To get pension, buy annuity from an insurance company

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Published: May 22, 2019 8:47:49 AM

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Is there any way where I can invest in mutual funds now for 30 years and get pension later?
– Shekhar Kumar
No, for a regular pension, you would have to purchase an annuity from any of the insurance companies.

Do I have to pay any tax on the yearly gains that I make from SIPs?
—Gautam Kapoor
Taxes are applicable only on realised gains and each unit would be treated independently to determine any applicable gain (short-term or long-term) relative to purchase price.

Should a resident Indian investor while filing his ITR declare his holding in funds such as such Franklin India Feeder which are governed by Indian laws or similar SEBI registered global equity mutual funds as a foreign asset?
—A Venkat

No, Indian investors are not required to declare the holdings in such funds. However, in case of a taxable event such as gains on redemption, one needs to disclose the gains as applicable (short-term or long-term gains) in the ITR form. Please consult your financial advisor for tax implications of your investments.

I want to know how interest rate is calculated and redemption works for me. I have SIP of `1,000 monthly. I wish to increase it to `1,500 for next SIP and thereafter continue `1000 monthly.
—Sagar Garag

The realized return (yield) can be computed by plotting cash flows against respective dates in an Excel spreadsheet; and using the XIRR formula.

For redemption: Equity oriented investments: Short term capital gains (holding period (HP) up to one year) taxed at 15% plus cess; Long term capital gains in excess of `1 lakh per annum (HP more than one year ) taxed at 10% plus cess.

Fixed income oriented and internation-al funds: ST gains (HP up to 3 years) taxed at marginal tax rate, LT gains (more than 3 years) taxed at 20% with indexation

If redeemed before a certain period, specified in the fund document, an investor is charged an exit load which is a percentage of the redemption value.

You cannot increase the SIP for one month and then reduce it again. MFs provide an option to increase / change the SIP amount but this change cannot be made on a month-on-month basis. Surplus money can be invested as lumpsum into funds where SIPs are ongoing.

(The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to

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