Things should not very easy for the mutual fund (MF) trade for the previous couple of years. Not solely a sustained low-return part is testing the nerves of fairness fund investors, however repeated bond failures have additionally left the boldness of investors of even the trusted debt funds shaken.
Now the tax rule making it obligatory to report each redemption transaction in Schedule 112A is additional bothering the fairness and MF investors, particularly those that in any other case had been eligible to file the Income Tax Return (ITR) 1 (Sahaj).
Individuals don’t having Income from Business and Profession are typically risk-averse individuals – like salaried and senior residents – some of whom take solely calculated danger for increased return by investing in equity-oriented MF scheme, however many of such investors may not be able to face the effort of submitting comparatively sophisticated ITR-2 just for investing in fairness MFs, returns on which aren’t very profitable for the final 5 years.
Take the instance of Shukla Basak (title modified), a retired particular person, who made some investments in two equity-oriented MF schemes by means of Systematic Investment Plan (SIP).
“My SIPs were in equity mutual funds and my SIP amounts were of Rs 2,000 per month in one scheme for almost four years and Rs 4,000 per month in another scheme for about one and a half years. The annual returns (CAGRs) were 5.7 per cent for the first scheme and 3.79 per cent for the second,” mentioned Basak.
“As soon as I realised that things were not going to get much better, I opted out. Fortunately that was before the Covid-19 pandemic. So, at least I got my capital back,” she added.
“Now, I am going to do what all senior citizens do, i.e. invest in fully secured government schemes because I cannot take the stress of watching the Sensex go up and down,” she additional mentioned.
Not solely the decrease danger tolerance capability, however, as a substitute of the ‘Sahaj’ 8-page ITR-1, the effort of submitting the 28-page ITR-2 has additionally acted as a giant deterrent.
“Also filling in ITR-2 was a real hassle and since I used to file my returns myself, I don’t want to repeat that experience,” mentioned Basak.
Also Read: Filing ITR to be a tiring process for fairness/MF investors doing SIP, STP, SWP
As Asset Management Companies (AMCs) and intermediaries like CAMS, NSDL, CDSL and most of the distributors don’t present information in correct format to fill Schedule 112A, the submitting course of turns into much more tough.
Sharing her expertise of submitting ITR-2, Basak mentioned, “The suggestion about AMCs and CAMS providing data in excel format would certainly be useful, but copy-paste is not allowed at all in the excel utility of ITR 2. It only throws up error messages if you try to do it. So, even if all SIP data is provided on an excel sheet, one would still have to enter each line of data manually. I know because I had to fill in 63 lines myself.”
Commenting on the bitter expertise that Basak confronted, CA Karan Batra, Founder and CEO of CharteredClub.com, mentioned, “Yes, this issue has been correctly highlighted. Government’s excel utility doesn’t allow copy-paste. Softwares are easy to use as they allow us to upload the complete excel file of all the data and no need to manually copy-paste.”
“The Income Tax Department should also give the option in excel utility to upload the file in required format,” mentioned Batra.
As an individual not solely must pay to purchase a tax-filing software program, but additionally must pay yearly for updation, it’s not viable for him/her to put in one simply to file a single return.
So, a person both must pay to avail companies of an expert to file the return, or must face the effort of submitting ITR-2 himself/herself.
“It made me think very carefully whether I will keep investing in mutual fund SIPs, because, honestly, the returns I got are not worth at all the hassle of filing ITR-2,” mentioned Basak.
Although, senior residents have decrease danger urge for food in comparison with youthful investors, however the ITR trouble may drive away many youthful salaried retail investors as properly. This is as a result of most of the salaried investors file ITR-1 themselves and wouldn’t prefer to face the effort of submitting a comparatively sophisticated ITR-2, until issues are made straightforward for them.