SMART INVESTOR

Lesser known tax deductions

2012-09-08T18:11:00.000+05:30

The short-term capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains.
The losses that have not been adjusted can be carried forward for up to eight years.
Besides, only short-term capital losses from stocks can be adjusted against other gains or carried forward. So, the stocks you bought more than a year ago will not be eligible.
Disabilities are also eligible for tax deduction upto 75000 rs if you are atleast 40% disable and 1lac rs if your are atleast 80% disabled or 50000 rs if you have a disabled dependent.
Donations given to recognised organisations are eligible for tax deduction.
Rent is deductible even if you dont get HRA:-The least of the following three can be claimed as deduction: rent paid, less 10% of total income; or Rs 2,000 a month; or 25% of the total income
Certain diseases also get tax benefits upto 40000rs and 60000rs for senior citizens.
Interest paid on second home loan is fully deductible.
Education loan interest is fully deductible.

Tax management

2012-07-14T22:43:00.002+05:30

For an individual having income upto 3.15 lacs:-

Under section 80C - upto 1,00,000 rs deduction.
Under section 80D - upto 15000 rs deduction.
For an individual(including man n woman) no tax implication upto -2,00,000rs.

1) Public provident fund(PPF):-You can invest upto 1lac rs in a year with maximum of 12 installments.For more detail visit this:-http://be-a-smartinvestor.blogspot.in/2012/07/public-provident-fundppf.html

2) 5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction.

3) Life insurance premium:-Any Premium upto 20% of sum assured is eligible for tax rebate under sec 80C. E.g. You have policy of sum assured Rs. 1,00,000/- and you are paying premium every year Rs. 25,000/-. Than you can claim maximum up to Rs. 20,000/- under section 80C.
For more detail visit this:-http://be-a-smartinvestor.blogspot.in/2011/06/insurance.html

4)ELSS(Equity linked saving schemes):-http://be-a-smartinvestor.blogspot.in/2012/07/elssequity-linked-savings-scheme.html

5)NSC(National savings certificate):-for detailed info:-http://be-a-smartinvestor.blogspot.in/2012/07/naional-savings-certificatensc.html

6)Voluntary Provident Fund (VPF) / Public Provident Fund (PPF):- PF is automatically deducted from your salary. your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You also have the option to contribute additional amounts through voluntary contributions (VPF). Current rate of interest is 8.5% per annum (p.a.) and is tax-free.

7)Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in Sec 80C deductions.

8)Unit linked Insurance Plan:-http://be-a-smartinvestor.blogspot.in/2012/02/ulips.html

9)Health Insurance Premium:-The annual deduction under sec 80D is of Rs. 15,000/- from taxable income for payment of Health Insurance premium for self, spouse, children. For senior citizens, the maximum deduction is Rs. 20,000/-. It comes under Section 80D

10)Post office time deposit scheme:-Only 5 years time deposit can be claimed under section 80C http://be-a-smartinvestor.blogspot.in/2012/07/post-office-time-deposit-scheme.html

Post Office Time Deposit Scheme

2012-07-07T14:48:00.001+05:30

Any individual (a single adult or two adults jointly) can open an account.
1 Year, 2 Year, 3 Year and 5 Year Time Deposit can be opened.
Minimum amount of deposit- 200rs and in multiples of Rs 200/- thereafter
Maximum limit.-No limit.
Rate of interest - 8.20%, 8.30%, 8.40%, 8.50% compounded quarterly for 1,2,3 & 5 years TD account respectively.
The investment in the case of 5 years TD qualify for the benefit of Section 80C.
Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C.
Interest income is taxable.
Account can be pledged as security against a loan to banks/ Government institutions.
Group Accounts, Institutional Accounts and Misc. account not permissible.
In case of premature closure of 1 year, 2 Year, 3 Year or 5 Year account on or after 01.12.2011, if the deposit is withdrawn after 6 months but before the expiry of one year from the date of deposit, simple interest at the rate applicable to from time to time to post office savings account shall be payable.
In case of premature closure of 2 year, 3 year or 5 year account on or after 01.12.2011, if the deposit is withdrawn after the expiry of one year from the date of deposit, interest on such deposits shall be calculated at the rate, which shall be one per cent less than the rate specified for a period of deposit of 1 year, 2 year or 3 years as mentioned in the concerned table given under Rule 7 of Post office Time Deposit Rules.

ELSS(Equity Linked Savings Scheme)

2012-07-07T13:43:00.001+05:30

Lock in period- 3 years.
Can contribute using Systematic investment planning(SIP).
Dividend paid is tax exempt.
At maturity the amount is exempted under long term capital gain tax.
It allows diversified equity investment.
It is similar to mutual fund.
Equity as an asset class has given a higher return over the long term.
ELSS are subject to market risks, investors must take into consideration their age and risk-taking abilities.
The investment horizon should be more than five years for higher inflation-adjusted returns.
ELSS is not eligible for tax benefits under the DTC(direct tax code), but since the implementation of the new tax regime has been postponed, investors can park their funds in these equity schemes for now.

Naional Savings Certificate(NSC)

2012-07-05T16:17:00.003+05:30

For 5 years:-

Minimum limit for investment-100rs.
No maximum limit for investment.
Can invest in denominations of INR. 100/-, 500/-, 1000/-, 5000/- & INR. 10,000/-.
No Tax deduction at source.
Investment up to 1,00,000/- rs per annum qualifies for IT Rebate under section 80C of Income Tax Act.
Rate of interest 8.60% per annum compounded half yearly.
Certificates can be kept as collateral security to get loan from banks.

For 10 years:-

Rate of interest 8.90% per annum compounded half yearly.
Else same as above.

Public provident fund(PPF)

2012-07-05T16:12:00.000+05:30

Ideal investment option for both salaried as well as self employed classes.
Minimum investment-500 rs in a year.
Maximum invsetment-1,00,000 rs in a year.
Rate of interest-8.80% per annum.
Its completely tax free investment.(EEE Product).
Loan facility available from 3rd financial year upto 5th financial year.
The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% p.a
Withdrawal permitted from 6th financial year.
Free from court attachment.

Gift tax

2012-07-05T15:01:00.000+05:30

The gift can be anything including cash,house,jewellery,paintings,shares,mutual fund.
The receiver has to pay tax for receiving any gift from non-relative valued at Rs 50,000 and more.
There is exemption for gifts received from certain people.
The gifts that one receives from relatives on the occasion of marriage are exempt.
The gifts received from parents and grand parents, the gifts received by a daughter-in-law from her parents-in-law are all exempted..
A Non-Resident Indian can gift to his/her parents in India from their NRE (Non-Resident External) account without their parents suffering any tax.
Tax-Exempt Gifts from"relative" means tax exempt on gifts received from : 
1. Spouse of the individual.
2. Brother or sister of the individual.
3. Brother or sister of the spouse of the individual.
4. Brother or sister of either of the parents of the individual.
5. Any lineal ascendant or descendant of the individual.
6. Any lineal ascendant or descendant of the spouse of the individual.
7. Spouse of the person referred to in clauses (ii) to (vi).
Tax-Exempt Gifts from Other Persons:
1. The gifts received by way of a will and inheritance are exempt from tax.
2. Gift from any local authority.
3. Gift from any trust or institution, which is registered as a public charitable trust or institution under Section 12AA.
4. Gift from any fund or foundation or university or other educational institution or hospital or any trust or any institution referred to in Section 10(23C).

Facts of Fixed deposit part 2

2012-06-06T17:30:00.000+05:30

Your deposits will earn lower than promised returns if you withdraw prematurely.
Interest earned on FD’s in the name of minors having no other income is also taxable.
You need to declare the interest earned on your FD’s in your annual income tax returns.
Some banks offer secured credit cards against your FD.
Not all 5 year fixed deposits enjoy section 80C income tax exemption.
Excess funds in your savings account can be moved to new Fixed Deposits of predetermined tenure.
You need not be a senor citizen to enjoy (higher) senior citizen rates.You can open joint account with your grandparent or parent(if senior citizen) as a first applicant.

Short Term Capital Gain(STCG)

2012-05-29T19:10:00.000+05:30

If shares or equity MFs are held for less than 12 months before selling, the gain arising is classified as Short Term Capital Gain.
Tax on Short term capital Gain(STCG) on share transaction, on which securities transaction tax (STT) has been paid, is applicable at flat 15 % rate.
A short term capital loss arising from sale of shares can be offset against a short term capital gain from sale of other shares, as long as both the sales occur in the same financial year.
If you hold a house for less than three years before selling it, then it is considered a short-term capital gain (STCG) and you have to pay tax according to your income tax slabs.

Long Term Capital Gain(LTCG)

2012-05-24T18:37:00.000+05:30

Long Term Capital Gain for residential property:-

If you hold house for more than 3 years before selling it then you have capital gain.
When you sell your property and have some capital gain then you have to pay tax.
Gain=Price at which you buy-Price at which you sell.
You have to pay 20% profit as tax.
You also get the indexation benefit.(depends on the inflation).
You can save tax if you buy a new house with that money in a year.(*condition apply).
You can also park your CAPITAL GAIN in CGAS before the due date of filing tax returns (31 July) to save LTCG tax.
This money has to be used in two years to buy a new home or construct in three years.

Example:- Cost of house = 10 lakhs
            Year of purchase    = 1995
                   Sale price             = 25 lakhs
                   Year of sale                  = 2008
                   Purchase CII     = 281
                   Sale CII      = 582
   Indexed purchase price = 207174 rs
                   Capital gain                  = 428826 rs
                   Tax with Indexation    = 85765

Mediclaim

2012-04-20T20:05:00.001+05:30

Mediclaim is like an health insurance.
It's a protection to individuals and their families against unforeseen expenses.
Its provides you financial protection against the unforeseen expenses you have to pay in case of sickness.
These plans also provide you protection against losses caused owing to accidents.
The various disease covered are Diabetes,hypertension,accident,surgery,operation.
Most of the pre-existing disease are covered from the fourth year.
Most of the company does not cover are AIDS, pregnancy,suicide.
There are some conditions like patient has to hospitalized for a day in hospital.
There are two different ways to get your bills claimed either by cashless facility Or Reimbursement.
In Cashless your bills are directly paid to the hospital.
In Reimbursement you can pay your bills in the hospital and get an reimbursement after submission of the same to the insurance company.
You also get advantage of saving on taxes as contributions towards medical health insurance premiums are exempted from taxation.
There are different types of mediclaim policies such as individual or family floater.
In individual policy it covers the expenses of only that person
In family Floater it covers the medical expenses of all the members of the family.

Budget 2012 part-5

2012-03-19T19:52:00.004+05:30

This time a negative service list has been prepared which gives the list of areas on which service tax wont be calculated and all the other areas service tax will be calculated at 12.36% increased from 10.3%.

The list is as follows:-

Services by the government or local authorities.
Services by the reserve bank of india.
Foreign consulates and embassies in india.
Agricultural services.
Manufacturing of goods.
Advertisements on hoardings or newspapers.
Toll charges.
Gambling.
Trading.
Entertainment tax.
Electricity.
Education.
Residential rent.
Certain financial transactions.
Public Transport.
Goods transport.
For the absolute end.

Union budget Part-4

2012-03-16T20:37:00.003+05:30

Deduction of up to Rs.10,000 from interest from savings bank accounts.
Cinema industry exempted from service tax.
Senior citizens without business income exempt from advance tax.
Investment linked deduction of capital expenditure enhanced for certain businesses; new sectors eligible for investment linked deduction.
STT on cash delivery reduced by 25 per cent to 0.1%.
Relief in indirect taxes to sectors under stress; agriculture, infrastructure, mining, railways, roads, civil aviation, manufacturing, health and nutrition, and environment get duty relief.
Tax Free Bonds of Rs. 60,000 crore to be allowed for financial infrastructure projects.

Union budget Part-3

2012-03-16T20:24:00.000+05:30

Things to be cheaper:-

Footwear below Rs 500.
Imported medical equipment.
Soya protein food products.
Matches.
Imported LCD and LED TV panels of over 20 inch.
Branded silver jewellery.
Mobile phone parts.
Branded garments.
Adult diapers.
Probiotics.

Budget 2012 part-1

2012-03-16T20:17:00.000+05:30

Income tax slabs Revised as follows:-

Upto 2.0 lakhs:- No tax.
2-5 lakhs - 10% tax.
5-10 lakhs- 20% tax.
Above 10 lakhs- 30% tax.

Service tax increased from 10% to 12%.
Excise Duty raised from 10% to 12%.
DTC to be implemented as early as possible.

Budget 2012 part-2

2012-03-16T20:16:00.002+05:30

Things to be costly:-

Refrigerators, air-conditioners, washing machines, watches.
cigarettes and Bidis.
Unbranded precious metal.
Soaps, cosmetics, home-care items.
Two-wheelers, cars, commercial vehicles.
Air travel, eating out at restaurants and hotel stays.
Imported gold bars and coins of certain categories, platinum.
Imported digital still cameras.
imported bicycles and bicycle parts.
Imported luxury vehicles.
Imported cut and polished coloured gem stones.

Pre-budget 2012

2012-03-12T21:48:00.003+05:30

Union budget will be presented on 16th march 2012 by our finance minister pranab mukherjee.
Direct tax code(DTC) is not going to be implemented this year.
Section 80c limit is expected to increase from 1 lacs to 2 lacs.
Tax exemption limit might increase from 1.8 lacs to 2.0 lacs for men and women.
Home loan principal amount might increase from 1.5 lacs to 3.0 lacs.
Mediclaim exemption might increase from 15,000 to 30,000 rs.
Tax labs are likely to change as follows.

upto 2.0 lacs-no tax.
2.0 lacs to 5.0 lacs- 10% tax.
5.0 lacs to 10.0 lacs- 20% tax.
Above 10.0 lacs-30% tax.

Major part of government revenue comes from people with low income.
Infrastructure bond limit might increase from 20,000 to 50,000 rs.
Since India need a huge amount of money for improving its infrastructure.
There could be increase in service tax from 10.3% to 11.5%.

ULIPS

2012-02-23T11:05:00.000+05:30

ULIPS means unit linked insurance plan scheme.

ULIPS are combo of investmenmt and insurance.
ULIPS are neither good for investments nor insurance.
The charges are very high in ULIPS.
The entry load charges,exit load charges,fund management charges,allocation charges etc makes it costly.
ULIPS had to be continued till its maturity period (10-15 years) to gain some benefit.
If you terminate in less than five years than you will lose you large amount of money.
The insurance part of the ULIP is too costly.
In fact you can buy term insurance.
ULIPS are not transparent as mutual funds.
Do not take ULIP if you don't plan to pay the premium for 20 years.

Scenario: You pay an annual premium of Rs 20,000 for a 15 year term.
Assumptions: Charges and returns
First year allocation charge: 20 per cent
Second year allocation charge: 15 per cent
Third year allocation charge: 5 per cent
Fourth year onwards: 3 per cent
Administration charges: Rs 30 per month
Fund management charge: 1.5 per cent per annum
Rate of return: 10 per cent per annum
Outcome: At the end of 15 years, you would have a fund balance of Rs 5.6 lakh.

Infrastructure bond

2012-02-11T19:31:00.000+05:30

Its the time when you want to show the investment that you have made in the current financial year.
Here comes the Infrastructure bond which gives you an additional tax benefit upto 20,000 rs under section 80CCCF.
There are various Infrastructure bond available in the market such as:-

IDFC Infrastructure bond.
L & T Infrastructure finance.
IFCI.
LIC
PTC.

The tenure of the bond is generally 10 years or 15 years.
The interest offered can be in the range of 10%-12% depends on the bond.
Always choose the bond which has good CRISIL rating preferably AAA.
The safety of the bonds depends on the rating. Higher the rating , Higher the safety.
You can apply in the demat mode also.
Also look at the financial credentials of the company.

Section 80c

2012-01-18T19:44:00.001+05:30

Section 80c of the tax code allows you a deduction of 1 lac rs in a financial year.The various instruments that come under section 80c are:-

Public Provident fund.
5 year fixed deposit.
ELSS (Equity linked insurance savings scheme).
Principal repayment amount of a home loan.
National savings certificate.
Stamp duty and registration charges for a home.
Senior citizens savings scheme (SCSS) .
Tution fees of your child.
Pension funds.

Hidden facts of FD

2012-01-09T20:12:00.001+05:30

Part 1

Along with banks companies also offer Fixed Deposit.
Banks Fixed Deposit are secure where as Companies Fixed Deposit are not secure.
Higher interest doesn't mean higher returns it depends on compounding.
Senior citizens get higher returns around 0.50%-1.00% more as compared to others.
Penalty on premature withdrawals can be negotiated.
Interest on Fixed Deposit are taxed before you get your maturity amount.
You can avoid TDS if you do proper documentation.
You can get loan or overdraft facility on your Fixed Deposit.

Where to invest?

2012-01-07T20:25:00.001+05:30

Its the time where you dont know where to invest your money.
Well its the great time to invest in equity market if you are a long time investor.
If you are intraday trader then donot invest in stock markets as it is very volatile at this moment.
This is the time where most of the stocks are trading at their low.
You can see a good profit in future if you invest at this time.
Its a great time to invest in debt instrument for at least 5 years to get a very good yield.
A investment in fixed deposit can give you a annualized returns upto 10.50% if invested for 5 or more years.
PPF , NSC and FMP are other good debt instrument to bet on at this time.
Its a great time for an NRI to invest in indian debt instruments.

Debit card

2011-12-30T19:40:00.000+05:30

Pros

It can be used for online transactions, ATMs, and anywhere that Mastercard and Visa are accepted.
This type of card enables you to do shopping without cash in your pocket.
Allows you to have control on your shopping since it depend on the money you have in your bank account.
It makes use of pin number which protects you from theft or misuse of card.
Nowadays most of the bank offers free debit card.
You can get cash from the nearest ATM locator (may be of any bank).
While making purchases at any merchandise you have to sign the receipt in turn providing protection.
No monthly interest on your spendings.

Credit card

2011-12-28T19:21:00.001+05:30

Cons

You tend to spend more than you earn.
Interest calculated on credit card are very high.
Interest can be in range of 20%-30% of your remaining debts of credit card.
If credit card is stolen then your manney can be in big danger
There are annual charges depending on the type of credit card you hold.
Increase ijn number of credit card can get you into much more debt.

But if you use it wisely it has much more pros than cons.

Credit card

2011-12-23T17:06:00.002+05:30

Pros

Purchase products and services without having cash in your pocket or in your bank account.
You have the option to pay the minimum charge and carry forward the balance to next month.
There is always a certain credit limit depending on your payment capabilities.
They are cheaper for short term borrowings.
They are more secure as compared to debit cards since they are not linked to your account.
They are very useful in buying things which offers you to pay the money by installments.
If you use it well they are very helpful.
You will have the hard copy of all tour purchases in term of a bank statement.
Helps to establish a good credit facility.
Its help you to earn reward points that you can redeem at restaurants,hotels,airlines etc.