Want to invest in ELSS for tax saving on 31 March? Beware of this Rule.

Are you planning to invest Rs 1.5 lakh in tax-saver ELSS mutual funds in the last week of March 2021? To complete your tax-saving for the year?

Then please be extra careful.

Besides the obvious risk of getting your market timing wrong with lumpsum investment in ELSS funds (as detailed in SIP Vs Lumpsum in ELSS funds), there is one more (new) risk that you need to be aware of.

There has been a rule change recently, As you might know, now the NAV is allotted (and MF units credited to investors) only when the money reaches AMC bank accounts. Therefore, it’s not necessary that you will get the NAV of the day when your bank account was debited. Do read this detailed note to understand this better – You may not get MF units at your investment day’s NAV.

So if you are planning to invest in ELSS funds to complete your Section 80C tax savings for the financial year 2020-21, then it’s possible that due to the said rule of NAV allotment based on fund realization, you may end up missing out on investing within the deadline of 31st March 2021. And that would mean missing out on the tax benefits for the financial year!

And you wouldn’t want that. Right?

So don’t be under the assumption that you will invest in ELSS funds on 31st March and be assured of an allotment the same day.

Related Reading: Which date NAV is applicable for the purchase of mutual funds?

Many investors wait to complete their tax saving at the last minute. If you are planning to complete your tax-saving via ELSS mutual funds, then please don’t forget that unit allotment is now based on the realization of funds at AMC’s end. There have been cases where MF units are getting allotted to investors after about a week’s time as well.

So don’t wait for the last moment.

If you have to invest in ELSS funds for tax saving, then do it much before the 31st of March 2021.

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