Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: VAT RATES :: ACCOUNTING STANDARD :: ACCOUNTING STANDARDS :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: due date for vat payment :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: empanelment :: list of goods taxed at 4% :: TDS
 
 
Direct Tax »
 6 tax tasks you should finish by March 31
 CBDT to waive interest if tax demand paid in retro cases
 CBDT to waive interest if tax paid in retrospective cases
 New move to settle retrospective tax cases, CBDT offers interest liability waiver to firms
 I-T department guidelines for interest waiver in specific cases offer tax relief
 ICDS provisions to prevail over judicial precedents: CBDT
 CBDT forms committee to check absconding I-T dept officers
 Central Board of Direct Taxes asks taxman to make all out efforts to recover arrears
 CBDT to honour honest taxpayers
 Startups in the docks over marked down valuation tax as March 31 nears
 CBDT asks taxman to make all out efforts to recover arrears

New Direct Taxes Code to affect inflows into FMPs
March, 04th 2011

The Direct Taxes Code (DTC) which is expected to be effective from April 1, 2012 could affect inflows into the fixed maturity plans (FMPs).

This is because uncertainly looms over whether investments into FMPs, especially those which are launched at the fag end of the financial year, will continue to get double-indexation tax benefits for its investors.

According to the DTC, the holding period will start from the end of the financial year in which the asset is purchased, effectively taking away the double indexation benefits. Currently, FMPs are structured in such a manner that the term of FMPs is spread over two financial years, thereby enabling the investor to gain higher tax benefits.

Under the current tax regime, if investors buys 370-day FMP in March, 2011, investor is eligible to claim benefits of inflation for two years before calculating the capital gains tax liability. This is because till now all investments into a fund in a year were construed as being invested at the beginning of the financial year.

Thus, investments spread over two financial years in the above case, gave the investor the benefit of discounting inflation from NAV gains made for two years, which in other words is termed as double indexation.

However, once DTC comes in, investors would be eligible for only one-year indexation benefits with investments made in a year assumed to be made at the end of the financial year.

Shobhit Mehrotra, senior senior fund manager and Head of Credit at HDFC MF says, one year FMPs is a seasonal product, with launches usually made during the March period. However, this year theres uncertainty as to whether double indexation benefit will continue be available post DTC. This is because at the time of maturity, DTC will become effective. The current FMP investor also faces the risk of losing tax benefit.

In January alone, over 40 FMPs were launched and collected over R12,700 crore while market participants say that, over R10,000 crore have been raised in February. In year 2010, FMPs had collected over R72,000 crore.

Mahendra Jajoo, executive director and CIO, fixed income at Pramerica MF says, There is strong indication that DTC might be implemented in April next year. But we believe that, its implementation will be prospective in nature and thereby enabling current FMP investors to claim double indexation benefits.

At this time of the year, a little more than one-year FMPs are usually launched by fund houses. At higher yields of around 8.5-9.5% p.a, FMPs are currently being aggressively pushed by mutual funds as an alternative to bank fixed deposits.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Quality Assurance Services Testing and Re-testing

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions