March Month is about to end! Have you planned your investment in tax-saving mutual funds or still you have postponed the plan for the last date that is for 31st March 2021? If you have postponed it for the last minute, then you need to pull your socks right now and invest much before the March 31 deadline.
This is because of the new provision announced by SEBI regarding the asset allocation and NAV applicability on mutual fund units. As per the new rule, the allotment of units on your investment in a mutual fund (MF) will happen only when the money reaches the asset management company’s (AMC’s) bank account and will be allotted on the NAV of the same day.
So basically if you invest in ELSS on 31st March 2021, no matter before the cut-off timings or before, your money will be credited in the AMC’s account after two days and you will be allotted mutual fund units after 2-3 days, that is based on the NAV of April 2 and not of March 30.
This means that your investment will be taken valid for the next financial year that is 2021-22 and not 2020-2021. You don’t get tax benefits for FY 2020-21. The main objective of your investment will remain unaccomplished!!
Units Will Be Allotted After The Money Is Received!!
After the SEBI new rule for asset allocation got effective, the time or day of your investment matters low, but what matters is when does the AMC receive your money in their account. You may have the point that the money was deducted from your account on 30th March, but the argument will go in vain.
Generally, there is a difference between the date of the amount deducted from your account and the amount deposited in the AMC account, it might be due to technical issues in the chain of entities through which the money passes or some other unforeseen problem. Well sometimes the money deducted is deposited on the same date, but this happens by chance only.
Although there are chances, why test your luck if you have the other option available and that is planning your ELSS investment by today or tomorrow.
Still Confused, Whether To Choose ELSS Or Any Other 80C instrument!
Investors still get confused when it comes to choosing a tax-saving investment. Many misconceptions rumored in the air make them confuse between ELSS and other tax-saving 80C instruments like EPF, PPF, insurance premiums, etc. However, it has always made them clear that these instruments can only give you tax benefits while ELSS offers dual benefits, potential to create long-term wealth via inflation-beating returns, and second help save on taxes.
Yes, being equity-oriented ELSS has the potential to generate wealth in the long-term in comparison to other tax-saving 80C instruments that are debt-oriented.
ELSS must Not Be compared with Other Products!!
Well, there are many that compare ELSS with PPF and try to pick the winner among these. Comparing both these together is generally not advised as both these funds have different assets with different risk-return profiles. However, there are many points that make ELSS better than PPF. The very first is the long-term locking period in PPF that is 15 years which is just three years in ELSS. The second point is the wealth creation potential of ELSS because it is equity-oriented, whereas PPF offers to fix returns because it is debt-oriented.
Basically, last but not the least, if you are one among those who have been planning to invest in tax saving mutual funds ELSS on the last day that is 31st March, then I suggest please drop that idea and plan it today or tomorrow. If you do not, then you may end up investing in the next financial year as per the new rule of SEBI. Thus, all hard work will go in vain.
So please don’t wait till the last moment, plan and invest in ELSS now!!
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For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).