How to do KYC for Mutual Funds
Recent media accounts reported that mutual fund industry now has over Rs. 23 trillion in Assets Under Management (AUM) in February 2019 alone. This could be considered to be a sign that an increasing number of people are taking financial planning earnestly and are setting distinct financial goals for their future.
With regards to secure investment schemes that provide above-average yields, mutual funds beat most other options to stand out as the emerging winner. Given the effortlessness through which one can invest in mutual funds, an upbeat market and a wide variety of mutual fund types make it an attractive investment proposition for new and seasoned investors alike. If you are looking to invest in mutual funds, first and foremost, it is essential to know that you can only invest in mutual funds if you are KYC compliant.
Understanding KYC for mutual funds
Know Your Customer, also known as KYC, enables financial institutions to validate your identity. As a first-time investor, you must undergo the KYC process before transacting in a mutual fund. Because it is a mandatory customer identification process, it is critical to submit your identity details to a mutual fund house, a stock broker like IndiaNivesh or any other financial institutions. This is because, according to the Prevention Of Money Laundering Act, 2002, AMCs must abide by the rules and guidelines established by the Act to implement a Customer Identification Proof.
Furthermore, there are specific requirements prescribed by SEBI concerning KYC norms of financial institutions and intermediaries to know their customers. KYC for mutual fund requirements are typically in the form of verifying the customer's identity and address, financial standing, occupation and vital demographic data. These rules and regulations are continually updated by SEBI periodically.
Valid from January 1, 2012, every investor regardless of the investment amount in mutual funds must comply with KYC to carry out any transaction. Since money laundering is a major issue worldwide, mandating KYC formalities is regarded as an efficient way of preventing illegal activity.
The chief objective of the KYC process is to ensure that a real person or individuals are making investments rather than fictitious names. Every mutual fund investor must adhere to the KYC procedure via a KYC Registration Agency (KRA). This information held by the agency is stored in a single repository for all fund houses and intermediaries to access. Examples of these agencies include NSE, CAMS and KDMS.
Documents required for KYC
To initiate your KYC process, you must submit the following documents along with the KYC application form and passport size photograph. Documents include:
• Identity proof such as driving license, passport copy, voter ID, Aadhar card, bank photo passbook, or PAN card
• Address proof such as recent landline or mobile phone, passport copy, electricity bill copy, voter ID, driving license or Aadhar card
Types of KYC procedures
Typically, you can complete the mutual fund kyc form either through the off-line or online method. CDSL Ventures Ltd has been nominated and authorised by the mutual fund industry to conduct the Know Your Customer procedure.
• Visit the CDSL Ventures website and download the KYC application form
• Fill in the details
• Submit the signed application form through the specified mutual fund authorities or intermediaries
• Provide identity proof and address proof and the passport size photograph to go along with KYC form
• The duly filled form can be physically submitted at any of the following places. These include the Asset Management Company (AMC) through which you are making the investment or the Registered Transfer Agent (RTA) such as CAMS.
• Create an individual account on the official website of the KRA. Fill in your credentials to initiate the online kyc for mutual fund
• Key in your registered mobile number and enter your Aadhar card number
• Verify the details through the OTP sent on your registered mobile number
• Upload a self-attested copy of your e-Adhaar
• Accept the consent declaration terms for the eKYC
Aadhar based KYC through biometrics
You can also opt for Aadhar based KYC if you have the Aadhar card. Request the fund house or agency to send their representative or an official to visit you personally and collect the details from you in person. You can submit a copy of your Aadhar card to the representative, and they will enter your biometric information on the scanner and link it to the Aadhar data repository. As your fingerprints get matched to the database, your credentials stored with the Aadhar database will reveal that your KYC has been validated. This process can ensure that you can go ahead with your mutual fund investment.
KYC for non-individuals
However, if the investor is not an individual, the KYC process must be completed in a different manner. For instance, here are some cases on how to complete the KYC based on the following:
• Joint applicants. All or both applicants in a joint applicant setting must complete the KYC individually.
• Power of attorney. The power of attorney holder and investor must complete the KYC process individually.
• NRIs/PIOs. All NRIs and PIOs must complete the KYC formalities individually.
• Minors. If a mutual fund investment is being made on behalf of a minor, the parent or legal guardian who wishes to operate the account on behalf of the minor must complete the KYC procedure. When the underage individual attains adulthood, he or she must complete the KYC formalities at the time.
It is important to note that if any KYC documents are found incorrect, insufficient or not in order, the investor's compliance status can get cancelled. Under such a situation, the investor is informed of the status by the relevant authority.
To know your mutual fund kyc status and the progress of your KYC process, you can check on the following websites. Here, it is important to note that you can visit any of the below sites depending on where you have given the KYC application form:
• CDSL Ventures Ltd. CVL - https://www.cvlkra.com/
• NSE (DotEx International) - https://www.nsekra.com/
• NSDL Database Management Ltd (NDML) - https://kra.ndml.in/
• CAMS - https://camskra.com/Home.aspx
• Karvy - https://www.karvykra.com/
To know more about your mf kyc status, you can visit any of the above sites and enter your PAN number.
On completing the KYC procedure successfully, you will be able to purchase mutual fund units from your respective AMC or RTA. You can freely invest in a wide variety of mutual funds of your choice and any amount, after completing your KYC formalities.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
An IPO or Initial Public Offering is a process that companies use to raise capital from the general public. In this, the company offers its shares in exchange for the funds invested by the public. These shares can be subsequently traded in the market.In short, it is a way through which a privately held company can get itself listed on the exchange and reach out to the public for its capital requirement by sale of its shares.Points to note when applying for an IPO• When one makes an application to buy an IPO, it is merely an invitation. It should not be confused with an offer. Only when the IPO issuing company offers the shares in exchange for money, does it amount to an offer. • Types of IPOThere are two kinds of Initial Public Offerings – Fixed Price and Book Built. In the case of a Fixed Price IPO, the issuing company determines the IPO price (sum of the par value and premium amount) in advance. Interested investors can buy the IPO only at the pre-determined price. In the case of a Book Built IPO, the issuer only announces an indicative range. The IPO's final price is decided through the process of book building. Generally, most of the IPOs these days are conducted through the Book Building issue process. • Classes of IPOsIPOs typically are categorized into three classes – Retail, High Network Individuals (HNIs) and Institutional. Investments till the value of Rs. 2 Lakhs are classified as retail. Who is eligible to buy an IPO?Any adult (someone who is at least 18 years of age) who is considered competent to enter a legal contract is qualified to buy during the IPO. The concerned person should have the following documents and accounts:• Valid PAN Card issued by the IT Department• Active Demat account (In case of an IPO, it is not necessary to have a trading account. A Demat account can suffice for this purpose. However, if the investor wants to sell the stock upon listing, then a trading account is required)Modes of investing in IPOEarlier when one wanted to invest in an IPO, he or she would need to reach out to a broker. The broker would provide a physical copy of the application form. The investor would need to fill it and submit the same along with the cheque for payment. The application money would get deducted from the investor’s account and balance (if any) post allocation would be refunded back. It was observed that this process was time-consuming and cumbersome. Hence, a need was felt to move to a more efficient model for investing in an IPO.ASBA – Applications supported by Blocked AmountASBA was designed as the answer to the issues faced during offline IPO applications. It is a process conceptualized and created by SEBI to streamline the online IPO process. With the help of ASBA, one can buy an IPO online without releasing the funds until the time the shares are allocated to them.This application provides an authorization to block the application money in the bank account, for subscribing to an issue. If an investor uses the ASBA feature, the application money is debited from the bank account only if the application is successfully selected for allotment. During the interim period (i.e. till the time the shares are allotted) one can earn interest on the blocked amount. This benefit is applicable if the money is held in an interest-bearing account.Considering the reach and ease of this application, Securities and Exchange Board of India (SEBI) made it compulsory for all IPO investors (for a public issue) to go through ASBA. This change has been in effect since Jan 2016. Some key advantages of ASBA are:• Investors do not need to pay the IPO application money through a cheque or other such facility• It eradicates the long-drawn process of refund of the money (the difference between application amount and actual allotment) by the IPO issuer.• It enables the investors to give authorization for the transfer of application money in the IPO application form itself. This ensures that the investors do not suffer from interest loss in the interim period.• Simpler application form• The IPO investor needs to deal only with a known intermediary such as their bank.Who can apply through ASBAIndividual investors who meet the following criteria can buy IPO (book building route) through ASBA:• He or she falls under the category of Resident Retail investor (is applying for securities whose value does not exceed Rs. One Lakh)• The bidding is being done at the cut-off value with a single option regarding the number of securities being bid for.• The funds being blocked for buying the IPO are held in an account with a Self-Certified Syndicate Bank (SCSB)• Has decided not to revise the bid value• The bidding is not being done through any reserved categoryHow to buy an IPO Online through the ASBA feature?The process to buy IPO online is extremely simple and hassle-free. One needs to follow the below-mentioned steps:• Log onto the online banking portal or net-banking account• Go to the section dealing with investments. There will be an option for buying an IPO or e-IPO. Click on that.• Fill in the required details such as depository information, bank account number, etc. and complete the process of verification.• Once the required information has been entered, the investor is led to a screen usually titled as “Invest in IPO” or something on the same lines.• Select the desired IPO. In a book building IPO, one needs to mention the bid price in addition to the number of shares• Read properly the “Terms and Conditions” of the IPO and accept the same for the next steps• If everything is in order, then confirm the bid by clicking on “Apply Now”Note: The list of the ASBA certified banks or partners is available on the website of NSE or BSE.With these technological advancements, it has become very easy to invest in an IPO. To make the process even better, one can reach out to financial experts such as IndiaNivesh. IndiaNivesh offers a wide range of financial services related to broking and distribution, institutional equities, strategic investments, corporate advisory as well as wealth management. Their research team studies the markets continuously and also lists out the top-performing IPOs for the benefit of the investors. All details are available at https://www.indianivesh.in/ipo-listing-details Final WordSo next time you see an interesting IPO coming up, you can buy the IPO online from the comfort of your home. In case IPOs are something that you would like to consider in the future, then we suggest you save or bookmark our tips on how to purchase IPO online. It will save you time in the future. And we all know that time is money! Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
There is a popular joke that one can teach their children about taxes by eating one-third of their ice cream. No one likes to pay more tax than they need to. As a result, everyone is on the lookout for ways to reduce or save tax outflows. If you mention the words “how to save tax" in a gathering, you are sure to get the attention of every person around you!In this article, we will share some income tax-saving tips and tricks with the help of your Demat account.What is a Demat account?A Demat or dematerialized account is used to hold shares, securities, bonds and mutual funds in an electronic format. The objective behind this account is to move away from maintaining physical copies or documents for shares or stocks and store them safely in a digital platform. It simplifies and expedites the trading process. One can access all their share certificates at the click of a button.A Demat account is principally similar to a bank passbook. Though it offers a wider range of benefits. When you make any deposits or withdrawals from your bank account, the credit and debit entries are made in your passbook. Similarly, when you buy or sell any shares, etc. it is credited to or debited from the Demat account. According to the SEBI guidelines passed in 1996, to invest in the stock market, one needs to mandatorily have a Demat account. How to save tax using a Demat account?Now you must be wondering how to save tax by using your Demat account. We will solve the mystery for you. There are three ways to save tax through a Demat account.1. Dividend Listed companies distribute a part of their earned profits amongst their shareholders in the form of a dividend. The dividend percentage is at the discretion of the company’s management. When companies pay a dividend, it is directly transferred to the shareholder’s Demat account. This arrangement can help with tax savings. In the case of a Demat account, tax is levied only for trading transactions i.e. which involve purchasing or selling shares. Dividend income does not fall under the ambit of tax calculations. Hence, this dividend income can be used by investors as an additional source of income. So, your share ownership has dual benefits – you enjoy dividend earnings from time to time and also save on tax outflows. 2. Capital Gains • Short-term capital gains (STCG): Any capital gains earned by selling off the shares within the holding period are called short-term capital gains. On the other hand, if the sale transaction is done after the completion of the holding period, the gains get classified as long-term capital gains. Long-term capital gains are not taxable until the value of Rs. One Lakh. Many investors make use of this provision to save on their tax outflows and earn higher net income (total gains minus taxes). So, you can store your shares safely in the Demat account for a longer period and benefit from the tax exemption available on long-term capital gains.• Short-term capital loss (STCL): Usually when you hear the word losses, you can only think of negative things. But there is a way that you can leverage your short-term capital losses to offset or adjust the tax payable on capital gains made in the short-term. So, if you have a Demat account, you can save the tax payable on short-term capital gains by balancing it against the losses incurred (short-term) across any asset class. Additionally, one can also carry forward short-term capital loss (to set-off the short-term capital gains) for eight years. The only pre-requisite is that the loss and gain need to be from the same category of assets.• Long-Term Capital Gains (LTCG) – Earlier, LTCG did not attract any tax obligations. However, with the recent changes, gains of this nature are taxed at 10%, if their value exceeds the limit of one lakh. Still, a Demat account holder can save taxes if their long-term capital gains are less than Rs. One Lakh. • Long-Term Capital Loss (LTCL) –Sometimes, even the fruits of patience are not sweet. Despite remaining invested for a long period, some assets or investments do not yield a positive return and we end up with long-term capital losses. However, just like STCL, one can use their long-term capital losses to offset or adjust the taxes payable due to long-term capital gains.This arrangement helps the Demat account holder to bring down some of their tax obligations. 3. Equity Linked Saving Scheme (ELSS): ELSS is best explained with the saying – “killing two birds with one arrow”. ELSS is a type of mutual fund which offers a twin set of benefits to the investors. In addition to the potential of wealth creation and appreciation, in the long run, they also offer tax savings. Investments till Rs. 1.5 Lakh in ELSS qualifies for tax deductions as per Section 80C of the IT Act. So, a Demat account holder can choose to invest in ELSS Mutual Funds and save taxes easily. Compared to other tax-saving tools available currently in the market, ELSS Mutual Funds offers more (or better) benefits. With a shorter lock-in period of three years and the potential of higher returns, they are becoming a preferred choice for many investors. Additionally, it enables novices or first-time investors to make an entry into the world of equity investing.How to open a Demat account?Opening a Demat account is an extremely simple and hassle-free process. One can select any Depository Participant (who is authorized by SEBI). The KYC paperwork requires only basic documents (PAN Card, Aadhar Card, details of residence, income proof) and a photograph of the applicant. While the investor opens the Demat account with the chosen DP, the actual shares are maintained in safe custody by either one of the national depositories i.e. NDSL or CSDL. These institutions are sponsored by government-owned bodies. Hence, one can be assured that their shares are safe in the Demat account. Choosing the right brokerage firm can make the process even more simple and quick. IndiaNivesh, a trusted name in the Indian financial market can become your investment expert in this. Indianivesh has been offering a wide range of financial solutions in the areas of broking, mutual funds, equities, IPO, insurance and wealth management for the last eleven years. Their technological expertise combined with in-depth market knowledge has helped numerous clients to grow and create wealth. Final Thoughts:A smart investor does not stop with merely earning. It is equally important to create wealth and maximize your return by finding out ways to save taxes or other outflows. If you have a Demat account, ensure that you make use of it optimally. It can be a great help not only in trading but also in saving tax outflows. Now that you know these great income tax-saving tips, you can ensure you get the best out of your hard-earned money. Especially with a partner like Indianivesh.And if you know someone who is wondering how to save tax, make sure to share this article with them. After all, sharing is caring! Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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