Investors willing to invest in the National Pension System (NPS) can’t wait till March 31 to make their contributions – to avail the additional tax benefits up to Rs 50,000 over and above the 80C limit of Rs 1.5 lakh on voluntary contribution to the NPS Tier 1 Account – as it takes some time for the money to get actually credited to the account of NPS fund manager.
Due to the time lag between making a contribution and getting it credited in the respective fund accounts, the NPS subscribers, depositing contributions through a cheque, need to contribute by 25th of the month during which the contribution deadline ends, while in case of online contribution, it is better to do it by 27th or 28th, depending on the number of working days available within the period.
On the other hand, investors willing to invest in Equity Linked Savings Scheme (ELSS) – to get tax benefits up to Rs 1.5 lakh u/s 80C of the Income Tax Act, were able to do so even on March 31 before 3 pm till last year, provided the last day of the financial year was a working day.
As the NAV applicability for mutual fund (MF) investments has moved to realisation based NAV from February 1, 2021, even for investments below Rs 2 lakh, there will be some time lag between making an investment and the investment money getting credited in the respective ELSS fund accounts.
As a result, even if a cheque of Rs 1.5 lakh is deposited before 3 pm, the units will be allotted on the day the investment money is credited in the fund account before 3 pm or on the next day in case it’s realised after 3 pm. The allotment of the units will be made at the NAV of the date of allotment.
So, like NPS, for ELSS also, investors have to invest early to ensure that the investment amount gets credited in the funds account on or before the March 31 deadline ends.
Moreover, as March 29, 2021 is a holiday in respect of festival Holi, investors, who are planning to submit MICR cheques that are subject to clearance, may witness further delays in processing as the banks will be closed on the 4th Saturday on March 27, 2021.
So, to ensure that they get the tax benefits on ELSS investments for the financial year 2020-21, investors need to submit the application form as early as possible as there are chances of the potential delays due to payment realisation.
But by which date should you deposit your ELSS application and the cheque to get the tax benefit?
According to the Operations Team of Mirae Asset Mutual Fund, transactions post March 25, 2021 may face these issues.