Money Matters

  • Ifthikar Bashir
  • Publish Date: Mar 19 2018 1:25AM
  • |
  • Updated Date: Mar 19 2018 1:25AM
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My wife and I invest Rs 1.5 lakh each in our respective PPF accounts every year. We now want to move to ELSS. Can we invest Rs 3 lakh under a single folio, held jointly, and claim Section 80C benefit of Rs 1.5 lakh each?

Mushtaq Ahmad, via email


In case of mutual funds, only the primary account holder is treated as the beneficiary for all tax benefits. Likewise, only the primary account holder will be liable to pay any taxes, such as capital gains tax, resulting from transactions in a folio. So, both of you won’t be able to claim deduction of Rs 1.5 lakh each by investing under a single folio. 



What is the applicable Net Asset Value while buying or selling mutual funds. Is it NAV at that the time of transaction, or cut-off time for that days or the previous day?

Saleem Khan, via email


In case of equity or debit funds, for applications received until 3 pm on any business day, the NAV of the same day, declared late in the evening, is applicable. If the application is received after 3 pm, the next business day’s NAV applies. This is for both purchase and redemption requests. 

In case of liquid funds, purchase and redemption requests are dealt with differently. For a purchase transaction, if the application is received at the official point of transaction until the cut-off time of 2 pm on a business day and the funds are available for utilisation before the cut-off time the same day, the previous day’s NAV is applied. For a redemption application received on any business day up to 3 pm, the same day’s NAV applies but of the application is received after 3 pm, the next business day’s NAV would apply.



I am a businessman and have been investing across asset classes. I want to know how equity mutual funds are better than other asset classes in the long-term?

Mubashir Ali, Rajbagh, Srinagar


Investing in equity means taking part ownership of the company, making one entitled to a share of its profit. If the company’s stock is doing well, it means its sales and profit are rising. Rising stock prices can be a reflection of inflation and if the company has pricing power, it can increase its sales and, in turn, profit. On the other hand, in fixed income instruments, it has been observed that the returns are not substantially higher than the rate of inflation.

Moreover, companies will borrow only if they can maximise their returns. Hence, the cost of interest on borrowings has to be lower than its earnings. Superior companies can enlarge their market share and create greater efficiency to maximise their returns and that reflects in higher stock prices. However, ownership comes with associated risks. Many companies die out or stagnate. In equity mutual funds, you are entrusting your money to a fund manager who is likely to invest in companies that are attractively priced and likely to generate good returns. These are the primary reasons why equity mutual funds generally give higher returns compared to other assets over the long-term.


I am a central government employee and have purchased a housing loan from a reputed private bank. I want to know whether I should prepay my loan first or continue investing my savings in mutual funds through Systematic Investment Plan?

Zoha Ali, Hawal, Srinagar


You shouldn’t prepay your home loan and must continue your SIP. Home loan is a good loan with an asset backing since you also save on rent if it is the home you live in. The rationale is that it’s a long-term loan and you pay a reasonably low rate of interest along with the advantage of a tax break. The additional money that you want to prepay the loan with should be invested in long-term equity mutual funds. The returns will be far superior to what you would have otherwise saved by prepaying your loan.


I bought ICICI Pru Elite Life II RP Plan a year ago, assuming it was a mutual fund scheme. Can it be converted into my existing mutual fund scheme – ICICI Pru Value Discovery – or can I get a refund?

Zarina Tabassum, via email


ICICI Pru Elite Life is a unit-linked insurance policy. There’s no option of converting ULIP to a mutual fund scheme. Though you will incur a loss, it is wise to surrender your policy. You can do so now and take the fund value after the lock-in period of five years.


Am I required to withdraw my mutual fund investments after I become a non-resident Indian? I have SIPs running.

Mir Zubair, via email 


As an NRI, you can continue your SIPs and investments in your existing mutual fund folios. There is no need to redeem your investments. But you need to inform your asset management companies about the change in your status, address and bank through a Know Your Customer change form.


What does “long-term” mean for equity investing?

Fouzia, via email

Most accurately, long-term is a timeframe that does not unnerve you even if the market goes up or down by 10%. That term can change for different people. If you are still earning, three years is good but if you are retired, then even three years is not long enough. The key question is, what is the minimum period required to earn more than the rate of inflation? For a Sensex investment, this is about seven years.