e-DRS

 

The Central Board of Direct Taxes (CBDT) recently launched the e-Dispute Resolution Scheme (e-DRS) to make the resolution of income tax dispute simpler, more effective and more productive. This online platform allows taxpayers to submit application to dispute resolution committees (DRCs) across India. It is an alternative to the traditional legal proceeding that already exists. Eighteen DRCs have been set up to accept applications. DRC can modify orders, reduce or wave penalties, and grant immunity from prosecution.

Who is eligible?

Eligibility is limited to those with total income of up to Rs 50 lakh and a tax variation not exceeding Rs 10 lakh for the relevant assessment year. A taxpayer can apply for e-DRS for a specified order including draft orders, intimations, certain assessments, orders increasing assessment or reducing loss, and orders related to tax deduction or collection (subject to condition) . However orders from search, survey proceedings or international agreements are excluded. Taxpayer prosecuted for specified offence under the income-tax Act, 1961, or other specified Acts are also excluded.

Faster and cost-effective

E-DSR offers a faster and more cost-effective alternative to traditional to traditional litigation the DSC is required to pass orders within six months after admitting the application. Once the DRC accepts the application, tax and interest must be paid, but penalties (up to 100 per cent for under –reporting or 200 per cent for misreporting) and prosecution can be waived.

Limited mandate

Not all disputes qualify. Complex cases may still require traditional litigation. DRC decisions are typically final and binding on taxpayers. If the proceedings are terminated or relief is denied, the decision cannot be appealed, which is the key drawback of the scheme. In such a cases the only option for the taxpayer is to challenge the DRC order through a write petition in the high court.

Essential Guide To Filing Form-34BC

Taxpayers can apply by filing Form-34BC on the income tax portal, by paying fee of Rs. 1000. Form 34bc can only be filed online through the e-filing portal. Lastly taxpayer can e-verify Form -34BC using Aadhaar OTP, electronic verification code (EVC) or Digital Signature Certificate (DSC).

Source: Business Standard.

DETAILS DISCUSSION ON DIVIDEND YIELD MUTUAL FUND

 

 Dividend Yield fund: A dividend yield fund invests in stocks that offer attractive dividend yields. Dividend yield is defined as dividend per share divided by the share’s market price. For example if a  stock quoting at Rs. 1000 pays out a dividend of Rs 30, the dividend yield works out to be 3 per cent.  Most of these funds invest in stocks of companies having a dividend yield higher than the dividend yield of a particular index, i.e., Sensex or Nifty. The prices of dividend yielding stocks are generally less volatile than growth stocks. Besides, they also offer the potential to appreciate. Among diversified equity funds, dividend yield funds are considered to be a medium-risk proposition. However, it is important to note that dividend yield funds have not always proved resilient in short term corrective phases. There are two options for earning Income from Mutual Fund Schemes which are enumerated as under:

  Growth/Appreciation or Cumulative Option: Under this option, the investor doesn’t get any intermittent income. The investor gets income only at the time of withdrawal of investment.  Till the time of withdrawal, the return gets accumulated & is paid back to the investor at the time of withdrawal in the form of capital gain.

  Dividend Option: At a regular frequency may be monthly/quarterly/half yearly or Annual, the Scheme declares dividend to the unit holders of the Scheme. Dividend option is further divided in two sub-options as under:

 • Dividend Payout Option: Dividends are paid out to the unit holders under this option. However, the NAV of the units falls to the extent of the dividend paid out and applicable statutory levies

. • Dividend Re-investment Option: The dividend that accrues on units under option is reinvested back into the scheme at ex-dividend NAV. Hence, investors receive additional units on their investments in lieu of dividends.

TAX IMPLICATION OF EARLY REDEMPTION FOR S G B s (Sovereign Gold Bond)

 

The Reserve Bank of India (RBI) has announced an early redemption of sovereign gold bonds (S G B s) issued between May 2017 and March 2020. The redemption will take place in two phases, starting from October 11, 2024, and extending to March 1, 2025. Early redemption of S G B s gives flexibility and allows investors to access their funds if needed. However, it is crucial to consider the potential drawbacks of premature redemption such as missing out on potential future gold price appreciation and the interest payments for the remaining years.

Tax implications if you hold the bonds until the end of the complete tenure: If you hold S G B s until maturity, there shall be no capital gains tax on gains on redemption. On the other hand the income tax act provides for exemption to individual on redemption/maturity of the S G B s by the RBI, since they are not regarded as a transfer and hence not chargeable to capital gains tax. Therefore, premature redemption when done through RBI, within the designated time frames/windows, does not attract capital gains tax in the hands of individuals.

Source: Business Standard

HOW TO READ VARIOUS MUTUAL FUND RATIO IN SELECTING A FUND

 

Mutual funds offer a convenient way to invest in a diversified portfolio of stocks and other classes of assets. When an investor decide to invest in mutual fund he or she  must analyse parameters of not only performance but also risk – adjusted ratios, expense ratio, down side risk or Sortino ratio. The basic objective of investment is to maximize return and minimize risk, to understand this basic objective an investor should take an informed decision and built a successful investment strategy.

Things to be remember when an investor going to select a particular mutual fund. Although Performance history is primary consideration; look consistent performance over several years, particularly during different market cycle. It is important to compare the fund’s returns with its benchmark index to gauge the alpha the fund manager can generate. Emphasize the important of long-term performance over short – term gains. Fees and expenses also play a significant role. Understand the different types of costs and load fees, as lower fees generally lead to higher returns. Risk assessment involves examining the fund’s volatility and standard deviation, with beta being a useful measure of a fund’s volatility relative to the market. A beta greater than 1 indicates higher volatility than the market. The Sharpe ratio measures a fund’s risk-adjusted returns and shows how much risk a fund manager takes to deliver a return. A higher sharp ratio means a fund manager is able to deliver better risk-adjusted return. But compare these ratios with other funds in the same category to ensure the comparison is like –to-like. With all this things an investor should also consider fund managers experience and his background as because ultimately he is the person who deals with your money.

There is also another thing that an investor should take into account risk factor associated with it and how to mitigate such risk. An investor should diversify their portfolio by investing in multiple funds across various asset classes and consider geographical and sector diversification. The information ratio, recently introduced by the SEBI assesses a fund’s performance relative to a benchmark while considering the consistency of that performance, with higher ratio suggesting consistent outperformance. The sortino ratio A variation of Sharpe Ratio that focuses on downside risk, making it useful for conservative investors.

BASICS OF INVESTING IN MUTUAL FUND

 

One simple and safe way of investing in equity class is investment through mutual fund. So, before investing through mutual fund one should know the basics of how asset management companies use equities into different market cap. There are two ways by which an investor can invest one is through SIP and another is Lump Sum.

In mutual fund total equity class is divided into three categories one is large cap 2^nd is mid cap and rest is small cap. Each class has its own risk and return characteristics. These categories can be considered a proxy of their size or what is technically known as market cap.

Large cap companies have a well established business in the industry that they operate in. The profitability and sales growth of these companies are usually constant. So the performance of the large cap companies is typically stable compared with other smaller companies.

On the other end companies which are categorised under small cap they are in the early stage of business and have a lot of scope for expansion and growth. Hence they have the potential of earning very high profits compared with large caps. But they may not be financially strong enough to be able to withstand a bad economic situation. So investment in small cap is high risk and high return possibility.

Whereas companies categorised as mid caps are lie between large and small cap companies. Mid cap companies share some of the growth characteristics of small cap companies but they are less risky because they are slightly large.

Now, after understanding the pros and cons of various market cap fund it is good for investor to determine which fund is best suitable for his/her portfolio.

HOW TO TRANSFER PPF ACCOUNT TO ANOTHER BANK ACCOUNT

 

PPF is an investment instrument that offers a guaranteed return, it enjoys the exempt-exempt-exempt (EEE) tax status, which means that you get tax benefit at the time of investment, and there’s no tax incidence on the accrual amount or the final withdrawal amount at maturity.

PPF account comes with a lock-in-period of 15 years, which can be extended further by a block of five years as many times as you want. However, it allows partial withdrawal before maturity and even offers loan facility, subject to certain term and conditions.

Step –By-Step Process

1.      1.  Visit the bank’s branch or the post office where you maintain the PPF account and ask for the account transfer request form.

2.     2.  Fill in details of your PPF account and that of the new bank, including name, and address of the branch where you want to transfer.

3.     3.  Submit the transfer request form to the bank where you are maintaining the account. The new bank (where the account is to be transferred) may also initiate the process.

4.   4.    Take the acknowledgement receipt to keep a record.

5.  5.     The bank or post office, where you have the PPF account will verify the details and initiate the transfer process.

6.   6.    It will send a certified copy of the PPF account, account opening form, passbook, nomination form , specimen signature of the account holder and cheque or demand draft for the outstanding amount to the new bank.

7.     7. Once checked the new bank will notify the account holder.

8.  8.     In case of change in KYC the new bank may also ask the account holder to fill up a new account opening form.

9.    9.  The new bank will open a PPF account and transfer the balance in it.

1010.   The entire process could take up to a month.

Source: outlook Money. nov. 2023

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SWP Vs. IDCW

 

Systematic Withdrawal Plan (SWP) and Income Distribution cum Capital Withdrawal plan both are used for regular income from the mutual fund by the investors. But, SWP is more reliable tool for regular income compared to dividend option. In the dividend plan of an equity fund, both the amount and frequency of the dividend are not guaranteed, and it largely depends on market and the profit the AMC earns.

Moreover, SWP is more tax efficient than IDCW. SWP is the redemption of units from the scheme; hence the tax treatment of each withdrawal will be the same as that for equity oriented funds. For units holds for more than a year, a long term capital gains tax of 10% will be applicable for gains of over Rs. 1 lac. While for a holding period of less than a year, it is 15%. Long-term capital gains of up to Rs. 1 lakh in a financial year are tax free. In comparison, when one opt for a dividend plan he/she has to pay tax on dividend as per his/her tax slab, which could go up to 30%. If the dividend exceeds Rs. 5000 in a year, the fund house deduct 10% TDS.