As the year passes, the due date for return filling i.e. July’31 is approaching speedily; it is thetime of year again where the country’s taxpayers scramble for filling the I-T returns. Everyone rushes to chartered accountants for filing returns. After all, the filing of tax return is compulsory for everyone whose gross total income exceeds the basic exemption limit.

Here are  few steps to be adhered for successful completion and submission of the Income tax return.

Identify the sources of Income
Firstly, you need to identify your sources of income under different heads. Under the I-T Act, all the incomes earned by persons are classified into five different heads, such as income from -

Salary
House Property
Capital Gain
Business and Profession
Other Sources
Thus, you should identify all your income from different sources, just to ensure that you haven’t missed out something while filling your return.

Get Hold of your basic documents
Some basic documents that should be referred to while filling the return include-

Form No.16(issued by the employer): This shows the income from salary and tax deducted by the employer on the same.
Summary of all bank accounts during the year: This summary gives an idea about the income earned during the year, investments made and other expenses. This will ensure that neither any income nor any eligible deductions are left out in return.
Details of tax paid during the year: This is required in case the individual has paid any advance tax during the year.
Income of a minor child: This is to be included (except in few cases) even it is a small amount, e.g. bank interest.

Chose the Right form to fill
Once the details in respect of income and expenses are collated, you should check which tax return form is applicable to you. With the introduction of new forms, based on the nature of income earned during the year, you should select the right income-tax form.
For example, there are two I-T return forms -- ITR-1 and ITR-2 - available for salaried individuals at the moment, and your sources of income will decide which form to use. Use the first form if your income is from salary, pension or interest earned in the financial year, and use the second one in case of any capital gain, income or loss from house property and income from any other source. There is another form - ITR-4 - which is meant for individuals having income from a business or profession. The Tax Department will refuse to accept your form in case you have chosen the wrong one.

Fill in Correct Personal Details
Ensure that you fill correct personal details in the form meant for you, especially your name, address, bank account details and PAN number. Bank account details include the bank account number, type of account and the bank's MICR code. "This is crucial, especially if you are claiming a refund. Likewise, your PAN is very important because the tax laws levy a fine for not quoting or misquoting your PAN number.

Assess your tax liability
Having identified your sources of income and after referring to the basic documents, you need to compute your tax liability for the year. If you are familiar with the process and are comfortable with doing it, you can do it all by yourself. If not, you should take the help of a tax expert or a CA or some other qualified professional. This is important as a wrong computation of your tax liability can land you in trouble later on. You also need to ensure that "if any tax is payable, the same has been paid as 'self-assessment tax' before filing the tax return. Further, if any interest is payable for late payment of tax, then the same has also been deposited.

Watch out if you have switched your job during last year
If you have changed your job during the previous financial year, then don't be under the impression that you can file the tax return on the basis of form 16, as received by your current employer. When you change jobs, you need to combine both the salaries and generally, taxpayers are under the impression that since both companies have deducted TDS then there is no need to combine both form 16 or no need to pay additional tax. Please be careful and include form 16 from both employers

TDS DEDUCTED
Whether you are filing offline or online, you will likely have TDS deducted by various sources- your employer or bank or a company. If they all issued Form 16 (employer) or TDS certificates, you will do well to ensure that they tally with the Form 26AS credit statement.
In case you have never heard of this, go and register with the tax department or simply login to your internet banking account and you will likely see it on the left or top menu. Click it and it will link you automatically to the Income Tax website.This statement will show the summary of all tax deducted, including advance tax paid or any refund to be made etc. by various entities. Ensure that the individual TDS certificates or the amount mentioned in Form 16 tallies with this.

Sometimes, there could be delays in updating (for FY-13, it should be updated by now) of Form 26AS but you will do well to check with your employer or the deducting entity (bank or corporate), if there is any difference.

File by Due Date and in the right tax jurisdiction
After the tax return is filled in, the next step is to file it appropriately, by the due date. For individuals having salary and interest income only, the due date of filing the tax return for the financial year 2015-16 is July 31, 2016. The return may be filed either electronically or in printed form. In few cases, even the electronically-filed return has to be filed in printed form within a given time period.

"One must also ensure that the return is filed with the right tax officer (tax jurisdiction). This is determined based on the address of the individual. In case of salaried employees, the jurisdiction is determined by particulars of the employer,"
The proof of filing the return is the acknowledgement, which is stamped and signed by the tax officer and a copy is returned to the individual.
One important thing to remember is whether it is electronic filing or paper filing, now individuals do not have to attach any document or attachment with the return of income

Maintain documents for future reference
The documents based on which the return is prepared may be requested at a later stage by the Income Tax Officer to check the correctness of the claims made. Failure to submit details may lead to disallowance of the deduction claimed, resulting in an increase in the tax liability or a decrease in the refund. Hence, it is advisable that all the documents required to substantiate the return are maintained by the taxpayer for future reference.

Mail a physical copy
If you are filing the return online, ensure that the ITR V acknowledgement sheet is signed (in blue) and sent by ordinary or speed post (the tax dept. does not take too well to courier) within 120 days of filing your return. This is all the more important if you have paid self-assessment tax or are expecting a refund. Ensure that you receive an e-mail acknowledging your receipt.And do ensure you provide your personal e-mail id for the taxman to communicate. You do not want the id (office id) becoming inaccessible if you switch jobs.

The golden rule is to be organized in your paperwork and be timely in paying tax and filing the tax return

Happy return filing of income!!

Introduction To KRA
KRA is an abbreviated short form of KYC Registration Agency whose primary job is to collect and maintain KYC records of individuals on behalf of SEBI registered financial market participants mainly Mutual Funds companies, NBFC, Brokers etc. A KRA is registered under the Securities and Exchange Board of India (KRA) Regulations, 2011. KRA helps to provide a centralized structure to various market participants to access the investor's data without going through the documentation process every time before any investment process.

Registration with KRA is a one time process for investor dealing in the securities market. It helps in undertaking financial transactions without any further KYC compliance. At present, there are five KRA operating in India namely Karvy KRA, CAMS KRA, NSE KRA, CVL, NDML. Registering with any of the five KRA will help to complete the KYC process as data are stored and shared in a centralized database.

In this post, we will discuss the KYC registration process with KARVY KRA and FATCA declaration status.

KARVY KRA
Karvy is known for its prowess in financial market and services. It was setup in 1982 in Hyderabad, by five young professionals to tap the largely unregulated financial market which was based in Mumbai. Firstly it started with Registry business, then followed the stock broking business. Since then, Karvy has developed itself an integral part of the Indian financial system.

The KRA services have been launched by its subsidiary Karvy Data Management Services (KDMS) in April 2008. KDMS is a leading provider of business and knowledge solution to its client in financial space. It has ISO 9001:2008 compliant service delivery mechanism and proprietary IT backbone.

One can check his/her KYC status by logging into the Karvy KRA website.

Karvy KYC Process
Karvy provides KYC services to both individual and non-individual entities. Individual investors looking forward to completing the KYC process through Karvy KRA are required to file the KYC Application form available in the Karvy Website and get it submitted to any Karvy branch or to your SEBI or AMFI registered financial advisor.

Supporting Documents required while submitting the filled in KYC form
Recent passport size colour photo
Self-attested copy of PAN Card
Proof of Identity
Proof of Address
*All documents need to self-attested

The Karvy KYC Application form is very easy to understand and to be filled. The details required in all the part (A & B) of the application form are basic and can easily be filled by the applicant.

Important points to remember while submitting the KYC form

• Non-resident individuals or foreign nationals are required to submit a copy of passport/ OCI card/ PIO card and foreign residential address proof
• For opening an account of a minor with Depository participant or for investment in mutual fund, copy of birth certificate/Mark sheet or school leaving certificate is required
• Politically Exposed Persons (PEP) should declare all the information along with the KYC documents.

Karvy e-KYC Process
Karvy also provides the e-KYC services to its customers through Aadhaar verification. The services are provided through Expres 2.0 platform for fast and easy completion of the KYC process. e-KYC with Karvy requires upload of scanned documents and In Person Verification (IPV) over a video call to complete the process.

Step involved in the e-KYC process:

• Log in to e-KYC portal of Karvy
• Fill in your name, PAN, DOB, email and phone number in the given column
• Karvy will verify the PAN card in the c-KYC database
• Provide the Aadhaar number and submit the scanned images ( colour passport photo and personalised cheque) of the documents
• Your details will be verified from the UIDAI database and the details will be populated in the screen
• Schedule an In Person Verification (IPV) over a video call with a Karvy representative
• Digitally sign the documents by the entering the OTP sent to your mobile and email
• After successful verification, the e-KYC account gets activated for initiating financial transaction in mutual funds

Karvy FATCA-CRS Declaration
The Foreign Account Tax Compliance Act (FATCA) or Common Reporting Standard (CRS) is a declaration prepared by financial institutions for every investor investing in capital markets and Banking schemes to comply with the regulations of CBDT. The FATCA has been made mandatory for every retail investor from 31st August 2015.

The FATCA declaration enables the government to share information with its allies which includes the USA, G-20 countries and OECD for achieving greater tax compliance among nations and prevent the system from being used for money laundering.

Process to file Karvy FATCA form
An investor can download from FATCA form (Individual & HUF category) from the Karvy website and the filled in form should be submitted along with investment application form with supporting documents. An investor needs to submit the FATCA application form every time he/she chooses to invest with different AMC or broker. Non-compliance to FATCA-CRS declaration may lead to freezing of accounts with no right to the transaction until the process is completed.

In the FATCA application form, an investor needs to correctly provide the information regarding his/her income details, net worth, PAN details, occupation details, Tax residency and whether belongs to a Politically Exposed Person (PEP) or not. If the investor's tax residency status is different from India, then he/she has to provide all the details of tax residency status of other countries.

The process is mandatory for all Indian investors including NRIs. The form is to be submitted to the nearest Karvy Computershare branch for further verification and processing the details provided.

After the banks and financial market regulators made the Know Your Customer (KYC) process mandatory for all individuals and organizations, many reputed and established organizations have started to offer KYC services on behalf of capital market players. Robust customer data collection and management has been the important aspect of these organizations. There are five registered KRA operating in India including NSE KRA.

Introduction to NSE KRA
The services of KYC Registration Agency are offered through its 100 percent subsidiary DotEx International Ltd. DotEx deals with data and info-vending products of NSE. Its three primary products & services are Data and Info vending (deals with the real-time data feed of NSE), NOW ( NEAT on WEB which provides risk management tools and trading platform to members) and KRA services.

The project on KYC services has been started on 6th March 2012 after DotEx received SEBI registration on 28th February 2012 to act as a KRA intermediary. The KYC services are provided through NSE registered financial intermediaries or advisors. DotEx incorporates the latest data management system to ensure Inter-operability among different KRA’s and to maintain the accuracy of data.

NSE KRA KYC Form
The KYC services are available for both Individual and Non-Individual entities. Individual investors are required to download the KYC form from its website and get it submitted to any NSE registered members or financial intermediaries.

Supporting Documents Required
Recent colour passport size photograph
Self-attested copy of PAN Card
Proof of Identity
Proof of Address
*All documents need to self-attested

The NSE KYC form is very easy to understand and fill in the details. In the form, basic details of the applicant are asked including the Tax residency status ( Applicant residing in India needs to select the Resident Individual option and NRIs are required to select the Non-Resident option).

NSE KRA doesn't provide e-KYC services for online KYC process to its clients.

For any details, Applicant can write to NSE KRA via email (dotex_kraops@nse.co.in) or can call at 022 - 26598182 \ 8407.

NSE FATCA-CRS Declaration
The FATCA declaration status is provided by nsemf.com. The form is to be downloaded from the nsemf website and submit the filled in form to any NSE registered members or financial intermediaries.

The form is divided into two segments in which details of PAN, Adress Type, Place and Country of Birth, Income details and whether the applicant is a politically exposed person or not. In the second segment of the form, the applicant has to declare their Tax Residency status and if the applicant resides in other country and pays taxes in that country then he/she has to provide the details including Country of Tax Residency, Tax Payer Identification Number and Identification Type etc. The form should be duly signed and submitted to the concerned person for further verification with the supporting documents of income and tax residency status.

Here is a post based on a similar question on Quora on investing money in a house versus deploying money in a fixed deposit or Mutual funds etc.

Before we get into specifics here are  General Principles to follow :

• We look at value created in long-term
• A bird in hand is better two in bush ( Liquidity is valuable and its ok to pay some premium for liquidity)
• When you cannot quantify risk it means you do not understand it fully
• Its always good to assign probabilities to outcomes so you don't plan for best case scenarios.
• With these principles in mind let us look at your problem and in fact any such problem

Option 1: You invest your money in Buying a house
So on day 1 your cash flow is -40 lacs and you have an equivalent asset. Lets analyze what have you got.

An asset which is worth 40 lacs
Depending on real estate growth it might grow by certain amount lets say 5 % annually.
You might get some rental income lets say 10 k monthly from it
You have some basic maintenance cost on the house maybe 3 k per month
So your monthly net cash flow is 7 K
Let's say your rental income increases by 5 % every year
So In 10 years, you will have an asset which has appreciated to = 40*(1+5%)^10 =65.15 lacs and you made an annual income of 84 k in the first year which increased at 5 % every year.
For the rental income lets say your tax bracket is 20 % so you actually earned only 5 k net income per month and let's say you invest it in some monthly SIP or any other investment.
At 10 years you calculate the total value of your investment. I used Bodhik SIP Calculator to calculate value if it was only 5k standard investment it came to around 10.33 lacs all through but your investment will change as your rental income increases you can do an excel to calculate it will be let's say close 13 lacs
So at the end of 10 years, you have 13 lacs in liquid cash + house which is possibly worth 65 lacs
Now let's say the house is not that liquid so you want to discount the gains by 10 % as liquidity premium which essentially means the market rate is X but if you are ready to sell the asset for 0.9 X its liquidity improves multifold, so we are left with total value of 73 lacs
Here is the best way to get

Option 2: House financed by partly by bank rest of the money in FD
You buy the same 40 lac house financed 75% by bank
So you have 30 lac loan and an EMI of 27 K
So you have the house and now you can earn the same rent as we discussed in the option 1
You can use the rent to pay part of your EMI
You can also deploy your money in a fixed deposit and get returns lets say 9.5 % as you say so that's 23750 monthly ( its approximated) will be a little less 20 % tax and it gets reduced to 19000
So you can similarly build a simple cash flow excel as your rent will increase and in year 2 or 3 you will break even
I will leave you to do those calculations or you can pay me to do it for you

Option 3: Chuck house Invest all in FD , invest proceeds in MF
You chuck house and invest all your money in FD
Returns are 19 k per month, you invest this money in aggressive SIP every month
So at the end of 10 years, you will have your principle in FD 40 lacs
This SIP if we assume 12 % return will be worth 44 lacs in 10 years
So at the end of 10 years, you have liquid 84 lacs

Option 4: Chuck house invest all in MF Lumpsum
Let's assume all of it grows at 10 %.
At end of 10 years, you will have about 1.03 crores
Option 5: Chuck everything Put everything in FD at 9.5 %

You will have pre-tax 94 lacs at 9 % annum FD
Post-tax it will be different as tax gets deducted based on your hurdle rate.

Financial planning is a  process which helps you to create structured and sensible decisions to help manage your finances better and achieve finance and life goals by proper management of your finances, you can read my post on financial planning for beginners  to understand this in detail.

Financial planning is for every individual but sadly times our experience has been women spent much less time and energy on financial planning, while women naturally are better than men at planning and managing but when it comes to financial planning either they are not aware, not interested or reluctant, while general principles of financial planning remain the same for every one , women definitely face unique challenges which makes financial planning for women a different challenge.

Before we go to tips that will help you create a better financial plan as  a women, here are some reasons why you need one.

Live More.. Plan more :
Women in general outlive men by almost 5 years though this gap is reducing now , which means there is a distinct probability that you would have to take care of your money  some time on your own even if you are married, so its important you start early

Higher Divorce Rates:  
Divorce rates are steadily increasing in India, which means every 2 in 10 marriages face some kind of martial discord, as a result it is important to ensure financial independence if and when such circumstances arise, a proper financial planning will help avoid any kind of financial distress and create financial safety net for you and your children

Women earn less for the same job :
There is enough data to show that on an average women earn less then men for the same job. Global research points out a wage gap of 15-20 %  between women and men wages, well how that gap gets reduced is a bigger question but it means women need to manage their money much better and hence need for better financial planning.

Women can manage everything better including money.
There is enough research which says women are better manager then men, they are able to mutitask better and also have long term view of things all these thinks are great skills you want to have to do good financial planning.

So  ladies are you convinced that women have special needs for financial planning and they should invest time and energy to create the same, if not you can call us or drop a comment on the post and we can explain you  further, if yes please go ahead and read my tips on how to create a financial plan.  I am sure at the end of this you will be closer to creating a good financial plan and financial future for yourself and your family

• Finance planning is for everyone,take control of your finances
• Consolidate and review your accounts so that you can start the financial planning process
• Create a snapshot of your financial picture, which means summary of your income and expenses (which basically tell how much money comes and how much goes), keep it detailed so that you do not miss anything, you can use any simple budgeting tool or use the excel below for the same.
• Next step is to create an emergency fund , this help you to have enough money for a bad day like job loss or unforeseen financial obligations for more details read my post on guide to create an emergency fund
• Lets talk money honey.. If you are married start a conversation with you husband on financial planning it will always be better you go in sync and align your individual and joint goals so that you have a consistent plan for the family.
• Get Insured adequately, that's the most important  step in your financial plan, you require both life insurance and health insurance check if you have the adequate cover, check the cover your employee provides, and see if it is adequate in general you anyways require independent health cover because you will not have employee insurance cover for ever, remember what we said at the top women live longer than men hence you will require health cover for longer period invest today invest wisely
• Start working towards a retirement plan now , you need to start planning for your retirement right now, if you are married talk to your husband so that you can together create the plan again retirement planning if done early helps you save much higher and you need to think about the fact that retirement can be a lonely phase if you live longer than your husband and hence your financial obligations might increase
• Hire a good financial planner or use a online service for financial planning
• Dont shy away from investing in equity or equity based mutual funds if your investment horizons are long term, equity returns over long period generally outperform most other assets.

Did you just switch to the new job? Are you planning to transfer the PF account and have no clue about the process? Luckily, you are in the right spot.

A few years back, transfer of PF account seemed to be impossible. But today, EPFO is making the sincere effort to make PF system useful and convenient for the employees. Transfer of PF account is the most prominent feature offered by EPFO.
In past, you had to make PF withdrawal when you get the new job. This situation was not healthy; you would receive taxable PF corpus. Today, you have complete freedom regarding PF account transfer. Not only you can forward the previous balance to a new account, but you can also continue the pension scheme for future benefit. Isn't commendable!

Still, people don't opt for the transfer. It is not profitable to close old account and get the new one. When you have the option to carry a previous balance, why don't you go for it!

Benefits Of Online PF Transfer
[Tweet "Save Yourself From Hassle By Doing Online PF Transfer! "]

If you still don't want to do the transfer, please check out its benefits right here:

• The online transfer system ensures transparency in the processing. With one click, you can track the status of your application. While in past, you have to go from desk to desk to get the information.
• The Delhi office of EPFO monitors the regionals PF offices. This way, regional PF are more accountable towards their operations.
• The online transfer is faster than traditional offline transfer. Within three weeks, you can expect the transfer of PF account.
  In online transfer system, there are fewer chances of errors.
• You should avoid closure of an account. If you make the withdrawal before 5 years of opening account, the interest earned becomes taxable. That's why online transfer is a preferred choice.

Step-By-Step Guide For Online Transfer Of PF Account
Online system may haunt some people. Honestly, due to online access, the transfer system has become easier like never before.

Pre-Requisites For Online Transfer
The following conditions should be met to transfer account online:

• The employee should be registered member at EPFO portal to claim transfer online.
• Your previous and current Member IDs should be present in EPFO database.
• The employer must own a registered digital signature certificate with EPFO.

For your convenience, we have explained step-by-step transfer process as below:

• First of all, visit the official website of EPFO at http://members.epfoservices.in/home.php. Here, you need to create a login ID using UAN details.
• You will be directed to the page, where you need to submit details like UAN, mobile number and employer's details, the number of establishment and account number.
• Once you have provided all the details, click on "Check Eligibility".
• Eligible account holders can register on EPFO web portal for online transfer.
• Submit the proof of photo ID, such as PAN card, Aadhaar card or driving license.
• Next, you will receive the PIN on your registered number. You have to verify that PIN.
• Once you have verified the PIN, you will get the confirmation message.
• Now you be directed to EPFO Member Claims Portal. Enter Document ID and phone number to log in.
• On the top, you will see the option for transfer of PF account.
• Now you have to fill a form for PF transfer. It has three sub-parts. In a first part, your personal details are required. The second one asks for old PF account details. In a third part, submit the new PF account details.
• Once you are satisfied with the details, enter the captcha to get PIN. Click on "I Agree". Once you have entered the PIN, the transfer will be initiated.
• Now you can download the form for print out. You may submit this form to the new or past employer. It verifies that real employee is making the transfer.
• One copy will be forwarded to the respective employer and regional PF office.
• After the verification is finished by an employer, your old PF account balance will be transferred to the new account.

Final Verdict
Undeniably, EPFO has made the system extremely flexible. Instead of withdrawal, employees can make a transfer to save for their retirement. We made a sincere effort to provide all necessary information about online PF transfer.
If you have any query or information, feel free to share with us!

Financial planning is a complex process which requires you to review your current fiances, cash flows, estimate future cash flows as well as financial obligations,create goals and map money that you will require to achieve the goal, understand amount of insurance you would need now and in future, look at your tax outgo and do tax planning, there are lot of tools for financial planning which can come handy for all these activities, this post summarizes some of these tools that can come handy as you   try to create a good financial plan

Retirement Calculator 
This is a simple calculator which helps you calculate what kind of funds you will require to have a comfortable retirement. It calculates your retirement corpus as well as how much you should save now to achieve that corpus. This Retirement calculator uses  your current expenses as a base and projects your future expenses based on inflation assumptions in future to arrive at your corpus.

Health Insurance Calculator
Health insurance calculator helps you to calculate the right insurance cover for you , in general health insurance should provide the right cover for you and your family, health insurance cover varies with your city , age and family status. Also premium changes with your current health condition etc.

SIP Planner/Calculator:
SIP planner/calculator helps you  create a financial goal and tells you how much investment you require every month to reach the goal, the goal can be your child's education and you might require certain money to take care of that, this tool can help you plan for that, this can also be an indication to

Budget Planner:
Budget planner is a handy tool to help you track your income and expenses, this helps you be tidy with your finances and understand how your money is moving

Fixed Deposit calculator:  
Fixed deposit calculator helps you calculate the periodic interest on your fixed deposits, it also helps you to calculated amount at the end of the term of your fixed deposit, this calculator can be used not just for fixed deposits, but post office deposits etc. You can use following calculators to calculate amount on your fixed deposits

Income tax calculator:
Income tax calculators help you to calculate your tax obligations for the year, you need to select the right assessment year for the same, you can go to income tax department site and calculate your tax, you can go here

One of the important questions i typically get when I advise our customers on financial planning is should I move my money from savings account to Liquid funds, this blog post attempts to answer this question, before we answer this question lets try to understand why do people keep money in savings account , for me there are 3 reasons

• To ensure liquidity , so that money can be used whenever required.
• Get some returns as money in the bank is more secure and gives some basic returns in the pocket
• Financial laziness where you don't worry about what your money does in your account
  So let's look at how much interest rates you earn on savings accounts with different banks , below is the current saving bank interest rates offered by different banks

Saving Bank Interest Rates (Nov 2017)
Bank Name  Interest Rates offered 
Yes Bank 6 % PA
ICICI Bank 4% PA
Kotak Mahindra bank 6% PA
SBI 4% PA
HDFC bank 4% PA
Axis bank 4% PA
If you look at most of the top saving banks give interest rate in the range of 4-6 %

Now let's look at yearly return on top liquid Funds in last one year to get an idea on how they fare as compared to your favorite savings account, below table summarizes the data, please note I have only taken top 5 funds as per Crisil ratings.

Top Liquid funds returns (As of Nov 2017)
Fund Name  Annual Return 
Indiabulls Liquid Fund 8.20%
L&T Liquid Fund 8%
Tata liquid Fund 8%
Axis Liquid Fund 8%
HDFC liqud fund 8%

So simply based on return liquid funds outperform savings account by anything between, 2-4 % points which is 50-100 % higher return than the savings account , so purely on the basis of returns investing in liquid funds is a no brainer.

Now lets look at other big concern liquidity, one of the reason keep money in savings account is on the go liquidity you can withdraw money at any time, through an ATM or from the bank, Liquid funds also provide similar kind of liquidity.Liquid funds can be redeemed at any time with no exit load and the funds hit your account in 24 hours. Some AMC's like Reliance also provide ATM cards powered by HDFC bank, where you can redeem the money.

So all in all Liquid funds  have high liquidity and can compete with savings account on that front.

Risk Assesment :- Liquid funds invest in  short-term securities mostly with maturity of 91 days , normally interest rates do not change too much in short term, hence interest rate risk is taken care of , so liquid funds do not carry much risk

So here is my recommendation, don't keep more than 1 month of your planned expenses in savings account move rest of the money to liquid funds and develop your emergency funds for 5-6 months using liquid funds

If you want to know more about liquid  funds read my post on   All you need to know about liquid funds

Mutual funds are regulated by SEBI( Securities and Exchange Board of India). SEBI regulates mutual funds as 1996 Mutual fund regulation. SEBI is also the regulator for wider capital and securities market in India.SEBI was formed in 1988 as a statutory body and drives it powers from SEBI act 1992.

There are a lot of options to invest your money in India. Mutual funds, however, are considered one of the best and highest yielding long-term investment plan. In simple terms, Mutual Funds can be described as a basket of securities in which a pool of investors with common financial goals invests their money. These investments are diversified in different sectors like shares, debt securities, and money market securities or all combined. Mutual funds regulated by the Security and Exchange Board of India (SEBI) provide secure saving option managed by professional account managers.

The regulatory authority of Mutual Funds

SEBI, the government body who regulates mutual funds in India, issued guidelines for the mutual funds for the first time in 1993. The regulations were fully revised in 1996. The main aim of the Mutual Fund regulatory body in India is to protect the interests of the investors. SEBI often issues guidelines for the Mutual Funds, depending on the situation in the market. The Mutual Funds are prompted by either public or private sector entities including the foreign entities are governed by the regulations issued by SEBI.

The regulations stated in the 1996 guidelines

As per the Mutual Funds regulations 1996, all mutual funds must register as trusts under the Indian Trust Act 1882. In order to run the Mutual Fund, the company has to set up a separate asset management company commonly known as AMC. The regulations state that the net worth of the parent company of the AMC must be more or equal to Rs.50, 000,000/-

If the Mutual Fund is dealing with money market exclusively, it has to register with the RBI as well. SEBI has the authority to penalize a mutual fund founded a guilty of not following the norms. All the mutual funds should be registered with SEBI and the government has also set up a separate regulatory agency for Mutual Funds as well which is known as the Association of Mutual Funds in India or AMFI.

The basic structure of a Mutual Fund

The very first person or company in the hierarchy is the sponsor. The sponsor must contribute a minimum of 40% of the total value of the investment managed by the mutual fund. It should be registered with SEBI as well. The Trust is the next level in the hierarchy. A mutual fund is registered as a trust as mentioned above. Every trust should have a board of Trustees who are responsible for safekeeping the interests of the investors. It is the duty of the Trustees to appoint the AMC. The AMC has to get an approval from SEBI to start its functions.

At any given time, AMC’s net worth should remain equal to or above 10 Crores. The hierarchy continues with custodian which is basically a trust company, bank or a financial institution that is responsible for holding and safeguarding the securities owned by the Mutual Fund. The Custodian may also act as a transfer agent. It is the responsibility of the registrar and transfer agent to handle communication with the investor. They also update the investment records regularly.

Investment in mutual funds is mostly secure, but it is in the investors’ interest to check the track record of the mutual fund before investing in it. Also, the investor should prefer a diversified mutual fund to gain long term benefits.

Arbitrage Funds are mutual funds with an objective to profit from inefficiency in the price of securities in two different markets. We look at their taxation, meaning and difference with liquid funds in this post. The fund invests in equity and debt instruments. The fund manager applies the arbitrage strategy in the equity portion of the fund and for debt portion; it is invested in short-term debts and liquid funds. The profit from arbitrage fund is riskless. The difference in price of securities in two markets in a small range, and it quickly narrows down when a large volume of new positions are added for possible arbitration.

Arbitrage means the difference in the price of a security/commodity in two different markets and the person who does arbitrage is known as, arbitrageur. An arbitrageur in the market always finds for inefficiencies in the market. They purchase a security from the market at a low price and sell it at a higher price in another market. The difference in price is the profit. Arbitrage is regarded as riskless profits. This forms the basic premise of how Arbitrage Funds work.

How Arbitrage funds work:
Inefficiency in price is present in every market. In the financial market, arbitrage strategy can be applied by purchasing stock in the Cash market and selling it at derivatives market at a higher price.

For example: A stock is trading at NSE cash market at Rs.1000 and in Future Market its price is 1200, then the fund manager will buy the stock from the Cash market and simultaneously they will sell the stock at future market. Here Rs 200 is the profit for trade. As the future market has an expiry date for the contract, the fund manager will sell the stock at cash market previously it has bought and will buy the stock in the future market, to cover the position. As the expiry date in Future market nears, the price difference also narrows down and trades at the same price in both markets.

The transaction cost in arbitrage funds is higher because it involves buying and selling of securities in two different markets and has to cover the position at the end of expiry of the future contract.

Arbitrage Funds Risk & Return
Arbitrage funds carry a moderate to low risk to investment. Opportunities for arbitrage comes when there is volatility in market, stable market does not provide much opportunity for arbitrage. The risk associated with equity holdings are reduced by hedging against the derivatives.

The main objective of the funds is to generate a maximum return with less risk associated. Historically, top performing arbitrage funds have given a return of 7-9% from its investment 5-10 year period. The return of mainly depends on the ability of the fund manager to spot arbitrage opportunities in the market. More the opportunity more is the return.

Arbitrage Funds Taxation
In terms of return, Arbitrage funds and Debt funds give a similar return but in terms of taxation Arbitrage funds score over debt funds. Arbitrage funds are considered as equity funds because a fund with more than 65% holding in equities is classified as an equity fund. In, equity fund the investment over a period of 1yr is considered as a Long term and is tax-free. For investment under 1yr period, the gains are taxed at 15% as short-term capital gains tax. But for debt funds, Investment over 3 yrs is considered as a long term and it is taxed at 20%, after indexation benefit. For a period of less than 3yrs is considered as a short term and gain is taxed at 10%.

Comparison between Liquid Fund and Arbitrage fund
Liquid Fund: Liquid fund invests in money market securities like a certificate of deposits, Treasury bill, term deposits with maturity up to 91 days. These funds are highly liquid in nature and carry low risk to investment and have no exit load on redemption of the investment. These funds are suitable for short term period and to manage short-term liquidity requirement. The investment can be redeemed within 24 hrs.

Arbitrage Fund: Its portfolio is a mix of equity and short-term debt instrument. It is suitable for an investment period of 1-3 yrs and carries moderate to low risk to investment. Most arbitrage funds have exit load of 0.25% to 0.50% for 3months and it takes 3-4 business day to redeem the investment.
The main difference between the two funds is the taxation of gains which is discussed earlier in the article and due to taxation benefit, lately arbitrage funds have able to increase their AUM.

Conclusion
In a first look, arbitrage funds seem to have a more complex investment strategy, but on a closer look, it's not very difficult to get into with its investment strategies. The fund is not suitable for long-term wealth creation as there are many other options in equity funds with a better return in long term duration. It's ideal for investing the surplus money for shorter duration in a tax efficient way compared to fixed deposits and one has to stay invested for more than 1yr time period to get the benefits of taxation. Investors should also note that the fund does not favor any specific bull or bear market. The fund performs well only in volatile markets as the probability of price difference increases.