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Venturing into Shariah Investment

Shariah Investment is an Islamic investment philosophy which follows shariah norms, the moral code of Islam. It encourages people to invest in a socially responsible way thus dissuading them from investing in anything which harms a man physically or emotionally.  Anyone who believes in shariah norms are free to invest in this.

There are various Shariah compliant mutual fund investments in India though the options stand limited. Here, let us discuss about the various Shariah investment options available in India.

Taurus Ethical Fund

This is a Shariah compliant mutual fund. It starts with a minimum investment option of Rs. 5000 as a onetime payment or Rs1000 as SIP (Systematic Investment Plan). Taurus provides an average expected return of more than 10 percent which is a better performance in comparison to fixed deposit. Its AUM (Assets under Management) is 37 crores and has an expense ratio of 2.6%. However, this suits those who eye long term investments of anything more than 5 years, being fully aware of the risk of equity market.

Minimum investment SIP AUM Expense ratio
5000 1000 37 Crore 2.6%

 

Tata Ethical Fund

Tata ethical fund is the most popular and recommended ethical mutual fund in India thanks to its AUM which stands at 515 crore and brand name.  One can invest a minimum amount of 5000 and a SIP of 150. The average returns expected is 14 percent and its expense ratio stand at 2.5 %.

Minimum investment SIP AUM Expense ratio
5000 150 515 Crore 2.5%

 

Nipon ETF (Exchange Traded Fund)

Demat account is a must for investing in Nippon ETF. The expense ratio is above 1 percent. The one persistent issue with Nippon is its low liquidity as its AUM is 3 Crore. This makes buying and selling difficult.

AUM Expense ratio
3 Crore 1%

 

The documents required for investing in an ethical mutual fund are as follows:

  • Pan card
  • Aadhar card
  • Cheque leaf or details of bank account

If you are a Non-Resident Indian, apart from having the above documents, you should furnish your address proof from your resident country as well as NRI account details.

If you are investing through Demat account, you will need

  • PAN card
  • Aadhar card
  • Details of Bank account

In case you are an NRI, besides the above-mentioned documents, you must have PAS (Personal Account System) account which must be linked to the trading account

Taxation and Discontinuation charges

  • Discontinuing the plan before the completion of 1 year will make you pay 1% as exit load from the amount.
  • Selling it before completing 1 year makes you liable to pay 15 % of the profit as tax
  • Selling it after 1 year makes 10 % of the profit taxable.
  • In ETF, you are free to buy or sell as and when there is liquidity
  • NRIs are not exempted from taxation

As limited options exist, most of the time, you feel exposed to its limitations in Shariah investments. So, conduct a detailed study before venturing.

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