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Tax and Mutual Funds

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes,”  Benjamin Franklin, one of the founding fathers of the United State of America,wrote in a 1789 letter . Benjamin Franklin is on the 100 dollar US note. Are Mutual Funds tax free or taxed, what are taxes associated with Mutual Funds,what factors affect tax on Mutual Funds,What are Capital Gain? This article explores Tax and Mutual Fund in depth. For tax rates on Mutual Funds in FY 2014-15/AY 2015-16 you can read Mutual Funds and Tax Rates for FY 2014-15.

Tax and Type of Mutual Funds

Tax on Mutual Funds depend on the type of Mutual Funds. There are various kinds of Mutual Funds such as Equity Funds(Large Cap,Mid Cap), Balanced Funds,Sector Funds, Debt Funds, Gold Funds , Exchange Traded Funds etc. For tax purposes Mutual funds are divided into two categories Equity Funds and Non Equity Funds.

  • The Mutual Funds where equity holding is more than 65% of the total portfolio are categorized as Equity Funds. Securities Transaction Tax (STT) is levied on redemption of Equity Mutual Funds irrespective of the holding period
  • Other Mutual Funds come under Non Equity category Examples: Debt Funds,Liquid Funds, Fund of Funds (mutual funds which invests in other funds), International funds (funds which have more than 35% exposure to international equities)
  • Exchange Traded Funds (ETF) are treated as equity or non equity fund depending upon the underlying security. If it invests in domestic equity it will be equity fund, otherwise non equity.

Mutual Funds Tax and type of Investor: Individual,Company,NRI

Your Tax Status is also important to determine the tax implication on your investment in a mutual fund. The various kinds of investors in Mutual Funds are

  • Resident Individual
  • Hindu Undivided Family (HUF)
  • Partnership Firm / Association of Person (AoP) / Body of Individual (BoI)
  • Domestic Company
  • Non Resident Indian (NRI)

Income earned from Mutual Funds :D ividends, Capital Gain and Mutual Funds

In mutual funds, you can earn income in the form of dividends and capital gains.

Mutual Funds and Tax Rates for FY 2014-15

This article covers the Tax rates on Mutual Funds for the financial year 2014-15 or Assessment Year (AY) 2015-16. This would be useful for filing Income Tax return which needs to be filled by 31 Jul 2015 if you have Mutual Funds. Our article Tax and Mutual Funds covers in detail are Mutual Funds tax free or taxed, what are taxes associated with Mutual Funds,what factors affect tax on Mutual Funds,What are Capital Gain? Our article Income Tax for AY  2015-16: Tax slabs, ITR Forms covers the filing of Income Tax Return.

Overview of Mutual Funds and Tax

Tax on Mutual Funds depend on the type of Mutual Funds, type of Investor and type of Income earned from Mutual Funds. The image below gives an overview

Tax on Mutual Funds

Tax on Mutual Funds

Tax and Dividends on Mutual Funds

Dividends are paid during the time one is invested in the fund. Dividends are tax free in hands of investor and is exempt income but still has to be shown in Income Tax return. The Mutual Fund pays Dividend Distribution Tax based on type of fund. Dividends are not guaranteed and the mutual fund is not under any obligation to announce a dividend. Dividend amount or when it will be declared is also not fixed.  The amount of dividend that is declared will be reduced from the Net Asset Value (NAV). Tax Implications on Dividend are given in table below. 

Financial Apps for India

Mobile App is the way going forward. There are many financial Apps but most of the Apps are developed specific to countries like US, UK and Canada etc. Apps specific to India are very very less, mostly are from the banks. Indian Post office schemes are ignored completely. Most of the Apps display the maturity amount of the schemes. But, they don’t give you monthly or yearly schedule. Financial Calculator India, by RK Labs, available on Google Play Store tries to fill the gap . It is exclusively for the people of India with the schemes available for Indian Banks, Post Office, Mutual Funds, etc. Our article covers the rising App culture in India, Financial Apps for India and then gives an overview of Financial Calculator India, by RK Labs , which helps people take informed decision about their finance thereby saving them a lot of time, money, effort, etc.

Apps and India

The new India,Facebook, Youtube,WhatsApp generation, is using the Internet  through the mobile. Accessing internet on mobile is more chat and app driven and very rarely does one use the browser.

Myntra, the country’s largest fashion retail portal, closed down its website on May 15th Friday and moved to an app-only platform.  The company says that 95 percent of Internet traffic comes through mobile, and 70 percent sales are generated through smartphones. So even if desktop users abandon the website, they aren’t really losing too much.  Many of us, the desktop generation, find the move to be a little ludicrous.

Indian Railways launched its ticket booking app for Android, Windows phones.On a pilot basis, the paperless ticketing system in unreserved segment will cover 15 stations in the suburban section of Southern Railway. Developed by Centre for Railway Information Systems (CRIS) “utsonmobile” – the paperless unreserved ticketing feature in mobile application aims to eliminate the need for printing of unreserved tickets. More than one crore passenger travel daily in unreserved segment and railways uses 1200 metric ton paper every year for printing unreserved tickets,

Some of the Apps on Finances on Android or Apple are given below

For list of Android Apps for India one can checkout www.androidos.in and iTune for Apple Apps or AppBrain. Top Finance Apps on Google PlayStore

App Financial Calculator of India

A financial calculator exclusively for the people of India with the schemes available in Indian Banks, Post Office, Mutual Funds, etc. This App provides the following calculators for both Android Mobile Phones and Tablets. It can be downloaded from https://play.google.com/store/apps/details?id=com.rkayapps.financeindia. It has been developed by RK Labs

Bank Calculators:

FAQ & List of Banks for Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) & Pradhan Mantri Suraksha Bima Yojana (PMSBY)

Our article Pradhan Mantri Suraksha Bima Yojana,Pradhan Mantri Jeevan Jyoti Bima Yojana and Atal Pension Yojna gives an overview of the Pradhan Mantri Suraksha Bima Yojana,Pradhan Mantri Jeevan Jyoti Bima Yojana and Atal Pension Yojna. There were many questions, some repeated, which were asked like List of Banks which are offering these schemes, does nominee have to pay premium, if we many saving bank accounts then can we enrol for multiple times. We have tried to collect answers to those questions here.

Who will provide the insurance ?

The scheme would be offered through LIC and other Life Insurance companies in collaboration with participating Banks. The Insurance policy will be a group insurance policy. Group Insurance policy is one of the insurance policies where large number of people are covered under the single policy, it is issued to insure the life or health of a specific group of people, the contract which is formed for the group insurance policy is called as a Master group insurance contract.  An example of group insurance is the Health insurance provided by the various companies to their employee as a part of employee benefit scheme.

To save administrative costs, there is often a Master Policy Holder who will retain the documentation on behalf of the members, and may deal with the members on behalf of the insurer. Participating Banks will be the Master policy holders. A simple and subscriber friendly administration & claim settlement process shall be finalized by  chosen insurance company in consultation with the participating bank.

What will be the role of the insurance company and the Bank?

The scheme will be administered by LIC or any other Life Insurance company which is willing to offer such a product in partnership with the bank. Participating banks will be free to tie up with any such life insurance company for implementing the scheme for their subscribers. For example HDFC Bank has tied up with LIC for Pradhan Mantri Suraksha Bima Yojana  and United Insurance for Pradhan Mantri Jeevan Jyoti Bima Yojana

Responsibility of the Bank will be to recover the premium, as per the option, from the account holders on or before the due date through auto-debit process and transfer the amount due to the insurance company. Enrollment form / Auto-debit authorization / Consent cum Declaration form, as required, shall be obtained and retained by the participating bank.

In case of claim, insurance company may seek submission of the same. Insurance Company also reserve the right to call for these documents at any point of time.

Will this cover be in addition to cover under any other insurance scheme the subscriber may be covered under?

Yes. It is over and above any other covers that you have. So if you have any personal accident or life insurance policy you can claim from that policy and this one. Please note that insurance cover for PBJJBY & PMSBY will be for 2 lakh only.

Can one subscribe to both Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) & Pradhan Mantri Suraksha Bima Yojana (PMSBY) policy?

Yes one can enrol for both Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) & Pradhan Mantri Suraksha Bima Yojana (PMSBY).

If one enrols for  Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)  and pays all the due premiums then if death happens through natural or accident till  subscriber is 55 years of age nominee will get 2 lakh.

If one enrols for Pradhan Mantri Suraksha Bima Yojana (PMSBY)  and pays all the due premiums then if death happens ,due to accident ,only till 70 years of age nominee will get 2 lakh. Incase of natural death nominee will not get 2 lakh. In case of Disability of both eyes, both hands, both legs or one eye and one limb due to accident one will get Rs 2 lakhs. And  for  Disability of one eye or one limb  one will get Rs 1 lakh

If one has many saving bank accounts, can one get multiple insurance policies?

Reasons to Apply for a Personal Loan

The other day in our office discussion during the coffee break turned to loans, car loans , home loans and personal loans. Many of my colleagues had taken personal loan. Rationale being a home or auto loan won’t be of any use if you are in urgent need of money to tide over a general financial emergency. You cannot use the money sanctioned towards a home or a car for any other purpose. Further, the lengthy formalities involved in these loans make them unsuitable for those in urgent need of funds. While banks and financial institutions offer flexible loans for those in urgent need of cash without onerous formalities, most of us make the mistake of completely ignoring this option due to its high costs and risks. Read ahead for an overview of four instances when opting for a quick loan with no usage restrictions can prove very beneficial.

Managing a Medical Emergency

Unlike other problems, you cannot simply ignore a medical emergency just because you don’t have enough cash in hand. In such a scenario, applying for a personal loan can help you tide over the crisis without the embarrassment of requesting friends and relatives for assistance. Apart from ensuring your family member enjoys quality treatment, the decision to opt for such a loan will minimize the financial consequences of this expenditure.

Disclaimer : This is an information based website, meant for providing assistance to it's readers. We do not hold any responsibility for mis-information or mis-communication.