ELSS (Equity Linked Saving Scheme) General Discussions

[sj1234]

Originally Posted by bhindi75

Hi,

I have never invented in mutual funds before, much less ELSS. I want to invest 30,000 in ELSS and spread this amount over 2-3 funds. When I searched the internet about ELSS, I got even more confused. I now have a thousand questions about ELSS. Perhaps someone can help answer these question. Forgive me if some of these questions seem childish or contradictory.

1. Which is th best ELSS for 2008. (I keep reading about SBI Magnum. What are the other.)

2. Is it better to apply in NFO or in old funds.

3. Is it even allowed to apply in old funds.

4. Are all ELSS funds closed ended.

5. What is the difference between close ended and open ended funds.

6. What is the lock in period for most ELSS.

7. I understand that you can invest on a monthly basis in SIP. How does the lock in period work out in SIP.

8. What is exit load.

9. What is entry load.

Can someone please help me find answers to these questions. Thanks in advance. And I will pose the remaining 991 questions after I start getting some answers to these questions. Thanks Again.

ELSS funds have a lock-in period of three years. This could be restricting, but look at the other side of the picture -- the lock-in period prevents unnecessary withdrawals and helps your money grow over a period of time.
If you are wondering why a three-year lock-in period is necessary, it is because you need to take a long-term view when you invest in equity. The real potential of equities starts to show only after a few years. This allows you to ignore the short-term slumps and stay invested for the long haul.
• How to compare mutual funds
• /The tax benefit
Investments in ELSSs fall under Section 80C. The limit under this section is Rs 100,000.
This is irrespective of how much you earn and under which tax bracket you fall. Also, there are no sub-limits under this overall Rs 100,000 amount. So, if you choose, you can invest the entire amount in ELSS or infrastructure bonds. How you utilise the limit of Rs 100,000 is entirely up to you. The dividends you earn in an ELSS are tax free.
When you sell the units of these funds, you can benefit from long-term capital gain, under which you don't have to pay

[srini4u]

Hi Bhindi75,

Answers for ur questions:

1) These are the other top ELSS funds now...
Magnum Taxgain( which u knw...)but this is the best n secure in long term
Principal Tax Savings
Birla Sun Life Tax Relief 96
Principal Personal Tax Saver
Sundaram BNP Paribas Taxsaver

2)Its alwys better to go for the Old Funds than NFO..as we have chance to look there track record
Why to risk with the new ones....There is a myth people think of getting more number of UNITS in NFO but down the period its the rate of performance growth that matters....!! I think u got it

3)Yes, you can apply into existing old ELSS funds like which are mentioned above.

4 , 5 )

First lets know the diff between Close ended Fund and open ended ....and about Lockin period

I think not all the ELSS funds are closed ended,,,they will be close ended till 3 years and then again open to all...

A Close ended fund can be closed for also about 10 years which means no further investments are allowed in that fund when it is closed. and open ended means any time an investor can invest in it and come out of it.

Coming out from the close ended depends on the LOCKIN period which is 3 years now.

6)In ELSS lockin period wil be 3 years as mentioned by the Fund scheme,Lockin in some funds schemes are also as high as 10 years , you need to knw before filling and apply for the fund.Be careful later you shd nt regret for the mistake done.

7)Lockin period for SIP

Suppose we consider
JAN 2008
FEB 2008
MAR 2008
....till Dec 2008

we can redeem JAN 2008 SIP only after JAN 2011
and FEB2008 can be after FEB 2011 and March ...in MARch 2011......dec 2008 can be taken at dec 2011

each month individually should complete 3 years its lock in ...that means the last month SIP in 3 years investment... u r doing now can be taken only after the 6 years.

Its not advisable to go for SIP in ELSS ....but still most people do that who really look for cost averaging and being more disciplined in there investments.


8)
Exit load is few funds charge u like 2.25% on the amount u r redeeming.

Entry load will be like 2.25%( changes according to u r Fund ) charged as for example
In a NFO of Rs10 per unit...u invest 5000 ...on 5000 u have 2.25% as entry load 112.50 will charged and remaining amount of 4887.50 will be u r acutal investment which gives u ...488.7 units

I think its clear for u... Even while exit when u redeem that amount wil be deducted and remaining credited to u..!!

I think all your questions are answered...hope I can provide more n more answers in future to u....Keep rocking !!!!

Srini4u

[marghadedk]

1. Apart from SBI Magnum Taxgain,there are some good schemes like a) Sundaram Tax Saver b) Birla Sunlife Tax Relief 96 c) Principal Tax Saving d)Principal Personal Tax Saver e)DSPML Tax Saver, with proven track record.
2. It is always preferable to invest in the old schemes as we can study about past returns,the management style and risk adjusted returns.
3. In an every open ended scheme it is allowed to apply in old funds.
4. there are some closed ended ELSS funds also, where within that close ended period you cann't apply.
5. For every ELSS, there is a lock in period of 3 years.
6. If investment in ELSS is through the SIP,the lock in period for every additional investment will be 3 years from particular SIP date.
7. Generally there is an entry load of 2.25% and no exit load.

[saroj.rath]

I have invested some amount in SBI Mutual Fund " Tax Advantage Fund - Series I " NFO with Growth option. It is my gut feeling that this Fund will do well in the market after listing. The issue closes on 3rd March.

[magnet]

I mean to say for dividend pay out..i guess divident tax is deducted before dividend in hand....i mean suppose 2600 is the dividend which comes and say 100 rs get deducted for dividend distribution tax.....than the remaining 2500 shouldnt be added to your final income as already tax has been deducted on it...or else we have to add it and pay income tax too on it.....

i just have 1 article as source

http://www.valueresearchonline.com/s....asp?str=10949

[mrindia]

Hello!
Dividends recieved at the hands of investors are not taxable. Whatever has to paid as taxes is already done by AMC.
mr india

[magnet]

okk but say suppose my overall net income comes ard 1.5lakh and suddenly some elss funds declare dividend say suppose 5.7k ard...and say taxes and all charges cut by them comes and total 5k is deposited in my account..than my taxabale income would become 1.55lakh or it would still remain the same 1.5L...i have lot of liabilities so opting for dividend payout option to clear all dues thats why thats important for me to know wrt this point

[mrindia]

Originally Posted by magnet

okk but say suppose my overall net income comes ard 1.5lakh and suddenly some elss funds declare dividend say suppose 5.7k ard...and say taxes and all charges cut by them comes and total 5k is deposited in my account..than my taxabale income would become 1.55lakh or it would still remain the same 1.5L...i have lot of liabilities so opting for dividend payout option to clear all dues thats why thats important for me to know wrt this point

Hello!
In that case your taxable income will still be 1.5lac. Correct me if somebody finds it wrong.
mr india