Skip to main content

G-Sec or Gilt Funds

 Invest in G-Sec Funds or GILT Funds Online
 
With falling interest rates, long-term gilts may generate good returns. Here's how you should invest in them.
 
Owing to a strong possibility of a rate cut by the Reserve Bank of India (RBI), long-duration gilts and gilt funds have started rally ing. Most long-duration gilt funds have generated an absolute return of more than 3% in the past one month. Experts feel the momentum will continue for some time. Given that rates are expected to trudge downwards in the coming days, returns from bond funds are likely to go up. So, investors should consider gilt funds now. Bond yields and prices are inversely proportional--prices go up when yields fall and vice-versa. The general expectation is that the RBI will cut rates by 25 basis points on 5 April and further cuts could happen in the coming meetings.

Retail investors' interest in government securities has remained elusive, and gilts have been the sole preserve of institutional investors. This is because of a high investment threshold of `10,000 and a relatively complex investment process. However, the government and the RBI is looking to sort out some of the problems in the coming months by facilitating more investments through stock exchanges and providing retail investors access to the NDS-OM trading platform-currently available to only institutional investors.  The government may be trying to get retail investors more active in debt markets by having them get used to the safest of debt securities--government debt.

Given the falling interest rate regime and the thrust on making the investment process easier, gilts are beginning to look attractive.The question is: should you invest in gilts directly, or via gilt funds?

Direct investing

You can invest in G-secs (government securities) through banks or via dealers such as ICICI Securities PD and IDBI Gilts. You need to open a CSGL (secondary constituent's subsidiary general ledger) account with your bank to hold all government securities in an electronic form. If you have a demat account and a bank account with Netbanking facility, you can also invest in G-secs through IDBI Bank's Samriddhi G-sec portal. The same can also be done via IDBI's ATMs.

Direct investment will fit the bill of investors looking for fixed, regular pay-outs in the form of interest payments.  G-Secs are safe as there is a guarantee by the government. Also, there are no intermediary costs to be borne as the retail investor is buying directly from the government,". The category average of g-sec fund returns (8.63%), falls below the government bonds index return (9.27%).

Gilt funds

Those not comfortable with investing in gilts directly can opt for gilt funds. Investing in gilt funds is the same as investing in any mutual fund scheme. You can either visit the fund house's site directly or approach a fund distributor. In terms of ease of investing, gilt funds clearly score over the direct mode Even if the government promotes retail par ticipation, investment through the mutual fund route will continue to be a far more convenient way of investing in gilts.

Tax implications

Currently, the listed bonds and gilt funds are taxed differently. The main disadvantage of direct gilt holding is that the interest or coupon received before the scheme's maturity will be taxed as per the investor's slab rate. If you make capital gains after holding the security for one year, you will have to pay a capital gains tax of 10%. Indexation is not allowed because gilt is an interest-bearing security.

Till recently, there was a capital gains tax benefit if you invested in government debt through gilt funds. But now, for shorter hori zons, it makes sense to use the direct investment route. The tax advantage of non-equity funds has ceased after the government increased the holding period for claiming long-term capital gains tax benefits from one to three years. Now, you are liable to pay a tax of 20%, after indexation, on longterm capital gains. Short-term capital gains are taxed at marginal rates. So, holding period becomes critical. If your investment horizon exceeds three years, gilt funds hold the tax edge. This is because the interest received by the fund will also be counted as capital gain in your hand.

-----------------------------------------------
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saving Mutual Funds to invest in India for 2016

Best 10 ELSS Mutual Funds in india for 2016

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

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

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

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

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

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

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...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
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