A Beginner Guide to learn about Mutual Fund with Web Online CA

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Mutual Fund: What is a Mutual Fund? Types and How it works

What is a Mutual Fund?

Mutual funds managed by Professional Fund Manager who make decisions which investments to buy and sell for the fund. Mutual funds offer multiple product choices for investment across the financial spectrum. A mutual fund is a portfolio of stocks, bonds, or other assets purchased with the pooled capital of investors.

Investors buy shares of the mutual fund, and their money is pooled together with money from other investors. The value of one share in a mutual fund is known as the Net Asset Value (NAV). It is calculated by dividing the total value of the fund's assets minus liabilities by the number of shares outstanding. NAV is calculated at the end of each trading day.

Mutual funds allow investors to access a diversified portfolio of securities with a relatively small investment amount.

Types of Mutual Fund 

There are different types of mutual funds, each catering to different investor preferences, risk tolerances and financial goals. Here are some common types of mutual funds:

Equity funds : These invest primarily in stocks or equities with the goal of long-term capital growth. These can be further classified into large-cap, mid-cap, small-cap or sector-specific funds. Equity funds have the potential to deliver substantial returns over time. As a result, the risk associated with these funds is also relatively higher.

Debt Funds : Also known as fixed-income funds, these invest in fixed-income securities such as government bonds, corporate bonds, and other debt instruments. They focus on generating regular income with lower risk compared to equity funds. Given that investments offer a set interest rate and maturity date, this could present a good opportunity for passive investors seeking consistent income with low risk.

Balanced Funds : These invest in a mix of equity and fixed income securities to provide a balance between capital appreciation and income generation. Balanced funds, under the management of fund managers, are particularly well-suited for investors with a moderate appetite for risk who aspire to retire early.

Index funds : These replicate the performance of a specific market index, such as the S&P 500 or FTSE 100, by investing in identical securities in the same proportion as the index. Index mutual funds belong to a category of mutual funds designed to mirror or replicate the components of a market index in their portfolio construction. These funds are managed passively, resulting in low expense ratios for investors. Index funds maintain identical proportions of shares as those found in the benchmark index they track. For instance, an index fund mirroring the Nifty index will hold stocks in the exact same ratio as the Nifty index components.

Money Market Funds : These invest in short-term, low-risk securities such as treasury bills, commercial papers and certificates of deposits with the aim of providing stability and liquidity to investors. The fund manager allocates your capital and provides regular dividends in return. Selecting a short-term strategy can markedly diminish the investment risk associated with these funds.

Sector Funds : These focus on specific sectors of the economy, such as technology, healthcare, or energy, allowing investors to capitalize on opportunities within those sectors. Sector funds also offer impressive returns

Tax-saving Funds (ELSS) : Equity-linked savings schemes (ELSS) offer tax benefits under Section 80C of the Income Tax Act in India while investing primarily in equities.

Global Funds : These funds invest in securities from markets outside the investor's home country, offering diversification benefits and exposure to global economic trends.

Specialized funds : These include thematic funds that invest in specific themes or trends, such as sustainable investing, real estate, or commodities, catering to investors with specific investment preferences.

Pension funds : Pension funds: The term "pension fund" signifies a fund established to offer financial assistance to individuals during their retirement years. Usually, it consists of investments from multiple contributors and serves to offer pensions to members upon their retirement from employment. Pension Funds can manifest as mutual funds or government-supported programs. They invest and reinvest contributed funds in suitable instruments, ensuring members receive a stable income when the plan reaches maturity.

Liquid Funds : Similar to income funds, liquid funds also fall within the debt fund category, investing in debt instruments and the money market. A distinguishing aspect that sets liquid funds apart from other debt funds is the method used to calculate the Net Asset Value.

Funds of fund : This program invests in units of underlying mutual fund schemes from either the same mutual fund house or different mutual fund houses. The choice of mutual fund assets considers factors like the investor's risk profile, investment objectives, and return expectations.

Fixed maturity funds : Fixed Maturity Plans, commonly referred to as FMPs, are essentially closed-end debt schemes that invest for a specified period, offering a low-risk profile.

Aggressive Growth Fund : An Aggressive Growth Fund is a type of mutual fund that focuses on investing in high-growth companies with the potential for substantial capital appreciation over the long term. These funds typically target companies with strong growth prospects, often in sectors such as technology, healthcare, or emerging markets.

Income Funds : Income funds are mutual funds designed to provide investors with a steady income stream. These debt-based mutual funds allocate investments across a range of assets, such as certificates of deposit, government securities, money market instruments, and corporate bonds.

Capital Protection Fund : Capital Protection Funds are closed-end mutual funds that invest in a combination of debt and equity. Throughout the duration of the plan, a segment of the investment is allocated to "protect" the capital, ensuring it remains equal to the principal amount.

Hybrid funds : Hybrid funds also known as balanced funds, are a type of mutual fund that invests in a combination of both stocks (equities) and bonds (fixed-income securities) with the goal of providing investors with a diversified portfolio. Which provides capacity. Both capital appreciation and income generation.

How mutual funds work?

Mutual funds operate by pooling money from many investors to invest in a diversified portfolio of securities managed by professional fund managers. When an individual or institutional investor buys shares of a mutual fund, they effectively become the owner of a portion of the fund's assets. These pooled funds are invested in various assets, such as stocks, bonds, money market instruments or a combination of them, depending on the investment objectives of the fund.

FAQ's

What are the advantages of e-filing?

E-filing is a fast, convenient, secure, and sometimes free way to file taxes. E-filing is processed quickly, even if you wait until the last submission date.

If you file electronically and direct deposit your refund, the funds will be transferred to your bank account within a few days of receiving and processing your return. If you have a balance, you can pay by direct debit. And with e-filing, you don't have to worry about making mistakes, as errors are corrected immediately.

How does Online Income Tax Return Filing work in India?

Taxes imposed on the income of individuals, corporations, and other legal entities are formally called income taxes. There is no uniform tax rate for all income ranges, and it varies by industry and region, and in some cases, lower incomes are eligible to pay income tax.

There are two types of taxes: direct and indirect. A direct tax is a tax that is collected directly from the taxpayer, whereas an indirect tax is a third-party tax such as a value-added tax.

An Indian Income Tax Return (ITR) is a form for filing income and tax details with the Income Tax Authority. The tax eligibility of the taxpayer is calculated based on income. Sometimes, taxpayers are bound to get refunds from the Income Tax Department if their income tax returns show excess tax paid during the previous year.

All registered taxpayers with taxable income must file their Income Tax Returns online. However, people over 80 who do not have income from regular business or profession can also file paper returns.

 What is a GST return, and how many GST returns are filed?

GST Return is a document giving details of income that a registered GST dealer must submit to the Government of India's tax authorities. This return confirms the payment of the registered GST dealer and calculates the tax liability.

GST returns are filed monthly or quarterly, or annually by GST-registered dealers depending on the nature of the business and whether there is an option to file returns monthly or quarterly. 25 GST returns should be filed in a year.

Taxpayers who have opted for Quarterly Return and Monthly Payment Plan (QRMP) must file eight quarterly returns and one annual return. Hence, 9 GST returns are to be filed in a year.

What is the role of a Digital Signature Certificate?

A certificate serves as proof of a person's identity for a specific purpose. For example, a driving license identifies someone legally driving in a particular country. Similarly, a digital certificate may be presented electronically to identify a person, access information and services online, or digitally sign certain documents.

A licensed Certificate Authority (CA) may issue a digitally signed certificate. Certificate Authority (CA) means a person licensed under section 24 of the Information Technology Act, 2000 of India to issue Digitally Signed Certificates.

How do I register for MSME Udyam Online in India?

MSME stands for Micro, Small, and Medium Enterprises. There was no clear definition of MSME till the Atma Nirvana package was announced by the Finance Minister in May 2020. These companies were classified based on manufacturing and service industries. But after the Atmanirbhar package, this distinction between manufacturing and service industries has disappeared. The classification of these companies is currently based on investment and sales. Earlier, this process was known as Aadhar Udyog Registration.

MSMEs can register through MSME Govt Portal only. Users can register for a new MSME through this portal or re-register an already registered Udyami Aadhaar Memorandum Part II (EM-II) or Udyog Aadhaar Memorandum. The Ministry of Small and Medium Enterprises manages and operates this portal, so it is safe and reliable.

What are the benefits of having a FOSCOS/FSSAI License/Registration?

Consumers are becoming more aware of food quality, standards, and hygiene in this information age. It is more convenient for online grocery stores to be personally FSSAI certified before buying anything from outside, as it provides better assurance of food quality without contamination or foreign ingredients.

Legal Benefits: Most people still believe that getting a food license is a slow and challenging process with lots of paperwork and paperwork. There is also a need for clarification that getting a food license costs much money.

Use of FSSAI Logo: FSSAI licenses only those businesses that meet minimum hygiene standards. If you have a food sales license, you can display it on menu cards, pamphlets, packaging bags, etc. The FSSAI logo on the food will show the products in the competition.

Business expansion: All newly established companies want to expand their operations to all other places and explore new markets and consumer bases.

Customers should feel comfortable buying new products as they set up their business in recent locations. A valid food license also makes expanding your business to new places or opening new stores easier.

Quality upgrade: An FSSAI License/Registration facilitates the provision of high-quality food products and improves the overall performance of your food business.

What is a Store or Establishment License?

A shop and establishment license is a legal document issued by a state government that allows a business owner to operate legally. This license indicates that the owner has complied with the labor laws, welfare rules, and safety rules related to the store or establishment. Employers can also avail of benefits provided by the government, such as employee wages, insurance, and sick leave.

Who should apply for a Stores and Facilities License?

A store and convenience license is a mandatory registration that all businesses operating at a physical location must obtain. The specific requirements for obtaining a license may vary depending on the state in which your business is located. Generally, companies such as stores, restaurants, hotels, cafes, theaters, and other commercial establishments operating in physical locations must apply for a store and establishment license. Businesses that work from home offices or coworking spaces may also require this license. Standard documents required to obtain a store and facility license include proof of address, identity, and PAN card. Getting a license usually involves completing an application and submitting the required documents to your local municipal or state labor office.

Why is it essential to obtain a trademark registration?

Public Notice of Trademark: A registered trademark is a visible expression of ownership of a brand. Trademark registration also establishes a brand's reputation and lets consumers know that the products or services associated with the trademark meet the brand's quality and control standards. It is an acronym that helps consumers make purchasing decisions by quickly identifying and differentiating their products and services from those of their competitors.

National Validity and Ownership Estimates: Trademark registration applies nationwide and provides a presumption of trademark validity and trademark ownership. Under federal trademark law, all registered trademarks are deemed to meet all critical USPTO registration requirements and have actual requests with the trademark registration owner.

Resistance Against Trademark Infringement: Trademark registration allows us to stop competitors from infringing our trademarks and tells the police how our brands are being used. You can ask the infringer to stop using your marks or use the social media provider or online marketplace to remove the infringing content.

What is company registration?

Before filing for company registration, let us understand the concept of a company. What is a company? A company is a business entity having at least two directors and employees/shareholders. It is a legal business entity established under the Companies Registration Online Rules established under the Companies Act 2013.

So how do you register a company in India? Although the process is simple, it requires the assistance of a company registration service provider. Web Online CA provides end-to-end support, guiding you through every step required to register your company in India.

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