Posted at 12:50 PM , on January 20, 2020
Mutual funds have been disappointed over the last two years as there has been little respite in the Budget. This time around, mutual funds will look at parity on a number of areas plus a reversal of some of the recent measures pertaining to capital gains tax and the tax on distribution of dividends by MFs.
Time to bring in DLSS
While ELSS has become extremely popular as a tax saving instrument, one argument has been that it forces people to take on risk. The answer could be in extending these Section 80C benefits to debt funds too and introduce a separate DLSS classification for the same. Of course, the lock-in period can be either retained at 3 years or extended to 5 years. The idea is that conservative investors need not be penalized when their financial plan dictates caution.
Parity with ULIPs and NPS
This has been a persistent demand of AMFI over the last few years. The first demand is to put pension plans of mutual funds at par with the National Pension Scheme (NPS) in terms of tax benefits. That will entail extending the additional exemption of Rs.50,000 on NPS to pension plans too. Secondly, while equity MFs are subject to LTCG tax, the ULIPs are exempt from any form of capital gains tax. This puts the mutual funds at a disadvantage and AMFI has been demanding parity.
Posted at 11:00 AM , on January 10, 2018
Equities as an asset class have not only emerged as a wealth creating asset class over the long term but they are also extremely tax efficient. As a stock market investor you have two approaches to equities. You can opt to directly open an equity trading account with a broker and buy equities into your demat account. Here you can select the stocks you want to buy and also take decisions on churning your portfolio. The second method is to invest indirectly through equity mutual funds. Here you allocate a certain corpus to the equity mutual fund and the fund manager decides what stocks to buy and what stocks to sell. Of course, this is a transparent process and you can see the portfolio of your fund each month in the fact sheets published by the fund. While equities have a stock price, the mutual fund will have an NAV (net asset value). Both equities and equities have emerged as solid wealth creating asset classes over the long term. For tax purposes, an equity share and an equity mutual fund are given similar treatment. But there are some very subtle differences between the tax treatments of direct equities versus equity mutual funds. Continue reading
Posted at 11:00 AM , on December 2, 2017
Over the last 3 years, mutual funds have emerged as an important source of investments for the retail investors. The assets under management (AUM) of mutual funds overall has touched a high of Rs.21 trillion with equity AUM touching a high of Rs.7.1 trillion. While that is still very small by global standards, it shows growing conviction for mutual funds with respect to retail investors. There are some unique advantages that mutual funds proffer. Here are 10 key advantages which make it quite attractive to investors as an asset class Continue reading
Posted at 12:25 PM , on October 24, 2016
According to a recent report, there are nearly 35 new fund offerings (NFOs) lined up from various mutual fund houses. For starters, an NFO is the equivalent of an IPO. While companies raise money through an IPO, a mutual fund raises fresh money through an NFO. But the question is that a mutual fund is always available on tap and one can go and buy any fund from the AMC at any point of time. So what is the idea behind a mutual fund NFO? Basically, mutual funds use an NFO to launch a new idea or a new scheme altogether. The NFO helps them to create the market visibility and excitement to ensure that it is fully subscribed. Interestingly, the last time we saw such a large number of NFOs was at the peak of the previous bull market in 2007. Post 2009, mutual funds in India were seeing redemptions continuously till 2014. It is only after mid-2014 that the tide changed and Indian mutual funds again started getting inflows. The question therefore is what should investors do in the midst of this barrage of NFOs? Continue reading
Posted at 4:44 PM , on October 14, 2016
Since the beginning of the calendar year the yield on 10-year G-Sec bonds has fallen from a high of 7.87% to the current level of 6.6%. The last time the 10-year G-Sec touched such a low level was back at the peak of the financial crisis in 2009 when central banks across the world were on a rate cutting spree to make adequate liquidity available at cheap rates. But, scratch the surface and the difference becomes a little more surprising. During the 2009 crisis, the repo rates were at a level of 4.75%. So the 10-year G-Sec yield at around the 6.5% level was perfectly understandable. But currently, the repo rates are at 6.25% (after the October monetary policy) but yields are already at the same level as 2009 when the repo rates were at 4.75%. So what exactly has driven this sharp fall in yields? Continue reading