Q. This refers to the story on second-hand goods (Second to None? 11 June). If I buy a pre-owned product which is within the warranty or guarantee period, will I be entitled to free repairs or replacement? What are the other pre-requisites that should be kept in mind before buying such products?
Kriti Srivastav, Raipur
Yes, you can avail of these benefits and the easiest way to do so is by producing the original bill. However, bills usually do not change hands during a re-sale. Instead, you can provide the manufacturer with the serial number of the product. So make sure you know where it is printed. Many companies maintain a database of these numbers and will not insist on any additional proof of purchase. Also, companies are aware of the manufacturing date and the warranty/guarantee period of various models. So they can easily figure out whether you are eligible for these benefits.
Q. In the story on mutual funds (Be Switch Savvy, 30 April), short-term capital gains tax is calculated at 16.995% after the redemption of 500 dividend units. Why has 16.995% been used for the purpose? Do funds and shares consider the same tenures for calculating short-term and long-term capital gains tax? Also, in the example where the NAV grows by 25%, are the assumptions that dividends are not reinvested and DDT is taxfree, true? There are some aspects of taxation that the story did not address. For instance, you calculated the tax after redemption of units, but what happens after exiting the funds? Also, why hasn’t exit load been considered? Are there other costs apart from loads and asset management charges?
The table in the story was a hypothetical illustration that showed the benefits of a switch. For simplicity, we had made some assumptions: no entry and exit loads, NAV growth of 25%, switch within a year of purchase and final exit after one year. Switching, if done within a year, attracts an STCG tax of 15%. The tax rate of 16.995% is the effective tax rate and includes 10% surcharge and 3% cess. If an investor exits after one year, the transaction attracts an LTCG tax, which is exempt for equity funds. While there is no entry load on investing directly, exit loads are applicable on switches and are borne by the investor. The exit load reduces the exit NAV, which shrinks the investor’s effective return. For details on the cost structure and taxation of funds, read our stories ‘Taxation Terms’ and ‘Your Fund’s Annual Cost’ in the fund section of our Website www.moneytoday.in.
Q. The profile of the two friends involved in the animal assisted therapy (AAT) was interesting (Power of Paws, 14 May). However, I think the article should have given more information on AAT.
Sandeep Kumar, Amritsar
The My Idea section focuses on the entrepreneurial skills of the person and its format limits the information we can provide. If you want more inputs on AAT, please send us your queries and we will be glad to answer them.