Why should retail investors go for Exchange Traded Funds (ETF's) rather than Direct Equity?

Why should retail investors go for exchange traded funds (ETF's) rather than Direct Equity?

Direct Equity investment has the potential to deliver much higher returns than fixed income products but for retail investors, it is not easy to handle the risk.

> Undoubtedly, Equity investment can provide much higher return than fixed-income instruments. But equities are subject to market risk & may become highly volatile at times when the economic outlook of the country becomes uncertain like the one we witnessed last year when the Covid pandemic broke out in the country. 

> To handle the risk involved in direct equity investment requires expertise, which most retail investors lack. So financial planners mainly advise retail investors to go through the ETF route to get a higher return at lower risk.

Here are key advantages of ETF over Direct Equity Investments :

1. Risk : An ETF is a type of mutual fund that invests in Equities of an Underlying Index in the same proportion as that of the underlying index. As ETFs track a particular index there is no scope for fund managers' discretion, which sometimes may go wrong. So by investing in ETFs retail investors can expect the return of an index at much lower risk than that of direct equity investment.

2. Diversification : To minimise the risk of Equity investment you need to have a portfolio of stocks across sectors so that if one stock or sector does not perform then returns from other stocks will offset the losses of non-performing sectors/stocks & overall you get a decent return. But to create a proper diversified portfolio one needs to have the understanding of different sectors & stocks & retail investors mainly lack this knowledge.

But by going through the ETF route, you get a readymade portfolio composed of the same stocks in the same ratio as its benchmark index has. Hence the risk gets minimised.

3. Capital Requirement : In case of direct equity, an investor needs to invest a sizable corpus to create a portfolio of stocks that can tackle market risk. But in ETFs you can start with as low as ₹ 5,000 investment & can own a portfolio that is equally efficient as that of the underlying index in handling risk.

4. Taxation : Indirect equity investment, an investor is liable to pay capital gain tax each time he sells stocks depending on period of investment & amount of gain/loss.

However, in the case of an ETF investors are required to pay capital gain tax only when they sell units & not on every transactions made by the fund to realign the portfolio with the benchmark index.

Join my telegram channel for more updates : https://t.me/moneplan

Various Invesment Options Available for NRI's

India is fast becoming an economic powerhouse. The massive development in the last two decades has made the country one of the attractive destinations for investors from around the world. At the same time, various investment options for NRI have led Indian Diaspora living in different countries like the US, Europe & across the globe to make successful investments here.

• If you are new to NRI investment, you must know what is NRI investment? 
• What are the best options for NRI investment in India? 
• What are the benefits of investment in India? Find out the answers below.

What is NRI Investment?

According to the rules, NRI or Non-resident Indian is a citizen of India who spends less than 183 days in the country in a given financial year. The tax year stretches from April 1st to March 31st in the succeeding year. As a non-resident Indian, you don’t have to pay taxes. 

NRI investment is the investment opportunity that can be utilized by the NRI's to make profits & earn more money.

So, what is the best investment for NRI in India? 

There are many options you can choose from. 

We have listed the best 6 best options which can give you a great return on investment & profits.

1. Fixed Deposits :

• Fixed Deposits or bank deposits is one of the most common types of investment made by NRI's in India. 
• Bank FDs are considered the safest investment option as there are hardly any instances of banks defaulting on them.
• NRIs can start FD's through their FCNR, NRO, or NRE accounts. 
• The rate of interest depends on the bank, amount & tenure of deposit.
• As the name indicates, you deposit money in your account for a fixed time period. 
• You can withdraw the money plus the interest once the period ends. 

1. Fixed deposits in the NRE Account : You may consider opening an NRE account in Indian Rupees. The interest you earn is tax-free, but you may be taxed in your country of residence. The interest rate ranges from 5%-7% depending on the tenure of the deposit.
2. Fixed deposits in the NRO Account : You may use the NRO Account to control your Indian income. For instance, you may receive rental income or dividends from shares & mutual funds that can be paid into the NRO Account. You can remit a maximum amount of $1 million from your NRO account after producing the relevant documents.
3. Fixed deposits in FCNR Account : You can open the FCNR (Foreign-Currency Non-Resident Account) in any foreign currency. It may have a tenure of one to five years. The interest you earn is tax-exempt. Moreover, foreign exchange fluctuations have no impact on the deposits in the FCNR account. 

• There are generally three kinds of Bank Savings Accounts for NRI's namely: 

1. NRE - Non Residential External Account : Money of such an account is kept in rupees. It’s easy to return the money to dollars. Interest rates on these accounts vary depending on the deposit size &/or bank. You can expect interest rates to be around 7% to 9% per year.
   
2. NRO - Non Resident Ordinary Account : This account type is generally used by NRI’s to control their Indian income. Rent income, dividends from investments or pension funds can be paid into these accounts. These accounts have a current limit of $1 million that is allowed to be transferred from this account to a U.S. Account per year. Take note the interest earned on an NRO Fixed Deposit is taxed at a rate of 30%.
3. FCNR - Foreign Currency Non-Resident : Foreign currencies are stored in these accounts. It helps to avoid the currency fluctuations that take place in financial markets. The currency you deposit into the account will determine the interest rate of it. Dollars should cause an interest rate of between 2% to 3%. You can take money from this account at any time & it is not taxed by the Indian government.

The easy deposit process, repatriation of funds & tax exemption for the interest make it an attractive option to invest in.

1. (A) Fixed Deposits : Government Securities :

• Government Securities or G-Secs are a low-risk investment option backed by the Government of India. 
• They are issued in treasury bills or bonds, whose maturity ranges from a few days to several years. 
• These bonds may have fixed interest rates or floating rates that are determined based on market-related changes. 
• Since these are backed by the Government of India, there is no risk of default if you hold it to maturity. 
• However, G-Secs are tradeable securities & their prices in the market are liable to fluctuate based on external factors.
• For longer-term investment strategies, NRI’s can look at the following types of dated government securities :
1. Fixed Rate Government bonds – The interest rate on this bond is fixed.
2. Floating Rate Government bonds – The interest rate on this bond will change according to the market-related changes.
3. Capital Index Bonds (CPI bonds) – These bonds have a coupon payment rate that is adjusted according to the inflation rates of the Indian market.

1. (B) Fixed Deposits : Bonds & NCD's (Non Convertible Debentures) :

Bonds & NCD's have risk involved, but it can also serve as a good investment option. There are three main bond categories :

1. PSU Bonds – Public Sector Undertakings Bonds (PSU) are contracts with a maturity date. You in effect loan money to a Company & they promise to repay it with interest on a specific date (called the maturity date). The interest rate on a PSU will be determined by the creditworthiness of the Company who issues it. These investments are taxed at 20% if you sell it after owning it for more than 3 years.
2. Non-Convertible Debentures (NCD) – This debt is secured by the Company’s assets. The interest rate will, therefore, be a bit lower as secured debt has less risk involved. But, the interest rate on NCD's will still be very competitive when compared to returns on investments like equities. 
3. Perpetual Bonds – These bonds don’t have a maturity date so there is no date by which it pays out. The issuing Company, however, promises to pay the holder a set amount of returns per year. The holders of perpetual bonds trade it on the open market. Market conditions and your willingness to sell will determine if you make a profit with the selling of this investment.

1. (C) Fixed Deposits : Certificate of Deposits (CD's) :

• Certificate of Deposits (CD's) is usually used as a short termed investment. 
• It almost works like a fixed deposit, but the holder of a CD may sell it. 
• You need a dematerialized account to buy and sell CD's. 
• A CD has a maturity date by which it promises to repay a certain amount. 
• Please note, amounts invested into CD's are typically very hard to return to dollars.

2. Equity Investments (Direct Equities) :

• If you are a risk-taker & would want to invest aggressively, equity is the best option for NRIs.
• According to RBI, NRI's can invest in the stock market under the Portfolio Investment Scheme – PIS. (Please Note : Your are permitted to hold only one PIS Account in India)
• A dedicated NRE or NRO bank account is necessary.
• Moreover, a SEBI trading account plus a Demat account that holds shares in electronic form are a must for Equity investments by NRI's.
• However, there is a restriction imposed by the RBI on the maximum limit of a Company's stock an NRI can hold, which currently is 10% of the Paid Up capital of the Company.
• NRI's are not allowed to do Intra-Day trading & short selling of stocks.
• Though the taxation rules for Capital Gains are same for NRI's & Resident Indians, the tax on the gains is Tax Deducted at Source (TDS) for NRI's, by the brokerage at 100% on the Tax Liability.

3. Mutual Funds Investment (MF's) :

Mutual Funds are large pools of money of investors’ money which is managed by qualified and certified professional fund managers. Mutual Funds currently operate under strict regulations of the Securities Exchange Board of India (SEBI). Mutual funds are a bit riskier than fixed deposits, but that is why the returns of mutual funds are more than that of fixed deposit accounts.

• Mutual Funds are riskier than fixed deposits.
• But it provides a better return on investment then Fixed Deposits.
• NRIs would need a bank account in India & use India Rupees for Mutual Fund Investment as foreign currencies are not allowed.
• NRI's can invest in all categories of MF's i.e. Equity Funds, Debt Funds, Balanced Funds, Liquid Funds etc.
• Though investing in MF's looks simple & easier compared to direct equities, it is important to understand the risk profile & investment strategy of each fund before investing.
• As per SEBI mandate & regulations, all MF's grade the MF schemes according to their risk profiles as Low, Moderately Low, Moderately High & High etc. 
• MF scheme are classified as Open Ended, Close Ended & Interval Schemes.
• Depending on the Investment philosophy & nature MF schemes are further re-classified into Equity Funds, Debt Funds, Balance Funds & Hybrid Funds.
• Depending on Investment strategy the are futher re-classified as Sector Funds, Contra Funds, Index Funds etc.
• NRI's can invest across any of these MF's from an NRE or NRO Account, but the repatriation rules will vary depending on whether investment are made from NRE or NRO Account.
• Taxation on Capital Gains on MF Scheme varies according to the type of scheme & holding period of the invested MF. 
• Please note there some limitations for NRI's residing in the US & Canada to invest in Indian MF's due to strict FATCA rules which mandate all the Fund Houses to report to the US Goverment, comprehensive details of all MF transcations of US Citizens including NRI's on a regular basis.
• The eight AMC (Asset Management Companies) of MF Houses which currently accept Investment from US & Canada based NRI's are :
1. ICICI Prudential Mutual Fund
2. SBI Mutual Fund
3. UTI Mutual Fund
4. Birla Sunlife Mutual Fund
5. Sundaram Mutual Fund
6. L&T Mutual Fund
7. PPFAS Mutual Fund
8. DHFL Pramerica Mutual Fund

Predominantly, there are two types of Mutual Funds - Equity Funds & Debt Funds.

3.(A) Mutual Fund Investments : ULIP's : Unit Linked Insurance Plans :

• ULIP stands for Unit-Linked Insurance Plan & combines the benefits of investment & insurance. 
• The hybrid option allocates a portion of your premium towards offering you a life cover & the rest is invested in a variety of financial instruments. 
• A ULIP typically has a lock-in period of 5 years. 
• You can claim tax benefits under section 80C of the Income Tax Act.

4. (NPS) National Pension Scheme :

• National Pension Scheme is a Government backed scheme with tax benefits.
• An NRI between the age of 18 years to 60 years can open an NPS account with a POP (Point of Presence) in India.
• You may open an NPS account with the bank where you have your NRO or NRE account for convenience. 
• Moreover, the pension from the National Pension System will be paid in Indian Rupees.
• You may also open an eNPS account if you have a PAN card or an Aadhaar Card.
• You may consider using your NRO or NRE bank account to invest in the National Pension System.
• There are two types of NPS : Tier 1 & Tier 2 Account with different rules & regulations.
• You may opt for the active choice where you decide on the asset allocation in Equity (E), Corporate Bonds (C) & Government Securities (G).
• However, you can allocate a maximum of only 75% towards Equities.
• You may also opt for auto choice where asset allocation is done according to life stages (Age) if you cannot decide on the right investment proportions.
• If you withdraw from NPS before 60 years you can withdraw only 20% of the accumulated corpus.
• You must compulsorily annuitise the remaining 80% of the Corpus.
• If you are 60 years of age or older at the time of withdrawal, you can withdraw 60% of the Corpus & the remaining 40% must compulsorily be used to buy an annuity plan.
• It is a safer option than bank deposits or in that case PPF.
• NPS offers an annual interest rate of 12-14% as well.
• The matured amount is exempted from tax.

5. Real Estate :

• Among the best investment options for NRIs, Real Estate is a popular one because of the emotional quotient attached to owning property in India.
• As an NRI, you are allowed to invest only in residental & commercial properties & cannot purchase agricultural land, farmland or plantations.
• Investing in property has two benefits : earning regular income through rent & benefit from capital appreciation.
• However, you can own such properties provided you have received it as a gift or as inheritance & the sale proceeds have to be mandatorily received in NRO Account, to which repartriation restrictions apply.
  

6. Others :

• NRIs can invest in other options like Government securities, treasury bills, debentures, national saving certificates, debt instruments, etc.
• The tax benefits or implications may differ from one option to another.

How to Identify & Pick & Hold to a Multi-Bagger Stock

Everyone loves to pick multi-bagger stocks. Though the framework to select multi-baggers is quite well-known, we hardly find investors having stocks that multiplied several times in value in their portfolio. 

Here are some mistakes that investors make in identifying or holding on to multi-baggers.

1. Fundamentals: You don’t know what you don’t know :

Investors in general have evolved & they are quite aware of the fact that they are not buying stocks, but are investing in businesses. Hence, an understanding of businesses is a must. But given the dynamic world we are living in, even sound & fundamentally strong companies can go out of business & that is what I meant with “we don’t know what we don’t know.” A Company which is fundamentally sound & strong today may not exist tomorrow. This may be because the very problem which that company is solving now may not exist tomorrow or their products may no longer be needed. There are enough examples such as Kodak, Nokia & Blackberry, which were the market leaders of their time.  Though one cannot predict everything, there is a strong need to identify businesses in this light.

2. Too much focus on the P/E Multiples :

There is a constant talk about the Price/Earnings (PE) ratio, but when it comes to identifying a multi-bagger, a high or low PE may or may not make a huge difference. In fact, look at TESLA stock, which defies rule & also proves the “Greater Fool Theory” that people are willing to pay a much higher price in anticipation of disruptive growth in future. So, do not focus too much on buying a low PE stock; rather, look out for disruptive opportunities while identifying a multi-bagger.

3. Do you understand the Sector well?

Always remember the fact that every stock has a story & you need to pick up those sectors which you understand & believe in. You may also look out for the sectors where you have a core competency like your immediate work area, be it the IT, FMCG or any other industry. Avoid investing on borrowed confidence & the tips given by friends or relatives.

For example, someone in the financial services sector may understand the importance of how the overall Life insurance, Health insurance & Equity market landscape will evolve in India. Examples of leading players include HDFC Life, SBI Life, or AMC or financial firms’ stocks such as HDFC AMC or Aditya Birla Capital.  So, choose a sector which you understand & you can find enough Multi-baggers across sectors as we did in the past, with the likes of Berger Paints, Bajaj Finance, Balkrishna Industries, Eicher Motors & many more.

4. How many MRFs do you have?

We give too much importance to identifying a multi-bagger than holding on to that stock. Take my word, making money is really easy unless you are in a hurry. Though it is easier said than done, let me share a real-life case of my friend’s father who is holding on to the MRF stock which he purchased at ₹ 18. Guess the current market price? It’s ₹ 88,906 per share!

Now, how can you beat that? A person has seen the price go from ₹ 18 to ₹ 89,000 & yet resists the temptation to sell. It is indeed a very difficult task & that is where the test of your patience comes in where most of the investors fail. That is why having a concrete plan & knowing why you invest in a particular stock in the first place is very important to decide your exit strategy.

5. Diversify, but don’t become a Mutual Fund :

Over-diversification will never allow you to have a multi-bagger. Instead, it’s better to go deep with a maximum of say six to seven stocks from different sectors or on the basis your risk profile & return expectations. Diversification is important for your overall asset allocation but not with respect to your stocks, so in case you invest in too many stocks which many do, then you would eventually be running a mutual fund scheme of your own. And that process may get you a decent return but never exponentially higher returns which is the objective behind a multi-bagger.

6. The role of Luck : 

Like it or not, luck plays a small role. I doubt those who claim to know which stock can become a multi-bagger in future. This is important for you to know given the current COVID times & the way many new-age investors who made good money since the lockdown period. The recent sharp rally in the markets & your recent success may not be repeatable often.

What is a DVR Share, How Does DVR Work & Everything You must know about DVR Shares

"One Share, One Vote" had been the bed-rock principle of the financial world for years, until the year 2000, when DVR shares were introduced in India for the first time. 

But what is DVR share? DVR stands for stocks that have Differential Voting Rights. Meaning that the shareholders with DVR shares have higher or lower voting rights as compared to shareholders who have equity shares. But under the Indian law, Companies are not allowed to issue equity shares with superior voting rights, so the only DVR shares issued in the Stock Market are those with limited voting rights.

How is a DVR share different from an ordinary share?

DVR shares are different from ordinary shares in two prominent ways.

1. They offer lower voting rights as compared to ordinary shares. So, the shareholder might not have the right to vote, but other rights such as bonus shares, rights share issue, etc. remain intact. 
2. DVR shares are generally offered at a discount which means the investment amount can be significantly lower as compared to investing in ordinary shares. 
3. Shareholders with DVR shares get higher dividends as compared to ordinary shares to compensate for the sacrifice of their vote.

Why do companies issue DVR shares?

To grow & expand in today’s world, companies need capital. Often, the founders & main stakeholders have to reach out to potential shareholders who would be willing to invest in the company. But this also means diluting the power & giving away some of the control. DVR shares help companies protect their interest while enabling them to raise that additional capital required to keep the business going.

So, issuing DVR shares is a brilliant solution in getting investors who are looking for investments but don’t want to participate in the workings of the business. The company can also control how many voting rights they want to give away. DVR shares also provide a safeguard against hostile takeovers. Without voting rights, shareholders can’t gain majority & challenge to take-over the control of the Company.

Why should you invest in DVR shares?

1. Strategic Investment – DVR shares provide you with an opportunity to reap the benefits of a highly successful business venture without having to worry about the day to day affairs of the company. 
2. Discounted Rates – DVR shares are listed on the stock market at lower costs which means your investment budget is smaller too. 
3. Better Dividends – DVR shares offer higher returns as compared to ordinary shares. As high as 10–20%. And since these shares are quoted at discounted rates, the dividend yields are much more profitable.

Conclusion :

While DVR shares might not have taken off in India in a big way, the latest amendment by SEBI may go a long way in enhancing the attractiveness of DVR shares in the Indian Stock Market. According to this amendment, SEBI has approved a framework that allows individual companies to issue shares with superior voting rights & disallows further issuance of shares that have lower voting rights. Moreover, the Government has also relaxed the norms for start-ups, where they can now have up to 74% DVR shares of the total capital as compared to the previous 26%. This move will enable companies to retain control while raising equity capital. How it impacts the world of the stock market is yet to be determined.

What are the Top 5 Tax Saving Investments for 2021

 What are the top 5 tax saving investments for 2021

There’s no denying that 2020 was a financially tough year for many people across the world. The rise of the COVID-19 pandemic had a huge impact on saving and spending trends. Many people came to realise that saving for an uncertain future was vital. Your financial priorities surely have also changed during the economic slowdown the COVID-19 pandemic caused. Let's take a look at how this can affect your tax planning investments for 2021.

• What are some of the non-negotiable options you can look into? 
• Are there any tax-savings methods that you can benefit from, particularly?.

There are several options available to you if you’re considering saving on your taxes in 2021. These savings options are greatly beneficial to your future. Here are five useful ways to save tax with the right investment plans for 2021.

• Life & Health Insurance 

Health & life insurance plans are of paramount importance - they secure your family’s future financial needs in the case of an emergency. A life insurance policy is greatly beneficial for our dependants, especially in the case that you are the sole breadwinner of the family. A life insurance policy will financially secure the future of your family, and enable them to pay off any financial expenses, as well as maintain a decent standard of living. The benefit of having health insurance is that it provides people with much-needed financial backup at times of medical emergencies. As long as your investments for health or life insurance plans are under a total of ₹1.5 lakhs, it is exempt from being taxed, under Section 10(10D) of the Income Tax Act.

• Saving for Retirement

Health & life insurance plans are of paramount importance - they secure your family’s future financial needs in the case of an emergency. A life insurance policy is greatly beneficial for our dependants, especially in the case that you are the sole breadwinner of the family. A life insurance policy will financially secure the future of your family, and enable them to pay off any financial expenses, as well as maintain a decent standard of living. The benefit of having health insurance is that it provides people with much-needed financial backup at times of medical emergencies. As long as your investments for health or life insurance plans are under a total of ₹1.5 lakhs, it is exempt from being taxed, under Section 10(10D) of the Income Tax Act.

• Saving for Retirement

Among the plethora of tax-saving products in the market, a key way to financially secure your future is to use savings plans such as the National Pension Scheme (NPS) or the Public Provident Fund (PPF). Using these tax-saving tools will give you peace of mind for any of your future financial needs. NPS and PPF encourage you to save so that you can access a regular pension in your retirement years. The Public Provident Fund allows you to only invest up to ₹1.5 lakh in one financial year. You can make this payment in 12 instalments or less. This risk-free investment option has a lock-in period of 15 years & also generates a high-interest rate at the end of its tenure.

• Mutual Funds and Equity-Linked Saving Schemes (ELSS)

Mutual funds are a fairly popular choice used to save taxes. Depending on your financial goal, you can choose from a range of tools that best suits you. Another alternative investment option is Equity-Linked Savings Schemes (ELSS). ELSS has similar advantages to that of mutual funds but with the added advantage of being a tax-saving option. The standout feature of this choice is that it has the shortest lock-in period of 3 years. An investment of up to ₹1.5 lakh in one financial year can be claimed as tax-deductible under Section 80C of the Income Tax Act.

• Tax-saving Fixed Deposits

ULIPs or United Linked Insurance Plans have been noted to be the best investment options in India. It offers you the dual benefit of acting as an investment as well as an insurance plan. For a ULIP, an insurance company invests part of the premium in shares or bonds & the balance amount is utilized as an insurance cover. This segregation of the premium is handled by a fund manager employed by the insurance companies. Under Section 80C of the Income Tax Act, investing in ULIPs can help you save a substantial amount when you are filing your taxes. ULIPs come with a lock-of of a five year period, so it would be advisable to plan before investing in ULIPs.

• National Savings Certificate (NSC)

As far as fixed income tax savings go, the National Savings Certificate is a reliable savings scheme that is spearheaded by the government itself. You can open an NSC at any post office. This savings tool is designed to encourage mid-income folk to invest and is similar to Fixed Deposits or even the PPF. The NSC is a low-risk tax saving investment option. If you opt for an NSC, you can avail a tax deduction of up to ₹1.5 lakhs under Section 80C of the Income Tax Act.

Others Deductions : Declaring home or education loans are also two other ways by which you can be eligible for tax deductions. They are eligible for tax deductions under Section 80C of the Income Tax Act.

5 Income Tax changes that could be expected in Budget 2021

5 income tax changes that could be expected in Budget 2021

There are expectations that the Government may hike the standard deduction limit in Budget 2021 to boost consumption. Tax experts expect the government to fix some anomalies in the NPS or National Pension Scheme with regard to income tax benefits.

In last year's Budget, Finance Minister Nirmala Sitharaman introduced a new income tax regime that came into effect from April 1st. So some tax experts say that in this year's Budget there might not be many new changes.

Under the new simplified income tax regime :

1. There is Zero tax for income up to ₹2.5 lakh, 
2. 5% for income between ₹2.5 lakh & up to ₹5 lakh,
3. 10% for income between ₹5 lakh & up to ₹7.5 lakh,
4. 15% for income between ₹7.5 lakh & up to ₹10 lakh,
5. 20% for income between ₹10 lakh & up to ₹12.5 lakh,
6. 25% for income between ₹12.5 lakh & up to ₹15 lakh,
7. 30% for income above ₹15 lakh.

These income tax rates are optional & are available to those who are willing to forego some exemptions & some deductions. The fact that a new tax regime has been introduced last year means that not many changes can be expected now". "Given that the Government is already running a high deficit owing to lower tax collections, believe any large cuts would be unlikely. However, some relief to certain distressed sectors & tinkering in personal income tax could be on the cards."

Here are five changes to income tax rules that could be announced in Budget 2021:

1. Tax experts expects Government to fix some anomalies in NPS or National Pension Scheme with regard to income tax benefits. "For contribution towards Tier I account up to 14% of the employer’s contribution is permitted for Central Government employees but when it comes to other employees maximum up to 10% of the contribution from employer is eligible for deduction under Section 80CCD(2)". Under the current income tax laws, if an employer is contributing towards the employee's NPS account, a deduction up to a certain percentage of salary (Basic + DA) irrespective of any limit qualifies for income tax deduction under Section 80 CCD(2). For Central Government employees, it is 14% of salary & for others, the limit is 10%.
2. "From a capital market perspective, key expectations include allow indexation while calculating LTCG on equity shares/equity MFs &/or allow setoff of STT against the tax liability thereon, reduce LTCG period to 1 year for debt MF, exempt dividend income in the hand of recipient to the extent of Rs.2-3 lakhs per annum,". "The reintroduction of long-term capital gains tax in the 2018 budget affected the investors’ confidence. The 10% LTCG tax is an additional tax burden along with other transaction taxes – like STT, stamp duty. Reducing or abolishing LTCG can raise the investors’ confidence".
3. Currently, Long-Term Capital gains (LTCG) arising out of the sale of listed equity shares & units of equity-oriented mutual fund schemes are now taxed at the rate of 10%, if the LTCG exceed ₹1 lakh in a financial year (Gains up to January 31, 2018 being grandfathered). Long Term Capital Gains on debt mutual fund units held for more than 36 months are taxed at 20% after adjusting for indexation. Short-term capital gains on units held for 36 months or less are added to the income of the individual & taxed as per the applicable slab rate.
4. Under the current Income Tax laws, switching of investment in units within the same scheme of a mutual fund from Growth option to Dividend option (or vice-versa), & from regular plan to direct plan or (or vice-versa) is considered a “transfer" & is therefore liable to capital gains tax, even though the amount invested remains in the mutual fund scheme. However, the switching of investments to/from investment plans to another within the same Unit Linked Insurance Plan (ULIP) of insurance companies is not considered as a “Transfer" & hence, not subjected to any Capital Gains Tax. The Mutual Fund industry in its proposals for Budget 2021 has said that "there is need to have uniformity in the tax treatment for “switch" transaction in respect ULIPs & Mutual Fund products to have a level playing field."
5. In a relief to salaried middle class taxpayers amid the coronavirus pandemic & to boost consumption, the Central Government may hike the standard deduction limit in Budget 2021, Standard Deduction is a fixed deduction that is allowed to specific income tax assessees, irrespective of expenses incurred or investments made. Introduced in the 2018-19 Budget, the standard deduction replaced the medical & transport allowance. It was further increased to ₹50,000 in the following Budget. Standard deduction should be hiked from ₹50,000 to ₹1,00,000 is what the majority wants this time around.

Sovereign Gold Bond Scheme 2020-21–Series 11 - Why invest in Sovereign Gold Bonds?

 

Sovereign Gold Bond Scheme 2020-21–Series 11 - Why invest in Sovereign Gold Bonds?

Sovereign Gold Bond Scheme 2020-21 – Series 11

> Issue Details -Issue Open Monday, February 01, 2021 To Friday, February 05, 2021.

> Live on Monday February 01, 2021.

> Why Invest in Gold : Gold – An asset class to consider:

1.  Provides hedge to your portfolio in volatile times.
2. Gold also helps in portfolio diversification due to its low correlation with other asset classes, such as Equity & Fixed Income - asset diversification among Equity, Debt & Gold – essential to beat volatility of any particular asset class.
3. Wealth managers believe investors should allocate 10-15% of their portfolio funds to Gold as it acts as an insurance against global uncertainty & rupee depreciation.

Why invest in Sovereign Gold Bonds :

> Returns : Interest of 2.5% on the issue price & which is payable of half yearly basis + Appreciation of Gold.

> Safety : Sovereign Guarantee on redemption of money (principal) as well as on the interest earned.

  * Elimination of risk & hassle-free holding as it eliminates cost of Storage as in Physical Gold.

> Liquidity : Tenure of 8 years with exit options in fifth, sixth & seventh year.

  * Tradeable on stock exchanges from the date to be notified by RBI.

> Taxation Benefit : Exemption from Capital Gains Tax on redemption.

  *  No TDS Applicable on Interest paid.

  * Indexation Benefit :  Will be provided on Long Term Capital Gains arising to any person on transfer of bond.

> Collateral : Accepted as collateral – Can be kept as collateral / security against Secured Loans.

Disclaimer : Please consult your Tax consultant for Taxation purposes.

Tax Planning with ELSS for 2021

 

@t.me/MonePlan : Stock & Market Updates with MonePlan :

> It's that time of the year when tax saving is on the top of our mind. 

> While selecting a suitable tax saving option (u/s 80C of the Income Tax Act), it is important to look at those which not only extend the advantage of tax saving but also have the potential to generate high returns that would beat inflation in the long term.

> One such investment avenue is Equity Linked Savings Scheme (ELSS).

> Tax Savings u/s 80C of IT Act, 1961 in case of highest tax bracket for investment of 1.5 lakhs in a financial year in ELSS.

> In case anyone is planning to save tax please get in touch with me @ 7506265365 or mail me at rajeshnair72@gmail.com

> Happy to Help

Sovereign Gold Bond Scheme 2020-21-Series IX -9th Tranche-All You Wanted to Know

Sovereign Gold Bond Scheme 2020-21-Series IX -9th Tranche-All You Wanted to Know

> Issue price Rs.5,000 per gm. Gold is on everyone's buying list. However, gold price has been rising to all-time highs and is still ruling at rates that are very, very high. So, if you get an opportunity to buy gold cheap, where you can make huge profit, then what will you do? RBI has released Sovereign Gold bond scheme in its 9th tranche.

> The Sovereign Gold Bond Scheme 2020-21 - Series IX will be open for subscription from December 28, 2020 to January 1, 2021. "The nominal value of the bond works out to Rs.5,000 per gram of Gold," the RBI said.

> SGBs are issued by the Government at regular intervals at the prevailing gold price. It has a fixed tenure of Eight years, but can be sold after a lock-in of Five years. However, if you hold SGBs till maturity, there will be no capital gain tax on the investment. You will get an interest of 2.5% annually, which will be paid semi-annually.

> The quantity of gold for which the investor pays is protected since they receive the ongoing market price at the time of redemption/ premature redemption. SGB offers a superior alternative to holding gold in physical form. Also, risks & costs of storage are eliminated in the case of these bonds. Investors are assured of the market value of gold at the time of maturity & periodical interest.

> Additionally, SGB is also free from issues like making charges & purity in the case of Gold in Jewellery form. The bonds are held in the books of the RBI or in Demat form eliminating the risk of loss of scrip etc. According to experts, SGBs remain the best vehicle to participate in Gold for the long term if the intent is to hold the bonds until maturity. One can also sell SGBs in the secondary market.

> Sovereign Gold bond issue price has been fixed at Rs.5,000 per gm. Those who buy online can get an additional discount of Rs.50. However, to really make a profit, here are top 5 Sovereign Gold Bond Scheme points you should know to make money. 

1. Sovereign Gold Bond Scheme Benefits :

a) People prefer buying physical Gold. This is generally in form of Jewellery.  However, in this, the making charges are added to gold price, making it expensive & when you go to sell, you get less money. So, one of the best benefits of Sovereign Gold Bond Scheme is this.

b) Another Sovereign Gold Bond Scheme benefit is that the investor receives the current/ongoing market price at the time of redemption or  premature redemption. The SGB offers a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. SGB investors are assured of the market value of gold at the time of maturity & periodical interest.

c) The Sovereign Gold Bonds are held in the books of the RBI or in Demat form eliminating risk of loss of scrip etc.

2. Sovereign Gold Bond Scheme: What are the risks involved in buying SGB?

In Sovereign Gold Bond Scheme, there may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for.

3. How much Gold can you buy under Sovereign Gold Bond Scheme.

The Sovereign Gold Bond Scheme issues bonds in denominations of one gram of gold & in multiples thereof. Minimum investment in Sovereign Gold Bond Scheme shall be one gram with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF) & 20 kg for trusts & similar entities notified by the Government from time to time per fiscal year (April – March).

4. What is Sovereign Gold Bond Scheme rate of interest?

The Sovereign Gold Bond Scheme interest rate given to investors is 2.50% (Fixed Rate) per annum on the amount of initial investment. Sovereign Gold Bond Scheme interest will be credited semi-annually to the bank account of the investor. The last Sovereign Gold Bond Scheme interest will be payable on maturity along with the principal.

5. What is Sovereign Gold Bond Scheme price on selling?

The nominal value of Sovereign Gold Bond Scheme is fixed on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jeweller’s Association Ltd for the last 3 business days of the week preceding the subscription period.

6. What is Sovereign Gold Bond Scheme redemption price?

On maturity, the Gold Bonds Scheme redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days from the date of repayment, published by the India Bullion & Jeweller’s Association Ltd.

7. How will Sovereign Gold Bond Scheme redemption amount be paid?

Both Sovereign Gold Bond Scheme Interest & Redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond.

8. How to buy Sovereign Gold Bonds - Payment Method?

Payment for Sovereign Gold Bond Scheme can be made through cash (Upto Rs.20,000). SGB can be paid for via cheques, demand draft, or even electronic fund transfer.

ESG Investing in Mutual Funds : A New Trend that doing the Rounds Globally & in India Now

Could investing in Socially Responsible Companies now, a good move towards your goals? ESG investing is used synonymously with socially responsible investing & ESG theme funds select stocks of companies that score high on Environment, Social Responsibility & Corporate Governance (E-S-G). 3 reasons why it is a good time to invest in ESG Theme Funds 1. ESG today is a global phenomenon : Sustainable investing  is becoming an essential part of the investing process across the world, with Europe representing almost half of the current $30.7 trillion of assets in sustainability funds. 2. ESG can optimize financial returns : ESG can aim to generate gains for both investors & the society overall. Historically, ESG investing has rewarded investors over the long term & generated higher risk adjusted returns. 3. ESG helps to avoid downside risks : Investments in ESG compliant companies can also help limit exposure to downside risks, such as a company’s hidden liabilities or issues that can lead to controversies & value erosion.