Tax in Simple Terms

Tax Software for 2011

2011-01-14T07:30:00.000-08:00

It's that time again! Time to file those taxes. If you don't take it to a professional what do you do? Many people try it on their own with the help of tax software programs available. Here are a few of the tax software programs you can choose from.

The H&R Block at Home 2010 Deluxe Federal State and e file is a popular pick in tax software. The deluxe edition can file up to five federal income taxes. This tax software comes with several perks. The first and foremost is the maximum money back guarantee. This guarantee states if you find another tax e file program that will result in a bigger return, H& R Block will return your money. Secondly H&R Block has enrolled agent to assist you in the event of an audit. The H&R Block at Home Federal and State e File supports most tax forms. It easily imports data from last years forms.

There are other forms of the H& R Block Federal and State E File. They are the deluxe and premium versions. The deluxe versions provides guidance for investment, retirement and deductions for home mortgage interest. The Premium version focuses on home employment and rental property. The Premium edition also offers a live tax advice session from an H& R Block professional.

Customers gave the H& R Block Deluxe tax software four out of five stars. Customers state this software is mostly excellent. Several customers report they have used this tax software for many years.

H&R Block At Home 2010 Premium Federal + State + eFile

The Turbo Tax Federal and E-file and State offers up to five federal tax returns. Questions guide you through your tax return, There is an Audit Reduce Meter that helps reduce your risk of an audit. A down loadable audit center is available. Turbo tax has tech support accessible by phone live chat or email. The Smart Scan checks for mistakes so you can be confident in your taxes. Expecting a return? Then do your your taxes via e file through this program! Get your Turbo tax in basic, Deluxe, Premier, and Home and Business.

Customers gave the Turbo Tax Software three and a half stars out of five. Customers like the question and answer session

TurboTax Premium Home & Business Federal + e-File + State 2010

The Liquid Tax 2010 federal state and e file features one low flat rate to e file. It has a 100% calculation guarantee. This program comes on CD ROM and can only be used for Windows.

The Quicken Deluxe 2011gives you the power to set financial goals for the upcoming year. The Quicken Deluxe shows you where your money is going so you can plan for your future. Speaking of the future the Quicken Deluxe can help you pay your bills by reminding you of due dates. You have an advantage of of having all of your accounts downloaded. This software also helps you simplify your taxes at the end of the year.

How to Organize Tax Information Throughout the Year

2010-11-21T06:53:00.000-08:00

We are officially in the midst of tax season. I don’t know about you but that’s not a time of year that I particularly enjoy. The thought of sitting down with my income information and all of the things that I’m hoping to claim as deductible income and figuring everything out just seems so overwhelming. Every year at tax time, I swear that I’m going to do a better job of staying organized with my taxes throughout the year so that it’s not such a hassle when April 15th rolls around. I’m happy to say that I’m doing a lot better with keeping track of stuff in 2009 (so far!) than I did in the past. Here are some of the things that I’ve started doing to organize my tax information throughout the year so that next year’s taxes go a lot more smoothly than this year’s:

Relying on technology. I happen to think that the best way to stay organized with taxes throughout the year is to get a great computer program going for tracking expenses and income. There are many different software programs available. Alternatively, you can use the tracking systems provided by your banks and credit cards or you can create simple online spreadsheets for these things. The technology and computer programs that you use are up to you and should be based on what’s easiest for you to understand since the whole point of this is to simplify your financials. A little bit of trial and error with different money tracking systems goes a long way towards making tax time easier. Microsoft Money is the one that I think is worth starting with.

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• Organizing my paperwork. For the most part, I’m keeping track of everything through the online system that I’ve set up but that doesn’t mean that I feel entirely comfortable getting rid of the papers that I need to accumulate for my taxes. The key here is to get super organized with paper work. I have two different physical files for this – one is for financial information and one is for expenditures. Each file has twelve folders in it pre-labeled with the months of the year. All of my receipts, bills and expense information for January went into the January 2009 folder in the expenditures file. All of my paycheck stubs, savings account information and loan stuff went into the financial file. I’ve backed this up with a computer spreadsheet organized in the same two-part fashion which lists each of the things in the file in case I lose that somehow.

• Playing around with an organizational system that works best personally. The two-part system described above is simple enough for me to use but still keeps me organized. It’s not enough for some people though. Some people require a more detailed method of separating different financial information – they may have separate monthly files for different types of income and expenses such as primary job income, secondary income, loan information, childcare expenses, property taxes and insurance. You need to figure out which method of organizing makes the most sense in your head and separate papers according to what works best for you.

• Scheduling one day per month to deal with this stuff. The big thing for me is taking the time to actually do all of this. I have now started just scheduling right on to my Google Calendar. For me, the best time to do this is the first Sunday of the month. I set a chunk of that day aside, close the door to my home office and tackle the task of organizing my tax information on both paper and computer form.

• Simplifying my accounts. Even though I’ve gotten a lot more organized about my finances this year, I do know that the more accounts that I have, the more difficult it is going to be to stay organized. A big goal that I achieved last year was limiting the number of financial accounts that I have. I now use just two main credit cards – one for all of my work-related (and deductible) expenses and one for everything else. This makes it really easy to deal with the deductible stuff – every statement from the work credit card just goes immediately into that month’s file for me to have at the end of the year.

• Keeping last year’s tax info handy. I don’t have to use it much but it’s nice to know that I can grab last year’s paperwork and look at it if I start to get confused about exactly what I am doing.

• Making a list of tax goals. What do you want to get out of better organizing your taxes? For some people, it’s the ability to sit down on January 1st and get taxes out of the way. For others, it’s the chance to feel “caught up” on taxes when they sit down to deal with them once a month. For still others, it’s the goal of learning how to rely on technology to assist in tax organization. And for most of us, the goal is to save some money. Make a list of all of your small and large tax goals and post it where you can see it regularly so that you are motivated to stick with the plan of staying organized with your taxes this year.

• Buddy up with someone who also wants to organize their tax stuff. Sometimes the only thing that you really need to get organized with your taxes is a little bit of external motivation. Make a commitment with a spouse, family member or friend to help each other get organized with taxes this year. The commitment will make you more inclined to stay organized plus you’ll probably learn some tips from the person that you’re doing this with.

These are some of the things that seem to be working for me in regards to organizing my tax filing information in a better way this year. Hopefully they’ll also work for you!

Direct tax code for 2011

2010-08-01T08:02:00.000-07:00

With an objective to improve the efficiency and equity of the Indian Tax System by broadening the tax base through minimizing the exemptions, remove the ambiguity in the law and checking the erosion of the tax base through tax evasion, finance minister Mr. Pranab Mukherjee, released the draft of new direct taxes code to solicit the public opinion about the code before presenting it to parliament. He intends it to be effective from April 2011. Budget presented in 2010 financial year has already initiated the process by lowering tax ratesunder different slabs of the income.

The code appears to be favoring salaried person in first instance. However, there are several points that are irritating to the salaried class.Main cause of concern is tax to be levied on withdrawals from the GPF/PPF/LIC schemes etc.Second concern is about the deduction of interest on loan taken for house construction. It appears that deduction on interest is not available if a person is living in his own house and showing no income from the house property. May be I could not understand the clause in its full sense.

How the provisions of draft direct tax code influence the income and how they influence the losses and gains in comparison to existing income tax rules, is shown below.

According to draft tax code, the gross salary will include the value of perquisites and profits in lieu of the salary. It will be reduced by the permissible deductions which include the following:

1. Professional tax paid

2. Transport allowance

3. Prescribed special allowance incurred in performance of duties to the extent actually incurred

4. Compensation under voluntary retirement scheme

5. Amount of gratuity

6. Commutation of pension

7. Pension received by the gallantry awardees

Deductions under item 4, 5 & 6 would be available to the extent the amounts are paid to or deposited in a retirement benefits account, After implementation of the code, amounts received from an approved retirement/superannuation fund will be taxable. Approved provident funds, superannuation funds, life insurer and New Pension System Trust etc will be the permitted savings intermediaries. Deposits will remain untaxed in these accounts but once withdrawals are made, the amount withdrawn will be treated as the income.

Salary will also include the following values as per new code:

1. The value of accommodation

2. The value of leave Travel Concession

3. The amount received on encashment of earned leave

4. Amount reimbursed for medical treatment

5. The value of medical treatment free or concessional by employer

Salary will include the income from House property. The following deductions are allowed from gross rent:

1. Amount of taxes levied by local administration (actual amount paid)

2. 20% of the gross rent as cost of repair or maintenance

3. Amount of any interest payable on capital borrowed

Important: If the gross rent is nil in the case of a self-occupied property, no deduction for taxes or interest will be allowed.

Tax incentives:

A. Deductions upto a limit of Rs 3.0 lakh will be allowed as per provisions of new code. These deductions will include the following items:

1. Approved provident funds, superannuation funds, life insurer and New Pension System Trust etc will be the permitted savings intermediaries.

2. Deduction for amount paid towards payment of tuition fees of children

B. Deduction of Rs 15000 (Rs 20,000 in case of a senior citizen) in respect of medical insurance premium + Rs 15000 for parent’s medical insurance premium (Rs 20,000 if parent is a senior citizen)

C. Deduction of Rs 50,000 (Rs 75,000 in case of severe disability) for medical treatment or maintenance of disabled dependent

D. Deduction of Rs 40,000 (Rs 60,000) in case of senior citizen) for expenditure on medical treatment for prescribed diseases

E. Deduction will be allowed for interest actually paid on a loan taken for higher education for self or children/spouse

F. Deduction allowed to a company for family welfare or AIDS prevention of its employees.

G. Deductions in respect to donations

Rate of income tax:

A. For individuals other than women & senior citizens: No tax upto Rs 1,60,000

For Women: No tax upto Rs 1,90,000

For senior citizens: No tax upto Rs 2,40,000

B. For individuals other than women & senior citizens: 10% tax ( Rs 1,60,001 to Rs 10,00,000)

For Women: 10% tax ( Rs 1,90,001 to Rs 10,00,000)

For senior citizens: 10% tax ( Rs2,40,001 to Rs 10,00,000)

C. For individuals other than women & senior citizens: 20% tax ( Rs 10, 00,001 to 25,00,000)

For Women: 20% tax ( Rs 10, 00,001 to 25,00,000)

For senior citizens: 20% tax ( Rs 10, 00,001 to 25,00,000)save

D. For individuals other than women & senior citizens: 30% tax ( Rs 25, 00,001 or more)

For Women: 30% tax ( Rs 25, 00,001 or more)

For senior citizens: 30% tax ( Rs 25, 00,001 or more)

Source : Internet and various blogs (Full details is available in finance minstry website)

online tax softwares

2010-07-01T01:46:00.000-07:00

Now with online tax paying picking up, we need to find the best one for our requirements. Here is the analysis of some of them by collecting data from web resources.

H&R Block and TaxCut

HRBlock advertises the most and is the most popular online tax service. You can import previous tax data from TurboTax and TaxCut.

Pros: HRBlock online tax software offers 5 choices of service at different costs. They offer a limited free filing service. Audit coverage is provided at a cost. Advanced tools are available on more expensive plans.

Cons: The extra choices add to an already complex software with too many choices. It seems like HRBlock has worked hard to maximize revenue at your expense. Several annoying requests for refund loans and similar services add to your cost if purchased. At a cost of up to $99.95 (extra for state returns), HRBlock is not a value. At this price you can have an accountant do it for you beginning to end.

RapidTax

Pros: RapidTax has an open and easy to use platform starting at under $15, more for states, and is user friendly. You can file returns from previous years. Live chat and email support are a bonus with RapidTax.

Cons: Audit support and professional review add to the cost. States are expensive at $19.99 and are in addition to fees for the federal return that max out at 34.99.

TaxSlayer

Pros: Active duty military people can file their taxes for free. Tax return cost starts at $9.95 plus $4.95 for unlimited states.

Cons: TaxSlayer is a low grade tax program. For easy returns, the price is right. Audit assistance only. Ouch.

TaxAct

Pros: Business and individual returns are offered with a money-back guarantee. Free file is available for very simple returns. Free email and phone support. Previous year's software available.

Cons: Price is right at $17.95, but annoying bank loan features cost significantly more. Audit support only. You will need a solid understanding of taxes to prepare your return with TaxAct. Still, a solid value for most.

1040.com

Pros: 1040.com is the easiest online tax preparation program I reviewed. The program doesn't ask irrelevant questions. Lowest cost at under $20 without additional fees. Bank products offered, but not invasive. Questions answered by a local tax professional. Audit protection is handled by local experts.

Cons: No free file. You should at least know what a 1040 is if using 1040.com. You don't need to be a pro, but a little understanding goes a long way.

CompleteTax

Pros: Free file available for simple returns. GainsKeeper compatible. Tax resources, financial calculators, tax news and alerts are nice additions to their services.

Cons: Difficult to navigate and overpriced at $49.95, plus $24.95 for a state return.

EZTaxReturn

Pros: Easy to use for those with little or no tax knowledge. Free newsletter and audit alerts. Referral program offers your friends $5 off their preparation and a $10 referral fee to you.

Cons: Very basic software. They brag that you need no tax knowledge which is never a good idea when filing taxes. Online resources are thin. Cost for federal and state is $39.95. They also sell fill-in forms for $19.95; they are free at the IRS website, www.irs.gov.

TurboTax

TurboTax, like all software reviewed, guarantees accuracy and the maximum refund. TurboTax is published by Intuit, maker of QuickBooks.

Pros: TurboTax has a comprehensive service that includes online preparation of corporations, partnerships, and LLCs, in addition to individual income tax returns. Limited free filing service is available. They also have an audit support center. TurboTax has the best free file program.

Cons: TurboTax has a more cluttered feel to their website. They are cheaper than HRBlock, but still charge up to $74.95, plus additional charges for state returns. The TurboTax website is slow at times and adds to frustrations. Like HRBlock, they offer overpriced and unneeded bank products

TaxBrain

Pros: Audit services include payment of up to $4000 in federal and state assessments in an audit. The questionnaire and worksheets are easy to fill out, making preparation a cinch.

Cons: Audit service agreement has enough outs to save Taxbrain from paying most tax assessments. Very expensive preparation fees at $69.95, plus $29.95 for states

CompleteTax

Pros: Free file available for simple returns. GainsKeeper compatible. Tax resources, financial calculators, tax news and alerts are nice additions to their services.

Cons: Difficult to navigate and overpriced at $49.95, plus $24.95 for a state return.

Ranking

Several factors were used to determine the order of the following list. Price, ease of use, and additional hidden fees are the most important. Also considered, but less important, are: layout, research, audit services, and support.

1.) 1040.com Ease of use, low cost, and no hard-sell on bank products, makes 1040.com the best. They don't advertise. They are supported by a network of over 28,000 professional tax preparers nationwide.

2.) TaxAct: Low cost and ease of use cannot trump the multiple efforts to add to your preparation bill.

3.) RapidTax: Low cost, ease of use and the opportunity to file previous years played in ranking RapidTax third.

4.) TaxSlayer: Low cost is TaxSlayer's biggest benefit. Concern over the software quality reduced the ranking a notch. Lack of a firm audit protection program hurt, too.

5.) EZTaxReturn: The opportunity to earn money on referrals coupled with reasonable cost is EZTaxReturn's biggest advantage.

6.) TaxBrain: High cost, but a compelling audit protection program. Doubtful TaxBrain will pay many tax assessments from an audit.

7.) CompleteTax: Average program and fee is a little high, but nice financial calculators and research resources.

8.) TurboTax: The two biggest are also the biggest disappointment. TurboTax is cheaper than HRBlock/TaxCut, but still has a very high price with invasive attempts to add to an already bloated fee. They have name recognition and charge heavy for it. Software is excellent if you have the time to wade through the endless sales pitches.

9.) HRBlock/TaxCut: Easily the worst tax preparation offer on the Net. Their price is so high you are better off visiting a local CPA and having it done for you. The effort to add to the already high bill adds more time to your tax filing effort. Solid program if you don't throw your computer out the window first. Name recognition allows HRBlock to charge the way they do. Not worth the headaches or cost.

Source : Web/Internet

Cheers,

Vinay

Organize your Earning and Tax Information

2010-02-07T09:35:00.000-08:00

We are entering the part of the year where people will be running around to find ways for tax savings. This is a busy season for making investments and digging out information about our earnings and investments made all through the year .. if at all made any !!

Every year during this period we swear to start investing for tax saving right from the beginning of the year and try organizing all these information but most of us fail to do that.

Here are some of the things that I’ve started doing to organize my tax information throughout the year so that next year’s taxes go a lot more smoothly than this year’s:

Relying on technology. I happen to think that the best way to stay organized with taxes throughout the year is to get a great computer program going for tracking expenses and income. There are many different software programs available. Alternatively, you can use the tracking systems provided by your banks and credit cards or you can create simple online spreadsheets for these things. The technology and computer programs that you use are up to you and should be based on what’s easiest for you to understand since the whole point of this is to simplify your financials. A little bit of trial and error with different money tracking systems goes a long way towards making tax time easier. Microsoft Money is the one that I think is worth starting with.

Organizing my paperwork. For the most part, I’m keeping track of everything through the online system that I’ve set up but that doesn’t mean that I feel entirely comfortable getting rid of the papers that I need to accumulate for my taxes. The key here is to get super organized with paper work. I have two different physical files for this – one is for financial information and one is for expenditures. Each file has twelve folders in it pre-labeled with the months of the year. All of my receipts, bills and expense information for January went into the January 2009 folder in the expenditures file. All of my paycheck stubs, savings account information and loan stuff went into the financials file. I’ve backed this up with a computer spreadsheet organized in the same two-part fashion which lists each of the things in the file in case I lose that somehow.

• Keeping last year’s tax info handy. I don’t have to use it much but it’s nice to know that I can grab last year’s paperwork and look at it if I start to get confused about exactly what I am doing.

These are some of the things that seem to be working for me in regards to organizing my tax filing information in a better way this year. Hopefully they’ll also work for you!

Gratuity in India

2010-01-02T23:53:00.000-08:00

What is gratuity ?

Under the Payment of Gratuity Act, 1972, it is employers statutory liability to pay 15 days salary (15/26 of a month's wages) for every completed years service to each of his employees on their exit, for any reason after five years of continuous service, subject to maximum limit of 3.5 lacs. Higher benefits can be paid if the employer so desires. Gratuity payable to the employees can be paid as and when liability arises and can be claimed as deductable expense under P & L A/c of the relevant financial years. However, the sound system of financial management envisages providing for Gratuity liability every year and claiming the tax benefits as it is mandatory as per Accounting Standards 15 (AS15) to account for the liability on Actual basis.

Payment of Gratuity Act, 1972

Object: It is an Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, and shops or other establishments.

Applicability: Any Employer of the above noted establishments where 10 or more persons are employed or were employed on any day of the preceding 12 months is liable to pay gratuity to its employees. Once the Act becomes applicable, it continues even if the number of employees falls below ten.

Entitlement: Gratuity is payable to an employee (nominee - in case of death of employee) who has rendered continuous service of five years or more on his termination of employment, superannuation, retirement or resignation. Completion of continuous service of five years is not necessary where the termination of employment is due to death of disablement.

Calculation: W x Y x 15/26 where W = Last Wage drawn i.e., basic + DA
Y = number of completed years of continuous service (six months or less to be ignored and more than six months to be counted as full year.
15 = 15 days salary
26 = No. of working days in a month.

Maximum Limit: Rs.3.5 lacs. (w.e.f 24-09-1997)

Time Limit for application to employer: Employee has to make an application in Form-I to his employer within 30 days from the date of gratuity becomes payable.

Personal finance softwares

2009-12-24T06:40:00.000-08:00

Personal finance software can be a big help

One of the biggest pitfalls in personal finances is being unorganized. When you aren't sure where the money is going, and you aren't sure what you have, it can lead to a personal finance mess. Organizing your finances doesn't have to be difficult, though. One of the easiest ways to organize your finances, and keep them organized, is to use personal finance software. Quicken and Microsoft both offer personal finance software that is easy to use, and that can be synched with the Internet if you like.

Organize your finances: getting started

Perhaps the hardest part of organizing finances is getting started. It can be a daunting task to set up all of those accounts and find all of that information and then record it on your personal finance software. This can seem like a daunting task, but if you can break it down into pieces, you can make it easier. Set aside a small amount of time each day, perhaps 15 to 30 minutes, to set up accounts on your personal finance software. Start with you checking account, and go through your last bank statement and your checks to see where you are. This might actually take a couple of days. But keep at it. Then continue setting up accounts as you have the time -- for savings, credit cards, loans and even investments.

Keeping your personal finance information organized

Once you have your information entered into your personal finance software, you can more easily keep track. At the end of each day, I take five minutes to enter in anything I spent or deposited that day. Each week, I take time to pay bills and/or reconcile accounts (using statements). Personal finance software makes all of this easy, bringing up everything that you entered into the computer during the statement period so that you can easily check it off using the statement for a guide. And, it can be even easier to keep track when you use your personal finance software to sync with your online banking and investments.

Personal finance software can be a great financial planning tool. You can print out reports that help you analyze your spending, and most personal finance software programs have a feature that can help you generate a budget, and then track how well you are sticking to it. Categories help you keep track of your spending, so that you can determine where, exactly, your money is going, and you can also use them to keep track of what is tax deductible, from business expenses to charitable contributions, so that it is easier to find that information at tax time.

New Draft tax code for india

2009-10-03T23:20:00.000-07:00

As a major development in the Indian taxing regime, our government is proposing a new tax regime/tax code/direct tax code which is supposed to be replacing India Income Tax act 1961.

According to new tax code / new direct tax code a new initial tax slab will be 10% tax up to Rs. 10 Lakh Income.

The government proposed major tax reforms through a draft code that aims at moderating income tax rates, Securities Transaction Tax (STT) and increasing deduction for savings up to Rs 3 lakh.

“We expect to have better compliance and better collection of taxes,” Mukherjee said.

These new changes are currently under discussion and for collecting public opinion.

Direct tax code to be implemented only by the end of 2011 or early 2012 after completed the process of debate and suggestion from public.

Summary of the new proposed changes

According to the new recommendations of the Code :

10 per cent tax rate should apply to an annual income of Rs 1.6-10 lakh per annum (Now 10 per cent is levied on incomes of Rs 1.6-3 lakh, 20 per cent on Rs 3-5 lakh and 30 per cent above Rs 5 lakh).
20 per cent rate rate should apply to an annual income to Rs 10-25 lakh per annum.
The maximum rate of 30 per cent should apply to income above Rs 25 lakh per annum.
Perquisites given to employees should be included in salary income (likely to inflate the taxable income of certain categories of salaried persons).
Tax rates for companies should be reduced to 25 per cent for both domestic and overseas companies. Currently, domestic companies are taxed at 30 per cent with surcharge and cess coming later.
Foreign companies should pay an additional tax of 15 per cent as branch profit tax.
Abolition of the controversial STT (but the Code also suggests reintroduction of tax on long term capital gains on securities trading).

Source : Internet

Tax slabs for financial year 2009-2010

2009-09-28T22:14:00.001-07:00

There is a slight change in the income tax slabs for financial year 2009-2010 introduced in Annual Budget 2009.

India Income tax slabs 2009-2010 for Men

Income tax slab (in Rs.)	Tax
0 to 1,60,000	No tax
1,60,001 to 3,00,000	10%
3,00,001 to 5,00,000	20%
Above 5,00,000	30%

India Income tax slabs 2009-2010 for women

Income tax slab(in Rs.)	Tax
0 to 1,90,000	No tax
1,90,001 to 3,00,000	10%
3,00,001 to 5,00,000	20%
Above 5,00,000	30%

India Income tax slabs 2009-2010 for Senior citizen

Income tax slab(in Rs.)	Tax
0 to 2,40,000	No tax
2,40,001 to 3,00,000	10%
3,00,001 to 5,00,000	20%
Above 5,00,000	30%

The surcharge on the tax for income above Rs 10 lakh is removed.

Recession and India

2009-05-20T23:03:00.000-07:00

From last few months or may be an year or so everyone is talking about recession, economy is bad , etc, etc..,
But what actually is recession ??
A recession is when there are 2 quarters of negative growth in the economy. Note that this means the GDP should be negetive. Not a slowdown in growth (say, from a growth rate of 8.5% of GDP to 7.0% of GDP) but a negative number. For example, if growth is -3% in one quarter and then falls again by 2% then because we have two consecutive quarters of negative growth, we can say that the economy is in a recession. A reversal. A decline.

And what actually is economic slowdown ??
It's slowdown in economic activity which actually fuels the GDP of a country.
So, when the GDP rates are positive but less than that of previous years, we say this as a slowdown.

US , UK and many europian countries are in recession, i.e negetive GDP numbers.

India, China and some of the emerging markets are suffering from slowdown.

So, the US is in a recession and most of its financial institutions are morally bankrupt and financially close to the edge. Yet, Indian stock markets is getting affected the most and why is that ??
This is because Indian Stock market has lot money from investors from US and other FII who just come in for a short term, make money and go back. When their economy itself is bad, they needed their money back and there they go .. every one is taking money back from India.

And the people suffering is the small investors who came into markets when they should not and trying to exit when everything is gone.

India is a story that is starting now and people who are patient and ready to be in markets for long term should be in the markets regarless of the fluctuations. India is not in recession and it has a strong local market and un matchable resource called PEOPLE.

So, be patient and we will be the next super power calling the shots.

Cheers....
Vinay

Income Tax Returns

2009-04-16T07:17:00.001-07:00

As the financial year 2008-2009 has ended its time for all of us to think about filing income tax returns. By thins time, our employers may have finished all the paper work required for getting us Form-16 which is required for filing income tax returns for the financial year 2008-2009. We may be getting Form -16 within few weeks from now.

Now we all have to start thinking about income tax returns submission.

So, what actually is return of income?

Return on income is nothing but a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income is communicated to the Income tax department after the end of the financial year. Different forms are prescribed for filing of returns for different Status of the individual and nature of the income earned. This is something like a summary of all the financial activity done by a individual within a particular financial year.

The form is available from http://www.incometaxindia.gov.in/ or we can get them from the Public Relation Officer [PRO] of IT department.

As per the new procedure, we need not attach any documents when filing returns.

Most of the salaries employees will have to fill either ITR1 or ITR2 form. After filling this form, we can submit this to the Assessing Office of the respective IT department or send it through post or file it electronically (online). We can also submit our returns in the nearby post office also.

Filing of return is your constitutional duty and earns for you the dignity of consciously contributing to the development of the nation. This apart, your IT returns validate your credit worthiness before financial institutions and make it possible for you to access many financial benefits such as bank credits etc.

How to apply and get a PAN card

2009-02-26T06:49:00.000-08:00

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department.
A typical PAN is AABPS1205E.
It is mandatory to quote PAN on return of income, all correspondence with any income tax authority. From 1 January 2005 it will be mandatory to quote PAN on challans for any payments due to Income Tax Department.
It is also compulsory to quote PAN in all documents pertaining to financial transactions notified from time-to-time by the Central Board of Direct Taxes. Some such transactions are sale and purchase of immovable property or motor vehicle or payments in cash, of amounts exceeding Rs. 25,000/-to hotels and restaurants or in connection with travel to any foreign country. It is also mandatory to mention PAN for obtaining a telephone or cellular telephone connection. Likewise, PAN has to be mentioned for making a time deposit exceeding Rs. 50,000/- with a Bank or Post Office or depositing cash of Rs. 50,000/- or more in a Bank.

In order to improve PAN related services, the Income Tax department has authorized UTI Investor Services Ltd (UTIISL) to set up and manage IT PAN Service Centers in all cities or towns where there is an Income Tax office and National Securities Depository Limited (NSDL) to dispense PAN services from TIN Facilitation Centers. For convenience of PAN applicants in big cities, UTIISL has set up more than one IT PAN Service Center and likewise there are more than one TIN Facilitation Centers.
PAN application should be made only on Form 49A. A PAN application (Form 49A) can be downloaded from the website of Income Tax department or UTIISL or NSDL (www.incometaxindia.gov.in,www.utiisl.co.in or tin.nsdl.com) or printed by local printers or photocopied (on A4 size 70 GSM paper) or obtained from any other source. The form is also available at IT PAN Service centers and TIN Facilitation centers.

PAN application may be made on Form 49A obtained from any source other than IT PAN Service Centers or TIN Facilitation Centers. For instance, a PAN application may be made on form downloaded from the website of Income Tax department or UTIISL or NSDL; or on form printed by local printers or a photocopy of downloaded or printed .

Application for fresh allotment of PAN can be made through Internet. Further, requests for changes or correction in PAN data or request for new PAN card (for an existing PAN) may also be made through Internet. For more details visit (www.tin-nsdl.com)

Location of IT PAN Service Centers or TIN Facilitation Centers in any city may be obtained from local Income Tax Office or any office of UTI/UTIISL or NSDL in that city or from websites of the Income Tax department (www.incometaxindia.gov.in or UTIISL(www.utiisl.co.in) or NSDL (http://tin.nsdl.com)

Required Documents for getting PAN card are
a. Individual applicants will have to affix one recent, coloured photograph (Stamp Size: 3.5 cms x 2.5 cms) on Form 49A;
b. Any one document listed in Rule 114 must be supplied as proof of 'Identity' and 'Address'; and
c. Designation and code of the concerned Assessing Officer of Income Tax department will have to be mentioned in Form 49A.

For Identity Proof, we can submit
Copy of school leaving certificate or matriculation certificate or degree of a recognized educational institution or depository account or credit card or bank account or water bill or ration card or property tax assessment order or passport or voter identity card or driving license or certificate of identity signed by a MP or an MLA or a Municipal Councilor or a Gazetted Officer;
In case the PAN applicant is a minor, any of above documents of any of the parents or guardian of such minor shall serve as proof of Identity;
In case PAN application is made on behalf of a HUF, any of above documents in respect of Karta of the HUF will serve as proof of Identity.

For Address proof, we can submit -
Copy of electricity bill or telephone bill or depository account or credit card or bank account or ration card or employer certificate or passport or voter identity card or property tax assessment order or driving license or rent receipt or certificate of address signed by a MP/ MLA/Municipal Councilor / a Gazetted Officer;
In case the PAN applicant is a minor, any of above documents of any of the parents or guardian of such minor shall serve as proof of Address;
In case PAN application is made on behalf of a HUF, any of above documents in respect of Karta of the HUF will serve as proof of Address.

Buy or sell shares in stock market

2009-01-17T23:06:00.000-08:00

How to buy shares in Indian Stock Market?

Simple steps to buy or sell shares in Indian Stock Market.

Prerequisites

1. You need to have a DEMAT and Trading account – Contact any banks or stock brokers such as IndiaBulls, India Infoline , Reliance Money etc.
2. You need to have a PAN number. – Check out my earlier blog on PAN.
3. You need to have a Bank account, preferably in the same city and with online transaction facility which makes life easier.

Steps

1. Once you have a DEMAT or Trading account, you will be given an online access for buying or selling shares.
2. Select the stock or shares of the company you want to buy.
3. Decide on price and quantity of the shares.
4. Transfer money or allocate money to your trading account from your bank account sufficient enough to buy the shares and pay for additional charges such as brokerage, commissions and any other charges.
5. Using online account , put an order to buy the shares. This will be an easy process as you can check current market price – share value of the company and send the order to stock market using simple user interface.
6. Once ordering is done, you will receive a confirmation of your order and once your share is bought, you will get a confirmation of your trade.
7. After a couple of days, the share will be credited to your account.
8. If you want to sell, you can use same online account and specify the number of shares you want to sell and put the order.
9. Once the order is executed, you will get an online confirmation for this and amount will be credited back to your account within 2-3 days.
10. You can transfer money back to your bank account or use the money to buy some other shares.

Tax implication

If you are transacting in stock market, and if are buying and selling a particular share within an year, you need to pay 10% of your profit as a capital gain tax. If the interval between buying and selling is more than one year, you need not pay any taxes. The dividend obtained from the shares does not attract any tax. If there are any losses in a year, you can deduct the amount from any other capital gains (only) when calculating your taxes!!

Happy Investing ……….
Vinay

Stock Markets and Investing in stock market

2009-01-17T23:03:00.000-08:00

According to some sources, only 8 % of the Indian population knows that there is something called stock market and only 4 % invests in stock market directly or indirectly.

During these times, investing in market may seem like a bad word. But historically there is not other investment vehicle that has given more return on investment that stock market. Ace investors enter the stock market during turbulent times and exit when they make good money during good times. There are lot of people who made huge money as well as there are more people who lost all they had. The people who made money are typically investors who spent time and energy learning about stock markets and investing in stock markets and people who lost money are those who just wanted to make quick money.

As any other job or business, there is no easy money available. You have to be patient, work hard, spent time and have sufficient knowledge about what you are doing. During initial years, you have to learn, invest and then earn.

It is very unfortunate that only very small percentage of people do this. So as a first step, here are some basics about stock market.

To invest in stock market, you have two main ways.

1. Invest directly in stocks.
2. Invest in Mutual funds which in turn will invest in stocks.

For investing in stocks, you have to have a DEMAT account and a TRADING account. DEMAT account is something like a bank account in which your stocks will be held. You need to pay/transfer money to your DEMAT account to buy shares. For opening a DEMAT and TRADING account, you need to approach a stock broker. He acts as a mediator between you and the stock market and buy/sell for you. There are lot of players like ICICI, HDFC, Indiabulls , etc which offer this service. They charge a certain percentage of your transaction as a commission or brokerage.

During this internet age, you need not go to a broker or bank for investing in stock market. All can be done online. Once you open an account, the broker will give you facilities such as trade online, transfer money online to and from your bank account to your stock market account – DEMAT/TRADING. You can get live information about the stock market from various websites including those services provided by the stock broker. You can get information about which stocks to invest, which of them are performing well and which are not and all the details and news about the stocks from lot of websites. So, investing in stock market has become very easy and less cumbersome.

For investing in Mutual funds, you need not have a trading account. Your stock broker/ any banks provide this service of buying or selling mutual funds. Nowadays, you can invest in mutual funds online also. But you have to invest through banks or mutual fund offices for the first time.
Now there is a mandatory requirement of PAN – Permanent Account Number for investing in Stock Market or Mutual funds. Read one of my earlier posts to know about PAN.

When you buy a Mutual Fund, the service provider will buy or invest in stock market in different stocks in the stock market ( there are some mutual funds which do not invest in stock market). The mutual funds are evaluated using the variation in the stocks it has invested depending on which it decides its NAV. When you buy a Mutual fund, a certain number of mutual fund units with that day NAV will be allocated to you.

So, if you take good decisions and consider a long term, say 5 – 10 years horizon, there is not other investment vehicle that has given higher returns which beats the inflation. But the catch word is long term and persistent non panicky investment decisions.

If you have not invested in stock markets, this is the right time. Start doing some research on stocks and start investing and start with a very small amount and grow as you gain confidence. Hard work always pays of. This is definitely not gambling unless you gamble with your money.

Check my other blogs to gain more information on stocks and tax implecations.

Cheers
Vinay

Tips to stay afloat in bad times

2009-01-07T08:48:00.000-08:00

As anticipated by many people, its here ... India is starting to feel the effect of bad economic conditions which is prevailing all over the world. Started in US and spread like a wild fire all over the world, its affecting each and every person around the world. Job Losses, Less money in hand, depreciating assets, mounting liabilities are causing lot of worries to people. We have to take some effective steps to overcome this situation which is not appearing to last of couple of years.

Here are some tips which make you sail this troubled times without drowning.

1. Loans .... These will have snowball effect in these times. So, clear as much loans as possible. Avoid taking any loan.
2. Keep cash in hand. Delay any investment particularly related to risk prone sectors such as equity, real estate and commodities.
3. Gold and FD's are good investment options.
4. Try for prepayment of any outstanding loans and credit card balances.
5. Be ready with cash which can be deployed easily in case of trend reversal which may happen any time.
6. Don't even think of Job change. Cling on to existing jobs at least for another year in the mean time try to improve your skill sets and job expertise.
7. Try to create some income generating assets such as rental income, interest income etc.
8. Not a good time to buy or sell real estate and vehicles.
9. Don't plan for any expensive vacations.
10. Avoid expensive eat outs or entertainments.
11. Bring down house hold expenses by cutting down unwanted spendings.
12. And most important thing of all .. Don't panic .. Its all in the game ... Its like a cycle .. and conditions will and have to pick up and for India population which once was considered problem will definitely become an asset and growth story of India is not hoax... Its real and India will become the next super power and economic center point of the world and land of dreams.

Hope for the best and plan to make it even better.... :)

HRA - House Rent Allowance Calculation for income tax calculation

2008-12-18T06:38:00.000-08:00

How to Calculate the Income Tax Exemption on House Rent Allowance (HRA)?
HRA - House Rent Allowance
It forms a one of prominent portion of your salary earnings. Many people think that they will get excemption from tax whatever they pay as rent. But is not true and there is a lot of complex calculation done before actually deducting from taxable income.
If you look at your pay slip, you will see an amount specified under HRA column. This is the amount given by your employee as Housing Rent Allowance. This entire amount is not tax free. In fact if you dont submit your rent reciept this amount will become taxable.

There is a calculation to be done before actually getting the exact figure.

The Rule is the value which is minimum of following three will be exempted from income tax
1. Hra received
2. 50% of salary (Basic Salary + DA) in case of residential accommodation taken on rent is situated in Mumbai,Kolkata,Delhi, Chennai and 40 % of salary in in any other case.
3 Rent paid in excess of 10 % of salary (Basic Salary + DA)

For Example

If your basic salary + DA= 10000

HRA = 4000

Rent Paid = 2000

calc 1 = 4000

calc 2 = (Metro) 5000 or (non-metro) 4000

calc3 = 2000- 1000 = 1000

The min of these three calculation is Rs.1000 .. So 1000 Rs it the amount excempted from tax ( ofcourse if you submit your bills :) )

There are also lot of free tax calculator available to do this .. but always better to what goes inside.

See ya

- Vinay

A penny saved is a penny earned

2008-12-09T07:05:00.000-08:00

The world around us today is completly different from what we have a few months back. Everybody is talking about bad global economic condition, layoffs, cost cuttings, reduced employment oppurtunities and many more things. All these lead to only one thing, less money to spend for people. This is what the ultimate result of recession and slow down in economy.

When earning money is hard, then only we can see or notice some part of our expenses which is burning a silient hole in our pocket..... The Tax.

We all get our pay checks or salary credited and till now we enjoyed it without thinking much about savings for future. This is what causing most of the Americans to feel the heat and they are now realizing how important savings is.

We have to keep in mind that we cant except everything to be fine throughout our life and we have to be always prepare of the worst. The scenario will change in matter of months or weeks.

Income tax forms a major component of deductions made in our salary. But there are lot of ways we can make this expense as saving. Without our knowledge, if we make simple plans to save tax, we can end up saving huge amount of money.

Here are some tips to save tax effectively.

ELSS : Equity linked Saving scheme : Equity may sound like a bad word after all the stock market crashes. But mark my words, equity is the best way to make money. ELSS is best way to save tax .. make savings and hence make money.

Here is a simple calculation.
Say you are in a 30% tax bracket.
For each 100 Rs you earn, you end up paying 30 rs as a tax. This 30 will never come back.... Its gone.
Now say you invest the same 100 Rs in ELSS. If will not pay any tax to this money ( ofcourse there is a limit for investing in ELSS after which it is taxable).
Now we can say that we effectively invested 70 rs and you are already in 30 rs profit.
Wait .. consider the worst case of market.. The stock market crashes and yours ELSS loses 50%. Here your effective loss is much less than that of market. More over the interesting point here is the loss is not actual loss unless you sell them.... i.e this money has not gone anywhere. Instead of loosing money, you have invested money in ELSS which has lost some of its value.
Over time, it has proven that stock markets always bounce back and reach newer highs. Here the patience play a very important role.
So, go for it and do some research on ELSS and invest some money into it.... It will always pay back.
Here is a simple trick.
1. Invest in ELSS for 3 years .. Use direct investment option which saves some money which was charged as broker commission.
2. After 3 years lockin period, withdraw the money invested in 1st year which is absolutely tax tree and use it to invest again in ELSS and claim tax benifit for this.
3. Always go fro divident pay out option and use this money for further investments.. mostly in other ELSS or if you dont want to take risk, put them in bank deposits or some save debt instruments.

Again .. write these words in golder letters.

-- A penny saved is penny earned -- ( tax free :) )

See you soon with some more tips ....

Cheers,
Vinay

Tax calculator for Financial Year 2008-2009

2008-04-17T10:22:00.000-07:00

As you all may be aware of , the tax structure is changed from the financial year 2008 - 2009.

This will largely affect our tax calculations and will have a considerable impact on the net take home salary.
Calculating income tax is a boring work and to make things simple, download this income tax calculator for the year 2008-2009. Its free tax calculator

It is simple excel sheet where you enter your salary data and shows the tax calculations based on this years and last years tax structure and shows how much you can save.

Any doubts, comment on this blog and will answer your queries

Cheers
Vinay

The income tax and savings

2008-03-31T10:28:00.000-07:00

There is a happy news for all the salaried people (at last … ). Our finance minister in his budget ( I can call it an election campaign) has given some relief for salaried employees.

Effective from 2008 April, the tax slabs are changed and also there is an increase in medical insurance claim.

Upto Rs. 1.5 lakhs: No tax.
1.5 to 3 lakhs: 10%.
3 to 5 lakhs: 20%.
Above 5 lakhs: 30%.

More Smiles for women though

For women the first slab ends at Rs. 1.8 lakhs and for senior citizens, Rs. 2.25 lakhs. Applicable from the April 1 2008 to March 31 2009.
Surcharge of 10% for earnings above Rs. 10 lakhs stays.

No change in the 3% cess either.

Now if you plan properly, you can end up paying very less tax compared to last financial year.

If you make a simple calculation,

A person with 5 lakh as an annual income will straight away save 44000 Rs because of this new tax slabs.

So, if he invests 1 lakh in tax saving investements, he can save some money there also.

Additionally, you can also invest in mediclaim insurance where you can get benefits upto 35000 Rs.

Income Tax Slabs for Financial year 2008 -09

2008-03-28T07:58:00.000-07:00

The Tax slabs for income tax has been changes effective from April 2008.

So start planning to spend the extra amount you will get from april.Yaahooooooooo

Here is breif look at the new tax slabs

Upto Rs. 1.5 lakhs: No tax.
1.5 to 3 lakhs: 10%.
3 to 5 lakhs: 20%.
Above 5 lakhs: 30%.

More Smiles for women though

For women the first slab ends at Rs. 1.8 lakhs and for senior citizens, Rs. 2.25 lakhs. Applicable from the April 1 2008 to March 31 2009.
Surcharge of 10% for earnings above Rs. 10 lakhs stays.

No change in the 3% cess either.

Savings:
1. Earn a net income (after all deductions, 80Cs etc.) of Rs. 2 lakhs and you'd save Rs. 4,000 in taxes. (4K vs. 9K)
2. For Rs. 4 lakhs, you save about Rs. 34,000 as compared to last year. (35K vs 69K)
3. For Rs. 8 lakhs, your saving is Rs. 44,000. (1.45L vs. 1.89L)
4. For Rs. 12 lakhs you save about 49K. (2.91L vs. 340L) [This has a 10% surcharge so savings are higher]

Higher incomes would save about the same - about 4K a month, approximately. Net effect of this is positive for people, and hugely positive for people earning below 5 lakhs (effectively half their taxes are saved).

Cheers

PAN or Permanent Account Number

2007-02-07T04:16:00.000-08:00

Hello All,

First i will give you info on most important thing required for all the tax payers.

The PAN : Permanent Account Number.

It is Issued by Income Tax department of India.

PAN is mandatory while we submit our returns for a financial year ( Normally in the month of June).

Nowadays PAN is mandatory for many things such as opening a DEMAT account ( used for trading in BSE or NSE - buying/selling stocks), cash deposits more than certain amount (usually above Rs. 50,000) , investments made above Rs.50000 and much more .

We can apply for PAN in any of nearest UTI bank branch. Filling up the PAN application form is simple and no need to go to an agent and pay him some fees to get it done.

We have to provide an address proof and a identity proof documents - Some of them may be Passport, Voters Id , Ration Card, Bank pass book........

It will take around 15 days for issuing PAN card.

So, If you don't have PAN yet, try to get it as soon as possible, because it is one of the most important document required for all financial purposes.

Cheers,

Vinay

My Intro

2007-02-07T03:57:00.000-08:00

Hello All,

About me, i am not an qualified Accountant or some tax expert.

I am a simlple middle class salaried employee as most of the Indian Community who worries about saving tax only in the month of feb or march.

Here I want to share the knowledge I have about Tax planning, better ways to save tax , basic things to consider while tax planning and much more in an understandable form to all those who don't know anything about tax . You people can also post your comments and suggessions so that i can improve the content of my blog site.

There are many sites which give more information on all these things, but most of the them cannot be understanded by common people. So I am trying keep the details as simpler as possible.

Cheers

Vinay