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Tax Code Dumps ELSS?

The MF industry will have to build a case for the ELSS

What kind of an impact will the new tax code have on the ELSS? I have been a mutual fund advisor for the last 6 years.

It is surprising that the ELSS is not there in the new tax code that will be taken up for discussion. What is still to be understood is, whether that is by design or by omission. It is unlikely that it is by omission because there are four other things and of them two are clearly done in a very deliberate way. So, it may cease to exist in its current form because if there is no 80(C) then there cant be an 80(C) fund. The new tax code is not an amendment or revision it’s a replacement. It substitutes the existing tax system of the land. Apparently, it looks as if equity-linked savings scheme will not exist in its form after the tax code comes into play.

But since it’s a good instrument, very cost effective, well regulated and transparent, hence it is good for investors. A very strong case can be built by the mutual fund industry for it to have it in a different form. Of course, by going through the new tax law the new tax saving funds will become very long-term funds. Redemption might get linked to the retirement of an individual or his retirement age. There could be a new product that can come and for that the mutual fund industry will have to work harder and make its voice heard.

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