A mutual fund (MF) is an investment tool funded by shareholders that trades in diversified holdings. It is a professionally managed investment fund that pools money from many investors to purchase securities and in return it charges a small fee to manage the money.

These investors may be retail or institutional in nature. Mutual funds have advantages and disadvantages compared to direct investing in individual securities.

Mutual funds are an ideal investment vehicle for regular investors who do not know much about investing. Investors can choose any mutual fund scheme and can invest on them based upon their goals.

Direct Plan Vs Regular Plan of Mutual Funds

Almost all mutual fund schemes come with two plans – direct and regular. Effective 1 January 2013, all asset management companies (AMCs) launched direct mutual fund plans for all open-ended schemes. Before 2013, only the regular plans were available.

A regular plan for mutual fund is meant for those who invest in a fund through their distributors. These plans, therefore, come embedded with distributor commission that gets deducted from your fund’s valuation before arriving at its net asset value (NAV).

There are many investors who wanted to invest on their own, so SEBI (Securities and Exchange Board of India) intervened in the matter and asked all the fund houses to come out with direct plans. The direct plan bypassed distributor commission and also its expenses are lower than those of the regular plan.

How to invest in Direct Plans?

Investor can go to every fund house’s website, can create account to register there and can invest in the direct funds. Other way is to go to Mutual Funds Utility, the mutual fund industry’s platform to invest across schemes, after opening an account there. There are various portals available which offer direct plans to invest in which may charge a flat fee.

Types of Mutual Funds in India

As per SEBI, there are 4 types of mutual funds available in India-

1. Equity mutual fund

Such type of category invests directly in stocks which can give returns based on the Stock market performance.

2. Debt mutual fund

Such schemes invest money in debt securities which are safer than the equity mutual funds and provide moderate returns.

3. Hybrid mutual fund

Under this category, money is invested in a mix of equity and debt.

4. Solution-oriented mutual fund

With a mandatory lock in period of five years, money is invested for particular solutions or goals like retirement and child’s education.

Must Read Conclusion on Direct plan vs Regular plan

Since there is advantage that you can save a lot of commission or other charges in direct investment plans of mutual fund and can get sizable return over a period of time but biggest drawback of this method is that you will have to complete the formalities, do the research of mutual funds, monitor your investment all by yourself. It is good investment option if you know all above ups and downs of the market.

Through direct plan, you would not be able to get the recommendations provided by the experts since market is full of mutual fund investment plans and it becomes very crucial to decide by yourself in term of direct plan vs regular plan whereas in regular plan on mutual fund investment, you would be able to get expert insight on any fund.

Investment service is another consideration where your advisor will provide services either quarterly or half yearly and also will review your investment periodically in regular plan whereas it is not possible in direct plan vs regular plan.

So, in all if you have sound knowledge about your portfolio and can manage it in all ups and downs then direct plan is good other go with regular plan.

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Financial year FY 2018-19 started and the new budget brought some changes to income tax laws for this year. We must be aware of these changes and should plan our taxes and investments accordingly. There are some relief points and some pains in this Budget. Let’s see the top 10 changes Budget 2018 made & all of these changes are applicable from April 1, 2018.

1. Transport Allowance & Medical Reimbursement not Tax Exempted

The Transport Allowance & Medical Reimbursement are no longer tax free. Currently the transport allowance was tax free up to Rs 19,200/- and medical reimbursement up to Rs 15,000/- so free from submitting above bills to the employers.

2. Standard Deduction of Rs. 40,000/- for salaried persons

A standard deduction of Rs. 40,000/- for salaried tax payers as well as for pensioners too. This deduction can be availed without submission of any proofs.

If point #1 is considered and subtracted from this deduction then there would be additional Rs. 5,800/- tax exemption for the salaried persons.

3. Cess hiked to 4% and named as Health and Education Cess

From FY 2018-19 the existing Cess of 3% (Education, Secondary and Higher Education Cess) has been increased to 4% and named as Health and Education Cess.

4. Reintroduction of LTCG on stocks and equity based mutual funds

Budget 2018 has reintroduced long term capital gains (LTCG) tax of 10%+Cess (i.e. 10.4%) on gains made of sale of equity or equity oriented mutual funds. To qualify for long term capital gains the stocks/mutual fund should have been held for at least 1 year. Capital gains up to Rs. 100K are tax free.

5. Dividend distribution tax on Equity mutual funds

The dividends from equity mutual funds would attract dividend distribution tax of 10%. However the dividend received would be tax free in hands of investor. This will affect schemes that were distributing dividends as a strategy.

6. Increased tax exemption upto Rs. 50,000/- on interest income for senior citizens

As per New section 80TTB, senior citizens would be able to claim interest income up to Rs 50,000/- as tax exempted income.

7. Tax deduction for Single Premium Health Insurance Premium

If you buy single premium health/medical insurance policy covering multiple years say for 5 Years then the  the tax exemption u/s 80D would be available proportionately for all the years.

8. Long Term Capital Gains Bond only eligible for capital gains from property

The long term capital gains tax exemption by investing in long term capital gains bond from specified companies (NHAI, REC or PFC) u/s 54EC would only be available for capital gains from sale of property including land, residential or commercial building.

9. Tax exemption on NPS for the Self-Employed

Till now, employees contributing to the National Pension System (NPS) were allowed to withdraw up to 40% of the total corpus without any tax at the time of maturity or closure of the account. The same benefit has now been extended to self-employed subscribers.

10. Senior citizens get Rs 20,000/- additional deduction on health premiums

Senior citizens will get a deduction for health insurance premium under section 80D of Rs 50,000/- up from Rs 30,000/- last year. There is also a hike in the deduction limits for medical costs on specified critical illnesses from Rs 60,000/- – Rs 80,000/- for senior citizens and Rs 100,000/- for very senior citizens who are 80 years and above.

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