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

Aug 05 2014, 02:01 IST
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SummaryWhat is the tax treatment at various stages for equity-linked savings schemes? In terms of returns, are they better than Public Provident Fund?

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 Budget’s 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

standpoint.

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

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