Money Rumors

Monthly Income Fund

2011-10-10T00:16:00.000-07:00

What is Monthly Income Fund
As all we know, the bank will pay interest for our deposits on monthly basis.Likewise the Monthly Income Funds also pays interest to its investor on monthly basis.These funds are suited for the people who are looking for additional income.
As its name tells it is a monthly scheme but there is no guarantee that they will pay on monthly .This is because they are investing the money in Market.If they get income from there investment they will pay the interest. If they don't get they wont pay us. There is big drawback in this scheme.
Where They Are Investing Our Money
Mostly they are investing 75% our money in Company Deposits,bank Deposits etc and only 25% of the money is invested in equity market.So the returns are somewhat high as compare to bank deposits.The income varies between 10% to 14%.
What are the Options
1)Monthly Dividend
2)Quarterly Dividend
3)Annual Dividend
4)Growth option
For whom it will Suit
* People looking for more interest then bank interest.
* People who can take less risk.
* For Senior Citizen .

Regarding Tax
Investors have to pay the Tax for Dividend .But the mutual fund company itself pay the tax for dividend.So no need to pay the tax for dividend separately.

Invest in Gold or Silver

2011-07-26T05:21:00.000-07:00

1)The rate of silver is $34/ounce compare to $17/ounce last year .It has doubled in one year and also given 100% profit in just one year.
2)Unlike Gold silver doesn't have alternative to made its purpose.It has demand both in industrial and also ornament purpose.So the chances of increase its demand is high as compare to Gold.
3)People are stay away from Gold due to its high cost. So they have started liking the silver.

4)Already the gold yields lot of profit.But the Silver yields very less profit in the past.So in coming days the rate of gold will be decrease and the Silver has very good future in price wise.
5)Gold already touches its high, so Investors are selling the Gold and buying the Silver.This will increase the price of Silver rate.
6)In 1985 we can buy 49 oceans of silver per one oceans of gold. But now we can buy only 42oceans per one oceans of Gold.The ratio will decrease more in coming days.
7)Moreover due to safety reason and high cost of Gold, people preferring alternative and cheaply available jewelery.This reducing the demand of Gold in Gold jewelery field.Where as there is no alternative for silver metal as it has huge demand for industrial purpose .

What is Company Deposits

2010-08-01T06:54:00.000-07:00

Companies you mustn’t invest in
1.New companies which have yet to prove their financial and managerial expertise, or which have not declared a dividend.
2.It is best to avoid private limited companies, and partnership firms. Such companies are under no obligation to publish their working results and it is therefore very difficult to judge their performance and ability to meet their obligations.
3.Companies whose balance sheets show accumulated losses.
4.Companies which claim to pay a rate of interest higher than 10% to 12% p.a. , unless this is due to frequency of compounding.
5.Companies with a poor liquidity position,
6.Companies which are not paying regular dividends to their shareholders.

Do not renew your deposits automatically
Never renew your deposits automatically without first asking for a refund of the matured amounts. A timely refund establishes the credibility of the company in honoring its commitments.

Check CRISIL or ICRA rating
Look for the CRISIL or ICRA rating. The Credit Rating and Information Services Ltd (CRISIL) and Investment Information and Credit Rating. Agency of India Ltd (ICRA) rates various company deposit schemes. Invest only in highly rated companies.
You should also keep in mind that CRISIL may revise its ratings from time to time. CRISIL put the following companies on rating watch from time to time.
Diversify Your Deposits.
Don’t put all your money in any company, no matter howsoever sound it may be. Things can, and do, change. Though Nirlon was a blue ship company in early 80’s , later it became a defaulter.
Give preference to local companies
When you are investing in company deposits, give preference to good companies in your state, city or town. So far as possible, do not invest in companies which are located far off. If it is a local company, you can personally visit and try to get your money back as soon as you hear of any cash-flow problems. Remember the words of Theodore Roosevelt: ‘Nine- tenth of wisdom Consists in being wise in time’.

Problems in Investing In Equity Shares

2010-07-13T05:19:00.000-07:00

1.Changing Market values
The Market values of actively traded equity shares seldom remain constant. They keep fluctuating; some moderately, but others violently. These fluctuations in market prices are likely to cause anxiety and discomfort for an amateur investor.
2 .No guarantee of Super Profits
There is no guarantee that you will make profits, let alone super profits, in this equity game. There are no sure-fire formula for success in the stock market. Some investors may gain and many others lose. There is even a risk of the complete loss of your capital. Remember equity is known as risk capital. You have to risk everything in order to gain something in the stock Markets.
3.Uncertainty of government policies
Consistency has never been a strong point of the Indian Government. Uncertain and changing policies of the government cause considerable damage to the profitability of companies which, in turn, affects the shareholders. A change in the government, of course, leads to considerable changes in policies.
4.Oversubscription of new issues
When you apply for new issues offered at par by a company belonging to a reputed group, it is likely that the issue may be oversubscribed several times.
5.Criticality of timing
Since timing is crucial both while buying or selling shares, you have always to be alert. If once you miss a good opportunity; you may have to wait for a long time for the next one. When prices rise, they rise quite fast when they fall, they plummet even faster.
6.Need for constant watch
Equity investment is not a one- shot affair; it demands your continuing involvement. You have to keep a constant watch on various environmental factors, such as economic conditions, an industry’s prospects, company’s performance, etc. sometimes it can be more preoccupying than a full time job. Many investors can neither afford nor are they inclined to spend so much time and energy on their investments. A possible solution to this problem is to entrust your equity portfolio to a reputed firm specializing in portfolio management. Alternatively, one may play the equity game through the mutual funds route.
7.Professional guidance is essential
It is possible that one may make some money in the beginning, through beginner’s luck. This often leads to aggressive buying of shares at high prices and subsequent panic sales, often at the lowest prices.
To avoid such wrong decisions, one may need expert and objective professional guidance which is both scarce and costly. Now a new breed of professional called CFAs (chattered Financial Analysts) is fast emerging in India.

What is Deposits In Companies

2010-05-25T05:15:00.000-07:00

Normally Deposits are made with companies. Such deposits can also be made with private parties including deposits with friends, relatives, proprietary concerns as also with partnership firms. From the point of view of safety of the investment, the investment by way of ‘Deposits’ or Loans should be avoided. If the deposits are made with proprietary firms as well as with partnership firms, then the investment should only be made with known firms. The investor should invest very small portion of his funds by way of deposits or loans. While making deposit with a friend, or a firm or a relative always obtain a stamped receipt in respect of the amount invested by way of deposit. The stamped receipt should, in particulars of the cheque, terms of loan, and details of rate of interest and the details about date of repayment of the loan. Always make deposits by account payee cheque to avoid tax problem.

The deposit with a public limited company is a better mode of investment than by way of deposit or loan. The period of investment generally varies from one year to five years. The interest nowadays is generally between 6% to 10% p.a. depending on the maturity of the deposit. The investor gets the option to receive interest either monthly, quarterly, yearly or on cumulative basis. While filling up the form for deposit does mention clearly the mode of interest payment. Many public sector companies are also accepting deposits from the public. The investor’s confidence is more on the deposits made with a public sector undertaking. It has been our experience that the Public sector undertakings might be making huge losses but they have had a very good track record of timely payment of interest and principal amount. If an investor is interested to make investment by way of deposits, then he should better make investment in 4/5 different companies. The public sector undertakings should be given more weight age in selecting your investment for deposits. A big disadvantage of the investment in the form of deposits is that it cannot be withdrawn prematurely.

Deposit Schemes for Retiring Employees

2010-05-19T05:21:00.000-07:00

In the year 1989 for the first time the 9% Deposit Schemes for retiring government employees was launched. The salient features of this schemes were that it was open to any retire Central or state Government employee or retired employee of a public sector company. The retire employee should have opened a bank account for depositing the money under this scheme within three months from the date of receiving the retirement benefits, in selected branches of State Bank of India and its subsidiaries. In case the retirement benefits were received in installments, multiple deposits could be made. There are exhaustive rules for nomination, premature encashment etc. The interest on balance lying in the deposit account is completely exempted from income tax under section 10(15)(iv)(i) of the I.T. Act. Similarly, the entire amount of money lying in this account is exempted from wealth tax. The Finance Act, 1992 had substituted the existing sub-clause (10c) of section 10 with effect from 1.4.93, whereby the benefit of tax exemption of voluntary retirement payment received has been exempted not only for public sector company employees or State Government employees, but even employees of any private sector company. Thus as a result of the amendment of section 10 (10C) of the Income Tax Act, 1961, a very liberal attitude has been shown to the employees of all corporate undertaking who are taking the benefit of voluntary retirement schemes announced by their company. Detailed rules to this effect have also been made. These are known as Income Tax (16th Amendment) Rules 1962, which define various guidelines for the above purpose. Even under the amended scheme, there is no wealth tax on the amount deposited in this scheme. The rate of interest is 8% for deposits under this scheme. With effect from 9-7-2004 this investment option would not be available as the scheme has now been scrapped.

Zero-Tax- Investment

2010-05-11T06:39:00.000-07:00

The most sections of the Income Tax Act which lead to Zero-tax- Investment relate to the provisions as contained in section 10, and section 80C. First up all Zero-tax could be achieved by making investment in certain Bonds and securities of the government which are completely tax-free. For example, the dividend income, income from tax-free bonds, income from mutual funds, and so on. Another mode of investment which helps achieve zero-tax investment is by making investment in certain specified areas so as to get the full benefit of section 88 of the I.T . Act, 1961. The optimum planning of investors, therefore, can be achieved by making zero-tax investments in terms of provisions of the Income Tax Act, 1961 as contained in sections 10, and section 80C of the Income tax Act , 1961.

In respect of tax deduction on tax under Section 80C, the maximum eligible amount is Rs 1, 00,000. Some of the important items in which investment can be made to achieve tax deduction under the overall limit of Rs. 1 Lakhs are investment in PPF, PF, NSC,NSS, Equity lined Savings Schemes, 5-year Bank Fixed Deposit, 5-year P.O .Deposit Schemes and Senior citizen Savings schemes. Besides, within the above limit one can also make repayment of housing loans and tuition fees for two children to avail the said deduction. The contribution made by a tax payer to the Pension Plan also enjoys the above tax deduction within the overall limit of Rs 1 Lakhs tax deduction. The best zero-tax investment would be in shares of companies because the entire dividends in the hands of a shareholder will be completely exempt from income tax under Section 10(34) of the I.T . Act, 1961.

The income received in respect of all units from the Unit Trust of India or any Mutual Fund would be fully exempt from income tax in the like manner as dividends under Section 10(35). This is applicable for all categories of tax payers. The 6.5% Savings Bonds, 2003 is one very attractive zero-tax investment proposal which was available from the Reserve Bank of India. The entire interest income from this Bond is fully exempt under the Income Tax Act, 1961 . Presently the investment in these bonds cannot be taken advantage of because they have been scrapped. The investment in listed securities and units of an equity- oriented mutual Funds also result into zero tax for the investor because there is no tax liability on long-term capital gains arising from the sale of listed securities and units of equity-oriented fund in case they are held for more than one year and securities transaction tax paid. The post office savings account interest is fully exempt from income tax.

Income Tax Free Investments

2010-05-04T02:38:00.000-07:00

Popularly known as Zero-Tax Investments, these are investments so made that there is no liability to income tax at all. These investments are broadly mentioned in section 10 of the I.T Act, 1961. First of all, the investment which is completely income tax free is investing in post office savings Account. Similarly, the Public provident Fund Account interest on which is @ 8% , is also completely tax-free. Likewise, the interest income from tax-free Bonds issued by Reserve Bank of India is also completely exempt from income tax. Public sector tax-free Bonds bearing interest of 8.5% or 9% are also completely exempt from income tax. The 8.5% or 9% Tax-free Public sector bonds are for a 10- year’s period. For some time certain public sector bonds of 10%and 10.5%were also being issued. New tax free Bonds by various Municipalities are also being issued. These bonds are completely secured and no income tax is deductible at source. The Reserve Bank of India has now stopped issuing tax-free bonds. Please watch for details in respect of certain tax-free bonds which are issued from time to time. The above are some of the very important tax-free investments.

Particularly in respect of persons with a high income the investing in tax-free bonds is really very lucrative. The dividends received from various companies are also fully exempted from income tax. Entire income on units of UTI as also other Mutual Funds would be completely exempt from income tax. The gains on selling the units of UTI/Mutual Fund would be taxable. However, the long term capital gains in respect of listed securities on which securities transaction tax has been paid are fully exempted from the purview of payment of income tax. Likewise , the long –term capital gains would not be levied in the case of equity oriented mutual funds..

NRI Bank Account

2010-05-01T20:47:00.000-07:00

These accounts can be opened only by persons who are Non Resident Indians. The NRI can open either a savings account with a bank or could make fixed deposits. A special feature of investments by the Non Resident Indians either in NRI bank account or in NRI fixed deposits is that the entire income is completely tax free under section 10(4) of the IT act. These accounts could also be opened under a separate account head know as FCNR Account. It is worthwhile to note that the deposits in all these accounts have to come out of remittances of foreign exchange from abroad. For further details and the terms of opening an NRI account, one should contact the nearest branch of any bank. Most banks in most of their branches have the facility of opening of NRI Accounts. For latest rate of interest on NRE Bank Account contact any branch of a bank in your area.

Foreign Currency Non Resident Accounts can be opened only by Non Resident Indians. Money in such bank accounts can be deposited only from foreign remittance in convertible foreign exchange. The bank interest from these accounts is also completely exempted from income tax. Likewise, the entire bank balance in these accounts is free from wealth tax without any upper limit. The big advantage of FCNR account is always maintained in foreign currency and if there is fluctuation in the price of the foreign currency, the account holder does not stand to lose.

Please contact your nearest bank to enquire about the rates interest rates on NRI Bank Accounts and also on fixed deposits by NRI.

Bond Investment - Saving Bonds 2003

2010-04-29T18:45:00.000-07:00

The Reserve bank of India had come out with two interesting Saving Bonds. These Bonds are known as 6.5% Savings Bonds, 2003 (Non Taxable) and 8% savings (Taxable) Bonds 2003. The erstwhile7% Savings Bonds as also the 8% Relief Bonds were discontinued long ago. Both these bonds make a very interesting investment option being available to the selected clients. Thus, it may be noted that both these bonds are not freely available for investment to all categories of tax payers. We will discuss the salient features of both the Bonds and finally at the end an equitable analysis has been made of prudent investor to decide whether to invest or not to invest in these bonds. The 6.5% Savings Bonds. 2003 (Non –taxable) are not available for sale now. We now discuss the salient features of both these investment instruments from the Reserve bank of India.

Salient Features of 6.5% Savings Bonds, 2003 (Non-Taxable)

As the name suggests, these bonds are non-taxable. Thus, the interest derived from these bonds is non-taxable. It therefore implies that these bonds would bring to the investor a net, return of 6.5% only. The interest amount would therefore be fully exempt from income tax without any upper limit. Thus, the net yield to the investor after taxes would also be 6.5% p.a. If we would like to find out the gross yield on investment in these bonds then we find that the gross pre tax yields in these bonds would be higher.

Presently, these 6.5% Saving Bonds.2003 (Non-Taxable) are not available for sale. They have been suspended by the government. However, those tax payers who are holding possession of these Bonds would continue to enjoy tax-free interest income from these Bonds.

Salient Features of 8% Savings Bonds, 2003 (Taxable)

As the name suggests, these bonds are taxable i.e the interest earned on these bonds would be taxable under income tax act 1961. These bonds are open for investment from 21-4-2003 until further notice. The bonds can be held by an individual who is a resident in India. Thus, even the NRI cannot make investment in these bonds. The individual and HUFs can make investment in these bonds. Besides, all charitable trusts and institutions which are registered as charitable institution or a university would also be eligible to make investment in these bonds. These bonds would also be issued for a minimum amount of Rs 1,000 and in multiples thereof. However, there is no upper limit of investment.

These Bonds are issued only in the form of Bonds ledger Account and may be held at the credit to the holder in an account called Bonds Ledger Account (BLA). The nomination facility for these bonds is exactly as per the nomination facility available for the 6.5% saving Bonds, 2003. These bonds which are to be issued in the Bonds Ledger Account shall not be transferable. The bonds will be repayable only on the expiration of six years from the date of issue.

The Bonds, shall not be traded on the secondary market and shall not be eligible as collateral for loans from banks, financial institutions and non banking financial company (NBFC) etc. These bonds will bear interest at rate of 8% per annum. Interest on non-cumulative bonds will be payable at half-yearly intervals from the date of issue or interest on cumulative bonds will be compounded with half-yearly rests and will be payable on maturity along with the principal, as the subscriber may choose. In the latter case, the maturity value of the bonds shall be Rs.1, 601 (being principal and interest) for every Rs. 1,000 (nominal). Interest to the holders opting for non-cumulative bonds will be paid from date of issue above up to 31st July/31st January on 1st August and 1St February. Interest on bond in the form of “Bond Ledger Account” will be paid by cheque /warrant or through ECS by credit to bank account of the holder as per the option exercised by the investor/holder.

These bonds are taxable hence income-tax would be deducted at source while making payment of interest on the non-cumulative bonds from time to time and credited to Government Account. Tax on the interest portion of the maturity value will be deducted at sources at the time of payment of the maturity proceeds on the cumulative bonds and credited to Government Account. However, tax will not be deducted while making payment of interest/ maturity proceeds as the case may be, to institutions which have made a deduction in the application from that they have obtained exemption from tax under the relevant provisions of the I.T Act and have submitted a true copy of the certificate obtained from I.T Authorities.

Kisan Vikas Patra

2010-04-28T00:57:00.000-07:00

Kisan Vikas Patras are available from post office. They are in the denominations of RS 1000 , RS 5,000 and RS 10,000. There is no upward limit for making investment in Kisan Vikas Patra. With effect from the period of maturity is 8 years and 7 months. The yields of this investment worked out to about 8%. Premature encashment of Kisan Vikas Patra Is permissible after 2-1/2 years. These are completely exempt from wealth tax. However, with regard to income tax there is no tax benefit at all in respect of either making investment in Kisan Vikas Patra or the interest income from Kisan Vikas Patra, as the interest income is fully taxable. For Persons desiring to have a fixed source of income and not much concerned about the liability or having an income below the taxable limit of income, this is a good investment.

If Kisan Vikas Patra issued on or after 1st day of March, 2003, is encashed at any time after the expiry of two years and six months from the date of issue of the certificate, the amount payable inclusive of interest shall be specified in the table given below for certified of the denomination of RS 1,000 and at proportionate rate for any other denomination, namely:


Date of issue of the  certificate        Amount payable inclusive 
to the date of its encashment            of interest (in rupees) 
2 Years 6 months or more 
but less than 3 Years                      1,170.51
3 Years or more 
but less than 3 years 6 months             1,207.95
3 Years 6 months or more 
but less than 4 Years                      1,267.19
4 Years or more  
but less than 4 years 6 months             1,310.80
4 Years 6 months or more 
but less than 5 Years                      1,355.90
5 Years or more 
but less than 5 years 6 months             1,435.63
5 Years 6 months or more 
but less than 6 Years                      1,488.49
6 Years or more 
but less than 6 years 6 months             1,543.30
6 Years 6 months or more 
but less than 7 Years                      1,649.13
7 Years or more 
but less than 7 years 6 months             1,713.82
7 Years 6 months or more 
but less than 8 Years                      1,781.06
8 Years or more 
but less than 8years 6 months              1,850.93

Public Provident Fund (PPF)

2010-04-22T03:46:00.000-07:00

Investment in PPF is by far one of the most important areas of investment for individuals and HUFs, particularly to take advantage of the tax rebate under Section 88 of the I.T. Act 1961. The first most important advantage attached to the investment in PPF is that the entire income is completely exempt from income tax as per provisions contained in section 10 of the I.T Act 1961. There is also no wealth tax on the investment in PPF Account together with other qualified assets is entitled to tax deduction under section 80C of the I.T , Act 1961. The maximum amount which can be contributed during the year is Rs. 70,000 (with other specied assets). Personal who are not in need of funds immediately, for whom liquidity is not a point to be considered for making investments, for such individuals and HUFs the investment in PPF is really a very good mode of investment. However it may be remembered here that loan can be taken from PPF account after the third year onwards and this loan carries an interest of 1% p.a. over and above the interest available on PPF account. From the point of view from tax planning it is worthwhile making investment in the PPF account in the name of the minor children, taking benefit of Section 80C, by the father or the mother, and thereafter making a gift of the PPF account to the minor child. In this scheme the provision of clubbing would not be attracted at all because of the fact that the PPF account interest income is completely exempt from income tax and later, when the money from PPF is received, the minor child who has been gifted away with the PPF account money is a major. Hence the provision would not apply relating to clubbing of income or wealth. The entire wealth in the form of PPF account is completely exempt from wealth tax. Tax deduction even on contribution in the name of a child and spouse is also permissible. The total amount of investment in PPF in the name of the individual inclusive of the investment in the name of the minor children during a financial year is Rs 70,000. The entire interest income from a PPF account is tax free under Section 10(11) of the Income Tax 1961.

The PPF account can be opened in a Post Office or with State Bank of India. Once the account is opened, a minimum sum of Rs 500 has to be deposited per annum. The duration of PPF account is 15 Years. After the expiry of 15 years , the PPF account can be extended by 5 years –block. The investment in the PPF account together with other eligible investment is entitled to tax deduction under Section 80C of the investment.

Post office Deposit

2010-04-22T03:45:00.000-07:00

Just like bank fixed deposits, the Post office Time Deposit Account is a sort of fixed deposit with the Post office. The maturity periods vary from one to five years. Deposits in this account can be made in multiples of RS 50 with no upper limit of investment. There is no wealth tax in respect of amount deposited in post office time Deposits. The rate of interest would be as under

Period Of Deposit Rate of interest per annum
1 year                   6.25 %
2 years                  6.50%
3 years                  7.25%
5 Years                  7.50%

Post office Savings bank Account

2010-04-22T03:20:00.001-07:00

Investment in post office savings bank Account is just like making investment in a bank with the only difference that this investment is made with the post office. Cheque book facility is also available provided a minimum balance is kept as per the guidelines of the postal department. The interest is about 3.5% p.a. which is paid annually and is completely exempt from income tax. There is no wealth tax on unlimited amount in respect of investment in post Office Savings Bank Account. This is again good investment for small investor only. The maximum investment is RS 1,00,000 for individual investor and Rs 2,00,000 for joint accounts.

Post Office recurring Deposit Account

2010-04-21T22:48:00.000-07:00

Post office recurring Account is for five years. There is no upper limit of investment in this account. The investments are to be made in multiples of Rs 10. Interest for these account is approx 8% p.a compounded at maturity, i.e ., after five years. Normally the account of RS. 10 denominations will yield RS.728.90 at maturity. The deposit is also exempt from wealth tax. For small investor this is a good investment, but in views of the fact that investment in PPF, etc. compares favorably with this investment, it is not very popular.

Post office Monthly income Account

2010-04-21T08:31:00.000-07:00

This is also very safe and secured investment. A person can open monthly income account with a post office. The rate of interest in respect of deposit made in this account on as after 1-3-2003 is 8% per annum. In comparison with Post office Monthly Income Account it is better to go in for Monthly Income Plan of a Mutual Fund as the income from Monthly Income Plan of a Mutual Fund is fully exempted from income tax under Section 10(35) of the Income Tax Act 1961.But this is safe investment who don't want to take any risk.

Post Office Investment

2010-04-18T17:49:00.000-07:00

Post Office Investment

Various small savings schemes are available to individual tax-payer. In the recent past the schemes of investment available from the Post office have great response from the Investors. The main reason of investment in various Postal; schemes is because of the safety factor. All investments in various postal instruments are fully safe and secured.

The investment can be made with the Post Office either in the Post office Savings Bank Account or in the Public Provident Fund Account. Similarly investment can be made by buying Kisan Vikas Patra . Like wise, an individual investor can open Post Office Time Deposit account or 5-Years Post Office Recurring Deposit Account. The entire bank interest from P.O savings Bank account is fully exempt from tax. The special features of the Post Office Schemes are that the investment in five year time in an account under the post Official Time Deposit Rules, 1981 would qualify for tax deduction under Section 80C of the Income Tax Act, 1961. Similarly, the senior citizens saving scheme would also qulify for tax deduction under Section 80C.

Investing in Buildings

2010-04-15T18:53:00.000-07:00

Investing in Buildings

Investment in building is very important from point of view of tax planning. While a building in a big city is beyond the reach of most people because of its very high price, even today one can buy a building in smaller town.

Joint Ownership

If a building is brought by different co-owners, it is better that clear mention be made of the % of ownership in the building of different co-owners in the conveyance deed. Likewise , all co-owners must contribute funds towards the total cost of the building prorate, ie on the basis of their share in the property. Also, in order to avoid problems at a later stage, the co-owners must prepare an agreement whereby they can make a clear cut demarcation of the property by metes and bounds in the names of different members of the family.

Freehold or leasehold

To get a fair idea of the price of a property, it should first be ascertained whether the property is in a freehold area or a leasehold one. As a prudent investment, the property should be in a freehold area, so that there is no problem while selling the property to various government agencies like Delhi Development Authority, Pune Development Authority, Madras Development Authority and so on , at the time of selling the property.

Rental Income

Once more than one person making the investment in a building, they are entitled to receive the rent jointly. The rental income received is liable to income tax in the hands of the various owners in the ratio of their ownership in the property.

Taxes

All commercial buildings are exempted from wealth tax. Like wise, irrespective of the size of the residential house is completely exempted from wealth tax. The residential houses would be exempted from wealth tax if it is given on rent for a minimum period of 300 days in a financial year. Similarly the tax payer has a choice to claim exemption in respect of either one residential house property or a vacant plot of 500 sq.meters.

Factory Building

As in any other property there could be different co-owners of one factory building. If a factory. If a factory building is used for carrying on one’s own business or profession, it is entitled to depreciation. However, no depreciation is allowed on the cost of the building. Similarly, letting out of a factory building with plant and machinery on lease would again not be income from business or profession but income from other sources. This distinction should be understood very clearly, particularly from the point of view of tax aspects connected with losses in business and their carry forward. The factory building used for any purpose would be fully exempt from wealth tax.

Investing in Agriculture Lands

2010-04-14T21:58:00.000-07:00

Investing in Agriculture Lands

Investing in Agriculture land, particularly rural agriculture land, is currently a craze among Indian Investor. The main reason is there is no wealth tax and income tax for income from these land .And also no capital gains in certain situations is payable on sale of agriculture land.

Rural Agriculture Lands

Before investing in rural agriculture land, you need to decide which area to buy it in. If the location or the distance is very fair, there is lot of problem in maintenance. So select land as close to your locations.

Land Ceiling law

The law will be differ from state to state. This will be differ from land to land depending on the quality of land. One can buy rural agricultural land in different parts on India within the permissible ceiling limits. Also some states like Maharashtra, Gujarat, Karnataka, Himachal Pradesh, etc have separate rules with regard to buying immovable property in the form of agricultural land. In this state the agricultural land can be buy only by agriculturist. One solution for this problem is to buy some piece of agricultural land in state like Haryana, Rajasthan and U.P first. That makes you agriculturist and then there is no problem in buying agricultural land in other states.

Title

The agricultural land you are interested in has a clean title. This can be verified by referring to Patwari’s and Tasildar’s records. Mutation deed also be verified. Better to avoid buying agricultural land which is in the name of a minor child or one which is a joint holding. These type agricultural land will create problem in future.

Master Plan of the Area

Check the master plan area to see whether the agricultural land is within the control of DTP(District Town Planner). If it is belong to DTP , one cannot be free to construct farm house or boundary walls without approval of appropriate authority. One should also ensure 4 and 6 of land Acquisition Act.

Tax

There is no Capital gain Tax on the sale of agricultural land. Agricultural land now forms a part of the definition of Urban land which become liable to wealth tax .No wealth tax for rural agricultural land. There is no gift tax on gifting the movable or immovable assets including agricultural land.

Capital Gains Bonds

2010-04-12T21:16:00.000-07:00

Deep Discount Bonds

Deep discount Bonds were issued by IDBI, Small industries Development Bank of India (SIDBI), SCICI ltd., Krishna Bhagya Jala Nigam Ltd and many more. In the present day the investment in Deep Discount Bonds has lost its charm because the Government has clarified that the deemed interest for each year would be liable to tax.

Capital Gains Bonds

These bonds are issued by selected organization in terms of section 54EC of the Income Tax act 1961. The interest rate of these bonds is very low. Presently the interest is in between 5% to 5.5%p.a. But the interest earned by these bonds is taxable. Presently these Bonds are issued by NHAI and REC. The investor must read terms and condition before making investment. The maximum investment limits per person is RS50 lakh only. Generally the duration of these Bonds are 60 months. Early redemption are allowed but after 36 months. The investor has to exercise the put option not later than 3 months prior to the end of 36 months from the deemed date of allotment ie during the 33rd month from the deemed date of allotment would be different for five years and three years.

These Bonds are not transferable, non-negotiable and cannot be offered as security for any loan or advance. No tax is deducted at source on the interest on these Bonds. In sprite of the fact that the interest rate on these bonds is very low, those investor s who derive long term capital gains find it as a very ideal instrument of investment to save tax arising the gains in respect of short term capital gains. These Bonds are not recommended for persons having no long term capital gains.

Type of Bonds-2

2010-04-12T09:39:00.000-07:00

NRI Bonds
From time to time the Government generally through the state Bank of India issues special Bonds which is popularly known as NRI Bonds. Mostly these Bonds are Tax-free Bonds. There is no wealth tax on these bonds so they are also gift tax free. India development Bonds, Resurgent India Bonds are some of the examples of NRI Bonds. These Bonds are generally designated in U>S Dollars and are issued to attract NRI’s settles at abroad. Presently the investments in these bonds are not available because they are not for sale now.
Tax free Bonds of Public Sector
A large number of public sector undertakings are now-a-days issuing tax-free Bonds. The special features of these Bonds are tax free irrespective of income.Investment in these bonds is quite lucrative. The bonds bear prevailing interest rate almost equal to Reserve bank’s tax free bonds. Before making investment in these a deep study of their interest rate is very important.
Benefit of Tax free Bonds of Public Sector
• Easy Transferable
• Can be easily sell in open market
• There is no wealth tax
• Effective investment plan for whom belongs to high income bracket
Taxable Bonds of private Sector
Like tax free bonds issued by the public sector is a separate series of public sector taxable bonds. These bonds generally bear an interest of 6% to 9% p.a

Types of Bonds

2010-04-11T09:48:00.001-07:00

Types of Bonds
• RBI Relief Bonds
• Saving Bonds Of Reserve Bank
• NRI Bonds
• Tax free Bonds of Public Sector
• Taxable Bonds Of private Sector
• Deep discount Bonds
• Capital Gains Bonds

RBI Relief Bonds

The RBI has stopped the issue of these Bonds with effect from 1.3.2003. Investment in Relief Bonds was particularly suitable for persons who are in the highest income bracket. The main reason why the investment was lucrative is that the entire interest income from the Relief Bond is completely exempt from income tax. Earlier Relief Bonds bearing interest of 10%, 9%,8.5% and 7% p.a were issued. The lock in period of these Bonds ,popularly known as Rahat patras, is five years. Besides , there is no wealth tax on an unlimited amount of these bonds. If the Bonds are sold before maturity then while computing the long term capital gain/loss the cost Inflation Index cannot be applied .

Saving Bonds Of Reserve bank

The Reserve bank of India has issued two new types of Bonds . These Bondds are known as 6.5% (Tax exempt)savings Bonds and 8% (Taxable)savings Bonds. The interest income from tax-free Bonds was completely exempt from would be liable to tax on the same with no exemption or deduction of income tax act under section 10. The investment in 6.5% saving Bonds, 2003 , Have been suspended with effect from 2004, hence presently the investment in tax free bonds of RBI cannot be made. However , do continue to watch details in the newspaper about new tax free Bonds which may be issued in future.

Now TDS @ 10% with applicable surcharge as well as education cesses would be applicable on interest in excess of RS 10,000 p.a from the taxable savings Bonds issued by the Reserve Bank of India

What are Bonds

2010-04-09T18:06:00.000-07:00

Various types of Bonds are available in the market. Before making investment in any of these Bonds, the prudent investor should have a look at the salient features of the bonds. Some of the Bonds may be such that their income happens to be completely exempt from income tax. For some bonds the interest received there from may become fully taxable. Some of the bonds are such while carry lower rates of interest but are useful to save capital gains. Thus, before making a choice about investment in a particular Bond care should be taken to go through the salient features of the Bond and the objective of the investor and only then the option should be exercised in favor of a particular bond. However, all types of bonds are completely exempt from wealth-tax.
Similarly, there is no gift, tax liability on making gift of these bonds. However, the Bonds which were to save your capital gains or which were bought by you to bring you the tax benefit under section 80C should not be sold or gifted for a minimum period of three years from the date of their purchase. Likewise the Capital Gain Bonds of NHAI or REC should not be sold or gifted during the lock-in period or else tax liability may be attracted. Investments in certain demarcated bonds are surely going to help the process of tax planning. Also watch for tax free bonds, the prudent investor must watch the details and announcement from time to time in the newspaper.

Tax Planning -Part2

2010-04-05T20:08:00.000-07:00

Safety of Investments
"All eggs should not be kept in one Basket" is very applicable in case of personal investment.Howsoever lucrative the investment proposals may be it should not be allotted an excessively large portion of your savings.It is recommended that entire savings available for investment should be divided at least into four to five portions so that the investment is spread over different areas.

Investment strategies should also focus on safety and security of the investment.Hence lucrative-looking investments but which carry high risks should be totally avoided. Investments offering medium returns but which ensure topmost security and safety of invested funds should be perferred.

Types of investment

senior Citizen Investment

Women Investors

Life Insurance

Investing for Children

Investing in property

Tax Planning-Part 1

2010-04-04T08:58:00.000-07:00

Key Points To Keep in Mind

When Making any investment it is very important to work out its tax implication because net return from an investment,after taking into account applicable income tax and wealth tax.

Whenever possible, investment strategies should be designed to achieve low or nil tax on one's investment.Taking advantage of PPF,Tax free bonds, mutual funds etc would also help in planning tax free investments.

Secondly it is usually beneficial to consider one's overall family investments, rather than looking piecemeal at investment for a single individual in the family.This aspect is important so that the income derived from various investment can be spread among the various family members and thus attract lower income tax.

Likewise, investment in the names of different family members should also be made in such a manner that the head of the family does not have to face any problem at any future point of time in case he wants to reshuffle investment in the names of different members of the family.Personal and family investments should also keep in view aspects relating to inheritance at a later stage. Accordingly, You may go in for joint purchase of properties, maintaining joint bank account and nominations in various investments