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unique identification (UID) number mandatory for all securities transactions

UID (Unique Identification) may soon be required for all securities transaction. At present the Ministry of Finance (MoF) is seeking views of capital market regulator - SEBI on making UID number mandatory.

This move, if implemented, could help the former track incidents of frauds and money laundering in market transactions.

Mandatory KYC (Know Your Customer) with effect from 1st January, 2011 for ALL investments in Mutual Funds

With effect from 1 January 2011, Know Your Client (KYC) norms for certain categories of investors (whether new or additional purchase) will undergo a change.
Know Your Customer (KYC) is a process introduced by SEBI as part of the Prevention of Money Laundering Act (PMLA). Under this, all Mutual Funds are required to comply to the KYC guidelines wherein they are required to perform customer due diligence for all their investors. Earlier, KYC was mandatory for Mutual Fund investments of Rs. 50,000 and above but now KYC has been made mandatory for investments of all amounts.
With effect from 1st January 2011, KYC (Know Your Customer) norms will be mandatory for ALL investors (including existing investors and joint holders), who wish to make investments in Mutual Funds, irrespective of the amount of investment.

In case you are not a KYC compliant investor till now, we request you to please apply for KYC compliance by submitting the KYC form duly filled in the required details along with the relevant supporting documents to the nearest Point of Service (POS).

Documents required to be submitted along with KYC application:

a)    Photo PAN card
b)    Proof of Address (Latest Telephone or Electricity Bill / Passport / Bank account statement / Voter ID / Driving License etc.)
c)    Passport size photograph

 Other important points:
Incomplete documents/forms are liable to be rejected. Investors must adhere to the checklist provided in the application form.
Investors, who have already completed their KYC formalities, need not undergo any additional requirement. We request you to submit your application for KYC compliance to one of the designated POS at the very earliest, so that you are not inconvenienced once the new requirements get implemented.

For individuals 
            For Non individuals

Know Your Client (KYC) documents is a mandatory proceduretoday

Know Your Client (KYC) documents is a mandatory procedure today. KYC is a client identification program that verifies and maintains records of the identity and address of investors.
 Source: business

Today other regulators too have made KYC mandatory. The Securities and Exchange Board of India (Sebi) has mandated it for mutual funds and broking accounts, the Insurance Regulatory Development Authority (IRDA) while buying insurance and the Forwards Markets Commission (FMC) for commodity trading. You need to submit it even for making post office deposits.

Impact: Although the effort towards strengthening identification norms has helped in preventing money laundering and reducing fraud, it has had a negative impact in an unexpected quarter. The growth in investor numbers in various instruments is either stagnating or reducing. Apparently, the KYC norms are proving restrictive because of the hassles of documentation. The KYC requirement sometimes leads to unnecessary and repetitive work, delaying operations. Customers complain about the paperwork involved. Ultimately, it means customers have to run from pillar to post for complying with the KYC norms. Investors complain of being asked to provide details repeatedly or face a freeze on their accounts.

* KYC is mandated by most regulatory authorities 
* Documents for proof of identity and address are needed. 
* Certain investments may need PAN card details
* Duplication of documents in some cases is possible
* Investee firms may also incur compliance cost

Mutual Fund Distributors Certification Examination

NISM-Series-V-A: Mutual Fund Distributors Certification Examination
The examination seeks to create a common minimum knowledge benchmark for all persons involved in selling and distributing mutual funds including:
  • Individual Mutual Fund Distributors
  • Employees of organizations engaged in sales and distribution of Mutual Funds
  • Employees of Asset Management Companies specially persons engaged in sales and distribution of Mutual Funds
The certification aims to enhance the quality of sales, distribution and related support services in the mutual fund industry.
Examination Objectives:
On successful completion of the examination the candidate should:
  • Know the basics of mutual funds, their role and structure, different kinds of mutual fund schemes and their features
  • Understand how mutual funds are distributed in the market-place, how schemes are to be evaluated, and how suitable products and services can be recommended to investors and prospective investors in the market.
  • Get oriented to the legalities, accounting, valuation and taxation aspects underlying mutual funds and their distribution.
  • Get acquainted with financial planning as an approach to investing in mutual funds, as an aid for mutual fund distributors to develop long term relationships with their clients.

Assessment Structure:
The examination consists of 100 questions of 1 mark each and should be completed in 2 hours. The passing score for the examination is 50%. There shall be negative marking of 25% of the marks assigned to a question.
Test Details:
Sr. No. Name of Module Fees (Rs.) Test Duration (in minutes) No. of Questions Maximum Marks Pass Marks* (%) Certificate # Validity (in years)
1 NISM-Series-V-A: Mutual Fund Distributors Certification Examination 1000 120 100 100 50 3

Kotak Select Focus Fund declares Maiden Dividend

Holding Mutual Fund Units in dematerialised form!

NSDL has introduced facility to hold existing mutual fund units in demat accounts. You can use your existing demat account for converting your mutual fund units in dematerialised form by submitting conversion request to your Depository Participant. You can now have a single Transaction Statement for shares, debentures and mutual fund units. For further information, please visit our website at the following link:
Procedure for conversion of Mutual Fund Units into dematerialised form through your Depository Participant (DP)
    • Obtain Conversion Request Form (CRF) from your DP.
    • Fill-up the CRF.
    • Submit the CRF alongwith the Statement of Account to your DP.
    • After due verification, the DP would sent the CRF and Statement of Account to the Asset Management Company (AMC) / Registrar and Transfer Agent (RTA).
    • The AMC / RTA will after due verification confirm the conversion request sent by your DP and credit the mutual fund units in your demat account.

Index funds are meant for the long-term investor

What is an index fund? It is a fund that invests in the exact proportion determined by this independent body in each and every one of the stocks that are present in the index. Such a fund must have a very good dealer (that is, a person who buys and sells stocks) but does not need a fund manager.

Index funds are meant for the long-term investor, it is said. In my view a long term equity investor is a person who buys equity like our mothers used to buy gold–buy it when you have the money; sell to meet an emergency or to buy a longer term asset, like a house or a married life or an education for a child! Anyone who invests or disinvest by timing the market is not a long-term investor.

The key risk that a long-term investor runs, when investing in equity is either that the company he chose becomes a non-performer or the person who chose it for him becomes a non-performer. The greatest advantage of an index fund is that you have to worry less about such events: the index committee or agency, whose members may change but whose processes are person-independent, takes care of such developments on an on-going basis.

They do not take the decision based on hot tips or broker influence and are not affected by the departure of that divine fund manager. Which is why, as markets become more and more efficient, most long term investors prefer to invest in index funds.

Frequently Asked Questions on Infrastructure Bonds

1. What is the Tax Treatment of interest on these Bonds?
The interest received on these bonds shall be treated as income from any other source and shall form part of the total income of the assessee in that financial year in which they are received.

2. Who are the eligible investors?
Only Resident Indian Individuals (Major) and HUF can invest in these bonds.

3. Can a Minor apply for subscription to these bonds?
A minor is not eligible to apply for subscription to these bonds.

4. Are these infrastructure bonds Tax Free?
No, the interest received in these bonds are not tax free. The investor is liable to pay tax on the interest creceived

5. Will TDS be deducted on these bonds?
No TDS shall be deducted on the interest received as these bonds are issued Compulsorily in Demat mode and shall be listed on NSE & BSE .

6. I don't have Demat Account. Can I apply?
The bonds shall be compulsorily issued in Demat mode, so investors without Demat A/c shall not be eligible.

7. I only have a joint De-mat account. Can I apply in my own name only?
The name of applicant shall be same as the holders of Demat account. In case of single applicant the demat account shall also be held in the name of the same single applicant.

8. Can I apply in joint names?
Yes application can be made in joint names with a maximum of three applicants, however the demat account shall also be held in the joint names and order of applicant shall be the same as appearing in the demat account. In case of application made in joint names, the tax benefit shall only be availed by the first applicant.

9. What is the maximum amount for which the benefit u/s 80CCF be availed?
Maximum benefit to an investor shall be Rs. 20,000/-- under section 80CCF of the Income Tax Act, 1942

10. What would happen if I apply amount more than Rs. 20,000/-?
The allotment shall be made for the sum applied, however the benefit under section 80CCF may only be availed for a maximum sum of Rs.20,OOOI-

11. Can I invest in all the four option?
Yes an applicant may subscribe to all the four options but the minimum application under each option shall be one bond i.e. Rs.5000/-

12. What is the benefit of investing in Tax Saving Infrastructure Bonds if they offer the same tax benefit?
The Tax exemption benefit under Sec 80CCF on a sum of Rs. 20,000/- is over and above Rs. 1,00,000/- benefit under section 80C, 80CCC and 80CCD.

13. What is the tenure & lock-in period of these Tax Free Infrastructure Bonds?
The Tenure of these bonds shall be 10 years and the bonds have a lock-in of 5 years

14. Who can offer these Long Term Infrastructure Bonds?
The entities like LlC, IDFC, IFCI and other NBFCs which are classified as Infrastructure Finance Companies by RBI shall be allowed to issue these long term infrastructure bonds.

15. I Don't have a PAN card. Can I still apply for subscription?
PAN card is mandatory for subscribing to these bonds.

16. How will i get my interest on the due date?
The interest shall be credited to the respective Bank account registered with the Demat account through ECS on the due date for interest payment, and -if the due date is a public holiday then the next working date.

17. Can I get loan on these bonds?
You cannot avail of any loan pledging these bonds in the first 5 years. Thereafter, these bonds may be pleadged to avail of loans

18. Where shall I submit the application forms?
The application form may be submitted at the branches collecting banks whose address are mentioned on the
application forms.

19. Who would get the interest in case of the joint application?
In case of joint application the interest shall be paid to the account of the first applicant only.

20. Can Intercity clearing cheques acceptable?
No, cheques has to be payable at par or local clearing cheques are only allowed.

Myths And Facts About Life Insurance

Life Insurance is considered as an important vehicle for financial planning, however decisions to invest the right amount in life insurance policies depends a lot on the perception and myths surrounding it. So, we've taken a look at the most common myths about life insurance, helping you to make the right financial plan for you and your family.

Myth 1:I am already Insured. I don't need any more insurance.You may have taken life insurance policies earlier but the question of having a sufficient cover is important. Although there are several methods to arrive at the right cover, the thumb rule is 10 or 20 times of your annual income or calculating “Human Life Value”. “Human Life Value” scientifically calculates the insurance cover. You can also consult your financial advisor to arrive at the right insurance cover for yourself.

Myth 2:I don't need life insurance because of coverage given by my employerOne should review if there is sufficient coverage offered by the employer. Also whenever you leave the company for any reason including retirement, the coverage normally stops.

Myth 3:Life insurance policies are not liquid and an individual gets the benefit only on happening of a contingency.Unit Linked Insurance plans offer liquidity as well as life insurance coverage. In ULIPs you have the facility to withdraw or encash amounts after three years from the commencement of the policy. The benefits in the policy continue even after the withdrawals. Also insurance is a good tool for long-term savings.

Myth 4:Life Insurance policies require commitment for premium payment for a longer period.Unit Linked Insurance plans offer a lot of flexibility and different premium paying period options to suit your requirements. You have the option to pay premiums for three years, five years, or entire tenure.

Myth 5:Mutual funds are a better alternative to Unit Linked Insurance Plans.Mutual Funds is pure investments. Through Unit Linked Insurance plans you can earn returns as well as get risk cover. Thus you can not only fulfill your medium and long-term financial goals but also take care of any risk in case of a unforeseen event.

Myth 6:Investing in Life Insurance policies require a lot of discipline as it requires large sum of amounts to be paid every year.For convenience, premiums can be paid by different modes like yearly, half-yearly, quarterly or monthly. In this way your yearly outgo is split into installments spread over the year creating regular savings in the plan.

Myth 7:Payment of Premium for Life Insurance policies is very inconvenient.There are various options available for premium payments. You can pay premiums through Internet or Electronic Clearing Services offered by the bank.

Myth 8:In Unit Linked Insurance plans the, investment pattern is decided by the Fund Manager and the individual has no control over it.Unit Linked Insurance Plans give a choice of Funds with investments in debt and/or equity. You can choose the asset allocation through these fund options depending on your risk appetite.
It's seen that the way life insurance was bought and perceived has undergone a paradigm shift. The essence to invest in life insurance lies in the right amount of risk cover and savings needed to achieve your financial needs.

PF vs PPF: What's the difference?

A young reader wrote in telling us he has just landed his first job and has begun investing. He had a very basic question: What is the difference between PPF and PF?

We attempt to clear his doubts.

1. What is PPF and PF?


The Employee Provident Fund, or provident fund as it is normally referred to, is a retirement benefit scheme that is available to salaried employees.

Under this scheme, a stipulated amount (currently 12%) is deducted from the employee's salary and contributed towards the fund. This amount is decided by the government.

The employer also contributes an equal amount to the fund.

However, an employee can contribute more than the stipulated amount if the scheme allows for it. So, let's say the employee decides 15% must be deducted towards the EPF. In this case, the employer is not obligated to pay any contribution over and above the amount as stipulated, which is 12%.


The Public Provident Fund has been established by the central government. You can voluntarily decide to open one. You need not be a salaried individual, you could be a consultant, a freelancer or even working on a contract basis. You can also open this account if you are not earning.

Any individual can open a PPF account in any nationalised bank or its branches that handle PPF accounts. You can also open it at the head post office or certain select post offices.

The minimum amount to be deposited in this account is Rs 500 per year. The maximum amount you can deposit every year is Rs 70,000.

2. What is the return on this investment?

EPF: 8.5% per annum

PPF: 8% per annum

3. How long is the money blocked?


The amount accumulated in the PF is paid at the time of retirement or resignation. Or, it can be transferred from one company to the other if one changes jobs.

In case of the death of the employee, the accumulated balance is paid to the legal heir.


The accumulated sum is repayable after 15 years.

The entire balance can be withdrawn on maturity, that is, after 15 years of the close of the financial year in which you opened the account.

It can be extended for a period of five years after that. During these five years, you earn the rate of interest and can also make fresh deposits

4. What is the tax impact?


The amount you invest is eligible for deduction under the Rs 1,00,000 limit of Section 80C.

If you have worked continuously for a period of five years, the withdrawal of PF is not taxed.

If you have not worked for at least five years, but the PF has been transferred to the new employer, then too it is not taxed.

The tenure of employment with the new employer is included in computing the total of five years.

If you withdraw it before completion of five years, it is taxed.

But if your employment is terminated due to ill-health, the PF withdrawal is not taxed.


The amount you invest is eligible for deduction under the Rs 1,00,000 limit of Section 80C.

On maturity, you pay absolutely no tax.

5. What if you need the money?


If you urgently need the money, you can take a loan on your PF.

Five things NOT to do with your money

Five things NOT to do with your money

There are individuals who have some money and others who have more money. And then there are financial planners, investment advisors and agents offering advice on what one should do with his money.
Investment avenues like equities, mutual funds and insurance products like ULIPs (Unit-linked Insurance Plans) and endowment plans among others vie for a share of the money available.

It would be safe to say that we are spoilt for choices, thanks to the varied avenues available. Furthermore, we are in a situation wherein there is a sort of an information overload, in terms of what one should be doing with his money.

We thought it would be interesting to switchover and consider this discussion from a different perspective. In this article, we highlight 5 things that you must 'not do' with your money.

1. Don't hoard your money in a savings bank account
The savings bank account often ends up becoming a default option for storing one's money. This isn't surprising considering that most of us receive our incomes i.e. salaries and fees through cheques. But the trouble with this arrangement is that the funds are squandered earning a measly return of 3.50% (or thereabouts).

The same money can be better utilised by gainfully investing it in an appropriate investment avenue. Sure, liquidity is important. So you should set aside a sufficient sum to meet your day-to-day expenses and to provide for contingencies as well.

But the balance should be invested in avenues like fixed deposits (FDs), mutual funds in line with the investor's risk profile and needs. Considering that even an AAA rated FD yields an annual return of 7.50%, the savings bank account should come across as an unattractive "investment" option to most.

2. Don't invest your money based on hearsay
Never make investments based on hearsay. Your relatives, friends and neighbours need not be appropriate sources for availing investment advice. In any case, what's right for them need not be right for you. The right way to invest is by engaging the services of a qualified and competent investment advisor.

Steer clear of agents and advisors, whose 'core competence' is offering rebates against investment made. Similarly, don't associate with an advisor who only approaches you when an NFO (new fund offer) is launched. Instead, what you need is an advisor, whose mainstay is his expertise and prompt service.

3. Don't manage your money without a plan
No game can be won without a proper strategy; likewise investing without having predetermined objectives like planning for retirement or providing for children's education, among others could spell disaster. It's a bit like setting off on a journey without knowing what the destination is.
In fact, setting objectives should be the starting point of any investment activity. Having done that, the next step would be to draw out a proper plan. The investment advisor has an important role to play at this stage. Rigidly adhering to the plan at all times, should also be treated as vital.

4. Don't invest all your money in the same avenue
Investors would do well not to disregard the importance of diversification and avoid investing all their money in the same avenue.
The investment portfolio should be comprised of instruments and schemes from across asset categories. Over longer time frames, such portfolios are best equipped to deal with changing market conditions and deliver on the returns front.
For example, market-linked investment avenues like equities and mutual funds are likely to occupy a lion's share in a risk-taking investor's portfolio. However, assured return schemes like FDs and bonds should also feature in the portfolio (from a diversification perspective) since they can impart a degree of stability to the portfolio.

5. Don't lose track of your money
Investors should never lose track of their finances. Whether the money is in a savings bank account or available in liquid form, it pays to be aware of how the finances are placed. By doing so, the investor is placed to make well-informed financial decisions.
Similarly, it would also help to keep track of the investment portfolio. Changing market conditions, interest rate fluctuations and other factors could necessitate the need to make modifications to the portfolio.

Why to go for SIP in any market condition

7 reasons for SIP in any market condition

Systematic Investing in a Mutual Fund makes good sense especially in the booming markets.

Fact No. 1: Over a long term horizon, equity investments have given returns which far exceed those from the debt based instruments. They are probably the only investment option, which can build large wealth.

Fact No. 2: In short term, equities exhibit very sharp volatilities, which many of us find difficult to stomach.

Fact No. 3: Equities carry lot of risk even to the extent of loosing ones entire corpus.

Fact No. 4: Investment in equities require one to be in constant touch with the market.

Fact No. 5: Equity investment requires a lot of research.

Fact No. 6: Buying good scripts require one to invest fairly large amounts

Systematic Investing in a Mutual Fund is the answer to preventing the pitfalls of equity investment and still enjoying the high returns. And it makes all the more sense today when the stock markets are booming.

1. It's an expert's field – Let's leave it to them 
Management of the fund by the professionals or experts is one of the key advantages of investing through a mutual fund. They regularly carry out extensive research - on the company, the industry and the economy – thus ensuring informed investment. Secondly, they regularly track the market. Thus for many of us who do not have the desired expertise and are too busy with our vocation to devote sufficient time and effort to investing in equity, mutual funds offer an attractive alternative.

2. Putting eggs in different baskets 
Another advantage of investing through mutual funds is that even with small amounts we are able to enjoy the benefits of diversification. Huge amounts would be required for an individual to achieve the desired diversification, which would not be possible for many of us. Diversification reduces the overall impact on the returns from a portfolio, on account of a loss in a particular company/sector.

3. It's all transparent & well regulated 
The Mutual Fund industry is well regulated both by SEBI and AMFI. They have, over the years, introduced regulations, which ensure smooth and transparent functioning of the mutual funds industry. This makes it safer and convenient for investors to invest through the mutual funds.

4. Market timing becomes irrelevant 
One of the biggest difficulties in equity investing is WHEN to invest, apart from the other big question WHERE to invest. While, investing in a mutual fund solves the issue of 'where' to invest, SIP helps us to overcome the problem of 'when'. SIP is a disciplined investing irrespective of the state of the market. It thus makes the market timing totally irrelevant. And today when the markets are high or very low, it may not be prudent to commit large sums at one go. With the next 2-3 years looking good from Indian Economy point of view, one can expect handsome returns thru' regular investing.

5. Does not strain our day-to-day finances 
Mutual Funds allow us to invest very small amounts (Rs 500 – Rs 1000) in SIP, as against larger one-time investment required, if we were to buy directly from the market. This makes investing easier as it does not strain our monthly finances. It, therefore, becomes an ideal investment option for a small-time investor, who would otherwise not be able to enjoy the benefits of investing in the equity market.

6. Reduces the average cost 
In SIP we are investing a fixed amount regularly. Therefore, we end up buying more number of units when the markets are down and NAV is low and less number of units when the markets are up and the NAV is high. This is called rupee-cost averaging. Generally, we would stay away from buying when the markets are down. We generally tend to invest when the markets are rising. SIP works as a good discipline as it forces us to buy even when the markets are low, which actually is the best time to buy.

7. Helps to fulfill our dreams 
The investments we make are ultimately for some objectives such as to buy a house, children's education, marriage etc. And many of them require a huge one-time investment. As it would usually not be possible raise such large amounts at short notice, we need to build the corpus over a longer period of time, through small but regular investments. This is what SIP is all about. Small investments, over a period of time, result in large wealth and help fulfill our dreams & aspirations

Dividend in Birla Sun Life Tax Plan on 17 Sept 2010.

Birla Sun Life AMC Ltd proposes to declare dividend in Birla Sun Life Tax Plan on 17 Sept 2010. 

The details of the Dividends are: 

Scheme Name - BSL Tax Plan 
Dividend Amt - Rs. 2/- 
Record Date - 17th Sept 2010. 

After payment of dividend, the NAV will fall to the extent of the payout and statutory levy, if any.
For more information please contact:
 (Investment Manager for Birla Sun Life Mutual Fund)
One India Bulls Centre, 
Tower 1, 17th Floor, Jupiter Mill Compound, 841, 
S.B. Marg, Elphinstone Road,
Mumbai - 400 013.
Tel.: 4356 8000. Fax: 4356 8110/8111. 

Tips for NRIs to optimise their spending and maximise savings

 Many non-resident Indians (NRIs) have been toiling hard to rake in that extra bit but are unable to fathom where all their money disappears by the end of the month. In most cases, there is a money leak happening somewhere. This leakage needs to be fixed right away before your expenses balloon to unimaginable proportions leading you into a debt trap.

A well-planned financial budget can help you set your finances in order. This will help you to allocate your income according to your needs and desires. Here are some of the important points that NRIs need to keep in mind so as to better manage their finances.

Ascertain your total income 
Jot down all your sources of income, which includes that of your spouse too if both are working. Apart from your regular employment, your part-time jobs, dividends, interest income from investments are all sources of income. Total them all.

Save at least 20% to 30% of your gross income 
Leave this money untouched. Depending on your age, goals and risk profile invest this amount in mutual funds, equities, fixed income, bullion, real estate and other asset classes.

You have to also check whether you have a good support system in place for yourself and your family. For example, if you are living in a place like Australia where children’s education, retirement and health expenses are supported by the government, there is not much to worry about. If you are covered under a social security system, then you may reduce your saving ratios by about 5%.

Buy property at the earliest 
Buy a home at the earliest, irrespective of which country you reside in outside India. Many NRIs make the mistake of not buying a home in the foreign country they stay in and continue to live in rented apartments for long periods. You must consider buying a home at the earliest as most properties continue to get more expensive over time.

Also, for those who are planning to buy a property back home in India on their return should make the purchase much earlier. The property values in most cities in India move up considerably over a period of 5-10 years. After a decade, a property in the NRI’s home state may become unaffordable.

Are you spending on a need or a want? 
Paying up your monthly rent, electricity and grocery bills are all needs you cannot wish away. But you can surely cut down on your several outings at expensive restaurants and shopping sprees that burn a deep hole in your pocket.

With several malls around, convenience is in, no doubt. But think. Are you buying goods that you really need or are you following the herd? Have you used that food processor you bought last Christmas or is it still lying in a sealed pack in the corner of your kitchen? Analyse your past purchases and you will know your spending habits.

Put off impulse purchases 
Do you go berserk when you hear of heavy discount offers, free gifts and cashback schemes? Stop! Simply put off impulse buying. That “buy one, get one free” offer may not be as good as it seems. Besides, give a thought - do you really need that shirt now or do you want it because it simply appears to be a good offer?

Follow the 60:30:10 ratio 
Try maintaining a ratio of 60:30:10 between your needs, wants and desires. Maintain a list of each of your expenses, howsoever, insignificant they may seem. And you will know how much you have ended up spending on items you don’t really need. Segregate the fixed and variable expenditure. While there’s not much you can do with the former, you can easily fine-tune your variable expenditure.

Contingency fund is a must 
Financial emergencies such as loss of employment, illness in the family and accidents can spring up unpleasant surprises just anytime. You need a contingency fund that can take care of sudden financial needs. Keep aside three to six months of your income for emergencies. And you won’t have to dip into your savings in case of a financial crisis.

Stick to your budget, review regularly 
Creating a budget is easy but it is hard to stick to it. Ascertain each time how close you have been to your laid-out plan. Make necessary changes wherever needed, fine-tune and stick to your budget always, come what may. Do a review to find out to what extent you are on track and whether there is a diversion at all. If yes, make up for the same in the next month and soon you will be on the right track to achieving your goals

Source: Times of money

The Brand New ULIP Product

New Features of Ulip Plans:

From September 1 2010, these new changes will be implemented, Insurance Regulatory and Development Authority (IRDA) recently had come up with new guidelines that are aimed to make the ULIPs more investor friendly and reduce the mis selling which is happening in the markets. IRDA has issued various guidelines.

1) Increased lock – in – period: For all ULIP`s the lock in period has been increased from 3 years to 5 years which also includes top-up premiums. The residuary payments for the lapsed policies or surrendered policies will be payable on the expiry of the five year lock in period. The overall charges will be distributed in an even fashion across the lock-in-period and no front loads any more. Apart from the regular premiums, additional premiums or top-ups premium will be treated as an individual single premium policy that will have a sum assured attached to it. A policy tenure of below or equal to 10 year will have 1.25 times of the single premium paid as the sum assured and for policy tenure greater than 10 year will have 1.10 times the single premium paid as the sum assured. Top-up premiums will also have a lock-in-period of minimum 5 years.

2) Minimum insurance cover: All ULIP`s will now offer broadly 7 to 10 times the first years premiums as minimum insurance cover. This depends on the age of the policy seeker, single premium policy or regular/limited premium policy and the policy tenure. Earlier which was 5 times the first year’s premium amount.

3) Limits on ULIP Charges: IRDA has capped on the maximum difference between the gross yield and the net yield. This will ensure reduction on the commission and expenses born by the policyholder making the charges simpler and easily understandable. For a policy tenure upto 10 years the difference cannot be less than 3% and for policy tenure above 10 years the difference cannot be less than 2.25%.

4) Surrender Charges: There will be no surrender charges if the policyholder surrenders the policy after the 5-year lock-in-period. Policy surrendered before 5 years the surrender penalty is deducted from the fund value and the balance will be paid to the policyholder.

5) Surrendering or cancellation of the policy: The fund value of the discontinued policy is credited to the “discontinues policy fund” by the insurer. The policyholder will get the refund only after the completion of the 5-year lock-in-period. The discontinued policy fund will earn a minimum interest rate of 3.5%p.a. and will be paid along with the total fund value deposited. Hence the income earned on the fund value and the fund value will not be available to the shareholders. Taking this a step ahead even when the insured or the nominee is untraceable the insurers will set aside the fund separately and show in their annual reports with age-wise break-ups of the sums.

6) Partial withdrawals: No partial withdrawals are allowed before the 5-year lock-in-period.

Apart from all these, the distribution channels of the insurers are required to provide a benefit illustration based on two scenarios i.e. @6% and 10%. The illustration should also account for all the policy related charges like mortality, morbidity, riders and guarantees on investment, commission amount to the brokers and the agents.

The biggest benefit, which any individual is going to draw out of it are the lower charges. Lower charges simply mean that more money will go towards investment, which means greater corpus on maturity. Along with that you will also get benefit of the charges being spread over a period of 5 years.

Looking at the changes, it looks like the ULIPs in the new avatar would be much more investor friendly and will benefit the investor better than before.


Fixed Maturity Plans (FMPs): Attractive destination in today's scenario to park your funds.

When interest rates start going up, investors seek options that will give them good returns. FMPs are schemes that invest in fixed income instruments, like certificate of deposits, commercial papers, money market instruments, corporate bonds, debentures of reputed companies or in securities issued by government of India and fixed deposits selected by the fund manager. The basic objective of a FMP is to generate steady returns over a fixed period. Thus, investors are assured of returns if they stay invested in these products for the entire period.

Since these products are of different maturities, investors have the option of buying schemes that suit their requirements. These have lower risk of capital loss due to their investment in debt and money market instruments and are least exposed to interest rate risk as the fund holds the instruments till maturity getting a fixed rate of return. Here, fund managers primarily invest in AAA, P1+ or such kind of good rated credit instruments with maturity profile of the securities in line with the maturity of the plan so there is also low credit risk with minimal liquidity risk involved. Since the instrument is held till maturity, there is a cost saving in respect of buying and selling of instruments.

Take adequate care to ensure that you invest in a FMP whose maturity period matches your anticipated liquidity requirement. FMPs are also listed on the stock exchanges and can be sold prior to maturity as well. However, liquidity of these schemes could pose a problem while trying to exit before maturity.

Tax Treatment:

Short term FMPs are taxed at the marginal tax rate applicable to you as an individual. In case of long term FMPs, the lower of 10% (without indexation benefit) or 20%(with indexation benefit) will be applicable as tax. Indexation is a technique to adjust income payments by means of a price index and is calculated using 'Cost Inflation Index'(CII). CII numbers are released by the government every year. Because of the indexation benefit on long term FMPs, FMPs are favoured by many investors vis-a-vis Fixed deposits, where the gains are taxable at the applicable marginal tax rate.

NSE Codes for Gold ETF funds (Exchange Traded Funds)

  • Benchmark Mutual Fund - Gold Benchmark Exchange TradedScheme (NSE Symbol: GOLDBEES)
  • Kotak Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: KOTAKGOLD)
  • UTI Mutual Fund - UTI Gold Exchange Traded Fund (NSE Symbol: GOLDSHARE)
  • Reliance Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: RELGOLD)
  • Quantum Gold Fund - Exchange Traded Fund (ETF) (NSE Symbol: QGOLDHALF)
  • Birla Mutual Fund: BSLGOLDETF. (NSC Code BSLGOLDETF) BSE Scrip ID: BSLGOLDETF. BSE Scrip Code: 533408 ...
Gold ETF Stock Watch

Other articles to refer on Gold ETF

1. Tax treatment for Gold ETF 

 2. How you can Invest in Gold ETF Fund

    Tax treatment for Gold ETF

    The Gold ETF is classified under mutual fund and will be taxed as per non equity mutual fund taxation rules. Gains from Gold ETF will have the same treatment as Debt MFs.Investor investing in Gold ETF need not pay wealth tax. Investor has to pay taxes after redemption as per the tax laws applicable for non equity mutual fund. But, when the Gold ETF is redeemed for physical gold the taxation rules will be similar to that of physical gold.

     Short Term Capital Gain Tax -------------------As per Income Tax Slab

    Long Term Capital Gain Tax------------------------Less of 10% without indexation or 20% with indexation which ever is lower +3%cess

    Dividend Distribution Tax-------------------------**13.519 (2011-12)
    **Dividend Distribution Taxes indicated above are inclusive of additional surcharge and cess.

    Also refer

    How Gold funds are treated from tax point of view???

    What you require to invest in Gold ETF Funds

    • Trading account with a stock exchange broker
    • Demat account as Gold ETF can be traded only in demat format.

    Advantages of Investing in Gold ETFs

    • Potentially cheaper to have price exposure to gold price as compared to other available avenues
    • Quick and convenient dealing through demat account
    • No storage and security issue for investors
    • Transparent pricing
    • Taxation of Mutual Fund
    • Can be traded on stock exchange like buying / selling a stock
    • Ideal for retail investor as minimum lot size to trade is one unit on secondary market

    Why should an investor invest in Gold ETF?

    • No worry on adulteration
    • Gold provides diversification to the portfolio
    • Gold is considered as a Global Asset Class
    • Gold is used as a Hedge against Inflation
    • Gold is considered to be less volatile compared to equities
    • Held in Electronic Form
    • Store of value
    • Extremely Liquid

    What is Net Asset Value (NAV)?

    Net Asset Value (NAV) is the actual value of one unit of a given scheme on any given business day. The NAV reflects the liquidation value of the fund's investments on that particular day after accounting for all expenses. It is calculated by deducting all liabilities (except unit capital) of the fund from the realisable value of all assets and dividing it by number of units outstanding.

    What is the difference between Growth Plan and Dividend Reinvestment Plan?

    Under the Growth Plan, the investor realizes the capital appreciation of his/her investments while under the Dividend Reinvestment Plan, the dividends declared are reinvested automatically in the scheme. 

    What is a Mutual Fund?

    The following are some of the more popular definitions of a Mutual Fund
    A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The fund's Net Asset Value (NAV) is determined each day.

    Mutual Funds are financial intermediaries. They are companies set up to receive your money, and then having received it, make investments with the money Via an AMC. It is an ideal tool for people who want to invest but don't want to be bothered with deciphering the numbers and deciding whether the stock is a good buy or not. A mutual fund manager proceeds to buy a number of stocks from various markets and industries. Depending on the amount you invest, you own part of the overall fund.
    The beauty of mutual funds is that anyone with an investible surplus of a few hundred rupees can invest and reap returns as high as those provided by the equity markets or have a steady and comparatively secure investment as offered by debt instruments.

    What is a Systematic Investment Plan?

    What is a Systematic Investment Plan?
    This is an investment technique where you deposit a fixed, small amount regularly into the mutual fund scheme (every month or quarter as per your convenience) at the then prevailing NAV (Net Asset Value), subject to applicable load.

    "Dividend and Capital gain taxation in the hands of investors in Mutual Fund Schemes from 1 April 2010 (The Finance Bill, 2010 has received assent from the President on 8 May 2010)"

    "Dividend and Capital gain taxation in the hands of investors in Mutual Fund Schemes from 1 April 2010 (The Finance Bill, 2010 has received assent from the President on 8 May 2010)"

    For Individuals 
    1. Dividend in Equity Scheme ======================Tax Free
    2. Dividend in Debt Scheme   ======================Tax Free

    Dividend Distribution Tax in Equity Schemes                        ==========           NIL
    Dividend Distribution Tax in Money market and liquid funds ========== 25%+7.5%Surcharge+3%cess= 27.68%
    Dividend Distribution Tax in other schemes                         ==========12.5%+7.5%Surcharge+3%cess=13.84%

    Long Term Capital Gains (units hold more than one year)
    Equity Funds                                                         NIL      but 0.25%STT(Security Transaction Tax) will be deducted in case of equity funds
    Debt Funds 
    Without Indexetion                                                           10.30%
        with Indexetion                                                            20.60%

    **10% without indexetion or 20%  with indexetion whichever is lower + 3% cess

    FAQ's: NRI Investment in Mutual Funds Scheme

    1. Can NRI Investment in Mutual Funds in India? Whether Permission is required from RBI?
    Non Resident Indians and Persons of Indian Origin residing abroad (NRIs) / Foreign Institutional Investors (FIIs) have been granted a general permission by Reserve Bank of India Schedule 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 for investing in / redeeming units of the mutual funds subject to conditions set out in the aforesaid regulations

    Procedure for making Investment in Mutual Funds 
    Buying in Mutual Funds

    Repatriation basis:
    Payments by NRIs/FIIs may be made by way of Indian rupee drafts purchased abroad or out of funds held in NRE/FCNR account or by way of cheques drawn on non-resident external accounts payable at par and payable at the cities where the Investor Service Centres are located.

    In case of Indian rupee drafts purchased and subscriptions through NRIs/FCNR account, an account debit certificate from the bank issuing the draft confirming the debit should also be enclosed.

    Non Repatriation basis:NRIs investing on a non repatriable basis may do so by issuing cheques/demand drafts drawn on Non-Resident Ordinary (NRO) account payable at the cities where the Investor Service Centres are located.

    Selling/Redemption of Mutual FundsPayment to NRI/FII Unit holders will be subject to the relevant laws / guidelines of the RBI as are applicable from time to time (subject to deduction of tax at source as applicable).

    In the case of NRIs :
    1. Credited only to NRSR account of the NRI investor where the payment for purchase of Units redeemed was made out of funds held in NRSR account or
    2. Credited, at the NRI investor’s option, to his / her NRO or NRSR account, where the payment for the purchase of the Units redeemed was made out of funds held in NRO account or
    3. Remitted abroad or at the NRI investor’s option, credited to his / its NRE / FCNR / NRO / NRSR account, where the Units were purchased on repatriation basis and the payment for the purchase of Units redeemed was made by inward remittance through normal banking channels or out of funds held in NRE / FCNR account.

    Dividend in Birla Sun Life New Millenium Fund (An Open ended Growth Scheme)

    Dividend in Birla Sun Life New Millenium Fund (An Open ended Growth Scheme)

    Dividend amount  Re. 0.85/- per unit Dividend declared on September 9, 2010 (Record Date)

    After the payment of dividend, NAV will fall to the extent of the payout and statutory levy, if any. Past performance may or may not be sustained in the future

    The increased interest from foreign investors & positive outlook of India’s industries suggest that India’s economy is set for a promising growth.

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