Why pension funds are a good bet for investors

Why pension funds are a good bet for investors
Pension funds in India are regulated by the Pension Fund & Regulatory Development Authority.

dubai - They are regulated by India's Pension Fund & Regulatory Development Authority



By NRI Problems by H.P. Ranina

Published: Sun 2 Dec 2018, 5:30 PM

Last updated: Sun 2 Dec 2018, 7:32 PM

Q: Investment in pension funds is becoming quite popular. As I am returning to India for good this year, I want to know how safe and secure these funds are and whether they are properly regulated?

A: Pension funds are regulated by the Pension Fund & Regulatory Development Authority (PFRDA). This authority exercises control over pension fund managers (PFM). The PFMs are permitted to invest only in corporate bonds which have at least a AA rating. It is possible that this may be enhanced to AAA rating in the near future. The PFRDA has now set up a committee to streamline the investment norms.

PFMs are required to do their due diligence on companies in which they wish to invest. Tighter regulations would entail higher capital adequacy requirements. There would be greater scrutiny in respect of asset-liability mismatch. Therefore, it is reasonably safe for investors to diversify by making investments in pension funds.

Q: I am planning to buy a house either in Mumbai or Bengaluru. Several projects are being advertised on builders' websites. As I am visiting India in the next few days, I would like to go to the proposed building site. Will I be able to get adequate information if I do so in order to take a definite view to book the property?

A: Fortunately, the Supreme Court of India has recently ruled that it is mandatory for builders to display their approved building plans at the construction site. This ruling has been passed because developers were giving the details of the project and plans on their website. However, these were not available at the project site where the building was to be constructed. Therefore, the Supreme Court has passed this order.

The Real Estate Regulatory Authority has issued a circular based on the Supreme Court ruling that every builder should ensure that the sanctioned plans, layout plans and all specifications which are approved by the competent authority are prominently displayed at the site where construction is to take place. Therefore, when you visit India, it would be better to go to the site where the proposed building is to be constructed and you should be able to access all the sanctioned plans and other specifications, based on which you may take a decision to buy.

Q: When I was working in India, I had been filing my tax returns every year. Since I have come to the Gulf, I have not filed a return though I have taxable income in India on which tax is deducted at source and balance amount I pay by way of advance tax in respect of my rental income. Since the tax has been fully paid, I have not filed tax returns for the last 2 years. Have I committed any default?

A: It is generally believed that if the tax has been paid in full by way of advance tax and withholding tax, failure to file the return would not attract adverse consequences. However, the Delhi High Court has recently held that the Income-tax Department can initiate prosecution proceedings under section 276-CC of the Income-tax Act, 1961, even if a person has discharged his tax liability in full but he has not filed his tax return. Before initiating the prosecution proceedings, a notice would need to be served on the tax payer.

No prosecution proceedings can be initiated if the tax liability for the year does not exceed Rs3,000. In other words, if the tax liability for an assessment year exceeds this figure, it is mandatory to file the tax return even if the tax has already been paid in full. The Delhi High Court took the view that prosecution proceedings can be initiated by the tax department where the tax return is not filed, despite the fact that, in that case, a refund was due to the tax payer. Therefore, you should ensure that you file your tax return by the due date for every assessment year, even if your tax liability has been fully discharged by the tax deducted at source and the advance tax paid.

The writer is a practising lawyer specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper's policy.


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