Financial Daily from THE HINDU group of publications
Sunday, Mar 06, 2005
Financial Daily from THE HINDU group of publications Sunday, Mar 06, 2005 |
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Investment World
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Mutual Funds Markets - Mutual Funds Stay invested in ELSS funds
I started a systematic investment plan on HDFC Long Term Advantage Fund for 12 months from January 2005 based on Business Line's recommendation. With the elimination of rebate under Section 88, what is your advice to those who have invested in ELSS under SIP? Should I stay invested for three years? Should I allow the SIP to run its course? A. Jayakrishnan Chennai You should let the SIP run its course. For one, ELSS funds too may be eligible for the tax exemption under the new section 80C of the Income Tax Act, without a ceiling on investment. Second, the fund you have chosen remains one of the superior investment options within the universe of diversified equity funds, which is why we recommended the fund. As to the lock-in period, you need to have at least a 3-5 year horizon for any investment in stocks or in equity funds; so the three-year lock-in is not a deterrent. The Finance Minister too has clarified that all the savings instruments earlier included under Section 88 will now migrate to Section 80C. You can expect ELSS funds to continue to fetch you tax benefits on your investment. The Budget makes ELSS funds more attractive as the limit is now Rs 1,00,000, against the earlier Rs 10,000. If the fund is required to make any changes to the scheme, based on the Central Government notification, (which can be expected once the Finance Bill is passed), the fund will certainly get in touch with you to inform you so that you can review your investment decision. Such changes are, however, unlikely. This apart, you should not base any of your investment decisions purely on the tax benefits offered by an instrument. Given its impressive track record, HDFC Long Term Advantage Fund ought to be considered even without taking into account the tax aspect.
Queries may be e-mailed to mf@thehindu.co.in, or sent by post to Business Line, 859/860 Anna Salai, Chennai 600002.
Aarati Krishnan
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