Prajna Capital |
- Should you Roll Over 1 year Fixed Maturity Plans?
- Tax Saving ELSS Funds in Guise of Retirement Plans
- Advantages for investing through Mutual Ffunds
| Should you Roll Over 1 year Fixed Maturity Plans? Posted: 04 Feb 2015 04:07 AM PST The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis points to 7.75 per cent on Monday. Those rolling over their investments should note FMPs will give them lower returns compared to last year. For instance, one- year certificate of deposits were ruling at 9- 9.5 per cent in 2014. At present, yields of two- year AAA- and AA- rated corporate bonds are 8.5- 8.7 per cent. Rollovers are most beneficial to investors in the 30 per cent bracket. Those in the 10 per cent bracket, on the other hand, can exit as they will not be impacted by the change in rules. Investors in the 20 per cent bracket choosing to roll over will be impacted marginally, to the extent of the indexation benefit. So, besides the taxation aspect, these investors should take into account the expense structure for the rollover period, credit quality of the new portfolio, and other competing debt options before deciding to roll over. Financial planners believe investors will be better off exiting their investment and deploying the money in open- ended bond funds. FMPs employ a buy- and- hold strategy and might not give high returns unless they invest in lower- rated papers. Open- ended bond funds can provide better capital appreciation opportunities in a falling interest rate scenario. Suggests rolling over 60 per cent of FMP investment and putting the rest in bond funds. Bond funds will give a kicker to your portfolio. One can invest for two years and then extend it to three years, depending on the interest rate outlook prevailing at the time. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015
1.ICICI Prudential Tax Plan 2.Reliance Tax Saver (ELSS) Fund 3.HDFC TaxSaver 4.DSP BlackRock Tax Saver Fund 5.Religare Tax Plan 6.Franklin India TaxShield 7.Canara Robeco Equity Tax Saver 8.IDFC Tax Advantage (ELSS) Fund 9.Axis Tax Saver Fund 10.BNP Paribas Long Term Equity Fund
You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds
Invest in Tax Saver Mutual Funds Online - For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 --------------------------------------------- Invest Mutual Funds Online Download Mutual Fund Application Forms from all AMCs |
| Tax Saving ELSS Funds in Guise of Retirement Plans Posted: 04 Feb 2015 03:26 AM PST Retirement funds are here, unfortunately. Regular readers of this column would be shocked at that `unfortunately', since I've written about the need for retirement-focussed mutual funds. But I say unfortunately because the retirement funds that are now in the process of being approved and launched are so in name only. Practically speaking, they aren't much different than the tax-saving ELSS funds that have been available for a long time. For the investor, they carry no additional advantage over ELSS funds, either as tax breaks, or in returns, or in any investment characteristic that makes them particularly suitable as retirement savings. These funds share the same ` . 1.5 lakh tax-saving allocation under Section 80C that is there for EPF, PPF, ELSS funds and so many other things. So, there's no additional tax break. Why then have these funds been launched? The idea of a mutual fund based retirement benefit scheme has been around for a while. The original idea was that this would be something like NPS tier 1. In that conception, fund companies would be allowed to launch `retirement plans' of pre-existing schemes with good track records. Employer contribution to such funds would not be counted towards the tax saving limit and the investments would be locked in till retirement. Since a fund's performance and suitability can change over the long period of time till retirement, savers would be allowed to switch from one fund to another without it being counted as a sale of investment for tax purposes. Given the choice of funds and the ability to switch, along with lock-in till the age of 58, this would have been a genuine retirement saving option.
When the Modi government's Budget was first presented, it appeared that some significant move had been made on retirement funds. Page 12 of the Budget Highlights document said `Uniform tax treatment for pension fund and mutual fund-linked retirement plan'. From this it appeared that the government had accepted Securities and Exchange Board of India's (SEBI) recommendation for creating a new class of mutual fund retirement plans. However, there was no reference to this in the Budget speech, nor in the Budget Bill itself. That little reference to retirement plans seemed to have found its way into the Budget highlights without anything to back it up. Later, it was explained that there was no mention in the Finance Bill because no change in the law was needed to launch the `mutual fund-linked retirement plan'. That was a clue that whatever was being referred to in the Bud get was nothing like the original idea had been. With the mention in the Bud get, the SEBI was free to go ahead and approve `mutual fund-linked retirement plans'. That process has moved forward and now a number of such funds are in the process of being approved by the SEBI and one (State Bank of India's) has already been approved. All have a lock-in of three years, unlike genuine retirement products that can't accessed till actual retirement. After the three years are over, they do have an exit load till the age of 58, but that's hardly a deterrent to savers casually withdrawing without giving it too much thought. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015
1.ICICI Prudential Tax Plan 2.Reliance Tax Saver (ELSS) Fund 3.HDFC TaxSaver 4.DSP BlackRock Tax Saver Fund 5.Religare Tax Plan 6.Franklin India TaxShield 7.Canara Robeco Equity Tax Saver 8.IDFC Tax Advantage (ELSS) Fund 9.Axis Tax Saver Fund 10.BNP Paribas Long Term Equity Fund
You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds
Invest in Tax Saver Mutual Funds Online - For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 --------------------------------------------- Invest Mutual Funds Online Download Mutual Fund Application Forms from all AMCs |
| Advantages for investing through Mutual Ffunds Posted: 04 Feb 2015 12:54 AM PST Mutual funds are the best available investment vehicle for retail investors. The average expense ratio is typically in the range of 2.5% per year whereas the same professional fund management offered by ULIPs comes at an average cost of over 8% annually . Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015
1.ICICI Prudential Tax Plan 2.Reliance Tax Saver (ELSS) Fund 3.HDFC TaxSaver 4.DSP BlackRock Tax Saver Fund 5.Religare Tax Plan 6.Franklin India TaxShield 7.Canara Robeco Equity Tax Saver 8.IDFC Tax Advantage (ELSS) Fund 9.Axis Tax Saver Fund 10.BNP Paribas Long Term Equity Fund
You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds
Invest in Tax Saver Mutual Funds Online - For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 --------------------------------------------- Invest Mutual Funds Online Download Mutual Fund Application Forms from all AMCs |
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