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Deepashree Shetty, Associate Partner
Tax and Regulatory Services

08 February 2023

The following returns from ELSS funds are taxable under both tax regimes Old and New: Dividend as “Income from Other Sources" as per applicable slab rates; and Redemption proceeds as Long Term Capital Gain @ 10% tax. Contributions made to ELSS funds are eligible for a deduction up to INR 1,50,000 per year under Section 80C of the Income-tax Act; thereby, eligible for tax-savings up to INR 46,800 during a year (assuming 30% tax and 4% cess on the deductible amount of INR 150,000).

However, a taxpayer opting for the New Tax Regime cannot claim the deduction under Section 80C and hence, the tax benefit for ELSS contributions need to be foregone. This could be a differentiating factor as ELSS generally have a 3-year lock-in period. So, the tax-benefit for contributions made during the lock-in period stands lost for a taxpayer opting for the New Tax Regime. ELSS fund investors may want to still opt for the Old Tax Regime to save taxes

Source: Livemint