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Investors are shunning equity-linked savings schemes (ELSS), or tax-saving mutual fund schemes, this tax planning season, say investment advisors. According to them, investors have invested a measly . 200 crore in the first four months of the tax saving season, which starts from October to March. A lackluster stock market, attractive returns from alternative investments in debt and the 'confusion' about the status of ELSS after the implementation of Direct Taxes Code (DTC) have contributed to investor apathy towards these schemes, which served as the introduction to stock market for many retail investors. Though investors' decision may look solid from the short-term perspective, they may be letting go of a chance to create wealth in the long-term by eschewing tax planning MFs, say investment experts.

Those who have been investing in these schemes regularly through SIPs (systematic investment plans), as part of their financial plans, have been continuing with their investment. But those who invest lump sum in these schemes at the last minute as part of their tax planning strategy are not enthusiastic about them anymore. However, more than the subdued market and better debt options, it is the confusion about the DTC which is really bothering the investors. According to experts, investors are in a quandary as they don't know for sure whether DTC would be implemented next year or whether ELSS would find a place in the final list of investments that qualify for tax deduction under Section 80C of the Income Tax Act. As per the original proposal, ELSS won't qualify for tax deduction after the introduction of DTC. However, there are unconfirmed reports that the MF industry is lobbying for the continuation of the benefit to ELSS.

It is a huge problem. Since most people are not sure whether ELSS would continue to exist next year, they are hesitant to make fresh investments in them. Also, since the stock market hasn't given any meaningful returns in the short term, it is difficult to convince them otherwise," says a mutual fund advisor. According to investment consultants, the rebound in the stock market in the recent past hasn't boosted investor sentiment. The smiles are back on many faces in the market, but the market has improved very fast. There is still some confusion about the future course of the market. Though investors have nothing per se against ELSS, they don't have the confidence to invest in stocks. Also, you can get assured returns of 8%-plus in alternative investments available under Section 80C. Investors, especially conservative ones looking for assured returns plus safety of capital, can invest in public provident fund (PPF) or five-year bank fixed deposits to claim tax benefit under the same section that also covers ELSS.

Sadly this is the best introduction possible to the stock market for retail investors, especially the first-timers. The tax benefit plus the three-year lock-in period act as a perfect way to weather the volatility in stock market. Unlike other funds, you won't be tempted to book profit after a short period and get out of the market if it goes down. In that sense, it prepares investors for a long-term in the market.

Unfortunately retail investors in India don't realise that when the market is down it is the right to invest in stocks. Sadly, investors end up doing exactly the opposite. When the market is very high, people start investing more and more in equities and they run away when the market starts going down. That is why they end up losing money in the market. I would still recommend ELSS to investors who are ready to take the risk and time to wait for the returns. The returns generated by these schemes in the long term underscore the point (See table). For example, the best performer returned around 13% in the last five years. As you would agree, that is something your debt investments can't offer you in the long term.

To begin with, ask yourself whether you can stomach the uncertainty and volatility in the stock market. Two, can you handle a depressed stock market even after the mandatory lock-in period? According to investment experts, this is crucial because investors should get into the stock market only if they have time in hand. "If you are used to the stock market, go ahead and invest. However, if you are a first-timer, be sure whether you can handle the volatility. As for first timers, I will ask them to invest the money in two or three tranches in the next one month when the market is a bit down. It may prove beneficial as the market has already gained much this year

A Case for ELSS Investment

Don't shun your ELSS just because of depressed stock market or better returns in PPF and five-year FDs

If you have earmarked money for the stock market, you can still go ahead with your investments

Don't let the confusion on implementation of DTC and the status of ELSS in the new regime bother you

Always remember that equity is risky and you should have at least five to seven years time frame

If you are investing for the first time in equities, be cautious as the market is going though a rough period

Equities can still earn you superior returns in the long-term; the best ELSS has returned over 13% in the last five years

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

HDFC TaxSaver
ICICI Prudential Tax Plan
DSP BlackRock Tax Saver Fund
Birla Sun Life Tax Relief '96
Reliance Tax Saver (ELSS) Fund
IDFC Tax Advantage (ELSS) Fund
SBI Magnum Tax Gain Scheme 1993
Sundaram Tax Saver

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Application form for Tax Saving Infrastructure Bond and more information

Submit filled up application Collection canter near you

------------------------------------------------
How to apply to REC Bonds?

Apply for REC Tax Free Bonds forms below

IDFC Premier Equity Fund - Re-opens for New Subscription

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Posted: 02 Mar 2012 02:11 AM PST

IDFC Mutual Fund has announced the re-opening of IDFC Premier Equity Fund for new subscriptions, with effect from March 1, 2012. Units will be available at the applicable NAV.

Last time, it was opened on March 31, 2011

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

HDFC TaxSaver
ICICI Prudential Tax Plan
DSP BlackRock Tax Saver Fund
Birla Sun Life Tax Relief '96
Reliance Tax Saver (ELSS) Fund
IDFC Tax Advantage (ELSS) Fund
SBI Magnum Tax Gain Scheme 1993
Sundaram Tax Saver

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Application form for Tax Saving Infrastructure Bond and more information

Submit filled up application Collection canter near you

------------------------------------------------
How to apply to REC Bonds?

Apply for REC Tax Free Bonds forms below

Submit the filled up form to Collection canter near you

Birla Sun Life Gold Fund

Posted: 02 Mar 2012 01:23 AM PST

Birla Sun Life Asset Management has launched a new scheme Birla Sun Life Gold Fund, an open ended fund of funds scheme. The scheme will be open from March 1 to March 15.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

HDFC TaxSaver
ICICI Prudential Tax Plan
DSP BlackRock Tax Saver Fund
Birla Sun Life Tax Relief '96
Reliance Tax Saver (ELSS) Fund
IDFC Tax Advantage (ELSS) Fund
SBI Magnum Tax Gain Scheme 1993
Sundaram Tax Saver

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Application form for Tax Saving Infrastructure Bond and more information

Submit filled up application Collection canter near you

------------------------------------------------
How to apply to REC Bonds?

Apply for REC Tax Free Bonds forms below

HRA and Home loan and Income Tax

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Posted: 02 Mar 2012 12:29 AM PST

Let us evaluate various possible situations an individual can find himself in and understand what the income tax act permits him to do.

1: You live in your own house

You have taken a home loan and residing in the house purchased with it. Since you are residing in your own house, you will not be able to claim HRA. However, you will be able to claim tax benefits on both, the principal and interest repaid on the home loan.

2: You own a house in another city

Resided in Mumbai but had bought an apartment in Chennai taking a home loan. S/He will be entitled to HRA exemption and tax benefits on both, the principal and interest repaid on the home loan.

3: Your house cannot be occupied at this point (e.g. under construction)

You have bought a house in Mumbai taking a home loan and you're currently living in Mumbai in a rented apartment because the house is under construction. In such a case, you are eligible to claim HRA.

In the case of tax breaks on the home loan, you can claim tax benefits only for your principal before the completion of your house. Once your house is completed, you can claim tax benefits on the total interest paid up to the date of completion in five equal installments in five years beginning from the year of completion.

4: You have a house which is ready for occupation but you cannot reside in it

You have bought a house in Delhi taking a home loan and now you aren't residing in it but are living in a rented apartment in Delhi itself for genuine reasons e.g. the house that you have bought is far away from your office. In such cases, the Income tax act permits the individual to claim HRA and home loan benefits which includes both principal and interest repaid on the home loan.

Also, please note that if your house remains vacant, then you will still need to pay tax on a notional rent income.

5: You have rented your own house and currently residing in a rented house

You took a home loan and your house is now ready for occupation. You have rented the same out while you reside in a rented house. The Income tax act allows you to claim both HRA and home loan benefits. However, in such a case, since you are the recipient of rent because you have let out your own house, that income is taxable at your hands.

The Income Tax Act treats HRA and home loan deductions under separate sections independently. The two are not interconnected to each other. HRA is dealt with in section 10(13A) Rule 2A while home loans are entitled for tax benefits under section 80C (tax benefit on principal repayment) and Section 24 (tax benefit on interest payment) of the Income Tax Act. Hence, figure out where you stand to avail both tax benefits accordingly.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

HDFC TaxSaver
ICICI Prudential Tax Plan
DSP BlackRock Tax Saver Fund
Birla Sun Life Tax Relief '96
Reliance Tax Saver (ELSS) Fund
IDFC Tax Advantage (ELSS) Fund
SBI Magnum Tax Gain Scheme 1993
Sundaram Tax Saver

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Application form for Tax Saving Infrastructure Bond and more information

Submit filled up application Collection canter near you

------------------------------------------------
How to apply to REC Bonds?

Apply for REC Tax Free Bonds forms below

The deflationary power of inflation

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Posted: 01 Mar 2012 11:51 PM PST

In India, over the last few years, the rate of rise in prices of several items, including consumables, has been in focus. Popularly known as 'rate of inflation', its sudden rise has been in focus among the policymakers, the government and the consumers alike. This is because it has been impacting each of these stakeholders in the economy in different ways.

Of these three, however, consumers have been hit the most. And among the consumers, the policymakers and the people in the government, there is an overlapping category of people, the investors, who are being hurt badly by this inflation beast. But surprisingly, not many understand the scale of the damage inflation is capable of inflicting on their invested corpus when they look at it with a longer term view.

A crude example would probably help here. In a very basic sense of the term, an annual rate of inflation of, say 8%, would mean that an article that cost you Rs 100 a year ago would cost Rs 108 today. Now suppose you, as an investor, had put in Rs 10,000 in a bank fixed deposit (FD) with an 8% interest rate about a year ago. Today, you have Rs 800 as interest income on that investment. But if the rate of inflation was 8% in the past one year, a basket of products and services that you would need regularly and which cost you Rs 10,000 a year ago would cost you Rs 10,800 today. So, even if you kept your money in a bank fixed deposit that earned you an 8% rate of interest, at the end of the year, because of inflation, you are still at the same level in terms of your purchasing capacity.

You would actually be worse off if the rate of interest that you earned from the bank was lower than the rate of inflation. That is, suppose you earned interest at 8% or 9% and the rate of inflation was 10%, something that we all witnessed during the past several months. So, on a point-to-point basis, even though you saved over the last one year, in terms of your buying power you are actually worse off. Now juxtapose the impact of a 10%, 20% or a 30% rate of tax. If you are a taxpayer and face one of these three tax rates, you would be even more worse off. In such a situation, going by your tax rate, you would end up getting about 7%, 6.3% or 5.5% net return.

Now to take this case a little farther: Think that you save every month some money, and you have done that over several years. But the rate of inflation makes you worse off every year (remember rate of interest in banks is closely linked to inflation). In that case, you could end up in a bad situation when you retire. So, what do you do now to save yourself from being affected by the inflation beast?

Inflation leads to depreciation in the value of money. So, direct money investments do not take care of addressing this problem. The trick here is to aim for higher positive returns by investing in equities, equity-linked instruments and commodities, including precious metals. Over the long term, these will definitely beat inflation. The questions about how much you should be in equity, the ratio between equities and commodities, how much total investments should you do — all these are questions specific to each individual, and your financial planner and advisor should be able to guide you through this.

The trick here is to aim for a post tax rate of return that would be higher than the rate of inflation. One of the tricks of achieving this is to invest in such instruments that, over the long term, they can give higher returns and also minimize the burden of tax on you.

For any financial planning exercise, we always aim for positive returns. In India, the long-term rate of inflation has been about 6-7%. So, the aim for every financial plan should be to have an inflation-plus return, or at least the returns should match the rate of inflation, financial planners say.

In India, since the general rate of interest in the economy is determined by the prevailing rate of inflation, the rate of interest you get in a bank FD is usually very close to the rate of inflation. For example, after the rate of inflation in India hovered above the double-digit mark, banking sector regulator Reserve Bank of India (RBI) also raised the key policy rates that determine the rate of interest in the economy, and FD rates also shot up to the current high rates of 9-10%. But here, the interest that you earn is taxable if you fall in the tax bracket.

The same is the case for several other investment instruments like bonds, debentures and some of the small savings schemes. However, there is a particular type of FD, of five-year maturity, in which the returns enjoy a tax-free status.

On the other hand, returns from equities, equity mutual funds and some other investment instruments, like the recently-introduced tax-free bonds, are tax free, provided these are held for the long term.

Among the mutual funds, equity linked savings schemes (ELSS) allow you tax rebate while you invest and also on the returns from these schemes. In addition, among all the investment vehicles that allow you tax rebate under Section 80C of the Income Tax Act, these schemes have the shortest lock-in — of three years only. All others have 5,7,10 years of lock-in. The government, however, is thinking of reducing the lock-in for qualified bank FDs from five years to three years — at par with ELSS.

Among mutual fund schemes, fixed maturity plans of more than one year are still attractive from the returns point of view, and also for their tax benefits, the latter coming from indexation. These instruments offer rates which are at least at par with bank FDs, but score over FDs in terms of tax advantages. All dividends and the redemption amount that you get from your long-term investments in mutual funds also are tax free. The same is the case for dividends you earn from your direct investments in equities.

Mutual funds also have the added advantage of diversification which also helps reduce your risks over the long term. Here, however, after the recent rally in the stock market, d iv i d e n d - yield stocks are not so attractive anymore.

Markets have now gone up, and so calculations of one month ago do not apply in the dividend yield story anymore. If you are investing for the long term and directly in equities, one should look at the brick-and-mortar stocks.

Stocks of companies from sectors like FMCG, steel, automobile, cements, etc, are easier to understand than companies like software where a much larger number of factors influence the stock price. Among equities, historically it has been seen that stocks of companies with a solid business and a good track record have mostly beaten the rate of inflation over the long haul. Data show that over the past two decades, while the average rate of inflation was between 6-7%, the average rate of return in sensex was more than 15%.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

HDFC TaxSaver
ICICI Prudential Tax Plan
DSP BlackRock Tax Saver Fund
Birla Sun Life Tax Relief '96
Reliance Tax Saver (ELSS) Fund
IDFC Tax Advantage (ELSS) Fund
SBI Magnum Tax Gain Scheme 1993
Sundaram Tax Saver

---------------------------------------------

Application form for Tax Saving Infrastructure Bond and more information

Submit filled up application Collection canter near you

------------------------------------------------
How to apply to REC Bonds?

Apply for REC Tax Free Bonds forms below

Submit the filled up form to Collection canter near you

Mutual Fund Fact Sheet

Posted: 01 Mar 2012 11:12 PM PST

Investors, typically, take advice from friends, relatives or brokers to buy stocks or mutual fund plans—often, out of sheer laziness. Even informed investors commit this mistake. But those who do their homework and conduct due diligence before putting in their money could stand to gain significantly.

In the case of companies, it is their balance sheet which contains the relevant details. But, for mutual fund investors, it is the fact sheet of the fund. This is a booklet containing vital information about each of the schemes of that particular mutual fund. One should read it not only before investing, but also after investing. People should ask for fact sheets from their advisors and respective fund houses on a regular basis. It updates the investor on the funds performance and any changes that take place. For instance, any change in the schemes expense ratio is something the investor would want to know about

After the circular sent by the Securities and Exchange Board of India (Sebi) to fund houses in this regard, mutual fund firms have been issuing new fact sheets since September 2011.

Performance scorecard: The fact sheet walks investors through the performance of the scheme through boom and bust periods. Currently, fund houses provide data on performance over four one-year periods, compared to a single one-year performance data earlier. Second, the returns have to be shown in percentage form, and the manner in which an investment of ~10,000 grew during the one-year periods. Earlier, most equity funds showed their past one-, three and five-year returns only.

The new fact sheets help compare like with like in a time period. Earlier, fund houses gave returns earned since inception, which was misleading, as every scheme had started at a different stage. Investors, instead of blindly investing, should know what fact sheets indicate. More, the portfolio turnover ratio that only the fact sheets show is an important matrix to compare schemes.

Track the fund manager: The fact sheet announces its fund managers and chief investment officers — another important indicator globally. However, in India investors are yet to begin the practice of actively keeping track of their fund manager.

The portfolio: This is an extremely important part, as it tells you the exposure of the fund to different sectors. The objective and ratings for equity and debt funds are stated separately. Although ratings are important, these cannot be the sole deciding factor. But with this, one is sure of not being mis-sold.

Standard deviation and Sharpe ratio: Standard deviation indicates the manner in which returns have deviated from the average, whereas the Sharpe ratio shows how well the portfolio has performed in relation to the risk borne. This is again very useful. Reason: Although one portfolio can reap higher returns than its peers, it is a good investment only if those returns do not come with too much additional risk.

The fact sheet is a booklet containing vital information about each of the schemes of that particular mutual fund.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

HDFC TaxSaver
ICICI Prudential Tax Plan
DSP BlackRock Tax Saver Fund
Birla Sun Life Tax Relief '96
Reliance Tax Saver (ELSS) Fund
IDFC Tax Advantage (ELSS) Fund
SBI Magnum Tax Gain Scheme 1993
Sundaram Tax Saver

---------------------------------------------

Application form for Tax Saving Infrastructure Bond and more information

Submit filled up application Collection canter near you

------------------------------------------------
How to apply to REC Bonds?

Apply for REC Tax Free Bonds forms below

United India Insurance Critical Health Policy - UNI Criticare policy

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Posted: 01 Mar 2012 07:03 PM PST

United India Insurance Company on Monday announced the launch of a critical care health insurance product. UNI Criticare policy covers 11 critical diseases. The policy targets people in the age group of 21-65 years, the company said in a statement. For the first nine months of the current financial year, the company had recorded a net profit of 414.41 crore, up 24% from a year ago period.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs