🤷‍♂️ MF stamp duty, Special liquidity scheme & SIP Interest Rate.

Orowealth Weekend Reads: July 5, 2020

LAST WEEK MARKET MOVES

HEALTH INSURANCE

As we face unprecedented circumstances and devastation due to the COVID 19 virus, it has become vital to plan for a Health Insurance Policy. As the word insurance suggests, Health Insurance provides financial coverage for the medical expenses incurred by an individual and their family members. With rising medical expenses, it has become ever so important to avail a Health Insurance plan in order to ensure your lifetime savings are intact.

As we continue in our journey to provide alternate products to our clients, we are excited to announce our partnership with Future Generali to provide a Health Insurance Policy with the following details:

1. Plans for Individuals with base premium as low as Rs 394 per month*
2. Plans for Families with base premium as low as Rs 757 per month*

Additional Benefits
a. Cashless Claim Benefits
b. Easy Installment Facility
c. Plans customized to cover for Covid – 19
d. Additional Cover beyond the Employer Cover
e. Tax Benefits under Section 80D, Income Tax Act, 1961

*Premiums to be paid are subject to the coverage being opted for and are exclusive of taxes.

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NEWS WE HAVE BEEN FOLLOWING

#SpecialLiquidityScheme

The Reserve Bank of India (RBI) came out with a government-approved scheme to improve the liquidity situation for Non-Banking Financial Companies (NBFCs) and Housing Finance Companies via a Special Purpose Vehicle (SPV). The intention of the government is to ensure there is no systemic risk to the sector. In order to qualify for the scheme, there are certain conditions some of which are as follows. The NBFCs have to be registered under the RBI Act, 1934 while the HFCs have to be registered under the National Housing Bank Act, 1987. CRAR/CAR of NBFCs/HFCs should be above the regulatory minimum of 15% and 12% respectively and net non-performing assets should not be more than 6% as on March 31, 2019. The entity seeking the scheme should have reported net profit in at least one of the last two preceding financial years and should have been rated as investment-grade by a SEBI registered rating agency.

SBICAP, a subsidiary of the State Bank of India, has set up an SPV named SLS Trust to manage this scheme. It will purchase short-term papers from eligible NBFCs and HFCs. These instruments will be CPs and NCDs with a residual maturity of three months or less and will be investment grade.

Takeaway-
The SPV will not make fresh purchases after September 30, 2020 and will recover all dues by December 31, 2020.

#StampDuty
From July 1, stamp duty has become applicable on mutual fund purchases. The stamp duty rate would be 0.005% of the purchase or switch-in value and will be applicable on all categories of mutual funds. Stamp duty will also apply on the transfer of mutual funds at 0.015%. All mutual fund purchases – lump sum, systematic investment plan (SIP), systematic transfer plan (STP), and dividend reinvestment will be covered under the ambit of the stamp duty. For dividend reinvestment transactions, the duty will be levied on the dividend amount less tax deducted at source. For other purchases, it would be levied on the purchase value less any charges. Investors will not need to pay this amount separately as the stamp duty will be auto deducted by the registrar and transfer agent of the mutual fund whose scheme is being purchased. The result would be a lesser amount of units credited into an investor’s account than the pre-stamp duty era. A note from B&K Securities assessed that as the duty is applicable only on purchase but not the redemption of units, it is similar to an entry load.

Takeaway-
The impact of the duty would be more on short-term investments. Hence, investors would do well to avoid churning their fund portfolios frequently.

FROM OUR BLOG SECTION

SIP Interest Rate

SIP or Systematic Investment Plan allows one to invest a pre-determined amount at regular intervals. It not only promotes a disciplined approach towards investing but is also easy on the pocket. One can start investing in a mutual fund through a SIP of only Rs. 500.

QUOTE OF THE WEEK
Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game. – Donald Trump ( 45th American president)
Chosen by Ravi – Orowealth.