Special Supplement On Tax-Saving Instruments

Mutually Beneficial Come March and the middle-class, salaried Indian turns edgy. With the deadline nearing, he’s busy doing the rounds of the red-brick building housing the Income-Tax department, racking his brains to figure out the right mix for his investments that will keep the tax hounds at bay. Less than one per cent of these assessees are scrutinised later but that’s another story. For those who want to play by the rulebook and legally beat the taxman, there are several schemes floated by financial institutions which ensure hefty rebates while maximising returns. Pre-liberalisation, the only sureshot method to escape the tax net was to evade it. But glasnost gales have swept all that out of the Indian economy replacing the draconian raid raj with the more polite ‘surveys’. Reforms have given a fresh lease of life to the economy which was in dire need of cash inflows. Financial institutions have risen to the occasion and devised numerous instruments to attract individual tax payers and the body corporate. The Voluntary Disclosure of Income Scheme launched by P. Chidambaram, besides triggering compliance, have prompted financial houses to churn out attractive tax-saving products for individual and corporate subscription. Mutual funds, which changed the configuration of the US money markets for ever, have really come into their own ever since. The opportunities are numerous - open-ended mutual funds, PPF, deep-discount income bonds. And given their huge corpus of funds, these instruments have truly evolved - attaining maturity themselves while leading the economy to the same.

Alliance Capital

Alliance Capital Asset Management (India) Pvt Ltd (acam) is an affiliate of Alliance Capital Management L.P. (Alliance Capital), a leading global investment management firm with over $368 billion in assets under management as on December 31, 1999. Alliance has offices in 32 cities in 20 countries. Alliance Capital manages retirement assets for many of the largest US public and private employee benefit plans (including 31 of the Fortune 100 companies). Alliance is also one of the largest mutual fund sponsors in the US, with a diverse family of fund portfolios and approximately 5 million shareholder accounts. Alliance and its subsidiaries employ over 2,000 people worldwide. Its success is based on its in-depth research capabilities. Worldwide research, portfolio management and trading staff of the company include 277 experienced professionals.

Since 1993, Alliance has maintained a presence in India. As an fii, Alliance Capital launched an "off-shore" fund, the Indian Liberalisation Fund, in December 1993.

The Indian Asset Management Company, acam, has launched 10 schemes, each designed to meet a specific investment objective. The company is headquartered in Mumbai and has sales offices in New Delhi, Pune, Bangalore, Chennai and Calcutta. It has built a reputation as a professional asset manager focused on providing investors superior performance and quality service. On January 31, 2000, acam was managing over Rs 2,598 crore in assets invested in the Indian equity and fixed income markets.

Alliance Capital has several schemes to its credit. They include Alliance Capital Tax Relief ‘96, launched in December 1995. It is an open-ended, equity-linked savings scheme that offers, besides long-term growth, tax benefits under Section 88. Alliance Monthly Income Scheme is an open-ended regular income scheme that targets investments of 85 per cent in debt and money market securities and up to 15 per cent in equity. This was launched in July 1999. This scheme also offers tax benefits. Alliance Government Securities Fund is an open-ended gilt scheme investing in the government of India and state government securities. The company has also started Alliance Basic Industries Fund which focuses on companies involved in basic industries - from automobiles, cement and construction to metals, capital goods, petrochemicals, steel and power. Alliance Buy India Fund focuses on companies in the fast-growing consumer and healthcare sector. The star product from the Alliance stable is the Alliance New Millennium Fund which targets personal computers and the cyberspace companies. Says Ajai Kaul, country manager of Alliance Capital: "Infotech has captured everybody’s imagination and there is huge potential in this sector."

Dundee Mutual Funds is sponsored by Dundee Bancorp Inc. a publicly-traded investment management company based in Canada with $15 billion assets under management and administration. Its business consists of the management of the Dynamic-Power Mutual Funds and other fiduciary assets, the creation and distribution of investment products, corporate services and the management of its own investment portfolio. Dundee manages a family of 35 funds and has distribution network of 75 offices across Canada with over 400,000 investors. Dundee Bancorp Inc is listed on the Toronto Stock Exchange. Other Dundee companies in India include Dundee Bancorp (India) Pvt Ltd, a restricted money changer; Dundee Capital Markets Pvt Ltd, a sebi-registered category I merchant banker; Dundee Financial Services, a non-banking financial services company and Dundee Precious Metals, a metals mining unit.

Dundee Liquidity Fund (dlf): It’s one of the top liquid funds in India. There’s neither any lock-in period nor any entry or exit load on this fund. dlf is credited with the highest rating - aaa - by crisil and "IndAAAmf" by Duff & Phelps. dlf announces weekly dividends which are tax-free for the investors and there is no tax deduction at source on redemption, irrespective of the amount redeemed.

Dundee Sovereign Trust: It’s an open-ended dedicated gilt fund, investing only in government securities. Thus, it carries no risk of default of principal or interest amounts on the investment made in the scheme. This fund will be investing in both short-term and long-term government securities and repos.

Dundee Taxsaver Fund: It’s an equity-linked savings scheme providing 20 per cent tax rebate under section 88 (2).

Life Insurance Corporation of India (lic) was established as a state undertaking on September 1, 1956, with the amalgamation of 245 existing Indian and foreign companies. It has been engaged in providing protection to citizens through life insurance. The size of the corporation has grown manifold since nationalisation. lic has 7 zonal offices, 100 divisional offices and 2,048 branches spread across the length and breadth of the country, conducting its business through an army of over 5.9 lakh agents. lic caters to different segments of the society. It has about 12 policies in the category of security for families in the event of the policyholder’s death. Some of these polices are Jeevan Mitra, Jeevan Sathi, Bima Kiran and Money Back. The corporation’s other policies aim at securing the future of tomorrow’s leaders. They are Jeevan Sukanya, Bal Vidya, Jeevan Kishore etc. For security of retired subscribers, lic has floated Jeevan Akshay, Jeevan Suraksha etc. lic has entered the mutual funds and housing finance businesses through lic Mutual Fund and lic Housing Finance Ltd, respectively. The lic Mutual Fund was set up to meet the stock needs of the investors. During 1998-99, it collected an amount of Rs 348 crore from 72,000 applications. Most lic policies give at least 20 per cent income-tax rebate to subscribers. However, contributions up to Rs 10,000 per annum in Jeevan Suraksha guarantee total exemption under Section 80CCC(1).

SBI Mutual Fund boasts of an impeccable pedigree, being sponsored by India’s premier public sector bank - the State Bank of India (sbi). Set up in 1955, the sbi today is one of the few Indian Corporates to have made a mark in the international financial markets. It touches the lives of practically every Indian with its 8,895 branches in India and 52 offices in 34 countries.

Set up in 1987, SBI Mutual Fund (sbimf) has over 13 years of operating experience. Today, it is India’s second largest mutual fund, with assets of over Rs 5,100 crore under its management and an investor base of over 20 lakh.

Till date, sbimf has launched 30 schemes, of which 9 have been redeemed. The fund has honoured all commitments to its investors. sbimf today operates eight open-ended schemes which cover a broad range of mutual fund products. Investors have a choice to select schemes depending on their needs and risk-tolerance. Each of the fund’s 12 equity and balanced schemes have substantially outperformed market indices, giving returns in the range of 130 per cent to 325 per cent for calendar year 1999. sbi’s balanced fund was ranked as the top-performing balanced fund while the IT Fund gave returns of over 250 per cent within six months of launch. The income funds have also been performing well, providing investors with an opportunity to earn good returns combined with high safety. sbimf presents a potential investor with a choice of seven open-ended funds, each catering to a specific investment need and covering the range of risk-return spectrum.

Magnum Sector Funds Umbrella (msfu): An umbrella fund comprising four sub-funds. Three of these sub-funds invest exclusively in the high growth sectors of fmcg, pharma and IT. The fourth is a Contra Fund, focusing on identifying and investing in undervalued scrips of good companies. They are suitable for investors who wish to focus their investments in particulars sectors, with the belief of superior sectoral prospects, as compared to that of a diversified equity portfolio. The fund has consistently been a top performer since its launch in July 1999.

Magnum Equity Fund (mef): It is a 100 per cent equity fund investing in a diversified portfolio of equities. This particular fund has appreciated by over 196 per cent in 1999 and has been generally outperforming the equity market. Suitable for aggressive investors who are looking for higher returns from equity investments, without focusing their investments to a particular sector.

Magnum Multiplier Plus Scheme (mmps): This equity fund invests in a diversified portfolio across various sectors, with assets of over Rs 900 crore. Due to its large size, this fund is ideal for investors who have a large investment outlay. The fund has appreciated by 210 per cent in 1999.

Magnum Tax Gain Scheme (mtgs): A tax-saving scheme which combines tax benefits under Section 88 with the opportunity to benefit from the growth in the equity markets. Investments up to Rs 10,000 in this scheme are eligible for an income-tax rebate of 20 per cent.

Magnum Balanced Fund: It combines the safety of debt investment with the returns of equity investments. At present, 25 per cent of the assets are in debt securities and balance in equity investments.

Magnum Liquibond Income Fund: An income fund investment only in high-quality debt. The fund has given an annualised return of 12.78 per cent since inception. It is a 100 per cent debt fund aimed at investors who look for steady and superior returns without sacrificing liquidity and safety of their investments. Returns are tax-efficient and can be taken either through half-yearly payment of dividend or as capital gains at the time of redemption. This fund is suited for investors who have an investment horizon of over a year.