IIFL MF launches India's first tax-saver index fund

IIFL Mutual Fund today announced the country’s first tax saver Index fund, ‘IIFL ELSS Nifty 50 Tax Saver Index Fund.’ The New Fund Offer (NFO) comes almost six months after the Securities and Exchange Board of India (Sebi) allowed fund houses to launch a passive equity-linked savings scheme (ELSS) in May this year.

Index ELSS will provide investors with the dual advantage of earning passive returns from equity as well as availing 80C benefits on investments up to Rs 1,50,000. The fund house said the NFO opens on December 1, 2022, and closes on December 21, 2022. “The scheme will re-open for subscription and redemption on an ongoing basis from January 02, 2023. Parijat Garg is the dedicated Fund Manager for IIFL ELSS Nifty 50 Tax Saver Index Fund,” the fund house said in a release.

The NFO comes in both growth and income distribution cum capital withdrawal options (IDCW) and will track the Nifty 50 index.

“The scheme will provide the twin advantage of tax saving under 80C and the potential to benefit from a diversified exposure to the equity markets. Being an index fund, it aims to have a portfolio that mirrors the Nifty 50 Index, which comprises large-cap Indian companies. This is a passive fund that is relatively low cost, as compared to actively managed schemes that tend to have a higher expense ratio,” the fund house said in a release.

IIFL fund manager Parijat Garg said, “The Nifty 50 accounts for about 50% of India’s market capitalization. Taking exposure to the Nifty companies through a passive fund is an opportunity for investors to harness the growth potential of equities, reduce tax outgo, lower the cost of investing, and gain diversified exposure.”

“An offering of this kind was long awaited by the market. Time and again, the Indian equity market has demonstrated formidable resilience against both domestic as well as global headwinds. For investors, one of the ways to leverage the India growth opportunity would be a passive investment with tax-saving benefits. Due to its passive approach, the fund eliminates the selection and behavioural biases that impact investment decision-making,” Parijat added.

The scheme will invest in stocks comprising the Nifty 50 Index in the same proportion as in the index to achieve returns equivalent to the total returns of the index subject to tracking error, while offering tax deduction on the such investment made in the scheme under section 80C of the Income-tax Act, 1961. Like in the case of other ELSS schemes, investments in this scheme would be subject to a statutory lock-in of three years from the date of allotment to avail of section 80C benefits.