Prajna Capital

TATA Tax Saving Fund
Compounding of Money and Wealth Creation with MFs and SIPs
How NRI income is taxed in India

TATA Tax Saving Fund

Posted: 10 Feb 2015 04:04 AM PST

TATA Tax Saving Fund Dividend

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

Invest in Tax Saver Mutual Funds Online -

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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You can write to us at

PrajnaCapital [at] Gmail [dot] Com

Leave a missed Call on 94 8300 8300

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Compounding of Money and Wealth Creation with MFs and SIPs

Posted: 10 Feb 2015 03:24 AM PST

Stick with your investments to benefit from high returns in the long term

The power of com pounding is one of those effects in any one's portfolio that financial planners swear by. That's because, to realize the true potential of a long-term investment, you need to have compounding on your side. A person should always keep in mind while investing that compounding amplifies the growth of the working money. Just like investing maximizes your earning potential, compounding maximizes the earning potential of your investments. But remember, because time and reinvesting make compounding work, you must keep your hands off the principal and the interest earned on that.

They often say that it's not the timing of investment but the time in investments that creates great wealth. It is surprising to know that an eye-popping 99% of wealth created by Warren Buffett, the celebrated investor and one of world's richest persons, was earned after his 50th birthday. Buffett made $62.7 billion of his $63.3 billion net worth after his 50th birthday. Such robust wealth in his 50s was created due to the magic of compounding in his investments. Buffet had started investing at a very early age and reaped the benefits of compounding over years.

Using the MF route

A systematic investment plan (SIP) in a mutual fund is an effective means to beat market volatility and benefit from the enormous power of compounding over time. An SIP allows you to invest in any mutual fund by making smaller periodic investments instead of a lump sum, one-time investment. Since this is small money flowing out at regular intervals, it doesn't affect your other financial commitments significantly. Rupee cost averaging is another benefit investors can reap from a disciplined SIP . Investing a fixed amount in a fund at regular intervals over time gets you more units when the price is lower, and the average cost per unit comes down.

The other advantage of investing through the mutual fund route is the higher expected rate of return compared to most other investments. To understand the role of returns, let us assume early investments of Rs 60,000 in each -fixed deposits and mutual funds (market linked products). The table Choose The Right Avenue illustrates the returns from each. It shows not only that higher returns help create a much larger corpus, but also conveys that the more you stay invested, the bigger the corpus will be.

Understand the risks involved

However, there is a word of caution: Several investors opt for aggressive investment products that may give higher returns, but they also come with higher risk. "They feel an aggressive portfolio will lead to wealth creation in shorter duration, which is not always true. It is also recommended to understand your risk appetite by undergoing a risk profile test and then take an investment decision.

Despite the advantages, investors, however, do not always reap the benefits of compounding. There are two main reasons for the same, Moving in and out of investments frequently cancels much of the benefits of compounding. Frequent churning would be akin to `taking two steps forward and one step back'. The other is choosing only low-return investments and restricting yourself purely to them for your long-term savings. This will rob you of the famed `multiplier effect'.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

Invest in Tax Saver Mutual Funds Online -

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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

Leave your comment with mail ID and we will answer them

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

Leave a missed Call on 94 8300 8300

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

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

How NRI income is taxed in India

Posted: 10 Feb 2015 12:22 AM PST

Non resident income in India can be classified into two categories. And one would be better off learning about the rules that decide how much tax is to be recovered from non resident.

With India rapidly progressing towards a globalized era with stronger economic ties being forged with other developing /developed markets, there are a plethora of employee movements across the globe. Such, employees, being sent to work in other countries, straddle two tax jurisdictions and may have a host of reporting and other obligations in addition to adherence to the tax laws in two countries.

Non-Resident Indians (commonly referred to as NRIs) are citizens of India or Persons of Indian origin who qualify as Non-Residents in India for the relevant tax year. As per Indian tax laws, a 'Non-Resident' is defined as an individual who was present in India for less than 60 days during the relevant tax year, and in case of Indian citizens who leave India (during the year) for the purpose of employment outside India, such limit to break Indian residency is replaced by 182 days. Additionally, when a citizen of India or a person of Indian origin who is outside India visits India in any year, he would be regarded as Non-Resident if his total stay is less than 182 days in the relevant tax year.

In order to analyze the tax benefits available to NRIs under the Indian domestic tax laws and under the double tax avoidance agreements (DTAAs), let us break such individuals into 2 categories:

For NR employees coming to work in India: Although India follows a 'source rule' basis of taxation, i.e. to tax all incomes which accrue/arise from an employment exercised in India, there are certain reliefs available under the domestic tax laws (commonly known as the 90 day rule) and the DTAA (commonly known as the 182 day rule) which allow exemption of such employment income earned in India for individuals qualifying as Residents of their home country, subject to satisfaction of certain other specified conditions such as physical presence in India, cross charge to an Indian entity etc. Personal income received outside India for such individuals (rent, interest etc) is not taxable in India.

For NR employees leaving India to work outside India: The compensation income received by non-resident Indians in a bank account overseas is not subject to tax in India. However, salary received in India is taxable under the Indian domestic tax laws (along with being taxed in the source country as most countries follow the source rule of taxation) i.e. on a 'receipt basis'. However, in such a case, an exemption may again be claimed under the Dependent Personal Services (DPS) clause of the DTAA entered between India and the relevant host country, if the individual qualifies as a resident in the host country.

Apart from the above, foreign tax credits may also be claimed by NRIs overseas in respect of incomes taxed both in the home as well as host jurisdictions, in accordance with the rules prescribed under the domestic tax laws and DTAA. It is pertinent to note that in case an NRI intends to avail any of the tax benefits provided under a DTAA, a Tax Residency Certificate needs to be applied for and obtained in respect of each of the tax year(s) for which such benefit is claimed. Such certificate is required to be issued by the country where the individual breaks residency.

An important point to note is that, Indian sourced income in the form of interest on deposits, rental income on property in India etc. shall however continue to be taxed in India (as per domestic tax laws) and the exemptions available under the domestic tax laws (except any specifically not applicable to NRIs) such as Section 80C with respect to certain investments, payment of principal on housing loan etc., may continued to be availed by them. Further, a non-resident individual, whose income during the tax year comprises only of investment income or income by way of long-term capital gains or both, does not necessarily need to file an income tax return in India. Also, a return is not required if the necessary tax has already been deducted at source from such income.

There are certain provisions under Indian tax laws wherein NRIs can opt for special tax rates (instead of progressive slab rates applicable in India) for specific investment incomes or capital gains from foreign exchange assets. Further, the interest earned by an NRI on his NRE bank account etc is tax free subject to certain conditions.

Hence, keeping the above in mind, work/business assignments to different countries may be planned and structured better by NRIs (as well as their employers) from a tax perspective.