Query: I am 58 and wish to gift Rs 20,000 each month for the next five years to my wife, a homemaker. Please advise mutual funds in which she can invest the amount every month via SIP. What will be the tax implication of these investments?
Naveen Kukreja CEO and Co-founder, Paisabazaar.com replies: Equity tends to outperform other asset classes if the investment horizon is five years and more. So, it is advisable that your wife invests her gift proceeds equally between a large-cap and a mid- and small-cap fund. In the large-cap category, she can opt for of any of the following three funds: ICICI Prudential Bluechip, Franklin India Bluechip and Reliance Large Cap.
In the mid- and small-cap category, she can consider any one of the following schemes: Franklin India Smaller Companies, HDFC Small Cap and L&T Emerging Business. She should invest in the direct plans of the aforementioned funds as they have lower expense ratios compared to the regular plans and this helps build a bigger corpus over time. On redemption after one year, capital gains of more than Rs 1 lakh will attract tax at 10%. In case she redeems her funds within one year of making the investment, the gains will be considered short term capital gains tax and taxed at 15%. As your wife is a homemaker, these gains will be clubbed with your income.
Query: I have been investing Rs 4,000 per month in Mirae Asset Emerging Bluechip Fund since September 2017 with a five-year investment horizon. But, the fund’s performance is not satisfactory, should I keep investing? If not, please suggest some other options in the mid-cap space.
C.R. Chandrasekar CEO and Co-Founder, FundsIndia.com replies : Mirae Asset Emerging Bluechip is among the best funds in its category. The fall that you would have witnessed since September 2017 is not on account of poor performance of the fund. The market and, specifically, mid-cap stocks have fallen in general and this is reflecting in the fund’s performance. These are opportunities to average— you’ll be able to buy more fund units for the same monthly investment—so, continue SIPs in the fund. Kindly note that the fund’s category is changing to large-and-mid-cap, however, its mid-cap holding continues to be high.