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Tax planning: ELSS mutual fund investment deadline alert! Invest by March 28 for Section 80C tax benefit – here’s why

Investment in ELSS mutual funds for tax benefits

: If you’re following the old tax system for the 2023-24 financial year, make sure you finish your

tax-saving investments

and expenses by March 31, 2024. While the general tax-saving investment window extends until March 31, this year’s Sunday deadline requires prompt action by March 28, 2024 for

ELSS mutual fund


Here’s why this date is critical and how to ensure your investment qualifies.
When investing in an Equity Linked Savings Scheme (ELSS) mutual fund through phone apps or internet banking, the money is typically deducted from your bank account immediately and transferred to the mutual fund’s account.
With banks operational on March 30, 2024, due to the fifth Saturday of the month, and closed on March 29, 2024, for Good Friday, the window for eligible transactions shrinks. Notably, stock markets will also remain closed on March 29 and throughout the weekend. Consequently, investments made in ELSS mutual funds during this period won’t qualify for tax benefits in the current financial year, states an ET report.
Shivansh Dandona, Head of Investment Management at FinEdge, was quoted explaining that to allocate units in an ELSS mutual fund, the purchase must occur during

stock market

hours. Even if the money is credited to the mutual fund’s account, the units will only be assigned on the next working day of the stock market, which in this case is April 1, 2024. Consequently, this investment won’t qualify for tax benefits under

Section 80C

for the current financial year, 2023-24. Ideally, to ensure eligibility for tax benefits, investments should be made at least 2-3 days before the last working day of the stock market in the financial year.

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As per the guidelines of the Securities and Exchange Board of India (Sebi), funds must be credited to the mutual fund’s bank account for an investment to be considered complete. Additionally, there are specific cut-off times before which investors must submit valid purchase or redemption requests to qualify for a particular day’s NAV.
Mutual funds are tied to market performance, as they invest in assets like stocks, bonds, or other specified instruments, each with its own fixed trading hours. The Net Asset Value (NAV) of a fund is determined by the market value of its underlying assets, closely following market prices. To qualify for a specific day’s NAV, the fund manager must know the amount to be bought or sold based on market trading hours and settlement periods. This approach ensures fair treatment for all investors, regardless of the size of their investment.

According to

Sebi guidelines

, to receive the same day’s NAV for purchased mutual fund units, the investment funds must be credited to the mutual fund’s account before 3 PM on days when the capital market (stock market or debt market) is open.
For example, an individual invests in a mutual fund scheme using


. If the money is credited to the mutual fund house’s bank account before 3 PM, the individual qualifies for the same day’s NAV. However, if the money reaches the mutual fund’s account after 3 PM, the individual will receive the NAV of the next working day.
According to the report, Bandhan Mutual Fund states that March 29, 30, and 31 of 2024 are non-business days for

mutual fund houses

. Hence, it’s crucial that the funds reach them before 3 PM on March 28, 2024, to ensure eligibility for the Section 80C tax break for the financial year 2023-24.
The procedures for receiving funds may differ between mutual fund houses and banks. It’s recommended to confirm with your chosen mutual fund house before initiating the investment process. Therefore, if you’re investing in an ELSS mutual fund scheme, it’s best to complete the process promptly to avoid any last-minute complications.