Rampant launch of ELSS

The mutual fund industry is abuzz with the launch of tax saving mutual funds schemes or Equity Linked Savings Scheme (ELSS).

After the Reliance Mutual fund made history by mopping up around Rs 700 crore, in its Tax Saver Fund, the Chola Mutual came up with the Chola tax Saver Fund and Kotak Mutual followed with the Kotak ELSS fund.

Apart from tax saving, Kotak ELSS also offers free life insurance cover. ELSS are eligible for income tax deduction under Section 80c. Earlier the ceiling on ELSS investments was Rs 10,000 for the purpose of tax rebate. However, according to the new tax regime announced this budget, investments upto Rs 1 lakh will be eligible for tax deduction.

According to Sandesh Kirkire, CEO, Kotak Mutual fund, "The ELSS scheme is a wonderful product as it helps to manage money with a long-term view. Its good that the market has an appetite for the scheme. We have added the life insurance cover to attract more investors."

The Reliance Mutual New Fund Offer (NFO) was a pleasent surprise to the whole industry as it gathered more money than the combined asset of the top four funds in the ELSS category.

The three major funds in this category are SBI Magnum Taxgain which manages Rs 219 crore, HDFC Long Term Advantage Fund (Rs 200 crore) and Pru ICICI Tax Plan (Rs 135 crore) had posted about 100 per cent appreciation in their Asset Under Mangement (AUM) during the last four months.

According to Tridib Pathak, CIO, Chola Mutual fund, "The ELSS scheme is the ideal investment vehicle for a retail investor as it gives him multiple benefits. The industry is clearly trying to bring in more participation from the small investors from all parts of the country."

Apart from the tax savings, ELSS have also proved to beeter than their plain vanila diversified counterparts. The Magnum Taxgain as well as the Pru ICICI Tax Plan posted more than 100 per cent return over the past one year.

S Naren, vice president-investments, Prudential ICICI, "The AUM (assets under mangement) of our tax plan has grown over 130 per cent since the announcement of the new tax norm. The schemes enjoy the advanatge of adopting a patient investment strategy there by preventing the risk of sudden redumptions."