Skip to main content

Pay Less Tax with MIPs and Beat Inflation

Invest MIPs Online


Retirees looking for regular income in their golden years should opt for these funds which invest a small portion of their corpus in equities and the rest in the safety of debt.
 
Retirees who invest in fixed deposits for regu lar income in retire ment don't realise that their money is losing value due to inflation. Even though their monthly requirement will gradually go up due to inflation, their deposits will continue to give out a fixed amount. The best alternative are monthly income plans (MIPs) from mutual funds. These funds follow a conservative investment strategy, allocating only 1020% of their corpus to equities and putting the rest 80-90% in safer bonds and other debt instruments.The returns are not very spectacular but are enough to beat inflation.
 

The good thing about MIPs is the relative safety they offer. These funds will give investors good returns if stock markets do well but they will also protect the downside because of the limited exposure to equities.

 

MIPs are also more tax efficient than fixed deposits. Interest from fixed deposits is fully taxable. For a person in the 30% tax bracket, the post-tax returns from a fixed deposit that offers 8% is actually 5.6%.Worse, this income is taxed every year even though he may get it only after the deposit matures. Also, if it exceeds a certain limit, it attracts TDS, so there is no escape. Retired engineer Kalyan Ghosh was advised by friends to split his fixed deposits across different banks. That might help him escape TDS but the income will still be taxable.

 

On the other hand, the gains from MIP funds are taxed only when the investor redeems the investment. Even then, only the gains are taxed and that too at a lower rate (see box). Investing in MIPs can help retirees bring down their tax liability.

Is monthly income assured?

Though these are called "monthly income plans", there is no assurance of monthly income. In fact, the dividend option of these funds is a very tax inefficient way to get a monthly income. Though the dividend received is tax-free, it comes to you after a heavy 30% dividend distribution tax. It is best to go for the growth option of the MIP fund and redeem units as and when you need the money. You can also start a systematic withdrawal plan (SWP) under which a fixed sum is redeemed every month and put into your bank account. Ideally, one should start redemptions after three years of investing for greater tax efficiency.

 

MIPs can be good source schemes for systematic transfer plans (STP) into equity funds. In an STP, a fixed sum flows out of the scheme to another scheme (usually an equity fund) on a predetermined day of the month or quarter.

Be wary of the charges though.MIPs have high charges (some charge up to 2.5%), which can be a drag on the overall returns.






-----------------------------------------------
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 Saver Mutual Funds to invest in India for 2018

Best 10 ELSS Mutual Funds in india for 2018

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Religare Tax Plan

4. DSP BlackRock Tax Saver Fund

5. Franklin India TaxShield

6. ICICI Prudential Long Term Equity Fund

7. IDFC Tax Advantage (ELSS) Fund

8. Birla Sun Life Tax Relief 96

9. Reliance Tax Saver (ELSS) Fund

10. Birla Sun Life Tax Plan

Invest in Best Performing 2018 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

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.
Read more

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli
Read more

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis
Read more

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l
Read more

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in 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]
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