1. Net assets include the amount originally invested by the scheme of mutual fund, the profits booked as well as the appreciation in the portfolio.
  2. NAV can be summarised as (Current value of investments held + Income accrued+ Current Assets – Current Liabilities- Accrued Expenses)/ Number of Outstanding Units)
  3. Net assets increase when the market price of securities held in the portfolio increases.
  4. NAV refers to the value of each unit of scheme. It is equal to Unit holders’ fund in the scheme (Net Assets) divided by number of outstanding units.
  5. While calculating Net Assets, Income and expenses of the scheme have to be accounted for on the basis of principle of accrual
  6. If a scheme declares a bonus and issues Bonus Units, The NAV Ex-Bonus goes down.
  7. Issuing fresh units at prices lower than NAV will result in post issue NAV coming down for all investors. Similarly, redeeming units at prices lower than the NAV will increase the NAV for the remaining unitholders.
  8. The criteria applicable for calculation of NAV of a scheme portfolio having an equity share will be as per the closing price of that share on BSE/NSE on the day of calculation of NAV.


  1. In open ended schemes, there is a facility for investors to acquire new units (called sell transaction) and to sell back the Units to the scheme (called “Repurchase or Redemption transaction).
  2. When sale price is higher than NAV, the difference between sale price and NAV is called “Entry Load”. Entry loads are, however, banned now.
  3. The difference between the NAV and the Re-purchase price is termed as Exit Load.
  4. If there is no entry load, sale price of MF Units will beequal to the NAV of the scheme.
  5. Any fresh imposition or enhancement in exit load can only be prospective subject to certain conditions.


  1. Fund management and running expenses can be charged to scheme.
  2. Initial Issue expenses of any Mutual Fund Scheme are to be borne by the AMC.
  3. Fees of service providers, distributor commission, advertisement expenses and expenses incurred for account statements, communication, dividend etc. are chargeable to scheme expenses.
  4. Penalties and fines for law violation are not chargeable to scheme expenses.
  5. The total expense of the scheme will be within the limits as specified (TER).
  6. There are no sub limits for the expenses within the limit of overall expense ratio.
  7. For schemes other than ETF/Closed ended/Interval, total expense limit has been specified by SEBI as follows:
AUM (Rs. Crore)TER for Equity-Oriented SchemesTER for Debt-Oriented Schemes
0 – 5002.25%2.00%
500 – 7502.00%1.75%
750 – 20001.75%1.50%
2,000 – 5,0001.60%1.35%
5,000 – 10,0001.50%1.25%
10,000 – 50,000TER reduction of 0.05% for every increase of 5,000 crore AUM or part thereofTER reduction of 0.05% for every increase of 5,000 crore AUM or part thereof
Greater than 50,0001.05%0.80%


  1. Neither rate nor quantum of dividend can be guaranteed or assured to the investors.
  2. For calculation of distributable reserve for dividend distribution, Valuation gains are not considered but valuation losses need to be adjusted against the profits.


  1. In order to determine the NAV of the scheme, the valuation of securities in scheme portfolio has to be done in accordance with the SEBI and AMFI norms.
  2. The process of valuing each security in the investment portfolio at its current market value is called “Mark To Market”.
  3. A traded security shall be valued at the last quoted closing price on the principle stock exchange where it is traded.
  4. If the security is not traded on a particular date, then it will be valued on the closing price at which it was traded on the earliest previous day.
  5. A Non traded or thinly traded Debt security is valued on the basis of the yield matrix prepared by an authorised valuation agency.
  6. A non-traded or thinly traded equity instrument can be valued using the capitalisation of earnings method
  7. Uniform valuation by all AMCs is to be ensured in respect of fixed income securities over 60 days.
  8. All Money market and Debt Instruments with residual maturity up to 60 days shall be valued at the weighted average price on the valuation date.
  9. When money market instruments and debt securities with residual maturity of up to 60 days are not traded on a particular day, they shall be valued on amortization basis.
  10. Illiquid securities exceeding 15% of total assets are to be valued at zero value.
  11. NPA stands for Non-Performing Assets.


  1. Accounts and auditors for the scheme will be different from those of AMC.
  2. While calculating profits of the scheme, all the expenses that relate to a period need to be considered, irrespective of whether or not the expense has been paid. This principal is referred to as Accrual system.


  1. A mutual fund trust is exempt from tax on its income and earnings under section 10(23) of the Income Tax Act.
  2. Capital Gaincan be defined as the appreciation in the value of asset.
  3. According to current tax provisions, Capital Loss, whether long term or short term, cannot be set off against any other head of Income.
  4. Government declares Cost Inflation Index number every financial year.
  5. Any Mutual Fund scheme having 65% or more percentage of its total portfolio in equity securities is referred to as equity fund for the purpose of Taxation.
  6. All funds other than equity funds are treated as debt fund for the purpose of taxation
  7. DDT stands for Dividend Distribution Tax
  8. Debt schemes paying dividends to its unitholders are liable to pay Dividend Distribution Tax.
  9. No tax is applicable on the dividend received by a mutual fund investor.
  10. On Short term capital gain on equity (Investment held for less than 12 months), 15% tax rate is applicable.
  11. On Long Term Capital Gain on equity (investment held for more than 12 months), tax @ 10% is applicable on gains exceeding Rs 1 lac in a financial year (Without Indexation benefit). However, all long-term capital gains up to 31st january’2018 have been grandfathered.
  12. For Debt schemes unit holding period less than 36 month is called short term and schemes unit holding period 36 months and above is called long term.
  13. For an individual investor, Debt Fund Long Term Capital gains are taxable @ 20% with Indexation.
  14. For an Individual investor, Debt fund Short Term Capital Gain tax will be at the rate which is applicable to him as per his income slab ,
  15. STT stands for Securities Transaction Tax and it is applicable on transactions of equity fund.

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[WATU 13]

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