The Hindu Business Line : Mother fund vs mirror fund

Both these terms are doing rounds in the context of global funds. A fund house in India investing, say, in Brazil, has three choices —invest independently there based on its own assessment of the market there or simply follow the mother fund that is the scheme belonging to the same fund house which then would be mirroring the investment pattern of the mother fund.

In other words, the investments of a mirror fund faithfully mirrors the investments of another fund house. The third option is to plug into the mother fund by simply and passively investing in the units of the mother fund. This begets the investors the advantages and disadvantages of investing in fund of funds.

Switch from dollar?

The OPEC has said that the steep increase in oil prices among other things reflects the depreciating value of the dollar. How?

Shobit Aggarwal, New Delhi

This indeed is a partial explanation for the phenomenal increase in the crude oil prices. This may not be apparent to us because the US dollar has not depreciated against the Indian rupee as much as it has against other currencies of the world, notably the euro and the yen. The OPEC historically has been offering its quotations in dollars though of late there has been billing in the stronger euro as well. In days to come there could a wholesale switch to the euro or a basket of hard currencies as hinted by the oil exporting nations.

This makes perfect sense because the euro has gained against dollar by a hefty 50 per cent these last six months. It is partially to compensate for the quotation in a relatively devalued currency that the oil exporting nations are pitching their quotations high.

Oil bonds

Why does the government issue oil bonds to oil marketing companies?

Rima Nambiar, Sholanur

Oil bonds are issued in lieu of cash. You should know that petrol, diesel, LPG and kerosene are subsidised in this country. The burden initially falls on the oil marketing companies, which incidentally are largely state-owned.

But then when the government ordains a price ceiling, the resultant subsidy ought to be borne by it. In India however this does not happen.

The government picks up the tab only to some extent and leaves the oil marketing companies to fend for themselves. Even the partial compensation to them is not given immediately but in the form of oil bonds that mature after five-seven years.

They of course carry interest but you would appreciate oil marketing companies are not amused by it because they are not interested in it — instead they are interested in liquidity. This is how a beleaguered government buys time which reflects poorly on the financials of oil marketing companies.

Expense on transport

I am a salaried person. My employer pays me basic salary, dearness allowance and HRA. But I spend close Rs 1,000 every month on going to office and back.

Can I claim this as my expense and deduct it from my salary income while filing my income-tax return?

Muchkund Mukhopadhyaya, Durgapur

What you are asking for is eminently fair and justified. But then for tax purposes, equity and fairness are not the guideposts. What matters is the letter of law. And the law is, transport allowance up to Rs 800 per month is tax-free. Your predicament is your employer is not paying you any such allowance.

The least he can do is to carve out this amount from your basic and convert it as transport allowance. But this has its own pitfalls. While alleviating your tax burden, it would chop off a portion of your as well as your employer’s contribution to your provident fund given the fact that no such contribution is made on transport allowance.

S. MURLIDHARAN

ASK! Send in your queries to ask@thehindu.co.in

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