Opinion: Retirees, salaried like middle class got a big blow again

Before discussing Rao Saheb’s pain, let us tell you his background. His age is more than 70 years. He was an officer in a central government company. Because of working in PSU, they get pension only in name. However, to spend his old age comfortably, he has invested his lifetime earnings in debt funds and gold funds under mutual funds. Depending on the performance of the fund house, he keeps on rotating between Gold Fund and Debt Fund. Invest in it because there is no stock market risk in pure debt or gold funds. Moderate returns are available. The best thing is that it gets some exemption in income tax which is not there in bank FD or company FD. Now that the Union Finance Minister Nirmala Sitharaman has taken away this benefit, it is natural for all the retirees like Rao Saheb to feel pain.

Why debt mutual funds were popular

Debt or gold mutual funds were popular among investors who do not want to deal with the brunt of the stock market. The money of this mutual fund is not invested in equity but in government securities, debentures, corporate bonds and other money market instruments. These are called Fixed-Income Securities. There is no risk like the stock market in this. It is a favorite of retired individuals or investors with a minimal risk appetite. Not only this, it also gets the benefit of indexation. Think of it as the interest earned from bank FD or corporate FD will be taxed every year according to your slab. Whereas in debt or gold mutual funds, tax is calculated at the time of withdrawal. Suppose you withdraw money from it after three years, then the amount of inflation that happened in three years is added and deducted from the income tax payable. In this way, the tax burden on the investors is significantly reduced. That’s why it is very popular.

How better is debt mutual fund than bank FD?

Let us answer this question through an example. Suppose a person has invested Rs 1 crore in bank FD and Rs 1 crore in debt mutual funds. He is in the income tax slab of 30%. He got 7% ​​interest in a year from bank FD, which means he got an interest of Rs 21 lakh in three years on the total amount. 30% tax was imposed on this, so Rs 6.30 lakh went to tax. Now coming to debt mutual funds. Let us assume that after three years there is a return of 7%. Means 21 lakh rupees. Got the benefit of indexation on this. Suppose the rate of inflation was 5 percent for all the three years. Means that in three years got the benefit of indexation on Rs 15 lakh. Now 6 lakh rupees are left. There will be a tax of 30% on this. Means tax of Rs 1.20 lakh was made. The tax in FD is Rs 6.30 lakh. Seen here is the net savings of Rs 5.10 lakh in debt mutual funds. This benefit will not be available after April 1. This is the long term tax efficiency of debt mutual funds.

What does the government want, everything should go down in the stock market?

Rao Saheb asks a question to the government, should all people enter the stock market? Is this the intention of the government? Earlier people were saving a lot of money in Section 80C of Income Tax. Now this too is slowly coming to an end. Years have passed, there is no increase in it. The avenues that were there for the risk-averse investors are also being gradually eliminated. In such a situation, the government wants everyone to invest money in the stock market.

Mutual fund investors disappointed

Investment guru Vishwajit Parashar also says that mutual fund investors are disappointed with the latest decision of the government. Earlier people not only used to invest in the domestic market, but also used to earn money by investing in the foreign market. Now that route is also being closed. The government has also imposed some tax on investment in International Equity Funds. From the next date onwards, if a person wants to invest Rs 1 lakh in International Equity Fund, he will have to invest only Rs 80,000. 20 thousand rupees will be deducted in tax in the beginning itself. He says that the middle class investors who had a good option of mutual funds are being broken slowly.