Indian mutual fund firms have asked the government to allow them to offer investors multiple tax planning equity funds, seeking relaxation of a rule that limits the options they can offer to customers. A regulation framed in 2005 restricts them to just one such fund or equity linked savings scheme (ELSS), limiting options for investors who have been increasingly using them to save tax.
ELSS is same as diversified equity funds except that they come with a three-year lock-in period. To cater to the rising interest in such funds, asset managers should be allowed to float as many ELSS as they wanted, to offer themes such as infrastructure, mid-cap, multi-cap or sectoral funds as available to them in other equity funds.
Two years ago, India allowed savers to claim tax benefit on investment of up to 100,000 rupees in ELSS, making them hugely popular among investors with assets of such funds rising nearly 25 times to 154 billion rupees in past three years.
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