Initially, mutual funds were allowed to either launch an actively-managed ELSS scheme or a passively-managed one but not in both categories. Passive funds are index funds or exchange-traded funds(ETFs) that imitate a stock benchmark like Nifty or Sensex. There is only one passively managed ELSS scheme – IIFL ELSS Nifty 50 Tax Saver Index Fund launched in December 2022 and has assets worth Rs. 22 Cr. Sebi has also guided the procedure for launching a passive ELSS scheme by a mutual fund house, which already has an actively-managed ELSS scheme. Under the procedure, Sebi said that further there should be no inflows or subscriptions including systematic investment plans(SIPs) and Systematic Transfer plans(STPs) to the respective Actively managed ELSS scheme. The proposed change is required that needs to be done after a clear written communication with its causes and gains of such change, is sent to each unitholder. Along with that, AMCs will provide an option to investors to redeem their units without exit load subject to lock-in requirements. Additionally, AMCs need to give an advertisement about the closing of the existing Actively managed scheme in print media. After completing three years after the date of stopping inflows in the actively managed ELSS scheme, Sebi said the scheme will be merged with the passively managed ELSS scheme and the investment would be managed through the passively managed scheme. Industry experts believe Sebi's move will massively benefit investors as passive ELSS are much cheaper compared to active ones. Compared to active plans, Passive ELSS are much cheaper with a lower expense ratio. Along with the tax benefit, investors will be able to save more money with a lower expense ratio. Thank you.
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