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How can I save tax using different tax deductions?

There are different tax deductions available to an individual under different Sections of the IT Act. Section 80C for example has a deduction limit of Rs. 1 lakh per annum.

You can save tax by making use of the various deductions available to you under different sections of the IT Act i.e. investing in these instruments.

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Invest Mutual Funds Online

Download Mutual Fund Application Forms from all AMCs

Income Tax Slabs for Assessment Year 2012 – 2013

Best Performing Mutual Funds

Largecap Funds:

DSP BlackRock Top 100 Fund

ICICI Prudential Focused Blue Chip Fund

Birla Sun Life Front Line Equity Fund

Large and Midcap Funds

ICICI Prudential Dynamic Plan

HDFC Top 200 Fund

UTI Dividend Yield Fund

Mid and SmallCap Funds

Reliance Equity Opportunities Fund

DSP BlackRock Small & Midcap Fund

Sundaram Select Midcap

IDFC Premier Equity Fund

Small and MicroCap Funds

DSP BlackRock MicroCap Fund

Sector Funds

Reliance Banking Fund

Reliance Banking Fund

Gold Mutual Funds

Relaince Gold Savings Fund

ICICI Prudential Regular Gold Savings Fund

HDFC Gold Fund

Posted: 23 Apr 2012 06:58 AM PDT

Invest Mutual Funds Online

Assessment Year 2013-14 Relevant To Financial Year 2012-13

I Tax Rates For Individuals Other Than II, III & IV Below
Upto 2,00,000 - Nil
2,00,000 to 5,00,000 - 10% of the amount exceeding 2,00,000
5,00,000 to 10,00,000 - Rs.30,000 + 20% of the amount exceeding 5,00,000
10,00,000 & above - Rs.130000 + 30% of the amount exceeding 10,00,000

II Tax Rates For Resident Women Below 60 Years
Upto 2,00,000 - Nil
2,00,000 to 5,00,000 - 10% of the amount exceeding 2,00,000
5,00,000 to 10,00,000 - Rs.30,000 + 20% of the amount exceeding 5,00,000
10,00,000 & above - Rs130000+ 30% of the amount exceeding 10,00,000

III Tax Rates For Individual Residents Aged 60 Yrs And Above & Below 80 Years (Senior Citizen)
Upto 2,50,000 - Nil
2,50,000 to 5,00,000 - 10% of the amount exceeding 2,50,000
5,00,000 to 10,00,000 - Rs.25,000 + 20% of the amount exceeding 5,00,000
10,00,000 & above - Rs.125000 + 30% of the amount exceeding 10,00,000

IV Tax Rates For Individual Residents Aged 80 Yrs And Above (Very Senior Citizen)

Upto 5,00,000 - Nil
5,00,000 to 10,00,000 - 20% of the amount exceeding 5,00,000
10,00,000 & above - Rs.100000 + 30% of the amount exceeding 8,00,000
There is no surcharge in the case of every individual, Hindu undivided family, Association of persons and body of individuals

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Invest Mutual Funds Online

Download Mutual Fund Application Forms from all AMCs

Online term Insurance plans appear too good to be true

Best Performing Mutual Funds

Largecap Funds:

DSP BlackRock Top 100 Fund

ICICI Prudential Focused Blue Chip Fund

Birla Sun Life Front Line Equity Fund

Large and Midcap Funds

ICICI Prudential Dynamic Plan

HDFC Top 200 Fund

UTI Dividend Yield Fund

Mid and SmallCap Funds

Reliance Equity Opportunities Fund

DSP BlackRock Small & Midcap Fund

Sundaram Select Midcap

IDFC Premier Equity Fund

Small and MicroCap Funds

DSP BlackRock MicroCap Fund

Sector Funds

Reliance Banking Fund

Reliance Banking Fund

Gold Mutual Funds

Relaince Gold Savings Fund

ICICI Prudential Regular Gold Savings Fund

HDFC Gold Fund

Posted: 23 Apr 2012 05:23 AM PDT

Despite scepticism on their financial prudence, they are not a threat to costumers

IRDA is fastidious about companies adhering to the mandated liquidity and solvency ratios. So, new businesses can't be garnered indiscriminately

The slew of online term insurance plans launched by various industry players is certainly evoking awareness among prospects and interest among the financial planning community.

While term plans were already touted as the best solution for ones insurance requirements, online term plans are that much more preferable, considering the (nearly unbelievably) low premium they charge. However, for every five enthusiasts, there is one Doubting Thomas who believes that if something looks too good to be true, it probably isn't.

According to them, the main reasons for such scepticism are: In their quest for market share, companies are sacrificing financial prudence. This race to the bottom may help them increase the number of customers but the nominees of these customers will encounter problems while making a claim, as companies will pull every trick out of the book to deny claims.

The problem will be compounded by the fact that no agent will be present to guide the nominees. Hence, they will have to run from pillar to post to get a hearing.

Companies will be diluting underwriting requirements to gain customers. This would backfire at a later stage, as evidenced by an outsized increase in the Adverse Claim Experience. This may even jeopardise the financial solvency of these companies.

While I will not profess to know all the answers, here is my view: Companies are not indulging in any hara-kiri by launching such policies, as none of them is charging a premium below the mortality charges incurred. Also, these charges themselves are trending downward (as the new mortality tables depict).

The Insurance Regulatory and Development Authority is fastidious about companies adhering to the mandated liquidity and solvency ratios. Hence, new businesses cannot be garnered indiscriminately by throwing caution to the winds. This mode of distribution is extremely cost-efficient for companies and they are merely passing on the savings to the customer. Another article on this subject deals with this aspect.

While a customer satisfaction survey is possible in a term insurance policy, (owing to the customer not being there to answer it), only a foolhardy company would sacrifice goodwill by denying genuine claims. Also, if there is suspicion of fraud, the claim would be withheld anyway until the investigation is complete. In such a case, no agent can hasten the process.

I have opted for online term insurance policies from two different companies and I must say the medical underwriting standards are not lax by any yardstick. Also, the onus is on us to be as truthful as possible in the application form. If we are not, the threat of discovery at a later stage will always hang over our head like the Sword of Damocles. In such instances, it is we and not the insurance company who is doing our nominees the greatest disservice.

Finally, if it is of any comfort, the Life Insurance Corporation of India is set to launch its own online term policy. That, I guess, should set all doubts to rest

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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

Invest Mutual Funds Online

Submit filled up application Collection canter near you

Gold ETFs vs Gold Funds

Posted: 23 Apr 2012 04:38 AM PDT

There isn't much of a difference between gold funds and gold ETFs. The underlying investment is the same in both. A gold fund invests in gold ETFs. Hence, it's just a convenience and cost trade-off. A gold fund costs a little more because you don't need to own a demat account to invest in it, which you need in the case of a gold ETF.

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Invest Mutual Funds Online

Download Mutual Fund Application Forms from all AMCs

How to Get Income Tax Refund ?

Best Performing Mutual Funds

Largecap Funds:

DSP BlackRock Top 100 Fund

ICICI Prudential Focused Blue Chip Fund

Birla Sun Life Front Line Equity Fund

Large and Midcap Funds

ICICI Prudential Dynamic Plan

HDFC Top 200 Fund

UTI Dividend Yield Fund

Mid and SmallCap Funds

Reliance Equity Opportunities Fund

DSP BlackRock Small & Midcap Fund

Sundaram Select Midcap

IDFC Premier Equity Fund

Small and MicroCap Funds

DSP BlackRock MicroCap Fund

Sector Funds

Reliance Banking Fund

Reliance Banking Fund

Gold Mutual Funds

Relaince Gold Savings Fund

ICICI Prudential Regular Gold Savings Fund

HDFC Gold Fund

Posted: 23 Apr 2012 03:48 AM PDT

Many of us rush at the last moment for making right tax investments, this leads to incorrect disclosure of investments which will ultimately end you up in paying extra taxes. This extra tax paid in addition to actual tax liability leads to a situation of Tax refund.

The process of getting the tax refund has traditionally been very tiring and time consuming for an individual. If you are expecting a tax refund then it"s important to take a few steps which will expedite the process.

How do I get the Tax refund?

Filing the return on time is the first and foremost requirement for claiming the Tax refund, by providing the adequate investment details.
File your return online so that it is processed faster and it doesn"t have to deal with bureaucracy. You can file your return online
Check your Income tax Return to see if it"s reflecting the tax refund correctly.
If your Tax return shows Tax refund, filing the return is all you need to do. The IT department will send the refund by post (cheque) or direct credit to your bank account.
You should provide proper details of bank account like MICR Code, bank account number and also the proper address to get the Tax refund amount directly credited in to your account.
Opt for direct credit so that you don"t have to deal with postal delays.

Further in a situation where you think that you forgot (to mention bank account no., MICR code of bank) or did not have the proper documents to show the investments made, a Revised Return of Income needs to be submitted.

What if you do not receive Tax refund within a year?

If you do not receive your tax refund within a reasonable time which normally is within a maximum of one year from the date of filing the tax return

Check your Tax Refund status here
You can approach Tax Ombudsman which are present in select cities to deal with such cases. The Ombudsman has been empowered by the government to help tax payers and also better the whole tax process.

Thus, to conclude, prevention is better than cure. So it is always better to plan early and prevent paying extra taxes than to wait months to get your refund back.

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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

How ECS Works

Posted: 23 Apr 2012 03:25 AM PDT

To avail the facility of paying premiums through ECS, the policyholder has to fill an ECS mandate form which can be procured online or from the insurance firm. Once the customer has filled the form and submitted the same with a cancelled cheque to the insurance company, the rest of the formalities are taken care of by the insurance company with the bank. By doing so, the policyholder authorises the bank to deduct the premium on the due date. Once the ECS facility is activated and the premium amount starts getting deducted from the policy holder's account, the customer gets receipt notifications from the insurance company.

ECS facility is currently offered in select cities which vary for each insurer. Typically, most of the large- and mini-metros and Tier II cities are covered .

ECS payments can only be made on a policy on which there is no overdrawn premium. Also, one must keep in mind that sufficient balance is to be maintained in the bank account. One can set the maximum amount that can be debited from the account and also set the validity period for the mandate. In case the customer wishes to discontinue the policy or simply switch back to regular means of payment (other than ECS) he can do so by sending a written application to the insurer as well as the bank.

When you deploy ECS payment mechanism, this also leads to improvement in efficacy levels of insurance firms by reducing administrative work and cost, and enables them to provide superior service. Planning and automating premium payment through this route is indeed an ideal solution for today's busy consumers.

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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

UTI MNC Fund

Posted: 23 Apr 2012 02:40 AM PDT

One should invest in the UTI MNC Fund Growth with the sole intention of diversification. An allocation of 10-15% of one's portfolio to this fund with a 3-5 year horizon would be a lucrative way to take advantage of the interesting mix of this fund

UTI MNC Fund Growth was launched in May 1998. Essentially, the fund invests in multinational companies in which the parent holding is significantly high and which have a commanding market share or a particular niche in their respective sectors. In 2006, the fund manager had taken exposure to capital goods and engineering (20%) sectors. Sensing execution issues in these sectors, in the last five years, the fund increased its exposure to sectors that fit in the consumption theme. At present the fund has a 15% exposure to the consumer goods sector. The fund's top ten holdings comprise strong brands that command sizeable market share in these sectors. The fund can serve as a strong diversification option for investors. In a typical diversification, two funds may have the same stocks in their portfolio. But in UTI MNC Fund, it would not be the case.

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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

Mutual Fund FMPs Fetch More returns than Bank FDs

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Posted: 23 Apr 2012 01:28 AM PDT

Here is your chance as a fixed income investor to earn 10% returns after tax. Probably, it may be your last chance as experts believe that interest rates have peaked and they would start easing soon. Thanks to the tight liquidity situation in the banking system, banks and companies are raising money at a rate of 10-11%. You can cash in on the trend and pocket some handsome returns if you park your money in fixed maturity plans (FMPs), especially those with one-year tenor. There are at least four FMPs from various mutual funds like HDFC, Kotak, open for subscription at the moment. Most FMPs are open for a very short period of time and you can get information about. Fixed maturity plans with 13 months tenure make investment sense due to prevailing attractive yields and double indexation benefit available to investors

Why Invest?

For the uninitiated, fixed maturity plans are closed-ended income schemes that invest in fixed income instruments with maturity coinciding with the maturity of the scheme, thus nullifying interest rate risk. Two factors make investing in FMP an attractive opportunity now. First, attractive interest rates. One-year rates are hovering around multi-year highs, and they are expected to come down soon. Obviously, it makes sense to lock-in your money at the current rate.

We expect lower CD issuances by banks in April compared to March this year. This along with some government expenditure in April would result in money market rates moving downwards. He is not alone.

Government expenditure should begin in April. Also . 60,000 crore should come into the system through redemption of government securities in April. This should improve liquidity and bring down interest rates. Put simply, investors may see lower yields in April compared to what are available now. We expect interest rates to come down by 100 basis points over the next one year. Current high yields are a temporary phenomenon caused by advance tax payments and bank borrowing through CD.

The attractive post-tax return is the second reason why you should consider investing in FMPs. If fund managers can park their money at around 10.5%, and if we assume expense ratio of 50 basis points, FMPs should deliver a return around 10%. Your long term capital gain tax liability would be 20.6% with indexation or 10.3% without indexation. If you buy an FMP that matures in FY 2013-14, you are eligible to claim double indexation benefit. Your investment is spread across three financial years and you get indexation benefit for two years. That should effectively bring the repurchase price of scheme units to indexed acquisition cost of unit, making it a zero tax transaction. To ensure this, you have to remain invested in the growth plan of the FMP.

FMP Vs Fixed Deposit

Many would like to point at one-year fixed deposits of public sector banks offering 9.75-10% returns as an alternative investment option available to investors. But a point to note is that interest payable on fixed deposit is taxed at marginal rate of tax. If you are in the highest tax slab you will end up paying 30.9% tax on interest earned. But we have already seen that you may not pay anything towards tax if you are in growth option of a 13-month FMP.

But fixed deposits score over FMPs on liquidity. FMPs are listed on stock exchanges and you may never get to exit at fair value on stock exchanges due to poor liquidity. Many banks have floated special schemes that do not charge any pre-mature penalty to attract money in fixed deposits. This is especially true in 7 days to 200 days fixed deposits. So if you are really not sure whether you can remain invested throughout the tenor of an FMP, avoid investing in the same, no matter how attractive the proposition is. But if you are sure of your cash flows and want higher post-tax returns compared to fixed deposits, a 13-month FMP makes a lot of sense.

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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

DSP Blackrock Opportunities

Submit filled up application Collection canter near you

Posted: 23 Apr 2012 12:10 AM PDT

DSP Blackrock Opportunities can take sectoral bets in an opportunistic market or can choose to be more diversified if the markets are volatile. Investors averse to undue market risks may choose to invest in other schemes from the same fund house

Having done reasonably well in 2010, DSP Blackrock Opportunities failed to meet investor expectations last year as a couple of misjudged stock calls led to a severe decline in its net asset value (NAV). As such, barring the year 2010, the scheme's performance can be construed to be average vis-avis its peers. It has however, resonably succeeded in delivering better returns than its benchmark over the 10-year haul. A high exposure to infra sector pulled down its NAV in the 2008 meltdown. But the scheme nevertheless managed to beat its benchmark index then. It now has a second fund manager to assist the lead manager. It will thus be interesting to see if the scheme can now capitalise on fothcoming opportunities more successfully.

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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

Sundaram Global Advantage Fund

Submit filled up application Collection canter near you

Posted: 22 Apr 2012 10:25 PM PDT

Given its exposure to international equity markets, the scheme can be used as a tool to diversify and hedge one's equity portfolio against adverse swings in the Indian market. But invest just a small percentage of your overall portfolio after making other investments

A fundamental rule to equity investing says "never put all eggs in one basket", which holds true for diversification, not only across asset classes, but also geographies. Sundaram Global Advantage is a feeder fund that invests not in stocks but in other equity mutual funds in the international markets. These schemes are advised by global research agency Fundquest of the BNP Paribas Group. A cautious decision to concentrate only on emerging economies and avoid developed nations of the US, Europe and Japan from its investment sphere, right from the time of its launch in 2007, has so far helped Global Advantage outperform not only the Indian equities but also its benchmark — MSCI Emerging Markets Index, in the volatile times. However, investors should not look upon this scheme as a money spinner, but as a cushion to mitigate the portfolio risk for times like these when the Indian equity markets have turned out to be one of the worst performers in the global arena.

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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

Changes in Insurance Domain - HEALTH INSURANCE

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Posted: 22 Apr 2012 09:12 PM PDT

Portability To Take Off

The much-awaited health insurance portability became effective from October 1, last year, but by all accounts, it has been a slow starter so far. However, insurers expect it to pick up speed between January and March, when salaried individuals are on a tax-saver-instrument buying spree. The framework could also spawn newer varieties of products and services. With increasing awareness on health insurance portability, more proposals on portability can be expected in the year 2012, value-added services will be launched in terms of second medical opinion, vaccinations, and discounts on health care facilities like on diagnostics and preventive health care facilities, like gyms.

Distribution To Spread Wings

After the Ulip charge ceilings that were placed in September 2010, many agents saw their business dwindle and eventually dropped out. The year 2012 could see the fructification of the agent-mentoring model that the Irda has mooted. The initiatives around creation of a senior, mentoring agents framework, new bancassurance norms and regulatory push towards shifting focus from metros to semi-urban and rural areas will widen access to products.

Expansion In Coverage

The list of health insurers offering OPD products that extend coverage to maternity expenses and dental treatment could grow longer this year, with Irda itself backing it. The Irda chief has asked insurance companies to target a larger healthcare cover, over and above hospitalisation policies, by creating such OPD products. With the entry of more international players, we expect cost-effective OPD — comprehensive health insurance policies in 2012. At present, most basic health policies kick in only if the insured is hospitalised for at least 24 hours or is undergoing treatment through day-care procedures.

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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

Cost Inflation Index and Capital Gains

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Posted: 22 Apr 2012 07:53 PM PDT

The rising cost of inflation has its impact on every investor and there are different efforts to ensure that the effects of this are reduced. On the income tax front there is a direct relief on this front available in the form of the Cost Inflation Index (CII) that will increase the cost of the assets and investments and hence reduce the capital gains that will be taxable. Here is a look at the entire concept and how it works for the individual tax payer.

What is CII?

CII is a figure that is announced by the tax authorities each year that represents the impact of the inflation in the economy. This is a figure that will determine the extent of the benefit that the individual will receive on their investments when they sell them and a capital gains tax has to be paid on it. The manner in which this works is that the CII is used to increase the cost on the investment based on the year of purchase and the year of sale. This is then compared to the selling price to arrive at the final figure.

So for example if there is an asset that is bought in 2003-04 for a price of Rs 50,000 and it is sold in 2010-11 for a sum of Rs 1.2 lakh then the gain for tax purposes is not Rs 70,000 ( Rs 120,000 – RS 50,000) but is actually lower. The working will result in the cost of purchase being calculated as Rs 50,000 X 711 ( CII of year of sale)/463 (CII of year of purchase) = Rs 76,782. The capital gain in this case stands at Rs 43,218.

Applicability

The use of the CII is possible only for long term capital assets where there is a tax to be paid on the capital gains that arises from the transactions. This means that two categories will be out of the ambit of the use of the CII. The first is a situation where there is a short term capital gains as in such a situation there is direct comparison of the sale price with the cost price to arrive at the amount of gain that will be taxable.

The second is a situation where there is a long term capital gains but this is tax free as in such a situation making the working with the CII calculations has no use as there is no tax to be paid. A couple of areas where this is widely used will be in case of real estate transactions like sale of a house property or the sale of a debt instruments like debt mutual funds.

Effective use

The most effective use will be visible in case of debt instruments like debt funds where the investor can ensure that a large part of their gains are actually tax free in their hands. One of the things that is witnessed is that the debt funds show a steady rise over a period of time and when this is kept for a period of more than a year then the CII will be applicable. In such a situation with the rise in the CII over the past couple of years being high and nearly more than 8-9 per cent this can result in a better situation on the tax front.

A large part of the gains that are recorded on the debt funds can actually turn out to be tax free for the investors when held for a period of one year and this will result in a situation where the net returns are significant. This is a benefit that needs to be used effectively. Another thing that also has to be kept in mind is that there will be a holding period of 3 years for the gains to be long term in case of house property but this will be just one year for debt investment like mutual funds

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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

New index to link insurance premium to inflation soon

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Posted: 22 Apr 2012 09:28 AM PDT

SOON there would be an index to indicate the rate at which premium for general, health and motorcar insurance is rising, in sync with inflation.

An expert committee under the chairmanship of Sriram Taranikanti, financial adviser, the Insurance Regulatory and Development Authority (Irda), has been formed to work out the index.

The committee, which also comprises officials from the government and the Reserve Bank of India (RBI), would decide on the periodicity of the proposed index as also the products to be covered in the basket of the cost barometer, an official said.

It is in line with a proposal to cover more services like banking, health, aviation and telecom sectors into the inflation indices.

"We have identified eight-10 sectors, which form part of the services price index... We are starting with insurance sector," the official said.

These indices are common in the developed countries, particularly in the US, the UK, Australia and Japan.

The consumption of these services is quite high in India as well and is rising at a fast pace.

The committee would capture the services cost data from 2007 onwards.

Irda would provide all the logistics support to the committee, which will also interact with different stakeholders of the insurance sector.

The services sector contributes an overwhelming 55 per cent to the country's gross domestic product.

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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

Consider mixed asset investments for year 2012

Submit filled up application Collection canter near you

Posted: 22 Apr 2012 08:44 AM PDT

AT THE start of every year, there is a question mark about the performance of various mutual funds during the year.

There is always a doubt as to whether this will be the year of equities or whether it will be debt that will perform well, and it is next to impossible to know this at the start of an investment period.

When there is so much uncertainty, there is a need to take a careful look at the overall position, and for many mutual fund investors, it could be mixed asset investments suiting their requirements. Here are some of the choices that could meet their needs.

Monthly income plans (MIP): One of the routes that will be visible in the mixed asset investment is that of the monthly income plans that are available from mutual funds.

There is a very small percentage of equity present here in the portfolio of the fund; thus, the equity impact will be marginal. This is meant for all those investors who have a firm belief that the interest rates will keep reducing during the year and there will be a rally in debt that will help a large part of the portfolio.

At the same time, the role of equity is marginal.

So, even if there is a small improvement in equities, this will reflect in a good position on the overall portfolio. This investment is not just meant to provide a regular return, but it will bring the benefits of both equity and debt together and is suitable for extremely conservative investors.

Conservative hybrid: Another category of funds suitable for many investors is the hybrid category where there is a predominance of debt in the portfolio with a significant equity component. The equity component can go up to 35 per cent, which is quite high. This is present for several hybrid products that are meant for the medium to long-term time horizon, as this kind of debt and equity mix will help in construction of a stable portfolio to help investors gain from the situation.

The main use of such a portfolio is to plan for future events, where a certain basic corpus will be available so that there is confidence that capital is building up towards specific goals. The base is protected through the debt investments, while the equity component would be used to generate additional gains. This is meant for long-term investors who can afford to take some higher amount of risk.

Balanced funds: For those who consider balanced funds as an equal mix between equity and debt, there is a need to rethink the situation, because the reality is anything but this.

If there is a view that the coming year will see a strong return of equities in terms of performance, then the option that the investors should be considering is balanced funds. This will ensure that there is a larger exposure to equities and then this is used along with debt to generate a strong rise in the portfolio.

In case of these funds, there is a very small percentage of investment in debt, usually less than 30 per cent, so the amount that is being influenced by debt is small to the extent that the impact is not going to be much. With the large equity component, the manner in which the fund manager constructs this part determines exactly how these funds behave.

Some balanced funds have even beaten equity diversified funds during many equity market bull runs. This is meant for those investors who are willing to take high amounts of risk, and hence, they would not be affected even if there was a drop in the values, in case the intended situation does not turn out as expected.

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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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Mutual fund is a good choice to save income tax

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Posted: 22 Apr 2012 08:16 AM PDT

MUTUAL fund, in its essential detail, is a pass-through vehicle through which an investor can invest in professionally managed portfolio of disparate asset classes.

Through this medium, an investor can invest in asset classes such as domestic equities, gilt, corporate bonds, money market instruments, gold, overseas equities. The choice of scheme is of course dependent on the investment objective, the time horizon and the risk profile of the investor.

Amongst the key benefits of investment in a mutual fund is the potential of high return, objective driven investment, professional portfolio management service, competitive investment costs, and potential tax benefits.

Mutual funds provide tax saving benefit in two principal ways. One is through the means of tax arbitrage, and other through deductions available under Section 80C for investment in the equity-linked savings scheme (ELSS).

The tax arbitrage, here, implies the different incidence of tax rates observed for largely similar risk-return portfolios of the mutual fund fixed maturity plans (FMPs) and the commensurate investment deposits.

For instance, if the FMP and the investment deposits are for a similar term period (of less than one year), and may have similar returns potential, yet, the incidence of actual tax rate may be different. Thus, the net yield on mutual fund FMP investment may be better than that of a deposit. A similar advantageous tax rate arbitrage is possible for FMP investments having an investment horizon of one year and more.

From a middle class professional's point of view, it is an ELSS investment that may provide a more effective tax-saving role. The investment in the ELSS not only provides the deduction from the gross taxable income (up to the extent of Rs 1,00,000), but it also has the potential of equity-generated returns. The investment under this scheme is locked-in for a period of three-years.

Other than that, nearly all the features and facilities for an ELSS investor are similar to that available in the diversified equity scheme. Thus, an investor can avail the SIP (systematic investment plan) facility to spread out the investment period over a long period of time, and may also utilise this to average the cost, reduce the tax incidence and garner competitive returns.

Moreover, the long-term return potential of equities provides an added advantage for an ELSS investor. The CAGR (compound annual growth rate) performance of Sensex in the 1980-2011 period has been around 16.64 per cent per annum. In other words, a one time hypothetical investment of Rs 10,000 in Sensex on January 1, 1980, would have grown to Rs 13,36,000 on November 30, 2011.

The investor can also utilise the SIP facility for investment in ELSS to not only plan tax savings, but can also build a long-term investment corpus. For example, an investor investing Rs 5,000 per month since January 1980 till November 2011 in Sensex would have invested a total of around Rs 19,10,000. But the value of his/her corpus would have expanded to Rs 4,03,00,000 by the end of November 2011. It is potency of this equity return profile, which gets augmented by the tax savings that makes ELSS an apropos medium of investment for the long term.

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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

How to get the best returns from small savings schemes ? - KVP, NSC, MIP

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Posted: 22 Apr 2012 06:44 AM PDT

THE small savings landscape has changed with the overhaul of the different instruments that are available in the market.

While freeing up interest rates by linking them to the interest rate of securities in the debt market is one of the changes involved, there are several other changes that investors will face when they want to make investments over the coming days.

Understanding these changes is a very important part of the entire investment process because the investor needs to know exactly what is available and how he should be going about completing his investments. Here is a look at relevant changes.

Kisan Vikas Patra (KVP): The Kisan Vikas Patra has been an investment instrument that has been in existence for a long time and was also popular. However, a lot of investments in KVP were being made in cash, and, hence, it came to be regarded as an instrument that was being used for hiding wealth.

This instrument, which offered around 8.41 per cent yields for investors, has now been discontinued from December 1, 2011, therefore, investors will no longer be able to buy any additional KVPs for investment requirements. Now, investors will have to choose between the other alternatives that are available for investment.

National Savings Certificate (NSC): There has been a major change in National Savings Certificates. Up until December 1, these were instruments, which paid 8 per cent yield

that was compounded half-yearly, giving a yield of 8.16 per cent, with a maturity of six years. Now, the features of this instrument have been changed and the difference will be visible on many fronts.

First, the tenure of the investment has come down with the end result that the six-year instrument will no longer be available, but the time has actually been reduced to five years. The new interest rate on the instrument is 8.40 per cent for the five year period and the figure will be 8.7 per cent for the 10-year instrument.

Earlier, there was only a single instrument that was available for investment, but, now, there is a longer term option. Investors now have to make a choice about the time period for which they want to lock in their investment. Investors who do not want any worries on interest rate risks should lock into the longer-period instrument when they expect rates to remain low during the interim period, although, it is very difficult to take a 10year view on interest rates

in such uncertain times.

Monthly Income Plan (MIP): One of the biggest changes will, however, be witnessed in case of the post office Monthly Income Plan. The old plan was discontinued from December 1 and now there is a new plan. Again, this will have multiple implications. In the past, the instrument was operational for six years, but now, this tenure will no longer be valid. New investment tenure will be for five years.

There is another aspect to this investment and this is in the form of a bonus paid at the time of maturity. This was an incentive for the investor to remain invested till the time of maturity because it would enable the investor to get a bonus of 5 per cent. This will no longer be available, so in case, the investor remains invested till the end of five years, there will be no bonus coming in. The only relief is that the interest rate has gone up to 8.2 per cent over the life of the new instrument.

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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

Mix Bonds and Bank FDs for Best Returns

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Posted: 22 Apr 2012 04:48 AM PDT

Investors are betting big on tax-free bonds of longer tenures. The recent bond issues of National Highways Authority of India (NHAI) and Power Finance Corporation (PFC) were oversubscribed by almost three times, say merchant bankers. A similar issue from Indian Railway Finance Corporation (IRFC) is expected later this month.

With interest rates expected to fall soon, financial advisors are asking their clients to add long tenure bonds and long-term fixed deposits to their debt portfolio. A rate cut is round the corner. These long-tenure bonds could give you the added benefit of capital appreciation. Similarly, you can also lock into higher rates in fixed deposits and also enjoy the benefit of compounding. Build a ladder around bonds and fixed deposits to optimise your returns.

Bonds or non-convertible debentures give you the twin advantage of coupon, or interest, rate plus capital appreciation. This is because since they are listed and traded on the stock exchange, the price of a bond could move up or down depending on the interest rate. In a scenario when interest rates fall, bond prices go up and you will benefit from capital appreciation.

For example, Tata Capital - N2 bonds with a coupon of 11.25% (face value . 1,000) and a quarterly interest payment, issued in March 2009, still trade at a premium of 3.4% at . 1,034.

So if the current 10-year Benchmark G-Sec has a yield of 8.25% and due to falling interest rate the yield comes down to 7.75%, then the price of a bond you hold is bound to rise. The capital appreciation would depend on the duration of the bond. Prices of long tenure bonds rise more than short tenure bonds. On the other hand, if interest rates were to rise to 9%, then the price of the bond you hold is bound to fall.

A bank fixed deposit earns you only interest. However, you stand to benefit from the effect of compounding rate of interest in a fixed deposit. So the interest income you earn every year by default is reinvested at the same rate. Bonds have the benefit of capital appreciation while fixed deposits give you the advantage of compounding For example, suppose you invest . 10,000 in NHAI bond at 8.2% for 10 years where interest is paid out annually, and . 10,000 in an SBI FD at 9.25% for 10 years, where you get the benefit of compounding. In the case of NHAI, you will receive . 820 as interest every year, while in SBI FD it will be . 925. In the case of NHAI, you will have to reinvest it at the prevailing interest rates at that time. So you are not sure what you will end up with at the end of 10 years. However, in the case of SBI, the interest income of . 925 will get reinvested at 9.25%, and at the end of 10 years you are sure to get . 24,954. This eliminates reinvestment risk and gives you the benefit of compounding.

Drawing A Strategy

As you can see, the strategy is based on the theory that interest rates are going to fall soon. How realistic is the theory?

There is a case for a rate cut. However, the central bank may watch for some more time before taking any decision. Most analysts expect the central bank to start cutting rates from the first quarter of the next financial year. Even the RBI statements indicate the same: "The guidance given in the second quarter review was that, based on the projected inflation trajectory, further rate hikes might not be warranted. In view of the moderating growth momentum and higher downside risks to growth, this guidance is being reiterated. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth".
The central bank has resorted to 13 rate hikes since early 2010, with an objective to rein in rising inflation. Food inflation was close to the 20% mark a year ago while the Whole Price Index (WPI) inflation crossed the 10% mark. While WPI inflation fell from 9.75% in October 2011 to 9.1% in November 2011, food inflation touched a 4-year low of -2.32%. However, growth is slowing down. India's GDP grew by 6.9% in the period July–September 2011, the slowest pace of expansion in the last nine quarters. It is this slowing growth which may make the central bank cut rates going forward.

Great Promises

For any drop in interest rates by 100 basis points, or 1%, very broadly you can see a capital appreciation of 5% on a 5-year bond, 7% on a 10-year bond and 10% on a 15-year bond. The higher the duration of the bond, the greater the capital appreciation. Since bonds like NHAI and SBI come from the government, they track benchmark 10-year Gsec rates. The 10-year yield now stands at 8.25%. Suppose this were to drop by 100 basis points over the next one year, then it is possible that the NHAI 10-year bonds with a face value of . 10,000 could gain . 700 per bond and trade at . 10,700 and the 15-year bonds will trade at . 11,000. Thus for a 15-year bond, an investor could make a capital gain of . 1,000, or 10%.

In addition, he earns an interest of 8.3%. So his total return could be as high as 18.3%.

Since it is very difficult to predict interest rates, experts are recommending the technique of laddering — a strategy to build debt portfolio with different maturities — to their clients. "Invest up to 75% of your corpus in a mixture of NCDs and fixed deposits. These products could have a maturity period between 3 and 15 years. If you are aggressive you could have a higher exposure to long tenure bonds. So your ladder could have NHAI/PFC bonds with a maturity of 15 years, SBI bonds with a maturity of 9 years and some fixed deposits with lesser and varying maturities. The advantage of such a ladder is that it frees up capital at various points of time, offering liquidity.

Lastly, financial advisors ask investors to buy these bonds with an objective of holding till their maturity, and not merely for capital gains. Bond markets are not well developed, with very little activity. So, exiting could be a problem. There are very few products with a maturity of 10 to 15 years, hence the market prices may not reflect the true price. For example, SBI - N6 bonds, with a 15-year maturity and a coupon rate of 9.45%, witness thin volumes with less than 100 bonds traded on most days. Also, some of these bonds have a call option. If the interest rates drop significantly, the issuer has the option to buy the bond back and return your money.

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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

Bajaj Allianz Cash Rich Insurance Plan

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Posted: 22 Apr 2012 04:16 AM PDT

Cash-rich insurance plan from Bajaj Allianz is a money-back plan that gives the flexibility to choose the premium paying term as well as the money-back term. Thus, for a policy term of say 25 years, the investor is free to choose the premium-paying term of 5, 10, 15 or 20 years. The balance period can be used to receive regular amounts as cash-backs.

Despite the feature of providing a regular income to the policy holder, the kind of returns that the scheme generates till maturity fail to impress if one were to alternatively consider investing a similar amount in other products such as fixed deposits, tax-saving bonds or PPF. Buy a pure-term plan instead that costs very little premium to provide cover to life and invest the surplus in other noninsurance savings products for better yields.

Maturity Gains

Assuming a sum assured (SA) of 10 lakh, for a policy term of 25 years by a healthy male-aged 30 years, the benefits that will accrue at the end of the policy term are illustrated thus…

Unique Feature

Apart from regular cash-back, which is 5% of the sum assured, payable annually during the cash back period, the scheme also provides for annual reversionary bonus, interim bonus and terminal bonus. These are, however, not assured and are payable on company's discretion. Being just a year old, the scheme does not have any bonus history.

For Existing Customers

As the policy is yet to complete three years, it cannot be surrendered. The existing investors are thus advised to stay invested at least for three years as an exit at this stage would mean loss of all premiums paid till date.

For Those Looking to Invest

The scheme suits those who find comfort in managing insurance and investments under one basket, even at the cost of returns. Regular cashbacks ensure a source of income during the aging years if the policyholder survives the term, while the death of the policyholder during the term shall bestow the payment of entire sum assured to the nominee.

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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

Tata AIG Life Mahalife Gold

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Posted: 21 Apr 2012 10:29 PM PDT

Invest Mutual Funds Online

Designed as a whole life plan, Tata AIG Life Mahalife Gold provides insurance coverage to the policyholder until the age of 100 along with guaranteed payouts @ 5% of the sum assured payable from the 10th policy year onwards until death or maturity age of 100, whichever is earlier. The scheme may also declare bonuses — which are not guaranteed — from the 6th policy year. This plan has a limited premium-paying term of 15 years.

Features

Tata AIG Life Mahalife Gold can also be bought in the name of the policyholder's children no sooner than they are born. This means that the parents need to pay the premium for 15 years while children will en-cash the guaranteed payouts from the 10th policy year until they survive or reach the maturity age of 100 years. The death benefit in this case shall accrue to the grandchildren who, as the nominee of the child in whose name this policy has been taken, will receive the sum assured.

Tata AIG Life Mahalife Gold has been cleverly crafted to benefit three generations - tax benefit on premium payment to parents, guaranteed income to children through their life span and an assured lumpsum payment equal to sum assured to the grandchildren. The scheme thus suits those having such a foresight and the willingness to invest for an immensely long unforeseen future.

Where the scheme does disappoint is on the returns front. The guaranteed payout of 5% per annum that accrues from the 10th policy year, does not appear lucrative enough to take care of the financial needs that may arise then, considering the time value of money and ever increasing inflation.

The premiums charged by this plan are high. So, investing money here implies securing a future source of regular income at 5% p.a. for life. With interest rates known to fluctuate quite often, this proposition may not turn out to be highly rewarding if the rates, in future too, were to quote far more than 5%, like they do today.

However, those seeking to provide for a secondary source of regular income, especially for their children, may consider an investment

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Wealth tax - When does it apply ?

Some of the Top performing Mutual Funds are

HDFC Top 200 Fund

ICICI Prudential Dynamic Plan

DSP BlackRock Top 100 Fund

Birla Sun Life Front Line Equity Fund

Reliance Equity Opportunities Fund

IDFC Premier Equity Fund

SBI Magnum Contra Fund

Sundaram Select Midcap

UTI Dividend Yield Fund

Posted: 21 Apr 2012 08:22 PM PDT

Though most of us tend to focus on income-tax, there is another direct tax all of us are subject to -- the wealth tax. In fact, prior to 1998, another direct tax, the gift tax was also applicable, but it was discontinued. Then, the Finance Act, 2004, brought in what was effectively a gift tax through the back door, by way of income tax. The only difference was that the original gift tax was payable by the donor and the new income tax on gifts is payable by the recipient.

This gift-based tax shall be discussed in detail in a later article. This time, we shall examine the largely ignored wealth tax. Essentially, wealth tax is levied on the benefits derived from asset ownership. The tax is to be paid on the market value of the same assets year after year, whether or not these yield any income. Every individual and Hindu Undivided Family whose net wealth (assets less liabilities incurred to acquire the assets) as on March 31 exceeds 30 lakh is required to pay wealth tax at one per cent of the amount that exceeds `30 lakh.

Note again that wealth tax is payable on the net wealth held as on March 31 of each year. This means it will be applicable on the asset even this was purchased only towards the end of the year. Conversely, those assets sold during the year and, consequently, not held as on March 31, will escape the levy of wealth tax.

The good news is that wealth tax is payable only on what are termed unproductive assets. Consequently assets such as shares, securities, mutual funds and fixed deposits, the productive assets, are exempted.

Though there is a long list of items such as yachts, boats, aircraft, etc, that are subject to wealth tax, for our purposes we shall only consider assets that are commonly owned such as real estate, jewellery and cars.

House property

Just like in income tax law, one house is exempt from wealth tax. In other words, ownership of more than one house will attract wealth tax liability on the second house onwards. There are three exceptions. If a property is used for conduct of business or a profession or if it forms a part of stock-in-trade or has been rented out for at least 300 days in the year, wealth tax is not applicable on such property.

A friend of mine has two houses, one in Mumbai and the other at his native place in Chennai. His parents live in the Chennai property, which is valued at over `50 lakh. By way of tax planning, he has asked his parents to pay him a token rent of `4,500 per month, thereby escaping the wealth tax liability. The rental income will be taxable in his hands but is lesser than the wealth tax liability that would otherwise be payable. Of course, the rent paid by his parents is returned back to them at the end of the year by way of a gift, as gifts between relatives is tax-free.

If this arrangement isn't possible, the house with the higher valuation can be claimed as exempt, leaving the one with the lower valuation subject to wealth tax.

Also note that wealth tax is applicable on net wealth, after deducting any liabilities or debt owed to acquire the assets. Therefore, if any house subject to wealth tax has been purchased using housing finance, the value of the loan due is deductible while arriving at the figure of net wealth.

Cars

The tax in this case would be applicable at the market price of the car. Exceptions are those used in a car-hire business. So, if you already own a car and intend to purchase another, such that the total value of your cars would go beyond `30 lakh, buy in the name of your spouse or any other family member, such that wealth is spread and the optimum benefit of the basic exemption of `30 lakh can be claimed.

Jewellery

In this case, these include ornaments made of gold, silver, platinum or any other precious metal and/or precious or semiprecious stones. Such items, even if sown into clothes or set into furniture, have to be considered for wealth tax purposes. Incidentally, cash in hand in excess of `50,000 is also subject to wealth tax.

If you find yourself liable for wealth tax, merely transferring the asset to your spouse will not help. Clubbing provisions similar to those applicable in income tax law are also applicable in the case of wealth tax. Therefore, any assets gifted to spouse, minor child or sons wife will be, notwithstanding the gift, deemed to belong to the taxpayer.

The writer is Director, Wonderland Consultants, a tax and financial planning firm. Contact at sandeep.shanbhag@gmail.com

The good news is that wealth taxis payable onlyon what are termed unproductive assets. Consequently assets such as shares, securities, mutual funds and fixed deposits, the productive assets, are exempted.

There will be tax incidence on a number of things such as cars, jewellery and paintings

How

|If there is a second house which is not being used for business, is stock-in-trade or rented for 300 days a year |If the price of the car/s exceeds ~30 lakh for one individual |If one owns ornaments of gold, silver and other precious metals, even if the sown into clothes or used as setting in furniture |Cash balance in excess of ~50,000

Solutions

|Renting out the second property, if necessary, for a small rental |If there are two cars, buy the second one in wife's name

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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

Banks Can not Charge for Account Closure

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Posted: 21 Apr 2012 10:41 AM PDT

Banks have been told not to charge fees from customers who are closing their accounts as RBI moves to make modern banking accessible to millions of ordinary people, including pensioners and the poor.

In a recent meeting between the banking regulator and heads of various banks, the central bank has told the banks not to charge any fee if a customer desires to opt out of a bank either due to a change in employment or a transfer to another city.

"How can you penalise a customer for not offering a service. Secondly, how can a bank have the authority to debit money from their customers account and credit it to their own P&L?.

Coming just weeks after triggering intense competition between banks by freeing savings rates, this diktat by RBI is likely to increase costs for all banks. But the worst-affected are likely to be the the private sector and foreign banks, who charge high fees for account closures.

The savings rate deregulation has already kicked off a rate war in the industry with aggressive new banks such as YES Bank and Kotak Mahindra increasing their rates to 7% and 6%, respectively. Account closures by people tempted by these high rates are likely to increase and banks are unlikely to have the freedom to impose any costs on such customers.

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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

Savings bank accounts can be portable soon

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Posted: 21 Apr 2012 10:17 AM PDT

AFTER life and non-life insurance, number portability on mobile phones, now, the government may allow you and me to move our savings bank accounts from one bank to another with same number.

This is apparently aimed at allowing savings bank customers to move to best service providers in a cost-effective way and ensure higher returns on their deposits.

Portability of savings banks accounts would also encourage competition among banks and allow deposit holders to make the most after savings rates were deregulated by the Reserve Bank of India (RBI) recently.

"We want to do it (savings account number portability). Right now, there are some technical problems.…We have identified them. We will overcome them soon," financial services secretary D K Mittal told reporters in the capital on Tuesday.

Banks would have to work on identification code, know your customer (KYC) norms and core banking solution (CBS) for implementing the savings bank account number portability, Mittal said.

"It is a good concept and it will help customers and sort out a lot of issues for them, if they are allowed to port their savings account with the account number.

For instance, if a customer ports a savings account, KYC checks will be simplified and it will be much easier for him to open an account," said P Sitaram, chief financial officer, IDBI Bank.

SBI and a few other public sector banks, however, said that savings bank account portability would be a hard task because banks will have to renumber the 500 million savings accounts in India. Like financial inclusion, this will be an added burden on banks. But, experts said savings bank account portability will force banks to offer similar interest rates on a savings account, which is not the case now. In addition, it will lead to a huge improvement in service delivery in PSU banks because they will be at risk of losing customers.

"Theoretically, it is a sound concept. To implement it is an Herculean task as it will mean renumbering of the existing savings bank accounts," a senior SBI official said.

"We at SBI have about 130 million accounts. Assuming that it is about 25 per cent of total accounts, there would be about 500 million savings accounts in India that will have to be renumbered." Savings bank account portability will be a costly exercise and will be confusing for customers. Another point of confusion will be on KYC norms, the SBI official said.

A Srinath, head of retail loans at Bank of Baroda, said, "The number portability is good, but, we need to have the necessary technology for it."

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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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Gold Continue to be a Safe Haven

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Posted: 21 Apr 2012 09:17 AM PDT

The term 'safe haven' has been synonymous with gold for ages now. The dictionary definition of a safe haven is "a place, a situation, or an activity which provides people with an opportunity to escape from things that they find unpleasant or worrying". From the perspective of investments, a safe haven is one that protects the overall portfolio returns when the prices of other risky assets in the portfolio fall. In other words, gold is expected to provide portfolio insurance during a crisis. Its unique properties make gold an ideal safe haven.

But over the last three months, the price action in gold in the international markets is threatening its status as a safe haven. Gold is down by about 18% from its recent peak and it has been moving more in tandem with other risky asset classes, especially the cyclical commodities. Its co-relation with risky assets and other cyclical commodities in the last few months has risen substantially as interbank liquidity has disappeared. Cyclical commodities usually rise when the risk appetite and the global economic confidence is higher and vice versa. And gold tends to do well when the risk appetite is low and a global crisis is on the anvil. The DJUBS commodity index has fallen by around 14% in last three months and gold's prices in US dollars have also fallen by 12%. The dollar's appreciation has helped gold's fall.

Gold usually competes with other global safe havens such as the US dollar, Swiss franc, Norwegian kroner, Japanese yen and US treasuries (bonds). The dollar derives its safe haven character from its status as a global reserve currency and US's dominating position in global trade, financial markets and GDP. US treasuries, too, enjoy the status probably for similar reasons. The other currencies are safe havens due to the strong economic strengths and the stable institutional framework of the countries concerned. Gold in the last three months has underperformed all the safe havens by reasonable margins, despite the rise in systemic risks and the possibility of a disorderly outcome of the European crisis.

So what's hitting gold now in international markets? A confluence of factors such as year-end squaring up of long positions and profit taking by hedge funds as interbank liquidity dries up in other markets; higher margin calls from exchanges (CME); a sharp fall in the Euro (rise in US dollar) in last few days, as the European crisis worsened and global risk appetite vanished; a general fall in commodity complex as global growth slowed; no further quantitative easing tranche's from the Federal Reserve or European Central Bank (ECB) as constitutional and political hurdles come in the way; the marginal improvement in macro data in the US; and the expected fiscal austerity on either side of the Atlantic.

Gold in Indian rupees (INR) has been able to minimise its fall due to the sharp depreciation of the rupee vis a vis the US dollar (USD). Gold in dollar terms peaked at 1,921/oz in September when the rupee was hovering around . 48. Gold in USD has since collapsed by 18% and in rupee by 13%.

Since most of the gold in India is imported, any changes in the value of the rupee is fully transmitted to the domestic gold prices, assuming no changes in duties, taxes or any other charges. So, gold prices in rupee are just lower by 9% from the peak, whereas in dollar it is down by 18% from its peak.

The rupee's weakness has become the white knight for gold prices in terms of the rupee. What if the rupee reverses its recent trend on positive policy triggers or RBI intervention? Gold as an asset class is unique as it enacts multiple roles at multiple times, such as being a proxy currency, safe haven, portfolio insurer, inflation hedge or just a commodity. But its recent move in tandem with risky assets such as commodities dilutes its safe haven status for the time being. Especially when almost onethird of the global gold demand comes with investment as an objective, more as a safe haven. Despite short-term headwinds, gold in the long run would continue to be a safe haven, till the global financial system remains fractured, sovereign crisis remains alive, real rates remain lower and central banks are expected to print money. Gold is a "real" proxy currency, which, unlike paper currencies, can't be printed at will and so they can't be safe havens on a sustained basis.

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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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Tips for building a good fund portfolio

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Posted: 21 Apr 2012 08:39 AM PDT

So you have a financial goal and your adviser has told you how much you should save regularly. You have also agreed that you will invest in mutual funds in a systematic manner. Now comes the tough decision of selecting the funds. Should you trust the list given by the adviser? What should you look for? Let me provide six pointers. I will restrict myself to equity funds here and deal with debt funds at a later date.

First, your requirement is to invest in the equity market. The mutual fund is only a tool to get there. It is fashionable to assume that you can pick a few winning stocks and do better than a fund manager. However, consider the time, effort, cost and, most importantly, your portfolio's performance record before you do it. If you are honest with your analysis, you are likely to find the mutual fund choice compelling.

Second, the simplest and cheapest mutual fund product is an index fund or an ETF. It gives you the exposure to equity without any risk of selection. Funds routinely publish performance data, stating that they have beaten the benchmark by a good margin. This may be factually correct, but you will get returns only if you select the winning fund at the right time. Advisers earn the least commission on index funds, so don't wait for them to propose this product.

Third, a new fund offer at 10 is not cheaper than an existing fund at, say, 100. An NFO is not cheaper than an existing fund; it just has a lower nominal value. It cannot generate a higher return than an existing fund just because it is priced at 10. But an existing fund has performance history, a track record. Unless it is an absolutely new idea, an NFO is an inferior choice to an existing fund.

Fourth, you should refuse to make a choice without any clarity on how a fund will deliver returns. If a fund manager tells you that the fund 'uses a process-driven, bottom-up approach to select stocks across sectors, with a disciplined selling plan' he is describing his job. If the fund says it will hold largecap stocks, you know it will modify sector weightage and stock weightage compared to the Nifty index, to deliver a better return. If this fund delivers better returns by picking up a few mid-cap stocks, it will amount to dishonesty.

Fifth, be clear about what you expect the fund to do and what you will do yourself. If you like to assemble your set of index, large-cap, mid-cap and sectoral funds, choose those that stick to such a definition. If you see the portfolio and performance at the fund website over 3-6 months, you will know. If you like the fund manager to do the juggling and like a loosely defined product, go for it, fully aware that you will not know what to expect. Investors like to give fund managers a long rope to do what they like as long as they deliver a return. This preference leads to more poorly defined products with fancy names.

Sixth, do not rely on past winners. What is important is to hold a well-diversified portfolio. A portfolio suffers damage when you persistently hold laggards; it is all right to miss buying a few winners at the right time as long as you throw out the rotten apples.

So, build a portfolio using a core and satellite approach. At the core of your equity portfolio should be index and large-cap funds, comprising at least 50% of your portfolio. The next layer should have funds whose specific focus can be rewarding—mid-cap funds, infra funds, small-cap funds, value funds, contra funds. About 35% of your portfolio could be invested here. The next layer should have funds that need an aggressive review. Sectoral funds, concentrated portfolios, specific strategies figure here. These will do well seasonally and need a close monitoring. This should comprise 15% of your portfolio and not over three to four funds.

If your portfolio holds too many names, acquired at different times for different reasons, you are doing yourself more harm than good.

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

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RBI frees savings rates in cooperative banks

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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

Posted: 21 Apr 2012 07:21 AM PDT

The central bank had deregulated rates for commercial banks in October

THE Reserve Bank of India (RBI) on Monday deregulated interest rate on savings accounts in all state and central cooperative banks, a move that will fetch better returns for depositors.

RBI had freed these rates for the scheduled commercial banks in October.

In a notification addressed to all state and central cooperative banks, RBI said they are free to determine their savings bank deposit interest rate subject to two conditions.

Under the first condition, the notification said, "Each bank will have to offer a uniform interest rate on savings bank deposits up to Rs 1,00,000, irrespective of the amount in the account within this limit."

The other condition states that for savings bank deposits over Rs 1,00,000, a bank may provide differential rates of interest, if it so chooses. This would, howev er, be subject to the condition that banks will not discriminate over the interest paid on such deposits, between one deposit and another of similar amount, accepted on the same date at any of its offices, it said.

Until now, cooperative banks were mandated to give 4 per cent interest rates on such deposits. The rate was increased from 3.5 per cent.

It also said interest rate on NRE accounts and NRO deposit under savings account, which has been prescribed at 4 per cent per annum at present, will continue to be regulated until further review.

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

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