Mutual fund unit holders can expect to receive two to four per cent hike
in dividend payouts by fund managers following tax exemptions announced
in the financial ordinance.
From the beginning of current fiscal year, mutual funds have been declared not-to-be-taxed entity by the government. Mutual funds will not have to pay any corporate taxes or pay capital gain tax for the shares that has been traded. Likewise, they have been exempted from paying any taxes on dividends received on shares and debentures and also mutual funds will not have to pay tax on interest received on deposits at financial institutions.
Though, the budget failed to give direct benefit to individual mutual fund investor as existing rate of five per cent capital gain tax and five per cent on dividend are applicable to them, tax discounts on mutual fund manager will translate as gain to them indirectly.
“Mutual funds will be capable to pay about two to four per cent more dividend that the originally estimated following the tax exemptions. We have calculated the possible rate of return and dividend payments considering the existing rate of taxes,” said COO of Siddhartha Capital Ltd that manages Siddhartha Investment Growth Scheme I (SIGS-I), Mekh Bahadur Thapa.
SIGS-I had estimated to offer eight to 13 per cent dividend from first year to the end of fifth year. Likewise, another existing mutual fund scheme managed by Nabil Investment Banking –Nabil Balanced Fund-I has estimated seven to 11 per cent dividend pay-out on its offer letter.
“We paid Rs 3.7 million as tax under different headings for the half year’s operation last fiscal year, so even if assuming to undertake similar trading and earnings we will save around Rs 7.4 million every fiscal year,” Thapa said.
“In my estimation net income’s 25 per cent is saved by not having to pay for taxes which will be transferred to the unit holders,” he added.
Despite, the obvious benefits of the mutual funds, investors considered it rookie investment instrument following its higher overhead costs involved. However, government’s move of making mutual funds as non-taxable has made it more attractive.
Mutual funds are subjected to higher frictional expenses –the overhead expenses incurred in brokerage commissions, capital gain tax along with management fees. “Earlier, mutual fund units were subjected to double taxes in a way which has been removed now as only unit holders will be paying them,” said share analyst Rabindra Bhattarai.
“Older tax system made both mutual funds and unit holders to pay capital gain tax on trading of units and trading of shares owned by mutual funds also paying taxes for unit holders and both of them also paying for dividends.”
At present, there are only two mutual fund listed at Nepse –Siddhartha Investment Growth Fund I which have been actively trading stocks since January.
Likewise, Nabil Balanced Fund I is being traded since two months back. NMB Capital is also preparing to launch its mutual fund scheme while Global IME Bank will also be launching its mutual fund scheme before the end of current fiscal year.
src : THT
From the beginning of current fiscal year, mutual funds have been declared not-to-be-taxed entity by the government. Mutual funds will not have to pay any corporate taxes or pay capital gain tax for the shares that has been traded. Likewise, they have been exempted from paying any taxes on dividends received on shares and debentures and also mutual funds will not have to pay tax on interest received on deposits at financial institutions.
Though, the budget failed to give direct benefit to individual mutual fund investor as existing rate of five per cent capital gain tax and five per cent on dividend are applicable to them, tax discounts on mutual fund manager will translate as gain to them indirectly.
“Mutual funds will be capable to pay about two to four per cent more dividend that the originally estimated following the tax exemptions. We have calculated the possible rate of return and dividend payments considering the existing rate of taxes,” said COO of Siddhartha Capital Ltd that manages Siddhartha Investment Growth Scheme I (SIGS-I), Mekh Bahadur Thapa.
SIGS-I had estimated to offer eight to 13 per cent dividend from first year to the end of fifth year. Likewise, another existing mutual fund scheme managed by Nabil Investment Banking –Nabil Balanced Fund-I has estimated seven to 11 per cent dividend pay-out on its offer letter.
“We paid Rs 3.7 million as tax under different headings for the half year’s operation last fiscal year, so even if assuming to undertake similar trading and earnings we will save around Rs 7.4 million every fiscal year,” Thapa said.
“In my estimation net income’s 25 per cent is saved by not having to pay for taxes which will be transferred to the unit holders,” he added.
Despite, the obvious benefits of the mutual funds, investors considered it rookie investment instrument following its higher overhead costs involved. However, government’s move of making mutual funds as non-taxable has made it more attractive.
Mutual funds are subjected to higher frictional expenses –the overhead expenses incurred in brokerage commissions, capital gain tax along with management fees. “Earlier, mutual fund units were subjected to double taxes in a way which has been removed now as only unit holders will be paying them,” said share analyst Rabindra Bhattarai.
“Older tax system made both mutual funds and unit holders to pay capital gain tax on trading of units and trading of shares owned by mutual funds also paying taxes for unit holders and both of them also paying for dividends.”
At present, there are only two mutual fund listed at Nepse –Siddhartha Investment Growth Fund I which have been actively trading stocks since January.
Likewise, Nabil Balanced Fund I is being traded since two months back. NMB Capital is also preparing to launch its mutual fund scheme while Global IME Bank will also be launching its mutual fund scheme before the end of current fiscal year.
src : THT
