Kavitha Menon's Blog

Five things to do in the current stock market scenario- My client was nervous. As the head of a leading consultancy firm he was aware of the state of affairs of the economy and specifically of his clients who were bleeding thanks to the impact of lockdown . He wanted to know my view on how to tackle the portfolio given the the stunning rally of stock markets across the globe . Like many a baffled investor he was sure that   the markets were in   bubble and unrealistic . While the rally has been sudden and unexpected there are justifications galore supporting it too. And as with every investor my client was   afraid that there will be reversal to the mean. What should investors do when Nifty is reaching new highs daily? I will share my two cents on how to deal with the current situation. 1.        Prepare yourself for volatility especially in equity – We aren’t exactly in a cheap market reeling from covid hit economy. Valuation ratios ...

Reduce tax impact on Debt Mutual Funds In the last couple of years some changes made in tax rules for dividends in mutual funds have made the dividend option of debt plans very unattractive. While dividend distribution tax has been done away with, mutual funds now deduct TDS (10%) and Stamp duty (.005%) every time dividends are paid and reinvested respectively. Besides the dividends are fully taxable in the hands of the investor. Clearly dividend options is not an option anymore and as an investor you must ensure you move lock stock into the growth option Short term capital gains  (if the units are sold before three years) in  debt mutual funds  are taxed as per applicable  tax  rate of the investor. Therefore, if your  tax  rate is 30% then  short term capital gains tax on debt fund  is 30% + 4% cess.  Long term capital gains  of  debt fund  are taxed at 20% with indexation. With some management , the overall effect...

For a large number of Mumbaikars owning a property in the city has become a distant dream . A quick search on a couple of real estate portals reveals that median prices for two BHK apartments is Rs. 1.5 crore in the western suburbs . Buying properties involve a  black component the percentage  of which  can be as high as 60% to a reasonable 30%. A mere  30 % black component in a deal of  1.5 crore  equals 50 lakhs . This becomes part of the money that  a home buyer funds from his savings . The real bummer is that  the bank will provide loan only on the white component . Which means it will fund only 80% of the 1 crore white component in our example . Thus over and above the 50 lakhs( black) , our home buyers will have to fund a further 20 lakhs from pocket . (No wonder  home loans are the safest assets for bankers !!) Isn’t it wonderful that such a large number of Mumbaikars seem to have this kind of money to buy homes?. Reality...

You haven’t heard this one before!- Contrary to what you would have heard from every TV channel and investment advisor – financial planners included about how important it is to invest in equities to achieve long term goals.  Here is why you should not invest in equities. Its lucrative because it looks complicated – Not lucrative for you but for an assortment of TV channels that offer running minute to minute commentaries on stock markets, stock brokers who make intelligent predictions on the next market movement and of course fund managers who are in the asset collection business. All the above would like you to believe that without equity you are going to be poorer than your neighbor  Not necessarily true. Most people will get rich because of higher income & higher savings relative to expenses. Don’t understand it , don’t invest   -The word ‘Equities’ is  generic and encompasses all kinds of companies with no real grading . Do you know how to ...

Tax Laws related to Gifts Gifts can mean taxes for the receiver as well as the giver .Iif you know laws related to gifts given or received you can avoid taxes or minimize their impact. I. Some gifts do not attract any taxes for the receiver. These gifts include Gifts from a relative. Relatives include Spouse of the individual; Brother or sister of the individual; Brother or sister of the spouse of the individual; Brother or sister of either of the parents of the individual; Any lineal ascendant or descendant of an individual; Any lineal ascendant/descendant of spouse of the individual Gifts received the occasion of the marriage of the individual, or Gifts received under a will or by way of inheritance, Gifts received in contemplation of death of the payer.   The Problem of Clubbing of Income Although the gift itself is tax free, in some cases it could attract clubbing of income. Income and wealth from gifts given to minor children, the sp...

Property investments have to be carefully considered and evaluated. There are many online sites that help you make preliminary inquiries about location, prices and deals in property markets. Here are a few such websites that you must go through for preliminary investigations about the property that interests you. 1. Property Search Portals There are several websites dedicated to listing properties directly from builders, property owners as well as from agents/brokers. These sites help you scan through hundreds of properties from the comfort of your home. Mainly the features they offer are Facilitating search amongst several properties by sorting them on the basis of price, location, covered area etc. Providing information about amenities, local infrastructure like schools or hospitals, connectivity and price history. Sites like magicbricks.com, a leading real estate portal, help you not only search but also register your requirements, which is in turn relayed to l...

My client complained that he was being offered a ridiculously high rate of interest on his car loan. It was surprising because he was a 'Privileged' customer of his bank and had no other liabilities. On enquiry, he was told that he was offered a higher rate due to bad CIBIL score. What is a CIBIL score and how did it impact my client's rate of interest on his car loan? CIBIL stands for Credit Information Bureau (India) Ltd. It collects information about borrowers like my client from all Banks and lending Institutions operating in India, collates such data and creates, maintains and distributes a report on credit history of commercial and consumer borrowers like credit card users, home loan or personal loan borrowers. Their report called Credit Information Report (CIR) is a factual record of a borrower's credit payment history compiled from information received from different credit grantors. Its purpose is to help credit grantors m...