ELSS fund - dividend reinvest option

[anand_ashutosh]

Hi,

I have invested 40K in SBI Magnum Tax Gain in Nov, 2007 with DIVIDEND-reinvest option. After that I started(from April 2008) investing 5K in the same fund through SIP for tax saving of financial year-2009. As we know, ELSS fund have 3 yrs lock-in period. Its dividend-reinvested component will also have 3 years lock-in period. Hence this process will go infinite time. Am I right? Fund has declared 11 Rs/unit dividend once in January-2008.

If I am right, what should I do to make my step correct? Can we convert dividend-reinvest option to growth option? Or is it possible to pull out all the money before 3 years and start investing freshly through SIP? What are other good ELSS funds?

Waiting for your response.

-Thanks & Regards
Ashutosh T.

[vasa1]

Originally Posted by anand_ashutosh

Hi,

I have invested 40K in SBI Magnum Tax Gain in Nov, 2007 with DIVIDEND-reinvest option. After that I started(from April 2008) investing 5K in the same fund through SIP for tax saving of financial year-2009. As we know, ELSS fund have 3 yrs lock-in period. Its dividend-reinvested component will also have 3 years lock-in period. Hence this process will go infinite time. Am I right? Fund has declared 11 Rs/unit dividend once in January-2008.

If I am right, what should I do to make my step correct? Can we convert dividend-reinvest option to growth option? Or is it possible to pull out all the money before 3 years and start investing freshly through SIP? What are other good ELSS funds?

Waiting for your response.

-Thanks & Regards
Ashutosh T.

Use your transaction slip to convert dividend-reinvest to dividend payout. This way, further dividends will be credited to your bank account or you'll get a cheque for the same.

If the reinvested units also have a lock-in that lessens by that amount the amount you have to invest u/s 80C in the relevant financial year.

I would not choose dividend-reinvest for an ELSS and in general (because MFs generally declare dividend in the bull market when the NAV is quite high).

[anand_ashutosh]

can't I convert it into Growth option using transaction slips?

Or can I take out all my money and start investing freshly? how much exit load I have to pay?

[vasa1]

Originally Posted by anand_ashutosh

can't I convert it into Growth option using transaction slips?

Or can I take out all my money and start investing freshly? how much exit load I have to pay?

I think while a change from dividend-reinvest to dividend payout is allowed even during the lock-in period, change to growth is not.

Please check with Traderji's tax guru (Diosys).

[diosys]

Originally Posted by vasa1

I think while a change from dividend-reinvest to dividend payout is allowed even during the lock-in period, change to growth is not.

Please check with Traderji's tax guru (Diosys).

Thank You vasa...but i am no tax guru....just a person with more knowledge...he he he he he

Anyways...What Vasa has said seems very correct to me....Conversion from Dividend Re-Investment to Dividend Payout is only way out....The other is not possible...Either from Growth to Dividend or from Dividend to Growth...

Please note what i have said above is no where in the Income Tax Act....There is no bar in it....it is only that mutual funds do not allow the same...

[vasa1]

Originally Posted by diosys

Thank You vasa...but i am no tax guru....just a person with more knowledge...he he he he he

.......

A person with more knowledge and willing to help others is a guru. As George Bush would say, "Make no mistake about it!".