ukraine – Russia war crisis
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