Tax Treatment of Public Provident Fund (PPF)

Public Provident Fund or PPF is one of the most popular investment options in India. It is statutory scheme of the Central Government of India which came into effect in the year 1968.

Currently, the interest rate offered through PPF is around 8.8% which is compounded annually. The rate of interest is applicable for FY 2012-13 w.e.f 01-Apr-2012. It is credited to the PPF account at the end of each financial year.
Currently, PPF comes under "EEE"(Exempt, Exempt, Exempt) method of taxation — wherein it is exempted at the points of investment, interest earned is totally exempt from tax and this applies to final maturity amount as well.

How:
1. When you make investment in Public Provident Fund
The investment made in PPF account are eligible for tax deduction under Section 80C of the IT Act. The investment however is limited to a maximum of Rs.100,000/- per year per person. This limit of Rs.100,000/- includes the deposits made in the name of any dependent children.


2. When you earn Interest on your investment in PPF - Tax Free Interest
The interest earned from your Public Provident Fund is totally exempt from tax under section 10 (11) of income tax act.


3. When you withdraw your PPF on maturity - Tax Free on Maturity
Amount received on maturity of PPF is fully exempt from tax and further If you extend the period with contribution option , you can avail exemption u/s 80C. Even under the proposed direct taxes code, PPF will continue to enjoy the same tax advantage.

Website address and the contact number of Mutual Fund Companies in India

Top Performing Mutual Funds in India June 2012

 

 

Tax Treatment for Equity Linked Savings Scheme (ELSS)

Equity Linked Saving Scheme is an open-ended equity growth scheme that is offered by mutual funds in line with existing ELSS guidelines. The investments under this type of scheme are subject to a lock-in period of 3 years and, as per the Finance Act 2005, are allowed the benefit of income deduction up to Rs. 1,00,000 under Sec 80C of Income Tax ACT . 

Currently, ELSS comes under "EEE"(Exempt, Exempt, Exempt) method of taxation  — wherein it is exempted at the points of investment, in the entire tenure of the investment and as well at the time of withdrawal.

     ELSS = Tax Benefits + Long Term Capital Appreciation

Also Refer

Which Mutual Fund Schemes are eligible for tax deduction under section 80C?

How:

1. When you make investment in ELSS Fund

 Your taxable income is reduced by the amount of investment made subject to a maximum investment of Rs. 100,000,means you get tax deduction under section 80C of income tax act.

2. When you earn income in the form of Dividend 

Dividends received from ELSS funds are also exempt from tax, as  ELSS Funds are mainly Equity Schemes, so there is no dividend distribution tax, so dividend is tax free in the hands of investors.

3. When you Redeem ELSS mutual fund units- Tax Treatment on Maturity of Investment in ELSS Fund

AS you know ELSS Funds are locked in for three years, so after three year when you sell ELSS units, they are considered as Long Term investment and currently long term capital gains are tax free.

Also refer

Is the dividend re-investment in a Tax Saver fund also subject to a lock-in period of 3 years?

 I am not able to redeem all units in ELSS Scheme?

 Explain Lock in Period in ELSS Mutual funds

How to register Mutual Fund SIP online - step by step process

An existing mutual fund investor, who has a User id and Transaction Pin, can avail of this facility by logging in on mutual fund website.Once you have logged in to mutual fund website, click on 'Register for SIP' and follow the instructions which will guide you through the entire process. 

• Fill the registration form- SIP Details 

• Confirm your registration 

The SIP confirmation page will be displayed. To change any details, click on EDIT. Check for correctness and click CONFIRM. 

 Upon clicking CONFIRM, a summary page will be displayed mentioning the Transaction Number and the SIP Registration Number (SRN)

•   Registration of Biller in your Net Banking Account

 (This step is very important for execution of your registration and regular debit of your SIP).

•  Login to your banks website and register Mutual fund as a Biller.

In order to complete your SIP registration with your bank, please log on to your bank’s net banking facility and register for auto debit instructions of your SIP installment directly from your account. It is recommend that you select the auto-payment option.

 Please input the SIP Registration Number (SRN) in the field requesting the Biller Reference Number.

Note your SIP Registration Number (SRN)/Unique Registration Number (URN) for future reference 

Important points to relater to SRN Number 

• Please complete your SIP registration with your bank within 10 days from today. 
• The SRN will be invalid if the registration on your bank's website is not completed within the specified period.
• If the SIP registration with your bank is not completed by you, units created in your folio for the aforesaid SIP, if any, will be reversed.

 Example:

SIP Registration in HDFC Mutual Fund

  

Important points related to adding mutual fund biller in your net banking account.

In your net banking Account, you need to select the option Bill Pay, check the list of Billers you can register in your bank for auto debit, check whether mutual fund is allowed in your bank account as biller, If mutual fund option is not allowed, then you can’t register sip online.

 

• To add an AutoPay Instruction for a biller, Click on 'Set'
• To modify or to delete an existing AutoPay instruction, click on 'Modify'
• Addition of AutoPay Instruction for a biller or any modification of AutoPay (change or deletion of existing instructions) will be effective from the next billing cycle/payment.
• For AutoPay setup for 'Presentment' and 'Presentment & Payment' type of billers, the bills will be paid 4 days prior to the due date.
• For payment type of billers, AutoPay will be enabled for the amount specified by you and will be paid on the date as specified at the time of setting up the AutoPay instruction.

Process

1. Click on Bill Pay

2. Register for a New Biller

3.  Select your Bill location and category of biller

4.  Add Biller details that is SRN number (SIP Registration Number)

5. Select option Pay exact amount on due date

6. After Adding verify and confirm the details.

How to register Mutual Fund SIP online - step by step process for ICICI- Example (Register SIP for RMF)

Switch out is now possible only after Realisation of Funds..

Wef June 1, 2012 - Amfi has asked mutual fund houses to process switches the very same way they process the redemption of mutual fund units that is now on Uniform process would be followed for processing of redemption/switch-out for all the Schemes of the Mutual Fund.

Pursuant to Association of Mutual Funds in India (AMFI) Best Practice Guidelines Circular No.28/2012-13 dated May 15, 2012, unit holders are requested to note that application for redemption/switch-out for units, for which funds are not realized via purchase or switch-in in the scheme of the Mutual Fund, shall be liable to be rejected.

In other words,redemption or switch out of units will be processed only if the funds for such units are realized in the scheme, by way of payment instructions/transfer or switch-in funding process.

For Example, A invests in a liquid fund on Monday and requests to switch out to an equity fund on Tuesday. This way, A earns returns for one day when the AMC has not yet received the funds. Fund houses usually receive money on the third or fourth day. These returns in effect are being paid out by existing investors. If you invest in an equity fund on Monday, we give the same day's NAV. The money is realised only on Thursday. Some investors give a switch-out request on Tuesday from an equity to a liquid fund. The source fund (equity fund) makes the payment to the liquid fund (switch-out fund) without realising funds. Then investors exit out of the liquid fund on the third day (Wednesday).

This latest AMFI circular says that all switch-outs should be done only after realisation of funds. Now, you can’t redeem unless the money is realised by the AMC.

Further, all switch funding shall be in line with redemption funding timelines adopted by the concerned scheme i.e. if a scheme follows T+3 payout for redemption, the switch out funding will also be made on T+3 and not earlier or later than T+3, where T is the day of transaction.

How to convert Mutual Fund Units into electronic (demat) form - Through your Depository Participant (DP)

Dematerialization of Mutual Fund Units means holding mutual fund units in demat form. SEBI now allowed mutual fund investments to be held in dematerialized form.

 It means that investors will have the option to convert their existing mutual fund investments into dematerialized form and buy/sell units through stock exchanges.

How to convert mutual fund units in demat Form:

 

1.  Obtain Conversion Request Form (CRF) from your DP.

2.  Fill-up the Conversion Request Form (CRF).

3.  Submit the CRF along with the Statement of Account to your DP.

4.  After due verification, the DP would send the CRF and Statement of Account
       to the AMC / RTA.

5.  The AMC / RTA after due verification will confirm the conversion request
       and the Mutual Fund Units in your demat account will be credited.

Important points to remember at the time of filling Conversion Request Form (CRF)

1.  It is mandatory to mention the ISIN* (International Securities Identification Number) of the Mutual Fund schemes while filling up the CRF 

Now what is ISIN Number?

ISIN mean  International Security Identification Number. ISIN  is a unique 12 digit alpha-numeric identification number allotted to the Mutual Fund Scheme. Each scheme will have an unique ISIN. It can be obtained from amfi India.com, NSDL or CSDL and has to be included in the CRF/DRF.

Click here to check the ISIN number of mutual fund scheme

 http://www.amfiindia.com/schemedetails.aspx

https://nsdl.co.in/downloadables/html/hold-mutual-fund-units.html

http://www.cdslindia.com/publication/downloadsMutualfund.jsp

2. Submit Separate CRF for each folio number.

3.  If mutual fund units are in locked-in and free under the same ISIN, in such case You will be required to submit a separate CRF for locked-in and free units if
such Mutual Fund Units (represented by Statement of Account) are held under
the same ISIN.

 4.  The name and pattern of the holding must be same in demat account and Statement of Account.

 If the name and pattern of holding in your demat account is different from the name and pattern held in Statement of Account, Mutual Fund Units cannot be converted into dematerialised form as there is a mismatch in the pattern of holding.

 

5. Nominee Details:  The nomination present in a demat account will also be applicable for Mutual Fund Units held in that demat account. If you so desire, you can change the nominee in your demat account by simply filling-up the nomination form once again and submit it to your DP or open another demat account to nominate the desired person as a nominee in that demat account.

How to Purchase and sale after mutual fund units converted in demat form
Purchase  

 You can subscribe for mutual fund units through your Stock Broker using the Stock Exchange platform. Upon subscription, your Stock Broker i.e., Clearing Member will credit the Mutual Fund Units into your demat account.

 Sale

 You can redeem your mutual fund units held in dematerialised form through two different modes i.e., through your DP or stock broker.

1. If redemption is through your DP

•  Obtain Redemption Form (RF) from your DP.
• Fill-up the RF form and submit it to your DP.
• After due verification, your DP will execute electronic redemption request, which will be electronically forwarded to the AMC / RTA
• The AMC / RTA will verify the redemption request and if in order, confirm the electronic request and make the payment as per your bank account details available in your demat account.

2. If redemption is through your stock broker

 you will have to submit delivery instruction slip (DIS) to your DP to transfer the mutual fund units to a designated CM Pool account of National Securities Clearing Corporation Limited 

 

Advantages of Holding units in demat form

• You will receive single transaction statement from your DP, which will
  display all the securities and Mutual Fund Units held in your demat account.
•  You will get consolidated and updated portfolio view of all your holdings across stock and mutual funds and it makes monitoring various investments much easier.
•  Single entity to be notified in case of change in details like change in bank details, address, or nomination details and

Disadvantages of Holding units in Demat Form 

You need to keep in mind that this convenience comes with a cost. 

This will result in paying additional cost for your mutual fund investment.

How 

 1. Demat Account Annual Maintenance charges

 Opening a new demat account means additional cost in the form of annual maintenance charges. These can vary from Rs 300-500 a year. You will also need to open a trading account with a brokerage house.

2. Transaction Charges

This differ from DP to DP, The DP also levies a charge. Each time a security moves out of your demat account, you need to pay a fixed charge of Rs 20 per transaction.

Dormant Mutual Fund Account Statement (CAS) - Don't Get Confused!

Dormant Account status is creating confusion among Mutual Fund Investors.
Don't get confused if you have received any Account Statement (CAS) showing status as Dormant.

The term Dormant means inactivity in particular folio. As per Sebi's directions fund houses had issued CAS Dormant Statement to notify those investors who had not transacted for six months or more so.

Registrars tags folio as Dormant, if there is no transaction in that folio for six months, The purpose of sending this dormant statement is to inform investors about the investment they made and may be forget about that investment. Investor don't need to worry if you have received any such statement. 

Also refer

Dormant Mutual fund Account Statement is now replaced with Half Yearly Account Statement !

Update: June 20, 2012
 
From the next statement cycle - that is April-September 2012 reports due in Oct 12, the words "Dormant Account" will be removed and will be replaced with a more explicit statement which simply says that no transactions have been executed for the last 6 months. This move should help avoid the needless confusion from the terminology "dormant accounts".

- Wealth Forum

Dividend in DSP Black Rock Opportunities Fund, record date June 15, 2012

DSP BlackRock Mutual Fund has announced dividend under dividend option of DSP BlackRock Opportunities Fund. The quantum of dividend will be Rs.2.50 per unit. The record date has been fixed as June 15, 2012.

Insufficient funds in your bank account on SIP due date!!

What happens if your Mutual Fund Sip is registered for ECS/Auto debit  and there is insufficient funds in your bank account on sip due date?

If the ECS instructions/ Auto debit bounces on sip due date, the units allotted would be reversed. The SIP will continue. Fund houses are usually quite lenient in these matters and will overlook one or two instances of an SIP ECS/auto debit bouncing, and will not charge anything for reversal and will not produce the sip again if  transaction got reversed.

Your Bank may charge you for reversal of transaction and charges differ from bank to bank.

However if there are three recurring instances of SIP bounce then the SIP registration would be discontinued.

The Scheme Information Documents do contain details of when an SIP will be ceased. For example, it may be mentioned that if an SIP auto debit isn't honoured for a few consecutive instalments (the exact number of instalments — usually three — will be mentioned in the scheme documents for the respective fund), the SIP will be ceased and a communication will be sent to the investor.

 I have registered an SIP with auto debit. I wish to change the bank from which the amount is being debited. Can I change the bank mandate from which the SIP amount is currently going ??

 Yes, bank mandate can be changed. A fresh SIP Auto Debit Form has to be issued for the same.

The SIP auto-debit form of mutual funds contain the option to  Change bank mandate.  Investors may select this option in the form and submit it at either the mutual fund's branch, Karvy or CAMS Service Centre. It will take approximately 30 days to effect the change, and for debits to go to the new bank. 

For Change in SIP Bank mandate you have to submit:

1. Fresh SIP Mandate dully filled and signed by the investor

2.  cancelled cheque leaf of the new bank 

Also refer

Can I Cancel my SIP before the tenure??

How to create online access for Investments in Birla Mutual fund.

How to register for Franklin Templeton Easy Services

Franklin Templeton provides ‘Easy’ range of services that make it truly easy for you to access your account information and transact at anytime and from anywhere. 

 

 To register for the above facilities, all you have to do is, visit here:

https://www.franklintempletonindia.com/aspx_app/GeneralAccess/EasyServices/RegisterEasyServices.aspx

1. Simply enter your customer folio, mobile number and/or email id
2. Click "submit" and
3. And complete a simple validation process.

 

 

 

 Investors who have registered their email id with Franklin Templeton can avail of the following services

Subscriptions
Notifications

 

If you are register for Investor mail back then you will receive following information in your registered email address, select the service and format in which you would like to receive:

1. Account Statement

2. Portfolio Valuation

3. Capital Gain Statement

4. Transaction Details 

5. Dividend Details

Link of web page as where you can register for above services.

https://www.franklintempletonindia.com/aspx_app/Generalaccess/Mailbacks/InvNotification.aspx

 

 

Merger of Sundaram India Leadership Fund with Sundaram Growth Fund with effect from 11th July 2012.

Sundaram Mutual Fund has approved the merger of Sundaram India Leadership Fund with Sundaram Growth Fund. The merger will be effective from July 11, 2012, and investors have been given an option to exit without payment of any exit load between June 11 and July 10.  

Long term capital gain tax on gold mutual funds- NRI Investment

Query of Blog Reader:

I shall appreciate if you could let me know what is long term capital gain tax on gold saving mutual fund. XXXXX MF have deducted 22% on the gold mutual fund I sold after 1 year of possession. Which method they should follow 11% or 20% with indexation. I had them for 1 year 12 months. What indexation they should apply? Hope to hear soon from you

After reading your query it seems you tax status is NRI as tax is deducted at source.

In case of NRI's, TDS will be deducted on the sale proceeds. The TDS will deducted depending upon whether it is a short-term capital gain or long term capital gains.

 

The tax system for Gold Savings Fund or Gold ETF is similar to that of non-equity mutual funds like debt funds. When computing income tax, gold exchange traded funds are treated as debt funds.

How is TDS calculated for NRI Investment ?

 Long Term Capital Gain Tax on Gold mutual Funds for NRI 

TDS rate for Long Term NRI investor's under Non-Equity Scheme(s) = 20% with indexation benefit. (A)
Surcharge = A x 10% = 2% (B)
Education Cess = A + B x 3% = 0.66% (C)
TDS to be deducted = A + B + C = 22.66%

 

 TDS rate for Long Term NRI investor's under Equity Scheme(s) = NIL