Q1. What is a Mutual Fund?
Ans. Mutual fund is a vehicle to mobilize moneys from investors, to invest in different markets and securities, in line with the investment objectives agreed upon, between the mutual fund and the investors. In other words, through investment in a mutual fund, investors can avail of professional fund management services offered by an asset management company.
Q2. What are the benefits of investing in mutual funds?
Ans. Following are the benefits of mutual funds:
- Professional Management: Mutual funds offer investors the professional management team to handle their funds in a better way. They have a research team that continuously analyses the performance and prospects of companies in which you are invested to provide you higher returns.
- Affordable Portfolio Diversification: Units of a scheme give investors exposure to a range of securities held in the investment portfolio of the scheme. Thus, even a small investment of Rs. 500 in a mutual fund scheme can give investors a diversified investment portfolio.
With diversification, an investor ensures that all the eggs are not in the same basket. Consequently, the
investor is less likely to lose money on all the nvestments at the same time. Thus, diversification help
reduce the risk in investment.
- Liquidity: Investors in a mutual fund scheme can recover the value of the moneys invested, from the mutual fund itself. Depending on the structure of the mutual fund scheme, this would be possible, either at any time, or during specific intervals, or only on closure of the scheme. Schemes, where the money can be recovered from the mutual fund only on closure of the scheme, are listed in a stock exchange. In such schemes, the investor can sell the units in the stock exchange to recover the prevailing value of the investment.
- Regulatory Comfort: All the mutual funds are registered with SEBI and they function under strict regulations designed to protect the interests of investors.
- Convenient Options: The options offered under a scheme allow investors to structure their investments in line with their liquidity preference and tax position.
- Tax benefits: Investments in equity mutual fund schemes held by investors for a period of 12 months or more qualify for capital gains and will be taxed accordingly. These investments also get the benefit of indexation. Investors can avail benefit u/s 80 c. Also tax benefit like STCG & LTCG can be availed depending on the type of investment. For more information kindly refer to “Taxation Section”.
Q3. What are types of mutual funds?
Ans I. Open-Ended – This scheme allows investors to buy or sell units at any point in time. This does not have a fixed maturity date.
- Debt/ Income – In a debt/income scheme, a major part of the investable fund are channelized towards debentures, government securities, and other debt instruments. Although capital appreciation is low (compared to the equity mutual funds), this is a relatively low risk-low return investment avenue which is ideal for investors seeing a steady income.
- Money Market/ Liquid – This is ideal for investors looking to utilize their surplus funds in short term instruments while awaiting better options. These schemes invest in short-term debt instruments and seek to provide reasonable returns for the investors.
- Equity/ Growth – Equities are a popular mutual fund category amongst retail investors. Although it could be a high-risk investment in the short term, investors can expect capital appreciation in the long run. If you are at your prime earning stage and looking for long-term benefits, growth schemes could be an ideal investment.
- Index Scheme – Index schemes is a widely popular concept in the west. These follow a passive investment strategy where your investments replicate the movements of benchmark indices like Nifty, Sensex, etc.
- Sectoral Scheme – Sectoral funds are invested in a specific sector like infrastructure, IT, pharmaceuticals, etc. or segments of the capital market like large caps, mid caps, etc. This scheme provides a relatively high risk-high return opportunity within the equity space.
- Tax Saving – As the name suggests, this scheme offers tax benefits to its investors. The funds are invested in equities thereby offering long-term growth opportunities. Tax saving mutual funds (called Equity Linked Savings Schemes) has a 3-year lock-in period.
- Balanced – This scheme allows investors to enjoy growth and income at regular intervals. Funds are invested in both equities and fixed income securities; the proportion is pre-determined and disclosed in the scheme related offer document. These are ideal for the cautiously aggressive investors.
II. Closed-Ended – In India, this type of scheme has a stipulated maturity period and investors can invest only during the initial launch period known as the NFO (New Fund Offer) period.
- Capital Protection – The primary objective of this scheme is to safeguard the principal amount while trying to deliver reasonable returns. These invest in high-quality fixed income securities with marginal exposure to equities and mature along with the maturity period of the scheme.
- Fixed Maturity Plans (FMPs) – FMPs, as the name suggests, are mutual fund schemes with a defined maturity period. These schemes normally comprise of debt instruments which mature in line with the maturity of the scheme, thereby earning through the interest component (also called coupons) of the securities in the portfolio. FMPs are normally passively managed, i.e. there is no active trading of debt instruments in the portfolio.
III. Interval – Operating as a combination of open and closed ended schemes, it allows investors to trade units at pre-defined intervals.
Q4. What are the options offered by Mutual funds?
Ans. Investors have varying investment needs. To meet this, Mutual Funds offer various investment plans like.
- Growth Option
Under a Growth Plan the investor realises only the capital appreciation on the investment.
- Dividend Payout Option
Dividends are paid-out to investors under a Dividend Payout Option. However, the NAV of the mutual fund scheme falls to the extent of the dividend payout.
- Dividend Re-investment Plan
The dividend accrued on mutual funds is automatically re-invested in purchasing additional units in open-ended funds.
- Systematic Investment Plan (SIP)
SIP is monthly investment plan like an RD investment. Investors are given the option of giving post-dated cheques (or a direct debit of the bank account) in favor of the fund. Every month units will allot as per applicable NAV as on date.
- Systematic withdrawal plan (SWP)
As opposed to the systematic investment plan, the systematic withdrawal plan allows the investor the facility to withdraw a pre-determined amount / units from his fund at a pre-determined interval. The investor’s units will be redeemed at the applicable NAV as on that day.
Q5. What are the risks associated to mutual funds?
Ans. The level of risk in a mutual fund depends on what it invests in. Usually, the higher the potential returns, the higher the risk will be. For example, stocks are generally riskier than bonds, so an equity fund tends to be riskier than a fixed income fund/debt fund.
Q6. What is an Asset Management Company?
Ans. An asset management company (AMC) is a company that invests its clients’ pooled funds into securities that match declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves. AMCs manage mutual funds, hedge funds and pension plans, and these companies earn income by charging service fees or commissions to their clients.
Q7. What is a Load or no-load Fund?
Ans. A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund which are more important. Efficient funds may give higher returns in spite of loads.
A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.
Q8. Can a mutual fund impose fresh load or increase the load beyond the level mentioned in the offer documents?
Ans. Mutual funds cannot increase the load beyond the level mentioned in the offer document. Any change in the load will be applicable only to prospective investments and not to the original investments. In case of imposition of fresh loads or increase in existing loads, the mutual funds are required to amend their offer documents so that the new investors are aware of loads at the time of investments.
Q9. Are mutual funds allowed to indulge in speculation/ day trading?
Ans. No, mutual funds are not permitted to speculate. As per SEBI regulations, all trades done by mutual funds should be settled by delivery except derivative trades, which are settled in cash.
Q10.What is offer documents?
Ans. Offer document is the most important source of information for investors. Mutual Fund Offer Documents have two parts:
- Scheme Information Document (SID), which has details of the scheme
- Statement of Additional Information (SAI), which has statutory information about the mutual fund that is offering the scheme.
Every investor must go through with whole offer documents before investing in any schemes.
Q11. What is key information memorandum?
Ans. KIM is essentially a summary of the SID and SAI. It is more easily and widely distributed in the market. As per SEBI regulations, every application form is to be accompanied by the KIM.
Q12. Do mutual funds offer a periodic investment plan?
Ans.Most private sector funds provide you the convenience of periodic purchase plans (through a Systematic Investment Plan), automatic withdrawal plans and the automatic reinvestment of dividends. You would basically need to give post-dated cheques (monthly or quarterly, periodic date of the cheque is fixed by the Asset Management Company). Most funds allow a monthly investment of as little as Rs500 with a provision of giving 4-6 post-dated cheques and follow up later with more. Regular monthly investments are a good way to build a long-term portfolio and add discipline to your investment process.
Q13. What are Offshore Funds?
Ans. Offshore funds specialized in investing in foreign companies or corporations. These funds have non-residential investors and are regulated by the provisions of the foreign countries where these are registered. These funds are regulated by RBI directives.
Q14. What is ELSS?
Ans. ELSS is a type of diversified equity mutual fund which is qualified for tax exemption under section 80C of the Income Tax Act and offers the twin advantage of capital appreciation and tax benefits. It comes with a lock-in period of three years.
Q15. How to know the performance of a mutual fund scheme?
Ans. The performance of a scheme is reflected in its net asset value (NAV) which is disclosed on daily basis in case of open-ended schemes and on weekly basis in case of close-ended schemes. The NAVs are also available on the web sites of mutual funds. All mutual funds are also required to put their NAVs on the web site of Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place.
The mutual funds are also required to publish their performance in the form of half-yearly results which also include their returns/yields over a period of time i.e. last six months, 1 year, 3 years, 5 years and since inception of schemes. Online platform offered by Elite Wealth Advisors Ltd. offers their investors to see the fund returns/yields over a period of time i.e 6 months, 1 year, 3 year, 5 year and from investment date. Also it allows investors to see their fund allocation, scheme wise performance and overall portfolio performance.
Q16. Is there any minimum lock-in period for my units?
Ans. There is no lock in period in the case of open-ended funds. But for tax saving funds, a minimum lock in period applies. For saving schemes under section U/s 88 and U/s 54EA, there is a 3 years minimum lock in period. For section U/s 54EB, it is 7 years.
Q17. What is NFO?
Ans. A new fund offer (NFO) is the first time subscription offer for a new scheme launched by the asset management companies (AMCs). A new fund offer is launched in the market to raise capital from the public in order to buy securities like shares, govt. bonds etc. from the market.
Q18. Can a mutual fund change the asset allocation while deploying funds of investors?
Ans. Considering the market trends, any prudent fund manager can change the asset allocation, i.e., he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the offer document. It can be done on a short term basis on defensive considerations i.e. to protect the NAV. Hence, the fund managers are allowed certain flexibility in altering the asset allocation considering the interest of the investors. In case the mutual fund wants to change the asset allocation on a permanent basis, they are required to inform the unit holders and give them option to exit the scheme at prevailing NAV without any load.
Q19. Does investing in Mutual Funds mean investing in equities?
Ans. No, this is not necessary. Mutual funds can be divided into various types depending on asset classes. They can also invest in debt instruments such as bonds, debentures, commercial paper and government securities apart from equity. You need to select a fund at the time of investment it may be equity or debt or combination of both depends on your investment objective.
Every mutual fund scheme is bound by the investment objectives outlined by it in its prospectus. The investment objectives specify the class of securities a mutual fund can invest in. Based on the investment objective, the investor can invest in the best suited schemes.
Q20. What is actively managed funds and passive funds?
Ans. Actively managed funds are funds where the fund manager has the flexibilityto choose the investment portfolio, within the broad parameters of the investment objective of the scheme. Investors expect actively managed funds to perform better than the market.
Passive funds invest on the basis of a specified index, whose performance it seeks to track. Thus, a passive fund tracking the BSE Sensex would buy only the shares that are part of the composition of the BSE Sensex. The proportion of each share in the scheme’s portfolio would also be the same as the weightage assigned to the share in the computation of the BSE Sensex. Thus, the performance of these funds tends to mirror the concerned index. They are not designed to perform better than the market. Such schemes are also called index schemes. Since the portfolio is determined by the index itself, the fund manager has no role in deciding on investments. Therefore, these schemes have low running costs.
Q21. What is Arbitrage fund?
Ans. An arbitrage fund is a type of mutual fund, which is specifically designed for those who are scared of market volatility and have a low risk bearing capacity. These funds are hybrid in nature as they invest in equity as well as debt and are designed to capitalize on market inefficiencies in order to earn returns.
Arbitrage Funds take opposite positions in different markets / securities, such that the risk is neutralized, but a return is earned. For instance, by buying a share in BSE, and simultaneously selling the same share in the NSE at a higher price. Most arbitrage funds take contrary positions between the equity market and the futures and options market.
Q22. What is gold funds?
Ans.These funds invest in gold and gold-related securities. They can be structured in either of the following formats:
- Gold Exchange Traded Fund, which is like an index fund that invests in gold, gold-related securities or gold deposit schemes of banks. The NAV of such funds moves in line with gold prices in the market.
- Gold Sector Funde. the fund will invest in shares of companies engaged in gold mining and processing. Though gold prices influence these shares, the prices of these shares are more closely linked to the profitability and gold reserves of the companies. Therefore, NAV of these funds do not closely mirror gold prices.
Q23. What is fund of funds?
Ans. A scheme that invests primarily in other schemes of the same mutual fund or other mutual funds is known as a FoF scheme. An FoF scheme enables the investors to achieve greater diversification through one scheme. It spreads risks across a greater universe.These ‘fund of funds’ pre-specify the mutual funds whose schemes they will buy and / or the kind of schemes they will invest in. They are designed to help investors get over the trouble of choosing between multiple schemes and their variants in the market.
Investing in a FOF gives the investor professional financial management services. This experience allows the investor to test investing in professionally managed funds before they take on the challenge of going for individual fund investing. Most FOFs require a formal due-diligence procedure for their fund managers. Applying managers’ backgrounds are checked, which ensures the portfolio handler’s background and credentials in the securities industry.
Investing in an FOF also allows investors with limited capital to tap into diversified portfolios with different underlying assets, which are hard to access through individual investment.
Q24. What is exchange traded funds?
Ans. ETFs are mutual fund units that investors can buy or sell at the stock exchange. This is in contrast to a normal mutual fund unit that an investor buys or sells from the AMC (directly or through a distributor). In the ETF structure, the AMC does not deal directly with investors or distributors. Units are issued to a few designated large participants called Authorised Participants (APs). The APs provide buy and sell quotes for the ETFs on the stock exchange, which enable investors to buy and sell the ETFs at any given point of time when the stock markets are open for trading.
ETFs therefore trade like stocks and experience price changes throughout the day as they are bought and sold. Buying and selling ETFs requires the investor to have demat and trading accounts.
Q25. What is a folio number?
Ans. A folio number is a very relevant concept in the lexicon of Mutual Funds. Like a bank account number, it is a unique number to identify your holdings with the respective mutual fund. The unique number differs from fund house to fund house. An investor can make multiple purchases by using the same folio number within the same Mutual Fund House.
Q26.What is a daily dividend fund?
Ans. A fund (money-market or bond) that calculates dividends daily, paying out or reinvesting the same.
Q27. What is the Rupee Cost Averaging?
Ans. Rupee Cost Averaging does not produce sudden, dramatic profits but generates sustained growth over the long term despite short-term fluctuations in the market. Opting for a Systematic Investment Plan for a Mutual Fund Scheme gives investors the advantage of Rupee Cost Averaging.
Q28. What is an assured return scheme?
Ans. An assured return scheme is a scheme that offers you a guarantee of a certain amount of returns, irrespective of how it performs in the market. If a scheme provides assured returns, you will find it clearly mentioned in the fund document. Some schemes offer assured returns only for a specific period and some schemes may declare assured returns one year at a time, reviewing their performance each year. So it’s important to keep track of such updates and understand details before investing.
Q29.What is Shut-Out Period?
Ans. After the closure of the Initial Offer Period, on an ongoing basis, the Trustee reserves a right to declare Shut-Out period not exceeding 5 days at the end of each month/quarter/half-year, as the case may be, for the investors opting for payment of dividend under the respective Dividends Plans. The declaration of the Shut-Out period is envisaged to facilitate the AMC/the Registrar to determine the Units of the unitholders eligible for receipt of dividend under the various Dividend Options. Further, the Shut-Out period will also help in expeditious processing and dispatch of dividend warrants. During the Shut-Out period investors may make purchases into the Scheme but the Purchase Price for subscription of units will be calculated using the NAV as at the end of the first Business Day in the following month/quarter/half-year as the case may be, depending on the Dividend Plan chosen by the investor. Therefore, if investments are made during the Shut -Out period, Units to the credit of the Unitholder’s account will be created only on the first Business Day of the following month/ quarter/half year, as the case may be, depending on the dividend plan chosen by the investor. The Shut-Out period applies to new investors in the Scheme as well as to Unitholders making additional purchases of Units into an existing folio. The Trustee reserves the right to change the Shut-Out period and prescribe new Shut- Out period, from time to time.
Q30. What are the factors that influence the performance of Mutual Funds?
Ans. The performances of Mutual funds are influenced by the performance of the stock market as well as the economy as a whole. Equity Funds are influenced to a large extent by the stock market. The stock market in turn is influenced by the performance of the companies as well as the economy as a whole. The performance of the sector funds depends to a large extent on the companies within that sector. Bond-funds are influenced by interest rates and credit quality. As interest rates rise, bond prices fall, and vice versa. Similarly, bond funds with higher credit ratings are less influenced by changes in the economy.
Q31. What is Systematic Transfer Plan (STP)?
Ans. An STP is a plan that allows investors to give consent to a mutual fund to periodically transfer a certain amount / switch (redeem) certain units from one scheme and invest in another scheme of the same mutual fund house.
Q32. What is Systematic Withdrawal Plan (SWP)?
Ans. An SWP allows an investor to withdraw a designated sum of money and units from the fund account at pre-defined regular intervals. The investor can reinvest the redeemed cash in another portfolio or use it as a source of regular income.
Q33. How can investors redress their complaints?
Ans. Investors would find the name of contact person in the offer document of the mutual fund scheme who they may approach in case of any query, complaints or grievances. Trustees of a mutual fund monitor the activities of the mutual fund. The names of the directors of AMC and trustees are also given in the offer documents. Investors should approach the concerned Mutual Fund / Investor Service Centre of the Mutual Fund with their complaints. If the complaints remain unresolved, the investors may approach SEBI for facilitating redressal of their complaints. On receipt of complaints, SEBI takes up the matter with the concerned mutual fund and follows up with it regularly. Investors may send their complaints to:
Securities and Exchange Board of India
Office of Investor Assistance and Education (OIAE)
Plot No.C4-A , “G” Block, 1st Floor,
Bandra (E), Mumbai – 400 051.
Investors can also lodge their complaint on scores.gov.in
Q34. What is SEBI Complaints Redress System (SCORES)?
Ans. SEBI takes up complaints against Mutual Funds registered with it and related issues. SCORES facilitates an investor to lodge his/her complaint online with SEBI and subsequently view its status.
Open an account
Q1. Who can invest in mutual funds?
Ans. Mutual Funds investor list:
- Resident Indians
- Non-resident Indians (NRI)
- Persons of Indian Origin (POI)
- Indian Public Sector Undertakings
- Indian Private Sector Undertakings
- Parents/Guardians on behalf of minors
- Wakf Boards
- Hindu Undivided Family
- Sole Proprietorship Firms
- Partnership Firms
- Cooperative Societies
- Charitable or Religious Trusts
- Trustee, AMC or Sponsor of their associates
- Endowment or Registered Societies
- Army/Air Force/Navy/Para-Military funds and other eligible institutions
- Scientific and/or industrial research organizations
- And other associations, institutions, bodies, etc., authorized to invest in mutual funds
Q2. What is the procedure to Invest in Mutual Funds?
Ans.The normal procedure is to fill-up the required application form and submit it along with a cheque for the amount of investment. Payment by cash is not allowed. The mutual fund company would issue you an Account Statement within four working days from the date of investment.
An investor also can fill up the online mutual fund account opening application form with Elite Wealth Advisors Ltd. Dully filled application form along with cancel cheque leaf and KYC documents(pan copy, address proof and one passport size photograph) to be submitted with Elite Wealth Advisors Ltd. Within 72 hours your online mutual fund account will be activated and you shall receive the user id and password on the email address as provided in the account opening from. Now you can purchase any Mutual Fund scheme online and make payment through various online modes.
Q3.What are the documents required for opening an account in the name of an Individual?
Ans. Documents required for opening an account in single name are as follows.
- Duly filled in Common Application Form.
- Cheque from his bank account /DD for the purchase amount.
- KYC Acknowledgement (Verified by KRA)
Q4. Can an Individual open more than one Investment Account or folio?
Ans. Yes. Individual investors can open more than one investment account or folios.
Q5. Can I open an account in joint name?What are the implications of various instructions in a joint account?
Ans. Yes. Implications are as follows:
- For accounts with operating instruction as “Joint”, transactions requests both of financial and non-financial nature will be processed only if the request is signed by “All” the holders.
- Accounts with operating instruction as “Anyone or Survivor”, transactions in the folio will be processed if the request is signed by any one or all the holders.
Q6. Is there any limit on the number of persons who can jointly open an account?
Ans. Yes, Maximum of three unit holders can jointly open an account/folio.
Q7. Can minor invest in mutual funds? If yes then what are documents required for opening the account of minor?
Ans. Yes. Minor can invest in mutual funds. Minor’s account can be opened as “On behalf of account” with Natural Parents or Court appointed Guardian as the persons operating the account.
For opening the account in name of the minor, Investors will have to submit the following documents.
- Duly filled in common application form.
- Subscription cheque favoring the scheme in which the investments needs to be done.
- KYC-KRA acknowledgement of the Guardian
- Date of Birth proof of Minor i.e Birth Certificate, Passport, School leaving certificate/Mark sheet issued by Higher Secondary Board of respective state etc
- Relationship Proof of Minor with Guardian, if the same is not available as part of the documents submitted for proof of DOB.
- Court Order in case of court appointed Guardian
- Third Party Declaration for payment received from anyone else other than natural guardian.
Q8.Can minors maintain and operate accounts?
Ans. Minors cannot maintain and operate accounts on their own.
Q9. Can minors open joint accounts with their parents or brothers or sisters?
Ans. Accounts in the name of minor cannot have joint holders but the same can be opened as “On behalf of account” with Natural Parents or Court appointed Guardian as the persons operating the account.
Q10.Is there any limit on the amount that can be invested on behalf of the minor?
Ans.There is no limit for the amount to be invested in the name of minor if the subscribed bank account is in the name of minor, however Payment by Parents/Grand-Parents/related persons in consideration of natural love and affection or as gift, is subject to the limit of Rs. 50,000/-.
Q1. What is NAV of a scheme?
Ans. The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date.
Q2. How often is NAV declared?
Ans. NAV is required to be disclosed by the mutual funds on a regular basis – on all business days or weekly – depending on the type of scheme. As per SEBI Regulations, the NAV of a scheme shall be calculated and published at least in two daily newspapers at intervals not exceeding one week. The NAVs are also available on the websites of mutual funds. All mutual funds are also required to put their NAVs on the website of Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place.
Q3. At what time is the NAV declared?
Ans. On all business days, depending on the scheme type, NAV is declared in the evening at or before 9 pm.
Q4. If different mutual funds have schemes in the same category, is it a better decision to opt for the scheme which has a lower NAV?
Ans. While determining which scheme to invest in, the NAVs and the resulting number of units available for a certain price are irrelevant to the decision. Always opt for a scheme which is professionally managed and belongs to a mutual fund whose schemes have performed well in the past.
Q5. Are the units allotted as per the NAV on the screen?
Ans. NAVs are declared by the Mutual Fund House by the end of the day. Hence the NAV displayed on the screen (the previous day’s NAV) will have a lag of one day or more. The displayed NAVs are indicative and for the purpose of guidance only. When you transact through the platform, you get the same day’s NAV depending upon the cut-off time applicable i.e. if the transaction is before the cut-off time, the same day’s NAV is allotted (for all working days).
Q6. How is the applicable NAV determined?
Ans. Liquid schemes – Subscription
- Where the application is received up to 2.00 p.m. on a day and funds are available for utilization before 2:00 p.m. without availing any credit facility, the closing NAV of the day immediately preceding the day of receipt of application.
2.Where the application is received after 2.00 p.m. on a day and funds are available for utilization on the same day without availing any credit facility, the closing NAV of the day immediately preceding the next business day; and
- Irrespective of the time of receipt of application (before or after 2:00 p.m. on a day), where thefunds are not available for utilization before 2:00 p.m. without availing any credit facility, theclosing NAV of the day immediately preceding the day on which the funds are available forutilization.
Liquid schemes – Redemption
- Where the application is received up to 3.00 pm – the closing NAV of day immediately preceding the next business day.
- Where the application is received after 3.00 pm – the closing NAV of the next business day.
Other than Liquid Schemes – Subscription
For amount less than INR 2 lakh
- Where the application is received up to 3:00 p.m., closing NAV of the day on which the application is received.
- Where the application is received after 3:00 p.m., closing NAV of the next business day.
For amount equal to or more than INR 2 lakh
- Where the application is received up to 3:00 p.m. and funds are available for utilization before3:00 p.m., closing NAV of the day on which the application is received.
- Where the application is received after 3:00 p.m. and funds are available for utilization, closing NAV of the next business day.
- Irrespective of the time of receipt of application (before or after 3:00 p.m.), where the funds are not available for utilization, closing NAV of the day on which the funds are available for utilization.
Other than Liquid Schemes – Redemption
- Where the application is received up to 3.00 pm – closing NAV of the day on which theapplication is received; and
- Where the application is received after 3.00 pm – closing NAV of the next business day.
Q1. How to select a mutual fund scheme to invest in?
Ans.To decide which scheme you should invest in, understand your investment goals and match them to the objectives and expected returns and previous performance track record of the mutual fund scheme you are considering. Begin by answering these simple questions for yourself and then reaching out to a financial expert for guidance.
- What is your age?
- How much money can you invest?
- For how long can you invest the money?
- How often do you need the returns?
- How much risk can you handle?
- Will you need money in the recent future?
- Do you need to save tax?
Read the offer document carefully, track the past performance of the scheme, compare it with others in its category and evaluate the quality of the securities that the scheme is planning to invest in.
Q2. What are the things I should check for before investing in a particular fund of my choice?
Ans. Followingthingsyou should check before investing in MF:
- As a start, read the objective of the fund and see that is matches your investment goals.
- Then check your scheme document for details on how the investment is being planned, on what basis are the securities being decided and what the overall logic and thought process behind the fund’s investment strategy is.
- Once you are convinced of the strategy, track the past returns of the fund to see how the strategy has worked and how the fund has performed in different market situations. While this does not guarantee future performance, it gives you a fair estimate.
- Mutual funds are not without risks, and fund managers will often diversify their portfolio to minimise risks and maximize returns. Read the scheme information document for information on risks.
- Diversify your investment portfolio and don’t invest all your money in a single fund.
- When choosing different funds to invest in, allocate your money in growth as well as income schemes, based on your age, income and risk handling ability.
Q3. How do I decide what the proportion of my debt and equity investment should be like?
Ans.Your risk-taking capacity, age, financial position, income and liabilities will determine the ideal debt and equity investment proportion for you. You can assess these using different tools and calculators as well as get a financial advisor to guide you. Many times, your mutual fund agents and distributors could help you out as they are more aware and clued in to fund and market performances.
Q4. What is purchase price?
Ans. Purchase price is the price paid by you to purchase a unit of a mutual fund scheme.
Q5. How can I purchase units of Mutual Funds?
Ans.There are three options for purchasing units of Mutual Funds:
- Directly by submitting physical transactions form to Elite Wealth Advisors Ltd,
- Through the stock exchange platform
- Through internet/ online transacting facility.
Q6. What documents needs to be submitted by me if I needto buy units of the mutual fund?
Ans. Investor needs to submit a completely filled application form along with the cheque/transfer letter/RTGS/NEFT and copy of the KYC-KRA acknowledgement at Elite Wealth Advisors Ltd.
Q7.Can I invest in Cash?
Ans.Yes, cash investments up to INR 50,000 per investor, per mutual fund, per financial year can be made in mutual funds. However, any repayment (redemption/dividend) is made only through bank channel.
Q1. What is redemption price?
Ans. Redemption price is the price or NAV at which an open-ended scheme purchases or redeems its units from the unitholders. It may include exit load, if applicable.
Q2. What is the procedure to redemption Mutual Funds?
Ans. Withdrawing your money from Mutual fund is very easy we just need to send redemption application form to Mutual Fund Company or login online to redeem/sell the units.
Q3.Is there any penalty for early redemption in Mutual Funds?
Ans. Mutual Fund companies charge exit load in case of early redemption but not in all case it will vary scheme to scheme. Generally in case of equity scheme there is an exit load of 1% if you redeem amount before 365 days.
Q4. Can the redemption proceeds be directly credited to my bank account?
Ans. Yes. It can be done provided direct credit is being opted while filling the application form and bank related complete information like IFSC code, MICR, bank branch is mentioned in the application form.
Q5.If the redemption payout mode is “Cheque”, can an investor come and collect the cheque personally or his representative can collect the cheque?
Ans. Yes. The investor can personally come and collect the cheque. He needs to ensure that the original redemption acknowledgement is available with him. In case he needs to authorize his representative to collect the cheque than he needs to give an authority letter along with the original copy of the redemption acknowledgement.
Q6. Will there be any tax applicable to my redemption proceeds?
Ans. Yes, Securities Transaction Tax (STT) of 0.001% will be deducted from the redemption proceeds of the investors (STT are government levies and are subject to change from time to time).
For more information please see taxation.
Q7. When would the redemption proceeds get credited to my account?
Ans.As per SEBI, all redemption payment needs to be released within a maximum of 10 business days from the date of acceptance of redemption request. However the AMC endeavors to make the payment as per schedule listed below:
- Money Market Fund – (Liquid and Sweep) – T+1 business day ( T being the date of Transaction acceptance before cut off time)
- Debt oriented scheme (including close ended and open ended schemes) – T+1 business day
- Equity oriented scheme (including close and open ended schemes) – T+1/T+2 business days.
Q8. What should an investor do if he has not received his redemption proceeds within the specified timeperiod?
Ans.The AMC endeavors to release the payment for all Equity scheme within T + 3 business days and Money Market fund and Debt scheme within T+1/T+2 business day (T being the date of transaction acceptance before cut off time). If it is beyond 5 days, the investor is requested to check his account statement for the mode of payout and the registered primary bank account in the investor folio. If the mode of Payout is ”Electronic payment ” (i.e Direct Credit/RTGS/NEFT) and the Redemption payment credit is not reflecting in the investors registered bank account
If the mode of Payout is “Cheque Payment” and the redemption cheque isn’t received by the investor, then the investor should contact customer care helpline at 42445757.Alternately, the investor can also email at firstname.lastname@example.org.
Q9. If the entire investment in an account/folio is redeemed will the account get closed?
Ans.No, even if the investor had redeemed all the units from the folio/account it remains active. You can invest in same folio in anytime in future.
Q10. What are the different types of dividend payout modes?
Ans.The dividend amount is paid to the investors in 3 different types of payout modes as mentioned below, depending upon the bank mandate registered:
Direct credit (DC).
Dividend proceeds are directly credited to the investors bank account through direct credit facility.
Dividend payment is made by directly through cheque favoring into your bank account registered with us.
Dividend payment is made through demand drafts wherever the bank mandate registered is not a DC bank and the MICR and IFSC codes are not available or incomplete.
Q11. What exactly is National Electronic Funds Transfer (NEFT)?Why should I choose NEFT over my current payout method?
Ans. National Electronic Funds Transfer or NEFT is a facility provided by the Reserve Bank of India (RBI), to make transfer of funds between bank accounts, convenient and secure. You can avail of the NEFT service to move your funds from any branch of any bank across India, to any other bank branch in the country.
If your current payout method is Demand Draft or Pay Order, it takes at least 3-4 days until your payout is dispatched and reaches you. NEFT, on the other hand, allows your payout amount to be transferred on the same day or the next day. The advantage of choosing NEFT over your current payout method is that NEFT is secure, quick and involves minimum risk.
Q12. Within how many days will an investor receive the dividend amount?
Ans. SEBI allows 30 calendar days for making the dividend payment.
Q13.I wish to change the Dividend Option Plan.
Ans. To change the dividend option from normal payout to re-investment or vice -versa, you need to provide a request letter for Change in Dividend Option for every Scheme that you wish to update. The letter should be submitted at the office of Elite Wealth advisors Ltd.
Q14. What is an ex-dividend date?
Ans. Normally, one business day after the record date. Investors purchasing unit on or after the ex-dividend date are not entitled to collect dividends or bonus units. The NAV falls by the amount of the dividend distributed and/or bonus issued.
The terms ex-bonus and ex-dividend often are used synonymously.
For instance, if the record date for dividend is October 15th, then investors who don’t have their names in the list of unitholders as on that day, will not receive dividend.
Q15. What is the process for correction on dividend cheque/pay order?
Ans.In case the cheque/pay order needs to be corrected i.e change in bank details etc. investor needs to submit a letter giving details of the folio no, cheque details, new bank details, cancelled cheque of the new bank etc along with the Original cheque/pay order along with respective form of the mutual fund house.
Q16.Where can I check whether there is any unclaimed amount (dividend/redemption) in my name lying with a mutual fund?
Ans. Mutual Funds provide on their website, the list of names and addresses of investors in whose folios there are unclaimed amounts (dividend/redemption). The information provided herein shall contain name of investor, address of investor and name of Mutual Fund/s with whom unclaimed amount lies.
The website of Mutual Funds is also required to provide information on the process of claiming the unclaimed amount and the necessary forms/documents required for the same.
The information on unclaimed amount along with its prevailing value (based on income earned on deployment of such unclaimed amount) is separately disclosed to investors through the periodic statement of accounts/CAS sent to the investors.
Q1. What is a switch?
Ans. Mutual Funds provide the investor with an option to shift his investment from one scheme to another within that fund.Switching allows the Investor to alter the allocation of their investment among the schemes in order to meet their changed investment needs, risk profiles or changing circumstances during their lifetime.
Q2. Is there any load on switching?
Ans.A switch from one scheme to the other is treated as redemption from the scheme from where it is switched out & a purchase into the scheme into which it is being switched. Thus you will be liable for any ‘applicable’ entry load or exit load.
3.What needs to be done to activate a switch?
Ans. Investors need to submit a written request mentioning the Switch out and Switch in Scheme or duly filled in transaction slip with switch details.Switch request will be processed as per cut off time.
Q1. What is Systematic Investment Plan or SIP?
Ans. A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.
Q2.What are the benefits of SIP?
Ans. Benefits of SIP are:
- It helps you to inculcate financial discipline of your money.
- It helps you to put the investment plans on your priority list.
- Early & regular investments can help you to compound the wealth.
- It helps you to average out the capital invested and thereby reduces the risk.
- Rupee Cost Averaging is the significant reason for choosing the SIP, allowing to gain maximum benefits on his/her investments over time.
Q3. What are the dates available for registering an SIP ?
Ans.The dates available for SIP registration are 1st, 7th , 10th, 15th, 20th and 25th of the month or any day depends on the mutual fund AMC.
Q4.What are the documents to be submitted by existing investors for starting SIP in existing folio?
Ans. Investor needs to submit the following documents
If the mode of SIP is through Post Dated Cheques (PDC)
Monthly frequency –
- Common application form ( for Systematic Investment)
- One current dated cheque
- Five post datedcheques
- KYC-KRA Acknowledgement if the same is not updated in the folio
- Common application form ( for Systematic Investment)
- One current dated cheque
- Four post datedcheques
- KYC- KRA Acknowledgement if the same is not updated in the folio
If the mode of SIP is through ECS (Debit Clearing) / Direct Debit Facility/Standing Instruction
- Common application form.(for Systematic Investments)
- Sip Registration cum Mandate form
- Original cancelled cheque from the bank account for which the debit mandate is provided.
- KYC-KRA Acknowledgement if the same is not updated in the folio
The completely filled documents needs to be submitted at our Office.
Q5.What are the frequencies offered for registering Systematic Investment Plan (SIP)?
Ans. Investors can opt for Monthly or Quarterly frequency for Systematic investments (SIP).
Q6.Can an investor register for multiple SIPs in the same scheme?
Ans.Yes, the investor can register for multiple SIPs in the same scheme, same plan in the same month.
Q7.What do you mean by SIP Top Up?
Ans. SIP Top Up is facility where an investor can increase the sip amount on regular basis without submitting any fresh request for the same every time. SIP Top Up is available for half yearly and Yearly frequency and the Top Up amount has to be in multiples of Rs 500.
Q8.What do you mean by SIP Pause?
Ans. SIP Pause is a facility which facilitates the investor to pause his/her existing SIP for a temporary period.SIP can be paused for a minimum period of 1 month to a maximum period of 3 months
Q9. Can i convert my offline SIP requests into online?
Q10.Can an Investor change the SIP amount for his existing investments?
Ans.Yes, the Investor can change the SIP amount in his existing SIP. The investor needs to submit the following documents 30 calendar days prior to the next SIP debit date.
- Letter to discontinue the existing SIP.
- New ‘SIP’ Form with revised SIP amount details.
The completely filled documents need to be submitted at our office.
Q11.Can I miss an SIP?
Ans.Yes, you can. Many investors think that if they miss an SIP, then their account will be de-activated, but it does not happen. Even if you miss an SIP due to insufficient amount of balance in your account, then don’t worry you can just pay it next month, and your SIP will continue as normal.
When you are starting with an SIP, don’t think too much about the future. Even if you miss some of the SIP’s due to financial crisis, it will be recovered in the next SIP.
Q12.How to shorten SIP duration?
Ans.You need to send a written and signed application to the fund management team before the next SIP comes. Or you can ask for the same request, online. Before stopping the SIP, you will have to complete a minimum investment period, which is 6 months for most of the organizations. To avoid the shortening of the investment period of SIP, start it for 6 months to a year period. Once you are satisfied with the SIP, extend the investment period.
Q13.How can I extend the SIP duration?
Ans.At the end of your SIP completion period you will get a renewal form, fill that to extend the SIP duration. If you want to extend the duration of the SIP before completion of the given period, then you can just fill up the SIP form with the existing portfolio number and the new time period. To avoid the shortening of SIP duration, start initially from 6 months to a year.
Q14.Will I get any intimation on the SIP orders being placed in my account?
Ans.You will be intimated on the each transaction through SMS & email alerts. Alerts will be on the following actions:
- On the successful registration of the SIP
- SMS/email alerts before the execution date(One/two day before)
- Alerts on the cancelation of the SIP orders.
Q15. Do I need to log in on every SIP date to place the Mutual Fund SIP orders?
Ans. No. Once you have placed your Mutual Fund SIP requests, Elite Wealth Advisors Ltd. will place the Mutual Fund SIP buy orders on your behalf. You need not login to your account to purchase the units.
Q16. Can I start a SIP when market is at all time high?
Ans.The idea of SIP is to avoid timing the market and should be started at any given state of the market. Be it very high or very low. The purpose of SIP is to avoid timing the markets and get into the habit of investing with a purpose.
Q17.In which mutual funds can I start a SIP?
Ans. Mutual funds are not categorized to be accepting any particular type of investment like SIP or lumpsum investments. All mutual funds accepts both the option of investment i.e. you can start a SIP or do a lumpsum investment or even both at the same time. So if you want to be doing a SIP of 1k and a lumpsum investment of 10k, you can do it in the same fund on the same day. If you have an ongoing SIP in any fund and want to be adding some more amount as lumpsum amount, you can do that. If you have an existing SIP and want to be doing a second SIP in the same fund, you can do that too.
Q18.Is there any upper limit to the SIP amount?
Ans. No. There is a misconception about SIP that it is for smaller investment amount but that is not the case. There is no upper limit to the SIP amount and you can SIP for as much investment amount as you want.
Q19.Are there any recurring costs?
Ans.No, there are no recurring charges. If you need to start additional SIPs, there are no additional charges.
Q20.Will the money I earn be taxed?
Ans.If you invest in Equity funds, all your earnings after 1 year are tax free. If you invest in Debt Funds, after 3 years you can get indexation benefit which significantly reduces taxes on your earnings. Refer to the Taxation part.
Q1. Can an investor appoint a nominee for his investment in units of a mutual fund?
Ans. Yes. The nomination can be made by individuals applying for / holding units on their own behalf singly or jointly. Non-individuals including society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family, holder of Power of Attorney cannot nominate.
Q2.Can I have multiple nominees for my funds?
Ans.Yes, you can enter up to 3 nominees for your funds.
Q3.How can I change my nominee details in my folio?
Ans. To modify/cancel an existing nomination, the investor is required to fill in the Modification/Cancellation form and submit the same duly signed to us.
The cancellation of nomination can be made only by those individuals who hold units on their own behalf, single or jointly and who made the original nomination and the request has to signed by all the holders.
On cancellation of the nomination, the nomination shall stand withdrawn and the AMC shall not be under any obligation to transfer the units in favor of the Nominee.
Q4.Will my existing mutual fund nomination automatically get updated for all future online Mutual Fund purchases also?
Ans. No. Nomination made in your existing mutual fund folios will not be automatically updated for new folios created for fresh mutual fund purchases made by you. For all new folios, you will be required to make a separate nomination request.
Q1.What is the procedure for updating new signature in the records?
Ans.The investor is requested to submit a letter for updating new signature in the records. The request needs to be signed by the unit holder(s) with the New Signature alongwith self-attested copy of any one of the document listed below towards proof of identity (self-attested)
- Photo PAN card
- Voter’s Identity Card
- Valid Driving License
- Valid Photo Debit Card issued by a bank in India
Further note that the new signature(s) need to be attested by the registered bank of the investor.
Q2.Can a name in joint account be deleted or a new name added?
Ans.You can neither delete nor add new name in regular process. Only in the unfortunate event of death, the name can be deleted in form of transmission of units.
Q3.What is the process of updating change of status from Minor to Major ?
Ans.FollowingList of standard documents are required to change account status from minor to major.
- Services Request form, duly filled and containing details like name of major, folio numbers, etc.
- New Bank mandate where account changed from minor to major.
- Signature attestation of the major by a manager of a scheduled bank / Bank Certificate
- KYC acknowledgement of the major.
- In case of existing folios where date of birth may not be available, AMCs shall obtain this information and update their records at the earliest.
Change in Tax Status (Minor Attaining Majority)
Upon attaining majority, a minor has to write to the fund, giving his/her specimen signature duly authenticated by his/her banker, as well his/her new bank mandate, PAN details, KYC acknowledgement letter, in order to facilitate the Fund to update its records and permit the erstwhile minor to operate the account in his/her own right.
Q4. What is the process for change of contact details like mobile numbers and email id in my folio?
Ans. You just need to submit updation request form to Elite Wealth Advisors Ltd.
Q5. How can I change my name in my folio?
Ans. Following documents required for name change in folio:
- Affidavit from the unit holder on stamp paper of value as applicable in the respective state of execution of the affidavit.
- In case of individual investors (including NRI), notarized copy of the Gazette notification regarding change of name.
- In case of the investor being a company, a duly certified copy of the fresh certificate of incorporation issued by the Registrar of Companies.
- In case of the investor being a firm which is registered, notarized copy of the entry in the Register of Firms relating to change of name.
- In case of the investor being a firm which is not registered, a notarized copy of the amended partnership deed relating to change of name.
- In case of a PIO, a certified / notarized copy of passport/documentation under the relevant jurisdiction evidencing the change in name.
- In case of change of name of a unit holder due to marriage, a notarized copy of her marriage certificate.
- Certified/Attested copy of PAN card displaying the new / changed name.
- KYC effected in the new / change name.
Q6.What is the process for changing address in the folio?
Ans. For updation of address in the folio following documents are required to be submitted for those who are KYC complied:
- Address updation form
- Proof of new address
- One passport size photograph
And for those who are not KYC complied are required to get the KYC process done (refer Q no 2 in KYC section).
Units in Demat Mode:
For investors holding units in demat mode, the procedure for change in address would be as per the depository participant process.
Q6.What is the process for changing bank details?
Ans. Change of Bank Mandate:In case of change of bank request, the investors shall be required to submit the below stated supporting documents to effect the change:
- Change of Bank Mandate Form
- Original cancelled cheque of the new bank with the investor name mentioned on the cheque along with old bank cheque leaf or any bank related document which has investor name printed.
- Copy of the bank statement/pass book duly attested by the new Bank, evidencing the name and bank account details of the investor (The bank statement shall not be later than 3 months old).
In case the request for change in bank account information and redemption request are in the same transaction slip or letter, such change of bank mandate shall not be processed.
However, the valid redemption transaction will be processed and the payout would be released as per the specified service standards and the last registered bank account shall be used for all the purposes.
If the investor submits redemption request accompanied with a standalone request for change of Bank mandate or submits a redemption request within seven days from the date submission of a request for change of Bank mandate details, the AMC will process the redemption but the release of redemption proceeds shall be deferred on account of additional verification, but will be within the regulatory limits as specified by SEBI from time to time.
Change of Bank Mandate for Systematic Investment Plan (SIP)
In order to change the existing bank account for SIP, investors need to submit following documents 30 days before the next SIP debit date:
- A new SIP Form with change of bank details
- Cancelled cheque leaf with name printed on that.
- Bank account detail of new bank
- Old bank details.(cheque or bank passbook transactions of last 3 months)
- Letter to discontinue the existing SIP.
Q1. What is a consolidated account statement (CAS)?
Ans. A CAS details all the transactions and investors holding at the end of the month including transaction charges paid to the distributor, across all schemes of all mutual funds, by an investor.
A CAS for each calendar month is issued to the investors in whose folios transactions have takenplace during that month.
A CAS every half yearly (September/ March) is issued, detailing holding at the end of the sixmonth, across all schemes of all mutual funds, to all such investors in whose folios no transactionhas taken place during that period.
Q2. What is the basis for consolidation of portfolios to be considered for CAS?
Ans.As per amendments to SEBI regulations, the asset management company shall identify common investors across fund houses by their permanent account number (PAN) for the purposes of sending Consolidated Account Statements.
Consequently, only those portfolios that have any of the following, will be considered and consolidated while issuing a CAS.
- Financial transactions in a month
- Identical holders
- All unit holders who are KYC compliant
Q3. Which financial transactions will be included in CAS?
Ans. The CAS will include all types of financial transactions like purchases including NFOs, redemption including maturity, switches, systematic transactions like SIP, SWP, STP etc., dividend payouts or reinvestments, merger, bonus transactions etc.
Non-financial transactions like updating of addresses, bank details, nominee registration etc. will not be included because the confirmation for these is sent separately by individual AMCs.
Q4. Will I get a CAS, if I hold units in the dematerialised mode?
Ans. Transactions under the dematerialized mode will not be included and you should check the dematerialised account statement for the same.
Q5.What investor details will the CAS include?
Ans. Apart from details of financial transactions, opening and closing unit balances in each portfolio, the CAS will also reflect the email ID registered, nominee registration status, mode of holding, KYC status, ISIN and UCC for each portfolio and scheme.
Q6. If the investor has registered multiple addresses with multiple AMCs to which address the CAS will be sent?
Ans.In case of KYC compliant folios, the address as per KYC will be used; else the address as per the last transacted folio will be considered.
Q7.So what happens if there are no financial transactions in a particular portfolio for a month?
Ans.Such portfolios will not reflect in the statement.
Q8.Will minor’s portfolios be considered for consolidation?
Ans.No, a minor’s portfolios will not be considered for consolidation since different portfolios of the same minor may have different guardians in different mutual funds and it will be inappropriate to consolidate on the basis of the PAN of the guardian.
Q9.If for any reason I need a duplicate CAS, what is the procedure I should follow?
Ans.A duplicate CAS will not be available in physical form for the past months. If you have a registered e-mail ID, you may use the mail back services provided by registrars of various mutual funds to get a duplicate statement.
Q10.What do I do if some of the folios are not reflected in the monthly CAS?
Ans.If you find that some of your folios are not reflected in the CAS, you should check the following and act appropriately:
Whether the folio has had any financial transaction in that month, since the CAS includes only those portfolios with financial transactions.
- If yes, then check whether the PAN of all the unit holders has been updated in the portfolio.
- If no, you should get to doing that immediately so that you don’t face the same problem in the future.
If the PAN is already updated, then you should check with the respective mutual fund or the registrar about the discrepancy.
Q11.Do you also get an individual statement from the AMC?
Ans. Portfolios with a registered e-mail ID will continue to get regular fund specific transaction intimation electronically after each financial transaction, within 5 working days. But portfolios with no e-mail ID will only get a monthly CAS
Q1. Do I need to have a Demat account to transact in Mutual funds?
Ans.For allotment in physical mode there is no need for a Demat account.
Some schemes like ETFs are compulsorily allotted in demat mode. Hence to transact in such a scheme you need to have a Demat Account linked to your trading account.
Q2. How do I opt for receiving units in my demat account?
Ans.For receiving units in your demat account, you have to submit a duly filled “Application for Allotment of Units in Dematerialized Mode” along with the application form / transaction slip.
Q3. How can I convert my physical MF units in Demat form?
Ans. If you have already a demat account with Elite Wealth Advisors Ltd. then you need to fill-up a “Conversion Request Form”, sign it, attach the latest statement of holdings & submit it to our nearest branch office otherwise open a demat account with us first.
Q4.What is the process to redeem dematerialized Mutual funds units?
Ans.If you have a demat account with Elite Wealth Advisors Ltd. you need to submit the duly filled & signed “Repurchase/redemption form” to our office.
Q5. What is the procedure to convert my mutual fund units from demat mode to physical form?
Ans.You are requested to submit“Re-materialization Request Form” to convert mutual funds units held in demat mode to physical form to your concern Depository Participants (DPs).
Q6.Can I transfer only partial units of my schemes to demat to physical or vice- demat to physical or vice-versa?
Q1. What documents are required for transmission in different cases?
Ans. 1. Applicants claiming units in his/her name shall be required to submit the prescribed documents depending on the requirements under various situations as stipulated below:
- Transmission to surviving unit holders in case of death of one or more unit holders:
- Letter from surviving unit holders to the AMC/ Mutual Fund requesting for transmission of units,
- Death Certificate in original or photocopy duly notarized or attested by gazette officer or a bank manager,
- Bank Account Details of the new first unit holder as per specified format along with attestation by a bank branch manager or cancelled cheque or bank statement bearing the account details and account holders name if not already avaliable.
- KYC of the surviving unit holders, if not already available.
- Transmission to registered nominee/s in case of death of Sole or All unit holders:
- Letter from claimant nominee/s to the AMC/ Mutual Fund requesting for transmission of units,
- Death Certificate/s in original or photocopy duly notarized or attested by gazette officer or a bank manager,
- Bank Account Details of the new first unit holder (nominee) as per specified format along with attestation by a bank branch manager and cancelled cheque or bank statement bearing the account details and account holders name.
- KYC of the claimant(s)/(nominee),
- c) Transmission to claimant(s), where nominee is not registered, in case of death of Sole or all unit holders:
- Letter from claimant(s) to the AMC/ Mutual Fund requesting for transmission of units,
- Death Certificate(s) in original or photocopy duly notarized or attested by gazette officer or a bank manager,
- Bank Account Details of the new first unit holder (nominee)as per specified format along with attestation by a bank branch manager or cancelled cheque or bank statement bearing the account details and account holders name.
- KYC of the claimant(s),
- Indemnity Bond from legal heir(s) as per specified format.
- Individual affidavits from legal heir(s) as per specified format.
- If the transmission amount is below the Threshold Limit set by the AMC: Any appropriate document evidencing relationship of the claimant(s) with the deceased unit holder(s).
- If the transmission amount is equal to or more than the Threshold Limit set by the AMC: Any one of the documents mentioned below:
- Notarized copy of Probated Will, or
- Legal Heir Certificate or Succession Certificate or Claimant’s Certificate issued by a competent court, or
- Letter of Administration, in case of Intestate Succession.
- Transmission in case of HUF, due to death of Karta:
- Letter requesting for change of Karta,
- Death Certificate in original or photocopy duly notarized or attested by gazette officer or a bank manager,
- Duly certified Bank certificate stating that the signature and details of new Karta have been appended in the bank account of the HUF as per specified format
- KYC of the new Karta and KYC of HUF, if not already available.
- Indemnity bond signed by all the surviving co-parceners and new Karta as per specified format.
- In case of no surviving co-parceners OR as defined above OR where there is an objection from any surviving members of the HUF, transmission will be effected only on the basis of any of the following mandatory documents:
- Notarized copy of Settlement Deed, or
- Notarized copy of Deed of Partition, or
- Notarized copy of Decree of the relevant competent Court
In case of certification by bank manager, the document should be certified by the bank manager with his / her full signature, name, employee code, bank seal and contact number.
- If the transmission amount is equal to or more than the Threshold Limit set by the AMC, the AMC/ Mutual Fund reserves the right to seek additional documents on a case-to-case basis.
- Where the units are to be transmitted to a nominee who is a minor, various documents like KYC, PAN, Bank details, Indemnity, etc. should be of the guardian of the nominee.
Q1. How can an investor authorise another person to operate his accounts?
Ans. Investors can submit notarised copy of registered POA (Power of Attorney) document to authorise another person to operate his folio/account.
Q2. What is meant by Power of Attorney (POA)?
Ans.A power of attorney is an instrument that is used by people to confer authority on somebody else to legally act on their behalf. They can be of two types – Special Power of Attorney (SPA) and General Power of Attorney (GPA). While an SPA is used for transfer of a specific right to the person on whom it is conferred, the GPA authorizes the holder to do whatever is necessary.
Q3. Should the POA (power of attorney) be registered? If so then with whom?
Ans.It is not compulsory to register a power of attorney unless it creates an interest in any immovable property i.e. charge in favour of donee. Registration of power of attorney is optional in India, where the ‘Registration Act, 1908’, is in force.
The Power of Attorney can be authenticated by a Sub-Registrar or any person authorised by him.
Q4.Can an investor disown a transaction authorised by POA?
Ans.As the investor had authorised the POA to carry out transactions on his behalf, investors can’t disown transaction authorised by POA.
Q5. Can a POA be cancelled or revoked?
Ans. POA registered in the folio/account can be cancelled or revoked any time.
Q6. What are the steps that need to be taken to cancel or revoke the POA?
Ans. Investor or POA holder will have to submit a written confirmation to cancel or revoke the POA.
Q1. What should be done to close the account / folio?
Ans.For closing the folio, all units in the folio needs to be redeemed. Investor needs to submit the redemption request form duly filled in registered office of the fund house or with RTA. The transaction will be processed as per the Net Asset Value (NAV) based on applicable cut-off timings depending on the date and time of receipt of the request. In case the mode of holding (MOH) opted by the investor is “Jointly”, then all the holders need to sign the redemption request. In case MOH is “either or survivor” than any one of the investor can sign the request.
Q1. Who is NRI?
Ans.A Non-Resident Indian (NRI) is a citizen of India who holds an Indian passport and has temporarily emigrated to another country for six months or more for employment, residence, education or any other purpose.
Q2.Who is a Person of Indian Origin (PIO)?
Ans.A Person of Indian Origin (PIO) means a citizen of any country (other than Bangladesh or Pakistan), if :
- He/She at any time has held an Indian passport
- He/She or either of his / her parents or grand parents was a citizen of India by virtue of the constitution of India or Citizenship Act, 1955 (57 of 1995) or He / She is a spouse of an Indian citizen or of a person referred above.
Q3.Can NRI invest in Mutual Funds (MFs)? Do NRI require special permission from the RBI to make the investment?
Ans. NRIs are eligible to invest in MFs on a repatriable as well as on non-repatriable basis. The RBI has granted general permission in this regard and as such and no special permission is required each time an NRI desires to invest in a mutual fund.
Q4.What are NRE and NRO accounts?
Ans. Non-Resident (External) Rupee (NRE) account is a rupee account from which funds are freely repatriable. It can be opened with either funds remitted from abroad or local funds maintained in NRE/ FCNR accounts, which can be remitted abroad. The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable.
Non-Resident Ordinary Rupee (NRO) account is a rupee account and can be opened with funds either remitted from abroad or generated in India. The amounts in such an account are generally non-repatriable. However, funds in NRO accounts can be remitted abroad subject to/as per various directives in force at the time of repatriation.
Q5.Can an NRI invest in foreign currency?
Ans.An NRI cannot make the investment in foreign currency. He needs to give us a Rupee cheque from his NRE, NRO bank account in India. He may also send a Rupee cheque from abroad payable in a bank in India. However, for an NRI to invest, it is mandatory that he maintains a bank account in India.
Q6.Is nomination by NRIs allowed in Mutual funds Schemes?
Ans.Yes, It is allowed only for Individuals.
Q7. How can I redeem funds?
Ans. Open-ended mutual fund schemes: Simply fill up the redemption slip and send it to our office. A cheque will be sent out within 1-4 business days from the day of receipt of the redemption request, depending on the nature of the scheme.
Closed-ended mutual fund schemes: You will not be able to redeem these funds until the scheme has matured. However, you can sell the units in the secondary market at the stock exchanges where the scheme is listed, through a registered stock exchange member.
Q8. How will the redemption proceeds be paid?
Ans.The redemption proceeds will be paid with a Rupee cheque payable to the NRE account of the investor in India.
For non-repatriable investments, the redemption proceeds will be paid by means of a Rupee cheque payable to the investor’s NRO account.
You can also have the funds transferred directly to your NRE/NRO bank account in India, as this is quicker and easier.
Q9.Can NRIs repatriate their earnings from mutual funds?
Ans.If the investment is made on a repatriation basis: The redemption proceeds and also the net income or capital gains (after tax) arising out of investment are eligible for repatriation, subject to compliance. If the investment is made on a non-repatriation basis: Only the net income (the dividend after tax), arising out of investment is eligible for repatriation.
Q10.Can I enroll in Systematic Investment Plans (SIP)?
Q11. Can I gift mutual fund units to relatives in India?
Q12. Can I avail of the indexation benefit?
Ans.The indexation benefit is available to units of schemes other than unlisted equity oriented schemes in case the units are held for more than 36 months.
Q13.For an application for investment when will the NRI be allotted units?
Ans.If an application is received before the prescribed cut off timings on any business day, the allocation of units will be at the applicable NAV adjusted for entry load, if any on the particular scheme. All applications received after the prescribed time will be treated as having been received on the next business day and the units allotted accordingly.
Q14.Can a Power of Attorney (POA) invest on behalf of the NRI investor?
Ans. Yes. Unlike banks where a POA holder cannot open an account on behalf of the NRI, in a mutual fund the POA has the authority to invest on behalf of the investor and sign documents for initial and additional purchases as well as redemptions.
Q15.Will you transfer money to an investor’s overseas account?
Ans. No. Investors need to contact their authorised dealers for this service.
Q16. What is the tax liability on redemptions?
Ans. Please refer the taxation part.
Additionally, please note that Section 206AA of the Income Tax Act (the Act) provides for tax deduction at source at the higher of the following rates, if the recipient of the income has not furnished their Permanent Account Number (PAN).
- At the rate specified in the relevant provision of this Act
- At the rate or rates in force
- At the rate of 20%
To reduce the compliance burden of foreign companies and non-residents, the Finance Act, 2016 has relaxed the condition of obtaining a PAN by such foreign companies and non-residents, subject to the recipient foreign companies or non-residents (deductee) furnishing the following details:
- name, email id, contact number;
- address in the country or specified territory outside India of the home country of the non-resident;
- a certificate of residence in any country or specified territory outside India from the government of that country or specified territory if the law of that country or specified territory provides for the issuance of such certificate i.e. Tax Residency Certificate (TRC); and
- Tax Identification Number (TIN) of the non-resident in the country or specified territory of his residence and, in case no such number is available, a unique number on the basis of which the non-resident is identified by the government of that country or specified territory of which he claims to be a resident.
Q17.What is the proof of the Tax Deduction at Source?
Ans.A TDS certificate is issued in the name of the Unit holder / First holder mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly known as Form16 A.
Q1. What is KYC?
Ans. To invest in a SEBI registered mutual fund, you need to be KYC compliant. Short form for Know Your Customer , KYC is a set of requirements prescribed by the SEBI for financial institutions to verify the identity of every investor. KYC involves verification of identity, address, financial status, occupation and other personal data.
Q2. What are the KYC requirements for a mutual fund investor?
Ans. Individual investors:
Proof of Identity:
- Photo PAN Card
- In case of Non Photo PAN Card in addition to copy of PAN Card any one of the following :
- Driving License /Passport copy / Voter ID /Bank Photo Pass Book.
Proof of Address (any one of the following):
- Latest Telephone Bill: Landline/Mobile (not more than 3 months prior to the date of application).
- Latest Electricity Bill (not more than 3 months prior to the date of application).
- Passport copy.
- Latest Bank Passbook/Bank Account Statement (not more than 3 months prior to the date of application).
- Latest Demat Account statement (not more than 3 months prior to the date of application).
- Voter ID.
- Driving License.
- Ration Card.
- Rent Agreement.
Investor must provide one passport size photograph with above documents.
Units can only be held in the name of Karta on behalf of the HUF.
Proof of Identity
- Copy of PAN Card of the HUF.
Proof of address (HUF)
- Latest Bank Passbook (not more than 3 months prior to the date of application).
- Bank account statement (not more than 3 months prior to the date of application).
Apart from these doucmentskarta POI, POA and one passport size photograph are also required. Karta can see the details given in the individual investor section. Karta also required to give the HUF declaration certificate.
Non individuals (PAN Mandatory) Companies / Bodies Corporate:
- Copy of the balance sheets for the last 2 financial years (to be submitted every year)
- Copy of latest share holding pattern including list of all those holding control, either directly or indirectly, in the company in terms of SEBI takeover Regulations, duly certified by the company secretary/Whole time director/MD(to be submitted every year)
- Photograph, POI, POA, PAN and DIN numbers of whole time directors/two directors in charge of day to day operations
- Photograph, POI, POA, PAN of individual promoters holding control – either directly or indirectly
- Copies of the Memorandum and Articles of Association and certificate of incorporation
- Copy of the Board Resolution for investment in securities market
- Authorised signatories list with specimen signatures
- Pan card of a company
- Address proof of a company
- Copy of the balance sheets for the last 2 financial years (to be submitted every year)
- Certificate of registration (for registered partnership firms only)
- Copy of partnership deed
- Authorised signatories list with specimen signatures
- Photograph, POI, POA, PAN of Partners
- Pan card of a firm
- Address proof a firm
- Copy of the balance sheets for the last 2 financial years (to be submitted every year)
- Certificate of registration (for registered trust only).Copy of Trust deed
- List of trustees certified by managing trustees/CA
- Photograph, POI, POA, PAN of Trustees
- Pan card of a trust
- Address proof of a trust
Q3.What is IPV?
Ans. IPV stands for In-Person Verification. The new common KYC regulation mandates all intermediaries should complete In-Person Verification (IPV) for all clients. Mere submission of identity and address proofs is not sufficient.
Q4. Who are authorized to perform IPV?
Ans.All intermediaries in the securities market are authorised to conduct IPV.
In case of Mutual Funds:
- Asset Management Companies (AMCs)
- Distributors who comply with the certification process of National Institute of Securities Market (NISM) or Association of Mutual Funds (AMFI) and have undergone the process of ‘Know Your Distributor (KYD)’
- Further, in case of any applications received directly from the investors (i.e. without being routed through the distributors), the Mutual Fund may rely upon the IPV (on the KYC Application Form) performed by the scheduled commercial banks.
Q5.Does the documents submitted along with KYC application form need to be self-attested?
Q6.Where will this information be stored?
Ans. The information will be updated by the KRA (KYC Registration Agency) in their central database.
Q7. What is a KRA?
Ans. KYC Registration Agency (KRA) is an agency registered with SEBI under the Securities and Exchange Board of India [KYC (Know Your Client) Registration Agency] Regulations, 2011. The KRA will maintain KYC records of the investors centrally, on behalf of capital market intermediaries registered with SEBI.
Q8. How many KRA are registered with SEBI?
Ans.At present, there are 5 KRA’s registered with SEBI
- CVL KRA – cvlkra.com
- NDML KRA – kra.ndml.in
- Dotex KRA- nsekra.com
- CAMS KRA – camskra.com
- Karvy KRA – karvykra.com
Q9. Where will I get the forms?
Ans. The KYC forms can be downloaded from our website www.elitewealth.in .
Q10.How many days will it take to update the information?
Ans. After submitting all the requisite documents, the KRA’s will take 10 working days to update the KYC status.
Q11.Is there any charge I have to pay to get myself enrolled in KYC?
Ans. No charges for KYC.
Q12. What happens if you have multiple folios in one mutual fund?
Ans.You will have to get the KYC acknowledgement updated against each folio.
Q13.When & how KYC forms have to be filled, in case of an existing customer?
Ans. KYC is mandate for investments in Mutual Fund. Hence KYC is required to be done at the time of investing in Mutual Fund. Existing customer have to follow the same procedure as the new customer are following.
Q14.After completing the KYC process, how can I transact in mutual funds?
Ans.Once your KYC form is acknowledged, you should attach the form with the transaction slip while investing first time in the mutual fund. If the transaction slip is not accompanied with the KYC form, your request will be cancelled.
Q15.Do I have to repeat the KYC process for every mutual fund?
Ans.Once you have filled & submitted the form to our Elite Wealth Advisors Ltd, and it is acknowledged, then attach the form with the transaction slip while you are investing first time in the mutual funds. After that, your information will be stored, and you need not provide the KYC form again.
Q16.Do I need to inform the change in my income status?
Ans.Yes, you need to. Every time you have increase/decrease in the income status it should be updated in your KYC.
Q17.Does the KYC acknowledgement have an expiry date?
Ans.No, it will be registered against your folio in all the future account statements. Once the acknowledgement is made you can invest in a number of mutual funds without a KYC form.
Q18.I am a joint holder in a Mutual Fund investment account (folio). Do I need to comply with KYC requirement?
Ans.Yes all investors including joint holders within a folio / all other folios need to get KYC compliant. If investment is in the name of a minor, the Guardian has to be KYC compliant. Holders and issuers of Power of Attorney, both have to be KYC compliant.
Q19.Is it necessary for a minor to be KYC complaint?
Ans.A minor investor is not required to be KYC compliant for investments in Mutual funds. In such cases, the Guardian has to be KYC compliant and provide his / her KYC Compliance letter along with the minor’s investment application form. Upon attaining majority, the unit holder will have to complete KYC formalities and the status should be updated.
Q20.What are the consequences of KYC cancellation/rejection?
Ans.In the event of any KYC Application Form being found deficient for lack of information / insufficiency of mandatory documentation, further investments will not be permitted.
Q21. What is CKYC?
Ans. CKYC refers to Centralized KYC (Know Your Customer). The main objective is to have aplatform which facilitates investors to complete their KYC only once before interacting withvarious entities across the financial services sector. Once the CKYC is complete for anInvestor, he / she is allotted a 14 digit unique KIN (KYC Identification Number) which needs tobe quoted by the investor while doing any transaction.
Q22. Who needs to comply with the CKYC procedure?
Ans. Currently CKYC is applicable to Individuals only (Resident Individuals & Non Resident Indian).Any individual customer who has never done KYC with KYC Registration Agency (KRA) andwhose KYC is not registered in the KRA as well as CKYC system is required to complete theCKYC process.
Existing investors who are registered or verified in the KRA system can continue makinginvestments without any additional documentation. However, for any modification to theirexisting records, they need to fill up the CKYC form.
Q23. How can I apply for CKYC?
Ans.For CKYC process, the customer is required to visit our branch and furnish the duly filled in CKYC form, along with all the required documents (duly attested) as prescribed under CKYC.
Q24.How CKYC is different from existing KYC in terms of information?
Ans. CKYC requires additional information (for e.g. – investor’s maiden name, mother’s name, FATCA information, etc.) to be submitted to CERSAI for completion of the CKYC formalities of an investor. Date of Birth is a mandatory information under CKYC. All required documentation including proof of identity and proof of address are mentioned in the CKYC form.
Q25. Whether PAN and In Person Verification (IPV) is required for CKYC in Mutual?
Q26. What are documents required for CKYC?
Ans. You need to submit just your one passport size photograph, your pan card and address proof photocopy (self-attested) with CKYC application form to Elite Wealth Advisors Ltd.
Q27.What is CERSAI?
Ans. Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI) is a central online security interest registry of India authorized by the Government of India to act as and to perform the functions of the Central KYC Records Registry under the PMLA (Prevention of Money-Laundering) rules 2005, including receiving, storing, safeguarding and retrieving the KYC records in the digital form for a client.
Q28.From when is the CKYC applicable and what procedure do I need to follow?
Ans. CKYC compliance is applicable for investments received from February 1, 2017 onwards. You need to note the following:
- New investors (investors for whom no record exists in any of the KRAs) will have to mandatorily submit the CKYC form along with the investment application. If the investor has filled the KRA application form in lieu of CKYC form, he will have to additionally submit the Supplementary CKYC form along with the KRA application form.
- Existing investors (investors for whom a record exists in any of the KRAs) can continue making investments without any additional requirements. In case any modification is required to be done in the KYC status, then need to submit the CKYC form to complete the modification.
Q29.Within how many days will I receive the KIN?
Ans.The KIN will be allotted by CERSAI within 4 – 5 working days.
Q30.I do not have an email ID / mobile number. How will the KIN be informed to me?
Ans.Upon generation of a KIN, CERSAI as a process will communicate the same vide SMS / email provided on the CKYC form. In the absence of both the details, no communication will be sent by CERSAI.It is advisable that you provide an email ID / mobile number on the CKYC form so that you do not miss out on any important communication sent by CERSAI.
Q31. If the investor is already KYC compliant do they have to submit new CKCY forms?
Ans.If an investor is already a KYC complaint as per the KRA guidelines, then they are required to fill the “CKYC Supplementary Form” to comply with the additional data requirement as per the CKYC guidelines.
Q32. If an investor is a KRA KYC complaint and not a CKYC complaint will the additional purchase /Fresh
purchase be rejected by the AMC?
Ans. AMC will not reject the transaction. However such investor will be informed to fill the supplementary CKYC form either online or through any of the AMC/RTA branches.
Q33.How many address correspondence address can be updated in the CKYC?
Ans.If an investor is doing his CKYC formalities for the first time he is required to provide the permanent address and correspondence address for communication. Later if the investor wishes to add more communication (specify to type of communication based on the financial institution) he is required to submit the separate form provided by CKYC for local addressupdation.
Q34.In case of investor submitted the KYC form however the KYC status as per KRA system is “Pending” or
“Hold” or “Failed” then should the investor submit CKYC form or supplementary CKYC form?
Ans. Investor whose KYC status is “On hold”/ “Under process”/ “In progress”/ “Rejected”/ ”Pending” in the
KRA records are required to fill up the New CKYC form to be CKYC complied .
Supplementary CKYC form will be used ONLY by the investors if they are already “KYC- complained” as
per the existing KRA guidelines.
Q35. In case of a joint holder folio does all investor have to be CKYC complaint?
Ans. Yes. All holders have to be CKYC compliant for new investors investing on or 1st Feb 2017.
Q1. What is FATCA?What is the purpose of FATCA and CRS?
Ans. FATCA stands for the Foreign Account Tax Compliance Act, a U.S. tax initiative that requires all financial Institutes (including Indian Mutual Funds) to report financial transactions of US persons including entities in which U.S. persons hold a substantial ownership, etc. to the relevant tax authorities.
CRS, developed by the Organization for Economic Cooperation and Development (OECD), is a global reporting standard for the automatic exchange of information (AEoI). The goal of CRS is to allow tax authorities to obtain a clearer understanding of financial assets held abroad by their residents, for tax purposes.
The purpose of FATCA and CRS is to aid automatic exchange of information between bilateral treaty partner countries about account-holders / investors maintaining accounts in foreign jurisdictions and also to prevent citizen or resident of countries / territories outside India, whether individuals or specified entities, from using banks and other financial institutions to avoid taxation on income generated from all offshore accounts. FATCA and CRS both, obligates such financial institutions to report information about persons from these countries / territories having accounts with them.
Q2.Who will be covered under the purview of FATCA and CRS?
Ans.All investors (including new as well as existing investors) has to provide information for FATCA. New Investors including Individual, Non Individual are required to provide this information at the time of initial purchase.
FATCA legislation will affect both individual and entities customers who are treated as a ‘US person’ for US tax purposes. The FATCA legislation will also affect certain types of entities with beneficial owners/ controlling persons from US.
An account having U.S. indicia like U.S place of birth, U.S. address etc. does not necessarily mean that the account would be reported. However such accounts would be subjected to closer scrutiny.
Q3. What is the information that the investor is required to provide in FATCA declaration?
Ans. Investors are expected to provide details such as Country of Tax residence, Tax Identification Number from such country, Country of Birth, Country of Citizenship, etc. at the time of Initial Investment or opening of folio. Existing investors will have to provide the information in the stand alone FATCA declaration form available on our website www.elitewealth.in
In case of Non-individual investors, the above mentioned information of any of the controlling persons will have to be submitted.
Q4.Who is a US person ?
Ans.A U.S. person is:
- A citizen or resident of the United States (including a green card holder).
- A partnership, corporation, estate, trust incorporated or created under U.S. law (U.S. incorporated entity)
- A non U.S. incorporated entity having shareholding of 10% or more or ownership (Substantial Ownership) held by
- An Individual who was born in the U.S. or is a U.S. citizen or a U.S. resident (including green card holder) or has a U.S. address or U.S. mailing address or U.S. ‘in care of’ or ‘hold mail’ as a sole address.
- A U.S. incorporated entity as described above
Q5.What is the impact of FATCA in India?
Ans. The Government of India has entered into an Inter-Governmental Agreement (IGA) with Internal Revenue Service (Government of US) for implementation of FATCA. In view of this all banks and other financial institutions in India will be required to identify, establish and report information on financial accounts held directly or indirectly by US persons.
Q6.What happens if one of the joint owners is a US person?
Ans. A joint account that has one US owner is treated as a US account and the entire account is subject to reporting as US person.
Q7.What will happen in case of a non US incorporated company? Will FATCA be applicable?
Ans. Yes. FATCA covers a wide range of entities and not just US incorporated entities.
Q8.Does FATCA replace existing US tax rules that I already follow?
Ans. FATCA does not replace the existing US tax regimes, it may however add additional requirements and complexity to the existing US tax rules you may already follow. We recommend you contact a professional tax advisor to discuss your personal tax situation.
Q9.How frequently should the investor provide this information?
Ans. Elite Wealth Advisors Ltd. will seek such information from all the investors (existing as well as new) and FATCA is relevant throughout the life cycle of the investor account or folio. The onus to provide accurate, adequate and timely inputs in this regard would be that of the Unit Holder. In this regard, any change in the status or information or certification previously provided should also be intimated to us within 30 days.
Q10.What if any investor refuses to provide the requisite information?
Ans.In case if a new investor refuses to provide the FATCA information and documents then he/she may not be allowed to open a folio.
In case of existing investors in case of any omission, delay or failure in providing such information, we would/ may be constrained to report relevant information pertaining to the account to domestic or foreign tax authorities.
Q1. What is capital gain?
Ans.The profit (if any) that you make on your mutual fund investments when you redeem or sell the MF units is referred to as Capital Gains. It can be a Short Term Capital Gain (STCG) or a Long Term Capital Gain (LTCG) depending upon the ‘Period of Holding’. The tax that is applicable on these profits is known as ‘Capital Gains Tax’.
Q2. What are the factors that determine the tax status of mutual funds?
Ans. (I) Residential Status & Mutual Funds Taxation:-The capital gains tax rates are determined based on the residential status of an individual / investor. Residential status can be either ‘Resident Indian’ or ‘Non-Resident India” (NRI).
(II) Type of Funds & Mutual Funds Taxation:-
- a) MF schemes that invest at least 65% of its fund corpus into equity and equity related instruments are known as equity mutual funds. Examples are : Large cap, Mid-cap, Balanced funds (equity oriented), Sector funds etc.,
- b) MF schemes that hold less than 65% of their portfolio in equities and equity related instruments are known as Non-Equity Funds / Debt funds. Examples are : Liquid Mutual funds, Money Market funds, Gold funds, Infrastructure debt funds, Balanced funds (Debt oriented) etc.,
(iii)Period of Holding & Capital Gains on Mutual Funds:-Capital gains on Mutual funds could be either long term capital gains or short term capital gains, depending on your investment horizon.
Long Term Capital Gains
If you make a gain / profit on your investment in a Equity Mutual Fund scheme that you have held for over 1 year, it will be classified as Long Term Capital Gain.
If you make a gain / profit on your investment in a Non-Equity Mutual Fund scheme (or in a Debt Fund) that you have held for over 3 years, it will be classified as Long Term Capital Gain.
Short Term Capital Gains
If your holding in a Equity mutual fund scheme is less than 1 year i.e. if you withdraw your mutual fund units before 1 year, after making a profit, then the profit will be considered as Short Term Capital Gain.
If you make a gain / profit on your Debt fund (or other than equity oriented schemes) that you have held for less than 36 months (3 years), it will be treated as Short Term Capital Gain.
Q3. What are the capital gain tax rates?
Ans. Capital Gains Tax Rates on Mutual Funds for FY 2017-2018
|Individual/ HUF $||Domestic Company @||NRI $|
|Equity Oriented Schemes
● Long Term Capital Gains (units held for more than 12 months) ● Short Term Capital Gains (units held for 12 months or less)
|Long term capital gains||Nil||Nil||Nil|
|Short term capital gains||15%||15%||15%|
|Other Than Equity Oriented Schemes
● Long Term Capital Gains (units held for more than 36 months) ● Short Term Capital Gains (units held for 36 months or less)
|Long term capital gains||20%&||20%&||Listed – 20%&
Unlisted – 10%*
|Short term capital gains||30%^||30%^^/25%^^^||30%^|
$ Surcharge at 15%, is applicable where income of Individual/HUF unit holders exceeds Rs. 1 crore. As per Finance Bill, 2017, surcharge at 10% to be levied in case of individual/ HUF unit holders where income of such unit holders exceeds Rs 50 lakhs but does not exceed Rs. 1 crore. Further, Education Cess at 3% will continue to apply on aggregate of tax and surcharge.
@ Surcharge at 7% is applicable where income of domestic corporate unit holders exceeds Rs 1 crore but does not exceed 10 crores and at 12% where income exceeds 10 crores. Further, Education Cess at 3% will continue to apply on aggregate of tax and surcharge.
&After providing indexation.
* Without indexation.
^ Assuming the investor falls into highest tax bracket.
^^ This rate applies to companies other than companies engaged in manufacturing business who are taxed at lower rate subject to fulfillment of certain conditions.
^^^ If total turnover or gross receipts during the financial year 2015-16 does not exceed Rs. 50 crores.
Q4. How is tax on mutual fund dividends calculated?
Ans. Taxation of Mutual Fund Dividends:-
- Dividends on Equity Mutual Funds : The dividend received in the hands of unit holder for an equity mutual fund is completely tax free.
- Dividends on Debt Funds : The dividend income received by a debt fund unit holder is also tax free.
Q6. What is Dividend Distribution Tax? What are the rates of Dividend Distribution Tax (DDT) for individual and non-individuals? Are there separate rates for liquid funds and other debt funds?
Ans. Any dividends declared by mutual fund houses are exempt from tax in the hands of investors. However, in debt mutual funds, AMCs pay Dividend Distribution Tax (DDT) from the distributable income at the rate of 28.33% (including surcharge and cess). There is no DDT on equity mutual funds. All non-equity funds, including liquid funds, have the same rate of DDT.
Rate For tax on distributed income (payable by mutual fund scheme)**
|Individual/ HUF||Domestic Company||NRI|
|Equity oriented schemes*||NIL||NIL||NIL|
|Money market or Liquid schemes / debt schemes (other than infrastructure debt fund)||25% + 12% Surcharge + 3% Cess=28.84%||30% + 12% Surcharge + 3% Cess=34.608%||25% + 12% Surcharge + 3% Cess=28.84%|
|Infrastructure Debt Fund||25% + 12% Surcharge + 3% Cess=28.84%||30% + 12% Surcharge + 3% Cess=34.608%||5% + 12% Surcharge + 3% Cess=5.768%|
* Securities transaction tax (STT) shall be payable on equity oriented mutual funds schemes at the time of redemption/switch to the other schemes/sale of units.
** For the purpose of determining the tax payable by the scheme, the amount of distributed income has to be increased to such amount as would, after reduction of tax on such increased amount, be equal to the income distributed by the Mutual Fund. In other words, the amount payable to unit holders is to be grossed up for determining the tax payable and accordingly, the effective tax rate would be higher
Q7. What is the Tax Deducted at Source for NRI?
Ans. Tax Deducted at Source (Applicable only to NRI Investors) #
|Short term capital gains
|Long term capital gains $|
|Equity oriented schemes||15%||Nil|
|Other than equity oriented schemes||30%^||10%* (for unlisted)& 20%& (for listed)|
# Short term/ long term capital gain tax will be deducted at the time of redemption of units in case of NRI investors.
$ Surcharge at 15%, is applicable where income of Individual/HUF unit holders exceeds Rs. 1 crore. As per Finance Bill, 2017, surcharge at 10% to be levied in case of individual/ HUF unit holders where income of such unit holders exceeds Rs 50 lakhs but does not exceed Rs. 1 crore. Further, Education Cess at 3% will continue to apply on aggregate of tax and surcharge.
^ Assuming the investor falls into highest tax bracket.
&After providing indexation.