MUTUAL FUNDS
Mutual Fund is a collective indirect route to the Stock Market.
When one individual takes decision of investment, numbers of considerations are to be made. The parameters for his decisions are like in which company one should invest, when, how much, when to reshuffle etc. This requires certain appraisal skills plus good deal of time and attention. One has to devote to the subject and remain in touch with the market. In case one has limitation of fund, he can not have the required spread of Scripps in the portfolio. When one or more criterions are not taken care of in course of investment decisions, this result in unremunerative investments. One develops apathy to the subject, and then blame the hard luck.
What if someone can do all these consideration and do the management of investment on your behalf? Well, Mutual Fund is the answer.
Mutual Fund is a collective investment medium. If you have Rs. 10000 to be invested in equities, can you work out good portfolio? Perhaps one can not buy even one scrip in a market lot. But if there 99999 others like you to put up investment jointly with you, the total sum available for investment shall be Rs. 100 crores. This collection is called a `corpus' that can be properly invested in Stock Market, and monitored systematically.
Mutual Fund is a collective investment medium. In addition to just collection of funds and investing, it has advantages in terms of providing for good equity research in house, maintain close touch and also the bargaining capacities on account of good volume of funds. The benefits of mutual funds are a) collective fund management b) benefits of equity research c) constant touch with the market and d) bargaining power. The earning that accrues to the fund is distributed to investors. There are no taxation implications, since mutual funds are exempted from income tax. They of course charge asset management fees. But this is a small cost against the benefits that comes to the investors.
In Western Countries, this is the most popular route of investments. We are hearing of all these FIIs. They are nothing but those overseas mutual funds.
CORPUS: This is a total collection of funds from investors, available for investment.
GROWTH SCHEME: In this type of schemes, the corpus is invested in equity shares of companies.
INCOME SCHEME: In this type of schemes, the corpus is invested in fixed income categories like bonds, debentures etc.
BALANCE SCHEME: Here corpus is deployed both in shares as well as debt investments in pre-defined proportions.
MONEY MARKET SCHEME: Here corpus is invested in money market instruments like commercial papers, bills discounting, treasury bills etc.
NAV: Net Asset Value of all the investments at the current market rates.
OPEN-ENDED SCHEME: In this type of scheme, investment as well as withdrawals can be made at prevailing NAV.
CLOSE-ENDED SCHEME: In this category, investment can be made only for a specific period of time.
SECTOR SPECIFIC FUND: Here the investment philosophy is that of corpus to be invested in particular sector only. For example Kothari Infotech Fund is investing only in Information Technology companies' shares. Kotak's K-Gilt funds are invested in Government securities only.
TAXATION:
In order to promote mutual fund business, Government has granted certain taxation benefits to this category of investments.
Section 54 EA - If the entire proceeds of the capital asset sold are invested within 6 months of sale for a period of 3 years, there is exemption from Long Term Capital Gain Tax.
Section 54 EB - If the gain portion of the capital asset sold is invested within 6 months for the period of 7 years, there is no tax on Capital Gain.
More over investment in mutual fund for more than one year is accounted as a Long Term Capital Gain, and not as normal income. So there is benefit of lower rate as well as indexing. Again if the proceeds/gain is reinvested as outlined in Section 54 EA/54 EB, there is no tax.
So it is possible to do prudent tax planning. One can combine benefits of Mutual Fund and Tax planning to derive maximum benefits.
Mutual Fund is one very good avenue of investment
2006-10-27 07:20:02
·
answer #1
·
answered by Anonymous
·
1⤊
0⤋
1. No tax will be deducted. What u are referring to as redistribution tax of 12.5% is the tax paid by the fund house on declared dividend. Since u are selling the units, no tax shall be deducted.
2. 100@56.03=RS 5603. Appropriate STT shall be deducted ( I think it is .15%). This shall be reflected in the account statement given by the fund house.
3. Know the buying NAV and the selling NAV. Difference in NAV x no. of units is your profit. Simple.
Know the TAx rules. Euity MF are those investing > 65% in equities. If you sell them after more than a year, you do not pay any taxes on the profit.
2006-10-27 17:43:50
·
answer #2
·
answered by Sam 2
·
0⤊
0⤋
The capital gains tax/redistribution tax would be calculated with your income tax return. Talk with your Indian Tax Rules Accountant as there would be no withholding on a distribution unless you request it.
2006-10-27 07:12:14
·
answer #3
·
answered by Anonymous
·
0⤊
0⤋
as per indian tax rule the benifite on the mutual funds dividents not paid tax and you are not an tax payee, like your anual income not in over one lakkhs you will not pay tax
2006-10-27 14:24:23
·
answer #4
·
answered by keral 6
·
0⤊
0⤋