Dividend Re-Investment Option in ELSS

POSTED BY TheZionView ON January 5, 2011 12:07 pm COMMENTS (7)

If i start a SIP on a ELSS fund with Dividend Re-investment option. Will my Redemption date extended to another 3-year Lockin period from the Dividend Declared Date?

For Example if i invest 10k today in ELSS Dividend Re-Investment Option and after 2.5 years the fund anounces a Dividend which will be re-invested in my case,will my 10K lockin period extended? If so isnt it a possibility to go in infinite cycle?

Please explain.

7 replies on this article “Dividend Re-Investment Option in ELSS”

  1. Sohil says:

    Sorry i replied in wrong thread sorry this was for other thread.

    Ya only your reinvest unit will be locked and plus u can count that reinvest money as investment in 80c for that year

  2. Sohil says:

    I was just going through past articles where the wory was ddt and ltcg tax.Now its clear on mf holding for more than 1 year wont attract ltcg tax hence going for growth option for long term is better than diividend redistribution option.
    But also one should note is ddt will be only 5% and not 14% as it used to be on debt funds.

    So if 7rs dividend is declared 35 paise will go as dividend at max say 50 paise.So not bad but again in long term growth will be better option now.

    I myself have hdfc premier multi cap fund divid reinvest.I invested 10k at that time just for the sake i wanted to open an account with hdfc and they were pestering me plus i was least interested in finance didnot did homework.

    Now just while digging old papers of investment i came accross this investment and was shocked to see that investment worth rupee 28k now(divid reinvested and fund growth at more than 17% cagr).
    Now i am myself thinking to switch to growth option but problem arising is i cant switch to same fund i guess.Also what will be the taxing angle or whether it will be treated as new investment or not that i need to find out.

  3. Rajendran says:

    Prabeesh,
    At this juncture going for a Dividend Re-ivnestment is not a smart option as after Mar-2012 on one knows what will happen to ELSS schemes. Will it continue to have tax excemption or not so I would say better go for either growth or dividend payout.

  4. bharat shah says:

    kindly add to my answer that it is only for dividend only, but that dividend will ean dividend, and that would be reinvested for another three years. so you can’t rid of the fund even if you don’t like in future.

  5. bharat shah says:

    yes. it is my experience. may not be infinite, but long long period. better go for growth option. for dividend payout , the dividend if less than certain a/m.(in my case it was rs.240/-) , it would nt be paid, but reinvested for 3 years without your permission. this is regulation-indian regulation!

    1. Vidyasagar says:

      I was looking at the HDFC Tax Saver ELSS. It has two options “Growth” & “Dividend”. Can anyone pls explain me the difference between the two and which one is better and why? Thanks in advance.

      -Sagar

  6. Ramesh says:

    Only your reinvested dividend will be locked, not the 10k amount value/units.

    Ramesh

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