2nd S..Systematic Transfer Plan

Most of the people wants to invest lump sum amount in mutual funds (Like Bonus, Arrears in salary, or any other income received from other sources..)but they are scared to put all of it in one go because the markets are at an all-time high.so to reduce the risk involved in investing there is 1 method or strategy which is known as Systematic Transfer Plan .So Let’s see

What is STP?

STP is a variant of SIP. STP is essentially transferring investment from one asset or asset type into another asset or asset type. In STP, a fund house allows investors to invest a lump sum amount in 0ne scheme (Debt Mf) and transfer regularly a pre-defined amount into another scheme.(Equity or Balance Mf) The transfer happens gradually over a period.

How STP Works?

Suppose you want to invest 1 Lakh in Equity Mf. Your 1st step will be

  • Choose the liquid or ultra-short term mutual fund.(If its other debt fund make sure there is no exit load )
  • Choose the Equity or Balance Mutual Fund which you want to transfer money.
  • Decide the amount to be transferred and frequency of the transfer (Daily, weekly ,monthly or quarterly )

For example you can decide to transfer 10000 every month on 10th of every month for 10 months or if 5000 than 20 months.

Benefits of STP

  • STP helps to keep a balance of Risk & Returns
  • Money invested in liquid fund earns interest till the time it is transferred to equity fund. The returns of liquid fund is usually higher than saving bank account.
  • Your money is invested in liquid fund this mean you can sell it at any time if you want. Hence it works like a Emergency Fund.
  • Since it is similar to Systematic Investment Plan (SIP),STP also helps in averaging out the cost of investors by purchasing fewer units at a higher NAV and more at a lower price.

Types Of STP

Fixed STP: – In Fixed STP, amount of transfer (from one mutual fund to other) is fixed.

Flexi STP: – Under Flexi STP amount of transfer is variable. The fixed amount will be minimum amount and variable amount depends on volatility in market. For E.g If Nav of the fund decrease you can invest more amount and if NAV of the fund increase you can invest less amount.

Capital Appreciation:-Under this type, the investor takes the profit part out of one investment and invest in other.

Key Points to remember.

  • Typically, a minimum of 6 such transfers are to be agreed n by investors in STP.
  • STP attracts short term capital gain tax because every transfer is considered as redemption in the liquid mutual fund. If debt funds are sold before 3 years, the gains are treated as short term capital gains and taxed according to income tax slab applicable to investor.
  • You can bring down tax liability marginally by opting for the dividend reinvestment option in the liquid mutual fund. Dividends are tax free for investors but mutual fund pay a dividend distribution tax of 28.84% on dividend declared.
  • If you want to invest in ELSS schemes and have lump sum money ,better put it in a liquid mutual fund and do


Next Article will be on 3rd S…Systematic Withdrawal Plan (SWP)


Do you know 3s of Financial Planning?

Today I want to explain 3 very common terms used in mutual fund investing which is also called 3 S of Financial Planning.

  1. Systematic Investment Plan (SIP)
  2. Systematic Transfer Plan (STP)
  3. Systematic Withdrawal Plan (SWP)

These are methods of Systematic investing and withdrawal in mutual funds. While most people know what is SIP is, majority are not aware of what STP & SWP is. These are important element of financial planning. So let’s understands how these 3 S works.

Systematic Investment Plan (SIP) 

What is SIP & How it works?

This option is similar to like Recurring Deposit in bank or post office.. Under this option you can invest fixed amount in mutual funds on particular date of the month. You can fix the amount according to your financial goals as well as you can select date also and invest it regularly. When you invest for the first time in mutual funds you would get folio number like your bank account number. Your money is auto debited (ECS) from bank account or you can give postdated cheques .After purchase in particular scheme you will get certain number of units based on the ongoing market rate which is called NAV of the day. Every time you invest money, additional units of the schemes added to your account. Whenever you make an investment in mutual fund scheme, the fund house has to send you an account statement providing details of holding.

Advantage of Systematic Investment Plan

  • It help to develop saving habits.
  • One can start investing in SIP with very low amount of Rs.500 or Rs. 1000
  • While Starting SIP, you have to choose date and no of installments-you can choose whatever is convenient for you.
  • There is no fixed tenor for running SIP ,Once the SIP tenure is fixed ,it can stopped in between or could be continued even after the tenor by placing the request with respective mutual fund company.
  • Full and Partial withdrawal is possible during or after the SIP tenor .Only ELSS mutual funds have 3 years lock in period and there is some exit load in some mutual fund schemes depending upon type of the scheme.
  • Simple, Convenient and easy to monitor. You do not have to take time from your schedule to make your investments. With a completed application form, one can just submit post-dated cheques or avail the Easy Pay (auto debit) ** facility and relax. You can monitor your progress of investment through periodic statement of accounts.
  • Rupee cost averaging: Investors investing fixed amount of money every month towards any investment vehicle allow them to buy more units or stocks when the price of the units (investment) is lower. This reduces the average cost of purchasing of the financial asset over time.Considaring a long term investment approach ,rupee cost averaging can even out any market ups and down in the long term, allowing investor to gain maximum benefits on his on her investments over time.


Month Investment Amount             NAV     No.Of Units
JAN           2000             15          133.33
FEB           2000             13          153.84
MAR           2000             16          125.00
APR           2000             14          142.85
MAY           2000             17          117.64
JUNE           2000             19          105.26

Total Units                                                                                                                        777.92

From above table we can see at every market correction an investor would end up buying more number of units. When the unit price goes up, he tends to gain.

What are documents required for SIP investment?

You need to provide KYC documents along with SIP application form .KYC documents include PAN card, address proof and identity proof.


 Mutual Fund Investments are subject to market risk ,read all scheme related documents carefully.  

Next Article will be on 2nd S …Systematic Transfer Plan

All about Financial Planning In India


Financial Decisions are critical decisions, which decide how monetarily comfortable we stay in life. Poorly planned financial decisions can cause, at best, great anxiety and at worst lead to insolvency, whereas well thought out decisions can lead to prosperous lifestyle.

Becoming a successful investor doesn’t happen by magic or in a day – it happens by setting goals and working to achieve them. The question then is how to go to about it. How to achieve the financial goals in life? What should be the 1st step towards it? How should I plan the available resources to achieve the goals?

Initially people don’t realize they need of financial planner or nobody knows there is thing (concept) like of financial planning. For some people financial planning simply means short term Cash Flow Planning or buying an insurance or investing in few mutual funds or fixed deposit or for some it may be restricted to Tax Planning. So what is financial planning & how it is helpful to achieve your financial goals? Let’s understand……

What is Financial Planning?

Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a home, savings for your child’s education, planning for your retirement or estate planning. In other words financial planning is not just investing, it is process which helps you to manage your finances in such a way that you link it to your life goals.

Who is Financial Planner?

As discussed earlier some people feels their insurance agent or mutual fund advisor is financial planner & they blindly trust & buy product suggested by them for some their neighbor or friend Or in some cases people want product (Mutual fund & Insurance ) just because their friend or neighbor buy or invested in that product. They don’t even bother to understand the product (mutual fund or insurance) which is suitable for him because his risk appetite, time horizon or goals are different from his friend.

A financial planner is someone who uses the Financial Planning process to help you figure out how to meet your life goals .The planner can take a big picture view of your financial situations and make financial planning recommendations that are suitable for you. Planner can look at all your needs including budgeting and saving, taxes, investments, insurance and retirement planning. Or, the Planner may work with you on a single financial issue but within the context of your overall situation. This big picture approach to your financial goals sets the Planner apart from other Financial Advisors, who may have been trained to focus on a particular area of your financial life.   — Source FPSB
In India Financial Planning Standard Board India is the authorized board to award CFP certification to an individual. CFP Is exactly like how doctors or CAs will get after going through desired skill in their respective filed. This process of awarding certificate involves education, examination, experience and ethics set by the board. Also there exists the condition that one must have a continuing education requirement. This makes a professional to be up to date in knowledge about personal finance.

Benefits of Financial Planning:

There are many advantages of following structured financial planning process which can have far reaching positive effects on one’s life. Creating financial plan helps you see big picture and set a short term and long term life goals, a crucial step in mapping your financial future.

It Provides direction and meaning to your financial decisions:- Financial Planning allows you understand how each financial decision you make affects other areas of your finances. It help you to understand Where are you today ,that is your current financial position ,where you want to be tomorrow ,that is finances linked to your goals and what must do to get there, that is asset allocation and investment strategy.

Family Security: – Providing for your family’s financial security is an important part of financial planning process. Financial Planning helps to provide protection for you and your family by having right insurance in place if something goes wrong.

Helps in Tax Savings:- Financial planning helps you to invest smartly as certain funds provide dual benefit. One, getting good returns & secondly, helping you in savings taxes where you can save up to Rs 1.5 lakh under section 80C of the I-T Act. Various options like ELSS mutual funds, PPF, tax-free bonds, etc provide both tax benefit and capital appreciation.

Standard of Living: The savings created from good planning can prove beneficial in difficult times. For example, you can make sure there is enough insurance coverage to replace any lost income should a family bread winner become unable to work.

Discipline in managing money: Financial planning brings in discipline. Also, there are subtle behavioural changes when you undergo financial planning. For example, when you run a systematic investment plan (SIP), your expenses are automatically curtailed and this goes t owards investments. Similarly, when you do financial planning, you become aware if your lifestyle expenses are above or below what you can afford. If it is the former, you can take necessary steps to cut back on unnecessary expenses.

6 Steps of Financial Planning

Financial Planning is a comprehensive and ongoing process that can help you to achieve your financial goals. Financial Planning Standard Board India has developed 6 steps that is widely use by Financial Advisor when meeting with client. The FPSB develops education programs for financial planners.

Below the six-step process is set out in brief.

Establish & define the relationship with client.

This is where the financial advisor will introduce him or herself and typically explains about what financial planning is, its process, information about company and services provided as well as fees & charges .Advisor may also ask questions like your family background as well as check your knowledge about financial products & market.

The purpose of establishing the goal or relationship is to form the foundation or purpose of planning itself–to begin the financial journey with the clarification of a financial destination.

Gather the client’s relative data.

During the second step of the process, the advisor will collect the client’s qualitative as well as quantitative information.

Qualitative provides general information like your financial goals, lifestyle, family’s medical history or health, and investment-risk tolerance level.

Quantitative provide basic but specific identifying information concerning details of current financial status. Examples include info about your total family income, expenses, investments, insurance coverage’s, and present liabilities or other obligations.

Analyze the Client’s data:

In this step financial planner analyzed all the information collected in 2nd step. He will analyses clients current financial status, his investment, insurance policies, and liabilities to determine the strength and weaknesses. He also analysis the clients objectives, needs and priorities.

Develop the Financial Planning recommendations and present them to the client.

The financial planner offers financial planning recommendations that address the client’s goals, based on the information the client provided. The planner reviews the recommendations with client to allow the client to make informed decision. The planner listens to clients concerns and revises recommendations as appropriate.

Implement the Financial Planning Recommendation.

Once client agreed to recommendation, next step is put plan into action. Based on the scope of the engagement, the financial planner identifies and presents appropriate products and services that are consistent with the financial planning recommendations accepted by client. Financial Planner also guides you what needs to be done, complete any relevant paperwork. Also if needs to be coordinate with meeting with other specialist.

Review the client’s situation.

Financial Planning is ongoing process.  The client and financial planner agree upon terms of reviewing and revaluating the client’s situation, including goals risk profile, lifestyle and other relevant changes. If there is any change the financial planner adjust recommendations as needed.




Goods & Service Tax is an indirect tax applicable throughout India which replaced multiple cascading taxes levied by the central and state government.  It is applied on services and goods at national level with purpose of achieving overall economic growth. So let’s see GST in detail.

It replaces

  1. State VAT
  2. Central Sales Tax
  3. Excise Duty
  4. Special Additional Custom Duty
  5. Service Tax
  6. Octroi
  7. Entry Tax
  8. Luxury Tax
  9. Entertainment Tax

However, following taxes will continue

  1. Basic Customs Duty
  2. Professional Tax
  3. Stamp Duty
  4. Motor Vehicle Tax
  5. Electricity Duty
  6. VAT on Petroleum Products
  7.  Toll Taxes

GST Council is the apex body created by Parliament for governance of this Act.  It includes Finance Secretaries of Central as well as various State Governments

GST Rates – 5%, 12%, 18% & 28%

GST Exempt goods / services – 0%

Old VAT / Excise TIN will go and new PAN based Registration Number for GST is essential.  Structure of this number is as under:


Out of which first two digits are state code (in which Registration is taken) – ’27’ is for Maharashtra.Next 10 digits (AAAAA0000A) are PAN number of the assesse and last 3 digits are serial number

Incidence of GST is on following:

  1. Supply of Goods / Services
  2. Agreed to Supply Goods / Services for Consideration (either in cash or kind)
  1. ‘Destination based’ Tax is charged (If source & destination are in same state, it is Transaction within state, if Source & Destination are in different states, then it is Interstate Transaction)
  2. Branch Transfer / Stock Transfer will attract GST

GST Registration is MANDATORY if Annual Turnover of Goods or Services or both is Rs.20 Lacs or above.

Three types of GST are there:

  1. Central Goods & Service Tax (CGST)
  2. State Goods & Service Tax (SGST)
  3. Integrated Goods & Service Tax (IGST)

Rates under GST

  1. Rates of CGST & SGST shall be equal and will be 50% of the rates stipulated for those specific Goods or specific Services. g. if the goods under transaction attract 18%, then CGST for them is 9% and SGST for them is 9%.
  2. In case of Local Invoice or Within State Invoice, CGST and SGST both need to be charged SEPARATELY and to be mentioned in the Return accordingly.
  3. Rates of IGST are equal to sum of rate under CGST and rate under SGST. Thus in above example, rate under IGST is 18% (9 + 9).
  4. Tax Credit (or set-off, as was said in earlier days), shall be available for all these three taxes viz. CGST, SGST & IGST.
  5. Earlier, in spite of ‘C’ or ‘H’ or ‘F’ forms, 2% Tax was a cost to the assessee. Now since these forms are done away with, this 2% cost is avoided, since full set-off or ITC of all Interstate Transactions is allowed now.
  6. There will be GST chargeable on FREE Items such as Medical Samples, Buy 1 get 1 Free etc. Valuation of such Free Items will have to be made, at par with sale of these items.  Thus if your are giving 1 free for purchase of 10,  You will have to Invoice for 11, levy GST and then you may give credit for the basic value of 1 being Free Item.  Thus GST needs to be paid on all items, being delivered to the customer.
  7. Invoice is allowed to be cancelled ONLY by way of issuing Credit Note and that too within a period of 6 months from the dateuch invoice.

Composite Scheme:

  1. It is available for all assessees having Turnover < Rs.75 lacs
  2. Under this scheme, 2.5% tax is applicable for Manufacturing Companies and 1% tax is applicable for all others.
  3. No Set-off or Tax Credit shall be available under this scheme.
  4. This is optional
  5. Assessee has to apply for this and then GST Official’s permission is required to opt for this.
  6. If this scheme is availed, GST cannot be charged in the Invoices raised by the Assessee and thus the cost of GST has to be borned by the Seller / supplier of goods/service.
  7. If this is availed in one year and for next year you intend to do away with this, you can apply to GST officials and take permission for the same i.e. either to Opt-in or Opt-out of the scheme.

Immovable Property is NOT Taxable under GST:

Thus, if the flat is booked before Completion Certificate, it is TAXABLE under GST, whereas, if the flat is purchased after Completion Certificate (Ready-possession flat), it is NOT Taxable under GST

GST is applicable on Advance from Customer, as and when it is received from the customer, before raising invoice for the same.  It needs to be declared in the Output GST Return (GSTR-1)

URD Purchases (Purchases from Unregistered Dealers / Suppliers)

If the Assessee has purchases from Unregistered Dealers, Assessee has to ACTUALLY pay GST on the same Reverse Charges).  Assessee can take set-off (credit) of the same in next month.

No Revised Return is allowed under GST

Input Tax Credit (ITC)  (similar to set-off under old system)

  1. Assessee has to be in possession of Tax Invoice, or Debit Note or Credit Note.
  2. Payment has to be made to the Supplier within 180 days. If the payment is not made to the supplier within this period the ITC has to be reversed by the Assessee.  It can later be availed, as and when actual payment of this is made to the Supplier.
  3. ITC for Reverse charges (GST paid on URD purchase or other specific services), can be availed in the next month, of the month of their actual payment

GST Rating:

  1. There will be GST Rating (just like CIBIL Credit Ratings) in respect of Assessee, in consideration of timely filing of Returns, timely GST payment and other discipline followed by the Assessee.
  2. This can be viewed by the Assessee, as also by others.
  3. Thus while selecting the Supplier, his GST Rating can be viewed beforehand.
  4. It will also be viewed by bankers, financial institutions while lending money to the Assessee.


Set-off (ITC) under GST

ITC under GST shall be available under GST in following order


      CGST                                            1.CGST




   SGST                                               1.SGST




           IGST                                               1.IGST



RETURN Filing Due Dates

  1. 10th of Next Month – Output GST (including Advance from Suppliers) i.e. Sale Return (GSTR-1)
  2. 11th to 15th – system will be closed / blocked for any entry, but entries can be viewed during this period, including Entries of your suppliers. View Supplier’s sales entries, and ensure if they match with your purchase entries in your books.
  3. 17th of Next Month – Input GST i.e. Purchase Return (GSTR-2) These entries HAVE TO MATCH with the entries made by your suppliers in their Sales Return.
  4. 21st if Next Month – Monthly Return in GSTR-3, alongwith payment. Liability of Payment shall be calculated by the System itself, after filing of GSTR-1 & 2 as mentioned above.
  5. 31st December of Next Financial Year – Annual Return (GSTR-9), alongwith Audit Report. Audit is compulsory for Assessees having Turnover of Rs.1 Crore and more.

If the Assessee is caarying out business at more than one places, he has to obtain GST Registration at each of such place and has to file Returns for each of such place of business.

Reverse Charges – GST to be paid on Self-Invoicing

  1. URD Purchases (with Names & Addresses of such suppliers)
  2. Services such as a. Goods Transport, b. Advocates Fees, c. Sponsorship, d. Rent a Cab.

TRANSITION PROVISIONS (For the period of switching over from present Tax System to GST)

  1. Transit-1 Return to be filed within 90 days. Set-off or ITC for these items shall be pending till this is filed.

2. June 29 – Reverse Charges to be paid


Income Tax Deductions F.Y. 2016-17


Section 80 C, 80CCC, 80CCD:-Maximum Deduction Rs.150000

The maximum tax exemption limit under this section is Rs.1.5 lakh only. This 1.5 lakh is aggregate amount. It means if the total of all investments is Rs. 2 Lakh the tax deduction would be available only on 1.5 lakhs. Both individuals and Hindu undivided families (HUF) eligible for these deductions. There are many instruments in which investments can be made are as follows.

  •  Life Insurance,ULIP,Pension Plan
  • Home Loan Principal,Stamp Duty & Registration charges for home purchase agreement
  • Employee Provident Fund/Public Provident Fund
  • Mutual Funds
  • Tuition Fees
  • Subscription in Any notified bonds in NABARD
  • Deposit in Senior Citizen Scheme
  • 5 year Time Deposit under post office
  • Fixed Deposit of 5 year
  • National Saving Certificate

Section 80 D : Deduction for Premium paid for Medical Insurance.


    Health Insurance Premium Paid



Total Deduction under Section 80D

Self, Spouse & Dependent Children   Parents (whether dependent or not)
Tax Payer & his family member has not attained 60 years of age  Up to Rs 25000    Up to Rs 25000  Rs.50000
The eldest member in family (yourself, spouse & Dependent children is less than 60 years & your parents are above 60 years of age     Up to Rs 25000      Up to Rs 30000 Rs.55000
The eldest member in family (yourself, spouse & Dependent children has attained  60 years & your parents are above 60 years of age Up to Rs 30000  Up to Rs 30000 Rs 60000

   Deduction U/s 80 U person with disability & severe disability

              Taxpayer       Dependents Maximum Amount of             Deduction
          Individual Less than 60 years                40000
          Individual Senior Citizens                60000
          Individual Very Senior Citizen                80000

Deduction U/s 80 U person with disability & severe disability

     Taxpayer         Disability Maximum Amount of       Deduction
     Individual Normal disability              75000
     Individual Severe disability            125000

Other Deductions

           Section Criteria/Conditions Maximum Deduction
        Section 24 (B ) Tax benefit on loan repayment of second house

Unclaimed loss if any will be carry forward to be set off against house property income of subsequent 8 years

        Section 80E Education Loan for higher secondary studies for you, spouse and children. Principal repayment cannot be claimed No limit on the amount of interest & deduction is available for maximum 8 years or till interest is paid whichever is earlier.
        Section 80G Contributions made to certain relief funds and charitable institutions .Only claim

When contribution has been made via cheque or draft.



Deduction is not applicable in case donations is done in form of cash for amount more than Rs.10000/-
        Section 80GG This section is applicable for those individuals who do not own residential house & do not receive HRA          Rs.60000
        Section 80TTA In respect of Saving Bank account interest         Rs.10000



It is time to file your income tax return (ITR) & in move to make the tax filing process more convenient, The Central Board of Direct Taxes (CBDT) has redesigned the ITR forms for financial year 2016-17.

All ITR forms would have a dedicated column seeking details of any cash deposit exceeding Rs. 2 lakh during the demonetization drive between November 9, 2016 and December 30, 2016. For those claiming Home Loan interest deductions under Section 80EE, there is a new field added in all ITR forms under Schedule VI-A.

The government also mandated quoting of Aadhaar number while filing the tax return .

Here is all that you need to know to file your tax returns successfully.


This form can be used if you have

  • Salary or Pension Income having total income up to 50 lakh.
  • Income from One House Property (excluding cases where loss brought forward from previous year)
  • Agriculture income which is less than R.5000
  • Income from Other Sources like FD/Shares/NSC etc (excluding Winning form Lottery and Income From House Race)

One significant change this year is that the new ITR Sahaj form is compressed into a single page with dedicated sections for deductions under section 80C, 80D, 80G and 80TTA.


The ITR 2, ITR 2-A and ITR-3 forms have all been converted into 1 single form and renumbered as ITR 2.

  • Salary or Pension Income
  • Income from Multiple Houses
  • Income from Capital Gains
  • Income from other sources (Including Winning from Lottery and Income form Race Horses.)
  • Income of a person as a partner in the firm.
  • An asset in foreign country or income from a source outside India.
  • Agriculture income which is more than Rs.5000.

Further, in a case where the income of another person like one’s spouse, child, etc. is to be clubbed with the income of the assesses, this return form can be used where such income falls in any of the above categories.


This tax return form has been discontinued in FY 2016-17.If you have filed ITR 2A in FY 2015-16, then you should file ITR 2 now for FY 2016-17.


The old ITR-4 tax form has been renamed ITR-3.


The old ITR-4S tax form has been renamed ITR-4. If you’ve e-filed an ITR-4 for FY 2015-16, then you must file an ITR-3 now.

The current ITR 4 is applicable to individuals and HUFs having income from a business and profession and who have opted for the presumptive income scheme as per section 44AD, Sec 44ADA and Section 44E of income Tax Act. However, if turnover of business exceeds Rs 2Cr, the tax payer will have to file ITR 3


This tax return form has been discontinued in FY 2016-17.If you have filed ITR 4S in FY 2015-16, then you should file ITR 4 now for FY 2016-17.

ITR-5: FOR FIRMS, AOP’s, and BOI’s

This forms can be used by Firms, Co-operative Banks, Co-operative Societies, Limited Liabilities Partnership (LLP), Association of Persons (AOP), Body of Individuals (BOI), Artificial Judicial Persons.

Applicable for all sources of Incomes.


Companies other than companies claiming exemption under section 11 are those whose income from property is held for charitable or religious purposes.


139(4A) – To be filed by every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purpose.

139(4B)- To be filed by a political party it the total income without giving any effect to the provisions Section 139 A exceeds the maximum amount that is not chargeable to income tax.

139(4C) – To be filed by every scientific research association, news agency, association or institute referred to in Section 10(23A), Section 10 (23B).fund or institution or university or educational institution or any hospital or other medical institution

139(4D)- To be filed by every university, college or other institution, which is not required  to furnish return of income or loss under any other provision of this section.




What is mutual fund?

A mutual fund is essence of Trust with a sponsor. They are registered with SEBI who approves the Asset Management Company managing the funds. In other words mutual fund is a mediator that brings together a group of people and invest their money in stocks, bonds and other securities.

What are benefits of investing in Mutual fund?

  • Professionally managed: The pool of money collected by mutual fund is managed by professionals who possess considerable expertise, resources and experience .Through analysis of markets and economy, they help pick favorable investment opportunities.
  • Diversification: Since funds invest in number of securities risk is diversified.
  • Flexibility: Investors can benefit from the convenience and flexibility offered by mutual funds to invest in wide range of schemes.
  • Low Transaction Cost: Due to economies of scale, mutual funds pay lower transaction costs. The benefits are passed to mutual fund investors, which may not be enjoyed by an individual who enters the market directly.
  • Regulations: All the mutual funds are registered with SEBI and complete transparency is enforced.
  • Easy to track: Mutual funds provide a clear statements of all investments which makes it easy for investors to keep a tab on.


Can I Invest Lump sum amount in mutual funds?

Yes you can invest

What is Systematic Investment Plan & How does it Work ?

Systematic Investment Plan (SIP) which is a systematic method of investing your money. In other words SIP is a planned approach towards investments and it helps you to develop the habit of saving and building wealth for the future. Best part is you can participate in SIP by investing minimum of Rs.500/- or more either on monthly or quarterly basis.

SIP is flexible and easy investment plan & conceptually similar to a recurring deposit where by a fixed investment is made on a regular basis. Your money is auto debited from your bank account and invested into a specific mutual fund scheme. You are allocated certain number of units based on the ongoing market rate called NAV for the day. Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Whenever you make an investment in a mutual fund scheme, the fund house has to send you an account statement providing details of holding.

Can I do additional purchase or increase amount of SIP?

Yes. You can do additional purchase and increase your SIP amount also in the same folio or scheme.

Is there any lock in period?

Only ELSS mutual funds (Tax Savings) have 3 years lock in period. Other mutual funds don’t have any lock in period but if you redeem your mutual fund before 1 year there is 1 % exit load.

What are investments options available in Mutual Funds?


Dividend is not paid out under a Growth Plan and the investor realizes only the capital appreciation on the investments (By increase NAV)

Dividend Payout Option

Dividends are paid out to investors under this option. However, the NAV of the mutual fund scheme falls to the extent of the divined payout.

Dividend Reinvestment Plan

Under this option dividend accrued on mutual funds is automatically re-invested in purchasing additional units.

How much returns can I expect from my mutual funds?

The returns are not fix because as you invest, units are allocated as per on going market rate called NAV & it fluctuates depending on the time of investment, economy’s condition and other factors

Returns on investment also depends on types of mutual fund and your investment tenure. Eg. Equity funds gives better return in long term and debt fund gives better return in short term.

What are different types of Mutual Funds?

Equity Funds

The aim of equity funds is to provide capital appreciation over the medium to long term. Such funds invest major part of their corpus in equities. These funds have comparatively high risks. There are different types of equity mutual funds such as Sector Fund, Index Fund, ELSS Fund & Diversified funds.

Debt /Income Funds

The aim of Debt funds is to provide regular and steady income to investors. These funds invest predominantly in high rated fixed income bearing instruments like bonds, debentures, government securities, commercial papers & money market instruments.  Debt funds are less risky compare to Equity mutual funds & best suited for the medium to long term investors who are averse to risk & seek capital preservation.

Liquid /Money Market Mutual Funds

These schemes invest exclusively in safer short term instruments such as treasury bills, certificate of deposit, commercial papers, and government securities, etc. The period of investment could be as short as a day.

Balanced Funds

The aim of balanced funds is to provide both growth & regular income. These funds invest both in equity & debt in the proportion indicated in their offer documents. Such funds are appropriate for investors looking for moderate growth.

Gilt Funds

These funds invest in Central & State Government securities & best suited for medium to long term investors. Since they are Government backed bonds they give a secured return and also ensure safety of the principal amount.

 What are documents to be submitted along with application form?

Every person shall quote his PAN and enclosed KYC acknowledgement letter issued by the KYC Registration Agency for all investments irrespective of amount involved for purchase of units


What is know your customer?(KYC)

It is one time exercise while dealing with securities markets – once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund, etc. )you need not undergo the same process again when you approach another intermediary .This entitles  In-person Verification (IPV),verification of identity and address, financial status, occupation and such other information as may be prescribed by guidelines , rules & regulations.

You can know your KYC status:







One of the most misunderstood financial products in India is “Term Insurance”. In fact insurance itself is not understood enough. Most people consider insurance as just another form of investments or tax saving instruments, which can earn them safe, stable returns over long run. The true and simplest meaning of insurance is – protection against risk. This risk may be life  or property or many other things. But in this article let’s focus on life insurance, and specifically term insurance.


Term insurance is a type of life insurance policy which pays the Sum Assured as the death benefit only if the person insured dies during the plan future. For instance, if a person buys Rs.10 lacs policy for 15 years, his family is entitled to the money if he dies within that 15 year period, subject to his paying all due premiums in time. What if policyholder survives the 15 year period? Well, then he is not entitled to any payment.


Last week one of my client asked me to advice if he really need to have a term plan as he already have 3 other policies for different purpose like children education, tax savings and retirement. The same dilemma is faced by many individuals who are not educated about the merits of the term plan. Since the term plan only pays death benefit, it is widely snubbed or skipped by many individuals. The logic behind their thought is that since no benefit is payable in the event of planned maturity, the premium paid under the term plan is not value for money. A simple question to be answered by many Financial Planner while suggesting the term plan is – Why should I pay for a product if I am not going to get any return?

So let me list 4 reason why you should buy Term Insurance Plan?


Term Plans are solely designed to safeguard your family when you are not around to take care of them. It covers 100% Risk. As the years roll by, however, the insurance cover must be revised from time to time to meet the changing needs.


The premiums of Term insurance plans are low as compared to other life insurance plans. This is because there is no investment element as all the funds go to covering the risk and providing protection. Term insurance plan provides a large cover at low premium ensuring that the nominee of the policyholder can live the same lifestyle in case of policyholder’s death.


Opting out of a term life policy is much easier than getting out of cash value policies. In term polices if you stop paying the premium the risk cover ceases and the policy ends. Nothing is payable to you as there is no element of savings in the policy. However, cash value policies only give the full promised survival benefit if they are held for the full tenure of the policy. If you stop paying premiums mid-term there is financial loss as you cannot recoup your savings portion of the policy without certain deductions.

Further many term life policy is much are “renewable” and “convertible”. The former ensures that you can go in for another term policy without a medical exam at the end of the first term policy. The latter allows you to convert your term policy into an endowment policy for the same sum assured with associated increase in premium.


Term Plans come with host of riders which provide extra benefits at nominal cost. Accidental death, permanent or partial disability, critical illness, waiver of premium are some of the options available. There is no set of rule as to who can avail a plan. It all depends on one’s need.

So there is no other financial product as important as a term insurance plan & that’s why Financial Planner suggest to buy a Term Insurance Plan




Everyone has a need for Life Insurance, because everyone is exposed to some or the other risk in life. Insurance enables the head or earning member of family to discharge the sense of responsibility that he or she feels for those dependent on them. By payment of small premium they create an immediate estate for their family and dependents. But one of the biggest problem is many consumers simply have no idea how much life insurance they need.

You need to know this, not only as an individual but as a customer too –particularly in view of fact that majority of Indians are still either uninsured or under insured. For instance, you might have several insurance policies, but are you also adequately covered?

Needs keep on changing through the life stages of an individual. Insurance need also changes during life. One should periodically review insurance needs in order to ensure that life insurance coverage adequately reflects the present life situation. For, while little life cover could result in the family not being financially self-sufficient in the event of the unfortunate death of the policyholder and chief wage earner, too much insurance would mean higher outgo of premiums at the cost of necessary life stage and lifestyle spent.

Figuring out your life insurance needs sounds trickier than it actually is. The important thing is first determine whether you need life insurance, which kind is best for you and carefully calculate how much you need.

First question: Do you need life insurance at all? If you have dependent and don’t have enough savings, you definitely need insurance.

Second question: Which kind of insurance should you get? If you’re main concern is to protect your family against loss of your income (Unfortunate death), term insurance is the way to go. It is cheapest insurance.

Finally, how much insurance do you need? The answer is really depends on how much money your family need will need after you are gone. There are many factors that are relevant in determining the amount of life cover you should buy. It takes a few steps, but it’s not rocket science. Let’s go through it:

  1. Income Replacement: –The objective of life insurance is to ensure that your family can live same lifestyle after you as they do now. In the event of your untimely death, the income earned from investment of the policy pay out should replace your current income. For e.g Mr. A aged is 25 years with current household expenses of Rs.30, 000 pm will retire at 58 years. Taking into consideration an average inflation rate of 7% , his projected expenses at retirement will be Rs.2,79,760.Thus the amount required at retirement will be Rs.4 Cr. Approx. (person lives for 12 years after retirement assuming no inflation.)
  2. Consider Liabilities/ Debt: The insurance cover should also include financial liabilities such as home loan, car loan and other personal loan. For example if your outstanding principal balance on home loan is Rs.20 lakhs and car loan of Rs. 3 Lakhs ,you need a minimum insurance cover of Rs. 23 lakhs plus a little extra for accrued interest.
  3. Future obligations: -You should also have enough coverage to pay for future financial obligations like children’s education, marriage etc. For e.g if you need Rs.5 lakh for child’s higher education & 10 lakhs for daughter’s marriage, you should include that when you are calculating how much cover you require.
  4. Tally up the resources: Now look at total of your savings or investments (e.g. FD, MF, PPF, EPF etc.) suppose you have 18 lakhs So carrying on the above example your


Total need = Income Replacement + Loans + Future Obligation – Invest.

                      =    4,00,00,000 +23,00,00,000 +15,00,000 – 18,00,000

                      =         4, 20, 00,000    (4.20 Cr)               



In previous article I have share short term investment options available in India. In this article I will share long term investments options available in India. Before that let’s see meaning of long term investments.

So what do you mean by Long Term Investments?

When an investment is done for a period of more than 5 or 6 years or even more than that, it is called long term investment. For e.g. saving money for child marriage, setting a retirement corpus that come under long term investment.

Most of, long term investments tend to give superior returns with passage of time. They are more tax efficient, as in case with certain mutual fund investments. Long term investment works only when it is untouched. However, you should always monitor your investment.

1. Invest in Stock/Shares: Shares tend to give better returns over the long term. As an investment options, investing in equity shares is considered to bring a high level of risk associated with it but if one can invest for a long term of more than 10 years, higher return is expected. Stocks can be opt as a part on the portfolio and percentage of allocation should based  on the risk capacity.

2.ELSS Mutual Funds: Mutual Fund investments are generally preferred by people who want to invest in equity and bonds with balance of risk & return. ELSS is a diversified equity mutual fund where the investors enjoy the dual benefits of capital appreciation as well as taxation benefit. In ELSS, the majority of funds are invested in equities. ELSS fund has 3 years lock in period from the date of investments i.e if you start SIP today, (July 2016) they can be redeemed in July 2019 only. This fund is best suited for investors who are willing to take risk and want to plan their long term investments.


3.Real Estate:-If you plan proper way, you can invest your savings in the real estate sector. But, you have to be very careful while choosing the right option since this involve huge investments. Moreover, one has to be patient enough to face impact of fluctuating prices in real estate sector. Your property might appreciate immediately or it might take many years for appreciation. Don’t be hurry to make investment in real estate. If required take help from experts.


4.Public Provident Fund: – Public Provident Fund is one of the best and secure long term investment option in India. It is among the few investments that not only offer you tax benefits under section 80C of the Income Tax Act, but also interest income is exempted from Tax. The current interest rate is 8.10% for F.Y.2016-17.Under this, the money will be locked for a period of 15 years & earn compound interest. A minimum yearly deposit of Rs. 500 required to open & maintain a PPF account & maximum deposit of Rs.1.5 lakh can be maintained in PPF account in financial year.

But less liquidity is a big negative for PPF. You can partially withdraw your investment  only at the end of 6th year. You can also take loan on balance of PPF account.



5.New Pension Scheme: – It is best retirement scheme for long term investment. NPS is regulated by PFRDA & hence considered a safe investment option. You can choose the percentage exposure you want to equity. All individuals between age group of 18 to 60 years can join NPS.

You get tax benefit for investment upto 50000 under section 80CCD in addition to Rs.1.5 lakh under section 80 C. The minimum annual contribution is Rs.6000 that can be paid in installment or lump sum.

There are restrictions on withdrawal before retirement and minimum 40%   of the corpus has to  be used to buy annuity. The main disadvantage of NPS is that 60% of corpus become taxable at maturity.


6.Post Office Saving Scheme: – Post office saving scheme are also called small saving scheme. It is preferred by individuals who want to earn fixed return with n risk. Being govt. saving scheme, it has very low risk. Post office offers various scheme such as National Saving Certificate, Monthly Income Plan, Recurring Deposit Scheme, Kisan Vikas Patra. Among them NSC is good post office investment option with guaranteed return amount.


7.Long Term Bonds: – Bonds is a form of lending money to government or company. In exchange government or company pays fix amount of interest on principal. If you don’t want to any risk or if you are not comfortable with direct equity shares or mutual fund investments, then investing in bonds could be a good options. There are many good bonds which actually provide a high return on investments. You may opt for Gov.10 year bond which is currently giving an interest rate of Rs.7.7%. One can also opt for inflation index bonds as the government set interest rate on bonds based on inflation.