This document discusses mutual funds and the tax benefits of investing in them. It begins by introducing mutual funds and their advantages, such as reduced risk through diversification. The objectives are then stated as understanding mutual fund basics, their various schemes, and the tax benefits of investing in them. The background section provides more details on mutual fund history, categories (open-ended vs. closed-ended; money market, fixed income, equity), and regulatory environment. The purpose is identified as creating awareness of benefits like tax deductions that people may not be aware of from investing in mutual funds.

1. 1
INTRODUCTION
The purpose of this study is to find out the tax benefit we get after investing into Mutual Funds.
There are different areas of investment like Real-estate, gold, equity etc. one such area is
mutual fund investment. Mutual fund offers good investment opportunities to investor because
it has diversity and low risk for the investor. We can define mutual fund as a mechanism for
pooling the resources by issuing unit to investors and investing fund in securities in accordance
with objectives as disclosed by the offer document. The advantage is, investor can invest in
various sectors and industries and thus can reduce their risk. The reason is all stocks may not
move in the same direction at the same proportion. So here if one sector is going down, other
may go up thus minimizing the risk of the investor. The profit or loss is shared by the investor in
proportion to their investment. This is the reason why people go for investing in mutual funds.
The mutual fund offer tax rebate to the investors under specific provision of income tax act
1961 e.g. equity liquid saving scheme u/s 80(c ), pension scheme launched by mutual funds also
offer tax benefits.
OBJECTIVES
 To study the basics of mutual fund
 To describe the various schemes under mutual fund
 To discuss the advantage of investing in mutual fund
 To discuss the tax benefits that we would get after investing in mutual fund
Report for YEMP Chisel, February 2012
PhiNNACLE Investment
Project Name: Mutual Fund and Tax Planning
Project Team Member(s):
1. Abhishek Kumar
2. Pooja Tripathi
3. Shubham Sahu
Project Supervisor:
Priti Bakhshi
Date of Report Submission: 20.02.2012
Purpose of Project/Report:
What are the benefits of mutual fund and how tax planning is beneficial for the investor and investment
company..!!!

2. 2
PROBLEM AREA IDENTIFICATION
The purpose of this report is to identify the various benefits of investing in mutual fund which
people at large are not aware about. They see investment as an upside down going market
where there is a lot of risk and chances of getting returns are less or you are mostly going to
face loss. This thinking is there because of lack of knowledge and awareness about this area.
People are unaware of the benefit which they can gain after investing into mutual fund. for e.g.
by investing in ELSS we can tax deduction upto Rs 1 lac from the taxable income under sec 80 (c
) resulting in reduction of taxable income. Similarly investing in ULIP under UTI and pension
scheme under mutual fund can give tax benefit and also security as well as good return after
retirement. People mostly use bank for saving their amount where they get little return from
interest rates but in mutual fund we can get high return on investment as per the market
performance. Therefore there is a need for everyone to know its importance and how it can be
used for tax planning which can be done by taking the advantage of various deductions we get
from taxable income u/s 80 (c ) to 80 (u ). It will increase our saving and is beneficial for
government also because whatever exemption we get are for those incomes which somewhere
or the other used by government for the development of economy and to maintain the
liquidity.
Background of the study
Mutual funds
A mutual fund is a pool of money that is managed on behalf of investors by a professional
money manager. The manager uses the money to buy stocks, bonds or other securities
according to specific investment objectives that have been established for the fund. In mutual
fund investors can invest in different industry and sectors. They are generally categorized
according to their investment objective. Some mutual funds invest on stock, other bonds,
money market instrument or other securities. It can be open-ended or close ended depends
upon the investment objective.
History of mutual funds
Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s,
Government allowed public sector banks and institutions to set up mutual funds.
In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives
of SEBI are – to protect the interest of investors in securities and to promote the development
of and to regulate the securities market. As far as mutual funds are concerned, SEBI formulates
policies and regulates the mutual funds to protect the interest of the investors. SEBI notified
regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector

3. 3
entities were allowed to enter the capital market. The regulations were fully revised in 1996
and have been amended thereafter from time to time. SEBI has also issued guidelines to the
mutual funds from time to time to protect the interests of investors.
All mutual funds whether promoted by public sector or private sector entities including those
promoted by foreign entities are governed by the same set of Regulations. There is no
distinction in regulatory requirements for these mutual funds and all are subject to monitoring
and inspecting by SEBI. The risks associated with the schemes launched by the mutual funds
sponsored by these entities are of similar type.
Schemes of mutual fund
Schemes according to maturity period:
Under maturity there are two types of scheme-open ended scheme and close ended scheme.
Open ended scheme- Under this scheme or fund investor can subscribe or repurchase on a
continuous basis. Investor can buy or sell the number of units at any time at net asset value
which are declared on a daily basis. These schemes do not have fixed maturity period. The key
feature of open ended scheme is liquidity.
Close ended scheme- under this scheme there is a fixed maturity period for e.g. 5-7 years. The
fund is open for subscription only during a specified period at the time of launch of the scheme.
Investors can invest in the scheme at the time of the initial public issue and thereafter they can
buy or sell the units of the scheme on the stock exchanges where the units are listed. In order
to provide an exit route to the investors, some close-ended funds give an option of selling back
the units to the mutual fund through periodic repurchase at NAV related prices. These mutual
funds schemes disclose NAV generally on weekly basis.
Schemes according to the investment objective:
Money market fund – this scheme is for a short term – less than 1 year to maturity. The risk is
low. Return on this scheme fluctuates much less as compared to other fund. This scheme
invests in instrument like treasury bills, certificate of deposit, commercial paper, government
securities etc.
Fixed income funds –in these investors invests in debt securities like – bonds, debentures or
mortgage that pay regular interest or in corporate preferred shares which can pay regular
dividend. In this risk is less and investors are getting fixed return on their investment.
Growth or equity funds – the goal of this scheme is the mid to long-term growth by investing in
riskier and big companies. Such schemes normally invest major amount in equities. Growth

4. 4
schemes are good for investors seeking for long term growth and capital appreciation.
Performance of this scheme depends upon the performance of the stock market. This schemes
provide different options to the investors like dividend option, capital appreciation etc.
depending on their preferences.