Are there any ETF's in ELSS category, giving tax benefits for the lock-in?

I prefer investing in index through ETF’s. And, wanted to avail tax-free corpus after lock-in period. I found ELSS as attractive category for tax-free corpus, but I found no ETF’s available. Are there any ETF’s which offer tax-exemption post maturity/lock-in period? I came across a mint article where I found CPSE ETF to be one, but looks little returns unfriendly. (Is CPSE ETF a good tax-saving option under ELSS category? | Mint)

Please suggest a list of all ETF’s falling in ELSS category. I’m not necessarily to take 80C claim out these ELSS (coz my EPF itself completes this limit). Appreciate response here!

ELSS is not excempt from tax on withdrawal, other than the normal 1 lakh long term capital gains exemption. 10% LTCG applies on entire profit.

AFAIK there is no difference between normal mutual fund and ELSS other than 80C deduction and 3 year lock in. So if you’re not claiming deduction then why not just invest in ETFs, which you say you prefer?

Thanks for enlightening me! I was under the impression that, LTCG tax is completely waived at maturity. Nevertheless, my idea behind investing in ELSS ETF (considering my hypothesis of tax-free maturity corpus) was to get an edge on LTCG tax, while rebalancing the ETF each financial year. Do you suggest any equity instrument (non-MF) which can help me save on LTCG or STCG while rebalancing the portfolio?

Hey @Wasim1210,

As rightly mentioned by @tallerballer, gains from ELSS are not tax-free. You do get a ₹1 lakh exemption as the gains would be long-term, but any gains above that would be taxable.

If the 80c deduction is not a factor in consideration, in the case of equity ETFs as well, if you hold them for more than 12 months, they’d classify as long-term and 10% tax would be applicable on the gains.

Hope this helps!

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Could you explain this? Didn’t understand it.

AFAIK there are no ELSS ETFs.
However, in India all ETFs must follow an index. So you can invest in index mutual fund and get same returns as whatever ETF you prefer. Yeah the problem is whenever you rebalance your ETFs, you have to pay tax on profits till then.
Zerodha themselves have an ELSS fund following NIFTY Large MidCap250 index.

Maybe look into PMS? They have a high minimum capital of 50 lakhs but I think you pay tax whenever PMS is rebalanced too. So not sure if it is an answer to your query.

Mutual funds have the advantage that the fund manager can rebalance their portfolio and not pay tax. You also get the benefit since the fund manager can pick the best stocks as per the mutual fund strategy. He can keep changing stocks and you only pay tax when you withdraw from the mutual fund.

Should state that am not a CA, and just trying to help.

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