Author: nilesh.harde

Steps to secure your child’s future using mutual fund

Steps to secure your child’s future using mutual fund

When it comes to future of your child, you do not think twice. You will do whatever it takes. You can build it brick by brick and one step at a time without hurting your finances. Mutual Funds are a way to go.

Here are 5 steps to secure your child’s future with mutual funds

1. Set Goals

Know the purpose you wish to save for and invest the money accordingly. It could be an international school admission or a professional degree at a university. Set your sight on a figure that will ensure your child gets the education he or she wants.

2. Save First

Once you know your goals, set aside some money before you spend the rest. It is important to get into a good savings habit every month as this is the stepping stone to your child’s secured future.

3. Start with SIPs

A way to get into a discipline of investing is by using SIPs. Systematic investment plans or SIPs help you in ‘rupee cost averaging’. This means you buy more units when markets fall and lesser units when markets rise. You can start with as little as Rs 500 every month.

4. Use SIP Top Up

As your income grows, you could boost your allocation to SIPs by using the SIP top up. This increases the amount you set aside each month for your child’s future. A timely top up can make a significant difference to the final amount you receive when you need it.

5. Do not stop investing

You must continue with your monthly MF investing habit till you meet your goals. If you stop investing for some reason, figure out a way quickly to replenish the child education kitty. The more you stay away, the more you hurt your prospects of reaching your goals on time. It makes sense to allocate your SIPs into diversified equity funds. You money grows along with your child. To reap the benefit, you need to give your money that much time

Tax benefit on Home Loan – Part 2

Tax benefit on Home Loan – Part 2

Tax benefit on home loan interest

  1. The interest component in the EMI can be claimed as deduction from “income from house and property“ under Section 24 of the Income Tax Act.
  2. The maximum tax deduction allowed under Section 24 is 2 lakh for self-occupied property and if the property is not self-occupied, there is no maximum limit.
  3. The interest payments for the year shall result in a loss under the head “income from house property“ which can be adjusted in the same year against other heads of income including salary.
  4. If the property is not completed within three years from when the loan was taken, then the interest benefit drops to 30,000.
  5. The pre-construction interest can be claimed from the year when the construction is complete in five equal installments.
Tax benefit on Home Loan – Part 1

Tax benefit on Home Loan – Part 1

Principal repayment of home loan

  1. The principal repayment component in the home loan EMI is allowed as deduction under Section 80C of the Income Tax Act.
  2. The maximum tax deduction allowed under Section 80C is 1.5 lakh, which includes investments in other instruments also.
  3. This deduction is allowed only after the construction is complete and completion certificate is awarded to the buyer.
  4. Payment made towards stamp duty and registration charges are also allowed to be claimed under Section 80C in year in which paid.
  5. In case the assesse transfers property on which he has claimed tax deduction under Sec 80C before 5 years, deduction claimed shall be deemed as income in year that the property was sold and taxed accordingly.
Why an MF Investor Should Appoint a Nominee?

Why an MF Investor Should Appoint a Nominee?

Nomination facility is offered for the transfer of mutual fund units in case of the unfortunate demise of the unit holder
What is nomination for mutual fund investors?
Nomination is the process of appointing a person to take care of the assets in the event of the investor’s demise. A nominee can be any person — spouse, child, another family member, friend or any other person you trust. Nomination facility is mandatory for new folios/accounts opened by individuals with single holdings. In case of joint holdings where there are more than one holders, it is not mandatory to have a nominee, but financial planners recommend that new folios should always have a nominee.

What if an investor does not wish to appoint a nominee?
If the investor does not wish to nominate, he must sign and indicate the same by signing on the requisite space.

How does a mutual fund investor make a nomination?
When you invest in a mutual fund, there is a column where you can fill the details of the nominee. Individuals holding accounts either singly or jointly can make nomination. But non-individuals including society, trust, body corporate, karta of Hindu undivided family (HUF), holder of power of attorney cannot nominate . Nomination for joint holders is permitted, but in the event of the death of any of the holders, the benefits will be transmitted to the surviving holder’s name. Only in the case of death of all holders will the benefits be transmitted to the nominee.

How many nominees can an investor appoint?
An investor has an option to register up to three nominees in a mutual fund folio. The investor can also specify the percentage of amount that will go to each nominee in case of his death. If the percentage is not specified, each nominee will be eligible for an equal share.

What are the benefits of appointing a nominee for your MF investments?
When a nomination is registered, it facilitates easy transfer of funds to the nominee(s) in the event of demise of the investor. However, in the absence of nominee, the heirs/claimant will have to produce a number of documents like a will, legal heir certificate, no-objection certificate from other legal heirs etc to get the units transferred in his/her name.

Is it possible to change a nominee once an investment is made?
Yes, the nominee can be changed/added/subtracted any time as per the investors wish.

Use Liquid Funds to Earn More than Savings Account

Use Liquid Funds to Earn More than Savings Account

Liquid funds belong to the debt category of mutual funds. They invest in very short-term market instruments like treasury bills, government securities and call money. They are getting popular with retail investors as they offer much higher returns than a savings bank account and because you can cash out in a day

1. When should you invest in liquid funds?
Liquid funds are used by investors to park their money for short periods of time typically 1 day to 3 months. For example, if you are saving money for a vacation to be undertaken three months from now, you could park it in a liquid fund. Many equity investors also use liquid funds to stagger their investments into equity mutual funds using the systematic transfer plan (STP), as they believe this method could yield higher returns and help them beat volatility over a period of time.

2. How fast can such funds be redeemed? What return can an investor expect?
Once an investor gives the redemption request before the cut-off time on a business day, the money reaches their bank account the next working day. There is no entry or exit load by fund houses in liquid funds. As per data, the category of liquid funds has given a return of 6.84% over the past year. This is higher than the 3.5-6% offered by banks on their savings account.

3. What is the risk of investing in liquid funds?
Financial planners consider liquid funds to carry lowest risk as well as least volatility in the category of mutual funds. This is because they generally invest in instruments with high credit rating (P1+). The net asset value of these funds sees a change to the extent of interest income accrued, including on weekends.

4. How are liquid funds taxed?
Liquid funds held for more than three years are eligible for long-term capital gains tax with indexation. If you sell before three years, you have to pay tax as per your tax slab. If you opt for the dividend option, the fund will be subject to a dividend-distribution tax of 28.84%.