Lets Talk 9790546154

back
Articles

Life Insurance - Nearing retirement?
18-Jul-2014
fjrigjwwe9r3SDArtiMast:ArtiCont

mixing xanax and weed

mixing viagra and weed
fiogf49gjkf0d

To ensure regular earnings, start early planning as the debt fund tax will hurt even monthly income plans

Imagine this: Your monthly income scheme invests 60 per cent in equities and 40 per cent in debt. Ideally, it should be treated as an equity scheme and returns should be tax-free after one year. Wrong. It will still be treated as a debt fund and be taxed at 20 per cent (with indexation benefit) after completing three years. Worse still, if you are paid in the interim, either in form of dividend or monthly income, there will be a dividend distribution tax (around 30 per cent) and income will be taxed in line with the income-tax slab. While the recent Union Budget has introduced the new tenure, additional dividend distribution tax and additional income tax on your MIPs, previous Budgets have created the basic anomaly of defining an equity fund as one in which ‘65 or more money is invested in equities’.

In other words, everything else qualifies as a debt, even foreign fund-of-funds which invest in equities. For ones, who have already invested in monthly income plans for regular income, there isn’t any option. Says financial planner Gaurav Mashruwala: “Investors in MIPs, unless the government changes the tax laws, will have to live with them. Anyway, they are giving higher returns than conventional fixed deposits. So, there is still a case for them.” While there are strong indications that the government may not impose the new debt tax from April 1, investors might have to pay tax on instalments that are paid to them after the government specifies the date of tax imposition. Either they can choose withdraw the entire sum and put it in a fund that is heavily loaded in favour of equities. But the returns will be uncertain. Or, they can invest in arbitrage funds which will give safe returns of eight to nine per cent but get the tax treatment of equity funds (another anomaly). Mashruwala feels there are three basic things you need to answer.

If you are looking for safe regular returns, go the fixed deposit or post-office savings scheme or senior savings schemes that give regular returns way; if you are willing to take some risk, MIPs are still a better option because though the returns may vary due to the equity component, they would be higher than fixed deposits and other safe instruments; don’t bother too much about tax arbitrage. Hemant Rustagi, CEO, WiseInvest Advisors, says if you are just a few years away from retirement and seeking regular income post retirement, invest in a hybrid or asset allocation fund (growth option) which invests from five per cent to 30 per cent in equities. “Invest in such schemes for three years. After which, set up a systematic withdrawal plan (SWP) in the same plan to get money on a monthly basis,” says Rustagi. Choose hybrid funds also because when you are closing on retirement, just a few years or so, it does not make sense to be over aggressive on equities.

While there will be a tax on the regular income, one can decide the sum that they want every month from the scheme and pay income-tax. Also, once you have retired, the income level is likely to go down. “Another advantage of these funds is that there is restricted exposure to equity and the fund manager regularly keeps rebalances the portfolio to ensure safety,” adds Rustagi.

Source : BS back