Please give me some information about shariah based mutual fund investments in India. By investing in those funds can I get tax benefits?
- Abdul Jabbar
Shariah refers to the Islamic canonical law based on the teachings of the Koran, which has certain strictures regarding finance and commercial activities permitted for Muslims. While trade and investment are encouraged, shariah investing rules prohibit involvement in alcohol, gambling, pornography, abortion, human cloning, defence, conventional banks or insurers, and certain forms of entertainment. Industries associated with pork are also out.
In March 2009, Benchmark Mutual Fund launched Shariah BeES, an exchange traded mutual fund. It is a passively managed fund that invests in securities that constitute the S&P CNX Nifty Shariah Index, in the exact proportion. For an investor seeking a low risk exposure, this passively managed fund is a good option that would replicate the market and provide returns that closely correspond to the returns of the securities as represented by the S&P CNX Nifty Shariah Index.
On the other hand, Taurus Ethical is an actively managed diversified equity fund launched in March 2009. The stocks which comply with the principles of Shariah are selected from the universe of the S&P CNX 500 Shariah Index.
Since both the funds are equity schemes, any long-term capital gains arising from them are tax exempt, whereas short-term capital gains would attract a tax of 16.99 per cent. The above two funds are not tax saving vehicles. To avail of a deduction under Section 80C of the Income Tax Act, you will have to invest in an equity linked savings scheme (ELSS).
This article was originally published on April 21, 2010.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
