In a bid to make its Rs 1,232 crore bond fund more attractive to investors, the Unit Trust of India (UTI) is set to introduce income option in the scheme from next month. The country's largest mutual fund will take a final call on the issue by the end of this month, UTI executive director B G Daga said.
Income and growth are ploughed back and reflected in the scheme's net asset value (NAV). The scheme is open-ended and alongside the growth option, offers a monthly withdrawal option exercisable only after six months of investment.
Under the 'systematic withdrawal plan', UTI repurchases additional units accruing to the investor on account of growth in scheme.
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Explaining the point of introducing the income option in the scheme, Daga said: "Investors availing of the systematic withdrawal plan are liable to pay capital gains tax. But those opting for income option, tax at 11 per cent would deducted at source, and the income distributed would put no further tax burden on the investor."
"The point of introducing income option in the scheme is to make it more flexible to investors' need: those who seek to avoid further capital gains will benefit by opting for the income option," Daga said.
The minimum investment under the systematic withdrawal plan is Rs 30,000. The scheme does not offer any other form of income distribution not. The minimum investment for investors choosing the growth option is Rs 5,000.
After about three years of operation, the value of assets under the scheme was Rs 1,232.22 crore as on February 28, 2001. The entire investment of the fund is in debt and money market instruments with low to medium risk profile. About 22.5 per of its assets are invested in non-convertible debentures of three companies: IDBI, ICICI and Reliance Petroleum.
Meanwhile, the UTI board is set to meet in the first week of July to finalise the results of its flagship US-64. Though admitting that the volume of recent redemption in the scheme was significantly high, Daga said, "Redemption in May has been traditionally high, and this year was no exception."