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9.6 Tax Benefit under Section 80C and Applicability of GST

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NISM-Series-V-A: Mutual Fund Distributors Certification Examination Exam

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1 Chapter 1: Introduction & Exam Overview

1.1 About the NISM-Series-V-A Examination 1.2 The 12-Unit Curriculum Map and a Study Plan

2 Chapter 2: Investment Landscape

2.1 Investors and Their Financial Goals 2.2 Savings or Investments? 2.3 Different Asset Classes 2.4 Investment Risks 2.5 Risk Measures and Management Strategies 2.6 Behavioural Biases in Investment Decision Making 2.7 Risk Profiling 2.8 Asset Allocation and Do-It-Yourself versus Professional Help

3 Chapter 3: Concept and Role of a Mutual Fund

3.1 Concept of a Mutual Fund 3.2 Classification of Mutual Funds 3.3 Growth of the Mutual Fund Industry in India

4 Chapter 4: Legal Structure of Mutual Funds in India

4.1 Structure of Mutual Funds in India 4.2 Key Constituents of a Mutual Fund 4.3 AMC Organisation Structure and Service Providers 4.4 Role and Function of AMFI

5 Chapter 5: Legal and Regulatory Framework

5.1 Role of Regulators in India 5.2 Role of SEBI and the Mutual Fund Regulations 5.3 Due Diligence Process by AMCs for Distributors 5.4 Investor Grievance Redress Mechanism 5.5 AMFI Code of Conduct for Intermediaries

6 Chapter 6: Scheme Related Information

6.1 Mandatory Documents I: Scheme Information Document and Statement of Additional Information 6.2 Mandatory Documents II: Key Information Memorandum and the Advertisement Code 6.3 Non-Mandatory Disclosures

7 Chapter 7: Fund Distribution and Channel Management Practices

7.1 The Role and Importance of Mutual Fund Distributors 7.2 Different Kinds of Mutual Fund Distributors 7.3 Modes of Distribution 7.4 Pre-requisites to Become a Distributor of a Mutual Fund 7.5 Revenue for a Mutual Fund Distributor 7.6 Commission Disclosure Mandated by SEBI 7.7 Distributors versus Investment Advisers, Nomination Facilities and Change of Distributor

8 Chapter 8: Net Asset Value, Total Expense Ratio and Pricing of Units

8.1 Fair Valuation Principles 8.2 Computation of Net Assets of a Scheme and NAV 8.3 Dividends and Distributable Reserves 8.4 Entry and Exit Load and Its Impact on NAV 8.5 The Expense Ratio Framework: Base Expense Ratio, Brokerage and Statutory Levies 8.6 Key Accounting and Reporting Requirements 8.7 NAV, Total Expense Ratio and Pricing of Units for the Segregated Portfolio

9 Chapter 9: Taxation

9.1 Applicability of Taxes in Respect of Mutual Funds 9.2 Capital Gains on Mutual Fund Units 9.3 Dividend (IDCW) Income and Tax Deducted at Source 9.4 Stamp Duty and Securities Transaction Tax on Mutual Fund Units 9.5 Setting Off Capital Gains and Losses under the Income Tax Act 9.6 Tax Benefit under Section 80C and Applicability of GST

10 Chapter 10: Investor Services

10.1 The New Fund Offer Process 10.2 New Fund Offer Price and Ongoing Offer Price for Subscription 10.3 Investment Plans and Services 10.4 Allotment of Units and Account Statements 10.5 Mutual Fund Investors: Who Can Invest 10.6 Filling the Application Form for Mutual Funds 10.7 Financial Transactions with Mutual Funds 10.8 Cut-Off Time and Time Stamping 10.9 KYC Requirements for Mutual Fund Investors 10.10 Systematic Transactions and Their Operational Aspects 10.11 Non-Financial Transactions, Special Investor Categories and Turnaround Times

11 Chapter 11: Risk, Return and Performance of Funds

11.1 General and Specific Risk Factors 11.2 Factors That Affect Mutual Fund Performance 11.3 Drivers of Returns and Risk in a Scheme 11.4 Measures of Returns 11.5 SEBI Norms Regarding Representation of Returns 11.6 Risks in Fund Investing: The Investor's Perspective 11.7 Measures of Risk and Provisions Relating to Credit Risk

12 Chapter 12: Mutual Fund Scheme Performance

12.1 Benchmarks and Performance 12.2 Price Return Index or Total Return Index 12.3 Basis of Choosing an Appropriate Performance Benchmark 12.4 Benchmarks for Equity Schemes 12.5 Benchmarks for Debt Schemes and Other Schemes 12.6 Quantitative Measures of Fund Manager Performance 12.7 Tracking Error and Scheme Performance Disclosure

13 Chapter 13: Mutual Fund Scheme Selection

13.1 Scheme Selection Based on Investor Needs, Preference and Risk Profile 13.2 Risk Levels in Mutual Fund Schemes 13.3 Scheme Selection Based on Investment Strategy 13.4 Selecting a Scheme Across AMCs or Within a Scheme Category 13.5 Selecting Options in Mutual Fund Schemes and Do's and Don'ts

9.6 Tax Benefit under Section 80C and Applicability of GST

Key Takeaways Explain This Topic AI

ELSS qualifies for deduction under section 80C up to INR 1.5 lakh, available only under the old tax regime.

ELSS carries a statutory lock-in of three years, the shortest among section 80C options.

Each ELSS instalment of a SIP carries its own three-year lock-in from its investment date.

GST at 18% applies to AMC management fees and to distributor commission.

GST forms part of the scheme's cost and, from 1 April 2026, sits outside the Base Expense Ratio cap.

Last updated: August 2026

ELSS and Section 80C

An Equity Linked Savings Scheme (ELSS) is the only mutual fund category qualifying for deduction under section 80C of the Income-tax Act.

  • Feature Position
  • Maximum deduction INR 1,50,000 per financial year, shared with all other 80C items
  • Lock-in Three years from the date of each investment
  • Minimum equity 80% , following SEBI's revised categorisation
  • Taxation of gains As an equity-oriented scheme: long-term after 12 months, 12.5% above INR 1.25 lakh
  • Available under The old tax regime only
  • The Regime Point Is Now the Most Important One

Since the new tax regime became the default , section 80C deductions — including for ELSS — are not available to an investor who remains in the new regime. Only investors who opt for the old regime can claim the deduction.

This has changed how ELSS should be discussed. Recommending ELSS "to save tax" without first establishing which regime the investor is in is a real mis-selling risk: the investor accepts a three-year lock-in and receives no deduction whatever.

The correct sequence is:

Ask which regime the investor is in, or intends to choose

If the new regime , ELSS carries no tax advantage — it is simply an equity fund with a lock-in, and an ordinary flexi cap fund is more flexible for the same exposure

If the old regime , check how much of the INR 1.5 lakh limit is already consumed by provident fund contributions, life insurance premiums, principal repayment on a home loan, tuition fees and similar items

Recommend ELSS only for the genuinely unused headroom

An investor whose employee provident fund contribution alone exhausts the INR 1.5 lakh limit gains nothing from further ELSS investment, whichever regime applies.

The Lock-In Works Per Instalment

The three-year lock-in runs from each investment's own date , not from the date the scheme was first entered.

  • For a monthly SIP into ELSS, this means: Instalment of April 2026 -> free from April 2029
  • Instalment of May 2026 -> free from May 2029
  • Instalment of March 2027 -> free from March 2030

An investor who has run an ELSS SIP for three years cannot redeem the whole holding on the third anniversary — only the instalments that have individually completed three years. Redemption follows first-in, first-out, so the earliest units become available first. Explaining this at the outset avoids a difficult conversation later.

Comparing ELSS with Other 80C Options

  • Option Lock-in Return character
  • ELSS 3 years Market-linked equity
  • Public Provident Fund 15 years Fixed, government-declared
  • Tax-saving fixed deposit 5 years Fixed interest, taxable
  • National Savings Certificate 5 years Fixed interest
  • Life insurance premium Policy term Depends on product

ELSS has the shortest lock-in of the mainstream 80C options and the only fully equity-linked return. Both features cut in the same direction: higher expected return, higher volatility, shortest commitment. That is the honest comparison, and it depends entirely on the investor being in the old regime.

Goods and Services Tax

GST applies at 18% to services supplied to a mutual fund scheme.

  • Item GST treatment
  • AMC investment management and advisory fees 18%, charged to the scheme

Distributor commission 18%; a registered distributor charges it on the invoice, and where the distributor is unregistered the AMC accounts for it under reverse charge

  • Other scheme services — RTA, custodian, audit 18%, within the expense framework
  • Exit load credited to the scheme Credited net of applicable GST
  • The investor's purchase or redemption itself No GST on the transaction

There is no GST on an investor's purchase or redemption of units. GST applies to the services rendered to the scheme, and reaches the investor only indirectly through the expense ratio.

Where GST Now Sits in the Expense Framework

This changed on 1 April 2026 . Under the revised framework:

The regulatory cap is the Base Expense Ratio , which excludes statutory levies including GST

GST, along with STT, CTT, stamp duty, SEBI fees and exchange fees, is charged on actuals over and above permissible brokerage limits

Total Expense Ratio is the sum of BER, brokerage, regulatory levies and statutory levies

Under the earlier framework GST sat inside the single TER cap and therefore competed with management costs for room beneath it. It now sits outside the cap, and the cap itself was reduced to compensate. A candidate who learned the older position should note the change specifically: GST is no longer within the expense ratio ceiling.