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Old 18th January 2018, 13:40   #1816
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Default Re: The Mutual Funds Thread

For taxation on mutual unds, see this beautiful explaination by Basunivesh.
Also very sensible post[url="https://www.basunivesh.com/2016/12/16/top-5-best-liquid-mutual-funds-in-india-in-2017/"] here .
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Old 18th January 2018, 15:00   #1817
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Hi,

This is how all debt funds are taxed:

Short Term Capital Gain | 36 months or lesser | added to income and taxed as per applicable slab rate
Long Term Capital Gain | more than 36 months | 20% with indexation

In addition, if you hold the debt fund for more than 3 years, you get indexation benefits. That works out much better than the 20% tax.

Here is an example:


https://www.advisorkhoj.com/mutual-f...0Mutual%20Fund

Liquid funds are simply debt mutual funds that invest your money in very short-term market instruments such as treasury bills, government securities and call money that hold least amount of risk. These funds can invest in instruments up to a maturity of 91 days. The maturity is mostly much lower than that.

<From value research> You may ask what is the big deal about average maturity? More explicitly, average maturity tells you how sensitive a bond fund is to change in interest rates. When interest rates move down, bond prices move up, thus boosting debt funds' return and vice versa when rates move up. However, a change in interest rates will impact different maturities differently. The price of long-term debt securities generally fluctuates more than that of short-term securities when the interest rate changes. Consequently, mutual funds with several long-maturity papers in its portfolio are more sensitive to NAV fluctuations.

https://www.valueresearchonline.com/...w.asp?str=4086


Thanks,

Pradeep



Quote:
Originally Posted by govigov View Post
DigitalOne, I find this advice very useful, but I have some doubts. Can you please answer two queries?

How can short term debt funds have a tax advantage?

What is a liquid fund of a fund house?

Sorry If I sound like a noob and if the questions do not make sense.

PS: I currently am holding all direct growth elss funds from SBI, FT, Mirae & DSPBR. Currently almost exceeding the 80c cap of 1.5L. So would like to invest in other avenues as well.
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Last edited by pradkumar : 18th January 2018 at 15:12.
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Old 18th January 2018, 15:06   #1818
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Quote:
Originally Posted by pradkumar View Post
Hi,


Bank FD at 8% interest:
Initial amount: 100,000
After 3 years at 8% interest: 125,971
After 30% taxes: 88,180

Liquid fund at 6% interest:
Initial amount: 100,000
After 3 years at 6% interest:119,102
After 20% taxes: 95,281


Pradeep
Isn't the tax on the interest accumulated? Here the post tax returns are lesser than the principal amount
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Old 18th January 2018, 15:10   #1819
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Yes. Made a calculation mistake. I guess the screen shot is a better calculation!

Quote:
Originally Posted by AltoLXI View Post
Isn't the tax on the interest accumulated? Here the post tax returns are lesser than the principal amount

Last edited by pradkumar : 18th January 2018 at 15:14.
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Old 18th January 2018, 15:29   #1820
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Few errors in that calculation. For FD, you have to pay tax each year. So, 8% is actually 5.6% post tax giving you about 117758 after 3 years. For Debt mutual funds, its 10% flat or 20% with indexation after 3 years (one time tax). So the value is 117191 if you pay CG without indexation or 117948 with indexation (considering 272 and 240 as the two indices).

Last edited by pnredkar : 18th January 2018 at 15:30. Reason: Typos
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Old 18th January 2018, 16:33   #1821
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Quote:
Originally Posted by pnredkar View Post
Few errors in that calculation. For FD, you have to pay tax each year. So, 8% is actually 5.6% post tax giving you about 117758 after 3 years. For Debt mutual funds, its 10% flat or 20% with indexation after 3 years (one time tax). So the value is 117191 if you pay CG without indexation or 117948 with indexation (considering 272 and 240 as the two indices).
There is no 10% flat rate now. I think it was removed in the 2014 budget (first NDA budget). Now it is only 20% with indexation.
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Old 18th January 2018, 23:40   #1822
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Mark Mobius is retiring from Franklin after more than 30 years.
What is the impact to Franklin investors like me?
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Old 19th January 2018, 08:05   #1823
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Originally Posted by S_U_N View Post
Mark Mobius is retiring from Franklin after more than 30 years.
What is the impact to Franklin investors like me?
I don't think he was doing active fund management for any of the FT India funds for a long time now. Shouldn't affect anything.
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Old 19th January 2018, 10:00   #1824
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Quote:
Originally Posted by DigitalOne View Post
There is no 10% flat rate now. I think it was removed in the 2014 budget (first NDA budget). Now it is only 20% with indexation.
Oh, is that so? Thanks for bringing it to my notice. I personally have never used the 10% flat provision anyways, 20% with indexation always worked better.

- Prasad
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Old 22nd January 2018, 22:53   #1825
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How long will it take for KYC modification to be processed? I went in for e-KYC for my wife only afterwards to know about the 50k limit. Later I made her file in full-KYC at a CAMs center but it is still showing 'under process'.
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Old 22nd January 2018, 23:08   #1826
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Quote:
Originally Posted by thoma View Post
How long will it take for KYC modification to be processed? I went in for e-KYC for my wife only afterwards to know about the 50k limit. Later I made her file in full-KYC at a CAMs center but it is still showing 'under process'.
It might take some time. But the limit of 50K is per AMC, so you can do e-KYC at other AMCs as well.
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