What Happens If I Miss Couple of Monthly SIPs to My ELSS Fund?

Prasanna Kumar Dash asks this week’s question on ELSS and tax deductions.

Hi Shabbir,

I’m a regular reader of your blog. It’s been really helpful to have ideas and advises from your articles.

I would like to ask a question on ELSS funds. I’ve been investing in a couple of ELSS funds in form of SIPs. My question is will the invested amount be considered for tax deductions if I miss a couple of monthly SIPs?

The answer is yes the amount you invested in any financial year for tax saving is still valid even if you miss SIPs.

Actually it does not matter how much amount you planned to invest in an ELSS fund but what does matter is how much you actually invested. Tax deductions are calculated based on your actual investments.

So let us understand this with an example.

You plan to invest at 10k per month in tax saving ELSS mutual fund. You started your investment in April and you did continue for 4 months aka April, May June and July. Then due to some financial constraints you missed the SIP in August and September and then you started again from October and continued till the complete fiscal year ended.

Your total investment amount for Tax Benefit was 1 lakh Rs instead of your planned amount of 1.2 Lakhs. So you are entitled to tax benefit of 1 lakh Rs which is the amount you actually invested.

The same applies even if you stop SIP in between or change in SIP amount or even have SIP along with lumpsum investments.

You started with a plan to invest 10k per month and did only for 7 months then you are entitled for tax benefits of 70k for that particular financial year.

You began with 10k per month and did only for 3 months, then you decreased the amount of 5k for the next 4 months and then 7k for the next 5 months and 25k of lumpsum investment as well. So your total investment in an ELSS scheme becomes 1.1 lakhs. So you are entitled to tax benefits for 1.1 lakhs for that financial year.