Confusion surrounding the ELSS funds after a government's notification has taken its first toll. The ABN AMRO Mutual Fund has suspended the new fund offer of its tax planning fund. The NFO was scheduled to close on November 30, 2005.
It may be mentioned here that in a notification dated November 3, 2005, the Government of India has communicated the requirements for equity linked saving schemes to be eligible for tax exemption under Section 80C of the Income Tax Act.
As per the notification, the investment will have to be kept for a minimum period of three years from the date of allotment of units, after the expiry of which, the investor will have the option to redeem his money. A minimum of Rs 500 should be invested in the said plan and in multiples of Rs 500 thereof.
The notification states that the said plan shall be open for a minimum period of one month during the financial year 2005-06 and a minimum period of three months during the subsequent years. The mutual fund will be required to announce the repurchase price one year after the date of allotment of the units and thereafter on a half-yearly basis. However, after a period of three years from the date of allotment of units, when the repurchase of units is to commence, the mutual fund will be required to announce the repurchase price every month or as frequently as may be decided by them.
The notification further goes on to state that such a plan would be terminated after the expiry of 10 years from the year in which the allotment of units is made. However, if ninety per cent or more of the units under any plan are repurchased before the completion of ten years, the mutual fund may at its discretion, terminate the plan even before the stipulated period of ten years, and redeem the outstanding units at the final repurchase price to be fixed by them.
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