Equity capital Gains can be saved by Simply churning your portfolio

Capital Gains have always been an essential topic for discussion while calculating the tax liability for an individual/non-individual. we are well aware that short term capital gains which arises when a security is sold within a year and are taxed @15% flat .

whereas Long term capital gains are those when exercised,creates a liability @10% of the gains above one lakh in context of equity. But, what if i say, we can reduce the long term capital gains liability just by doing simple calculative churning.

let us understand with an example:

Suppose we have invested Rs. 10 lakh in the year 2018 whose value became 11 lakhs in the year 2019 and 11.5 lakhs in the year 2020. If we redeem the amount in 2020 , capital gains would be 1.5 lakhs for which we have to pay flat 10% tax.

in the other scenario, if we redeem it in 2019 when it was 11lakh then we will be within exemption limit of 1 lakh so no tax. Again invest the amount in the year 2019 in same fund and again redeem at a maturity value of 11.5 lakhs. Here, the capital gains is only 50000 as the investment amount was 11 lakhs so, no tax here as well.

Economics Session for 10th,11th & 12th at just Rs. 99

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Time Reflected Towards small & Midcap segment Again- As mutual Funds cutting Exposure to Large cap

As we encountered the biggest turnaround time in past few months, amid changes took place in the investment arena, mutual funds also churning their allocation wisely & Prudently.

Looks like the time has come to shift focus beyond the largecaps and zero in on the broader market on Dalal Street. Or that is what the latest buy-sell data of SBI Mutual Fund – the country’s largest asset management firm – is indicating.

The 50-share Nifty gained 55 per cent to 11,642 till October 30 from its 52-week low of 7,511 hit on March 24. The index closed at 12,938 on Wednesday, November 18. The rally has taken Nifty’s price to earnings (P/E) ratio to 34.94 times as of November 17 from a 10-year average of 22.55 times.

In October, the fund house lowered its holding in at least 40 Nifty companies, as their valuations turned expensive amid the ongoing stocks rally from the March lows. In turn, they raised stakes in several midcap and small cap stocks from across sectors.

A fiscal booster is a must to kickstart the long overdue economic and earnings cycle in India. A decisive reflationary shift in global policy can be an added tailwind. Real estate, which has an important bearing on the economy owing to the high multiplier impact, is showing early signs of recovery, which is encouraging.

With growth becoming more broad based, this polarization should reverse. Looked through other lenses, this would mean a reversal in polarisation in value versus growth, smallcaps versus largecaps, cyclicals versus defensives, and more importantly emerging markets versus developed markets. For India, a global reflation could just be the icing on the cake.

Selecting Right Service Provider- Is it easy?

Now a days , we are surrounded by so many options and oppurtunities. It is tough to say or decide about which option will be best or which option would be a right pick.

Depending upon the people preferences , companies are projecting themselves as a real caretaker in terms of their stability and suitability. Every sector specially digital space is hiring experts to represent themselves more customer centric, instead of becoming alike.

In the Financial service arena, specially the distributor segment, who are typically the middle man between manufacturer and final recipient of services, are fighting not with their actual competitors whereas, with their own service manufacturers.

Initially , mutual funds ,insurance ,bonds or other financial instruments came in to picture with the help of these distributors only. Theses financial products are advised and procured with ease by these only distributors and the competition then were only the service level towards the consumer among the distributors.

But, Now a days, Scenario is completely different as we see the manufacturers itself acting as a distributors, giving service windows like a distributor, providing marketing and relationship support as a distributor. And the game not ends here, these are promoting the theme of direct buying from manufacturer to reduce cost.
Is this cost reduction technique or strategic customer acquisition by slowly and gradually chocking the distributors commission and putting in to the shoes of their own distributors, will work really in the favor of customer. We are witnessing the regulator too is aggressive towards degrading service levels of distributors by segregating advisory & Distributorship , which was earlier a tool to get new clients as well as retaining them.

This time the mutual fund distributor or other similar financial service providers are like a poster shop in which there is no approaching appeal left with them. The thing which left is same available with all distributors along with manufacturer who itself is a direct distributor who got upper hand by having tag of Distributor+manufacturer.

Is it the end, surely not because the actual looser would be the customer if he/she fails to decide on the actual benefits of being with these distributors as:
 Distributors could provide fail deal options with varied products.
 Distributors are more concerned about every products of different manufacturer.
 Distributors are concerned to link between products & customer need.
 Distributors can lead a customer to bargain with manufacturer.
 Distributors are those who Decide ,Research & offer suitable manufacturer’s product among various alternatives.
 Distributors are service oriented ,not the manufacturer.
 Manufacturer will offer only single product, but distributor will not.
 Distributors provide prompt resolution, and will run for the customer.
So, Don’t put cost in the place of service while choosing the buying window, as your single decision will decide your future.

Managing Right Balance Between Equity & Debt in Volatility

In a trend-based model, equity exposure is cut sharply during a market fall to protect the gains, while a valuation-based model holds lower equity at peak valuations.

Whatever approach is followed, the dynamic management of equity exposure enhances gains during a bull run and cuts losses during sharp downslides. To put it otherwise, it adds to investors’ wealth when the market is performing well, i.e., rising, and prevents a dip in the corpus when is nosedives.

This dynamic strategy of BAF is akin to a game of kabaddi, where teams frequently adopt aggressive and defensive ploys to score points and avoid getting ‘out’. When a raider finds opponent players surrounding him and see thin chances of survival, he retreats. On the other hand, when there’s the slightest of opportunities, he makes an aggressive move to score points.

Switching between these two modes judiciously ensures safety and helps one get the points required for victory. This art, deployed by BAFs, can help in rebalance a portfolio and maintain an equilibrium between risk and reward.

Volatility stems from various factors. To be honest, most of them are beyond one’s control. Having said that, a successful investor is the one who, instead of trying to predict volatility, prepares his portfolio in a manner that can withstand volatility, if not benefit from it.

There are several ways to achieve this practically, but balanced advantage funds (BAFs) stand out among the rest because of several advantages they bring to the table.

Settle Tax Dispute by 31st March 2020, Get discount on penalty

As per the bill, the scheme is applicable to: the appeals filed by taxpayers or the Government, which are pending with the Commissioner (Appeals), Income tax Appellate Tribunal, High Court or Supreme Court as on the 31st day of January, 2020 irrespective of whether tax demand in such cases is pending or has been paid; The pending appeal may be against disputed tax, interest or penalty in relation to an assessment or reassessment order or against disputed interest, disputed fees where there is no disputed tax.

According to the bill containing scheme details, the designated authority, within a period of 15 days from the date of receipt of the declaration will determine the amount payable by the declarant (taxpayer) in accordance with the provisions of this Act (the scheme) and grant a certificate to the declarant containing particulars of the tax arrears and the amount payable after such determination, in such form as may be prescribed.

The taxpayer would be required to pay the amount determined by the designated authority  within 15 days of the date of receipt of the certificate and intimate the details of such payment to the designated authority in the prescribed form and there upon the designated authority shall pass an order stating that, the declarant has paid the amount.

The scheme details mention that once the taxpayer avails to resolve the dispute with the tax authority under this scheme then the amount payable, shall be considered final and such cases will not be reopened in any other proceeding under the Income-tax Act. The designated authority shall not institute any proceeding in respect of an offence; or impose or levy any penalty; or charge any interest under the Income-tax Act in respect of tax arrears.

Scheme may not be applicable in following Cases:

  1. Relating to an assessment year in respect of which an assessment has been made under section 153A or section 153C of the Income-tax Act, if it relates to any tax arrear;
  2. Relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration;
  3. Relating to an appeal before the Commissioner (Appeals) in respect of which notice of enhancement under section 251 of the Income-tax Act has been issued on or before the specified date;
  4. To any person in respect of whom an order of detention has been made under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 on or before the filing of declaration.
  5. Relating to any undisclosed income from a source located outside India or undisclosed asset located outside India;

6. Relating to an assessment or reassessment made on the basis of information received under an agreement referred to in section 90 or section 90A of the Income-tax Act, if it relates to any tax arrear;

Budget 2020, Highlights & Important points to consider

Budget 2020-2021, presented today by our honourable finance minister, Nirmala sitharaman. Here , we came to administer a new tax regime in which a normal taxpayer who is not taking any tax deduction till now, get benefitted with lower tax slabs.

New tax slabs has eliminated tax upto the income of five lakhs in which middle and lower middle group will get benefitted more.

Taxes from 5 - 7.5 lakhs reduced from existing 20% to 10% , 7.5 - 10 lakhs reduced from current 20%  to 15% , 10 - 12.5 laks reduced from current 30% to 20% , 12.5 - 15 lakhs from current 30% to 25%.Tax Slabs above 15 lakhs has kept at previous rates of 30 %.

New tax regime came with an option to choose from current slab rates or previous slab rates in which differerence is of deduction benefits, which says, If you choose to get deduction of 80c, 80 D  10,10D etc. then you have to opt the previuos tax rates in which old slab will prevail . In other scenario, if we choose not to invest in tax saving instruments specifically for tax rebate, then new tax slab rate is made available for you.

This budget in its clear picture show liquidity measures in the hands of taxpayers who previousy invests in specific options just for the sake of tax benefits instead of other options or taking it as a liquid. But now there is an option in which just pay a nominal amount as tax to the government and invest or use your money as you wish to use or invest.

Budget 2020,focussed long term growth of the economy. Finance minister sought a growth rate of 10% in coming financial year with a fiscal deficit of 3.8 % instead of previously sought rate of 3.3%. This announcement made foreign investment more attractive by removing dividend distribution tax for the companies which is now be taxed in the hands of investors. There is not any relaxation for LTT or STT.

Now, the investor or an individual has to make separate calculation or computation based on their income and choose from the tax  rates to go with.

In a falling stock market avoid these mistakes


    1. Getting anchored to a price

    We often set a benchmark price for the shares they hold. This benchmark is usually the purchase price but could also be the highest level touched by the stock. Future decisions on the stock are based on this price.

    1. Buying more to average

    EVERY BODY makes mistakes, but some investors tend to compound them. If the stock you purchased drops, don’t try to buy more shares to bring down your average buying price. Investors often try to cover their losses by buying more of the same shares at the lower price.

    1.  Buy scrips at 52-week low prices

    A SLIDING market turns some investors into value pickers. They actively look for stocks trading near their 52-week low. These are perceived as good bargains since much of the downside is thought to be already captured in the price. However, some of these ‘opportunities’ may actually turn out to be value traps.

    1. Altering your financial plan

    A SHARP fall in the market can lead investors to alter their financial plan or investment strategy. Some may be tempted to excessively ramp up exposure to equities to benefit from the market correction, while more conservative investors might deem fit to take out all the money to be on the safe side.

    1. Stopping SIPs because of the fall

    ONE COMMON mistake that small investors make is to stop their systematic investment plan (SIPs) in equity funds when markets tumble. This defeats the very purpose of the SIP. A bearish phase is precisely the time when sticking to the SIP discipline will help you achieve your long-term goals.

    Long term capital gains, what actually is the impact?
    One advantage for investors who have invested before Jan 31, 2018 is that the market value of investments as on Jan 31, 2018 will be considered as Cost of Acquisition for calculating LTCG instead of the Actual Cost at the time of purchase (Scenarios 2 & 3 of the above table explains the benefit of this clause). If the market value of investments as on Jan 31, 2018 is less than the Actual Cost of acquisition, the Actual Cost will be considered for calculating LTCG ( Refer Scenario 4 in the above table).
    As a long term investor, you should not be worried about the Long Term Capital Gains tax. If we take scenario 3, the tax payable on the redemption amount of Rs.8,00,000 and Capital Gains of Rs.1,50,000 is Rs.5,000/- which is 0.63% on redemption amount and 1.67% on Actual Gains (Rs.3,00,000 = Rs.8,00,000 - Rs.5,00,000) respectively.
    After the re-introduction of the LTCG tax, it makes more sense for investors to focus now on choosing right funds that meet their investment objective which will help them achieve their financial goal over long term.
    The Central Board of Direct Taxes (CBDT) has issued 24 frequently asked questions (FAQs) on long term capital gains (LTCG) taxation on equity shares proposed in the recent Union Budget. Click here to know more
    So irrespective of taxation , equities have a potential to grow and it is advisable to be invested in this asset class for long term.
    * The 4% Health & Education Cess will be applicable on the tax amount and not on the gains. So taking Example 3 ahead - the Cess will be applicable on the tax amount payable (Rs. 5,000) and not on gains (Rs. 50,000). Surcharge willbe applicable based on the level of income of the investor.
    Companies to choose in Declining markets

    Decline not always a sign of getting out of the game because all are doing the same.
    We are not in the investment arena to decide where the market will move or what would happen in the future but we could follow the simple rule which says BUY LOW SELL HIGH.

    it clearly states that despite of having crunch in the small and midcap section of the market specifically if we talk about stocks , mutual funds etc. The market is signalling an opportunity to grab the position at a lower price taking in to consideration the measures in the economy and the signalling growth prospects.

    Our economy is targetting 5 trillion in near future which is going to leverage the sectors which are not only comes from large cap category but also the smallcaps.

    We are not the future predictors but we are as mindful to understand,what data and analytics says.