Clarification: update on financial year : no change

Clarification: update on financial year : no change 

*Clarifications* :

*1) FY 2019-20 is not at all extended till 30th June, only the date is extended for some compliances.*

*Fact:* Financial year closure is not extended. Only the date of compliance which were required by 31stMarch 2020 either by the taxpayers or by the tax authorities has been deferred till 30thJune 2020.

*2) Belated returns or Revised returns for the FY 2018-19 can be filed till 30th June.*

*Fact:* All taxpayers who have not filed the return of income of FY 2018-19 can file or revise the return till 30th June 2020. In normal course, belated income tax return cannot be filed after the end of the relevant assessment year. However, due to lock down till 14th April, Government is allowing the filing of return of FY 2018-19 (AY 2020-21) till 30th June. Readers may noted that earlier there was a period of 2 years for filing or revising the return which is reduced to 1 years earlier.

*3) In the FY 2019-20, income is taxable till 31st March only and not upto 30th June, i.e. for taxability of income financial year is considered till 31st March only.*

*Fact:*  The income of the FY 2019-20 (i.e., till 31st March 2020) will be taxable for the FY 2019-20.

*4) Deductions under 80C, 80D, etc. can be claimed by investing till 30th June.*

*Fact:*  Investment in PPF/LIC etc which are eligible for deduction u/s 80C and mediclaim payment for claiming deduction u/s 80D can be done till 30.06.2020.

*5) New LIC, mediclaim, PPF, NPS, etc. policies taken till 30th June will be eligible for the deduction for the FY 2019-20.*

*Fact:*  There is a restriction of Rs. 1.50 Lakh for deposits in the PPF A/c in one year. If the person has not deposited any amount in the PPF Account till 31.03.2020 and if he deposits it in between April to June 2020 then surely he will be eligible for deduction u/s 80C in the FY 2018-19. However, as per the present PPF rule, such person may not be able to invest again Rs. 1.50 Lakh for the FY 2020-21 as there is an yearly ceiling of Rs. 1.50 for deposit in the PPF Account. To take care of this situation, the Government need to amend the PPF rules to provide that Rs. 3 Lakh in aggregate can be invested for the FY 2019-20 & 2020-21.

*6) Payment of Premium of old policies of LIC, mediclaim, PPF, NPS, etc. due upto 31st March can be claimed as deduction even if paid till 30th June.*

*Fact:*  If the person pays the premium which is due in April  – 2020 and if he makes the payment of the same before 30.06.2020 then he can get deduction in the FY 2019-20 (AY 2020-21). Only the payment of such policies which has become due before 31stMarch would be considered for deduction.

*7) Housing loan interest is eligible for deduction on accrual basis, so interest accrued till 31st March will be eligible for the deduction in FY 2019-20. However Installments due upto 31st March can be claimed as deduction even if paid till 30th June.*

*Fact:*  If a person deposits the amount in April to June 2020 in his housing loan account then he would be eligible for deduction u/s 80C subject to the condition that the amount is due till March  – 2020. It may be noted that interest on housing loan is eligible for deduction on accrual basis and not on payment basis. All interest which is due till 31st march 20 even if not paid(even till 30th June 20) is eligible for claiming in a.y.20-21 itself.thatvway this is not specific to current extension as it is there in section for all years

How to do E-KYC for mutual fund investments

How to do E-KYC for mutual fund investments

KYC formalities can now be completed online, which is a hassle-free and quicker approach to investing. 

Know Your Customer (KYC) compliance is a prerequisite for investments in mutual funds. Investors are required to fulfill KYC requirements with a KRA (KYC registration agency) once and this is applicable to all investments across funds. KYC formalities can now be completed online, a hassle-free and quicker approach to investing. E-KYC is based on the Aadhaar number.

The investor has to log into the KRA website and enter basic details such as PAN number, email id, AMC name, bank name, date of birth, mode of holding and tax status. On providing these details, the KYC compliance status of the investor will be displayed. If the investor is not KYC compliant, he is required to add his Aadhaar number and registered mobile number.

Aadhaar-based authentication

After providing the Aadhaar number and registered mobile number, the Aadhaar authentication screen is displayed. An OTP is sent to the registered mobile number. The same needs to be entered on the screen along with pin code.

Uploading documents

After Aadhaar authentication, the investor is required to upload a self attested copy of e-Aadhaar. Further, he will be required to select consent declaration displayed on the screen for further processing of the request. 

The Aadhaar and registered mobile number of the investor is verified with the Aadhaar database of the UIDAI. Upon successful verification, the screen displays that the investor is e-KYC verified and can carry out transactions in mutual funds.

Points to note

1. This facility is currently available only for individual investors with single mode of holding.

2. Sebi currently permits investment of Rs 50,000 each financial year per mutual fund for Aadhaar based e-KYC using OTP verification.

3. Once the investment value crosses Rs 50,000 in a financial year, the investor will have to undergo in-person verification.

Short Selling

*Short selling* 

Think of short selling as the opposite of a regular purchase – in a regular purchase, you first buy the shares at a price and sell them at a higher price. In short selling, the shares are first sold at a higher price and then bought back at a lower price.

More or less, it is a bet like any form of trading but in this method, investors gain by betting that the stock price will fall.

Generally, short selling happens when investors expect the prices of shares to fall. This means that there is a bearish sentiment in the market. Essentially, short sellers are bears – they try to drive the price down to make a profit.

*How does short selling work?* 

Let us understand short selling with an example.

Suppose the shares of a company XYZ are currently at ₹500. There is an investor in the market who expects the price to go down to ₹300 in the near future. This means that the investor thinks that the prices are currently high, so buying at this price is not an option.

So, to make a profit, the investor first sells 100 shares of XYZ at ₹500, so he has ₹50,000 from the sale.

When the price of XYZ’s shares come down to ₹300, the short seller buys XYZ shares by paying ₹30,000.

The difference of ₹20,000 is the investor’s profit.

 *A risky gamble* 

Short selling is a risky gamble – there is no limit on prices, so you can end up with unlimited losses. Shorting is where you guess the price of a stock on a date in the future, and agree to buy it. So one has to buy it even if the stock price is high!

If there is excessive short selling in the market, it also suggests that the bears have taken over and the share or the market could end up crashing, leading to losses for a lot of retail investors.

 *SEBI considering banning it* 

The National Stock Exchange and Sensex have crashed by more than 18% in March alone, wiping off crores of investor wealth in the process.

To keep the fall under control, the Securities Exchange Board of India (SEBI) is considering a ban on short selling, says a report by Business Standard. This would prevent bears from controlling the market and crashing it further.

Countries like the UK, Italy, Spain, South Korea have temporarily banned short selling in the wake of the coronavirus crisis.

Why Debt Mutual funds Fell Last Week along with equity funds

Debt fund investors should understand that the NAV of a debt fund can change in three primary ways:
 (a) To reflect the interest income the bond in the folio receive, the NAV will increase a little each business day.
(b) Longer the duration of the bond in the portfolio, the more sensitive it will be to demand and supply changes.
 (c) NAV can change when the credit rating of the fund changes.

What happened in the bond market last week was a change in demand and supply. Foreign Portfolio Investors started selling Indian bonds resulting in a sudden loss of demand. When demand goes down, bond prices go down, the NAV goes down.
Market demand and supply is measured with the Bond yield = interest income/ current price. When prices fall, the yield shoots up. Longer the duration of the bond, more will be the fall in price if demand falls, more will be the increase in yield, more will be the fall in NAV.

It does not matter if the bond is gilt or AAA-rated. A sudden mismatch of sellers and buyers (sellers > buyers) will lead to a fall in the NAV. The image above shows how the five-year gilt yield shot up in the last few days resulting in trailing one-week (one-month) negative debt fund returns. It would also affect hybrid funds to varying extents.
The corresponding picture for the ten-year gilt is shown below. A corresponding and proportional variation will be in seen in bonds of different duration and different credit rating.

Only funds holding short-term bonds like overnight funds, liquid funds, money market funds were largely spared. Notice how the fall in NAV increases as the average maturity increases.