If you don’t, then please activate it. It will take 10 mins of your time to understand the process for your bank and another 30 mins to do the formalities (form filling, etc). Here are the ‘how to’ links for some of the popular banks:

HDFC Bank | ICICI Bank | SBI

But, why do you need netbanking?

Well all of us have a busy life where we spend anywhere between 8-10 hours in office or college. I believe the rest of the day should be spent with family or doing something for yourself.

Well, I like to be a couch potato watching TV for hours. I tend to enjoy a lazy life, especially the weekends. And nothing irritates me more than doing ‘bank’ work on Saturdays.

So, I am going to list down some ways in which netbanking has helped me cut down my bank-related hassles.

INVESTMENTS:
Online Share Trading:

What you need?

-          Online Demat Account

-          Savings account with netbanking activated on it

What you need to do?

-          Link your demat a/c with your online banking a/c

-          If you are currently an offline trader, request your broker to convert your account into an online one & then link it to your online bank a/c

-          If you are planning to open a demat a/c, then the ‘linking’ can be done at the registration phase

Benefits:

-          This facility allows me to simply login to my demat a/c, transfer money from my online bank a/c and voila – I have money to buy shares.

-          I don’t have to deposit lump sum (in my demat a/c) at frequent intervals to trade

Transfer funds to your demat a/c

-          You can also transfer excess money back to your bank account when not needed.

Transfer money back to your savings a/c

MUTUAL FUNDS:

-          If you buy mutual fund units through your online demat account (which I do), then you have the same benefits as in online share trading.

-          It even works if you have individually registered with your respective mutual fund houses. Just log in with your customer ID and choose the option to transfer money through netbanking.

Choose your payment gateway

-          When you redeem or sell your funds, you can transfer the money back to your savings account through netbanking.

INSURANCE PREMIUMS:

Every insurance company allows you to register your policy online and make payments through netbanking.

Once the payment is processed, the system generates your receipt and lets you take a print out at your convenience.

OTHER INVESTMENT AVENUES

My mother even makes her PPF deposits each year through her online SBI account.

There are many other investment avenues where you can utilise your online bank account. These were just the important ones. If I am missing anything, please let me know.

But there is an annual routine task that can turn into a nightmare if not handled right. And this is what clinched the deal for me in favour of netbanking. All the juicy details to follow in the next post.

- Life Insurance Corporation of India (LIC)

- Infrastructure Development Finance Company (IDFC)

- Industrial Finance Corporation of India (IFCI)

- Non-banking infrastructure finance companies, approved by the RBI

would qualify for additional income tax rebate under section 80CCF. The announcement comes in the wake of a decision taken during this year’s budget session (Budget 2010-11) to encourage investment in long term infrastructure bonds.

The Nature of Bonds:

- Investment of up to Rs20,000 in these bonds will qualify for income tax rebate under section 80CCF

- This deduction will be in addition to Rs 1,00,000 permitted under sections 80C, 80 CCC and 80 CCD

- Tenure of the bonds will be 10 years with a lock-in of 5 years

Is it a good investment bet?

According to experts at Bankbazaar.com,

- It will make more sense for people in the Rs 8+ lakh tax bracket to invest as the returns would effectively counter inflation

- For the people in the Rs5-8 lakh bracket, it would be advisable to invest in these bonds if the period of investment is 3 and not 5 years

Source: Bankbazaar.com

Should you invest?

Infrastructure growth will play a vital role in India’s growth story.  For a country trying to achieve roti, kapda, makaan, ports, roads, highways, power & telecommunication facility for all, I believe everybody’s two cents will matter. So if the returns are decent and help me save tax then I definitely don’t mind pitching in. What about you?

What is it?

Equity Linked Savings Schemes or ELSS are equity diversified mutual funds that carry a tax advantage. You can claim upto Rs 1 lakh by investing in these funds.

Why ELSS?

- Returns tell the story. The category has generated over 30% average return in the last year.

- The funds have a lock in period of 3 years. This prevents you from unnecessary withdrawals.

- The lock in period allows the fund manager to take long term bets in the market. This way an investor avoids market volatility and also earns decent returns

- The dividends on an ELSS are tax free

How & where did I invest?

I purchased my units online through my demat account. Quite convenient I must say. Just choose your fund, your mode of investment (SIP or one-time), start & end date and VOILA, it’s done. Just make sure there is money in your demat account before the cut off time on the chosen date (1 pm on all business days).

And yes, I did not invest a lump sum in my chosen funds. I decided to take the SIP way for 2 funds.

SIP: Rs 2000 per month starting May 2010 till Mar 2011

Funds: Sundaram BNP Paribas Tax Saver & Canara Robeco Equity Tax Saver

Click here to see other good ELSS funds.

My Status:

I have already covered Rs44,000 (2 x 2000 x 11) under 80C.

Conclusion:

My main reason to invest in these two funds was the tax benefit. If you are looking for higher returns it would be a good idea to have some diversified equity mutual funds in your portfolio.

So I got thinking….why not put out, on a public forum… the way I handle my money or atleast try to.

But why would I do that? Well, sometimes when you spell out your plans; the clarity you get is amazing. Maybe I’ll be able to better judge myself under a scanner. And because I’ll be doing it for everyone to see, it should keep me disciplined.

So this is what I’ll do. Because I fall in the taxable category, I plan to invest Rs 1 lakh under section 80C and claim another Rs20,000 by investing in infrastructure bonds. And every time I make such an investment I will write down my experience on this blog – do’s & don’ts, what I learnt, best way to go about it, etc.

And you my dear reader get to judge my decision. Applaud it, trash it – do whatever you want. If I get to learn it’s a plus for me. If what I did makes sense, then it’s simply good advice.

So starting next month (when I submit my tax declaration in office), you are in on my best laid (financial) plans.

Then why the CARELESS treatment of it, once we get it? Most of us out there have no clue about how to make money work for us. And it pains me to say that this kind comprises mainly of women.

CASE IN POINT: My 26 year old friend works as a TV producer in one of India’s top 3 GEC channel. Her monthly in-hand is a comfortable Rs25,000 and her only liability is an education loan.

So imagine my horror when I find out that her entire salary is taxable, as she doesn’t apply for a deduction on the interest being paid by her. SHOCK NO. 2: She has no idea what this is all about. This is her second year as a tax paying citizen of this country & all she has to show for it is a FORM 16 from the previous year.

So, what is wrong with the picture here? 2 things.

• If the government of this country has so considerately allowed you to get a rebate on your loan interest, then why don’t you use it!!!

Let the math do the talking.

Annual Gross Income – Rs 3,50,000

Investments under 80C = Nil

Deduction under 80E (education loan) = Rs 72,000 (Rs 6,000 per month)

Can you see the difference between the 2 figures? That’s a huge amount for anyone.

• The only document to prove that she paid some amount of tax in FY2010 is her FORM 16. Please Note: Income tax filing does not end with you getting your FORM 16. You need to contact a tax consultant or a chartered accountant to file your income tax returns. FORM 16 only accounts for your salary/pension – not income from other sources.

If you receive rental income, interest from investments or income from any other source, you need to show it. Your IT returns are important documents, especially if you are applying for a loan or a self-sponsored visa.

I believe both these points demand their own post & I shall do that. Till then keep watching this space for more!!!

As a kid the highlight of any academic year for me, would be the first few months. No matter how badly you had performed in your last class, you could start all over again. This I believe is our fascination with newness. Newness that signifies wiping the slate clean for a better beginning.

But the darker side to this is our attempt to forget the past and sweep it under the wraps. Because we can’t undo our mistakes and learn from them, we simply start anew with no lessons learnt.

This darker side is the platform on which the mutual fund companies built their NFO empire. But SEBI seems to have ruined the party!!!! MF companies are finally marketing their existing funds to investors. Let us examine the new dynamics.

(Newspaper ads promoting existing funds)

Till now mutual fund inflows mainly consisted of New Fund Offer (NFO) money. This was the best case scenario for asset management companies (AMC) as the entry load took care of much of the initial cost and past performance didn’t matter. Both advantages have now been curtailed by SEBI. Entry load was abolished last year & apparently now, SEBI is refusing clearance to look-alike NFOs. Unless mutual fund companies plan to launch new funds with unique investment objectives, fund approvals will be hard to come by.

This works out nicely for investors – no more copy-cat NFOs gunning for our attention, lesser number of funds to choose from & a fair share of limelight for funds with brilliant track records. Talk to any established mutual fund expert and his advice would be to buy an existing fund with a minimum track record of 3 years.

So dear investors, rather than spending your time talking to everyone from your neighbour to your brother’s-colleague’s-friend’s-agent, pick up the maths & art of analysing funds to best suit your needs.

Before I express my views on your budget, please do read the following note:

I belong to the ‘globalized capitalist’ generation, which roughly translates into – have money to spend and things to spend on. I am used to my disposable income & anything you do to reduce that, just makes me……well, unhappy. I also belong to this great country. so living within my means & saving for a rainy day, come with the territory. And hence, striking a balance between the two is a daily battle for me.

In light of the above note, your Budget 2010 has scored a decent 8/10 on my rating scale. Let me tell you why:

Changes in Tax Slabs: Even though the entry level slabs remain unchanged, taxpayers can now save upto Rs50,000 in taxes annually. If you earn up to Rs 3 lakhs per annum, there will be no change in your tax outgo. But if you earn between Rs 3-5 lakhs, you can save up to Rs 20,000 and people earning in the Rs 5-8 lakh range, can save between Rs20,000-50,000.

Addition to 80C: Infrastructure bonds are back! We will now be able to claim Rs20,000 under section 80C, which is over and above the existing limit of Rs1,00,000. This is an added bonus for people who are mainly interested in low-risk tax saving instruments.

Addition to 80E: Well, this was the clincher for me. Till last year, I could not claim the interest paid on my post-graduate education loan under section 80E. Why? Because I didn’t go in for traditional courses like engineering, medicine, management, etc. But I can do that now, as 80E has been modified to include all types of courses.

Various other measures like elimination of surcharge on income tax (Rs10 lakh and above), hike in section 80DD deduction from Rs75,000 to Rs1,00,000 & removal of Fringe Benefit Tax (FBT) will help millions of taxpayers take more money home.

But Mr Mukherjee, all is not hunky-dory.

• Your gradual withdrawal of stimulus measures introduced last year, will force companies to pass on the burden  to consumers.
• The Rs26,000 cr that you expect to earn by way of excise and customs duty hikes on crude oil & petroleum products, will hurt even more
• Even though existing public service schemes are burning a hole in the government’s kitty, you & your sarkaar still keep unveiling newer ones. Please sympathize with the RBI and do your bit to contain the burgeoning fiscal deficit.

After all is said & done, I believe you are doing a good job. Please, continue to consider & involve every stakeholder of this country in your plans.

Regards
Your taxpayer

But somehow mutual fund investors have ignored this warning, going by the increased collections reported by new fund offers (NFOs) in the last few months. In Oct 09, mutual fund houses collected Rs 6,270 cr worth of NFO money in just 15 schemes compared to Rs 7,004 cr by over 68 NFOs in Oct 08. What is even more surprising is how fund houses with no previous track records are getting positive response to their new offers.

Though the increasing participation in equities is a positive sign for a country where less than 3% of the population invests in the markets, the preference for NFOs is disturbing. Assets under management (AUM) of fund houses have almost doubled in the past year, mirroring the craze for NFOs during the previous bull-run.

So why should one be cautious of NFO’s?

NFOs are not cheap

New fund offers are anything but cheap. Investing in them is like paying for something without knowing its worth. The common belief is that subscribing to an NFO at its face value (NAV of Rs10), returns are much higher as compared to investing in an existing fund with higher NAV. In reality what matters and is usually overlooked is the percentage return on investment. NAV is simply the cost you incur to purchase the units of a mutual fund. For example, let us compare two infrastructure equity funds of SBI and TATA Mutual Fund:

As we can see, Tata Infrastructure fund gave higher returns even though it was purchased at a higher NAV.

No proven track record

The longer a fund has been in the market, the safer it is to invest in. Its longer track-record of returns, the investment style of its managers, its risk ratios, etc help an investor judge the mettle of a fund. An NFO offers no such scope of research and analysis before a purchase decision.

So are all NFO’s bad?

Today, investors have the luxury to pick and choose funds that meet their investment needs. They can utilise various tools to judge a fund’s risk profile, management style and performance to take the right decision.

NFOs are more risky than existing schemes as it is always better to have a track-record to fall back on. If an NFO provides you with the kind of exposure you looking for and has substantial growth potential, then go ahead and invest. But do so, not because your friendly neighbour or your financial advisor thinks it’s a bargain.

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