Skip to main content

Invest in Mutual Fund MIPs for higher Returns

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)
 

 


MONTHLY INCOME PLANS V/ S POST OFFICE SCHEMES
 

Investors looking for a regular monthly income can choose between Monthly Income Plans (MIPs) offered by mutual fund houses or Post Offices. Both have their own advantages and disadvantages.

While the former can offer higher returns, since they invest in market linked instruments, the latter is safer since it is guaranteed by the government. The Post Office schemes are very easy to invest in, due to which they are preferred by retired people. But MIPs are more tax efficient and hence, suitable for High Networth Individuals ( HNIs) Investors should invest in MIP or Post Office Monthly Income Schemes ( POMIS) based on their risk appetite. While MIPs can offer higher returns as compared to POMIS; it also carries market risk and interest risk. On the contrary POMIS provide guaranteed monthly income, but do not meet the inflation ' risk'.

MIPs

MIPs are open- ended schemes that invest a majority of their assets in fixed income instruments and allocate asmall portion to equity and equity- related instruments. MIPs typically invest in debt instruments like debentures, corporate bonds, government securities and so on, while maintaining a small exposure to equity to earn something extra.

Generally, the equity allocation is maintained between 10 per cent to 25 per cent of the total assets. This is a good option for those investors who are looking at regular and steady income and still want to dabble a bit in equities.

Like all other mutual funds, MIPs too come with the growth and dividend ( Payout and Reinvestment) option. The growth option of an MIP is ideal for a 'moderate' risk profile, since it typically falls between a pure income fund and a balanced fund. It is a viable option for HNIs, institutions, trusts and so on, as these investors typically do not require a regular monthly dividend inflow, but still would like capital appreciation at controlled risk levels.

Investors can invest in such funds if they are conservative in their investing style and are looking out for better returns or are looking for a regular source of income. Also, this is suitable for investors in the high tax bracket, since it is more tax efficient than options like fixed deposits and post office monthly income schemes.

MIPs offer an investor regular income through the ' dividend' option. Since they invest in debt instruments, whenever the interest rate falls, the capital gain on bonds rises as price of bond increases and when interest rate raises, capital gain on bond falls.

Taxation of MIP's

MIPs are treated as debt funds and, hence, the taxation is same as debt funds. Dividends are exempted from tax in the hands of investors, since company pays a Dividend Distribution Tax on such dividend declared.

Redemption is covered by capital gains tax based on the holding period tenure.

Short- term capital gain – if the holding period is less than one year, the capital gain will be considered as a short term capital gain. It will be taxed as per tax slab Long- term capital gain – if the holding period is more than one year, the capital gain will be considered as a long term capital gain. It will be taxed either 10 per cent without indexation or 20 per cent with indexation.

Long- and short- term capital

loss – The good part of MIP is that any short term gains made on MIPs can be set off against short term losses. And long term capital gain on MIPs can be set off against long term losses.

Post Office Monthly Income

Scheme ( POMIS) is a guaranteed return investment available at the post office. On the deposit made in the post office, monthly assured return in the form of interest is earned. Though it offers no tax incentive, it is a preferred instrument amongst small savers because of its government backing that the product offers. However, there is an upper limit for investment into POMIS. You cannot invest more than 4.5 lakh in asingle account. If you invest jointly, the limit is 9 lakh. The minimum investment is 1,500.

Features of POMIS

The capital invested in POMIS is completely protected as the scheme is backed by the Government of India, making it totally risk- free with guaranteed returns. The amount invested is liquid, despite the fact that there is asix- year lock in period. However, the biggest disadvantage of POMIS is that it is not inflation protected, which means that if the inflation is the same as interest rate, then there is no real rate of returns.

Taxation of POMIS - It is taxed along with the regular source of income. However, Tax Deduction at Source is not applicable.

In a falling interest rate regime, monthly income plans will score over post office schemes due to equity exposure

Risk Low risk No risk involved as it is government backed Range of returns 6 per cent to 12 per cent p. a. 8% p. a

Complexity Moderate Simple to understand and invest Assured monthly income Not really assured Assured monthly income Penalty for early 1 per cent before 1 year 2 per cent before 3 years; 1 per cent after withdrawal 3 years and before 6 years Tax on returns Dividends are exempted in Interest income is taxable the hands of investor; as per the tax slab redemptions are taxable as per capital gains guidelines Limit on investment No limit 4.5 lakh for single account and 9 lakh for joint

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now