Mutual funds reached to 21% of total bank deposits

Mutual funds are now 21% of the bank deposits. On the other hand, the Indian mutual fund’s industry still has much to gain on with its worldwide squint regarding of the brisk and massive growth in the recent times.

mutual funds

In spite of a massive rise in the equity market and a stable inflow through the SIPs (Systematic Investment Plans), mutual funds had become successful in enticing the trade investors as their equity AUM (Assets under Management) rated for 8% of the bank deposits in the previous fiscal year. According to the data obtained by the RBI, the equity assets of the mutual funds were ₹9.3 lakh crores in averse to ₹115 lakh crores in bank deposits by March end.

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Progressively, the latest data reveals that the mutual funds are getting well-liked among the investors. The AUM of the mutual funds was counted at 10.44% of the total bank deposits by March 2013. This percentage has increased to 17.44% in March 2017 and then gains a hike to 21% in December 2017. In past 4 and half years, the mutual fund industry has added an amount of ₹ 14.25 lakh crores meanwhile ₹33.79 lakh crores increased the bank deposits.

Also, mutual funds AUM stances at 18% in March 2017, on the other side this ratio was 100% in the US. A huge growth possibility can be seen in India in terms of population dispersion and increasing per capita income from ₹75,000 to ₹2.5 lakhs. The mutual fund industry has attempted several campaigns like ‘Jan Nivesh’ and ‘Mutual Fund Sahi Hai’ to attract the investors towards MF. Also, in the past six years, the mutual fund industry has acquired the growth of 20%. Mutual fund AUM will touch ₹95 lakh crores by 2025 if the industry gets to attain this rate.

mf1Source– RBI, IRDAI (Insurance Regulatory and Development Authority of India)

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mf2One of the biggest macroeconomic improvements in MFs is AUM to GDP ratio. Vast change can be seen between the percentage of GDP in FY 2000 and the GDP of FY 2018. Where the GDP was 5.6% in FY 2000, now it has risen to 12.8% and this growth indicates the huge growth potential of the MF industry.

mf3The chart shows that developed countries like the US (101%), France (76%), Canada (65%) and the UK (57%) have listed high-level mutual fund penetration. Similarly, the emerging countries like South Africa (49%) and Brazil (59%) have an outrageous allocation in mutual funds in comparison to India. The distribution of India indicates a significant scope for growth as the average of the mutual fund penetration of the world stances at 62%.

mf4This chart shows that the highest allocation percentage of equity mutual fund AUM to market cap ratio is of Germany that is 51%, the US stands second with 41%. While India has only 4% allocation and such low penetration suggests that there is a steady growth prospect for the MF industry, especially in equity mutual funds.

How to disclose mutual funds capital gains while filing ITR

Here’s what constitutes capital gains for mutual funds and how your existing investments need to be accounted for in your IT return.

Those who’ve sold mutual funds also fall under this ambit and have to declare their gains or losses. Let us find out what constitutes capital gains for MFs and how your existing investments need to be accounted for.

What is Capital Gain?

Capital assets could be any form of wealth like land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, jewellery, stocks and even mutual funds. Any profit or gain that arises from the sale of any of these ‘capital assets’ is a capital gain. These gains could be taxable in your hands, subject to the taxation rules of the year in which they occurred. The rules of taxation differ from one capital asset to another. For example, the rules for capital gains on equity mutual funds are different from those of debt mutual funds.

Fact sheet of Women fund managers who have outperformed or Underperform over the long-term

Mutual Fund Gains & Losses

Investing in MFs does not immediately concern the I-T Department. However, if you make a profit or loss after redeeming your MF investment, the I-T Department wants to know about it. The nature of the investment, whether it is a debt fund or an equity fund, determines the exact tax impact on the investor.

In a debt MFs, capital gains earned on investments held for under three years are called Short Term Capital Gains. Gains on investments held longer than three years are called Long Term Capital Gains. For equity MFs, gains become long-term if held for one year.

Depending on what your gains (or losses) are, they need to be disclosed appropriately while filing your tax returns.

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All funds will attract tax to some level on redemption. The short-term taxes are higher, of course, as shown in the table above, while long-term taxes are lesser. One can also claim short-term and long-term capital losses incurred during redemption of both debt and equity mutual funds.

Dividend

Mutual fund schemes have dividend plans where the fund house releases dividends to investors periodically. The dividend that is received in the hands of the investor is tax free up to Rs 10 lakh in a year. The dividend earnings of a large majority of retail MF investors would fall within this limit. However, the income still needs to be declared.

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Listing on the Correct ITR Form

ITR Form 2 is for Individuals and HUF not carrying out business or profession under any proprietorship, but having income from sources other than salary. Make sure to take out FY-2017-18’s transaction statements from all your fund holding platforms before you get ready to file the ITR.

Remember that tax is calculated on the entire value of redeemed funds and not on an individual fund. For instance, you will be liable to pay LTCG of 10% only if gains from your entire portfolio exceed Rs 1 lakh, and not from a single fund.

Unlike ITR-Form 1 and For 4, you cannot file this form online. You will have to download the Income Tax XML for ITR 2 from the Income Tax Department’s website, fill it, and submit a return by logging in and uploading the XML, in the income tax portal.

For those seeking deductions, if you have not claimed the same while submitting investment to your employer, you can do that in the form here. Remember for MFs, only pension and ELSS category of funds can be claimed for deductions under Section 80C up to a maximum of Rs 1,50,000.

Remember that other than MFs if you hold other capital assets like property, gold and more and have made gains by their sale, you will have to list the same in the same XML form. Income accumulated from renting out property also has to be listed on the form.

 

Why should you get a standalone cancer insurance plan?

According to a report by the Indian Council of Medical Research (ICMR) based on its National Cancer Registry Programme, the number of new cancer cases is expected to rise from 13 lakhs in 2015 to 18 lakhs in 2020. Around 60-70 percent cancer cases are in the age group of 35-64 years.

The cost of treating this dreaded disease can range anywhere between Rs 15 lakhs and Rs 25 lakhs, or even more, which makes it imperative to have an insurance cover. Since the amount of coverage provided by a normal health insurance policy is likely to be inadequate, many insurance companies offer stand-alone policies that cover all types of cancers.

health

Standalone cancer insurance plans are fixed benefit plans that offer lump-sum payouts at different stages. The sum assured for these policy starts from Rs 200,000 and goes up to Rs 50 lakhs. The term of the policy can range from five to 70 years. As these are pure protection plans, they do not offer any benefit in case the policyholder survives the policy term.

Cancer-specific policies cover different stages of diagnosis, be it minor, major or critical. They cover various treatments, including chemotherapy, radiation therapy, hospitalization, and surgery.

What is the treatment cost of Cancer and how to protect it Financially?

The three stages of cancer that are covered include Carcinoma in Situ (CIS) or the making of a tumour, minor stage, and major or critical stage. The pay-out happens depending on the stage the person is diagnosed with. Around 20-25 percent of the sum assured is paid out if the policyholder is diagnosed at an early or minor stage (the exact percentage varies from one insurer to another). If partial payment has been made by the insurer at an early stage, it is then deducted from the payment at the major stage. For instance, if 25 percent payment has been made in the minor stage, then only 75 percent of the sum insured will be paid at the major stage.

Pre-existing cancer is not covered by these policies. Certain cancers such as skin cancer and cancer caused by sexually transmitted diseases are also not covered by these policies. “Exclusions are important and those buying these policies should read the policy wording carefully,”

HOW CAN YOU SETTLE YOUR INSURANCE CLAIM IF REJECTED?

Critical illness covers too provide lump sum cover for a number of critical illnesses, including cancer. But they don’t cover all the expenses incurred during cancer treatment. They pay only a pre-defined amount upon diagnosis of any critical illnesses listed in the policy document. If you have a mediclaim policy, it will pay for the cost of treatment up to a certain limit. On the other hand, these standalone cancer covers will pay a pre-defined amount on diagnosis of the disease, and at a couple of other stages, which you can use for treatment and meet various other expenses that may arise.

A health insurance policy provides cover for hospitalization expenses, but there are always several additional expenses that are not covered. These cancer plans act as a supplementary cover in addition to the basic health insurance plans. “If one is at an average risk of developing cancer depending on one’s family history, one should have a standalone cancer product. But one should remember that a cancer plan cannot be a substitute for a basic health insurance policy,”

On diagnosis of cancer, future premiums are waived off. One can also claim tax benefit under Section 80D on the premium paid. The premium for this cover is calculated based on the sum assured, policyholder’s gender and age, term of the policy, existing health issues, and family history. A person is not covered if he has already got cancer due to the risk of recurrence.