INDIA BUSINESS WORLD - DECEMBER 2005
THE MONTH THAT WAS

OPEN-ENDED ELSS TO GET TAX BENEFITS

Mutual funds can go ahead and launch one open-ended equity linked savings scheme (ELSS) that will qualify for a tax deduction under Section 80 C, with the finance ministry notifying the ELSS 2005.

Individuals who have invested up to Rs 1 lakh in any equity-linked Savings Scheme (ELSS) after April 1 2005 — both open-ended or closeended — will be eligible for a tax deduction under Section 80 C of the Income Tax Act. The benefit will be available as long as the plan conforms to the schemes notified by the finance ministry.

The CBDT clarified that the tax benefit under Section 80 C will be available to investments made after April 1, 2005 in units of a mutual fund or the Unit Trust if such units are issued under any plan formulated in accordance with three schemes — ELSS 1992, 1992 as modified in 1998 and ELSS 2005.

While the 1992 notification allowed tax deduction for investments in close-ended plans, the 1998 one extended the benefit to open-ended schemes. The ELSS 2005 is essentailly a replication of the 1998 one.

Simply put, the tax benefit under Section 80 C will be available on investments made after April 1, 2005 in ELSS plans floated by mutual funds in the past and after April 1, 2005. Plans launched by Kotak MF, Reliance MF and Chola Mutual Fund will enjoy the tax benefit.