According to the management of Reliance Capital Asset Management Company: "The new dividend options will be an ideal investment avenue for investors who require regular tax-free income and for investors looking for tax efficiency with respect to post tax returns on investments made for a period less than one year".

The management of the fund pointed out that the income distribution tax and the surcharge payable by the Reliance Income Fund will be at the rate of 11 per cent where as an individual investor or a corporate entity opting for capital appreciation instead of dividends will have to pay short-term capital gains tax including surcharge at the rate of 33 per cent(highest marginal slab) and 38.5 per cent respectively. These plans would therefore help an investor effectively pay a lower rate of tax on returns.

For instance, the annualised post-tax return on investments in the quarterly option of the income fund will be 9.79 per cent against 7.37 per cent in the case of fixed deposits.

The income fund has also announced a 15 per cent dividend in its existing dividend plan for the period ended March 31, 1999. The AMC has reduced the investment management fees from 1.25 per cent to 1 per cent which they pointed out would further reduce the costs of the scheme while improving returns to the investor.