After reading your articles, I have become keenly interested in the investment opportunities u/s 88, especially in the open-ended schemes of UTI/MFs and infrastructure related bonds, as I think these are the best in providing modest returns along with modest safety. I request you to furnish me the following details:
1. Which are the best schemes for tax saving under Section 88?
2. How do I enter these various schemes, especially infrastructure bonds and open-ended equity linked tax saving mutual funds? Where can I get the required forms?
3. Which are the best open-ended schemes in mutual funds, especially in tax saving schemes? Which of these are the best, especially in terms of the quality of fund managers, as I believe a firm is only as good as its people? Please give me your opinion on the Prudential ICICI Mutual Fund.
4. Can I operate and control my fund sitting here in Mangalore and later from Chennai? Is there any other advice you can give me regarding my investments? Please bear in mind the fact that I would not like lock-in periods of more than three years.
-- Vipul Agarwal, vipul -- agarwal@bigfoot.com

Here goes the information you seek:
1. Tax saving schemes: FA00 has raised the limit of Section 88 to Rs 80,000 (from Rs 70,000), but retained the limit on non-infrastructure instruments (company PF, PPF, LIC, etc.) at the old level of Rs 60,000.To take maximum advantage of this amendment, invest Rs 10,000 in ELSS of UTI/MFs and the remaining Rs 70,000 (less Co-PF, LIC, etc.) in ICICI/IDBI tax-saving bonds. I have started liking the ELSS and the bonds (both with a lock-in of three years only), especially after the interest on PPF was reduced to 11per cent from 12 per cent.
2. Investments: If you are left with any investible funds, park them in pure-growth, open-ended, debt-based schemes of UTI/MFs. As and when you have additional investible funds, keep on increasing your exposure in these schemes without bothering much about safety (this is of the highest order, thanks to SEBI) and liquidity (withdrawal possible within five working days without any penalty in most of the cases).
3. As regards suggestions about ELSS and the UTI/MFs, I have already dealt with this in my articles which, I presume, you have read.
4. The forms are available in plenty with brokers and agents connected with the organisations. In case you have any difficulty, I shall arrange to send you the forms.
5. Yes, Prudential ICICI has an excellent management, but there are others that are equally good, if not better.
I bought a house through LIC Housing Finance in 1997. The deduction u/s 24 for interest repayment on the borrowed capital has been increased to Rs 1 lakh and the rebate u/s 88 has been raised to Rs 20,000. Now that the interest rates on housing finance have dived, can I take a loan from some other (or same) financier and avail of the present concessions?

-A taxpayer The deduction on interest u/s 24 for acquiring, constructing, repairing, renewing or reconstructing with borrowed capital, is up to Rs 30,000 on self-occupied property (annual value nil). There is no limit on properties either actually let out or deemed to be let out (more than one property). This ceiling has been raised to Rs 1,00,000, but only on capital borrowed on or after April 1, 1999, for acquiring or constructing (and nothing else) the property, provided such acquisition or construction is completed before April 1, 2003. Moreover, the rebate u/s 88 has been increased from Rs 10,000 to Rs 20,000 within the overall limit of Rs 60,000 for non-infrastructure related instruments.

On loans taken to acquire, construct, repair, renew or reconstruct any house property (including residential), from any source, the interest is deductible. On the other hand, the rebate u/s 88 can be claimed only if the loan is taken from some certain specified sources and is for purchase or construction (not repair, renewal or reconstruction) of only a residential house (not any house). If the borrower takes another loan for repaying the original loan, he can still continue to claim the deduction on interest on the second loan. For rebate u/s 88, the second loan has to be from an approved source. Bad! Different criteria for similar situations, making the ITA structure complicated for no apparent reason.

--The author may be contacted at anshanbhag@yahoo.com.