Search the Internet          Tips  Sites: Finance, Investment

Recent Specials

Are pension fund      schemes bad ideas? Strong rupee adds      to IT firms' woes Chance to get state      finances back on track The small screen sees      a big battle Why you need personal      accident insurance 'RBI should deregulate      savings rate, cut CRR' Reforms: One step      forward, two      steps back The state governments'      precarious finances

Gender issues

A N Shanbhag

In our modern world women must learn to take care of their own finances. This being the case, let’s examine if there are any special concessions or investment avenues available for women so that they can manage their incomes and savings optimally.

Section 88C: Tax concession

Any resident woman below the age of 65 can avail of a 100 per cent tax rebate or Rs 5,000, whichever is lower. In other words, if her tax payable works out upto Rs 5,000, she gets a full deduction.

If, on the other hand, the tax payable works out to any amount above Rs 5,000, she can claim a deduction of Rs 5,000 from the amount of tax payable. However, note that this is for women below 65.

Once she becomes a senior citizen (at 65), she loses this privilege but starts enjoying the higher rebate of Rs 15,000 for senior citizens.

Rebate for senior citizens: Section 88B

Senior citizens are residents who are over 65 years at the end of the financial year. This means that any individual whose 65th birthday falls anytime during the year, even if it happens to be the last date — March 31 — is considered a senior citizen. All such persons are entitled to claim 100 per cent tax rebate or Rs 15,000, whichever is lower.

Schemes specially designed for women investors

UTI has come out with schemes specially designed for women. While ‘Grihalakshmi Unit Plan’ is a close-ended scheme and hence currently not available for investment, another plan called ‘Mahila Unit Scheme’ (MUS) is quite popular.

The objective of these plans is to enable adult women to pool their savings into an investment vehicle so as to get periodic cash flow. If cash flow is not desired, then the income/gains can stay deployed in the scheme so that the capital keeps growing.

And there is also a ‘Gift Plan’, under which units can be purchased by any person in the name of any adult woman for the purpose of gifting them to her on an occasion such as a birthday, marriage or a festival. There’s no gift-tax liability as gift-tax was abolished in October 1998.

The scheme has a Festival Cash Option (FCO) under which investors can choose to repurchase the proceeds of units to the extent of appreciation on any festival specified by them.

If the investor doesn’t want the FCO, she is free to choose the Growth Option and stay invested till such time that she needs the funds. Partial or full repurchase can be effected as per the desire of the unit holder.

Schemes such as MUS help to inculcate the savings habit in investors. Being open-ended, the investors can make further investments as and when it is possible for them to do so and if the money is needed, repurchase can be asked for at any time. So, for all practical purposes, these schemes function like quasi-bank accounts, albeit with slightly higher risk but much higher return.

Same scheme: Different forms

Different investors have differing needs. Some may require regular monthly dividends, some may need it at quarterly intervals and yet others may have capital appreciation as their sole objective.

Schemes such as MUS are extremely flexible, in that they can be tailor-made to meet whatever objective the investor desires. Here’s how.

Savings bank account: As already discussed, you can deposit and withdraw from MUS whenever you feel like. Withdrawal takes less than five working days.

Regular dividend scheme: You can write your own dividend cheques in terms of repurchase requests. In fact, you can even choose your own periodicity: annual, half-yearly, quarterly or even monthly. That is not all. You can ask for additional withdrawals to see you through unforeseen difficulties.

If you opt for regular dividend, the cheques are received on pre-specified dates and the money lies idle in the SB. With pure-growth, withdrawals can be need-based. If not withdrawn, the capital keeps on growing, without any tax liability.

Monthly income scheme: It is possible to give standing instructions for monthly payments.

Pension scheme: Keep depositing investible funds after catering to your day-to-day needs. Over time and with the magic of compound interest, a sizable corpus can be built up. When you really retire, in your old age, you can ask the mutual fund to pay you systematic monthly withdrawals, which is nothing but pension.

One plan equals all: Similarly, plans such as MUS can be converted into Tax-free Relief Bonds, Children’s Gift Growth Plan, Children’s College and Career Fund, Rajlakshmi Unit Plan, Grihalakshmi Unit Plan etc.

Crisis management: The excellent liquidity precludes you from keeping a large amount liquid (thereby earning extremely low interest, even lower than inflation) for catering to unforeseen calamities.

To sum up

If you haven’t yet taken interest in your finances it is time to give it all a careful look. There is much more information available on the individual mutual fund websites and offices. They would be more than happy to help you. Remember, it is never too late to invest wisely.

Powered by

ALSO READ:
More Specials
More Money Headlines