The Hindu Business Line : Tax saving schemes galore from mutual funds

New fund offers that are open for subscription include JP Morgan India Tax Advantage Fund, SBI Tax Advantage Fund, ICICI Prudential Tax Shield Fund and Lotus India Agile Tax Fund. Reliance is also in the process of launching a 10-year close-ended ELSS (equity-linked saving scheme).

“The flow of fund in a close-ended scheme is steady as there are no sudden withdrawals. This helps fund managers to plan long term and get maximum returns possible,” said Mr Mukul Gupta, CEO, Birla Sun Life Mutual Fund.

Section 80C of the I-T Act allows an individual investor to pare tax burden up to Rs 1 lakh, provided there is a lock-in of three years.

Since most of the fund houses have open-ended tax saving schemes under their ambit, they have launched close-ended versions, just to work around SEBI norms which bar identical schemes.

SBI MF, ICICI Prudential, Lotus India and Reliance MF have launched 10-year close-ended tax saving schemes, as they already manage open-ended schemes. SBI MF manages Rs 3,305 crore under Magnum Taxgain ’93, Reliance Tax Saver AUM is at Rs 2,254 crore, ICICI Prudential’s Tax Shield AUM Rs 893 crore and Lotus India Tax Plan AUM Rs 76.35 crore.

The tax saving scheme of JP Morgan, which entered India early this year, will be an open-ended scheme.

Collection up 32%

Mutual funds mop-up under tax saving schemes have jumped 32 per cent to Rs 15,437 crore in November from Rs 11,734 crore in August.

“These schemes are in much demand as investors not only save tax but also get good returns,” said Mr Gupta.

Reliance Tax Saver Fund inflow rose 21 per cent between August and November to Rs 2,254 crore, Birla Sun Life Tax Relief ’96 was up 46 per cent to Rs 615 crore, SBI Magnum Tax Gain Scheme ’93 up 37 per cent to Rs 3,305 crore, HDFC Tax Saver up 28 per cent to Rs 1,544 crore, Fidelity Tax Advantage up 28 per cent to Rs 1,164 crore and UTI Equity Tax Saving was up 29 per cent to Rs 430 crore.

Higher rate of return

“Investors are not only considering the schemes for saving tax, but also an investment opportunity. The rate of returns is much higher as the funds are locked in for three years,” said Mr Lokesh Nathany, National Head, Wealth Management, Almondz Global Securities.

Investors are attracted by the good returns these schemes offer. “The returns from tax saving scheme was about 50-60 per cent this year, thanks to the vibrant capital market which has seen historical highs this year,” said Mr Ravindranath Easwaran, Head, Retail, SBICap Securities Ltd.

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