Mutual Funds - Taxation

Mutual Funds - Taxation

 

Mutual funds are tax efficient investment avenues. For instance:

·         Dividend income received from the Mutual Fund is exempt from tax in the hands of unit holder;

·         No tax is deducted at source for dividend income credited or paid by funds to its unit holders;

·         No tax is deducted on capital gains in case of redemptions made by resident unit holder;

·         The income earned by the mutual is exempt from tax, however in certain cases mutual fund has to pay dividend distribution tax;

·         In case of an individual or HUF, investing in Equity Linked Savings Schemes (ELSSs) an amount invested upto Rs.1 lakh in ELSSs is allowable as deductions from the taxable income in the year of investment. However, the investment is locked for three years pursuant to the nature of ELSSs.

 

Capital gains tax

Investors are required to pay tax if they make capital gains from the sale of mutual fund units. The capital gains may be both long term and short term in nature.

Capital gains are liable to tax based on:

·         The duration for which the Units of the Fund were held prior to redemption; and

·         The manner in which the redemption/switch is effected.

Gains arising on transfer of Units (say by sale/redemption/switch) held for a period in excess of 12 months are classified as long-term capital gains; in any other case, the gains are classified as short-term capital gains.

 

Long Term Capital Gains:

Equity Oriented Fund:

Long-term capital gains arising on redemption of units of an 'equity oriented fund', on which Security Transaction Tax (STT) has been paid, are exempt from income-tax in the hands of unit holders.

 

Other Funds:

In case of other funds Long Term Capital gains arising on redemption of Units are taxable at the rate of 20% (plus applicable surcharge and education cess) after claiming indexation benefit.

Alternatively, the Unit Holder may offer the long term capital gains realised on transfer of Units to tax at the rate of 10% (plus applicable surcharge and education cess), without claiming any indexation benefit.

In case of an individual or a HUF, being a resident, where the total income as reduced by such long term capital gains is below the maximum amount, which is not chargeable to income tax, then, such long term capital gain shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income tax and the tax on the balance of such long term capital gains shall be computed at the rate of 20% (plus applicable surcharge and education cess) after claiming indexation benefit.

Long term capital gains realised by FIIs/sub-accounts on transfer of Units are taxable at the rate of 10% (plus applicable surcharge and education cess), and the FIIs / sub-accounts will not be permitted to claim indexation benefit.

 

Short Term Capital Gains:

Equity Oriented Fund:

Short term capital gains arising on redemption of units of 'equity oriented funds' on which STT has been paid are taxable at the rate of 10% (plus applicable surcharge and education cess).

In case of an individual or a Hindu Undivided Family ('HUF'), being a resident, where the total income as reduced by such short term capital gains is below the maximum amount, which is not chargeable to income tax, then, such short term capital gain shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such short-term capital gains shall be computed at the rate of 10% (plus applicable surcharge and education cess).

 

Other Funds:

In case of Other Funds Short term capital gains realised on transfer of Units are taxable at the normal rates applicable to the Unit Holders. Surcharge and education cess would apply separately.

In case of an individual or a HUF, being a resident, where the total income as reduced by such short term capital gains is below the maximum amount, which is not chargeable to income tax, then, such short term capital gain shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income tax and the tax on the balance of such short term capital gains shall be computed at the normal rates applicable to the Unit Holders.

Short-term capital gains realised by FIIs/sub-accounts on transfer of Units are taxable at the rate of 30% (plus applicable surcharge and education cess).

 

Dividend distribution tax (DDT)

·         No distribution tax in is payable on income distributed by Equity Oriented Fund;

·         Any income distributed by a mutual fund (other than from Equity Oriented Fund) to its unit holders shall be chargeable to tax in the hands of the mutual fund and the mutual fund will be liable to pay tax on the income distributed to its unit holders at the rate of:

§        *12.5% (plus applicable surcharge and education cess) on income distributed by the mutual fund to its unit holders who are individuals or HUFs; and

§        *20% (plus applicable surcharge ad education cess) on income distributed by the mutual fund to all other categories of unit holders

*The Finance Bill, 2007 proposes to increase the rate of additional tax payable on income distributed by a liquid fund to its unit holders to 25% (plus applicable surcharge and education cess).

For the Unit Holder it means that the Fund will be exempt from tax on its income earned, but will be liable to pay distribution tax on income distributed to its Unit Holders in the manner described above. While the dividend income received in the hands of the unit holder is exempt from tax in their hands.

 

Tax treaty benefits:

Section 90 of the Act provides that taxation of non-resident investors would be governed by the provisions of the Act, or those of a Double Taxation Avoidance Agreement ('DTAA') that the Government of India has entered into with the Government of any other country of which the non-resident investors are tax resident. The provisions of the DTAA prevail over those of the Act if they are more beneficial to the taxpayer. Hence, the above rates are subject to applicable DTAA benefits, if applicable.

 

Surcharge and education cess:

Nature of person	Surcharge
Individuals, HUFs, body of individuals and association of persons	10% surcharge on tax payable if the total taxable income exceeds Rs 10,00,000
Artificial juridical persons	10% surcharge on tax payable
Firms and resident corporate taxpayers	**10% surcharge on tax payable
Non-resident corporate tax payers	**2.5% surcharge on tax payable
Co-operative societies and local authorities	No surcharge is applicable

 

** The Finance Bill, 2007 proposes to restrict the levy of surcharge to only those firms and corporate taxpayers having a total taxable income exceeding Rs 1 crore.

An education cess of ***2% is levied on all taxpayers - the education cess is to be paid on the tax payable, plus surcharge. Accordingly, the rates of tax and TDS rates mentioned above will be increased by the applicable surcharge and education cess.

*** The Finance Bill, 2007 proposes to increase the rate of levy of education cess from the existing 2% to 3%.

 

Wealth tax

Units in the Fund are not treated as 'assets' as defined in section 2(ea) of the Wealth Tax Act, 1957. Hence, they would not be liable to wealth tax.

 

Please note:

·     Please refer to the clause on "Tax Benefits of investing in the Scheme" as disclosed in the Offer Document.

·     The tax incidence to Unit Holders could vary materially based on characterization of income (ie capital gains versus business profits) accruing to them in the Fund.

·     In the context of international investors, there can be no assurance that tax treaty provisions, even if more favourable, will apply in determining their liability to tax in India.

·     Tax rates in India may change from time to time. Any such changes may adversely affect the taxation of the Fund and / or the Unit Holders in the Fund.

In view of the particularized nature of tax consequences, each investor is advised to consult its own tax advisor with respect to specific tax consequences of being a Unit Holder in the Fund.

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Indian Markets - A Smart recovery

Indian Markets  -  A Smart recovery

The markets opened in the positive on the back of strong global cues and then started to slip into negative territory post lunch. However, they soon staged a smart recovery in the last hour of trade to finally close with healthy gains. While the Sensex was up 117.08 points or 0.66% at 17,734.68, the Nifty gained 37.35 points or 0.72% to close at 5191.80. Broadmarket indices performed in line with the frontline indices as the BSE Midcap and Smallcap indices gained 1.05% and 0.64% respectively. The market breadth was positive as A/D ratio was 1.2:1 on the BSE. NSE cash turnover was Rs.12193.69cr vs. Rs. 12184.21cr yesterday.

Sectorally, barring the BSE Bankex and Capital Goods, all the BSE Indices ended higher. The BSE IT and Metals surged 4.77% and 3.83% respectively. Top Gainers amongst the index pivotals included Satyam Comp, Hindalco, Wipro, Tata Steel and Infosys. Losers were HDFC, ICICI Bank, BHEL, SBI and Grasim Inds.

While the main indices continue to remain rangebound a lot of stock specific action is being seen. We nevertheless continue with our go slow approach on fresh long positions due to continued global uncertainties and the fact that the main indices in India are yet to enter into a confirmed uptrend.

Source- Capital Markets

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International Markets- USA - 20 Feb 2008

US Market reverses direction and ends higher

US Market witnessed a rollercoaster ride but ultimately closed modestly higher for the day today, Wednesday, 20 February 2008. The day started on a pessimistic note with indices sliding down after a couple of weak economic reports. But in the second half, few comments from Fed chief shelved the concerns and the market turned upward to finish the day in positive ground.

Earlier in the day, the government reported that U.S. consumer prices rose a seasonally adjusted 0.4% last month. The core consumer-price index, which excludes food and energy costs, climbed 0.3% in January, its biggest jump since June 2006. Among other reports, January housing starts and building permits were roughly in-line with estimates.

Then in the afternoon session, the Federal Open Market Committee meeting minutes were out. Federal Reserve Chairman said that Fed is quite ready to ease interest rates further to help US economy find a solid footing. Fed raised its core inflation forecast for 2008 to 2.0% to 2.2% from 1.7% to 1.9%. The Fed also cut its 2008 GDP forecast to 1.3% to 2.0% from 1.8% to 2.5%.

After being down by almost 75 points earlier in the day, market made a U-turn and the Dow Jones industrial Average ended the day with a gain of 90 points at 12,427. The NASDAQ Composite Index finished higher by 21 points at 2,327. S&P 500 finished higher by 11 points at 1,360.

Twenty-three of thirty Dow stocks ended in the green today. H-P was the main Dow winner today. Verizon and AT&T continued to lead the group of Dow laggards even today.

Crude prices ended once again higher. Prices rose today after comments from Federal Reserve Chairmans that Fed is quite ready to ease interest rates further to help US economy find a solid footing. Oil also rose after the U.S. dollar fell enhancing the appeal of commodities as an inflation hedge. Crude-oil futures for light sweet crude for March delivery today closed at $100.74/barrel (higher by $0.73/barrel or 0.7%) on the New York Mercantile Exchange. Earlier in the session, the March contract, which expired today, hit a record all-time high of $101.32 a barrel.

Tomorrow's economic reports include Weekly jobless claims followed by January's Leading Economic Indicators. Philadelphia Fed Survey and Energy Information Administrations weekly oil and gas inventory report will follow them.

Source- Capital Market

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Mutual Funds News 21st Feb 2008

Mutual Funds News 21^st Feb 2008

IRDA asks insurers to follow proposal norms

Hyderabad: The Insurance Regulatory and Development Authority (IRDA) has asked the insurers to strictly follow norms with regard to proposal for insurance. The authority has advised all insurers to strictly follow the provisions relating to 'Proposal for insurance' (Section 4) under the IRDA (Protection of Policyholders' Interests), 2002. IRDA was in receipt of several complaints, citing instances of policies being issued without collecting a proposal form from customers as specified in Section 4.

 

StanChart's AMC sale talks at final stage

Standard Chartered's plans to sell its asset management company (AMC) has now entered its final stage and Swiss Bank UBS is expected to make another attempt to buy the AMC. But this time whoever gets it might have to pay much more because the valuations have shot up. After the first sale agreement with UBS was scrapped due to regulatory concerns the possible re-entry of UBS into the bidding process has once again raised questions about the future of the sale process.

Standard Chartered is currently in the final stages of the new bidding process. Sources say seven bidders have been shortlisted from a list of 40 and invited to submit financial bids.The bidders include prominent global names like Goldman Sachs, Lehman Brothers & Emirates Bank. UBS is also likely to re-enter the race, now that the RBI has cleared a full banking licence for the Swiss bank.With UBS making a surprise comeback into the race to bag Standard Chartered's lucrative asset management business, many question whether the new bidding process could also now be in jeopardy.

 

ICICI Prudential AMC bags Lipper awards

ICICI Prudential Asset Management has received the prestigious Lipper Fund Awards for 'Best Overall Fund Group over three years'. The fund house has also won awards for `Best Bond Fund Group' and `Best Mixed Assets Group'. These apart, the company has won awards for its three plans, --ICICI Prudential Gilt Fund Investment Plan-PF Opt Growth, ICICI Prudential Dynamic Plan-Growth and ICICI Prudential Long Term Plan.

ICICI Prudential Asset Management is a joint venture between ICICI Bank and UK-based Prudential Plc. The company has operations in 135 cities in the country and has assets under management of around Rs 64,04,507.55 crore as on January 31, 2008. The Lipper Fund Awards highlight funds that have excelled in delivering consistent strong risk-adjusted performance. Lipper awards are given to funds in 21 countries across Asia, Europe and America.

 

DSP Merrill Lynch MF launches new FMP Series

DSP Merrill Lynch MF has unveiled DSP Merrill Lynch Fixed Maturity Plan 3 Months Series 3. It is a close-ended income scheme. The scheme has tenure of 3 months. Objective: The primary investment objective of the schemes is to seek capital appreciation by investing in a portfolio of debt and money market securities. It is envisaged that the portfolio of each scheme will display a maturity profile that is generally in line with the term of the scheme. The schemes may also use fixed income derivatives for hedging and portfolio balancing. The fund will invest can invest up to 100% in debt instruments and up to 100% in money market. The scheme may invest up to a maximum of 100% of the scheme's net assets in domestic securitised debt.

 

DSP ML MF declares dividend

The DSP ML Financial mutual fund has announced the declaration of dividend under dividend option of DSP ML India T.I.G.E.R. Fund (The Infrastructure Growth and Economic Reforms Fund). The record date for dividend will be 22 February 2008.

The quantum of dividend is 50% i.e. Rs. 5.00 per unit on the face value of Rs. 10. The NAV of the scheme was recorded at Rs 27.945 as on 15 February 2008. DSP ML India T.I.G.E.R. Fund is open ended growth scheme, whose primary investment objective is to seek to generate capital appreciation, from a portfolio that is substantially constituted of equity securities of corporates, which could benefit from structural changes brought about by continuing liberalization in economic policies by the Government and/or from continuing investment in infrastructure, both by the public and private sector.

 

Reliance MF unleashes new Fixed Horizon Fund

Reliance MF launches Reliance Fixed Horizon Fund -VI-Series 2 and it is a close-ended income scheme with maturity period of 91 days from the date of allotment. The primary investment objective of the scheme is to seek to generate regular returns and growth of capital by investing in a diversified portfolio of central and state government securities and other fixed income/ debt securities normally maturing in line with the time profile of the series with the objective of limiting interest rate volatility. The scheme will invest 30%-100% in money market instruments. The scheme will invest 0%-70% in government securities issued by central and/or state government & other fixed income/ debt securities including but not limited to corporate bonds and securitised debt. Debt securities will also include securitised debt, which may go up to 70% of the portfolio. The total debt derivative exposure would be restricted to 50% of the net assets of the scheme. The fund shall not invest in equity derivatives.

 

UTI MF launches new FTI Series

UTI Mutual Fund has unveiled a fund called UTI Fixed Term Income Fund- Series IV Plan III -February 14 Months and it is a close-ended income scheme with plan tenure between 12 to 24 months. The objective of the scheme is to generate regular returns by investing in a portfolio of fixed income securities. The fund will invest 30%-100% in debt including securitised debt. It will have an investment of 0-70% in money market instruments. The plan invests up to 100% of its debt portfolio in securitised debt. The scheme charges an exit load of 3.00%, if the investment is redeemed before the maturity period. Whereas there will be no exit load charged on the redemption made on or after the maturity period.

 

ICICI MF declares dividend

ICICI Mutual Fund has announced 25 February 2008 as the record date for declaration of dividend under dividend option of ICICI Prudential Interval Fund II - Quarterly Interval Plan C. The fund house has decided to distribute 100% of surplus available as on record date. The NAV for the scheme was Rs. 10.1192 as on 18 February 2008. ICICI Prudential Interval Fund II - Quarterly Interval Plan C is a debt oriented interval scheme. The investment objective of the scheme is to seek to generate optimal returns consistent with moderate levels of risk and liquidity by investing in debt securities and money market securities.

 

Tata MF files an offer document

Tata Mutual Fund has rolled out a fund called Tata Small and Mid Cap Infrastructure Fund and it is an open-ended equity scheme. The investment objective of the scheme is to seek long-term capital appreciation by investing predominantly in small and mid cap stocks of companies engaged in or expected to benefit from the growth and development of infrastructure.

Tata Small and Mid Cap Infrastructure fund offers two options i.e. growth and dividend. Dividend option will have facility of dividend payout and dividend reinvestment. The scheme may invest 65-100% in small and mid cap stocks of companies engaged/ associated with infrastructure sector. It will have investment of 0-35% in other equity and equity related instruments. The scheme may prefer to invest 0-35% in debt, money market and securitized debt medium instruments. Investment by the scheme in securitized debt will not normally exceed 30% of net asset of the scheme. The scheme may levy 2.25% an entry load for each investment amount less than Rs. 2 crore. No entry load will be charged for the investment amount equal to or more than Rs 2 crore. The scheme carries an exit load for each investment amount less than Rs. 2 crore; it may charge 1% an exit load if redemption is done on or before expiry of 12 months from the date of allotment. For investment amount greater than or equal to Rs. 2 crore, the scheme may not charge any exit load.

 

HDFC MF declares dividend

HDFC Mutual Fund has announced 25 February 2008 as the record date for declaration of dividend under dividend option of HDFC Fixed Maturity Plan 90 Days November 2007 (2) under HDFC Fixed Maturity Plan -Series VI. The fund house has decided to distribute 100% of surplus available under its both retail and wholesale plans as on record date. The NAV for the scheme was Rs. 10.2081 as on 18 February 2008. HDFC Fixed Maturity Plan 90 Days November 2007 is a close-ended income scheme. The investment objective of the scheme is to seek to generate income by investments in debt, money market instruments, and government securities.

 

SBI MF launches new debt fund series

SBI Mutual Fund has launched a fund called SBI Debt Fund Series - 90 Days Fund and it is a close ended debt scheme. The objective of the scheme is to provide regular income, liquidity, and returns to the investors through investment in a portfolio comprising of debt instruments.

The fund will invest 0%-80% in Government of India dated securities and treasury bills and money market instruments. It will have an investment of 20-100% in AAA/AA+ bonds and debt instruments. The investment in securitised debt will be up to 20% of the exposure to AAA/AA+ bonds. SBI Debt Fund Series - 90 days offers two options i.e. growth and dividend. The dividend option further offers dividend payout facility. The scheme charges an exit load of 1.00%, if the investment is redeemed before the maturity period. Whereas there will be no exit load charged on the redemption made on or after the maturity period. The minimum investment amount under the scheme would be Rs 50,000 and in multiples of Rs 1000 per application.

 

Mutual funds continue selling

Mutual funds (MFs) sold shares worth a net Rs 326.80 crore on 19 February 2008, compared to their selling of Rs 45.10 crore on Monday, 18 February 2008. MFs' net outflow of Rs 326.80 crore on 19 February 2008 was a result of gross purchases Rs 618.70 crore and gross sales Rs 945.50 crore. The 30-share BSE Sensex rose 27.61 points or 0.15% at 18,075.66 on that day. MFs were net sellers of shares worth Rs 539.40 crore in this month, till 19 February 2008.

 

Seven suitors line up for StanCharts MF business

The race for Standard Chartered Mutual Fund is in the last lap, with around seven suitors in the fray, including Credit Agricole, Shinsei and IDFC. The price tag is $200 million, up from $120 million that UBS was willing to pay last year.

Initially there were 20 fund houses in the race including three from India. The base price for the deal was $137.5 million. In the final round, the lowest bid has been for $175 million while some were above $200 million.

Other players in the final leg are Fortis, Aviva, Mirae, a US fund major and a Middle East player. Incidentally Fortis is in the final stages of taking over ABN Amros AMC business in the country as part of its global deal past year. ABN Amro has assets under management of Rs 8529 crore as on the end of January. StanChart has AUMs of Rs 13,118 crore. The AMC which focused on debt schemes forayed into equity two years ago; today it has around 30% of its AUMs in stocks something that has pushed up the valuation.

As a part of the erstwhile deal with UBS, employees were to be given a retention bonus. This time depending on the final deal, either StanChart or the new buyer will give the bonus to the employees. The core team is expected to remain in place. Sources maintain that any new buyer would not only takeover the AMCs assets but its team.

The deal between StanChart and UBS was canceled as the latter failed to secure the Reserve Bank of India approval for the deal. When contacted, StanChart officials refused to comment on the process. Though StanChart would be more amenable to an overseas player taking over the fund, as it would mean a possible tie-up to distribute funds internationally, it is not against a domestic entity like IDFC.

Its perceived that a local buyer may be quicker in getting regulatory approvals.

Last year when the British bank tied up with UBS to sell the AMC business, it had also said that Standard Chartered Wealth Management will form a strategic alliance with UBS Global Asset Management to distribute mutual funds in Asia, Africa and the Middle East. It would look at a similar model this time too.

 

Crisil 'AAAf' rating to DSPML MF

Crisil has assigned AAAf rating to DSP Merrill Lynch Mutual Fund's DSP Merrill Lynch Cash Plus Fund, which indicates that the funds portfolio will provide very strong protection against losses due to credit defaults.

Crisil's assessment of a bond fund's credit quality is based on the creditworthiness of the fund's portfolio, for which it has developed a credit quality matrix to assess the aggregate credit quality of a fund's underlying portfolio.

The fund is managed by DSP Merrill Lynch Fund Managers.

 

JM Financial ML MF declares dividend

The JM Financial ML Financial mutual fund has announced the declaration of dividend under dividend option of the regular and institutional plan of JM ML Fixed Maturity Fund Series VI- Quarterly Plan 5. The record date for dividend will be 25 February 2008.

The AMC plans to distribute realized appreciation in the NAV of the plan / option from 27 December 2007 till the record date as dividend. The NAV of the scheme was recorded at Rs 10.1238 under regular plan and Rs 10.1314 under institutional plan as on 19 February 2008.

JM ML Fixed Maturity Plan Series VI- Quarterly Plan 5 is a close-ended income scheme, whose primary investment objective is to seek to generate regular returns through investment in fixed income securities normally maturing in line with the time profile of the respective plan.

 

Rolta India stocks likely to benefit MF scheme

Share prices of Rolta India went up by 3.26% to Rs. 313.55 reported at BSE at 10.43 a.m. on 21 February 2008 against previous day close of Rs 303.65.

The rising share prices may have positive impact on NAV of mutual fund schemes, which holds their stake in the company. Tata Capital Builder Fund (G) is likely to gain most as it has the highest percentage holding of the stocks of the company compared to its peer groups who have invested in the stocks of the company in January 2008. Tata Capital Builder Fund (G) was holding 2.60% of its total portfolio size invested in the stocks of the company as on 31 January 2008. The scheme holds 27200 units of the company in January 2008.

Other schemes, which likely to gain includes DSP ML Technology.com (G) with holding of 1.04 lakh units (1.72% of its portfolio), and LICMF Growth Fund (G) with 40000 units holding (1.20%) as on 31 January 2008.

 

Canara Bank loses by 3.41%

Share prices of Canara Bank went down by 3.41% to Rs. 278.00 reported at BSE at 10.52 a.m. on 21 February 2008 against previous day close of Rs 287.80.

Declining share prices may have negative impact on NAV of mutual fund schemes, which holds their stake in the bank. Reliance Banking Fund - (Bonus) is likely to lose as it has the highest percentage hold of the stocks of the bank compared to its peer groups who have invested in the stocks of the bank. Reliance Banking Fund - (Bonus) has 6.27% of its total portfolio size invested in the stocks of the bank as on 31 January 2008. The scheme holds 17.90 lakh units of the bank in January 2008 compared to its peer groups who have invested in the stocks of the bank.

Other schemes, which may affect includes ING Dividend Yield Fund (G) with 60155 units (6.03% of its portfolio), JM HI FI Fund (G) with holding of 75194 units (4.54%) as on 31 January 2008.

 

Mutual fund firms seek nod to offer more tax plans

Indian mutual fund firms have asked the government to allow them to offer investors multiple tax planning equity funds, seeking relaxation of a rule that limits the options they can offer to customers.

A regulation framed in 2005 restricts them to just one such fund or equity linked savings scheme (ELSS), limiting options for investors who have been increasingly using them to save tax.

ELSS is same as diversified equity funds except that they come with a three-year lock-in period. To cater to the rising interest in such funds, asset managers should be allowed to float as many ELSS as they wanted, to offer themes such as infrastructure, mid-cap, multi-cap or sectoral funds as available to them in other equity funds.

Two years ago, India allowed savers to claim tax benefit on investment of up to 100,000 rupees in ELSS, making them hugely popular among investors with assets of such funds rising nearly 25 times to 154 billion rupees in past three years.

FoFs and International Funds

The industry also wants fund of funds (FoFs), which invest in equity schemes, and other funds investing in overseas equities to be treated as equity funds to enable them to pay less tax.

Indian regulations classify funds investing more than 35% of assets in foreign equities and FoFs as debt funds and subject to higher taxes, making them unattractive. Investments in them attract long-term capital gains tax of 10% after a year, which domestic equity funds do not pay. Short-term gains tax can go up to 30%, while it is only 10% for equity funds. Investors also pay surcharge and cess.

 

HSBC MF launches HSBC FT Series 43

Name of Fund: HSBC Fixed Term Series 43

Scheme: It is a close-ended income scheme, which will be for fixed term of 14 months from the date of allotment.

Investment Objective: The investment objective of the scheme is to seek generation of returns by investing in a portfolio of fixed income instruments normally maturing in line with the time profile of the plan.

Asset allocation: The scheme may invest up to 100% in money market instruments (including CBLO and reverse repo) It may invest up to 100% in short term and medium term debt instruments and securitised debt. The investment in securitised debt will not exceed 50% of the net asset of the scheme. The net notional exposure to derivatives shall not be more than 50% of the net assets. Under normal circumstances, the scheme shall not have an exposure of more than 50% of its net assets in foreign securities.

Fund Opens: 19 February 2008

Fund Closes: 21 February 2008

Face Value: Rs 10

Investment Options: The scheme offers two plans i.e. regular and institutional plan. The scheme will have both growth and dividend option. Dividend reinvestment facility is available under dividend option.

Load structure: The scheme may not levy entry load as it is of close-ended nature. The scheme charges an exit load of 2.00% if the investment is redeemed before the maturity date.

Minimum Investment Amount: The minimum investment under regular plan is Rs 10,000 and in multiple of Re 1 thereafter. For institutional plan, the minimum investment amount is Rs 1 crore and in multiple of Re 1 thereafter.

Minimum subscription amount: Rs 5 crore

Benchmark Index: CRISIL Liquid Fund Index

Fund Manager: Mr Alok Sahoo and Mr Suyash Choudhary

 

Principal PNB MF launches FMP Series

Name of Fund: Principal Pnb Fixed Maturity Plan 460 Days - Series IV

Scheme: It is a close-ended scheme.

Objective: The primary objective of the scheme is to build an income-oriented portfolio and provide returns along with regular liquidity to investors.

Asset Allocation: The fund will invest up to 0%-100% in debt securities (including securitized debt) and money market instruments. It will have investment of 0-100% in government securities. Investment in securitised debt may be up to 100% of the net assets of the scheme.

Fund Opens: 19 February 2008

Fund Closes: 21 February 2008

Face Value: Rs 10

Investment Options: The scheme will have two-investment plans viz. regular plan and institutional plan with growth and dividend options under each plan. The dividend option under both plans will have the facility of payout and sweep.

Entry Load: No entry load will be charged during the new fund offer of the scheme.

Exit Load: The scheme may levy 1% an exit load on redemption of investment from the date allotment to 400 days.

Minimum Investment Amount: The minimum investment amount under regular plan is Rs 1000 and any amount thereafter. Under institutional plan, the minimum investment amount is Rs 50 lakh and any amount thereafter.

Benchmark Index: CRISIL Short Term Bond Fund Index

Fund Manager: Mr. Ritesh Jain

 

MFs crash but still promise long term gain

The bearish trend in the stock market for the last few weeks has hit the investors hard. Even those who have invested through mutual funds have lost substantial wealth. However, this has created a good opportunity to invest in the market.

It is expected that in the next one to three years, Indian stock market will give a return of more that 25% compounded annually. The investor should postpone the idea of liquidating their investments in the stock markets to invest some other assets class. Returns from the investment in the equity market would be more than other areas.

In the long term, equity is still the best instrument to invest. However, one should not enter the market with the short term view in the current market scenario.

The 30-share sensitive index has fallen by over 25% in the last one month from 20,827 on January 11 to 16,631 on 11 February 2008. This has brought down the share prices of many good performing companies to very attractive level. Prices of medium and small companies have become even more attractive.

The present fall in the market is mainly because of the apprehension of a slowdown in the US economy. The performance of India centric companies is likely to improve as economy continues to grow at around 8.5%. Investment in equity of these companies will remain robust.

There is no redemption pressure on mutual funds. Investors are still investing in MFs. According to one source, Reliance MF has raised over Rs 5,000 crore in the primary market. Other funds like HDFC Infrastructure has mobilized around Rs 2000 crore. AIG Fund has raised another Rs 450 crore. These funds are likely to start investing in the current week. Besides, funds are mobilizing substantial fund through systematic investment plan (SIP).

FIIs have also started coming back in the market. In February so far, there net investment has increased by Rs 330 crore as against a net sale of Rs 3,200 crore in January.

 

ICICI Prudential MF files an offer document

Name of Fund: ICICI Prudential Banking and Financial Services Fund

Scheme: An Open ended equity scheme

Objective: The primary objective of the scheme seeks to generate long-term capital appreciation to unit holders from a portfolio that is invested predominantly in equity and equity related securities of companies engaged in banking and financial services.

Investment options: Investors under the ICICI Prudential Banking and Financial Services Fund have a choice of a retail option and an institutional option I. Only growth sub-option is available under institutional option. The retail option has two sub options namely growth and divided with payout and reinvestment facility.

Asset Allocation: The scheme will invest 70-100% of its portfolio in equity and equity related securities. The scheme will invest 0-30% in debt instruments including cash and cash equivalent. The plan may invest up to 70% in derivative instruments. It may invest up to 50% in securitised debt. The scheme may have investment in ADR/GDR 50% of allocation to equity and equity related securities.

Face Value: Rs 10.

Entry Load: The scheme carries an entry load only under retail option. There will be an entry load of 2.25% for investment of less than Rs 5 crore. There will not be any entry load charged for investment of Rs 5 crore and above. Institutional option I does not carry an entry load.

Exit Load:

Under retail option: For investment less than Rs. 5 crore and made during the NFO period and redeemed before 6 months from the date of allotment, there will be 1% an entry load. There will be no entry load levied for investment of Rs.5 crore and above.

Under institutional option I, there will be no exit load charged.

Minimum Investment Amount: The minimum investment amount under retail option is Rs. 5000 and in multiples of Re.1 thereafter. Under institutional option, the minimum investment option I is Rs 10 crore in multiples of Re 1 thereafter.

Minimum target amount: Rs 1 crore

Benchmark Index: BSE Bankex

Fund Manager: Mr. S. Naren and Mr Amit Mehta

 

Franklin Templeton MF ties up with State Bank of Travancore

Franklin Templeton Mutual Fund and State Bank of Travancore have entered into a pact for distribution of latter's mutual fund products.

The bank has been distributing mutual fund products of SBI Mutual Fund for the last four years. The tie-up arrangement with Franklin Templeton Investments has been made to provide value added services to all its customers and other investors.

 

Reliance MF files an offer document with SEBI

Name of Fund: Reliance Fixed Horizon Fund IX

Scheme: It is a close-ended income scheme. The scheme offers 12 Series with different maturity. The offers under Series 1 to 4 having 15 to 18 months duration, Series 5 to 8 having 18 months 1 day to 21 months and Series 9 to 12 with maturity period 21 months 1 day to 25 months.

Objective: The primary investment objective of the scheme is to seek to generate regular returns and growth of capital by investing in a diversified portfolio of central and state government securities and other fixed income/ debt securities normally maturing in line with the time profile of the series with the objective of limiting interest rate volatility.

Asset Allocation: The scheme will invest 0-70% in money market instruments. The scheme will invest 30-100% in government securities issued by central and/or state government & other fixed income/ debt securities including but not limited to corporate bonds and securitised debt. Debt securities will also include securitized debt, which may go up to 100% of the portfolio. The average maturity of the securities will be in line with the maturity profile of the scheme.

Face Value: Rs 10 per unit.

Investment Options: The scheme will have retail and institutional plan and each plan will have a growth option and dividend payout option.

Entry Load: Being a close end scheme it will not charge any entry load under all the series during the initial offer.

Exit Load:

Under Series 1 to 4: The scheme charges an exit load of 2.00% if the investment is redeemed on or before completion of 6 months. The scheme charges an exit load of 1.00% if the investment is redeemed between 6 months-1 day and before completion of 12 months. It further reduced to 0.25% if redeemed between 12 months-1 day and before the maturity of the scheme.

Under Series 5 to 8: The scheme charges an exit load of 2.00% if the investment is redeemed on or before completion of 6 months. The scheme charges an exit load of 1.00% if the investment is redeemed between 6 months-1 day and before completion of 15 months. It further reduced to 0.25% if redeemed between 15 months-1 day and before the maturity of the scheme.

Under Series 9 to 12: The scheme charges an exit load of 2.00% if the investment is redeemed on or before completion of 12 months. The scheme charges an exit load of 1.00% if the investment is redeemed between 6 months-1 day and before completion of 18 months. It further reduced to 0.25% if redeemed between 18 months-1 day and before the maturity of the scheme.

Minimum Investment Amount: The minimum investment amount under retail plan is Rs 5,000 and in multiple of Re 1 thereafter. The minimum investment amount under institutional plan is Rs 1 crore and in multiple of Re 1 thereafter.

Benchmark Index: CRISIL Composite Bond Fund Index

Fund Manager: Mr. Amit Tripathi

 

Escorts MF declares dividend
Escorts Mutual Fund declared dividend under its two schemes namely- Escorts Income Fund and Escorts Opportunities Fund.

Scheme	Monthly Dividend	Rate of Monthly Dividend per unit (In Rs.)	Record Date	NAV as on 18-02-2008
Escorts Income Plan	102nd	0.035	26-02-2008	Dividend Option-10.4912 Growth Option-24.4573 Bonus Option-12.8793
Escorts Opportunities Fund	70th	0.160	26-02-2008	Dividend Option-15.1167 Growth Option-31.1914

 

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Economy News 21st Feb 2008

Economy News 21^st Feb 2008

• Rupee plunges to 5-month low of 39.90
• Budget may roll tax sops for power sector
• Budget likely to give relief to income tax payers
• Budget wishlist: Excise duty drop on steel
• Budget may cut excise duties to boost manufacturing
• Indian salaries rose an average 15.1% in 2007:Hewitt Associates

     

Rupee plunges to 5-month low of 39.90

The Indian rupee plunged by 13 paise against the greenback on Feb 19 to close at its five-month low of 39.90/91 as heavy demand for dollar continued to pour in from domestic banks amidst the US currency's scarce availability globally. At the Interbank Foreign Exchange (Forex) market, the Indian unit fell to the intra-day low of 39.94 a dollar after resuming steady at 39.75/77 a dollar. It had fallen by ten paise to close at 39.77/78 per dollar on Feb 18.

 

Budget may roll tax sops for power sector

The Union Budget is an opportunity both for populist as well as meaningful measures to kickstart various sectors and power is one such area, which could do with more incentives. Finance Minister P Chidambaram is all set to announce a new set of measures to add capacity in the sector. According to sources, there may be an excise cut on power equipments from 16 per cent to 10 per cent. The income tax exemption for investment of up to Rs 50,000 in power bonds may be allowed, sources said, adding that CFLs and Energy efficient ACs may get excise cut by 5-6 per cent. The appreciation of rupee may hold FM from making any change in customs duty currently at 5 per cent for non-mega power projects but the cut in excise duty rates may be sufficient for the industry as the cut will translate into lower operational cost for the companies in the business.

The power sector also feels there is a strong case for rationalization in duties as that will make the sector more attractive. "There is a case for excise duty cut," said Ravi Uppal, Chairman, ABB India. The electrical equipment companies have grown at a rapid pace in the last few years. However, going by the order inflows of these companies and with the sops expected in the budget, we can expect a much higher growth in the sector. With spiraling fuel prices, there is an urgent need to give incentive to renewable and non-conventional energy and the finance minister may do exactly the same.

 

Budget likely to give relief to income tax payers

Income tax payers are likely to get a major relief in the Budget 2008-09, as the government prepares itself to please the middle class in the election year.Finance Minister P Chidambaram can give a marginal but visible relief to personal income tax assessees this year, as tax collections have substantially improved over the past three years. With buoyant tax collections in 2007-08, there is significant pressure on Chidambaram to reduce the effective rates. The Minister himself has acknowledged that with better tax compliance, there could be a case for cut in rates. The minimum income threshold limit for income tax payer could be raised from Rs 1,10,000 to Rs 1,25,000 or Rs 1,30,000, sources said. Similarly, the income threshold for 30 per cent tax rate could be raised from the current Rs 2,50,000 per annum, sources said, adding that this had been kept constant since fiscal year 2005-06.

 

Budget wishlist: Excise duty drop on steel

First came the price rollback and now India's steel lobby wants the Finance Minister P Chidambaram to do his bit to bring down the price even more, a relief not just for the aam admi but also for the industry. The Union Steel Minister Ram Vilas Paswan has already flagged off the agenda seeking to halve the excise duty to 8 per cent but expectations don't stop here.Tax cuts The steel minister proposes to reduce excise duty on steel to half from 8 per cent, export tax to be up on iron ore and Import duty on iron ore to be nil besides cut in import tax on coking coal to nil from 5 per cent.The steel lobby also wants hike tax on iron ore exports and a simultaneous cut in customs on ore imports. The industry is also demanding to coke coal imports duty free and cut in customs duty on other raw materials like zinc, nickle, LNG.

The iron ore exports should be banned. Declining profits The steel sector has seen many ups and downs in one year since the last budget. Looking at the ups, yes the steel prices have gone up but they have not been able to catch up with the raw material price hikes and this has squeezed the margins of the steel players but those feeling the heat the most are the smaller steel producers.

 

Budget may cut excise duties to boost manufacturing

Concerned over the slump in industrial production and to maintain inflation around 4 per cent, the Government is likely to provide relief to the manufacturing sector by marginally cutting excise duty rates or sector-specific duties in the Budget 2008-09. Finance Minister P Chidambaram may announce cut in excise duty rates across the board from 16 per cent to 14 per cent or sector-specific duty cuts in the budget to be presented on February 29, official sources said. Sectors like pharmaceutical, textile machinery, food processing, paper and auto including two wheelers, tyres are expected to get relief in excise duty, but like last year Chidambaram could also prune excise duty exemptions to maintain revenue collections, sources said.

According to Finance Ministry, due to various excise duty exemptions the estimated revenue foregone touched Rs 9,690 crore in 2006-07 as against Rs 66,760 crore in the previous year. It includes area-specific tax exemptions of Rs 7,000 crore in 2006-07. With the approval of over 400 special economic zones, the revenue foregone figures could be much higher for 2007-08, although some tax exemptions were withdrawn in the last budget.

 

Indian salaries rose an average 15.1% in 2007:Hewitt Associates

According to a survey by human resources firm Hewitt Associates, Indian salaries rose an average 15.1% in 2007 with the highest increase coming from the real estate sector. Compensation in the real estate sector surged 25.2% in 2007. Salary rise for employees at junior, senior and middle management levels was higher than that for the top mangement.

Hewitt expects the momentum to continue in 2008, rising about 15.2%, but will stabilise at 9%-10% by 2012.

The report suggests the struggle for talent and sustainability is large and rapidly growing in India. However, it also forecasts a shortage of people with specialist and technical skills and lack of leadership talent in India.

Hewitt found that the attrition rate was at an all-time high, led by insurance industry, followed by IT-enabled services and hospitality sectors.

 

Direct tax collections surged over 40% in Apr 07-15 Feb 08.

Direct tax collections surged over 40% in April 2007-15 February 2008. Net direct tax collections jumped 41.4% to Rs 228745 crore from Rs 161776 crore in the corresponding period of the previous fiscal. It achieved over 85% of budgeted direct tax target of Rs 267490 crore.

Corporate tax collection advanced 38.78% to Rs 138073 crore in April 2007-15 February 2008 compared with Rs 99488 crore in the corresponding period of the previous fiscal. Personal Income Tax (including FBT, STT and BCTT) catapulted 45.64% to Rs 90356 crore from Rs 62040 crore.

Securities transaction tax (STT) leaped 84.64% to Rs 7878 crore as against Rs 4267 crore. Fringe benefit tax (FBT) scaled up 29.75% to Rs 5216 crore from Rs 4020 crore. Banking cash transaction tax (BCTT) rose 16.81% to Rs 478 crore compared with Rs 409 crore.

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