Budget 2014 Highlights

Economy

• Expects sustained growth of 7-8% or above in next 3 to 4 years, with lower inflation, lower current & fiscal account deficit.
• Target of Fiscal Deficit for FY15 – 4.10% of GDP, FY16 – 3.60% of GDP and FY17 – 3.00% of GDP
• Investments
• Kisan Vikas Patra (KVP) – Post Office savings / investment instrument will be reintroduced. Earlier in this scheme, your investment used to double in 8 years & 7 months.
• Maximum investment in Public Provident Fund (PPF) has been increased to Rs.1.50 lakhs in a financial year

Investment

• Introduction of National Savings Certificate (NSC) with life insurance cover for Girl Child.
• Introduction of REIT (Real Estate Investment Trust) and InvIT (Infrastructure Investment Trust), which will have capital gains tax benefit similar to Equity Shares.
• One Demat Account for all kinds on investments and uniform KYC (Know Your Customer) across all financial services.
• Introduction of Varistha Pension Bima Yojna for a period of 1 year from 15 August, 2014 to 14 August, 2015.

Education

• Set up 5 new IIT (Indian Institute Of Technology) in Jammu, Chattisgarh, Goa, Andhra Pradesh and Kerala and IIM (Indian Institute Of Management) in Himachal Pradesh, Punjab, Bihar, Odisha and Maharashtra. 
• Set up 4 new AIIMS (All India Institute Of Medical Sciences) in Andhra Pradesh, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP and add 12 more government medical colleges.

Taxation

Direct Tax 

• Increase in personal income tax slabs for individuals and senior citizen by Rs.50,000. Thus, the tax exemption limit for FY14-15 for individuals will be Rs.2.50 lakhs and for senior citizen will be Rs.3 lakhs. This will effectively save tax of Rs.5,150 for all individuals. 
• Increase in the limit of tax deduction available under section 80C to Rs.1.50 lakhs in a financial year. Taking the benefit of this will effectively reduce additional tax for individuals under 10% tax slab by Rs.5150, 20% tax slab by Rs.10,300 and 30% tax slab by Rs.15,450. 
• Increase in the limit of tax deduction available under section 24B to Rs.2 lakhs for interest paid on Home Loan for a self-occupied property. 
• Change in classification of Debt Mutual Funds for the purpose of Capital Gains and increase in the tax rate of Long Term Capital Gains. It will be considered as a Long Term Capital Asset if hold for atleast 36 months, and will capital gains will be taxed at 20%. 
• Governement appeals to all political parties to resolve to pass the GST Laws and the Direct Tax Code in 2014-15

Indirect Tax

• No change in Service tax, it stands @ 12.36% 
• Custom Duty to make LCD / LED TVs below 19 inch, Computer Monitors, Mobile Phones, Diamonds, etc cheaper. 
• Custom Duty to make Imported Electronic goods, Cigarettes, Pan Masala, Guthka, Aerated Drinks, etc expensive.

SEBI colours investors portfolio with MF product labeling

Holi – The festival of colours brings joy to every life.

This year SEBI has also added colours to Holi for making lives of investors more colorful. It is to be seen whether lives of investors across the country will really become colourful with this move of SEBI called “Product Labeling in Mutual Funds”.

So what has SEBI done this Holi? Aren’t you curious to know?

After standardization of health and life insurance products by insurance regulator IRDA, the capital market regulator SEBI has come up with “Product Labeling in Mutual Funds”. SEBI has taken this step in order to control mis-selling in mutual fund industry. This step can help mutual fund investors get some idea of the scheme by looking at the product label before investing.

What is ‘Product Labeling’ and how does it work?

As per the circular, all mutual fund schemes should ‘Label’ the scheme with respect to the nature of the scheme, investment objective and the level of risk associated with the scheme.

a) Nature of scheme:

The investor can identify and match the scheme as per his requirements depending on his investment’s time horizon. All the schemes need to label its nature i.e. short-term / medium-term / long-term. Say for example, if a scheme has a label ‘long-term capital growth’, it indicates, you can consider investing in this scheme if you have a long-term investment horizon and would like to invest in for wealth creation.

b) Investment objective:

All the schemes need to brief the investment objective of the scheme in one sentence followed by the kind of the category / kind of the scheme, so the investor can get some idea about where the mutual fund scheme is investing the funds. Say for example, if a scheme has a label ‘Investment in Debt/Money Market Instrument/Govt. Securities’; it clearly indicates that, the scheme invests the funds in money market and govt. securities, and thus it is a Debt scheme.

c) Level of risk:

Each scheme will have a specific colour depending on the risk associated with the scheme. SEBI has allocated the following colours according to the level of risk.

Blue – Low risk

Yellow – Medium risk

Brown – High risk

d) Disclaimer

All the schemes need to have a disclaimer saying, the investors need to consult their financial adviser if they are unable to identify and decide suitable scheme for them.

How will “Product Labeling” benefit MF investors?

Just like looking at the traffic signal, the pedestrian knows when to cross the road; similarly by looking at the label of the mutual fund scheme, the investor will be able to identify the type of the scheme and whether it is suitable for him or not. The main fear of the investor is the safety of the principal invested; so before investing if the investor checks the colour allocated to the scheme, he can get an idea of the level of the risk associated with the investment. After the product labeling, the chances of the investor falling prey of mis-selling from the agent will reduce. The investor will be able to select the scheme as per his investment time horizon and will be aware where the scheme invests the pooled funds.

All the schemes needs to be labeled in the initial application form, Key Information Memorandum, Scheme Information Document and the common application form. This will be effective from 1^st July 2013. This is good move by SEBI considering the investors interest and helping the investors to take informed decision. The only thing which investor cannot measure from the product labeling is the fund performance of the scheme, for which he will still have to either research himself over the internet, rely on the advice by the experts featured by media but the best bet would be his financial advisor.

Published in: Moneycontrol.com

Budget 2013 Highlights

Economy

• FM says Current Account Deficit (CAD) and Food Inflation is a big concern for India. Foreign investment are must to fill the deficit.
• Doing business in India should be easy.
• Fiscal Deficit to be seen at 4.80% versus 5.2% previous year.
• Revenue Deficit seen at 3.3%

Infrastructure

• Infrastructure debt funds for infrastructure development of the country.
• Allow to issue Tax-free bonds upto Rs.50,000 Crore in FY 2013-14

Banking

• All PSU bank branches to have ATMs by 31/3/2014.
• To introduce first public sector bank for women, with initial capital of Rs.1,000 Crore by October,2013.
• Additional deduction on interest of Rs.1 lakh will be allowed in the first year on home loan upto Rs.25 lakhs for first residential property. Applicable for home loans availed between 1/4/2013 to 31/3/2014.
• Post Office will offer Core Banking Solutions (CBS).

Insurance

• Insurance companies can open branches in Tier II cities without IRDA approval.
• Banks can act as Insurance Brokers
• All small cities to have one branch of LIC and any one PSU General Insurance Company.
• Rashtriya Bima Bachat Yojna extended for rickshaw, taxi drivers, sweepers, etc.
• KYC from banks sufficient for Insurance.

Capital Markets

• FM distinguished Foreign Institutional Investor and Foreign Direct Investment is distinguished. Stake of less than 10% in a domestic company will be considered Foreign Institutional Investor (FII) and for stake more than 10% will be considered Foreign Direct Investment (FDI).
• FIIs to be allowed to trade in exchange traded currency derivatives.
• Debt segment to be start soon on the Stock Exchange.
• Exchange Traded Fund (ETF) to be allowed for Pension and Insurance investments.
• Mutual Fund Distributor will be allowed to become member of stock exchange for ETF, Debt Fund and Asset Backed Securities.
• Inflation Protected Bonds / Certificates to be introduced.

Taxation 

Direct Tax

• Tax slabs for individuals and HUF’s to remain the same. There is only an additional credit of Rs.2,000 for persons falling under first tax slab i.e. income Rs.2,00,001 to Rs.5,00,000.
• Rajiv Gandhi Equity Scheme (RGESS) continues for first time investors in stock market, with increase in income limit to Rs.12 lakhs and will be eligible for the scheme for 3 years.
• 10% Surcharge on individual with income more than 1 crore.
• 10% Surcharge on domestic companies with income more than 10 crores.
• 10% Surcharge to be charged on Dividend Distribution Tax (DDT).
• This additional surcharge is applicable only for 1 year
• 15% tax on dividends received from foreign subsidies. No DDT on dividends distributed from this income.
• TDS @ 1% on value of transfer of property, valuing more than Rs.50 lakhs.

Securities Transaction Tax (STT)

Equity Futures – 0.01%

Equity shares, ETFs and MF units – 0.001%

No change in STT on other Derivatives instruments

Commodity Transaction Tax (CTT) at 0.01% on trading in non-agricultural commodities.

Direct Tax Code is still work in progress.

Indirect Tax

• No change in Service tax, it stands @ 12.36%.
• Increase in import duty on imported luxury cars to 100% and imported bikes with more than 800 CC to 75%.
• Exemption on Gold Import Duty upto Rs.50,000 for men and upto Rs.1 lakh for women.
• Excise Duty on Cigarettes and Cigars is increased to 18%
• Service Tax on all air conditioned (AC) restaurants.

FM’s Conclusion

India is the 10^th largest economy in the world and sees to become 7^th or the 8^th largest in the near future. India has the scope of being in the top 5 economies in the world by the year 2025.

SEBI Board Meet August,2012 - Press Release

           Securities and Exchange Board of India (SEBI) in its board meet on 16^th August,2012 has got the following regulations to re-energise Mutual Funds and reforms in the Primary Market. 

Mutual Funds

          SEBI Board has bought in actions to increase the penetration of mutual fund products and its distribution networks, improve the reach of MF products in smaller cities / towns, investor protection, strengthening regulatory framework and alignment of interest od investors, distributors and AMC’s.

• Asset Management Companies (AMC’s) will be allowed to charge additional Total Expense Ratio (TER) upto 30 basis points (0.30%) if new inflows from beyond top 15 cities are more than 30% of total inflows.

• Allow investment upto Rs.20,000 by cash for small investors without PAN or Bank accounts.

• Transaction cost of Rs.100 / Rs.150 for existing / new investors shall be on product basis.

• SEBI may provide investments in equity schemes of mutual funds, which have securites, allowed under Rajiv Gandhi Equity Savings as the underlying announced in Budget 2012-13.

• Differential treatment for different classes of investors (new investor, direct investor) under same scheme and charge lower expense ratios for such investors.

• Service Tax on investment management fees should be charged on the scheme.

• The entire exit loads will be credited to the scheme and the AMC’s will be able to charge additional TER upto 20 bps (0.20%).

Primary Market

SEBI Board has developed framework for enhancing participation of retail investors, facilitating capital raising from issuers, enhancing market integrity, investors confidence and regulation of Investment Advisors.

• Increase the nationwide broker network of stock exchanges at more than 1000 locations in addition to the existing channels, for distributing IPO’s in electronic form.

• All ASBA banks are mandated to provide ASBA facility in all branches; to reduce the time taken for issuance to listing of securities.

• The minimum application size of IPO increased to Rs.10,000 – Rs.15,000 from Rs.5,000 – Rs.7,000.

• All individuals, corporate body, partnership firm, Financial Planners providing investment advise to the investors for consideration (i.e. by paying fees) must be registered as Investment Advisors under SEBI (Investment Advisors) Regulations, 2012 (“Investment Advisors Regulations”).

• Insurance advisors, MF advisors (AMFI registered), CA’s, lawyers, stock brokers / sub-brokers are excluded from registering themselves as Investment Advisors.

• Only the act of giving advice to the investors will be regulated under this regulation, while the product regulator will regulate the selling of products.

Source: www.sebi.gov.in

IRDA Health Insurance regulations exposure draft

IRDA has come up with draft regulations with respect to Health Insurance on 30th May,2012. These regulations will be effective from the date of their publication in the Official Gazette by the Central Government. Few important points to noted are:

1) Entry Age: All Health insurance policies should provide maximum entry age at least up to 65years.

2) Exit Age: All health insurance policies shall not have an exit age for renewal of the policies, once the proposal is accepted, provided policy is continuously renewed without break.

3) Travel Insurance: Travel Medical insurance can be taken as an add-on cover to existing health policy as and when existing policyholder travels by charging suitable premium for the add-on cover.

4) Cost of pre-insurance health check up: In case of non-life insurers, where the proposal is accepted and subsequently resulted into a policy, in all such cases, insurers shall reimburse at least 50% of the cost if any, incurred by the insured in pre-insurance medical examination.

5) Senior Citizens: All health insurers and TPAs, shall establish a separate channel to address the health insurance related claims and grievances of senior citizens.

6) Multiple Policies: Contribution clause may not apply in case two or more policies are taken by an insured during a period from one or more insurers, the policyholder shall have an option to chose insurer with whom the claim to be settled.

7) Ayush/Ayurvedic treatment: Insurers may provide coverage to non-allopathic treatments provided the treatment has been undergone in a government hospital or in any institute recognized by government.

8) Claim Settlement: Claim must be settled within 30 days.

Small Savings Schemes interest rates to rise by 0.20% – 0.50%

 The interest rates on Small Savings schemes like National Savings Certificate, Public Provident Fund, etc. by 0.20% to 0.50% from 1st April,2012. According to the budget estimates, there is likely to be a net outflow of Rs.12,000 Crore from small savings scheme from the current fiscal. This hike in interest rate may attract small investors.

Small Savings Interest Rates