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As per amendment in the Income Tax Rules, PAN or Aadhaar are to be mandatorily quoted for cash deposit or withdrawal aggregating to Rupees twenty lakhs or more in a FY. Please update your PAN or Aadhaar. Kindly reach out to the Bank’s contact center on 1800 10 888 or visit the nearest IDFC FIRST Bank branch for further queries.
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FinFIRST Blogs
Savings Account
Want to move to the new tax regime and stop ELSS funds? Think again!
Summary: While the new tax regime can reduce your tax liability, it doesn’t offer deductions for ELSS funds. So, if you are thinking of stopping your ELSS investments, you might be making a mistake. Read the article below to know more.
The Union Budget 2023 made the new tax regime all the more attractive for reducing tax liability. However, the new regime doesn’t offer tax deductions under Section 80C for ELSS (Equity Linked Saving Scheme) funds and other investments.
If you consider opting for the new tax regime when filing your taxes, you might be tempted to stop your existing ELSS investments. However, this might be an undesirable step.
Also read: https://www.idfcfirstbank.com/finfirst-blogs/finance/difference-between-money-finance-funds
Factors to consider when stopping ELSS investments
1. Impact on savings
ELSS funds are equity-oriented mutual fund schemes that have the potential to generate attractive returns on your investment over time. So, your savings will be impacted if you stop investing in these funds. You would lose out on the return potential of these schemes – a loss that is not recommended.
2. Lock-in period
ELSS funds have a lock-in period of 3 years. If you have invested in a lump sum, you must wait 3 years before you can redeem the fund. In the case of SIPs (Systematic Investment Plans), the lock-in period of 3 years applies to each SIP instalment. So, while you can discontinue your SIPs, you cannot liquidate the ELSS folio before the lock-in period ends.
3. Market volatility
The equity market is volatile, and when you want to redeem your ELSS investment, the market might not be conducive to your decision. If the market is falling, you might suffer a loss on redemption.
4. Investment goals
While ELSS investments offer tax benefits on investment, saving tax is not the only consideration. You may save to create a corpus for your financial goals. Such goals will be impacted if you discontinue investing.
Also read: https://www.idfcfirstbank.com/finfirst-blogs/savings-account/how-to-set-achievable-financial-goals
5. Tax efficiency
Measure the tax efficiency of your decision to stop ELSS investments. Check your tax liability under the old and new tax regimes and choose where ELSS funds have the lowest tax liability. If the new tax regime is better, you can switch without stopping your ELSS funds. It would allow you to save tax, invest, earn returns, and create a corpus for your goals.
Conclusion
ELSS funds can help achieve your financial goals by creating an equity-linked corpus. So, don’t stop your ELSS investments, whatever tax regime you choose. If you choose the old regime, you can claim Section 80C deductions on ELSS investments and an exemption on long-term capital gains. Besides, if you open an IDFC FIRST Bank Savings Account, you can also claim a deduction on the interest earned under Section 80TTB.
So, understand the laws governing the new tax regime and make the right choice.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.
