Mandatory to stick to scheme, fund house while rolling over FMPs

Updated: Aug 5 2014, 07:31am hrs
What is the tax treatment at various stages for equity-linked savings schemes In terms of returns, are they better than Public Provident Fund

Mayank Shah

Equity-linked savings schemes (ELSS) need to be held for a minimum period of three years. Being equity schemes, they are subject to long-term capital gains and, hence, a zero rate of tax. Since ELSS invest in equities, returns from these funds would vary based on your time of investment and the time you decide to exit.

The returns are not really comparable to those from Public Provident Fund, which gives you a fixed return. But, broadly speaking, as these funds invest in equities, your returns are likely to be better over a long horizon.

Under the Budgets proposals, will I need to pay any

tax on dividends for my

investments in debt and equity funds

Amol Gandhi

Dividend distribution tax would continue to be paid by the asset management companies, as was done earlier.

Only the way the tax is calculated has been modified in

this budget.

I have been availing myself of indexation benefit on debt fund investments for a few years. Now, will I get this benefit on even selling after three years

Saurav Gupta

You will get indexation benefit if you sell your investments after three years, as opposed to earlier, when it was available to investors for a holding period of more than one year. The budget made

this change.

If I roll over my one-year FMP to three years, is it mandatory for me to stick to the same scheme and the same fund house

PC Rao

Yes, you will have to stick to the same scheme and the same fund house in case of a rollover. Only when you remain invested in a particular scheme from an AMC for more than three years would you be able to classify the investment as long- term from an income tax


Will the new tax rules on non-equity funds after Budget 2014 also be applicable to balanced funds

Suman Kumar

Since balanced funds maintain more than 65% investment in Indian equities, they are classified as equity funds from the income tax standpoint. So, the new tax rules on non-equity funds would not apply to balanced funds.

Are there any systematic withdrawal plans, instead of the popular monthly ones, where I can pull out the money once a year

AR Sukumar

There are systematic withdrawal plans that allow you to pull out the money once a year.

It would be better to check with your financial advisor, or with the asset managment company on whether it offers this facility on the fund you are planning to invest into.

Are there some new KYC documents wherein one has to declare ones annual income

Rajesh Adhikari

I do not think the KYC documents for investments in mutual funds require one to declare ones annual income.

By Niranjan Risbood

The writer is director manager research, Morningstar India

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