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Samkit Maniar  |180 Answers  |Ask -

Tax Expert - Answered on May 28, 2024

CA Samkit Maniar has eight years of experience in income tax, mergers and acquisitions and estate planning.
He has graduated from Mumbai’s N M College of Commerce and Economics and has completed his CA from The Institute of Chartered Accountants of India."... more
Asked by Anonymous - Mar 25, 2024Hindi
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I am a retired person and get monthly pension of Rs 3200/- ( EPS 95). Also my ex employer reimburses medical expenditure which is reflected as salary income in 26AS. Can I claim standard deduction (upper limit 50K) on above incomes?

Ans: Assuming medical expenses reimbursement is more than 50k, yes you can.

Please take your CAs advice before moving ahead.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Why do Debt Funds offer lower returns as compared to Equity Mutual Funds?
Ans: Debt funds and equity mutual funds serve different purposes in an investor's portfolio. Debt funds offer stability and lower risk, while equity mutual funds focus on high growth with higher risk.

Below are the key reasons why debt funds provide lower returns than equity funds.

1. Nature of Underlying Investments
Debt funds invest in bonds, government securities, corporate debt, and fixed-income instruments.

These instruments provide fixed interest, leading to predictable but lower returns.

Equity mutual funds invest in company stocks, which have the potential for higher capital appreciation over time.

2. Risk-Return Tradeoff
Lower risk means lower return potential in debt funds.

Debt investments focus on preserving capital rather than aggressive growth.

Equities are volatile, but over the long term, they tend to generate higher returns.

3. Interest Rate Sensitivity
Debt fund returns depend on interest rate movements in the economy.

Rising interest rates reduce bond prices, lowering returns in debt funds.

Equity funds are less impacted by interest rate changes and benefit from economic growth.

4. Inflation-Adjusted Returns
Debt funds often fail to beat inflation in the long run.

Equity investments provide inflation-adjusted growth due to rising corporate earnings.

Holding equities for longer durations results in compounding benefits.

5. Growth Potential
Equities represent ownership in businesses that expand over time.

Business growth translates to higher share prices and higher returns.

Debt instruments provide fixed interest, which limits potential upside.

6. Tax Efficiency
Equity mutual funds enjoy lower long-term capital gains (LTCG) tax rates compared to debt funds.

Debt fund gains are taxed as per the investor’s income tax slab, reducing post-tax returns.

This tax treatment makes equities more attractive for long-term wealth creation.

7. Market Performance
During economic growth, companies generate higher profits, leading to higher equity returns.

Debt fund returns depend on interest rate cycles, making them less rewarding in growth periods.

Equities have historically outperformed debt over longer durations.

Finally
Debt funds provide safety and stability but offer lower returns.

Equity mutual funds outperform over time due to business expansion and compounding.

A well-balanced portfolio should include both debt and equity, based on financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

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Sir I am a Engineer by profession snd working in Qatar. Same time i had Cost accountant Degree and passed out way back at 2009. After that no touch with Cost Accounts. Now i am 48 yrs and after few yrs i want to move back to India. But that time if want open a cost accounting firm, what would be the best move i can do to open the consulting firm?
Ans: Hello Mr. Heman,
Reestablishing your career in cost accounting and setting up a consulting firm in India requires careful planning. Start by updating your knowledge through ICAI’s continuing education programs, industry seminars, and professional courses to stay current with evolving regulations and industry practices. Reactivating your ICAI membership and obtaining a Certificate of Practice (CoP) is essential to offer consulting services legally. While still in Qatar, gaining practical exposure by offering freelance or part-time cost auditing or GST advisory services to Indian firms will help establish credibility.

Next, choose a suitable business structure - Sole Proprietorship, LLP, or Private Limited Company - based on your growth plans and compliance preferences. Register your firm with the Ministry of Corporate Affairs and obtain the necessary licenses. Conduct thorough market research to identify your target clients, understand industry needs, and define your service offerings, such as cost audits, financial consulting, and management advisory. A well-structured business plan with clear financial projections will help ensure long-term sustainability.

Investing in technology and infrastructure is crucial. Setting up a professional office, adopting modern accounting software, and leveraging cloud-based financial solutions will enhance efficiency. Building a strong professional network is equally important - reconnect with former colleagues, join industry associations, attend networking events, and establish a digital presence through a website and social media to attract clients.

Lastly, focus on compliance and quality assurance. Adhering to ICAI regulations, tax laws, and ethical standards is critical for maintaining credibility and trust. By systematically following these steps, you can successfully transition back into cost accounting and establish a reputable consulting firm in India, ensuring a stable and rewarding career.

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