While equities have underperformed in 2018, India’s debt market is offering lucrative investment opportunities with non-convertible debentures (NCDs) of some companies offering returns up to 10.76%. Debentures of Shriram Transport Finance, Mahindra and Mahindra Financial Services, SREI Equipment Finance and Kosamattam Finance, which are currently open for subscription, are offering returns between 9-10.76%, payable annually.
While bank fixed deposits has been one of the most popular savings instruments, small finance banks are luring retail investors with their lucrative FD rates. For instance, Jana Small Finance Bank is offering a rate of 9% on its 3 years FD and 8.50% for deposits for a 3-to-5-year tenure. On the other hand, India’s largest bank, SBI is offering a rate of 6.8% for deposits between tenures of 3 and 5 years and a rate of 6.85% for deposits over 5 years. It is a good idea to diversify and invest only a part of your savings in SFBs.
The Reserve Bank of India (RBI) on Tuesday released guidelines on tokenisation for various card transactions, including debit and credit cards, to improve safety and security of the payment system. Instead of using actual card details, this token is used to perform card transactions in a contactless mode at point of sale (POS) terminals and quick response (QR) code payments. At present, tokenised card transaction facility would be offered through mobile phones or tablets only and will be extended to other devices later based on experience, the central bank said.
According to RBI data, transactions through mobile wallets marginally declined in November, both in terms of value and volume. The decline in transactions came after mobile wallet companies stopped using Aadhaar for e-KYC to enrol new customers following the Supreme Court order. While the transaction value declined 14% to Rs 16,108 crore in November from Rs 18,786 crore in October, transaction volume registered a 5.7% drop to 347.32 million in November as compared to 368.45 million in October. The cost of conducting physical KYC has gone up to Rs 100-150 per person from Rs 15 per person under e-KYC.
Every mutual fund house incurs expenses. Mutual fund schemes are permitted to deduct these expenses from a portion of the investment assets held by it. Equity funds are allowed to charge up to 2.5% of the assets that a scheme manages; debt funds’ expenses are capped at 2.25%. Ideally, the lower the expense, the better it is as expenses reduce fund returns. But a low expense ratio is just one of the many parameters that investors should look at.
Mutual Funds received Rs 8,233 crore through systematic investment plans (SIPs) from the retail investors in December 2018. The SIP inflows registered a growth of 3.10% over the preceding month. SIP inflows stood at Rs 7,985 crore in November. However, total asset under management (AUM) of the industry declined by 5% to Rs 22.85 lakh crore in December as against Rs 24 lakh crore in November.
More and more people are opting for a wedding insurance which provides safeguards against potential risks which may disrupt the event. The scope of cover includes cancellation or postponement of the wedding due to natural and manmade events such as earthquake, fire, theft, burglary etc. Also damage to any property (including jewellery) and any injury/ death of persons named as such in the policy are also insured. The policy also safeguards losses if the person(s) named under the policy does not appear for the wedding event due to death, personal injury, hospitalization and other reasons mentioned in the policy document.
The government has retained the 8% interest rate on the Public Provident Fund (PPF) for the January to March quarter. PPF offers deduction benefits up to Rs 1.5 lakh on deposits and tax exemption on interest and withdrawals. An investor can make annual contributions upto Rs 1.5 lakh. A subscriber can avail loan of 25% of the balance amount available. The loan has to be repaid within 36 months. PPF has maturity period of 15 years, extendable any number of times, and can be closed prematurely after completion of five years for specific reasons like higher education or medical treatment.
Recently the government notified withdrawals from National Pension System (NPS) completely tax free. NPS offers two types of accounts: Tier I and Tier II. Investment in Tier I account offers numerous income tax benefits but withdrawal by subscribers is not permitted till the age of 60 with few exceptions. I-T rules offers deduction of Rs 50,000 u/s 80CCD (1B) under Tier-I NPS account in addition to the Rs 1.50 lakh deduction u/s 80C, 80CCC (investment in pension plan offered by an insurer) and Section 80CCD (1). Investment in NPS is available to both salaried individual and self-employed.
According to a circular issued by the Finance Ministry, interest rates on 1-year post office time deposits (POTD) have been increased by 10 basis points (bps) to 7 per cent for the January-March, 2019 quarter. The interest rate on three-year POTD has been reduced by 20 bps to 7 per cent. Interest rates of other small savings schemes like Public Provident Fund (8 per cent), Sukanya Samriddhi Yojana (8.5 per cent), Senior Citizen Savings Scheme (8.7 per cent) and Kisan Vikas Patra (7.7 per cent) have been kept unchanged.
An investor can opt for a lumpsum investment or Systematic Investment plan (SIP) in equities and equity MFs. SIPs capture the wide fluctuations in the equities which do not grow in a linear way. SIPs average out the cost of investment and accumulate more units over longer periods. This concept is called rupee-cost averaging. Unlike equities, in case of debt funds or any other fixed income instrument, lumpsum investment is preferable to a staggered one (FD v/s Recurring deposit) since the return rises in a linear way. Higher the investment at the lower point, higher will be the return.
As per the amended provisions, a resident (other than an individual) which enters into a financial transaction aggregating to Rs 250,000 or more in a financial year is mandatorily required to apply for and obtain a PAN. The key managerial personnel, Managing Director, Director, Partner, etc. would also be required to apply for a PAN within the timeline as applicable to the resident entity in which they hold such position. The new PAN card rules are expected to widen the tax base and help the government and tax authorities to have more control on entities entering into financial transactions above the limit.
Wealth accumulation occurs over the course of a lifetime. There should be a clear plan, as to what is to be achieved within a stated timeline. The process of saving and investing must be initiated early with a predetermined goal of meeting financial targets. Asset class to be carefully chosen for investment, studying the risk in each of the investment option at the same time ensuring adequate diversification. Lastly investor should not get perturbed by market fluctuations and exit an investment before an ideal time.
A PF account becomes inoperative if the employee does not make an application for withdrawal within 36 months of retiring after attaining the age of 55 years. Therefore, even after leaving one company, the PF account continues to earn interest and is not termed inoperative PF account till such a situation rises till age 55. The interest credited to an Employees' Provident Fund account after an individual ceases to be in employment is taxable in his hands in the year of credit. The unclaimed amount which remains inoperative for 7 years is transferred to the Senior Citizens' Welfare Fund.
HDFC Mutual Fund has surpassed ICICI Prudential MF to regain top position after two years as the largest asset management company (AMC). While HDFC MF looks after assets under management (AUM) worth Rs 3.35 lakh crore, ICICI Prudential MF manages Rs 3.08 lakh crore, according to AMFI data. With AUM of Rs 2.64 lakh crore, SBI MF ranks third. Aditya Birla and Reliance MF follow next with Rs 2.42 lakh crore and Rs 2.36 lakh crore, respectively.