Prajna Capital |
- Shift from Debt to Equity - Arbitrage Funds
- Reduce Capital Gains Tax Outgo
- Franklin India Flexi Cap Fund dividend
| Shift from Debt to Equity - Arbitrage Funds Posted: 27 Mar 2015 04:52 AM PDT In addition to generating returns comparable with debt options, arbitrage funds also enjoy the tax advantage of equity funds.
Arbitrage fund investors had been worried about the category being clubbed under non equity funds in the recent Budget. As this did not happen, there is relief among them as they can continue to enjoy tax benefits. Arbitrage funds cash in on the opportunities that exist between the spot and the futures market. They pair trade--buy in the spot or cash market, while simultaneously locking-in a higher price for the same in the futures market. They pocket the difference when the sale actually happens. Their risk profile is very low--comparable to short term debt funds. Fund managers try to maintain their equity holdings in the cash market above the 65% mark, so that these schemes are classified as equity funds. Equity funds do not incur capital gains tax if held for more than one year and, if held for less than a year, short-term capital gains are taxed at 15%. Debt mutual funds, if held for less than three years are considered short-term assets and taxed at marginal rates. The dividends from arbitrage funds are also tax free because there is no dividend distribution tax on equity funds. It is not just the tax advantage that has made arbitrage funds attractive for investors. These funds have also been generating better returns compared to short-term debt funds which do not take risky duration calls--pure interest accrual products like liquid funds or ultra short-term debt funds. Their returns are also significantly higher than the long-term bond yield (yield to maturity) of around 7.1-7.3% offered by tax-free bonds listed in the market. The higher levels of the stock market have also led to higher volatility--the BSE 1-Month Realised Volatility Index has moved up to around 16 from around 4 on 1 January. This increased volatility is also generating enough arbitrage opportunities, and they are likely to last as well. There are good arbitrage opportunities now and the situation should remain like this so long as the stock market remains firm. Investors need to move a part of their debt portfolio to arbitrage funds to enjoy the twin benefits of tax advantage and better returns. With the government flip-flopping on taxation issues, the tax advantage may cease in the future, so those looking for investment opportunities for less than three years stand to benefit the most. However, if you invest before 30 March, you can still reap the tax benefits, even if the government shifts this category to non-equity funds in the next Budget, as it will be effective only from April 2016. You still have one full year to redeem your investment with tax free capital gains. However, these schemes may not be suitable for very short-term investors--those who want to park their money just for a few days. Though these schemes make paired trades and lock-in the possible gains, these gains are realised only at the end of the futures and options cycle. Since both the cash and the futures market transactions are separately valued on a mark-to-market basis--at current market values--there might be short-term volatility in their net asset values. Exit load is another problem that is faced by short-term investors. Most schemes charge exit load if units are redeemed in less than 90 days. The exit load varies between 0.25 and 0.50%. If you want to invest in arbitrage funds, but are unlikely to stay invested for more than three months, go with the schemes that charge lesser exit load. The qualifying criterion to invest in an arbitrage fund should be their equity funds tag--they are popularly known as equity arbitrage funds (we included only these funds in our study). Asset under management (AUM) is another good criteria to select a fund-schemes with high AUM are likely to have a dedicated arbitrage desk and, therefore, are likely to be better at spotting arbitrage opportunities and generating higher gross yield. We did not consider schemes with less than `100 crore AUM for our study. 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 |
| Reduce Capital Gains Tax Outgo Posted: 27 Mar 2015 03:39 AM PDT
In over 300 small stocks, daily average volumes up between 500% and 50,000% in March
Many investors churned their portfolios in mid and small-cap stocks since the beginning of March in order to trim the capital gains tax ahead of the financial year-end. Though this is a fairly routine exercise every March, this time the rush to book losses was more than the previous years due to a big rally in the stock market since the beginning of the current financial year.
In over 300 stocks with a market capitalisation of less than ` . 1,000 crore, daily average volumes have shot up between 500% and 50,000% in March, indicating the rush to book losses for tax adjustment despite stringent action by the market regulator Sebi against many such companies in recent months. Sensex has risen almost 26% since the beginning of the financial year, while the BSE mid and small-cap indices have surged 48% and 51%, respectively. Due to a sharp rise in several mid and small-cap stocks this financial year, investors are readjusting their portfolios to meet the available tax benefits. However, given the fact that liquidity in most small-caps is relatively low, investors should be careful of a high impact cost as it will add to the transaction cost Booking losses is not restricted to small cap stocks alone, many investors who made huge profits in the current financial year, sold some of the mid-caps from their portfolios, which corrected recently, said experts. We have recommended our clients who have booked profits during the rally to sell those mid-caps which have fallen recently and buy them in the first week of April to adjust the short-term capital gain tax. If investments are less than a year old, an investor can book a loss on shares and lower his tax liabilities, tax experts said. This loss can be offset by the short-term capital gains made during the year. If an investor has invested in a stock less than one year ago, it can be sold to adjust the short-term capital gains tax if he is incurring loss on the stock. If the holding is more than one year, loss incurred on sale of such security becomes long-term capital loss, which can't be offset against a short-term capital gain. These losses can also be offset against short-term and long-term gains of non-equity assets, like real estate, debt mutual fund units, gold exchange traded funds, etc. However, long-term capital losses on assets that are subject to securities transaction tax, can't be offset against any income, and can't be carried forward for offsetting against any future gains. 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 |
| Franklin India Flexi Cap Fund dividend Posted: 27 Mar 2015 01:53 AM PDT Franklin Templeton Mutual Fund has announced dividend under Franklin India Flexi Cap-D and Franklin India Flexi Cap Direct-D. The quantum of dividend shall be R1.75 per unit.
The record date has been fixed as March 27, 2015. 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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