SEBI allows mutual funds to launch passive ELSS funds

Personal finance
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Considering the growing popularity of passive funds such as ETFs (Exchange Traded Funds) and mutual funds amongst retail investors SEBI had set up a working group to review the regulatory framework for passive funds in India. Following the recommendations from the working group, SEBI has made a slew of regulatory changes with regard to the operations of passive ETFs and mutual funds.

One of the most notable change being on the ELSS (Equity Linked Savings Schemes) front, with SEBI now allowing mutual funds to launch either one of the active or a passive ELSS schemes. The passive ELSS scheme should be based on one of the indices comprising equity shares from the top 250 companies in terms of market capitalization.

This is good for investors considering the fact that average expense ratio of regular plan of ELSS fund is about ~2.2% and direct plan is ~1.1%. While the expense ratio of broad index funds is about 0.2-0.3%

ELSS funds are a special category of mutual funds that enjoy tax exemption on investments made under section 80C of the Indian Income-tax Act, 1961. And come with a compulsory lock-in period of three years.

You can learn more about ELSS funds in this Varsity chapter:

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Great news… this means we can surely expect an Index ELSS fund from Zerodha AMC?

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This should have been allowed and started long time ago. Hopefully they start this fund before the close of the current F.Y.

When Zerodha AMC starts the NIFTY50 ETF ELSS, all the other AMC’s will start closing down their active ELSS funds.