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The valid tax proofs for mutual fund investments

Only the statements sent by you fund house or the depository statements sent by your RTA or AMC are valid as proofs of mutual fund investments

One of the popular instruments of saving tax is the equity-linked saving scheme or ELSS. These are tax-saving mutual funds that allow you tax deduction benefits under section 80C of the income tax Act, within the overall limit of Rs1.5 lakh. Follow these steps before and after making tax investments to avail these benefits.

Mint Money advises investing in an equity fund through a systematic investment plan (SIP). The same holds true for a tax-saving fund as well. Experts suggest that even though many investors enrol for annual SIPs in ELSS, and then keep renewing them every year, a better strategy is to enrol for a 2-3-year SIP so that you don’t need to remember to renew your SIPs. 

However, if you are investing towards the end of the financial year, then you don’t have this choice. The only option available to you is to invest a lump sum amount. 

A key mistake that many investors make, according to some financial advisers, is that people invest in a different tax-saving scheme every year. As a result of this, their portfolios have two or more tax-saving funds, which are not needed. In reality, just one ELSS is sufficient and if you have started a multi-year SIP, then your tax deduction investment needs are also taken care of.  

Tax saving funds come with a 3-year lock-in. But that’s common knowledge. What many investors may not realise is that when they start SIPs, all the instalments are subject to the 3-year lock-in from the day that the instalment started. Assume that you start an SIP from 1 April 2018 till 1 March 2019. The first instalment, which you made on 1 April 2018, will be locked in till 1 April 2021. But the instalment of 1 March 2019 will be locked till 1 March 2022. 

As soon as you make your investment, your fund house sends you an account statement, which you may need to submit to your employer as proof towards your tax-saving investments. Many fund houses send account statements that can be opened only by using a password (usually, it’s your Permanent Account Number). If your employer demands printouts, then passwords are not a hindrance. But what if your company asks you to upload documents? The salary or accounts division may not be able to access your account statement because it will be password-protected. In this case, you will have to take a print-out of your password-protected account statement, scan it and then upload the image of the document. 

There are two more things that you should remember. One, if you have been investing in an ELSS through an online portal, the portal would also give an account statement. But this statement is usually not allowed as proof of investment. You need to procure the account statement as issued by your fund house, on its own letter-head. 

And two, what if you invest in a mutual fund through a demat account? In this case, your fund house doesn’t send account statements. It is your depository participant that will give you a transaction statement. This statement is valid documentary proof.

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