The Tax saving Schemes of MFs and the DTC 2010

The govt's intent to push tax saving schemes to the long term spectrum was visible as eary as 2010 with introduction of Direct Tax Code bill 2010(DTC) . DTC seeks to integrate the IT Act 1961 and Wealth Tac Act 1957 into one single platform.

As a class of investment, the Equity Linked Savings Schemes(ELSS) is an entry level product to mutual fund industry for the uninitiated. They invest atleast 80% funds in equity and have 3 year lock-in period. They allow you get diversified across assets.

All other investments in the Sec 80 C of the  IT Act 1961 are of longer lock-in-period. Even if the lock-in-period is over, investors can continue in the scheme is an added attraction of the ELSS open ended ones. This provides an opportunity to wait for the market conditions to improve and the NAV give a better appreciation..but one should have the capacity to wait..

The assessment of Risk-Return profile is necessary for entering into the  ELSS like any of the Mutual Fund Schemes.There are certain expenses also qualify along with the specified investments under Sec 80 C of the IT Act 1961

Look at the performance of the ELSS - the 36 funds that completed 3 years have given 8.77% to 29% and the last one year returns alone have gone beyond 100% in certain cases.

When RGESS (2010) was introduced MFs were allowed to offer such schemes(2012). They have given similar performance as that of ELSS in the last 1 year.

Budget 2014-15 has raised the overall limit of Sec 80 C investments to Rs 1.5 lakhs & ELSS automatically is a beneficiary the budget also had a mention that MFs would be allowed to offer pension products.. So make hay when there is sunshine..

However, there are already two MFs offering pension products already

happy investing