There is no associated tax liability if an equity fund is held for more than a year. As you invested in the dividend option of the fund for a period exceeding one year, there is no tax liability on the redemption amount which is transferred to the growth scheme (the securities transaction tax (STT) is deducted by the fund before paying you the amount).
After the transfer, as you redeemed your investment after two months, you would need to pay a short-term capital gains tax at the rate of 15 per cent on the gain (if any). This has to be disclosed when your file your income tax return at the end of the financial year.
Kindly advise about good five star rated mutual funds. I want to invest Rs 20,000 per month in some well rated schemes which should give me a minimum of 15 per cent annual returns. I am 55 years old and have 10 more years of service left.
- Dr.Ashok M.Patil
Expecting 15 per cent per annum from a diversified fund is a realistic expectation. But as always, fund selection is the most important criteria. First, assess your risk appetite and decide on the ideal equity-debt allocation you would like to maintain. Next, check on the track record of the fund over the past three to five years. Star ratings would help you choose the right fund.Since 10 years of your service are left, you can invest in well rated equity diversified funds, which are large-cap oriented. Large-caps offer more stability when compared to mid-and small-caps. You can also include some balanced funds to have certain amount of debt in the portfolio.
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While initiating the SIPs, make sure you do not invest in more than four funds for a total amount of Rs 20,000 (Rs 5,000 in each). To safeguard the corpus that would be created over time, you can slowly start shifting your assets from equity to debt, three years before the retirement (if you require the corpus after retirement).
Suggested Funds include HDFC Top 200, HDFC Prudence, Birla Front Line Equity, DSP ML Balanced, Sundaram Select Focus and Magnum Balanced
How is the asset under management (AUM) of a fund computed? I was confused while seeing the net assets of Reliance Tax Saver scheme for the month ending March 2008. The net assets came down from around Rs 2,111 crore in February, 2008 to around Rs 1,882 crore in March, 2008. This, being a tax saving fund, wherein redemptions are not allowed before the stipulated three year lock-in period, how did the fund's size shrink?
- Achanta Krishnasarma
The fund's AUM is declared once every month. The AUM is the total value of the portfolio that the fund is invested in on that particular day of declaration. In simple terms, it is the total of NAV multiplied with total number of units. Hence, the AUM fluctuates with the changing stock prices, redemptions and even additional purchases done.In the month of March, Reliance Tax Saver was amongst the worst performing tax saving funds. The fund lost 15.54 per cent during the month. Consequently, as its asset value declined, its AUM also declined by a similar percentage from Rs 2,111 crore to levels of Rs 1,882 crore.
Such fluctuations might be more drastic, if a fund faces redemption pressure during such a phase of decline. As the fund completes its three years in September 2008, it would be open for redemption for investors who had invested initially.
I am planning to invest in gold, but am unable to decide whether it should be an ETF or physical gold. Please throw some light on the ETF/Gold funds that can be chosen. I want to invest around Rs 1 lakh.
- Raghavendra Ramarao
With the rising gold prices globally, investors have benefited of late by investing in this asset class. Gold exchange traded funds (ETFs), many of which were launched last year, have made investment in physical gold easy. These funds have various advantages when compared to direct investment in physical gold.The units of such funds are traded on a recognised stock exchange and there is no associated wealth tax liability if you hold units of a Gold ETF. In the past one year, Gold ETF's have emerged as the second best performing category after Equity Banking with returns of 26.62 per cent (as on April 16, 2008). There are currently six gold ETFs in the market, with only two having a performance history exceeding one year.
As of April 16, UTI Gold ETF and GoldBenchmark ETF gave returns of 26.66 and 26.58 per cent respectively. DSP Merrill Lynch World Gold Fund that invests in stocks of international gold mining companies is another option you can look at. The fund has generated an astounding return of 45 per cent in the past nine months. TATA AIG mutual fund is launching a fund on the similar lines.