If
the investment term
is less than 12 months,
then the gain attract
tax at the rate of 10%
without indexing or
20% with indexing, whichever
is lower. If the investment
term exceeds 12 months,
then the gain attract
tax at the investor's
personal tax rate.
Irrespective
of the deposit term,
the interest income
attracts tax at the
deposit holder's personal
income tax rate.
Dividend
Distribution Tax (DDT)
Applicable
to the fund house at
the rate of 25 percent.
No
applicability.
Is
the rate of return assured?
No
Yes
Liquidity
High,
you will receive the
redemption proceeds
within 24 hours of lodging
the request.
Extremely
high. You can withdraw
the sum anytime from
your account through
the bank, ATMs, etc.
The
similarities
Fixesd
Maturity Plans
Bank
deposits
Tax
implications on the
gain
If
the investment term
is less than 12 months,
then the gain attract
tax at the rate of 10%
without indexing or
20% with indexing, whichever
is lower. If the investment
term exceeds 12 months,
then the gain attract
tax at the investor's
personal tax rate.
Irrespective
of the deposit term,
the interest income
attracts tax at the
deposit holder's personal
income tax rate.
Dividend
Distribution Tax (DDT)
Applicable
to the fund house at
the rate of 25 percent.
No
applicability.
Is
the rate of return assured?
No
Yes
Liquidity
High,
you will receive the
redemption proceeds
within 24 hours of lodging
the request.
Extremely
high. You can withdraw
the sum anytime from
your account through
the bank, ATMs, etc.
2. Liquid Funds vs Savings Bank
Account
The
differences
Fixesd
Maturity Plans
Bank
deposits
Tax
implications on the
gain
If
the investment term
is less than 12 months,
then the gain attract
tax at the rate of 10%
without indexing or
20% with indexing, whichever
is lower. If the investment
term exceeds 12 months,
then the gain attract
tax at the investor's
personal tax rate.
Irrespective
of the deposit term,
the interest income
attracts tax at the
deposit holder's personal
income tax rate.
Dividend
Distribution Tax (DDT)
Applicable
to the fund house at
the rate of 25 percent.
No
applicability.
Is
the rate of return assured?
No
Yes
Liquidity
High,
you will receive the
redemption proceeds
within 24 hours of lodging
the request.
Extremely
high. You can withdraw
the sum anytime from
your account through
the bank, ATMs, etc.
The
similarities
Risk
Level Negligible
3. Gold exchange traded funds
vs investment in physical gold
The
differences
Gold
exchange traded funds
Investing
in Physical Gold
Form
of holding
Electronic/
Demat form
Physical
form
Making
charges involved
None
Yes,
if bought in the form
of jewellery
Purity
of the gold
Gold
ETF invest in gold that
is 99 percent pure.
The
purity of physical gold
is subject to ambiguity,
unless bought from banks
in the from certified
gold coins, bars, etc…
Cost
of investing
The
investor will have to
bear an entry load,
brokerage charges, commission,
management fees, etc.
Physical
gold attracts VAT, sales
tax and wealth tax.
Dividends
Based on
the performance of the
fund, the investor can
receive dividend.
Investor
does not receive any dividend.
Minimum
Investment
The minimum
investment for ranges
between Rs. 5000 and Rs.
10000, depending on the
fund house.
There is
no minimum limit for investment
in gold, as the investor
can invest smallest unit
available at the prevalent
price.
Liquidity
High. GETF
units are listed on the
stock exchange and hence,
can be easily sold.
Very High.
Can be easily converted
into cash.
Storage
No storage
required since the investor
is allotted units of the
ETF and it is in dematerialized
form.
Storage
required
Risk of
theft
Nil
High
Entry/ exit
loads
Applicable
Nil
The
similarities
Tax
implications on gains
If the investment term
is greater than 36 months,
then the gains attract
tax at the rate of 10%
without indexing or
20% with indexing, whichever
is lower. If the investment
term is less than 36
months, then the gains
attract tax at the investor's
personal tax rate.
4. Index funds vs Exchange trade
funds
The
differences
Index
Funds
Exchange
Traded Funds (ETFs)
Product
Description
Index
fund primarily invest
in stocks that form
a
part of an index namely
Nifty, BSE 100, Nifty
Junior, etc.
ETFs
are open-ended mutual
fund schemes that track
an index, basket of
assets or a particular
commodity and can be
traded on the stock
exchange like any other
stock.
Accounts
to be maintained
savings
bank account.
Demat
account, broking account
and saving
bank account.
Loads
Based
on the route of investment
(direct with the
house or through a distributor)
and the investment
terme an entery and
exit can be levied.
Nil
Minimum
investment
The
minimum investment is
Rs 5,000
The
minimum investment amount
not defined
Mode of
redemption
Based on
the performance of the
fund, the investor
can receive dividend
Redemption
is in kind.
Expense
ratios
High due
to Constant Rebalancing
of Portfolio
Lower vis-à-vis
index funds
The
similarities
Tax
on gains
If the investment term
is less than 12 months,
then the gains attract
tax at the investor's
personal tax rate. If
the investment term
exceeds 12 months, then
the gains do not attract
any tax.
Tax
on dividend income in
the hands of the investor
Dividend income is tax-free
in the hands of the investor.
Tax
on dividend income in
the hands of the fund
house
Dividend income is tax-free
in the hands of the fund
house.
High
Liquidity
In case of index funds,
redemption proceeds
received with 36 hours
from the date of submission
of request. Since ETFs
are traded like stocks
they will ideally be
settled on a t+2 basis.
5.
Mutul Funds Vs unit linked insurance
plans
The
differences
Mutual
Funds
ULIPs
Investment
objective
To
offer an indirect route
to invest in the capital
market with the objective
of capital appericiation
To
provide life cover with
capital appreciation
and insurance cover
in case of premature
death
Minimum
investment term
Nil,
except in case of ELSS
(3 years)
5
years
Lock-in
period
Nil,
except in case of ELSS
(3 years)
3
years
Investment
Sum
The
entire investment sum
is invested
Only
a portion of the premium
is invested.
Form of
return
In the form
of dividend in case of
dividend option, and capital
appreciation in case of
the growth option.
In the form
of capital appreciation
and insurance cover in
case of premature death
Section
80c tax benefit
Applicable
only to ELSS
Applicable
to all ULIPs
Shift From
one portfolio to another
No each
scheme has only one portfoilo
Yes,each
ULIP offers more than
1 investment portfolio.
6.
Equity linked saving scheme Vs
equity diversified funds
The
differences
Equity
Linked Saving Scheme(ELSS)
Equity
Diversified scheme
Section
80c benefit
These
schemes provide the
section 80c tax benefit
to investors.
No.
Lock-in-period
To
avail of the tax benefit,the
investor has to
stay invested for 3
years from the date
of investment
No.
The
similarities
Tax
on gains
If the investment term
is less than 12 months,
then the gains attract
tax at the personal
tax rate .If the investment
term exceed 12 month,
then the gains do not
attract any tax.
Tax
on dividend income in
the hands of the investor
Dividend income is tax-free
in the hands of the investor.
Tax
on dividend income in
the hands of the fund
house
Dividend income is tax-free
in the hands of the fund
house.
Risk
return profile High risk high
return
7.
Medium term debt funds vs medium
term gilt fund
The
differences
Medium
term debt fund
Medium
term gilt fund
Nature
of risk involved
Credit
rate risk and interest
rate risk
Interest
rate risk
Nature
of securities
All
types of debt securities
issued by corporates,banks,
the government, etc.
Debt
securities issued by
the government.
The
similarities
Tax
on gains
If the investment term
is less than 12 months,
then the gains attract
tax at the rate of 10%
without indexing or
20% with indexing, whichever
is lower. If the investment
term exceeds 12 months,
yhen the gains attract
tax at the investor's
personal tax rate.
Tax
on dividend income in
the hands of the investor
Dividend income is tax-free
in the hands of the investor.
Tax
on dividend income in
the hands of the fund
house
The fund house distributing
dividend has to bear Dividend
distribution tax at the
rate of 12.5 percent in
case of individual investors…
8.
Medium term debt funds vs Floating
rate funds
The
differences
Medium
Term Debt Fund
Floating
Rate Fund
Investment
Objective
The
primary investment objective
of the scheme is to
generate stable returns
by investing in good
quality fixed I.ncome
and money market securities.
A
floating rate debt scheme
tries to provide a cushion
from price volatilities
arising out of interest
rate changes.
Investment
portfolio
Companies
of various type of debt
instruments issued by
corporates, government,
etc. wherein the rate
of interest is fixed.
Comprises
of various types of
debt instruments issued
by corporates, government,
etc. wherein the rate
of interest is floating.
Types of
risk involved
Credit rate
risk and interest rate
risk
Credit rate
risk
Risk Reward
Profile
Low Risk
with low returns
Very Low
Risk with low returns.
Exit Load
Generally
levied if the investment
term is less than 1 year.
Nil
Special
Attribute
Provide
more stability and moderate
returns in a volatile
equity market scenario.
Provide
better returns in a rising
interest rate scenario.
The
similarities
Tax
on gains
If the investment term
is less than 12 months,
then the gains attract
tax at the rate of 10%
without indexing or
20% with indexing, whichever
is lower. If the investment
exceeds 12 months, then
the gains attract tax
at the investor's personal
tax rate.
Tax
on dividend income in
the hands of the investor
Dividend income is tax-free
in the hands of the investor.
Tax
on dividend income in
the hands of the fund
house
The fund house distributing
dividend has to bear Dividend
distribution tax at the
rate of 12.5 percent in
case of individual investors…
9.
Index funds vs equity diversified
funds
The
differences
Index
Funds
Equity
Diversified Funds
Product
Description
Index
funds attempt to minor
the performance of a
designated benchmark
index, by investing
in the same stock and
weightage as the index.
Equity
Diversified Mutual Funds
invest and maintain
a very impressive portfolio
of high and sustainable
growth companies with
the objective of providing
the maximum returns
to its investors.
Investment
Objective
To
clock returns that is
in tune with those given
by the benchmark index.
The
intention is to identify
investment opportunities
and clock attractive
returns, and in the
process outperform the
benchmark index.
Investment
strategy
Passive
Active
The
similarities
Tax
on gains
If the investment term
is less than 12 months,
then the gains attract
tax at the investor's
personal tax rate. If
the investment term
exceeds 12 months, then
the gains do not attract
any tax.
Tax
on dividend income in
the hands of the investor
Dividend income is tax-free
in the hands of the investor.
Tax
on dividend income in
the hands of the fund
house
Dividend income is tax-free
in the hands of the fund
house.
