Prajna Capital

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• How to Reinvest capital gains to get Tax Benefits
• Index - linked insurance products may entirely go
• How can you help your earning children to manage money more wisely

How to Reinvest capital gains to get Tax Benefits Posted: 18 Jun 2013 04:59 AM PDT Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     Most taxpayers are happy selling their existing homes and investing the same money to buy another one as they are aware that any gains that they make on selling the old property is exempt if it is reinvested in ( or used for constructing) another property within the prescribed time limit ( as per the provisions of section 54 of the Income Tax Act). First time home buyers, too, can take benefit of an exemption if they are selling other long- term assets like gold, silver, plot of land, and so on to invest in ( or construct) their dream homes ( in accordance with the provisions of section 54F of the Act). In one of the recent cases that came up for decision with the Hyderabad Tax Tribunal, the question that came up for decision was whether a taxpayer can claim exemption from long- term capital gains arising from the sale of a property and an asset other than property by investing in a single residential property? The taxpayer had earned longterm capital gains from the sale of two distinct and separate assets; one being aplot of land and the other being a house property. He claimed that the entire long- term capital gain arising from the sale of these two capital assets was invested in purchase of the new residential house and, hence, he was entitled to claim exemption under section 54 and 54F of the Income Tax Act. The tax officer, based on his interpretation of these two sections, was of the opinion that for claiming exemption under both the sections, the taxpayer had to invest in two houses. On this basis, he rejected the taxpayer's claim. The taxpayer appealed against the said order. During the course of the appellate proceedings, the taxpayer contended that section 54 and 54F are independent provisions and not mutually exclusive. He submitted that both the sections require investment in a new house and that neither section 54 or 54F nor any other provisions of the Act restricted the taxpayer from claiming exemption under both the sections against investment in the same residential property. The appellate authority, however, dismissed the taxpayer's claim and held that while the purpose of both the referred sections is to give fillip to the housing sector, the language of the sections envisage different sources of investment in a residential house. The authority also held that the two sections are meant to operate in an exclusive manner and cannot be clubbed together for getting a bigger advantage of exemption on account of bigger investments. The taxpayer preferred a second appeal with the Tax Tribunal. At this level, the taxpayer submitted that section 54 and section 54F are independent and operate in isolation. It was submitted that the interpretation of the tax officer and the lower appellate authority that as the two sections are separate and call for investment in one residential house each, is not a correct interpretation. In the current case too, the taxpayer argued that no double deduction was being claimed as the entire capital gain arising out of sale of residential house is invested in the part of the new residential house and the sale consideration received from sale of plot of land is invested in another part of the house. The honourable Tribunal, in its decision, held that a reading of section 54 and 54F makes it clear that they are independent of each other and operate in respect of long term capital gains arising out of transfer of distinct and separate long- term capital assets. However, both the sections allow exemption only on purchase or construction of a new residential house. In the current case, the taxpayer had sold two distinct and separate long term capital assets, that is, one is a residential house which comes under section 54 and the other is a plot of land, under the ambit of section 54F. The taxpayer has also purchased a residential house within the prescribed period in terms with both section 54 and 54F for a price much more than the long term capital gain. The Tribunal observed that the only reason for the tax officer and the first appellate authority to reject the taxpayer's exemption claim was that he cannot claim exemption under both the sections towards investment in a single house. The Tribunal did not concur with this interpretation and observed that the same is totally misconceived and misplaced. The restriction imposed under section 54F does not allow exemption if the taxpayer purchases or constructs more than one residential house. In view of the above, the Honourable Tribunal held favourably that the taxpayer is entitled to claim exemption for the amount invested in the new residential house under section 54 as well as section 54F. It also held that there is no specific bar under either of the sections or any other provision of the Act prohibiting allowance of exemption under both the sections in case the conditions of the provisions are fulfilled. This decision has to be viewed as a favourable interpretation of the capital gain exemption provisions in favour of the taxpayer. In the current scenario, it is quite common for individuals to sell their existing assets and reinvest the same into buying a home for oneself. With home prices rising high, decisions like the one above help individuals in better tax planning and management. Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- 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 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 Download Tax Saving Mutual Fund Applications These Application Forms can be used for buying regular mutual funds also Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds ) ICICI Prudential Tax Plan Invest Online HDFC TaxSaver Invest Online DSP BlackRock Tax Saver Fund Invest Online Reliance Tax Saver (ELSS) Fund Invest Online Birla Sun Life Tax Relief '96 Invest Online IDFC Tax Advantage (ELSS) Fund Invest Online SBI Magnum Tax Gain Scheme 1993 Invest Online Sundaram Tax Saver Invest Online Edelweiss ELSS Invest Online ------------------ Best Performing Mutual Funds Largecap Funds Invest Online DSP BlackRock Top 100 Fund ICICI Prudential Focused Blue Chip Fund Birla Sun Life Front Line Equity Fund Large and Midcap Funds Invest Online ICICI Prudential Dynamic Plan HDFC Top 200 Fund UTI Dividend Yield Fund Mid and SmallCap Funds Invest Online Reliance Equity Opportunities Fund DSP BlackRock Small & Midcap Fund Sundaram Select Midcap IDFC Premier Equity Fund Small and MicroCap Funds Invest Online DSP BlackRock MicroCap Fund Sector Funds Invest Online Reliance Banking Fund Reliance Banking Fund Tax Saver MutualFunds Invest Online ICICI Prudential Tax Plan HDFC Taxsaver DSP BlackRock Tax Saver Fund Reliance Tax Saver (ELSS) Fund Gold Mutual Funds Invest Online Relaince Gold Savings Fund ICICI Prudential Regular Gold Savings Fund HDFC Gold Fund Invest in Tax Saving Mutual Funds Download Any Application Forms Buy Mutual Funds Online Invest Online Buy Gold Mutual Funds Invest Now

Index - linked insurance products may entirely go Posted: 18 Jun 2013 04:02 AM PDT Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     Index- linked insurance products (Ilips) are expected to be absent from the product portfolio of life insurers from October, when the new norms for traditional products will be enforced. In line with the new product guidelines, Ilips will not be considered as a separate category. Life insurers have approached the Insurance Regulatory and Development Authority ( Irda) to allow the sale of these products after the October deadline. If Irda doesn't consider the plea, life insurers will either have to completely modify the product or discontinue it. Ilips are insurance products whose returns are linked to benchmark indices. These products are linked to the 10- year government bonds or equity indices such as Sensex or Nifty. While those linked to government bonds are less risky, those linked to equity- based indices would have fluctuations in returns, based on stock market performance. At present, some life insurers offer this product to their retail customers. Since most of these are linked to the 10- year benchmark yield, they are a safer mode of investment than equity. Life insurers also said they'd seen good consumer interest for Ilips, due to the link with government securities. This product is easy to understand and transparent in terms of the return. Hence, it has been one of our top- selling products. Taking this into consideration, we have approached Irda to allow us to sell the product post October, too. The process of product re-filing has begun for all insurers. Life insurers have requested Irda to allow them to sell the product on the premise that these products are linked to government bond yields and, hence, not very risky. In the initial draft guidelines for traditional products, Irda had talked about Ilips as a new category of life insurance. Insurers will have to provide a benefit illustration for the insurance products, linked to benchmark indices, Irda had said. Irda had said it would have benefits clearly reflecting the possible movements of the index to be linked and the value of the benefit to be guaranteed in such a scenario. For example, if there is a change of less than two per cent per annum on interest rates, the value of benefits assigned would be 0.25 per cent per annum of the policy account. Similarly, if there is a change of more than five per cent per annum on interest rates, the value of benefits assigned would be four per cent per annum of the policy account. Death benefits, lock- in period and surrender norms were similar to Ulips, according to the draft. But, this product category was excluded in the final traditional product guideline, as the industry was apprehensive on the calculation of the charges for the product. Market players said there were limited transactions in this segment. We have not seen many index- linked products. From the wholesale investors segment, I have not seen many transactions happening. There might have been transactions from the retail investors' side. |Life insurers have approached Irda to allow the sale of these products after the October deadline |If Irda doesn't consider insurers' plea, the latter will either have to completely modify the product or discontinue it |Index- linked insurance products are insurance products whose returns are linked to benchmark indices. These are linked to the 10- year government bonds or equity indices such as Sensex or Nifty Insurers will have to provide a benefit illustration for the insurance products, linked to benchmark indices Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- 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 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 Download Tax Saving Mutual Fund Applications These Application Forms can be used for buying regular mutual funds also Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds ) ICICI Prudential Tax Plan Invest Online HDFC TaxSaver Invest Online DSP BlackRock Tax Saver Fund Invest Online Reliance Tax Saver (ELSS) Fund Invest Online Birla Sun Life Tax Relief '96 Invest Online IDFC Tax Advantage (ELSS) Fund Invest Online SBI Magnum Tax Gain Scheme 1993 Invest Online Sundaram Tax Saver Invest Online Edelweiss ELSS Invest Online ------------------ Best Performing Mutual Funds Largecap Funds Invest Online DSP BlackRock Top 100 Fund ICICI Prudential Focused Blue Chip Fund Birla Sun Life Front Line Equity Fund Large and Midcap Funds Invest Online ICICI Prudential Dynamic Plan HDFC Top 200 Fund UTI Dividend Yield Fund Mid and SmallCap Funds Invest Online Reliance Equity Opportunities Fund DSP BlackRock Small & Midcap Fund Sundaram Select Midcap IDFC Premier Equity Fund Small and MicroCap Funds Invest Online DSP BlackRock MicroCap Fund Sector Funds Invest Online Reliance Banking Fund Reliance Banking Fund Tax Saver MutualFunds Invest Online ICICI Prudential Tax Plan HDFC Taxsaver DSP BlackRock Tax Saver Fund Reliance Tax Saver (ELSS) Fund Gold Mutual Funds Invest Online Relaince Gold Savings Fund ICICI Prudential Regular Gold Savings Fund HDFC Gold Fund Invest in Tax Saving Mutual Funds Download Any Application Forms Buy Mutual Funds Online Invest Online Buy Gold Mutual Funds Invest Now

How can you help your earning children to manage money more wisely Posted: 18 Jun 2013 02:58 AM PDT Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   There is no doubt that accumulation of substantial wealth occurs only over a sustained period of time. The best way to do it is the slow and steady manner, which your earning child needs to adopt in a disciplined way to accumulate the drops that will make a mighty ocean. The main question here is: which financial instruments to save in? It has been statistically proven that it is not the timing of the investment but asset allocation — that is where all do you invest in and in what proportion — which matters the most in the long run. Wrong choice of instruments will do irreparable damage to wealth creation efforts while incorrect timings can easily be handled by regular investments in a disciplined manner over a long period of time. Generally it is seen that, at least in the initial earning years of a young one, he/she is heavily dependent and influenced by his/her parents' pattern of investment. If the influencing parent is conservative and only goes in for safety of capital like provident funds, bank FDs, insurance policies and NSCs, the child also thinks along similar lines. However, the fact that these fixed-interest instruments are almost never able to keep up with the inflation monster, and consequently provide negative inflation-adjusted returns, is lost sight of. Thus, while money may seem to grow in these instruments in absolute terms, its purchasing power (or effective worth) is lost at a rate equal to the difference between inflation and tax-adjusted returns of the investment instrument. For example, if a bank FD gives 9% rate of interest and the child is in the 20% tax bracket (that is earning Rs 5-10 lakh a year), his/her actual returns on the FD are 9% minus 1.8% tax (20% of 9%), that is only 7.2% per year. With consumer inflation at around 9.5%, the money's worth is being lost at the rate of 2.3% per year on a cumulative basis. The returns are likely to get further pruned in the current era of high inflation and falling interest rates as this 2.3% gap widens. If the same money was to be invested in SIPs of equity diversified mutual funds, the long-term returns of the same are expected to be 12% per annum on a conservative basis while being fully tax-exempt according to current laws. Adjusted against inflation, it is likely to give 3% positive cumulative yearly returns on a conservative basis. Of course, one has to keep faith in the long-term returns potential of equity while not getting unnerved by the short-term equity-typical fluctuations. Building an investment pattern similar to the one given in the table here is likely to provide your child a substantial accumulation of wealth in the future while still giving enough liquidity for any requirements in between. Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- 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 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 Download Tax Saving Mutual Fund Applications These Application Forms can be used for buying regular mutual funds also Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds ) ICICI Prudential Tax Plan Invest Online HDFC TaxSaver Invest Online DSP BlackRock Tax Saver Fund Invest Online Reliance Tax Saver (ELSS) Fund Invest Online Birla Sun Life Tax Relief '96 Invest Online IDFC Tax Advantage (ELSS) Fund Invest Online SBI Magnum Tax Gain Scheme 1993 Invest Online Sundaram Tax Saver Invest Online Edelweiss ELSS Invest Online ------------------ Best Performing Mutual Funds Largecap Funds Invest Online DSP BlackRock Top 100 Fund ICICI Prudential Focused Blue Chip Fund Birla Sun Life Front Line Equity Fund Large and Midcap Funds Invest Online ICICI Prudential Dynamic Plan HDFC Top 200 Fund UTI Dividend Yield Fund Mid and SmallCap Funds Invest Online Reliance Equity Opportunities Fund DSP BlackRock Small & Midcap Fund Sundaram Select Midcap IDFC Premier Equity Fund Small and MicroCap Funds Invest Online DSP BlackRock MicroCap Fund Sector Funds Invest Online Reliance Banking Fund Reliance Banking Fund Tax Saver MutualFunds Invest Online ICICI Prudential Tax Plan HDFC Taxsaver DSP BlackRock Tax Saver Fund Reliance Tax Saver (ELSS) Fund Gold Mutual Funds Invest Online Relaince Gold Savings Fund ICICI Prudential Regular Gold Savings Fund HDFC Gold Fund Invest in Tax Saving Mutual Funds Download Any Application Forms Buy Mutual Funds Online Invest Online Buy Gold Mutual Funds Invest Now

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