As per the latest data available with mutual fund industry body AMFI, the total AUM of ELSS, or tax-saving funds, stood at Rs 25,069 crore at the end of January 2013. This is the first time since April, 2011 that assets in ELSS category has crossed the Rs 25,000 crore mark.
From a meagre Rs 1,410 crore at the end of January 2003, the AUM of ELSS has soared by nearly 18 times in 10 years, according to Association of Mutual Funds of India (AMFI) data.
The ELSS funds generally see significant inflows between December and March, as investors look to invest in schemes offering tax benefits as part of their fiscal-end tax planning activities.
Investments up to Rs 1 lakh in ELSS funds by eligible investors qualify for tax deduction under Section 80C of Income Tax Act. An investment of Rs 1 lakh in ELSS funds can help an investor save up to Rs 30,900 from his/her total tax liability.
Since the launch of first ELSS fund by SBI Mutual Fund in March 1993, all major fund-houses including HDFC, Tata, Birla Sun Life, ICICI, Reliance and UTI have floated their own schemes attracting investor interest.
For instance, approximately nine lakh folios have been opened in Reliance Tax Saver (ELSS) fund since inception in September, 2005.
Tax-saving funds have also seen less net redemptions as compared to traditional equity funds due to robust inflows into these schemes through Systematic Investment Plans (SIPs) and the mandatory three year lock-in requirement.
While equity funds have seen net outflow of over Rs 13,000 crore in the ongoing financial year, ELSS outflow was just Rs 1,875 crore in the same period, data shows.