Fund Merger effect on Investors

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Mutual Fund Merger will not have a very significant consequence for investors. The merger will be applicable for only similar funds. Some of the funds will have the disadvantage of becoming very big. But that apart, there is no tax consequence because last year’s budget made a provision that if your fund is getting merged then there will be no tax implication and it will be considered as an old investment.

Earlier, the situation was that a fund merger amounted to redemption of the old investment and new investment being made into the merging fund. So if you were invested in a fund which is merging to another one then there was a tax consequence because if you are sitting on long term gains then it would suddenly got redeemed without you asking for it and then being invested in the new one. And then one had to again wait for 365 days to make it long term investment. Now that problem is not there. Every investor will also get a zero load exit option and the fund merger is fairly mechanical.

You will get units of the new fund on the basis of a simple division. For example, if a fund’s NAV is Rs 50 and the fund in which it is going to merge is Rs 100, then you will get one unit for the two units you are holding. It will be a simple division of the two values.

Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds

Top 10 Tax Saver Mutual Funds for 2018

Best 10 ELSS Mutual Funds to invest in India for 2018

1. DSP BlackRock Tax Saver Fund

2. Invesco India Tax Plan

3. Tata India Tax Savings Fund

4. ICICI Prudential Long Term Equity Fund

5. Birla Sun Life Tax Relief 96

6. Franklin India TaxShield

7. Reliance Tax Saver (ELSS) Fund

8. BNP Paribas Long Term Equity Fund

9. Axis Tax Saver Fund

10. Birla Sun Life Tax Plan

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Long Term Debt Funds

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If you are a fixed-income investor. These are relatively low-risk investments but most of them got their calls wrong in a sense that everyone was expecting a rate cut but we haven’t seen any. I would say that holding it for two-three years would enhance the return. These funds haven’t given great returns but at least protected you from the downside. No doubt, 2-3 per cent is nothing compared to 10-11 per cent, if everything would have fallen as expected. But you will have a decent return in two-three years time and things like this will keep happening.

And, if you want to avoid such thing in future, don’t take chances. Be conservative, invest in a short-term debt fund. It will give you predictably 8.5 per cent. During this period, when dynamic bond funds have given 2-3 per cent return only, those funds have given 7-9 per cent returns.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

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Franklin India Taxshield Fund

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Franklin India Taxshield Fund scheme seeks medium to long term growth of capital, with income tax rebate. The scheme invests in equities and there is an exposure to PSU Bonds and debentures and Money Market instruments.

An established fund in the ELSS category, it has steadfastly maintained a large-cap bias amid different market phases. Consistency of returns and an ability to contain downside have helped it retain four to five-star ratings for much of the last eight years.

Franklin India Taxshield Fund returns in the last one year show a slowdown relative to the category and benchmark. The fund’s year-to-year returns don’t always beat its more aggressive peers, but its performance adds up to very handsome returns over the long term.

Franklin India Taxshield Fund is a Fund which allocates a minimum 60 per cent to large caps, it has pegged up this exposure even higher, to 80 per cent in the last one year. Mid and small-caps now make up less than 20 per cent of the portfolio. The fund also avoids momentum stocks and sticks to bottom-up fundamentals-based investing. Though this fund is from a growth style fund house, it tends to be quite valuation-conscious. It doesn’t take cash calls and remains fully invested through cycles.

Franklin India Taxshield Fund has underperformed its benchmark significantly in the last one year, which has also hurt three-year returns. However, in the five-year period, it has outperformed the benchmark by 3 percentage points. In the past, outpacing the benchmark in 12 of the last 15 years, this fund has proved more adept at containing losses in bear markets than riding bull phases to the hilt.

Go for Franklin India Taxshield Fund if you like a less bumpy ride in choppy markets.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

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Long Term Capital Gains Tax

Long-term capital gains tax

Long-term capital gains tax is nil for all equity mutual funds schemes

Long-term capital gains tax is 10% for all equity mutual funds schemes. The investor has to hold his equity investments for more than 12 months to qualify for long-term capital gains tax.

If investments are sold before a year, short-term capital gains are taxed at 15 per cent.

You have to fill ITR-2 form to file Income Tax returns and show your long-term capital gains.

SBI BlueChip Fund

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After the third quarter results, expectations of sustained earnings growth going ahead are high, especially among large-sized companies. Therefore, it makes sense to be invested in mutual fund schemes that focus on large companies. One such scheme is SBI Bluechip Fund that has managed to perform across market cycles.

SBI BlueChip Fund scheme, being managed by Sohini Andani for about seven years, invests 80% of its corpus in large-sized companies and the remaining in mid-sized companies. Andani follows a bottom-up approach, which has rewarded the investors of the fund. In the past three- and five-year periods, the scheme has delivered close to 10% and 18.4% returns, while its benchmark, S&P BSE100, has delivered 6.35% and 13.5%.

In the past six months, the fund manager has struck a balance between defensive and non-defensive themes in the portfolio, and has added wellestablished and less leveraged companies, such as HDFC Bank, and Larson & Toubro, which are also leaders in their sectors.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

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Taxation of Hybrid Mutual Fund Schemes

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The tax treatment of gains made in equity funds is different from those made in non-equity funds or debt funds. To be considered an equity fund, the equity allocation in the fund has to be anything above 65 percent of the total assets. Therefore, unlike in the past, when a scheme’s portfolio had to be referred to gauge its tax treatment, now the categories itself will decide it.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

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SWP are Tax Efficient for Regular Income from Mutual Funds

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Over the past few years, many investors have opted for dividend plans of equity-oriented balanced funds, for regular cash flows, as they rendered tax-free income. Many equity-oriented balanced funds have a history of paying fixed monthly dividend regularly giving investors an informal assurance of regular income. Also, the annualised returns of these plans are generally between 8 percent and 12 percent p.a. The popularity of these schemes may wane as Budget 2018 has announced a 10 percent dividend distribution tax (DDT) to ensure there is parity between dividend and growth schemes, where taxation is concerned.

Dividend distribution tax on equity mutual funds

The main distinction between capital gains tax and DDT is that DDT is paid by the fund house and not by investors, whereas capital gains tax is paid by the investor. Dividends received from all mutual funds remain tax-free in the hands of the investors. However, investors would be impacted as the AMC pays the tax out of the declared dividends and it will reduce the in-hand return to the investor. The Budget has introduced a 10 percent DDT on equity-oriented mutual funds. This 10 percent will be deducted from the dividend announced and then dividend will be paid to the investor. If you include the surcharge and cess, the effective rate of dividend tax is 11.65 percent.

Effect of dividend distribution tax (DDT)

Earlier, in the absence of DDT, an investor would receive the entire amount of dividend declared. Hence, there was no difference between the amount of dividend declared and the amount of dividend actually received by the investors. Now, with the introduction of DDT, the dividend received by the investors will be reduced to the extent of 11.65 percent. The fund house will deduct the tax amount from the dividend declared and the net dividend will be received by the investors.

To understand DDT in a better way, let us consider an actual example:

A balanced fund declared a dividend of Rs. 0.12 per unit with a record date of April 23, 2018. In the absence of DDT, the investor would receive the entire amount of Rs. 0.12 as dividend. Now, with the introduction of DDT, the investor received only Rs. 0.1062 per unit (Rs. 0.0138 deducted as dividend).

Alternative of Dividend Option – Systematic Withdrawal Plan (SWP)

The SWP route now becomes more relevant for fetching regular income from equity funds. Investors will be able to optimize their tax on long-term capital gains accrued on the amount withdrawn under as a SWP (provided it remains below the Rs 1 lakh threshold).

For example:
Amount Invested: Rs 25 lakh
Withdrawal: 12% per annum
Amount received per month: Rs 25,000
Amount received per annum: Rs 3 lakh

Exemption on profit per annum: Rs 1 lakh

Considering, the rate of return of 12 percent p.a., an investor would be liable to pay a nominal tax of 2 percent of the amount withdrawn in the first year as short-term capital gains tax. LongTerm Capital Gains tax liability will arise somewhere in the 4th-5th year as at that time the profit amount would be more than Rs 1 lakh. Here, the liability will be approx. 1 percent of the amount withdrawn. The investor will be liable to pay tax only on gains over and above Rs 1 lakh.

Post LTCG tax and DDT, both the options give almost the same returns. However, leaving the returns criteria aside, SWP is still a better alternative to dividend plans on the following parameters.

swp

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

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ULIPs or Equity MFs

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It is a differential advantage of ULIPs that it will not be liable to long-term capital gains tax like an equity fund. But that doesn’t make ULIPs attractive. Mutual funds have too many good things going for them. Mutual funds are transparent, they are liquid, they are low on cost and also you can move your money around if the investment is not doing well. Your liquidity on ULIPs is low, the surrender charges and other things could be very different. The cost claim of ULIP is low but most customers of ULIP don’t feel that and there is opaqueness.

That apart, when you mix insurance and investment, you don’t get finest of both. Your need for insurance changes dramatically which ULIPs can’t fulfill. There may be some ULIPs that would be more advantageous and that may be proven over time. But insurance is very important and ULIPs can’t really fulfill the need to actually have a meaningful insurance. Don’t mix both.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

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ELSS Is definately better than other Tax Saving Options

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Under Indian tax laws, savers have a complete range of tax saving instruments like Public Provident Fund (PPF), Tax-saving fixed deposits, National Savings Certificate (NSC), Equity-linked Saving Scheme (ELSS) and others. Yet, individuals often take sub-optimal investment decisions with their tax-saving investments. Why does this happen?

One common reason is that there is a confusion of goals between saving tax and making investments. The typical investor makes this decision either in late March under the duress of having the deadline slip by, or under intense pressure by a salesman who drives home the fact that time is running out. At the end of the day, we make sub-optimal investment decisions and when we realise the fact later, we console ourselves by saying that at least we got tax benefits for the investments. This approach proves expensive in the long run.

This duality of concern-tax as well as investments-prevents clear-headed thinking about just exactly what one is getting out of an investment and whether the quantum of disadvantages are actually worth the quantum of tax benefits that are being obtained. Investors should work on eliminating both these sources of poor decision-making-time pressure as well as not thinking through about these investments. Eliminating time pressure is simple-just plan these investments as early in the year as possible and once you start in time, there’s no need to stop after a year.

For most people, the investment that should make most sense is in an ELSS. Salary-earners generally have some of the permitted amount going into fixed income through PF deductions and to balance that, equity is advisable. ELSSs are unique in being the only viable tax-saving investment within Rs 1.5 lakh limit that brings the benefits of equity returns. Sure, there are two other options that give equity-linked returns-ULIPs and the National Pension System (NPS). However, ULIPs have a longer long lock-in period of 5 years coupled with high costs and poor transparency. The NPS is a retirement solution rather than a savings one. It has only partial exposure to equity and a very long lock-in period that effectively extends till retirement age. There’s no way a three year lock-in product like the ELSS can be compared to the NPS.

For many beginner investors, it makes an excellent gateway product in which they get the first taste of equity investing and of mutual funds. You end up investing in these funds because the tax-savings attracts you and it has the shortest lock-in. This experience encourages investors to invest in equity mutual funds over and above their tax-saving needs. Once you have a taste of long-term equity returns, then you end up trying other types of equity investments as well.

Equity investment carry higher risk over the short-term. However, for investment periods of three to five years or longer, the risk on equity investments is considerably lower. When you take inflation into account, bank FDs and similar deposits turn out to be sub-optimal because of inflation. Like all equity investments, the best way of investing in an ELSS is through monthly SIPs throughout the year. That’s also the way to avoid any last minute rush. At the beginning of every year, estimate the amount you have left over from the Rs 1.5 lakh limit after statutory deductions, divide it by 12 and start an SIP.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

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Aditya Birla Sun Life Frontline Equity

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After two major disruptions in the form of demonetisation and implementation of the GST, a clear trend that has emerged is the gain in the market share by large-sized companies which dominate the organised part across sectors. It is quite evident that the large sized companies would continue to clock superior due to increasing business resulting from improved market share. This fact justifies investment in schemes which have singular focus on large-sized companies in their portfolio. Among them, Aditya Birla Sun Life Frontline Equity Fund has distinguished itself from its peers on the sheer strength of performing better than its peers in the industry.

In the past six months, the scheme’s fund manager Mahesh Patil, who has been managing the scheme for the past 13 years, has selected companies which fall under defensive and value themes. These are IOC and ONGC. The scheme has outperformed even its peers in the past ten years. In the past five-year and ten-year period, the scheme has given 15.7% and 12.3% returns respectively, while its benchmark S& P BSE200 has given 13% and 7% returns respectively, in the same period.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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