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I am an IFA at BARODA location Gujarat. 1. Will you please share any notification which states that a Mutual Fund Distributor does not have to pay GST upto income Rs. 20 lacs. or please throw some light on this. 2. Why Mutual Fund commission is not subject to TDS despite being more than Rs. 10,000? 3. In Fixed Asset allocation Strategy Equity 70% and Debt is 30%. I have decided to switch as and when there is deviation of 10% as we should rebalance the portfolio. Is it 10% deviation in equity, shall we rebalance or it can be any asset class 10% deviation shall we rebalance portfolio? Normally Debt is constant only equity is volatile, what is optimum strategy in above case? Which Asset Allocation Strategy is good, Fixed or Dynamic Asset Allocation?

As per your query in regard to payable GST on income up to 20 lakhs, we wish to inform you that the CGST Act itself states in section 22 that every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds 20 lakhs. There is no separate notification for a 20 lakhs exemption limit. 

Apropos your query regarding the TDS, we would like to inform you that Section 194 H of Income Tax Act is applicable for TDS on Commission. As per this section TDS is deducted on Commission or Brokerage at the rate of 5%, if the Income is more than Rs.15,000. But this section specifically excludes transactions dealing in securities (Mutual Fund Units are Securities).  Therefore, TDS is not deducted on Mutual Fund Commission.

Further giving clarity on Fixed Asset allocation Strategy, we would like to inform you that in a Fixed Asset Allocation Strategy also known as a Tactical Asset Allocation Strategy, you pre-define your standard allocation and intend to keep your portfolio allocation more or less in line with the Standard Allocation. The percentage you invest in equity and debt remains constant and does not change with time. This means you will need to regularly rebalance your portfolio. If the value of investments in equity increases, you are supposed to sell some portion of equity and invest the same in debt and vice versa. The end goal is to keep the percentage of your allocation constant.

If you decide to keep your maximum deviation at +/- 10% from Standard allocation, then your 70%:30% Equity: Debt Allocation can have a maximum deviation of 7% (i.e. 10% of Equity allocation), which can act as your trigger point. You can benchmark your allocation to any particular asset class say Equity in this case (considering it to be more volatile in nature). It means you are comfortable having an Equity: Debt Allocation of 77%:23% (if equity appreciates, where you will book profit from equity and switch to debt) and 63%:37% (if equity depreciates and you will switch allocation from debt to equity). The portfolio allocation can be rebalanced if you hit the trigger or at an interval of every 6 months, whichever is earlier.

Under Dynamic Asset Allocation one keeps changing/adjusting the proportion of assets in the portfolio according to the market fluctuations and sentiments. In this case one increases allocation to asset class which is expected to do well and vice versa. In this strategy one constantly rejigs investment allocation based on the market conditions. If equity markets are moving upwards, one is supposed to increase investments in equities. On the other hand, when equity markets are on a downward trend, one becomes cautious and switches some exposure to debt. This strategy relies on market conditions and ones expertise to decide allocation at different points of time. The biggest challenge in this case is the timing of allocation and the chances of going wrong in assessment of market direction.

Fixed Asset Allocation Strategy is more predictable as compared to Dynamic Asset Allocation Strategy.

Hope we have replied to your query to your utmost satisfaction.

Advise you to further confirm/clarify the same with your Tax consultant as well.     

Disclaimer:

Risk Factors: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Please visit - www.QuantumMF.com to read Scheme Specific Risk Factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the scheme's objective will be achieved and the NAV of the scheme(s) may go up or down depending upon the factors and forces affecting securities markets. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the Sponsor / AMC/ Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited (AMC). The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.