Skip to main content

Kisan Vikas Patra vs Gold

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

 

Kisan Vikas Patra vs Gold

 

Kisan Vikas Patra ( KVP) was re-launched with much fanfare by the finance ministry, with initial reports suggesting the minister promised these would be bearer instruments that could be purchased in cash. The unspoken implication was that it would be as convenient to buy as gold and, hence, become a go- to investment for the black money floating in the domestic economy.

Opposition parties were quick to criticise the instrument, till it became clear that the relatively- relaxed Know Your Customer ( KYC) norms were applicable only for investments up to ₹ 50,000 and even for that, the only relaxation was that the Permanent Account Number ( PAN) was not required but identity and address proof were, even for the minimum investment of ₹ 1,000. It was a very different regulatory regime that had earlier allowed issuance of KVPs or Indira Vikas Patras for large cash investment without proper KYC requirement. Now, the government is bound by its obligations on anti-money laundering laws and might not be able to come out with any bearer financial instruments. So, it is very unlikely that black money holders will invest in KVPs instead of gold. Gold is easily available in the grey market for cash payment with no questions asked and as it is widely presumed to give returns in line with inflation, it is expected to protect the value of the investment even though it is no longer as easy to sell back the gold in cash for large values.

The focus on gold as a store for black money has obscured the demand for gold by middle- class Indians who are not hiding unaccounted money but investing their tax- paid money in gold. Many Indians consider it a good investment instrument, which will also come in handy in future for their children's marriage. This is testified by the popularity of jewellery schemes with retail investors, including women investing properly accounted money ( though maybe without their spouse's knowledge). These consumers have invested in jewellery so that after 10- 15 years, they can exchange this jewellery for fresh ones to be purchased on the occasion of their children's marriage. This kind of investment by regular middle- class consumers will be a reasonably significant part of the 2,400 tonnes of gold estimated to be held by Indian households.

If a part of this hoard can be freed, it will reduce the import of gold to that much extent. The government had introduced a gold deposit scheme 14 years ago for this purpose. The scheme provides for a gold certificate to be issued in lieu of jewellery, with interest and redemption being in gold units. These certificates are also exempt from income tax, capital gains tax and wealth tax. Despite its many attractive features, the scheme has never really taken off for individual consumers because of some basic shortcomings.

First, the minimum quantity is a stiff 500 gm ( equivalent to about ₹ 15 lakh of jewellery), which effectively cuts off the retail consumer from the scheme. Reducing this minimum limit to, say, 50 gm would bring in a large number of retail consumers. Second, capital gains tax is payable at the time the jewellery is converted into a gold deposit scheme. If a certain threshold amount, say, 100 gm or roughly ₹ 3- lakh worth of jewellery, is exempted from capital gains for each individual consumer, it will remove a major irritant for entry into the scheme. The amount of capital gains tax given up will not be significant, given that most jewellery tendered in the scheme tends to be many years old and because of indexing, the effective rate of capital gains tax is not very high. Third, the certificates need to be denominated in a single gram ( like most gold exchange- traded fund units) for ease of tracking and partial sale/ redemption.

These changes should enable the government to bring out a significant part of the jewellery hoard with the regular Indian middle class consumers, unlike the current situation where the scheme has basically been used by institutional investors such as temple boards and gold ETFs. Even if the changes are only partly successful, it will still make a dent in the stiff import bill we pay for gold.


For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

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 Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

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

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. 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
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
      2. Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Rs 14,000 Crore worth of tax free bonds coming soon from NHAI , PFC

  NHAI, PFC file prospectuses, coupon rate not yet decided MORE debt investment options have opened up for investors with AAA rated tax-free bonds worth over Rs 14,000 crore lined up. The National Highway Authority of India ( NHAI ) and Power Finance Corporation ( PFC ) are offering Rs 10,000 crore and Rs 4,033.13 crore worth of tax-free bonds, respectively, as per prospectuses filed with the Securities and Exchange Board of India (Sebi). Of a Rs 5,000 crore issue by PFC, Rs 966.87 crore has already been raised through private placement on September 28 and November 1. Tax-free bonds give investors tax-free return on any amount invested. In another kind of bonds, the long-term infrastructure bonds, investments up to Rs 20,000 are tax exempt, that is this cap amount can be deducted from the taxable income. Accordingly, the NHAI prospectus has clarified that only the amount of interest from -and not the actual investment on -its new bonds will be tax-free. "NHAI's publ...
Read more

Change in Fund Manager for some of HSBC Mutual Fund Schemes

Buy Gold Mutual Funds Invest Mutual Funds Online Download Mutual Fund Application Forms Call 0 94 8300 8300 (India) However, this facility is only available to Unit holders who have been assigned a folio number by the AMC.   HSBC Mutual Fund has announced that the below mentioned schemes shall be managed by the new fund managers as stated in the table. The effective date will be July 02, 2012.   Amaresh Mishra 's will be Vice President and Assistant Fund Manager. Having done a Post graduate diploma in Business Management and Bachelor of Chemical Engineering, he has over seven years of experience in Equities and Sales.   Mr. Piyush Harlalka's designation shall be Vice President- Fixed Income. Qualified as a C.A., C.S. and holding M.B.A.( Finance degree), he has over six years of experience in Fund management and ...
Read more

How EEE and EET Tax affect Retirement Investments

  An important factor while choosing a financial product is its taxation , and for retirement savings, this is even more important as the sums involved are usually life-long savings. Here's a look at the current tax treatment of three major long-term retirement planning products, which are - Employees' Provident Fund (EPF), Public Provident Fund (PPF) and National Pension System (NPS). EPF The tax treatment is EEE, which means your money is exempt from taxes at the time of investment, accumulation and withdrawal. At the time of investment, the tax deduction is under the limit of section 80C of the Income-tax Act , which is currently Rs 1.5 lakh. Partial withdrawals are also tax-free if made after 5 years of continuous service. If withdrawals are made before 5 years of service, 10% tax will be deducted at source. Exceptions have also been provided for transfer of amount and conditions wherein the subscriber is unemployed for more than 2 months or the loss of job was beyond th...
Read more

Personal Finance: You can insure your wedding

But luck may not always be on your side. With the frequency of such attacks, as also other risks and unforeseen accidents growing, a wedding insurance is something you may want to look at if a marriage is being planned in the family. Event insurance plans like this is still in its nascent stages due to low awareness. And given the sacred nature of the ritual, nobody wants to discuss or think negative. But as wedding spends and risks grow, it makes sense to cover the potential monetary loss. The policy in those countries even covers the loss of the wedding ring, the wedding gown not reaching on time and even the expenses/loss due to late or non-appearance of the photographer which may mean staging the event once again for the photograph. In India, most insurance companies — including ICICI Lombard General Insurance, Oriental Insurance, Bajaj Allianz and National Insurance — offer wedding insurance. The policy is tailor made to individual requirements and needs. The sum insur...
Read more

DSP BlackRock MidCap Fund

Best SIP Funds Online   HOW HAS DSP BlackRock Small & Mid Cap Fund PERFORMED? With a 10-year return of 14.61%, the fund has outperformed both the category average (12.34%) and the benchmark (10%) by a good margin. Should you invest in DSP BlackRock Small & Mid Cap Fund? This fund invests predominantly in mid-cap stocks but takes a sizeable exposure in small-caps as well. The focus is on nascent companies with high growth potential. The fund manager places emphasis on quality and avoids inferior businesses even if these look tempting from a valuation perspective. Over the past year, the fund portfolio has grown, having added to some of the underperforming sectors like chemicals and healthcare. Its portfolio churn has come down significantly. The heavily diversified portfolio is run completely agnostic of its benchmark index— most bets are from outside the index—which can at times lead to bouts of underperformance as seen in the recent years....
Read more
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