Include gold in your investment portfolio

dubai - A 10 per cent allocation to gold would lend stability to the investment portfolio.

Q: Gold prices have been going up recently. The equity market in India is also showing a declining trend. Some advisors are recommending gold for investment purposes. I am not too sure.

A: In India, the price of gold has come down to around Rs30,400 for 10 grams as against a peak rate of around Rs31,800. In the international market, gold was trading last month at around $1,320 per ounce. Global inflation outlook and volatility in financial assets have contributed to the upward movement in the price of gold. The recent crash in the price of Bitcoin has also had an impact and made gold more attractive.

With equities and bonds likely to face a challenging environment, some analysts consider gold to be a good choice as part of a portfolio of investments. A 10 per cent allocation to gold would lend stability to the investment portfolio and reduce risks arising from volatility in bonds and equities. Gold is generally considered to be a good hedge against volatility.

Q: Alternative investment funds are being suggested from time to time. I am not sure what they mean and what are the advantages of investing through them.

A: AIFs are privately pooled investment funds which are categorised into 3 types. Category I funds investment in startups, small and medium enterprises and venture capital. Category II funds include private equity and debt funds. Category III funds include hedge funds. AIFs can raise money from both domestic and foreign investors. Unlike mutual funds which raise money only from foreign portfolio investors and non-resident Indians, AIFs can raise funds from all classes of overseas investors.

The Securities and Exchange Board of India proposes to tighten regulations applicable to AIFs to monitor the source of funding and their end use. SEBI will scrutinise the anti-money laundering policies which are implemented by AIFs. They will also try to ensure that money raised by AIFs is not invested back in entities owned by the investors. The regulator will conduct audits on AIFs to examine the fund sourcing arrangements.

Q: Small businessmen in India have been facing difficulties in filing sales returns under the GST law. Is any simplification going to be introduced to deal with this problem?

A: Last month, it was announced that the Goods & Services Tax network has been modified to make it easy for businessmen to file the sales return in Form No 3-B. Under the modified system, all the necessary information has been shown at one place. The tax payer would now see the current balance of input tax credit at the top of the screen. After utilisation of the credit, the balance amount of tax payable would be shown in the same table.

Changes have also been made in respect of the challan to be prepared for making payment in cash. The challan would be prepared taking into account the balance available in the cash ledger after utilisation of the input tax credit. These figures would be shown on the screen and, therefore, the possibility of any error is completely eliminated.

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.