Please suggest some debt-oriented mutual funds that qualify as tax saving schemes. I am looking for a low-risk scheme which can give around 12 per cent tax-free returns.
-Anirban Biswas
The only class of equity mutual funds that qualify for tax savings are equity linked savings schemes (ELSS) that invest a minimum 80 per cent of their assets in equities and all returns are tax-free. Due to their equity component, their risk will be higher than debt funds. Apart from these, there are two pension schemes viz. Templeton India Pension Plan and UTI Retirement Benefit Unit Plan, which invest a minimum of 60 per cent of their assets in fixed income instruments.
Debt investments qualifying for exemption under Section 80C of the Income Tax Act are National Savings Certificate (8.16 per cent, taxable), Public Provident Fund (8 per cent, tax-free), Infrastructure Bonds (6 per cent, taxable) and 5-year fixed deposits with banks and the Post Office (8-8.75 per cent, taxable).
For tax-free returns, consider balanced funds that invest about 65 per cent of their assets in equities and the rest in fixed income instruments. These are less risky than the pure equity schemes. All dividend income and capital gains from these after a year are tax-free. Some good conservative balanced funds are Canara Robeco Balance and DSP BlackRock Balanced.
If my broker shuts down his business, will the AMC continue my account?
-Manoj Kumar
Your investments are not affected if the broker discontinues his practice. You, however, can save on entry load by filing an application with the fund house on regarding the outstanding instalments as direct and not routed through the broker.
I wish to renew my SIPs. Should I wait for August 1, when the entry loads in MFs will be discontinued?
-Amit Kumar Verma
It is advisable to wait for the new rulings to become effective. You will be able to save upon a crucial cost on your investments.
The circular issued from Sebi on June 30 states the new rules will be applicable to, among others, "Systematic Investment Plans (SIP) registered on or after August 1, 2009". Fund houses will continue to charge load on SIPs registered before August 1.
I have 5,000 units of Kotak MNC Fund that I bought during its NFO period. Should I hold on to it?
-C S Venkatesh
Effective July 1, units under Kotak MNC Fund have been merged with Kotak Opportunities Fund. The latter is an aggressive equity fund and has been a good performer. You can hold on to your investments in this fund.
Declaration of dividends is entirely at the discretion of the trustees. No predictions can be made about possibilities of dividend declarations under a scheme.
Can I set off long-term capital gains (LTCG) from investments in an FMP (375 days maturity) against short-term capital loss (STCL) and long-term capital loss (LTCL) from selling equities in the current year?
-Anand Kumar V
Where the capital gains are tax-free, capital loss will also be treated as nil for taxation. Hence, LTCG from FMP cannot be set-off against LTCL from selling of equities. But it can be set off against STCL from selling of equities. Further, it is possible to carry forward the capital losses for the eight assessment years immediately succeeding the assessment year in which the loss was first computed.
Value Research
