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Send your answers on 9029868078 (WA) or mail me on email@example.com
Send your answers on 9029868078 (WA) or mail me on firstname.lastname@example.org
Bharat Bond ETF is an exchange traded fund with a Target Maturity Date.
It will invest in bonds of Central public sector enterprises (CPSEs), Central Public Sector Undertakings (CPSUs), Central Public Financial Institutions (CPFIs) and other Government organizations.
It is a Government of India Initiative to help public-sector organizations with their borrowing requirements.
An Exchange-Traded fund can be freely traded live during market hours and is a low-cost product.
What is a Fixed maturity ETF?
This kind of ETF has a Fixed Maturity Date. Bharat Bond ETF has 2 types: 3 years and 10 years. The underlying index will also mature at the same time. For example: BHARAT Bond ETF – April 2023 denotes the maturity date.
What is the underlying index?
Nifty BHARAT Bond Index which will be initially constructed with AAA bonds. If a bond falls below AAA but is above BBB- (investment grade), the bond will be removed from the index only in the next calendar quarter. Only if becomes junk will the bond be removed from the index in five days.
What is the difference between an open-ended ETF and a fixed maturity ETF?
In an open-ended ETF, the fund will keep buying new bonds upon maturity of the existing bonds. A fixed maturity ETF will try and hold the bonds up to maturity. For example: a 3 year Bharat Bond ETF will hold bonds that mature within 12 months of the maturity date. The residual maturity of the 3-Y ETF is 282 years.
What are the advantages of a fixed-maturity ETF?
This combines the ability to sell at the exchange at any time and eliminates interest rate risk and credit rating change risk if the bonds are held up to maturity and do not default.
Is the return of principal guaranteed?
No. While the underlying risks are comfortably and acceptably low, no such guarantees can be made.
Are the Returns Guaranteed?
Are returns predictable? Will I get the indicated yield if I hold until maturity?
Returns are not predictable. Even if one holds the ETF until maturity, the final returns will be governed by market forces. For example: the interest received by the fund will be reinvested into the portfolio. The yield of the bonds could be lower at that time (bonds priced higher) resulting in a deviation from the estimated yield on creation. This is known as Re-Investment Risk. (People in my Whatsapp Group might understand this as this has been communicated to them). Over 3 years, this is likely to be minimal but can be significant over a 10 year period.
Any changes in the bond portfolio, especially a rating downgrade resulting in the need to sell the bonds, will impact yields.
Public sector bonds are the safest, are they not?
Relative to a corporate bond = YES. This does not mean default is not possible. Five years ago how many would have believed a 100% government-controlled company like BSNL would find it difficult to pay staff salaries?
How to invest in Bharat Bond ETF?
Obviously, through Demat Account. No other route is available currently.
Taxation in the Bharat Bond ETF?
The maturity date of 3 year bond is a little more than three years. This is to ensure the gains will be denoted as long-term capital gains with 20% tax after indexation. This means that the purchase price can be inflated using the cost inflation index before computing the gains. So effective tax rate would be about 18-20% depending on the rate of inflation.
Pls note the rate is applicable for all tax slabs. For those in the 5% slab, a simple FD will work better.
For senior citizens, this is not particularly attractive as fixed deposits carry an Rs. 50,000 income tax exemption.
For a sale mid-term, the gains will be added to income and taxed as per slab.
Min & Max Investment for Retail Investor?
Min: 1000, Max: 2 Lakhs (Only for NFO period).
Any Better Alternatives?
A carefully chosen Arbitrage Fund that don’t hold risky bonds, better for those in 20% & 30% tax slab. Arbitrage fund can be redeemed at any point of time with no exit load. (There can be some funds with 30 days waiting period).
People who want to still try the Bharat Bond ETF & have demat account can go ahead with 3 yrs term. 10 yrs will be too long as it may carry re-investment risk, liquidity risk and more volatility.
If you still have any more questions, kindly send me on 9029868078 / email@example.com alongwith your complete details & location.
For any Mutual Fund Strategy, Investment Mandate is of critical importance. Hence, the fund manager of the scheme cannot go against the mandate to improve the performance.
Value Discovery Fund strictly belongs to Value Category with Blend Portfolio. Value is used to diversify the portfolio. Make sure you understand truly the meaning of Diversification.
All funds in your portfolio will never generate returns at most times. While some funds will have upside & some at lower. Value Funds will help you regain your losses over longer period.
This might be a warning bell according to me.
In this fund’s case, inflow has stopped & redemptions has increased. In Sept 2018, AUM of this scheme was 16477.28 Crores, whereas, in Sept 2019 it was 15095.61 Crores. Can you think what would be the reason for this?
Through above image, you can understand the fund has underperformed its benchmark & category for 1 yr, 3 yrs & 5 yrs duration.
The fund has outperformed the index by only 2044 times as compared to 2113 times.
To understand it more clearly how the fund has performed vis-a-vis with other fund of same category i.e. Value Style, view the comparison.
What will be your call:- If the fund manager deviates from investment mandate to improve performance
Is the Mandate Important?
Life Insurance Plans are very popular as a tool to get deduction under section 80C of the Income Tax Act, 1961. The investment in life insurance can be deducted up to Rs 1,50,000. It a common perception that Premium Paid on all Life Insurance Policies qualifies for deduction under section 80C of the Income Tax Act,1961 and full premium amount qualifies for deduction under section 80C.
Apart from several other items provided under section 80C, a taxpayer, being an individual or a Hindu Undivided Family (HUF), can claim deduction under section 80C in respect of premium on life insurance policy paid by him/it during the year.
Policy to be taken in whose name?
In case of an individual, deduction is available in respect of policy taken in the name of taxpayer or his/her spouse or his/her children.
In case of a HUF, deduction is available in respect of policy taken in the name of any of the members of the HUF.
No deduction is available in respect of premium paid in respect of policy taken in the name of any person, other than given above.
Overall deduction u/s 80C (along with deduction u/s 80CCC & 80CCD) allowed is up to Rs. 1,50,000
How much deduction available u/s 80C for investment in insurance policies???
Section 80C of the Income Tax Act provides deduction up to Rs 1,50,000 provided you invest according to condition given in section itself. One of the most popular way of saving tax by deduction u/s 80C is purchase of insurance policy. There is common perception that premium upto Rs 1,50,000 on any insurance product like life insurance or Unit Linked Insurance plan is fully allowed. However, this is not correct. The reason for such conclusion is section 80C (3) and 3(A) of the Income Tax Act which specifies which premium is eligible for deduction under section 80C of the Income Tax Act,1961.
Restriction on amount of deduction with respect to capital sum assured/ Eligible Premium under Sub-section (3) and (3A) of 80C of Income Tax Act,1961 For regular Life Insurance Policies (other than contract for deferred annuity)
Issued from 01.04.2012 – premium paid not in excess of 10% of Capital Sum Assured (as amended by Finance Act 2012).
Eligible Premium under Sub-section (3) and (3A) of 80C of Income Tax Act,1961 For Life Insurance Policies (other than contract for deferred annuity) for (a) a person with disability or a person with severe disability as referred to in section 80U, or (b) suffering from disease or ailment as specified in the rules made under section 80DDB,
Therefore , it is clear from section 80C (3) that whatever insurance premium is paid for any insurance policy( other than deferred annuity) or ULIP, the maximum allowable is fixed at 10% of the sum assured.
So, next time you buy any insurance product , think about sum assured and whether the insurance premium is just below 10 % of sum assured regular policies and 15% for for (a) a person with disability or a person with severe disability as referred to in section 80U, or (b) suffering from disease or ailment as specified in the rules made under section 80DDB.
Minimum holding period for Life insurance policy – 2 Years.
Minimum holding period for ULIP- 5 years
Taxability of Premium allowed in Earlier year- If any of Life insurance policy is terminated, sold, etc., before the minimum holding period specified above, then the deduction allowed in earlier years would be deemed as income of the previous year of termination, sale, etc. Further, no deduction will be allowed in respect of contribution, payment, etc., made towards such policy (i.e., which is terminated) during the year of termination.
Mr. Kiran had made the following payments during the financial year 2018-19 to avail of the advantage of deduction under section 80C:
1. Premium paid on his life insurance policy of Rs. 8,400. Policy was taken in April 2011 and sum assured was Rs. 25,000.
2. Premium of Rs. 1,000 on his another life insurance policy. Premium was due in March 2015 but was actually paid in April 2016.
3. Premium of Rs. 30,000 on life insurance policy taken in the name of his wife. Policy was taken in April 2012 and sum assured was Rs. 2,00,000.
4. Premium of Rs. 30,000 on life insurance policies taken in the name of his three children (one is minor daughter, second is major married daughter and third is major married son, who is a practicing doctor). The policies are term plans and premium on all the policies worked out to be 5% of capital sum assured.
5. Premium on life insurance policy taken in the name of his parents who are dependent on him. Premium paid during the year amounted to Rs. 25,200.
6. Premium on life insurance policy taken in the name of parents of his spouse who are dependent on him. Premium paid during the year amounted to Rs. 2,520.
7. Premium on life insurance policy taken in the name of his younger brother and sister dependent on him. Premium paid during the year amounted to Rs. 5,000.
8. Investment in PPF Rs. 60,000.
9. Investment in NSC Rs. 10,000. Interest accrued during the year on NSC amounted to Rs. 1,000.
10. Payment of tuition fees of his minor daughter Rs. 5,000.
11. Repayment of housing loan Rs. 12,000.
12. Investment in post office time deposit Rs. 10,000.
What will be the extent of deduction under section 80C for the year 2018-19, which Mr. Kiran will be entitled to claim in respect of above payments?
(A) The taxpayer can claim deduction under section 80C in respect of premium on life insurance policy paid by him during the year. Deduction is available in respect of policy taken in the name of taxpayer, his spouse and his children. No deduction is available in respect of premium paid in respect of policy taken in the name of any person other than given above. Deduction is restricted to 20% of capital sum assured in respect of policies issued on or before 3 1-3-2012 and 10% in case of policies issued on or after 1-4-2012. Considering the above provisions, deduction in respect of life insurance premium will be as follows:
1) In respect of premium of Rs. 8,400 on his life insurance policy which is taken in April 2011, deduction will be restricted to 20% of capital sum assured. Sum assured is Rs. 25,000 and 20% of the same will work out to be Rs. 5,000. Hence, out of Rs. 8,400, he will be eligible to claim deduction of Rs. 5,000.
2) Deduction under section 80C is available on payment basis. In respect of premium of Rs. 1,000 on his another policy (which is due in March), no deduction will be available in current year, since the premium is not paid in the current year. Premium is paid in next year and hence, he can claim deduction of Rs. 1,000 in next year.
3) In respect of premium of Rs. 30,000 on life insurance policy taken in the name of his wife, deduction will be restricted to 10% of capital sum assured. Sum assured is Rs. 2,00,000 and 10% of the same will work out to be Rs. 20,000, hence, out of Rs. 30,000, he will be eligible to claim deduction of Rs. 20,000.
4) Premium in respect of policy taken in the name of his children works out to be 5% of capital sum assured. Hence, entire amount of premium of Rs. 30,000 will be eligible for deduction. Further, it should be noted that deduction is allowed for all children irrespective of the fact whether they are dependent/independent, major/minor, or married/unmarried.
5) No deduction is available on account of premium paid in respect of policy taken in the name of any person other than the taxpayer, his spouse and his children. Hence, no deduction will be available in respect of premium paid by him on policy taken in the name of his parents, parents of his spouse and his brother/sister.
6) Total premium eligible for deduction under section 80C will amount to Rs. 55,000 (Rs. 5,000 + Rs. 20,000 + Rs. 30,000).
(B) The taxpayer can claim deduction under section 80C in respect of any contribution made by him towards statutory provident fund or recognised provident fund or approved superannuation fund or public provident fund (PPF). Thus, contribution to PPF of Rs. 60,000 will be eligible for deduction under section 80C.
(C) The taxpayer can claim deduction under section 80C in respect of amount paid by him towards purchase of NSC. Hence, he will be able to claim deduction under section 80C in respect of Rs. 10,000 paid by him towards purchase of NSC.
Accrued interest on NSC is taxed in the hands of the receiver and the same will be treated as an investment during the year of accrual (except for last year) and will qualify for deduction under section 80C. Hence, accrued interest of Rs. 1,000 will be treated as taxable income and on the same hand will also qualify for deduction under section 80C.
(D) The taxpayer can claim deduction under section 80C in respect of amount paid by him during the year towards tuition fees (excluding development fees, donation or similar payments) paid at the time of admission or thereafter, to any university, school, college or other educational institution situated in India, for full time education of any two children of the taxpayer. Hence, Rs. 5,000 paid by him on account of tuition fees of his minor daughter will qualify for deduction under section 80C.
(E) The taxpayer can claim deduction under section 80C in respect of amount paid by him towards repayment of housing loan. Hence, Rs. 12,000 paid by him on account of repayment of housing loan will qualify for deduction under section 80C.
(F) The taxpayer can claim deduction under section 80C in respect of investment made by him in post office time deposit. Hence, he can claim deduction of Rs. 10,000 under section 80C.
Considering above eligible items given in (A) to (F), the eligible amount of deduction will come to Rs. 1,53,000.
However, total deduction under section 80C cannot exceed Rs. 1,50,000, hence, deduction will be limited to Rs. 1,50,000. In other words, Mr. Kiran can claim deduction of Rs. 1,50,000 under section 80C.
Total:- Rs. 55,000 Life Insurance + Rs. 60,000 PPF + Rs. 11,000 NSC +Rs. 5,000 tuition fees + Rs. 12,000 housing loan + Rs. 10,000 time deposits.
P.S: Pure Term Cover is flavour of the season, offering wide benefits against traditional insurance policies & Ulip.
Kindly consider your risk profile, life goals, family objectives etc before buying any product. Do discuss your case with Fee Based Financial Planner or Fee Only Financial Planner against regular insurance agent receiving commissions due to conflict of interests.
One of my friend (Akshay) asked if he can buy car on Loan?
Car value = 10 lacs
Down payment = 1 lac
Loan = 9lacs
Monthly EMI = Rs 20,000 for 5 years
Akshay asked if his decision is right in buying car in above calculated approach
I said, You are buying a liability on another liability
Akshay – How, please explain.
I – Car is a liability, we need to keep spending on car monthly for fuel and maintenance and its value decreases over time.
Akshay – Acha Ok.
I – And you are buying a car (liability) with a loan (another liability), which is not a good approach.
Akshay – Ok, but my wife started working last month and she is earning 20-25k approx monthly and we thought to buy car with her salary.
I – So, when your income increases, you buy things which you dont need on loan?
Akshay – No, but we want Caaaaar.
I – How much will be your daily usage of car?
Akshay – We will not use it daily, may be monthly twice or thrice during weekends or holidays.
I – Ohh, then you can make use of cabs like Ola or Uber.
Akshay – Yes; but it doesnt give feel of owning a car.
I – Oh, I think you dont know, until loan is cleared CAR will not be yours’.
Akshay – Hmm yes, but it will be with us 🙂
I – You are getting emotional.
Akshay – Please tell me if my logic is correct, shall I buy car with calculations mentioned above?
I – As I said earlier, it is not a wise approach to buy car on loan. By the way, bank will not give loan to your wife as she just started earning and also nobody will give loan upto 80-90% of income going as EMI.
Akshay – I thought about it, so what I will do is, I will take loan on my name and pay emi from my account and will adjust with my wife salary.
I – Ok, what if your wife stops working after couple of years?
Akshay – Why will she stop working?
I – Consider for suppose
Akshay – It may become tight for me to pay EMI, I dont have much emergency fund also.
I – Hmm…thats risky.
Akshay – Please tell me if my decision is fine?
I – I have been telling since beginning, that this decision is not wise, but what are you expecting from me?
Akshay – I want you to tell me that my decision is right.
I – Then; why are you asking me if you have pre-decided?
Akshay – I want to confirm with you.
I – I can give opinion if you can listen open-mindedly. If you have pre-decided then whatever I say doesnt’ matter to you.
Above discussion happend about 8 to 9 months ago with one of my friend (name has been changed for privacy reasons) and no conversation happend after that
Today he pinged me and asked if we can meet over coffee and when we met;
Mr. Akshay looked unusual and was uncontrollable with his emotions. Upon discussing with him, following is the summary,
He bought the car on the loan, then after 4 months his wife had to stop working as it became difficult for her to manage work at office and son (2yrs old) at home as Akshay’s mother went back to their hometown who used to take care of his little son.
Akshay, in his words whatever you told became reality. After my left to hometown, We have decided and asked my wife to stop working and car EMI became a big burden now. I thought of informing you at that time itself but I did’nt know how to show my face to you, all these days that’s why I did not communicate to you.
Today I thought, Kaustubh was able to analyse and tried to advice me not to buy car at that time itself but I did’nt listen to him.
I dont know how many more mistakes i m doing which I did’nt ever thought of, so I kept my ego, shyness aside and messaged you. Now, I want your advice on all my financials and tell me what actions should I take to ease out my financial burden.
Kaustubh – My Final words – Financial Planning is all about managing RISK and ensuring we achieve our Dreams and Aspirations by not falling as trap to RISK by avoiding / mitigating it
Long real life story, please read at your convenience. Hope you all learn out of it 👆🏾👆🏾👆🏾👆🏾