Interestingly, UTI has made a provision in the latest MIP whereby it can alter its assured payout in the event of a change in tax laws having bearing on income distribution. Thus, in the event of a waiver of tax on dividend payout, the Trust may hike the return from MIP. The Trust does not want the tax on dividend payout to come with retrospective effect since it will hit its existing MIP schemes.

UTI is likely to aggressively highlight the tax-free status of MIP '99 to garner investments. The budget for 1999-2000 has made dividend tax-free inthe hands of investors although it has levied a 11 per cent tax on income distribution by funds with less than 50 per cent exposure to equities.

The coupon of 10.75 per cent is, by far, the lowest from UTI in its MIP series. In its first MIP for 1997, where returns were assured for all the five years, UTI had offered a coupon of 14 per cent. Thus, in just three years, the coupon has fallen by a massive 325 basis points. ``With interest rates falling so sharply, it is doubtful whether a return of 10.75 per cent will be sustainable for a long time,'' said an analyst.

The MIP, which opened for subscription on April 5, will close on May 19. The plan will compete for investors' moolah with the bond issue of IDBI and ICICI, which are likely to hit the market towards end-April/early May.

``Although the coupon has not been decided, these bond issues are likely to offer a return of 12.5 to 13 per cent against 14 per cent in their previous offer. This may pose a problem for MIP even with its tax-free status,''said an analyst.

There are three options in the monthly income plan - monthly, annual and cumulative. The scheme offers repurchase after three years at NAV while the units of all the three options are listed on the National Stock Exchange. The minimum investment under the monthly and annual options is Rs 10,000 while it is Rs 5,000 in the cumulative plan. The fund offers tax-breaks under section 54EA.