Despite upfront commissions to distributors, ELSS witness tepid inflows as investors stay away because DTC takes away tax benefits from FY 2012
Mumbai: The mutual fund industry has not been able to capitalize on its popular tax savings schemes this year, thanks to the direct tax code (DTC) which puts a break on the tax benefits available up to Rs 1 lakh under Section 80C of the Income Tax Act which kicks in from 2012.
Net inflows in the peak month of March 2011 stood at Rs 576 crore. The month of January and February saw net inflows of Rs 245 crore and Rs 348 crore respectively. According to AMFI, net inflows in the year stood at Rs 266 crore compared to Rs 1,554 crore net inflows in the previous year.
“People who had the knowledge of DTC implications have avoided ELSS. Overall, the collections have been muted this year. Some AMCs were offering four to five years of commissions in advance. The performance of ELSS has been average and the industry was hoping for higher collection,” says a marketing head of a leading fund house.
Cafemutual had first reported about how fund houses were paying upfront commission to market ELSS as a result of DTC and the ELSS gets not-so-encouraging performance.
To salvage the future of ELSS, SEBI and AMFI have written to the Central Board of Direct Taxes (CBDT) to continue the tax benefit.
Tax saving schemes constitutes Rs 25,569 crore or 4 per cent of the Rs 6 lakh crore assets under management of the mutual fund industry. There are a total of 48 ELSS in the industry, including 12 close-ended schemes.
