Capital markets regulator Sebi has permitted the scheme of mutual funds with active Equity-Linked Savings Schemes (ELSS) to set off passive schemes. This aims to offer an economical and tax-saving alternative to individual investors.
Sebi said, “Mutual funds having existing actively managed open-ended ELSS scheme may launch passively managed open-ended ELSS schemes after stopping fresh inflows/ subscription to existing actively managed open-ended ELSS scheme”.
The regulator has mentioned that the process for setting off a passive ELSS scheme through mutual fund has an already stated actively-managed ELSS scheme. Under this Sebi said that the fund house as a result will have to halt the new inflows or subscriptions, including systematic investment plans (SIPs) and systematic transfer plans (STPs), in response to the actively managed ELSS scheme.
“The passive ELSS are much cheaper with a lower expense ratio as compared to the active ones. Along with the tax benefit, a lower expense ratio is something wherein investors will get directly benefited, and they will be able to save more money.”
This also opens up opportunities for the mutual fund industry to have more inflows of funds and more savings from a consumer standpoint,” Mahesh Shukla, CEO and founder PayMe, averred.
Rachit Chawla, CEO Finway FSC, averred that this move will allow investors to incur a tax advantage to save more and spend less. This will offer them an opportunity to manage more inflows and make savings from the standpoint of a consumer.