Prajna Capital |
- Tax Plan that best suits your stage of life
- Section 80E Tax Saving with Education Loan
- Savings Account Interest Rate
| Tax Plan that best suits your stage of life Posted: 13 Jan 2014 03:58 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
Come January – February and everybody starts to think of the income taxes. Income taxes, most likely are one of the largest expense one encounters over lifetime, may be bigger than owning a home or the cost of sending kids to college. You must be thinking that why even bother about taxes at this time of the year? Tax planning demands attention only when your employer sends the tax deduction notice in the beginning of the year or, during the last 1- 2 months of the financial year.
But, shouldn't you be more careful in effectively planning your tax commitments to ensure you don't pay more than your fair share. After all, effective tax planning not only facilitates in saving taxes but also provides decent returns. Tax planning involves selecting the right tax saving instruments and making wise investment decisions in the process.
For instance, when one buys a house through a bank loan, benefits of tax deduction on the interest amount and well as repayment of principal can be availed. One can claim up to Rs. 250,000 or the actual interest repaid whichever is lower. Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. In the same way, various tax incentives for reduction of tax liability can be looked at; all of which requires some planning.
You must be considering why one should read another article on tax planning, when already there in no dearth of them. Well, the difference we are trying to explain here, is the tax planning suitable to individuals according to the various stages of life they are currently in. 80% allocation to Equity linked saving scheme (ELSS) for tax saving may be an ideal choice for a young graduate, whereas for a retired person, this should not exceed 15-20% of the total amount allocated for tax saving. All in all, Tax Planning is a significant decision and its impact becomes much more pronounced considering which stage of life an individual is in.
Here comes the 'Four article series', where we will explore the suitability of various tax saving instruments at various stages of life:
So, stay tuned to our series on Tax planning and plan your taxes judiciously.
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
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| Section 80E Tax Saving with Education Loan Posted: 13 Jan 2014 02:56 AM PST 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
Education loan Tax Saving under Section 80E
It's a common notion that in current inflationary scenario, students have to resort to education loan to fund your college fees. Do you know that education loan is your pal in reducing your taxes? How? As per Sec 80E, any amount of interest paid towards the education loan, can be claimed as a deduction. However, this applies only on interest and not on the principal.
--------------------------------------------- Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
2. Franklin India Smaller Companies E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF
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| Posted: 13 Jan 2014 01:16 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
Savings Bank Account Interest Rates
Every individual has a Savings Bank account, but pays little attention to the interest earned on the balance in this account. Some people may not even know that the balance they maintain in their savings bank accounts earn an interest. In the past, before RBI had deregulated the savings bank interest rate regime, all banks were offering the same interest rate, which was 4% per annum. When RBI brought about changes in 2011, banks became free to decide the interest rate they wanted to pay on their savings bank accounts, depending on their liquidity and profitability preferences.
How is savings bank interest rates calculated?
Previously, the interest rate of 4% per annum was applied against the lowest balance available in the account between the 10 th and the final day of the month. This was seen as a very unfriendly method of calculation, as the depositor did not receive full benefits of the amount he maintains in his account. From April 2010 onwards, this changed and the savings bank interest is now calculated based on the daily balance method. This means that you will earn interest based on the closing balance you maintain every day, giving you the maximum benefits. For example, let's say that your bank pays you an interest rate of 5% on your savings bank account. You have the following transactions during the month:
1 st of the month: Balance in the account is Rs. 3 lakhs
21 st of the month: Withdraw Rs. 1 lakh à Balance in the account is Rs. 2 lakhs
25 th of the month: Deposit Rs. 2 lakhs à Balance in the account is Rs. 4 lakhs
31 st of the month: Balance in the account is Rs. 4 lakhs
Your savings bank interest amount will be calculated at 5% on Rs. 3 lakhs for 20 days, Rs. 2 lakhs for 4 days, and Rs. 4 lakhs for 7 days, instead of the earlier method wherein the interest is calculated on the minimum balance of Rs. 2 lakhs. Thus, you stand to earn more in the present times than what you might have earned in the past.
What has the de-regulated Savings Bank interest rate regime resulted in?
De-regulating savings bank interest rates have definitely helped the customer to earn more interest, as competition for low cost savings bank accounts has led some banks to increase the interest rate offered. However, on the ground level, it is seen that not many banks have actually increased their rates beyond the 4% mark. For deposits below Rs. 1 lakh, IndusInd Bank, Kotak Mahindra Bank and Yes Bank offer higher rates at 5.5%, 5.5% and 6% per annum respectively, while for deposits above Rs. 1 lakh, these banks offer 6%, 6% and 7% per annum respectively in that order. However, majority of the banks, including the big banks like SBI, ICICI Bank and HDFC Bank have retained the savings bank rates at 4% per annum. This shows that savings bank interest rate may not be the sole determining factor of which bank you must hold your savings account with; other reasons like quality of service, familiarity with the bank, user-friendly interfaces etc. also play an important role. In the case of HDFC Bank, their low cost deposits as a proportion to total deposits are very high at 45%, giving it less incentive to offer high interest rates.
The increase in rates on Savings Bank accounts also results in higher interest rates on short term deposits offered by the banks. An increase in deposit rates will lead to a contraction in the net interest margins of the banks. As a result, to maintain margins, such banks will increase their lending rates, leading to costlier loans. Although an increase in lending rates is a factor of many conditions, increase in the interest of low cost deposits is an important factor.
The high rates on Savings Bank accounts quoted by a few banks can go down if the rates on fixed deposits also go down and if the general interest rate scenario is soft. As the threat of inflation continues and RBI has still not shown signs of reducing rates, the current scenario is expected to continue for some time.
Taxation of Savings Bank Interest rates:
Unlike interest on fixed deposits, interest earned on savings bank accounts is not subject to Tax Deduction at Source. However, this does not mean the interest earned on Savings accounts is completely tax free. It is exempt up to Rs. 10,000 in a year, and if the interest you earn from Savings accounts crosses this threshold, it becomes subject to tax.
Things to look out for before you shift your Savings Bank accounts based on the interest rate:
As mentioned earlier, only a few banks offer high interest rates. However, you need to consider a few factors before you jump to shift your account. Ascertain the minimum balance to be maintained and the account closing fees. Sometimes minimum balance can be waived off if a fixed deposit is opened with the bank. Also evaluate the service charges and various ancillary fees. After all, your Savings account should offer you a host of benefits, rather than simply earning you interest
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 Mutual Funds Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
2. Franklin India Smaller Companies E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF |
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