I am 50 and I am a retired. I have approximately ₹36 lakh (present value) invested in Franklin Templeton Income Builder which just completed three years (date/year of investment: 27 June 2012). There is a significant drop in the fund's NAV in the last few days. I want to know why it is happening. It does not seem to be in sync with 10-year gilt yield. Of course, this fund is a corporate bond opportunity fund.
Second, considering my status, do you think it will be prudent to switch ₹36 lakh to an ultra short term fund? Or should I hold it in the same fund till May/June 2016. I need this money to be redeemed for my daughter's education (university fees) around July 2016.
Lastly, If I decide to redeem immediately, what could be the approximate taxation(@20%) after indexation. Probably you can give me a rough calculation as I am unable to do so.
- Bidyut Bhattacharya
Franklin India Income Builder Fund has declined marginally by -0.33 per cent in the last week. But the scheme has a good track record. It has given 10.96 per cent in the last year, 10.01 per cent in the last three years and 9.99 per cent returns in the last five years.
You haven't specified how much money you would require for your daughter's college fee. You can transfer the money you may require for the college fee to a liquid fund or ultra short-term fund since you need the money in nine months. You can keep the rest of the money in the same fund, as it may benefit more from a likely fall in interest rates in the next few months. Also, remember that you will have to pay tax on your gains from the liquid fund or ultra short-term fund in the next nine months. Short-term capital gains are added to the income of the investor and taxed as per the applicable slab.
You have to pay 20 per cent tax on your long term capital gains.
Your capital gains are: sale price - indexed cost of acquisition
The formula to calculate cost of acquisition is: purchase price x cost inflation index of the year of sale/cost inflation index of the year of purchase
You can get cost inflation index here: Click Here
This article was originally published on September 15, 2015.
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