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Financial planning for the retirement years

admin — Wed, 04 Nov 2009 03:58:49 +0000

MUMBAI: Financial planning assumes a different role when an individual walks into the golden years of retirement. This a phase in which an individual bears the fruits of his savings which he has built over 20-30 years of his working life. As financial planners say, it’s a stage where you have a healthy mix of debt and equity. The idea is to build a portfolio which is safe and generates a steady monthly stream of income.

AVOID EXOTIC INVESTMENT OPTIONS

Often senior citizens fall prey to ‘ponzi schemes’, which promise high returns. Unregulatred, unrated schemes are best avoided. “If an interest-bearing instrument promises to offer a return close to double the return of a nationalised bank’s fixed deposit for the same tenure, avoid it,” says a product specialist with a private banking outfit.

But besides these fraudulent schemes there are investments products that are legal but inappropriate for seniors. Structured products with capital protection option may seem like an ideal fit when the equity market looks shaky and inflation eats into returns from fixed-income instruments. But these products come with some specific risks which vary from product to product. For instance, such instruments usually carry a knock-out level clause. If the benchmark index rises beyond a particular level, your returns will not be commensurate with the rise in the index. Often investors lack the expertise to understand the nitty-gritty of these products.

INVEST ACROSS ASSET CLASSES

Multi-asset exposure is key to financial success. “As inflation keeps eating into the money’s worth, it is prudent to have some inflation beating instruments such as equities in the form of index funds in one’s portfolio,” says Veer Sardesai, a certified financial planner from Pune. But an investor has to stay long on stocks and mutual funds to make good gains. There are 21 index funds on the Nifty and they are low cost in nature.

“Also to generate a tax-efficient income, one should put a judicious mix of investments of both long term investments beating inflation and investments with monthly cash-flow.”

Only put a share of your total wealth in fixed-income instruments that generate frequent interest income equal to your monthly bills. You can use the remaining amount for some longer term commitments.

Though interest rates on small savings schemes are low, they still make sense as an investment option. These are guaranteed by the sovereign and there is little scope for default. One can also consider the bonds and fixed deposits floated by the public sector undertakings. “Given the upward bias the interest rates may show in CY2010, it makes sense to not to commit money for more than two years,” says the product specialist.

JOINT ACCOUNT & NOMINATIONS

Joint holdings in all financial transactions is one of the simplest steps that help at the operational level. One should also ensure that the nominations are in place and in favour of the persons of one’s choice to ensure smooth transfer of ownership. After all, it is hard- earned money. Nominations, however, are far safer as the right of the nominee comes into existence once the account holder is no more.

DATA BANK

One should create a databank of financial assets and the insurance cover for them. A couple of family members or a good friend should be aware of their whereabouts. The databank should not only account for the financial assets, but also offer some cues about what actions should be taken if the owner is made incapable of taking any decisions. Dealing with medical emergencies could prove to be a difficult task to handle. A databank that provides with the contact numbers of service providers and hospitals is of great help. Carrying a photocopy of the mediclaim card in one’s purse can be of help.

MAKING A WILL

“Given that money is the root cause of all evils, it is important to plan for the inevitable. A Will with clarity of the assets held by the person with clear-cut demarcation of asset classes and the respective nominees is a must,” says Devangi Bhuta, AVP, Lotus Knowlwealth. Will is the second-best tool next to joint ownership to exercise this right. One should set aside some assets for the spouse and other dependents in the family if they don’t have any source of income. It’s best to keep the language simple, precise and clear for an easy interpretation.

Otherwise the relatives may interpret to their benefit, which may lead to problems for the actual legal heirs.
But besides the financial decisions there are a number of other issues for which one needs to be prepared. You need to invest in physical security like a home security device or objects of convenience. The most important decision is to plan on how to use your time. Some prefer to offer their expertise to the community at large by training the next generation for a small honorarium, while others get into philanthropic activities and keep themselves occupied.

Source: Economic Times

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Some investment avenues for the NRI in India

admin — Wed, 07 Oct 2009 14:30:23 +0000

Citizens of India who have the NRI status (Non-Resident Indian) can invest in India in almost all avenues that are open to a citizen with Resident Status. However, there may be some limitations or requirement for approval when investing in certain avenues. This article will analyse the options for NRI investments in brief.

Basic Requirements

As an NRI there are a few additional requirements in the form of documentation that a citizen has to comply with while investing in India. As any other citizen, documents such as a PAN card, ID Proof and Address Proof (the passport will suffice to be the single document for both), a KYC certificate (Know-Your-Client Certificate) for Mutual Fund investment above Rs.50,000/- and Passport size Photographs are required.

Apart from this an NRE (Non-Resident External Account - Dollar Account), and / or an NRO (Non-Resident Ordinary Account - Rupee Account) is/are required. The difference between these accounts is that the investments made and the returns got from those investments, using the NRE account can be repatriated to other countries.

Investment in Mutual Funds

NRIs can directly invest in any mutual fund from their NRE/NRO account. For investment above Rs.50,000/- the KYC documentation is required. Investment can be in any mode - only once, regular (monthly (SIP), quarterly, etc). The NRI investment returns in Mutual funds can fully be repatriated.

To make the investment the KYC forms given at any of the “Service Points” listed on the AMFI website. This will take about 4 days. A letter is sent back to the address for communication stating that the investor is verified. A copy of this letter has to be attached will all the mutual fund investment / withdrawals above Rs.50,000/-.

The investments will require forms to be signed but can be downloaded from any of the respective Asset Management Company (Mutual Fund) websites. So the NRI could sign, fill and have the forms sent directly to the Mutual Fund Company or to a relative / friend / financial advisor who could then give it to the Fund Office.

Investment in Shares

NRIs can invest in shares using a Demat (Dematerialised Format) account. However RBI approval has to be got for each transaction.

This is a cumbersome process unless the investment is large (>Rs.1 crore) and/or to acquire significant stock holding in a company.

The better way is thus to use the mutual fund route for exposure to the stock market.

Investment in Real Estate

Investment in land and buildings (housing and commercial) can be done by NRIs with the same rules as for the Resident Indians. However since buying land is a long drawn process, giving a Power of Attorney to a close relative (normally the parents) for executing the purchase / sale process may be advisable.

One limitation to the investment in real estate is that only the original money invested in the land can be repatriated even if invested from the NRE account.

For example if Rs.50,00,000/- was invested in a house and it was sold after 4 years for Rs.1 crore, the capital gain of Rs.50 lakhs will need to be taxed and reinvested in India itself. Only the initial investment of Rs.50 lakhs can be taken back out of the country by the NRI (if the investment was made from the NRE account).

Investment in Gold and Jewellery

Here again the investment is as per the norms for normal resident Indians.

A point to note for even the resident Indians is that gains made from buying and selling gold and gold jewellery is subject to capital gains tax.

So keep the receipts safely while making gold purchases.

Becoming a Partner in a Business

Here again approval from RBI has to be sought as becoming a partner is akin to buying shares in the business.

Bank Fixed Deposits

An NRI can invest in all the bank deposits. The interest is taxable and is generally subject to TDS unless a request from for not deducting tax at source is submitted.

Postal Deposits

Most or all of the postal deposits are out of bounds for the NRI. They cannot invest in the National Savings scheme, Kisan Vikas Patra, Monthly Income Scheme nor the Public Provident Fund.

Typically these schemes are coming under the Small Savings Schemes and the NRIs are expected to save BIG!!!!.

However schemes that were started before one becomes an NRI can be continued till the end of the scheme. They cannot be renewed at the end of the term if the NRI status continues at that time.

Summary

This article is a primer which covers most of the common investment avenues and their investability for NRIs.

All avenues but for direct investment in shares and being a business partner (which require approval for each investment); and the postal deposits (which clearly does not permit) are open for an NRI to invest based on their needs.

Source: Economic Times

Notes from InvestmentKit.com

NRI’s can also invest in life-insurance policies including ULIP, Pension Plans even if they’re residing out of India. Some of the best avilable plans are from State Bank of India (SBI). You may contact at contact@investmentkit.com for more details.

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Be cautious while investing in Mutual Funds

admin — Sun, 04 Oct 2009 03:27:47 +0000

Mutual funds are slowly becoming a preferred way of investing in equity by retail investors. This is quite welcome, given the benefits that mutual funds offer.

Professional management, diversification, transparency, affordability and convenience are some advantages, which have been highlighted time and again. Investors who wish to invest small amounts; are not very knowledgeable about the stock markets; and cannot devote much time to research and follow-up, would find mutual funds to be quite an attractive proposition to participate in the equity markets.

Investors in mutual funds should, however, be aware that investing in mutual funds does have a few disadvantages too. They must, therefore, do adequate research to minimize the impact of such negative factors.

Over Diversification

The fund may become very popular and attract lot on investments. Therefore at some point the corpus size may become too large vis-à-vis the investment opportunities available. The fund manager would, then be forced to invest in average stocks also, as he would have already reached the prescribed limits for the quality stocks.

Or the fund manager may take a cautious route and invest in much larger number of stocks than what is actually warranted for the purposes of diversification.

This can hurt the overall returns that the fund could have otherwise generated by limiting its exposure only to above-average stocks.

Higher concentration

Contrary to the above, it may also happen that the fund manager may take a much larger exposure to select industries, thereby exposing the fund to concentration risk.

If your risk appetite is low or possibly you have already invested in a few sector-specific stocks, then this particular fund may no longer be suitable to your overall investment pattern.

Idle Cash

All funds must keep some amount of the corpus in cash/cash equivalents to take care of the day-to-day redemptions. If this amount is large, it means that the fund is forgoing the opportunity to earn higher returns.

However, care must be taken to see whether this is a permanent feature of the fund or only a temporary phase. It is possible that the fund manager expects the markets to fall. Therefore, he might have booked profits by selling off a part the portfolio and is waiting for an opportune moment to re-enter the market at lower levels.

Fancy Names

Mutual funds have been marketing their funds under very fancy and catchy brand names. These could sometimes mislead the investor in understanding the real objective of the fund.

The investor, therefore, must read the prospectus to find out the exact nature of the fund and then decide whether it suits his investment objective or not.

Moreover, there could be a perception difference in what you believe the name stands for and what the fund’s intention actually is.

Higher expenses

As compared to direct investing into equity, one has to generally pay a higher cost at the time of investing. Typically, brokerage for direct purchase could be about 1% maybe even less, whereas entry load in a mutual fund could be around 2.25%.

Second, in mutual funds one would have to pay on-going annual fund management charges of about 2.5%, which is nil if you have brought shares and these are lying in your demat account. Moreover, these fund-management expenses are payable even if the fund has failed to perform, which would further reduce your already below-normal profits or maybe even add to your losses.

Loss of control

When investing in a mutual fund, you are effectively handing over the charge of your money to a fund manager. You are, therefore, dependent on the fund manager’s investment philosophy to generate returns for you. (Also read - Fund manager or Fund house - Who do you invest with? )

Some investors may not be comfortable with this kind of passive investing. They would rather like to be in full control of their investment decisions.

One must keep the above issues in mind, when investing in mutual funds. However, given the fact that the advantages of a mutual fund far outweigh these negatives, they are still the best alternative available.

Moreover, given the easy liquidity, it is possible to sell and move to other funds, in case such disadvantages become too much of a drain on the returns. One must, therefore, be diversified across various funds and actively review one’s portfolio say at least 1-2 times in a year.

Source: moneycontrol.com

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Sensex to touch 50,000 in 7 yrs: Morgan Stanley

admin — Fri, 04 Sep 2009 03:12:03 +0000

CHENNAI: Morgan Stanley on Thursday said that sensex could touch 50,000 mark in seven years from current levels , if the assumptions made are optimistic.

“One way of looking at market valuations is to find out the number of years it could take the market to reach a certain level. In our base case, using our residual income model, the BSE sensex (used as a market proxy) could take about nine years to breach 50,000 from its current level.

If the assumptions are made optimistic, the period to 50K shrinks to seven years,” analysts Ridham Desai and Sheela Rathi said on Thursday .

Source: Economic Times

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7 common investment mistakes you should avoid

admin — Tue, 01 Sep 2009 13:39:32 +0000

The other day I got a call from a friend. He wanted to know my opinion on ‘Stock A’, which was proposed to him by an old hand in the stock market. He was told that the stock would double in a few months and the person who had recommended the stock also had bought some. I told him that this stock was crap and unless an operator was running the stock, I did not see strong reasons on why this stock would double. I said this not because I have the ability to spot stocks that will double in very short periods of time, but because I am yet to come across people or experts who can do this feat every time.

So in a nutshell I told him to stay away from this stock. Nevertheless he went ahead and took some exposure in the stock, as the seduction of making quick bucks was very high. Exactly 3 days down the line this stock is 18% down with 10% being knocked off in 1 day. He was now skeptical about making equity investments with the losses suffered in a couple of days. He blamed the stock markets as well as others for his misfortune, but at the same time wanted to participate in the growth of the Capital Markets and our economy.

However, never ever did this friend ponder over the mistake he had committed. I bet there are plenty of people who are guilty of committing the same mistake or others, but never get down to really understand what went wrong and try to learn from their mistakes.

So what are the important lessons for people wanting to create wealth through equities? The cardinal rule is to make as few big mistakes as possible.

Though the list can be pretty long, here are seven common mistakes people make when investing in equities and that you should stay away from.

Mistake No 1: The first and biggest mistake is not to admit making a mistake

People stubbornly hold on to stocks where they are making sizeable losses in the belief that they can exit when the price reaches their buying price. Most of the minds are not trained to acknowledge the fact that they have made a mistake and probably the best thing is to move on. There was this gentleman who had bought a “penny stock” at Rs. 9 following a tip and hoping that it would double in a few months. The stock first rose by 20% and then declined by almost 40%. He was unwilling to let go of the position with the belief that he will do so only when the price reaches his buy price and it will happen sometime soon. The gentleman is still holding on to the stock and the stock has lost a further 40%. He could have exited the stock with a loss of just 28% initially (considering the appreciation of 20%). Now his losses are around 56% and he is still holding the stock. This happened in October 2005. Even several blue chip stocks have actually doubled or tripled since then.

Mistake No 2: Buy on tips and khabars and wanting to make a quick buck

Technology has made our lives much easier but at the same time has caused a lot of overload as well. We are subject to SMSes , emails and flyers with lucrative offers for “buy and sell tips” , commodities trading etc. that at the end of the day leave you confused. In this state only two things can happen, (a) One is that you procrastinate and not take any action with the fear of screwing it up and (b) Succumb to these offers for making you rich quickly.

The point that I am trying to make is that how people who are conservative or sane can take dangerous calls and sabotage their own well being. I remember having met this conservative gentleman who was targeting only 12% returns but still could not resist the stock market temptation when the broker called and showed him some tantalizing figures.

Mistake No 3: Buying a loser on its way down thinking you are averaging your costs

Mistake No 4: Ignoring Risk in the investment and looking only at the returns

Risk is an integral part of every equity investment and some equity investments are more risky than others. People however look at the returns without giving due importance to risk. Stock Futures can give you great returns but at the same time they can wipe out your capital as well. In the mutual fund context, people look at returns when investing in the fund, but do not consider the kind of risks the fund manager has taken whether it be concentration in stocks or sectors etc. At the same time betting heavily in Futures & Options, Commodities without understanding the nuances of the same is fraught with risk. Understand the risk i.e the downside inherent in every investment and volatility associated with it.

Mistake No 5: Buying penny stocks thinking they are cheaper and ignoring stocks, which are priced above a certain number like Rs. 1000 thinking, they are expensive.

Mistake No 6: Exiting Winners early and sticking to Losers

Ask yourself “Suppose I have a choice of 2 boats. Boat A is strong, consistent and has traveled the sea through many rough weathers as well. Boat B is showing some cracks and leaks in certain places. Water seeped in through this boat sometime back. Which boat will I choose to safely get me from this shore to the next? I bet all would opt for Boat A and no person in his right mind would opt for Boat B. Yet when this same logic is applied to stocks, people will stick to losers (Boat B) but exit winning stocks (Boat A) to make a small profit.

Mistake No 7: Just thinking but not doing anything

Finally doing makes all the difference. There is no substitute for action. Just knowing that exercise is good will not keep you fit. In the same vein, just knowing this stock is good is of no use unless you buy it.

I come across so many intelligent people who know many things but are simply unable to implement because of lack of time and busy schedules. “I knew this stock would do well, wish I had put in money here” or “I missed a good time to enter this stock” are some common responses you hear. Whatever the reason be, in the end what matters is whether you did what you knew was right. A better option for people here is to put their investments on Autopilot (Automatically investing fixed amounts every month in stocks and mutual funds).

To be a successful investor and create wealth through equities, you should shun the costly mistakes outlined. And yes if you have made any one of the above mistakes, admit it and correct it. More importantly “Stop Hoping”.

At the end of the day “Hope is not a Strategy in the Equities Market”.

Source: moneycontrol.com

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UBS sets Sensex target at 20,000

admin — Fri, 28 Aug 2009 03:20:11 +0000

Mumbai: The Bombay Stock Exchange’s Sensitive Index (Sensex) may rise to 20,000 by March 2011, helped by a recovery in the economy and company earnings, UBS AG said.

UBS set the new target as it estimates earnings will grow by 21% in the year ending March 2012 and expects the index to trade at 14.9 times 2012 earnings. UBS forecasts earnings of the 30 stocks in the Sensex will increase 4% in the year ending 31 March and 22% the following year.

Source: livemint.com

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4 golden rules of equity investing

admin — Wed, 19 Aug 2009 03:25:29 +0000

IF you want to invest in equities, there are only four things you need to remember.

1. Choose the right company
Look for superior and profitable growth. The company should earn at least 20% return on its shareholders’ capital.

Ideally a long-term investment perspective (more than five years) allows you to participate in the company’s growth. At the short end (3-6 months), share performance is driven more by market sentiment and less by company fundamentals. In the long run, the relevance of the right price diminishes.

2. Be disciplined
Stock investing is a long, learning experience. You will make mistakes, but also learn from them. Here is what you can do to ensure a smooth ride.
–Diversify your investments. Do not put more than 10 per cent of your corpus in one stock, even if it’s a gem. On the other hand, don’t have too many – they become difficult to monitor. For a passive long long-term investor, 15-20 is a healthy number. Use this asset allocation tool to find out if you need to invest beyond equities
–Research and analyse your company’s performance through quarterly results, annual reports and news articles.
–Get a good broker and understand settlement systems
–Ignore hot tips. If hot tips really worked, we’d all be millionaires.
–Resist the temptation to buy more. Each purchase is a new investment decision. Buy only as many shares of one company, as fits your overall allocation plan.

3. Monitor and review
Regularly monitor and review your investments. Keep in touch with quarterly results announcements and update the prices on your portfolio worksheet at least once a week. This is more important during volatile times when there can be great opportunities for value picking! Find out how you can buy 1 rupee coins at 50 paise !

Also, review the reasons you earlier identified for buying a stock and check whether they are still valid or there have been significant changes in your earlier assumptions and expectations. And use an annual review process to review your exposure to equity shares within your overall asset allocation and rebalance, if necessary. Ideally, revisit the RiskAnalyser at every such review because your risk capacity and risk profile could have undergone a change over a 12-month period.

4. Learn from your mistakes
When reviewing, do identify and learn from your mistakes. Nothing beats first-hand experience. Let these experiences register as `pearls of wisdom’ and help you emerge a smarter equity investor.

Source: moneycontrol.com

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Get all Info about Swine Flu through free SMS

admin — Wed, 12 Aug 2009 03:31:55 +0000

Dear All,

For the benefit of all, I’ve created a SMS channel on Swine Flu, which will give you all information about Swine Flu disease (H1N1 & its variant virus), symptoms, precautions, medicine, Govt. steps etc. This will be powered by Google news i.e. it will send you SMS as when any media in India gives information about it.

To join it free, click on
http://labs.google.co.in/smschannels/subscribe/SwineFluNews

Note: You must have Google account to subscribe to any of the list below. If you’re not, you’ll be prompted to open free google account first.

Please forward this email to all your friends, colleagues, relatives or any other person in your email directory. It will help them also.

Regards
Admin

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Keep Swine Flu Away with Basic Precautions

admin — Mon, 10 Aug 2009 13:32:12 +0000

Swine flu in India is spreading like wildfire, taking the toll to six. Officials say there are currently more than 800 cases of the H1N1 flu strain in India. Governments from all around the world are finding ways to combat this deadly disease. So what can you do to protect yourself? Stay calm and practice these 10 effective prevention tips.

1. Wash your hands frequently

Use the antibacterial soaps to cleanse your hands. Wash them often, at least 15 seconds and rinse with running water.

2. Get enough sleep

Try to get 8 hours of good sleep every night to keep your immune system in top flu-fighting shape.

3. Keep hydrated

Drink 8 to10 glasses of water each day to flush toxins from your system and maintain good moisture and mucous production in your sinuses.

4. Boost your immune system

Keeping your body strong, nourished, and ready to fight infection is important in flu prevention. So stick with whole grains, colorful vegetables, and vitamin-rich fruits.

5. Keep informed

The government is taking necessary steps to prevent the pandemic and periodically release guidelines to keep the pandemic away. Please make sure to keep up to date on the information and act in a calm manner.

6. Avoid alcohol

Apart from being a mood depressant, alcohol is an immune suppressant that can actually decrease your resistance to viral infections like swine flu. So stay away from alcoholic drinks so that your immune system may be strong.

7. Be physically active

Moderate exercise can support the immune system by increasing circulation and oxygenating the body. For example brisk walking for 30-40 minutes 3-4 times a week will significantly perk up your immunity.

8. Keep away from sick people

Flu virus spreads when particles dispersed into the air through a cough or sneeze reach someone elseâ€™s nose. So if you have to be around someone who is sick, try to stay a few feet away from them and especially, avoid physical contact.

9. Know when to get help

Consult your doctor if you have a cough and fever and follow their instructions, including taking medicine as prescribed.

10. Avoid crowded areas

Try to avoid unnecessary trips outside. Moreover, avoid touching your eyes, nose or mouth. Germs spread this way.

Source: Yahoo.com

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Post office deposits being interconnected

admin — Mon, 10 Aug 2009 03:33:16 +0000

LUDHIANA: On the line of banks, Indian postal department is going in for interlinking, which would enable customers to deposit with or withdraw money from any of the post offices in the country. The facility is likely to boost deposits by people in post offices. In the first phase, the interlinking would be intra-state, between the districts. In the second phase, the facility would be inter-state and finally, all post offices in the country would be interlinked under the core banking system.

With this facility, long queues in post offices are expected to get shortened and this move would help save time of post office account holders including pensioners and senior citizens. The step would render more time to postal officers in dealing with routine enquiries regarding outstanding balance request for cheque books, transfer of money etc in a more efficient manner. Through online facilities, the postal officials can now remain updated about financial details of customers from the amount available in the passbooks to every single transaction made.

Giving information, one of the officials of postal department informed that this facility of core banking system and the core banking facilities would be at locations having computerized operations.

He added that the project called “Arrow” is already underway in the city and it would be completed in October, under which, all post offices would be computerized.

Preeti Katyal, one of the account holders with the postal department, expressing happiness over initiation of the project, said the step being taken by the postal department would help in upgradation of the postal banking system, bringing it on a par with the other banks and customers could now happily open accounts in post offices.

“The main aim is to provide maximum facilities to customers of postal department and it is expected that this service would take off within this financial year,” said PR Kumar, chief post master, Punjab circle. He added that this facility would be just like ATM, where the account-holder would be given a code and he could carry out his transaction anywhere in the country.

Source: timesofindia.indiatimes.com

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Gold: 18,000 in 8 months and 8,000 in 18 months?

admin — Tue, 04 Aug 2009 12:13:11 +0000

Clearly, the mood is mixed. On one hand you have China and India apparently in a position to recover quickly from the global economic global meltdown, and on the other you have continuing dire forecasts (from the IMF, no less) of the steepest growth contraction since World War II. Equity markets have looked up in the last couple of months but no one is willing to bet on the longevity of the rally. Impending inflation is a constant fear and has historically been a bugbear for several potential bull-runs.

Commodity futures prices provide a glimpse into the potential outcome for the immediate future. It’s always too early to predict, but recent firming up of price in crude oil and copper could point to a bottoming out of the world economy with demand coming in at lower prices. Even after softening a bit, crude is still at double its price just six months ago; copper is up 60% from its recent lows.

Therefore, one important milestone of the revival stage seems to have been crossed. But inventories continue to pile up and there is easy availability of most industrial commodities in the world markets. The relative strength (or weakness) of the US dollar will continue to play a role in pricing and traders & hedgers globally use currency futures markets to hedge currency risk for effective, pure-play commodity positions.

The one commodity to benefit in virtually any scenario is gold and the major factors are all in favour: Interest rates are at all time low and there is a perception that the US dollar will remain weak in the immediate future till the full effects of the recession play out. Also, there is little confidence yet in the durability and viability of other investment alternatives like equities, bonds and real estate.

In this scenario, the only way for gold prices to move is up. Even if the stimulus packages announced by the governments worldwide work, it will ensure that the liquidity being pumped in to address the credit crisis will cause inflation in the immediate term which in turn will become the dominant factor in pushing up gold prices. Large international investors will invest in gold to hedge against impending inflation because gold has traditionally been an excellent hedge.

If this scenario unfolds, you could be looking at gold reaching new highs in dollar terms and the continuing devaluation of the rupee against the US dollar can push the gold price up to Rs 18,000 within 8 months. But nothing lasts for ever; eventually the global economy will recover and when it does, you will have a situation of higher interest rates, a stronger US dollar and controlled inflation. Big money will likely flow back to other asset classes which could mean gold prices will move south.

If the rupee appreciates too – a very likely possibility – then I’m willing to stick my neck out with a calculated forecast for gold to touch Rs 8,000 in 18 months. After all, gold prices almost doubled in rupee terms in the 18-month period between August 2007 and February 2009 – considering its expeditious movement when all the factors are aligned just right, it is likely that the retracement will be just as quick.

Because the gold prices are affected by a variety of factors which are dynamic, it is best to keep in continuous touch with your brokers’ research desk so that you have a detailed fundamental outlook regularly as well as guidance on trading based on technical parameters to help you make the right trading decisions. After all, whether you are a corporate or an individual, you need the latest and best available information input to help you make the right decisions.

(The author is President, Religare Commodities Ltd)

Source: Economic Times

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Search Engine for Investments and Stock Market

admin — Sun, 02 Aug 2009 03:25:02 +0000

Dear All,

Many times it happened that we’re searching for some information related to finance, investments or Indian stock market and in that process, we’re searching the complete web. To save your time and to get the best results in short span of time, we’ve made a custom search engine, which will search ONLY the following famous websites of India.

investmentkit.com
moneycontrol.com
profit.ndtv.com
www.bseindia.com
www.nseindia.com
sify.com/finance
money.rediff.com
economictimes.indiatimes.com
www.livemint.com
indiaearnings.moneycontrol.com
www.utvi.com
in.reuters.com

This search engine is powered by Google.
Try it on http://www.investmentkit.com/search/index.shtml

Thank you, your business is appreciated! We strive to provide you with the best service possible. If there is anything we can do to serve you better, please let us know.

Regards
Gopal Krishan Doda (Financial Planner)
- State Bank of India MF Agency Manager, AMFI Certified, MDRT Member

http://www.investmentkit.com

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Five top security tips when filing taxes online this season

admin — Wed, 29 Jul 2009 02:35:19 +0000

Source: VeriSign

It’s that time of the year again when you need to file your end of year income tax return, but is the plethora of paperwork bogging you down? The Indian government has just made things easier by launching the facility of filing your income tax returns online.

The advantages of filing your income tax returns online are plentiful. For instance, you can file your returns anytime, anywhere, away from the prying eyes of others and within the confines of your own home.

However, you do need to ensure you protect your personal information online. It is no coincidence that identity theft rate related to tax return filing rises in keeping with the increasing popularity of online tax filing.

With thousands of Indian taxpayers heading online to file their returns in time for the Tax Day deadline, VeriSign, Inc., the trusted provider of Internet infrastructure services for the networked world, is offering five easy-to-follow tips for Indian tax payers to protect themselves.
1. Be skeptical of emails that feature Web links. Those links can be part of a phishing scam that takes you to look-alike Web pages designed to steal your sensitive personal information, from PAN numbers to credit card account information. If you need to log in, do so independently and through the log-in Web page – not by clicking on a link.
2. When you go to file your taxes, make sure you’ve reached the correct site. One easy way is to look for a green address bar that indicates that the Web site is authentic.

3. Make sure you’re entering your personal information in a secured session by looking for https:// A Web address beginning with “https” means that that there is an encrypted connection between your browser and the Web site’s server, indicating that your communications are secure and cannot be intercepted.

4. When you finish your taxes, be sure you’ve logged out of your session. If you don’t log out, fraudsters can potentially log in to your session after you leave the site.

5. Do not respond to any tax issues or requests using fax. You might receive a email scam requesting for a fax with personal information to be sent back to “The Income Tax Department.” The Income Tax Department will never request personal information via fax.

With these simple precautions, you can file your taxes online with confidence.

Source: Economic Times

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PAN mandatory for customers paying annual premium over 1 lakh

admin — Mon, 27 Jul 2009 02:30:34 +0000

New Delhi: Insurance regulator IRDA on Friday made it mandatory for insurers to collect permanent account numbers (PANs) of every customer paying an annual premium of over Rs 1 lakh, a move designed as a part of know your customer norms.

“It has been decided to mandate the requirements of PAN on all high value insurance products,” Insurance Regulatory and Development Authority (IRDA) told all insurance companies in a circular.

IRDA added that all insurers are advised to collect PAN from all persons purchasing insurance products where the contracted annual premium payable on the insurance policies, per policy basis, exceeds Rs 1 lakh.

IRDA said this norm is to be implemented with immediate effect and all insurers are to comply not later than August 1.

Commenting on the decision, IDBI Fortis Life Insurance MD and CEO G V Nageswara Rao said, “It is part of know-your- customers norms. Since the cap is of above Rs 1 lakh, I don’t expect any significant impact on the business.”

Bureau Report
Source: Zeenews.com

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Tax return filing tips for NRIs

admin — Sun, 26 Jul 2009 13:58:46 +0000

Taking up a job abroad or settling overseas may not absolve an individual from filing an income-tax return in India.

Filing of a tax return in India depends on the taxability of income earned by the individual.

This in turn depends on his/her residential status as per domestic tax laws.

This article provides guidance to Non Resident Indians (NRI) for filing income-tax return in India.

As per domestic tax laws (i.e. Income Tax Act, 1961), an individual is considered to be a tax resident of India, if he satisfies either of the following conditions:

1) is physically present in India for 182 days or more in that tax year (period beginning from 1 April through 31 March); or

2) is physically present in India for 60 days in that tax year and 365 days or more in the preceding four tax years. The period of 60 days is extended to 182 days, if the individual is:

- an Indian citizen who leaves India during the tax year for purpose of employment outside India or as a member of the crew of an Indian ship; or

- an Indian citizen or a person of Indian origin and comes to India for a visit. A person is deemed to be person of Indian origin if, he or either of his parents or any of his grandparents were born in undivided India.

If neither of the condition is satisfied, the individual is classified as a non resident.

The following income of a NRI is taxable in India:

” Income which is received/ is deemed to be received in India; or ” Income which accrues or arise/ is deemed to accrue or arise in India.

In most cases, the NRI would also be taxed in country of his residence.

Such a situation may entail additional tax outflow due to double taxation (i.e. income being taxed in India as well as in the country of residence).

The double taxation could be mitigated by appropriate planning considering provisions of the Double Taxation Avoidance Agreement (tax treaty) entered into by India with other countries and availing benefits of the same, if any.

A NRI is required to file income-tax return in India, under the following situations:

” India sourced income exceeds the basic exemption limit (Rs 1.5 lacs for tax year 2008-09) ; ” Taxes withheld exceed tax liability for the tax year thus resulting in a refund situation; ” To enable the NRI to claim tax treaty benefits in country of his residence (i.e. the country in which his global income is consolidated and taxed).

Where income of the NRI consists only of investment income or long term capital gains or both and appropriate taxes have been withheld on such income, the NRI is not required to file income-tax return.

If the NRI is not registered with the Indian tax authorities, the first step towards filing the income-tax return would be to make an application for allotment of Permanent Account Number (PAN) in Form 49A. The PAN should be quoted in all correspondences with Indian tax authorities, including income-tax return. The application can be made either in physical form or electronically.

Based on the nature of income, appropriate income-tax return form needs to be filled. The relevant forms for NRI’s for tax year 2008-09 are as under:

ITR 1 Individuals having income from salary/ pension/ family pension & interest

ITR 2 Individuals not having income from business/ profession

ITR 3 Individuals who are partners in a partnership firm and do not carry out any other business/ profession

ITR 4 Individuals having income from business/ profession

The income-tax return can be filed either in physical form or electronically on website of the income-tax department (www.incometaxindiaefiling.gov.in)

Under physical filing option, the NRI must fill the relevant ITR form and submit the same alongwith the acknowledgment (ITR V) to the concerned income-tax office duly signed and verified. If the individual is not present in India, the income-tax return and the acknowledgement should be signed by a person duly authorised by him and holding a valid power of attorney.

Under the electronic filing option, the NRI is required to fill in the necessary details and validate the ITR form. Upon validation, a XML file is generated, which is uploaded on the website with a Digital Signature (NB: Digital signature is required to be separately obtained from specified Digital Signature Issuing Authorities). However, if the XML file is uploaded without a digital signature, the individual is required to print the acknowledgement and submit the same through ordinary post at the following address within thirty days from the date of uploading the income-tax return.

Income-tax Department - Centralized Processing Center (CPC) Post Box No 1, Electronic City Post Office, Bangalore - 560100, Karnataka

It is important to note that the acknowledgement generated upon uploading of return is a password protected file. The password to open the file is PAN number (in lower case) and date of birth (ddmmyyyy) of the individual. For eg, if the PAN of the individual is ABCDE9999X and his date of birth is 1 October 1975, the password to open the acknowledgment would be abcde9999×01101975.

Upon receipt of ITR V, the CPC would send a confirmation e-mail on the email address mentioned in the income-tax return. The due date for filing income-tax return for tax year 2008-09 is 31 July. Where the NRI is working partner in a firm or is engaged in business/ profession whose accounts are liable to be audited, the due date is 30 September.

Non filing of income-tax return would result in levy of interest at 1 percent per month of delay.

Further, penalty of Rs 5,000 could be levied if the income-tax return is not furnished within a period of two years from end of the relevant tax year (i.e. 31 March 2011 for tax year 2008-09).

The tax years of countries are usually different.

Country: Tax Year

United Kingdom : 6 April - 5 April

Australia: 1 July - 30 June

USA, Germany, Denmark, Singapore: 1 January - 31 December

It is imperative to determine the residential status of the NRI for a particular tax year as the residential status would determine eligibility to claim tax treaty benefits. There could be situation where an individual is a resident of two countries or a non-resident in both the countries (this is possible in case of highly mobile employees).

In such situation, a ‘tie-breaker’ test as per the relevant tax treaty is applied to determine residential status of the individual. This determination is imperative, since the country of residence relieves burden of double taxation by giving either credit for taxes paid in the source country or the country in which the individual is not a resident spares the income that has suffered tax in the country of residence.

On the other hand, where a NRI is considered to be a non resident of both countries, he is not entitled to the tax treaty benefits and thus would be governed by the respective domestic tax laws of those countries relating to residence and taxability. “Bank details - It is mandatory to provide bank account details in income-tax return in case of refund. Most of the NRI’s don’t have bank account in India and may be forced to open one to claim refund.

“Electronic filing of income-tax return without digital signature - A signed copy of the acknowledgment is required to be mailed to the CPC, Bangalore via regular post within a period of 30 days. Sending the acknowledgement by any other medium like courier or speed post is not permitted. Accordingly, there is no system to track the acknowledgment and confirm if it has reached the CPC within the prescribed time.

Further, in the absence of a stamped copy of the acknowledgment, it is not clear how the taxpayer would furnish proof of filing of income-tax return where required.

(The author is a senior tax professional with Ernst & Young, India)

Source: Economic Times

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10 must-do things while filing your income tax return

admin — Thu, 23 Jul 2009 04:10:29 +0000

With the due date of July 31fast approaching, it is that time of the year again when the nation’s tax payers scramble to file I-T returns. After all, filing of tax return is compulsory for everyone whose gross total income exceeds the basic exemption limit.

For financial year 2007-08, for instance, the basic exemption limit was Rs 1.45 lakh for women below 65 years of age, Rs 1.95 lakh for senior citizens and Rs 1.10 lakh for any other individual. However, for financial year 2008-09, the limit has been increased to Rs 1.80 lakh for women below 65 years of age, Rs 2.25 for senior citizens and Rs 1.50 lakh for males below 65 years.

Thus, if your income for the year exceeded the exemption limit, you will be required to file the return by the due date. “You need to file the tax return even if you are not paying any tax or even if your employer has deducted tax at source,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.
However, despite all the precautions taken by you, rush-hour filing may mean that you could inadvertently miss out on certain details and disclosures, and therefore be on the bad books of the taxman. If not that, you might just forget to make the most of the tax breaks available to you, thus paying more tax in the process and claiming no or less return. Here are 10 important things to do before filing your I-T return:

Identify Sources of Income

Firstly, you need to identify your sources of income under different heads. Under the I-T Act, all incomes earned by persons are classified into five different heads, such as income from salary, income from house property, income from business or profession, income from capital gains, and income from other sources. Thus, you should identify all your incomes from different sources, just to ensure that you haven’t missed out something while filing your return.

Refer to the Basic Documents

According to Vikas Vasal, executive director, KPMG, some basic documents/information that should be referred to while filling the return include:

· Form No 16 (issued by the employer): This shows the income from salary and tax deducted by the employer on the same.
· Summary of all bank accounts during the year: This summary gives an idea about the income earned during the year, investments made and other expenses. This will ensure that neither any income nor any eligible deductions are left out in the return.
· Details of tax paid during the year: This is required in case the individual has paid any advance tax during the year.
· Income of a minor child: This is to be included (except in few cases) even if it is a small amount, e.g. bank interest.

Compute Your Tax Liability

Having identified your sources of income and after referring to the basic documents, you need to compute your tax liability for the year. If you are familiar with the process and are comfortable with doing it, you can do it all by yourself. If not, you should take the help of a tax expert or a CA or some other qualified professional. This is important as a wrong computation of your tax liability can land you in trouble later on.
You also need to ensure that “if any tax is payable, the same has been paid as ‘self assessment tax’ before filing the tax return. Further, if any interest is payable for late payment of tax, then the same has also been deposited,” says Vasal.

Chose the Right Form

Once the details in respect of income and expenses are collated, you should check which tax return form is applicable to you. With the introduction of new forms, based on the nature of income earned during the year, you should select the right income-tax form.

For example, there are two I-T return forms — ITR-1 and ITR-2 - available for salaried individuals at the moment, and your sources of income will decide which form to use. Use the first form if your income is from salary, pension or interest earned in the financial year, and use the second one in case of any capital gain, income or loss from house property and income from any other source. There is another form - ITR-4 - which is meant for individuals having income from a business or profession. The Tax Department will refuse to accept your form in case you have chosen the wrong one.

Fill in Correct Personal Details

Ensure that you fill in correct personal details in the form meant for you, especially your name, address, bank account details and PAN number. Bank account details include the bank account number, type of account and the bank’s MICR code. “This is crucial, especially if you are claiming a refund. Likewise, your PAN is very important because the tax laws levy a fine for not quoting or misquoting your PAN number,” says Kapur.

Claim all Deductions

Ensure that you have, under various sections of the I-T Act, claimed all the deductions that you are eligible for. For example,
a. Under Sec 80 C - For investments made like PF, PPF, NSC, school tuition fees of children, insurance premium, investments in specified mutual funds etc.
b. Under Sec 80 G - Donations made to charitable organizations
c. Housing deduction for interest on housing loan etc.
Information of Specified Investments/ Exempt Income

You also have to fill in information in respect of specified investments, as per prescribed limits, such as:
# Property bought or sold in excess of Rs 30 lakh
# Mutual funds, in excess of Rs 2 lakh
# Cash deposits in excess of Rs 10 lakh
# Credit card payments in excess of Rs 2 lakh
# Bonds etc in excess of Rs 5 lakh

It is also important to know that certain income that is exempt (i.e. income which is not taxable) is also required to be disclosed in the I-T return form. For example, dividend received and receipt of PF balance, among others. Not disclosing these incomes may land you in trouble also.

Claiming a Loss

If you are planning to claim a loss in the income-tax return, which you would like to carry forward, the same can be done, only if the return is filed by the due date. If this filing deadline is not met, then the loss claimed would not be allowed to be carried forward for future set off against income.
File By Due Date & In the Right Tax Jurisdiction

After the tax return is filled in, the next step is to file it appropriately, by the due date. For individuals having salary and interest income only, the due date of filing the tax return for the financial year 2008-09 is July 31, 2009. The return may be filed either electronically or in printed form. In few cases, even the electronically-filed return has to be filed in printed form within a given time period.

“One must also ensure that the return is filed with the right tax officer (tax jurisdiction). This is determined based on the address of the individual. In case of salaried employees, the jurisdiction is determined by particulars of the employer,” informs Vasal.

The proof of filing the return is the acknowledgement, which is stamped and signed by the tax officer and a copy is returned to the individual.

One important thing to remember is whether it is electronic filing or paper filing, now individuals do not have to attach any document or attachment with the return of income.

Maintain Documents For Future Reference

The documents based on which the return is prepared may be requested at a later stage by the Income Tax Officer to check the correctness of the claims made. Failure to submit details may lead to disallowance of the deduction claimed, resulting in an increase in the tax liability or a decrease in refund. “Hence, it is advisable that all the documents required to substantiate the return are maintained by the tax payer for future reference,” says Vasal.

These are the few important points which you should bear in mind while filing your return. The golden rule is to be organised in your paper work and be timely in paying tax and filing the tax return.

Source: Economic Times

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AMFI guidelines on PAN requirements as per Sebi circular

admin — Fri, 17 Jul 2009 03:25:31 +0000

SEBI, vide circular dated 27 April 2007, had made income-tax Permanent Account Number (PAN) mandatory for all transactions in securities market. But currently SEBI has conveyed that micro schemes such as SIPs upto Rs. 50,000 per year per investor shall be exempted from the requirement of PAN. Instead this may be operationalized by accepting other standard specified identification instruments as:

•Voter Identity Card, Driving License

•Government / Defense identification card

•Passport

•Photo Ration Card

•Photo Debit Card (Credit card not included because it may not be backed up by a bank account).

•Employee ID cards issued by companies registered with Registrar of Companies

•Photo Identification issued by Bank Managers of Scheduled Commercial Banks / Gazette Officer / Elected Representatives to the Legislative Assembly / Parliament

•ID card issued to employees of Scheduled Commercial / State / District Co-operative Banks.

•Senior Citizen / Freedom Fighter ID card issued by Government.

•Cards issued by Universities / deemed Universities or institutes under statutes like ICAI, ICWA, ICSI.

•Permanent Retirement Account No (PRAN) card issued to New Pension System (NPS) subscribers by CRA (NSDL).

•Any other photo ID card issued by Central Government / State Governments /Municipal authorities / Government organizations like ESIC / EPFO.

Applicability & Transactions covered-

The following transactions will be covered:

•Systematic Investment Plans (SIPs) where aggregate of installments in a rolling 12 month period or in a financial year i.e. April to March does not exceed Rs 50,000 (to be referred as Micro SIP hereinafter).

•The following transactions will not be covered as they are currently not considered either for PAN or KYC requirement:

1.Redemption

2.Switch

3.Systematic Transfer Plans

4.Systematic Withdrawal Plans

5.Dividend Reinvestments / Sweep transactions

•This exemption will also not be applicable to normal purchase transactions upto Rs. 50,000 which will continue to be subject to PAN requirement.

•This exemption will be applicable only to investments by individuals (including NRIs but not PIOs), Minors and Sole proprietary firms. HUFs and other categories will not be eligible for Micro SIPs.

•The exemption is applicable to joint holders also.

It is recommended that this procedure be implemented by all mutual funds with immediate effect and latest by 1 August 2009.

Source: NDTV.com

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TDS assessees must quote correct PAN or pay more tax

admin — Thu, 16 Jul 2009 04:00:22 +0000

NEW DELHI: All tax assessees, including non-residents, whose tax is deducted at source must quote the correct permanent account number (PAN) or else they would end up paying more tax.

“The deductee (person from whose income tax is deducted), shall mandatorily furnish his PAN to the deductor failing which the deductor shall deduct tax at source at higher rates,” says the Finance Bill for 2009-10.

The government also proposes to make amendments in the Income tax Act to charge those not quoting PAN at a higher tax rate from April 1 next year.

The bill says the deductor will deduct tax at higher rates than that is in force or 20 per cent in case the TDS assessee does not furnish his PAN.

In fact, people who have interest income or other income which is not taxable should also fill a form (15 G) and senior citizens (above 65 years of age) or pensioners (form 15H) and quote their PAN in the form, if they do not want to be taxed.

Besides, a similar rule is applicable to non-residents who are liable to get tax deducted at source following any transaction in the country, according to the Finance Bill.

” These provisions will also apply to non-residents where TDS is deductible on payments or credits made to them,” the document said.

Source: Economic Times

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Decoding the tax jargon: Taxable income and you

admin — Mon, 13 Jul 2009 05:04:30 +0000

Budget 2009 was an out-of-season affair and was laced with greater expectations, considering that it was announced on the back of an election won mainly on the plank of the common man’s progress.

The finance minister has woven a set of proposals that could bring the marginal tax paying individual some cheer, while handing out a mixed bag to substantial taxpayers.

PERSONAL TAX

Here is why you can sport a small smile. The threshold of taxable income has increased across categories. The existing surcharge of 10% for individuals earning more than Rs 10 lakh, threatening to become a permanent way of life, is proposed to be deleted. This would mean savings of around Rs 3,400 and upwards, depending upon your income level.

For the many who are straddling between education and employment or any other income earning activity, the deduction from taxable income of interest on your education loans is being broad based to cover any education post the senior secondary stage, from the existing cover for specified graduate or postgraduate courses only.

Any responsibility you may have towards medical treatment training and rehabilitation of a dependent with severe disability, as defined, could just get a wee bit lighter with the flat deduction available being increased to Rs 1,00,000 from Rs 75,000. Strangely, the lawmakers did not reason to similarly extend the existing benefit where the taxpayer himself suffers from severe disability.

The current threshold of Rs 15,00,000 for wealth tax levy, which is ridiculously incongruous to realities today, has been marginally raised to Rs 30,00,000. The onus of paying advance tax is now only on those whose tax liability exceeds Rs 10,000 — raised from Rs 5,000. The brunt of taxes withheld on your rentals (over Rs 1, 20,000) gets lighter with reduction in the TDS rate from 15% to 10% on building, furniture and fittings.

If you are into business with a turnover/receipts not exceeding Rs 40 lakh, you gain more time and energy for your business — you can offer to tax income of 8% on a presumptive basis, without the hassle of having to maintain the prescribed books of account, undergo a tax audit or pay advance tax!

For operators who are engaged in the business of plying, hiring or leasing of goods carriages owning not more than 10 carriages, however, the picture is different. Now, profits and gains which are taxable on a presumptive basis for each vehicle are: Heavy goods vehicle — raised from Rs 3,500 to Rs 5,000 per month and for others it has been raised from Rs 3,150 to Rs 4,500 per month.

As a partner in a firm, look out for additional salary — the limits have been made uniform for both professional and other firms and stand increased: For the first 3,00,000 book profits/loss — 150000 or 90% of book profits, whichever is higher and for balance book profits it is 60% of book profits.

More impetus for saving: Tax benefits on contribution to the government’s pension scheme will now be extended to the self-employed. Clarity is required on the eligible amount though, with the existing provisions speaking of 10% of salary, with relation to employees. Moreover, even post closure of the account, you will not need to pay tax if you purchase an annuity plan in the same year.

If you harboured thoughts of transferring your immovable property, bypassing a registration with the stamp authority, and therefore an assessment to duty, in terms of the proposed amendment, the consideration for the purpose of computing capital gains tax would now be based on the assessable value of stamp duty with respect to the transfer, and not merely the assessed value, as per existing provisions.

And, for those of us who were planning receipts of gifts in kind (other than those excluded), without having to pay tax, the tax net will now also cover receipt of property, which includes works of art without consideration or where the consideration received is less than the aggregate stamp duty value/fair market value exceeding Rs 50,000.

This is for the employees. A loud cheer went up for the abolition of FBT. It weakened however, with the realization that this heralded the return of the perquisite regime for employees. Now bewilderment rules, with the realization that the employee could possibly be worse off than under the pre-FBT days.

Where FBT was paid for the amenities to employees, even in a situation where the tax was passed back to the employee, the effective charge came to around 7% or 17%. It will now be taxable, depending upon the relevant valuation rules, at up to 34%.

Contribution exceeding Rs 1 lakh by your employer to a super annuation fund shall now be taxable as a perquisite in the pre-FBT regime, regardless of the quantum this was not brought to tax. ESOPs will now be taxable on the date of exercise of option based on the fair market value, determined in the manner to be prescribed. In the pre FBT scenario, to the extent that such a scheme were in accordance with prescribed guidelines and duly approved by the commissioner of Income-tax , they were not taxable as perquisites.

So now all the amenities, privileges, benefits provided by your employer to you/a member of your household (with the exception of phone expenses, as per current rules) will be brought to tax. In the interim period between the Budget speech and the enactment of law, should an employer, invoking provisions as per which the more favorable between the proposed and existing provisions can be adopted, choose to not pay FBT, would he be duty bound to deduct tax at source from payments to employees, although he could equally claim refuge under the same beneficial provision? This is an aspect that merits consideration.

In all, you could say, the token sops are overshadowed by the more grim prospects. You might have liked to have a greater premium on savings in the form of a higher deduction (from the paltry Rs 1 lakh), more relief for the senior citizen in the face of decreased income from investments, and a higher threshold for tax payments too. What is sure is that many of the intimidating provisions are likely to face, if not a lot of debate now, then plenty of litigation in the days to come.

One only hopes the tax code announced by the finance minister is a more simplified and harmonious version of the current legislation.

Source: Economic Times

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Union Budget 2009-10: No PAN card, shell out more

admin — Tue, 07 Jul 2009 05:47:09 +0000

If you don’t have a permanent account number (PAN), your tax deducted at source (TDS) could be higher. The penal rate will be a minimum 20%. The proposed penal rate is seen as an attempt by the government to gradually make PAN mandatory for all transactions, and ensure that more people come under the TDS net.

According to the changes proposed in the Finance Bill, a person whose tax is being deducted at source should furnish his PAN to the deductor. If he fails to do so, he will have to pay a flat 20% TDS. Finance minister Pranab Mukherjee has cut TDS rates on rental payments for plant and machinery to 2% from 10%, and land and building to 10% from 15%. The lower rates will come into force from October, 2009.

But those who do not furnish PAN till April 2010; will not enjoy the benefit of a lower TDS.

Over 75 lakh PAN cards are issued every year. Since the process has been streamlined over a period of time, the government reckons that nobody has a valid reason not to have a PAN. A nationwide publicity campaign has been on for the past three years to promote PAN compliance. Over and above this, the government has also proposed to remove surcharge and cess on TDS in relation to non-salary payments. Currently, all TDS payments attract a surcharge of 10% and an education cess of 3%.

These provisions will also apply to non-residents where TDS is deducted on payments or credits made to them. The proposed TDS rates for individual or HUF contractors and sub-contractors will be as low as 1%. This is primarily to keep an audit trail. But sub-contractors and contractors in the transport business will be spared of TDS, if they furnish PAN, failing which the rate could be as high as 20%.

Source: Economic Times

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