Tuesday, November 8, 2011

Prajna Capital

Prajna Capital

Recurring Deposit

Posted: 08 Nov 2011 06:06 AM PST



Want to save for a purchase or an event in a systematic way? The amount needed could be for anything— purchase of a car or even an expensive LCD. If you have a three-year time frame and are wary of the vagaries of equity market, you can consider a recurring deposit. If you can spare the money for five years, you can even look at opening a recurring deposit with a post office.

HOW DOES IT WORK?:

In recurring deposit you fix a certain amount, which is debited from your savings account, just like a SIP. This total amount, along with the interest amount, comes back into your account at the end of the fixed period.

WHEN DOES IT WORK?:

This investment is ideal if you are looking to save small amounts of money month after month. In a way, it's lighter on your pocket, especially at such times when daily expenses are touching the roof. Moreover, it instils in you financial discipline.

FEATURES:

You can open a recurring deposit either with banks or with the post office. The minimum amount of investment varies from bank to bank. For example, in ICICI Bank and HDFC Bank, the minimum investment amount for RD is Rs 500 per month, whereas in Axis Bank, it is Rs 1,000. The tenure usually ranges from six months to a maximum period of 10 years.


The investment amount is lower at Rs 10 per month for post office but the tenure of investment is five years. However, it allows partial withdrawals.


Most banks allow only premature withdrawals. The interest rate applicable for premature closure of deposits (all amounts) will be the lower of either the base rate for the original or contracted tenure for which the deposit has been booked, or the base rate applicable for the tenure for which the deposit has been in force with the bank.


Also, an investor has the option of prematurely withdrawing the amount after three years in post office RDs. Bank rates are over 8% for one-year RDs. The post office offers a rate of 7.5% (quarterly compounded) on the fiveyear RDs.
 

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Gifts and Tax

Posted: 08 Nov 2011 05:19 AM PST

 

IT IS human nature to be happy when one gets a gift, whether on certain occasions or otherwise.


However, one also has to accept that there are associated income tax implications under the IncomeTax Act, 1961 (the Act) on certain gifts.

It may be recalled that earlier, gifts were taxable in the hands of the donor under the Gift-Tax Act, 1958, which continued for around 40 years until it was repealed in 1998.

Subsequently, in 2004, taxability of gifts was reintroduced as part of the Act and were made taxable in the hands of the recipient, and effective from September 2009, the scope of taxability provisions in connection with gifts has been widened.


Taxability of gifts: As per the provisions of Section 56(2)(vii) of the Act, specified gifts received by an individual or Hindu Undivided Family (HUF) are taxable under the head "income from other sources" in the hands of the recipient, subject to the monetary limits and other conditions specified therein.

As has been specified in the Act, gifts would mean any sum of money; immovable property, such as land or building or both; shares and securities; jewellery; archaeological collections; drawings; paintings; sculptures; any work of art; or bullion.

In case of any sum of money received, the aggregate value of which is in excess of Rs 50,000, the whole amount is taxable in the hands of the recipient.

In a case, where any immovable property is received as gift without consideration, the stamp duty value of which exceeds Rs 50,000, the stamp duty value of such property would be taxable in the hands of the recipient.

Where a property, other than immovable property is received with out any consideration and the aggregate fair market value (FMV) of which is in excess of Rs 50,000, the entire FMV would be con sidered as income of the recipient in accordance with regulations. For ex ample, in case you receive any jewellery, shares or any other movable property covered within the provisions of the law, then the FMV of such gifts would be computed in accordance with the prescribed regulations and accordingly taxed.

Exceptions: The income tax authorities have also provided a breather from tax by providing for cer tain exceptions in relation to receipt of gifts. Some of the exceptions have been specified below: Gift received from a rel ative would not be consid ered as taxable in the hands of the recipient, ir respective of the value of the gift. The act has speci fied that relatives would include the spouse of the individual; brother or sis ter of the individual; brother or sister of the spouse; brother or sister of either of the parents of the individual; any lineal ascendant or descendant of the individual; and any lineal ascendant or descendant of the spouse.

Gifts received on the occasion of marriage of an individual, whether received from relatives or non-relatives, irrespective of the monetary limit.

Gifts received under a will or by way of inheritance.

Gifts received in contemplation of the death of the payer or donor.

Gifts given by the employers to their employees, if the value of the gift is less than Rs 5,000 in aggregate during the tax year.

Therefore, gifts received under any of the above situations will be considered exempt from tax in the hands of the recipient.

It can, therefore, be seen that the relevant awareness and understanding of tax provisions relating to gifts would be helpful in order to understand its implications and to be in compliance with tax laws.
 

ULIP Review: Shriram Ujjwal Life

Posted: 08 Nov 2011 03:39 AM PST

Shriram Ujjwal Life is a Type I unit-linked insurance plan (Ulip) that offers higher of the sum of death benefit or fund value as death benefit. This is a plain vanilla scheme which has rigid features such as fixed policy tenure and only an annual mode of premium payment. Conversely, the scheme also allows alterations like reduction in sum assured and attachment of riders. Although the cost structure is slightly expensive, the product offers good yield as the insurer has managed a few of its equity funds well.
   
Our View

Overall, the policy is priced high and has rigid features. Even the performance of its funds other than the Equity Fund has not been encouraging. The policy, however, has certain good features like automatic transfer of funds and a settlement option that may work in favour of the plan.

Unique Feature

The scheme offers an optional auto transfer strategy which allows an investor to gradually transfer money from the Conservative Fund to the Equity Fund. Also, it has an option to reduce the sum assured anytime during the policy year.

For Existing Customers

Stay invested, but opt for automatic transfer option to gradually transfer premium money from Preserver to Equity Fund. This will help to get better returns and avoid market risk. One may add term insurance if not adequately insured.

For Those Looking to Invest

Shriram Ujjwal Life does not have anything exceptional. When compared to other Type I Ulips in the market, the investment options (funds) have generated lower returns. Investors can give this scheme a miss.
 

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in L&T Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

 

 

UTI MASTER VALUE

Posted: 08 Nov 2011 03:13 AM PST

Master Value has been a decent performer, especially since 2007. But the scheme can take time to yield returns given its value style of investment and higher exposure to mid-caps and small caps. Invest only with a long-term horizon

 

For a country that is gung-ho about growth, the value style of investment is hard to sell, with hardly any takers. UTI Master Value is probably one of the oldest value-oriented equity schemes. However, in keeping with the market trend, it has skewed its focus from pure value to growth at reasonable prices (GARP). Master Value shot into the limelight in 2009 delivering over 115% returns which more than compensated for the loss in its NAV in the previous year. Its focus on GARP helped it do well in 2010 despite volatility. It returned more than 27% gains against 17% returns made by the Sensex. The strategy has, however, backfired on the scheme this year as GARP stocks have declined the most in the current market.
 

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in L&T Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

 

 
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