by Tensing Rodrigues
CORRIGENDUM: At the very outset let me correct the blunder I committed last Thursday in my answer to the query on Capital Gains. The opening sentence of the fourth para read “This logic is valid for assets sold up to March 31, 2010. From April 1, 2010,
the Direct Taxes Code should become applicable.” It should read “This logic is valid for assets sold up to March 31, 2011. From April 1, 2011, the Direct Taxes Code should become applicable.” I am obliged to my readers who were alert enough to notice the error and kind enough to bring it to my notice; thanks a million.
I am finding value in investing in banks. Are there any equity oriented MF schemes that are dedicated to banks? Kirit Melwani
Yes there are presently seven equity-oriented MF schemes that are dedicated to banks and financial sector. They are as follows:
Most of them have just completed a year; hence it is too early to comment on their long- term performance. However, given the growing importance of the financial sector in the country they can be expected to give returns superior to the broad index. It may help to look at some of their portfolios to make a better assessment of the funds. The top 5 equity holdings of ICICI Pru Banking and Financial Services Fund are ICICI Bank (18.96 per cent), HDFC Bank (14.52 per cent), Axis Bank (12.00 per cent), State Bank of India (11.82 per cent) and ING Vysya Bank (4.93 per cent). The top 5 equity holdings of Reliance Banking Fund are State Bank of India (14.19 per cent), ICICI Bank (13.72 per cent), Bank of Baroda (9.59 per cent), Canara Bank (9.36 per cent), Oriental Bank Of Commerce (6.77 per cent) and Corporation Bank (6.15 per cent). The top 5 equity holdings of UTI Banking Sector are ICICI Bank (17.53 per cent), State Bank of India (14.41 per cent), HDFC Bank (13.82 per cent), Axis Bank (7.87 per cent) and Bank of Baroda (7.43 per cent).
According to the budget 2010, investment of up to Rs 20,000 in ‘Infrastructure Bonds’ is exempted from Income Tax. Can you please throw some light on the same? Is it applicable during current financial year i.e. 2009-10? Mahesh Naik
No, the provision u/s 80CCF is applicable to income earned during the next financial year i.e. 20010-11, not 2009-10. And it is applicable for only that financial year, not the one following, i.e. 2011-12, unless the provision is incorporated in the Direct Taxes Code. The government is yet to notify these bonds. Clarity on issues such as the tenure of the product and interest rates is awaited. Experts expect these bonds to have a long tenure, at least of five years and pay interest at around 1.5 per cent discount to the fixed deposit rates of similar tenure. This is not the first time that infrastructure bonds have been made available for tax-saving. A few years ago, banks that undertook infrastructure development used to issue such bonds. For instance Flexibonds, issued by IDBI Bank, and Tax-Saving Infrastructure Bonds issued by ICICI Bank were popular till 2005. These bonds were eligible for up to Rs 30,000 deduction under Section 80C.
As and when the details of the bonds become available you will have to weigh the options, and decide whether to invest in the bonds or not. Given below is a hypothetical case, for comparing gains from investing and not investing in the infrastructure bonds.
