The Hindu Business Line : Fresh money inflow into tax saving funds

Distributors have started reporting more inflows into the tax-savers (or Equity Linked Savings Schemes as they are technically termed), a small but committed portion of which is by way of SIPs - systematic investment plans - that allow investors to allocate fixed sums of money at regular intervals.

While the end-July figures are yet to emerge, the all-round view is these funds will see even more inflows as the year drags on, peaking towards the close of the third quarter, a time when many investors start thinking seriously about tax planning.

As Mr S.K. Ganguli, a tax advisor who handles HNI clients puts it, the new section has the potential to draw more investors towards MFs, especially to tax-saving schemes.

"People are now warming up to the opportunity provided by the Government," he said, hoping that ELSS products will be able to firmly shore up their asset bases in the days ahead.

The reference is clearly to the limit provided by Section 80C - Rs 1 lakh. It is, however, pointed out that an investor may not choose to put the entire amount in these funds; for an average person, investments may also include other instruments like infrastructure bonds.

MF circles argue the new Section will help their case in a much better manner than what Section 88 allowed. Fund houses also claim the actual process of using SIPs has now become less cumbersome, thanks to the auto-debit facility that investors can apply. "This will enable them to do away with the process of writing cheques for 6 or 12 months. This makes life simpler for many," said Mr Arindam Ghosh, Chief Marketing Officer of Sahara MF.

According to Mr Dhirendra Kumar of Value Research, the ELSS category will now draw new investors, particularly the "methodical ones" who put a premium on actively-managed options. "An ELSS can have the luxury of having an all-equity portfolio. This can boost returns in a situation where the lock-in period is as much as three years," he said.

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