• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy
• Books

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

K.R. Srivats

New Delhi, March 14 The decks have been cleared for provident funds and superannuation trusts managed by the private sector to take a greater exposure in the stock market.

The Central Board of Direct Taxes (CBDT) has changed the investment pattern for recognised provident funds under the income-tax rules.

The CBDT has aligned it with the new investment pattern for non-government provident, gratuity and superannuation funds, as spelt out by the Finance Ministry in August last year.

The trustees of such funds will have greater flexibility in terms of a wider variety of financial instruments as well as greater freedom to actively manage portfolio.

The alignment was required if such funds continue seeking recognition by the tax department and also to have larger exposure to the stock markets, point out tax experts. The Income tax department’s recognition of the provident fund is a must if certain tax benefits are to be retained by the employers as well as employees. Contributions made by an employer to a non-recognised provident fund could result in such an expense being disallowed for income-tax purposes at the hands of the employer.

With the latest CBDT move, the private sector managed provident funds can also with effect from April 1 park their funds in new instruments like rupee bonds of multilateral funding agencies, money market instruments and certain term deposits of commercial banks.

Under the new investment pattern, a recognised provident fund can invest up to 15 per cent of the aggregate investible funds in the shares of companies on which derivatives are available in BSE/NSE.

Also, the central government securities, state government securities and units of gilt mutual funds have been clubbed into a single category and investment up to 55 per cent of the investible funds has been allowed. However, the exposure of a trust to an individual gilt mutual fund has been capped at five per cent of its total portfolio at any point of time.

Such provident funds can now invest up to 40 per cent of their aggregate amount of investible funds in debt securities with maturity of not less than three years tenure issued by bodies corporate including banks and public financial institutions.

This investment window also covers term deposits of not less than one year duration issued by the scheduled commercial banks. The provident funds can also invest in rupee bonds having an outstanding maturity of at least three years and issued by IBRD, IFC and the Asian Development Bank.

More Stories on : Investments | Pension Plans | Stock Markets | Social Security

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2009, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line