Investing

An Initial Public Offering (IPO) is a significant event for a company, as it marks the transition from a private entity to a publicly traded company. As an investor, understanding the IPO cycle and its various stages is crucial for making informed decisions. 

A critical aspect of IPOs that often comes up during the investment process is the IPO lot size. In this article, we’ll walk through what is lot size in IPO, how it’s calculated, and understand the concept with examples.

What is the IPO Cycle?

The IPO cycle refers to the company’s various stages when moving from a private to a public entity through an initial public offering. Understanding the IPO cycle can help investors make more informed decisions from preparation to post-listing activities. For those seeking expert guidance, an investment advisory firm can provide valuable insights into the factors influencing an IPO’s success.

Why Understanding the IPO Process is Crucial for Investors

Understanding the IPO process can help investors evaluate potential investment opportunities. It clarifies how the price of an IPO is set, the IPO lot size, how shares are allotted, and the risks involved in investing during the early days of a company’s public life. With this knowledge, investors can better assess whether or not an IPO is a good fit for their portfolio.

How Companies Transition from Private to Public Through an IPO

A company that decides to go public offers shares for the first time. The transition involves a detailed process, including regulatory approvals, setting an IPO price, and eventually listing shares on a stock exchange. This public offering allows the company to raise capital for expansion, acquisitions, and debt repayment, among other uses.

Definition and Explanation of the IPO Cycle

The IPO cycle comprises the entire process a company goes through to list its shares on the stock market. This cycle involves several key stages: preparation, registration, pricing, allotment, and post-listing activities. Whether dealing with current IPOs or evaluating listed IPOs, each stage presents unique challenges and opportunities for the company and investors.

Why Companies Choose to Go Public

There are several reasons why a company may decide to go public. By offering shares to the public, the company can raise capital, improve its visibility, enhance its credibility, and allow early investors and employees to liquidate their holdings. Going public also gives the company access to broader capital markets for future financing needs.

Stages of the IPO Cycle

The IPO cycle can be broken down into several distinct stages. Let’s take a closer look at each of these stages to understand how the process unfolds.

1. Pre-IPO Stage: Company Preparation

Before a company can offer shares to the public, there’s a lot of internal work to be done.

Internal Planning: When a Company Decides to Go Public

The decision to go public is often made after extensive internal planning. The company must assess its financial health, market conditions, and growth potential. They also need to decide the best time for an IPO, ensuring favorable market conditions.

Selection of Investment Bankers and Underwriters

To navigate the IPO process, companies hire investment bankers and underwriters who help them determine the offering’s pricing, structure, and timing. These professionals also manage the marketing efforts of potential investors.

Drafting the Red Herring Prospectus (RHP) and SEBI Approval

A crucial document in the IPO process is the Red Herring Prospectus (RHP). This document outlines key information about the company, its financials, risks, and plans. It is submitted to the Securities and Exchange Board of India (SEBI) for approval before the IPO.

Also Read: What is an IPO and How Does it Work?

2. IPO Registration and Compliance Stage

Once the RHP is approved, the company proceeds to the registration and compliance stage.

Filing the DRHP (Draft Red Herring Prospectus) and SEBI Review

The company files a Draft Red Herring Prospectus (DRHP) with SEBI, which then reviews the document for accuracy and completeness. This step ensures that investors can access all necessary information about the company before investing.

Regulatory Approvals and Market Analysis

In addition to SEBI’s approval, the company must fulfill other regulatory requirements, such as obtaining clearance from the stock exchanges where the shares will be listed. During this process, market analysts start evaluating the company’s potential, which plays a significant role in determining the demand for the IPO, especially when compared to other IPO performers in the market.

Roadshows and Marketing the IPO to Investors

Once the regulatory approvals are in place, the company conducts roadshows to market the IPO to potential investors. During roadshows, company executives present their business plans and growth strategies, and investors can ask questions and assess the viability of investing.

3. IPO Pricing and Subscription Phase

The pricing phase is one of the most critical steps in the IPO cycle.

Book-Building vs. Fixed Price IPOs

In a book-building IPO, the price range is set, and investors place bids within this range. The final price is then determined based on demand. In a fixed-price IPO, the price is set beforehand, and investors purchase shares at that price.

How the IPO Subscription Process Works

During the subscription phase, investors submit their applications to buy shares. The shares are allocated according to the demand in different categories, such as retail investors, institutional investors, and high-net-worth individuals.

Factors That Determine the Final Issue Price

Several factors determine the final issue price, including market conditions, company performance, share demand, and the overall economic environment.

Also Read: How to Buy IPO? All You Need to Know

4. IPO Allotment and Listing Process

Once the shares are subscribed, the company moves to the allotment and listing process.

How IPO Shares Are Allocated to Investors

Investors are allotted shares based on their applications, with specific categories receiving priority. The shares are then listed on a stock exchange, which can be freely traded.

Understanding IPO Listing Day and Market Reactions

On listing day, the stock begins trading publicly, and the market’s reaction can significantly impact the share price. Investors closely monitor the price movements, as it provides insight into how the market views the company post-IPO.

5. Post-IPO Phase: Life After Listing

After the IPO, the company enters the post-IPO phase, which involves further adjustments and market reactions.

Also Read: IPO Allotment Process: The Complete Guide

Lock-In Periods for Promoters and Institutional Investors

During the post-IPO phase, promoters and institutional investors are often subject to lock-in periods, which prevent them from selling their shares for a specific time, typically 1-3 years. This is done to stabilize the stock price in the initial months.

Stock Volatility and Market Performance After IPO

Post-IPO, stock prices can experience high volatility. Investors need to be prepared for fluctuations in stock value and keep an eye on the company’s performance and broader market conditions.

How IPOs Transition Into Publicly Traded Companies

Eventually, the company settled into its new identity as a publicly traded entity. Over time, its stock price stabilizes, and it starts engaging in regular financial disclosures to comply with public company regulations.

Real-World IPO Cycle Examples

1. Case Study: A Successful IPO Cycle

One example of a successful IPO cycle in India is Zomato’s IPO in July 2021. The food delivery giant raised ₹9,375 crore through its public offering. The IPO attracted massive investor interest, with strong demand from retail and institutional investors. Zomato’s roadshow effectively built anticipation, and the company’s stock price surged post-listing, reflecting the market’s confidence in its growth potential. This successful IPO marked a significant milestone in India’s food delivery sector.

2. Case Study: An IPO That Struggled After Listing

On the other hand, some IPOs struggle after listing, with stock prices falling below the initial offering price. An example is ACME Solar Holdings Ltd., a renewable energy company that launched its IPO in 2024. Despite the issue price being ₹289, the stock opened at ₹251, reflecting a listing discount. This example highlights how companies in emerging sectors, like renewable energy, can experience post-listing struggles due to market conditions or investor sentiment.

What These IPO Cycles Teach Us About Market Trends

By studying successful and unsuccessful IPOs, investors can learn essential lessons about market trends, timing, and the risks associated with investing in IPOs.

Common Challenges Faced During the IPO Cycle

1. Regulatory Hurdles and Compliance Delays

One of the common challenges companies face during the IPO cycle is regulatory delays, which can push back the offering date or affect the timing of the listing.

2. Market Volatility Impacting IPO Pricing

Market conditions play a crucial role in determining the success of an IPO. Volatility can result in lower-than-expected demand, leading to an underpriced IPO or a failure to meet subscription targets.

3. Oversubscription and Under-Subscription Risks

Both oversubscription and under-subscription carry risks. Oversubscription can result in a lack of shares for investors, while under-subscription can indicate weak demand and result in a failed IPO.

Conclusion

The IPO cycle is a multi-stage process that involves careful planning, regulatory approvals, market analysis, and post-listing adjustments. By understanding these stages, investors can better understand how IPOs work and what factors influence their success or failure.

Learning about the IPO cycle is crucial for investors to evaluate potential opportunities. By considering the stages of the cycle, the company’s background, and market conditions, investors can make more informed decisions when participating in an IPO.

In the case of IPO lot size, knowing the minimum number of shares you must buy in a particular IPO is essential. Understanding this and how it affects your investment can help you manage your portfolio more effectively. 

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Investing in real estate in India is one of the many ways to build wealth over time. Whether it’s buying property for rental income, long-term appreciation, or business purposes, real estate offers multiple financial benefits. However, real estate tax is one crucial factor that can impact profits—the taxes and deductions associated with property ownership, rental income, and sales.

Understanding real estate tax is essential for investors who want to reduce their tax burden and legally increase their profits. The Indian tax system offers various deductions and exemptions that help lower property owners’ tax liabilities. 

Leveraging expert insights from stock advisory services can further enhance returns while ensuring compliance with tax laws. Let’s explore key tax-saving strategies for real estate investors in India.

Deduction on Home Loan Interest (Section 24(b))

One of the most significant tax benefits available to real estate investors is the deduction on home loan interest under Section 24(b) of the Income Tax Act. Here’s how it works:

• Self-Occupied Property: If you reside in the property, you can claim a deduction of up to ₹2 lakh per annum on the interest paid on your home loan.
  
• Let-Out Property:  If you rent out your property, you can claim the full interest paid on a home loan as a deduction. But the total loss you can adjust against other income (like salary or business income) is limited to ₹2 lakh per year.

2. Principal Repayment Deduction (Section 80C)

Under Section 80C, you can claim a deduction of up to ₹1.5 lakh per annum on the principal repayment of your home loan. This section also covers expenses like stamp duty and registration charges, provided they are claimed in the year of purchase.

3. Additional Deduction for First-Time Homebuyers (Section 80EEA)

To promote affordable housing, the government introduced Section 80EEA, which offers an additional deduction of up to ₹1.5 lakh on home loan interest for first-time homebuyers.
 

4. Tax Benefits on Joint Home Loans

If you take a joint home loan with a co-applicant, both parties can claim deductions on the interest and principal repayments, subject to individual limits. This effectively doubles the tax benefits, making it a sound strategy for couples or business partners investing in real estate.

5. Deduction on Stamp Duty and Registration Charges

The money spent on stamp duty and registration is relatively high. You can claim these expenses as a deduction under Section 80C, up to ₹1.5 lakh, but only in the year you make the payment. 

6. Tax Benefits on Rental Income

Rental income is taxable under the head “Income from House Property.” However, you can claim the following deductions:

• Standard Deduction: 30% of the net annual value (gross annual rent minus municipal taxes paid) can be claimed as a standard deduction for maintenance and repairs.
  
• Interest on Home Loan: Entire interest paid on the home loan for the rented property can be deducted from the rental income. 

7. Long-Term Capital Gains (LTCG) Tax Benefits

If you sell a property after keeping it for more than 24 months, the profit you earn is called long-term capital gain. This gain is taxed at 20%. But the good part is that you get indexation benefits, which means the property’s purchase price is adjusted for inflation. This helps reduce the taxable profit, so you pay less tax on the sale.

Additionally, you can save on LTCG tax by:

• Reinvesting in Residential Property: Under Section 54, if you reinvest the capital gains into another residential property within a specified period, you can claim an exemption from LTCG tax.
  
• Investing in Capital Gains Bonds: Section 54EC allows you to invest up to ₹50 lakh in specified bonds (like those issued by NHAI or REC) within six months of sale to claim exemption. 

8. Tax Benefits for Affordable Housing

The government offers additional incentives for investments in affordable housing to boost the housing sector. These include:

• Section 80EEA: As mentioned earlier, this provides an additional deduction of up to ₹1.5 lakh on interest paid for affordable housing loans.
  
• Pradhan Mantri Awas Yojana (PMAY): Eligible beneficiaries can receive interest subsidies on home loans under this scheme, further reducing the financial burden.

9. Set-Off and Carry Forward of Losses

Set Off of Losses

Set off of losses refers to adjusting losses against income or profits within the same year or in future years. Losses can be set off in two ways: intra-head set off (within the same head of income) or inter-head set off (across different heads of income). For example, a loss from house property can be adjusted against salary income. Losses from business (other than speculative business) can be set off against income from different sources, except salary. However, some losses, such as speculative business losses, capital losses, and losses from gambling, cannot be set off against any other head of income.

Carry Forward of Losses

If losses cannot be fully adjusted within the same year, they can be carried forward to future years to set off against income in those years. Losses from house property can be carried forward for up to 8 years, but only against income from house property. Under the old tax regime, house property losses can be offset against other income up to ₹2 lakh in the same year, with the remainder carried forward. 

However, under the new tax regime, house property losses cannot be offset against other income, and losses from previous years cannot be carried forward. Specific rules apply to other losses, such as those from speculative business, race-horses, and capital gains, which restrict carry forward and set off. 

Source: Cleartax.in

If your expenses on a house property, like loan interest, are more than the rental income, it results in a loss under “Income from House Property.” You can adjust this loss against other income, such as salary or business income, but only up to ₹2 lakh in a year. The extra amount isn’t wasted if the loss is more than ₹2 lakh. You can carry forward the remaining loss for up to eight years and adjust it against future house property income, helping reduce tax in coming years. 

10. Tax Planning for Real Estate vs. Stocks

When comparing real estate to stocks, the tax implications must be considered. While both asset classes can offer growth potential, real estate provides more avenues for tax deductions and exemptions. For instance, benefits under Sections 24(b), 80C, and 80EEA are exclusive to real estate investors.

In contrast, stock investments primarily offer tax benefits through long-term capital gains exemptions up to ₹1.25 lakh and tax-advantaged accounts like Equity-Linked Savings Schemes (ELSS) under Section 80C.

Investopedia

11. Diversifying with Real Estate Stocks

Investing in real estate stocks, such as shares of companies in the housing sector, can provide exposure to real estate without the need for direct property ownership. These investments combine the real estate market’s growth potential with the stock market’s liquidity. 

However, it’s crucial to carefully analyze factors such as market trends, company performance, and economic conditions before investing in real estate stocks. Unlike physical property investments, these stocks can be influenced by broader stock market volatility, interest rate changes, and regulatory policies in the housing sector. Understanding the real estate tax implications on capital gains and dividends is essential for effective tax planning.

Conclusion

Smart tax-saving strategies help real estate investors save money and follow tax laws. Knowing real estate tax benefits, deductions, and exemptions can lower tax payments. Using tools like a retirement planning calculator helps with better financial planning, leading to long-term wealth and security in the housing sector and beyond.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Investors often encounter two financial instruments: New Fund Offerings (NFOs) and Initial Public Offerings (IPOs). While both offer investment opportunities, they serve different purposes. Understanding NFOs vs. IPOs helps investors make informed decisions that align with their financial goals. 

Here’s a breakdown of their key distinctions, advantages, risks, and investment considerations.

What is NFO vs IPO: A Quick Overview

An NFO occurs when an asset management company (AMC) launches a new mutual fund scheme, offering units at an initial price, usually ₹10 per unit. After the NFO period, the fund can operate as open-ended or closed-ended, investing in stocks, bonds, or other assets.

An IPO is when a private company offers shares for the first time. Investors buy shares at the IPO price, and after listing, the shares fluctuate based on market conditions. Companies use IPOs to raise capital for expansion, debt repayment, and operational growth.

A fundamental difference between an NFO and an IPO is that NFOs deal with mutual funds, while IPOs involve company shares. IPO pricing is market-driven, while NFO pricing is fixed at NAV. IPOs can be volatile, whereas NFOs rely on fund managers for returns.

Why Understanding NFO vs IPO is Important

Many investors confuse NFO with IPO, assuming they operate similarly. However, NFOs provide access to diversified mutual fund investments, often guided by a stock advisory company. IPOs, on the other hand, involve direct stock market exposure with higher volatility.

Misunderstanding NFOs vs. IPOs can lead to unrealistic expectations. Investors might anticipate IPO-like returns from NFOs or expect IPOs to be as stable as mutual funds. Knowing how each works helps avoid misaligned expectations and investment pitfalls.

IPO: Meaning, Investment Potential & Risks

An IPO allows a private company to issue shares to the public, raising capital while giving investors a stake in the business. Investors must understand how to buy an IPO, including applying through a brokerage account and bidding during the IPO subscription period. After listing, shares trade on the exchange and prices fluctuate based on demand.

Investment Potential & Risks of IPOs

• IPO investments offer early access to a company’s growth potential.
• Current new IPOs can generate high returns but are prone to market volatility.
• IPOs lack historical performance data, making future valuation difficult.
• Hype and speculation often lead to initial overpricing, followed by corrections.

NFO: Meaning, Investment Potential & Risks

An NFO is when an AMC introduces a new mutual fund scheme. Investors pool money into the fund, investing in stocks, bonds, or ETFs. Once the subscription period ends, the fund becomes open-ended or closed-ended.

Investment Potential & Risks of NFOs

• NFOs provide access to newly structured mutual funds at an introductory NAV price.
• They lack historical performance data, making predictions challenging.
• Unlike IPOs, NFOs depend on fund manager strategy rather than market hype.
• Long-term investors can benefit from diversification and professional fund management.

Key Differences in NFO vs IPO

1. Market Entry: Stocks vs Mutual Funds

• NFOs provide access to mutual funds.
• IPOs allow direct investment in company shares.

2. Pricing Mechanism of NFO vs IPO

• NFOs have fixed NAV pricing (usually ₹10 per unit).
• IPOs determine price via book-building or fixed pricing.

3. Risk Factors in NFO vs IPO

• NFOs are professionally managed, reducing risk.
• IPOs depend on market sentiment and company fundamentals.

4. Growth Potential

• IPOs have higher return potential but are riskier.
• NFOs offer stable growth with moderate risk.

5. Investor Eligibility & Application Process of NFO vs IPO

• NFOs are accessible through mutual fund platforms.
• IPOs require a stock market account and a Demat account.

Comparison of IPO vs NFO on Key Parameters

Parameter	IPO (Initial Public Offering)	NFO (New Fund Offer)
Definition	A company’s first-time offering of its shares to the public.	A mutual fund’s first-time offering of new units to investors.
Issuer	A private company.	An Asset Management Company (AMC).
Objective	To raise capital for business expansion, debt reduction, etc.	To gather funds from investors to build a new investment portfolio.
Underlying Asset	Company’s equity shares.	Units of a new mutual fund scheme.
Pricing	Determined through book-building or fixed-price methods based on market demand and company valuation.	Typically at a fixed initial Net Asset Value (NAV), often ₹10 per unit.
Listing	Shares are listed and traded on stock exchanges.	Fund units are not listed in the same way as shares. The fund begins to operate, and the NAV changes based on the funds’ investments.
Risk	Higher risk due to company-specific factors and market volatility.	Risk varies based on the fund’s investment strategy (equity, debt, hybrid).
Potential Returns	Potential for high returns if the company performs well, including listing gains.	Potential for returns based on the performance of the fund’s portfolio.
Performance History	The company’s past financial performance can be analyzed.	There is no prior performance history, as it’s a new fund.
Investment Liquidity	Shares can be bought and sold on stock exchanges.	Units can be redeemed with the AMC, subject to redemption rules and potential exit loads.
Regulation	Regulated by the Security Exchange Board of India (SEBI) for stock markets.	Regulated by SEBI for mutual funds.

NFO vs IPO: Which is Better for Investors?

1. Short-Term vs Long-Term Investment Goals

• NFOs are ideal for long-term diversification.
• IPOs are suited for short-term gains and high-risk tolerance.

2. Risk Appetite: High-Risk vs Low-Risk Investments in NFO vs IPO

• IPOs are riskier but offer higher potential returns.
• NFOs provide stable, professionally managed investments.

Real-World Examples of NFO vs IPO Investments

Below are examples highlighting how each type of investment has performed over time.

Example of IPOs

Zomato’s IPO in 2021 is a notable success story. Launched at ₹76 per share, it was oversubscribed 38 times due to overwhelming demand. Zomato’s shares opened at ₹116 on the NSE and BSE, providing early investors a 52% gain on Day 1. The IPO helped Zomato raise ₹9,375 crore and marked the arrival of India’s startup ecosystem in the public markets.

IPOs are not always guaranteed success. For example, Paytm’s IPO in 2021 was highly anticipated but saw a steep decline after listing. It was launched at ₹2,150 per share, but weak financials and market sentiment caused it to drop over 27% on the first day. 

Example of NFO

SBI Small Cap Fund is an example of a well-performing NFO launched in 2009 at ₹10 per unit. It has delivered massive long-term returns, and as of 2024, its NAV (Net Asset Value) has grown to over ₹150 per unit. 

Conclusion

NFOs and IPOs offer unique investment opportunities, differ in risk and return potential, and have diverse benefits. Choosing between them depends on your risk appetite and financial goals. A balanced approach, backed by thorough research, including historical performance, such as 52-week high stocks, fund objectives, and company fundamentals, can help maximize returns while effectively managing risks.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

In India, a Hindu Undivided Family (HUF) is a special legal setup that helps families manage their finances and taxes more efficiently. By creating a HUF, families can reduce their tax burden and boost their savings. In this article, we’ll explore what an HUF is, HUF benefits, HUF taxation, and how families can use it to save more.

Understanding HUF: What Is It?

A HUF (Hindu Undivided Family) comprises family members who share a common ancestor, including their spouses and unmarried daughters. It is treated as a separate legal entity under Indian law, meaning it can independently own property, earn income, and take on liabilities. 

The most significant advantage is that HUFs are taxed separately from their members, allowing families to save on taxes while more efficiently managing their wealth.

Formation of an HUF

Forming an HUF is straightforward. It automatically becomes a reality when a Hindu family starts living together and acquires assets or property. However, understanding income tax concepts is crucial, as HUFs are treated as separate tax entities. 

To formalize it for taxation purposes, the family needs to apply for a Permanent Account Number (PAN) in the name of the HUF and open a bank account. The eldest male member typically acts as the ‘Karta’ (head) of the HUF, managing its affairs, while other members benefit from shared tax exemptions and deductions. cleartax.in

Taxation Benefits of HUF

One of the primary advantages of forming a HUF is the tax benefits it offers. Understanding what is income tax can help families optimize their tax liabilities. Here’s how families can save more through HUF taxation:

1. Separate Tax Entity: An HUF is treated as a separate taxpayer under the Income Tax Act. This means the HUF enjoys the same tax slabs as individual taxpayers, allowing it to claim deductions and exemptions independently.  hdfclife.com
2. Deductions under Section 80C: The HUF can invest in tax-saving instruments like Fixed Deposits and Equity Linked Savings Schemes (ELSS) to claim deductions up to ₹1.5 lakh under Section 80C. This is in addition to the deductions claimed by individual family members. hdfcbank.com
3. Health Insurance Premiums (Section 80D): Premiums paid for health insurance policies covering HUF members are eligible for deductions under Section 80D. This further reduces the HUF’s taxable income.  hdfcbank.com
4. Exemption on Gifts: An HUF can receive gifts up to ₹50,000 without attracting tax. Gifts from specified relatives are entirely tax-free, irrespective of the amount. This provision allows families to transfer assets or funds to the HUF efficiently.  Policybazaar
5. Capital Gains Exemptions: The HUF can claim exemptions under Sections 54 and 54F concerning capital gains arising from the sale of property. The HUF can minimize its tax liability on capital gains by reinvesting the proceeds as specified. hdfclife.com

Understanding How HUF Works 

Consider a case where an individual earns a taxable salary of ₹18 lahks and receives ₹6 lakhs as interest income from fixed deposits. After claiming a ₹1.5 lakh deduction under Section 80C and a ₹50,000 deduction under Section 80TTB, their taxable income amounts to ₹22.5 lakh, leading to a tax liability of ₹5.1 lakh.

If the fixed deposits were held under an HUF, the HUF would be taxed separately, allowing for additional deductions and exemptions. This restructuring reduces the total tax liability to ₹3.6 lakh, a savings of ₹1.5 lakh.

Families can optimize taxation by splitting income into two separate taxable entities by forming a HUF. This strategy can also be applied to investments like rental properties and stock market gains.

Types of Income an HUF Can Earn

An HUF (Hindu Undivided Family) can generate income under various categories, including:

• House Property: Rental income from properties owned by the HUF.
• Business Income: Profits from businesses operated under the HUF’s name.
• Capital Gains: Earnings from selling assets such as real estate or investments.
• Income from Other Sources: Includes interest, dividends, and similar earnings.

Types of Income an HUF Cannot Earn

• Salary and Professional Income: Since salaries and professional earnings require individual effort, they cannot be attributed to a HUF.
• Freelance Income: Considered as personal effort income, freelance earnings are also not eligible under HUF.

Investments and Financial Planning through HUF

Beyond tax savings, a HUF can be a strategic tool for family financial planning:

1. Investments: The HUF can invest in various financial instruments, including mutual funds, stocks, and fixed deposits. Engaging with stock market advisory services can help the HUF make informed investment decisions and potentially enhance returns.
2. Systematic Investment Plans (SIPs): An HUF can initiate SIPs in mutual funds, promoting disciplined investment. Utilizing an SIP calculator can assist in planning and projecting future returns aligning investments with family financial goals.

Key Considerations

While the benefits are substantial, families should be mindful of certain aspects:

1. Clubbing Provisions: Income transferred to the HUF without adequate consideration may be clubbed with the individual’s income, nullifying tax benefits. Proper planning is essential to avoid such scenarios.
2. Partition of HUF: Reforming a HUF once it is partitioned isn’t straightforward. Families should consider the long-term implications before deciding to partition.
3. Compliance and Record-Keeping: To prevent legal complications, it is crucial to maintain clear records of HUF transactions and ensure compliance with tax regulations.

Conclusion

Forming a HUF offers Indian families a valuable avenue to optimize their tax liabilities and enhance savings. Families can achieve greater financial efficiency and security by understanding the intricacies of HUF taxation and leveraging available benefits. However, consulting with financial advisors or tax professionals is advisable to navigate the complexities and ensure compliance with all legal requirements.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Technology is evolving rapidly, and quantum computing is among the most exciting areas. This futuristic technology has the potential to change industries, making it an interesting option for investors. If you want to invest in quantum computing stocks, this guide will help you understand the basics, key concepts, and how to get started.

What is Quantum Computing?

Quantum computing is a new way of processing information based on the principles of quantum mechanics. Unlike traditional computers, which use bits (0 or 1), quantum computers use qubits, which can simultaneously be both 0 and 1. This significantly enhances their ability to tackle complex challenges, particularly in artificial intelligence, cybersecurity, and materials science.

How Does Quantum Computing Work

Quantum computing relies on two key ideas: superposition and entanglement.

• Superposition means that instead of being just 0 or 1 like standard computer bits, qubits can be both at the same time. Imagine a spinning coin—it’s neither heads nor tails until it stops. Similarly, a qubit holds multiple values until measured.
• Entanglement is a special connection between qubits. When two qubits are entangled, any change in one instantly affects the other, no matter how far apart they are. This makes quantum computers powerful, as they can process information in ways traditional computers cannot, helping in advanced problem-solving.

Since qubits are delicate, they are kept in extremely cold environments to avoid heat or electromagnetic wave interference. These properties make quantum computers much faster than traditional ones for complex tasks.

Why Invest in Quantum Computing Stocks?

Quantum computing is still in its early stages, but many big companies and startups are investing in this technology. The potential applications are enormous, from faster drug discovery to solving complex financial calculations. As a result, investing in quantum computing stocks could be a great way to get in early on a future industry leader.

Key Companies in Quantum Computing

Here are some companies leading the way in quantum computing:

Top Quantum Computing Stocks to Watch

1. IBM (IBM) – A pioneer in quantum computing, IBM develops advanced quantum processors and cloud-based services. Its IBM Quantum Experience platform lets businesses and researchers experiment with quantum technology, making IBM a leader in commercial quantum computing.
2. Google (Alphabet – GOOGL) – Google’s Sycamore processor achieved quantum supremacy, solving problems beyond classical computers. The company continues investing in quantum research to make it practical for real-world applications.
3. Microsoft (MSFT) – Through Azure Quantum, Microsoft is developing quantum solutions using topological qubits, which improve stability. It collaborates with hardware developers to make quantum technology accessible via cloud computing.
4. Intel (INTC) – Best known for semiconductors, Intel works on quantum chips like Horse Ridge, which helps scale quantum systems efficiently. Its goal is to develop cost-effective quantum processors.
5. Rigetti Computing (RGTI) – A quantum startup focused on making quantum computing accessible. It offers a cloud-based platform allowing developers and researchers to explore quantum applications without expensive infrastructure.

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Like any emerging technology, investing in quantum computing stocks has benefits and challenges.

Advantages of Investing in Quantum Computing Stocks

1. High Growth Potential – Quantum computing is a revolutionary technology with the potential to transform industries like AI, cybersecurity, and healthcare, leading to significant long-term growth.
2. Early Investment Opportunities – Investing now allows you to enter the market before quantum computing becomes mainstream, potentially yielding high returns in the future.
3. Strong Industry Backing – Major companies like IBM, Google, Microsoft, and Intel invest heavily, ensuring continued innovation and development.
4. Diverse Applications – Quantum technology can impact sectors like finance, drug discovery, and logistics, increasing demand.
5. Government & Corporate Support – Governments and businesses worldwide fund quantum research, accelerating adoption and commercialization.

Risks of Investing in Quantum Computing Stocks

1. Uncertainty – Quantum computing is still developing, and widespread use could take years. Companies invest heavily, but profits are unpredictable, making it a long-term risk for investors.
2. Competition – Big players like IBM, Google, Microsoft, and startups are competing to lead. With so many innovators, predicting which company will dominate is hard, affecting stock performance.
3. Regulation – Due to cybersecurity concerns, governments may impose strict rules on quantum technology. Regulations on encryption and data protection could slow industry growth and impact investments.
4. High Costs – Quantum computing needs expensive research, hardware, and cooling systems. Companies are spending billions without immediate profits, which can make stocks volatile.
5. Scalability Issues – Quantum computers are hard to build and maintain due to their sensitivity to environmental factors. If companies struggle to scale the technology, their market potential may be limited.

Steps to Invest in Quantum Computing Stocks

If you’re interested in investing in this sector, here’s a simple step-by-step guide to buy Quantum Computing Shares:

1. Research the Market

Before investing, it’s important to understand how quantum computing works and which companies are leading the innovation. You can check out research reports, industry news, and insights from share market advisory experts.

2. Use a Financial Calculator

A financial calculator can help you evaluate stock performance and estimate returns before deciding. It’s a useful tool for long-term planning.

3. Look for AI and Semiconductor Stocks

Many quantum computing companies are also involved in AI stocks and semiconductor stocks. These areas are interconnected, and investing in them could provide broader exposure to the tech industry.

4. Choose a Brokerage Platform

To invest in quantum computing stocks, you need a brokerage account. ICICI Direct offers international trading through its Global Investment Platform, allowing access to U.S. stocks like IBM, Google, and Microsoft. HDFC Securities provides global investing options in partnership with Stockal, enabling Indian investors to buy international quantum computing stocks. Zerodha primarily focused on Indian stocks, but through tie-ups like Vested Finance, it offers access to U.S. quantum stocks.

5. Diversify Your Portfolio

Quantum computing is still a developing industry. Investing in a mix of established tech giants and smaller startups is a good idea to balance risk and reward.

6. Monitor Your Investments

Quantum computing stocks can be volatile. Keep an eye on industry developments and use financial calculators to track performance over time.

Final Thoughts

Quantum computing could be the next big thing, and investing in quantum computing stocks offers a chance to be part of this revolution. You can make informed decisions by researching and considering AI and semiconductor stocks. If you’re unsure, seeking advice from a share market advisory can also help.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

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