Direct Tax Code

Hi Sanjeev, my question is wrt to the tax reforms that are proposed from April 1. 2012. Considering that i invest rs 1 lakh in ELSS this year which has a locking period of 3 years, can i avail tax benefit on the premiums that i will be paying in the next two years, given that they will not fall under the tax exempted schemes under the new law.

asked Feb 04 '11 at 05:27 by amber4182 1111


Your question is not very clear. I think you are confused between mutual funds and insurance.

ELSS is equity linked tax saving scheme (tax saving equity mutual funds). There are no annual premiums in mutual fund investments.

Lockin period of 3 years means that mutual funds units you buy this year in equity tax saving mutual funds, cannot be redeemed till next 3 years from date of buying.

Premiums are paid in case of insurance policies and not in the mutual fund investments.

answered Feb 04 '11 at 14:09 by pankaj 5.2k320

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Hi Pankaj, Thank you for your response. I am sorry for using the word premium. What i mean was that if i take a mutual fund which has a locking period of 3 years, and i invest 1 lakh in it the first year. this 1 lakh will be tax exempted for the first year that is 2011-2012. however in the next financial year when DTC is in place, i will still have to pay 1 lkah towards this mutual fund, but under new new law, mutual funds will not be tax exempted from April 2012, hence my payment for 2012-2013 and 2013-2014 will not be tax exempted.. this is what my understanding is. is it correct? or since the mutual fund was bought when they were tax exempted, so i will gain tax benefit even under the new law..
(Feb 04 '11 at 15:18) amber4182
Investment in Mutual funds is not a recurring one (except SIP). There is no compulsion to invest again next year if you invest this year. 3 years lock in does not mean that you will have to invest again for next 2 years. Lock-in means your current investment cannot be sold for next 3 years. Whatever you invest in 2010-11, you will have exemption only on 2010-11. 2012-13 will be a new financial year and you will have think tax saving separately in that year.
(Feb 04 '11 at 15:24) pankaj

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Asked: Feb 04 '11 at 05:27

Seen: 2,365 times

Last updated: Feb 06 '11 at 03:18