Budget 2013 - India

Mr. P Chidambaram, the Finance Minister of India, presenting the budget 2013 on February 28, 2013. The main highlights of the budget for the common man are as follows:

• Implementation of DTC again deferred
• First home loan of up to Rs 25 lacs will get an additional Rs 1 lac interest deduction
• Income Tax Sops on the equity investments under Rajiv Gandhi Equity savings scheme extended to Mutual Funds
• Income level raised to Rs 12 lacs from Rs 10 lacs for Rs 50,000 exemption for the individuals under RGESS
• No changes in Income Tax rates or slabs
• Rs 2,000 credit for those earning up to Rs 5 lacs per annum
• Super rich tax: 10% surcharge on income above Rs 1 cr
• DDT surcharge raised to 10% from 5%
• TDS at 1% of land deals over 50 lacs
• To reduce STT on equity futures, MF units - STT reduced from 0.17% to 0.1%.
•  Cigarettes and SUVs will get costlier
• Custom duty on imported motor vehicles hiked to 100% from 75%
• Mobile phones, priced above Rs 2,000 will get more expensive
• To exempt vocational courses, testing services from Service Tax net
• Gold duty free limit raised to Rs 50,000 for men and to Rs 1 lac for women travelers
• Service tax to be imposed on all AC restaurants

 To summarize, it is clear that there was nothing to offer for a common middle class Indian.
 
  

What are Arbitrage Funds

Arbitrage funds are one type of mutual fund schemes that invest in the equity markets. These funds work differently than other equity funds as these funds buy stocks in the spot market and sell them in the derivative market and earns from the price difference. These funds generates good returns especially when the markets are volatile as there are better arbitrage opportunities.

Remember, arbitrage funds attracts short-term capital gain tax of 10% while there is no long term capital gain tax if held for more than one year.

How Investment in Stocks Helps to Evade Debt

Are you drowning in debts? Are you facing difficulty in managing your finances? If yes, then why don’t you try your hands in stock investment? Stock investment can be a great help in this regard and can help you to get out of the debt traps pretty fast. It not only provides you with the extra money to pay off your debts but also guides you to manage your future debts in a better way. If you are financially strapped then a debt relief program can help to lead out of this problem. You can still plan your investments wisely and keep yourself constantly updated with the rapid changes and fluctuation in the stock market. You can surely earn sufficient money and can get rid of your debt burden fast.

To be a successful investor first you need to have experience and proficient knowledge on the field of investment. Stock exchange investments are very tricky in nature; thereby thorough understanding of the subject is required to make the investments successful. All investors commit mistakes in stock exchange investments but they aim at not to repeat those mistakes in near future. Therefore before you get involved in stock investments learn about it as much possible and follow these few suggestions given below. Remember investing in stocks involves risks and in case you lack the sufficient knowledge on the subject, you can fall into further debts instead of getting out of it.

How to invest in stocks

• Evaluate the market properly before making your final investment. Analyze the difference between good and bad investments through different case studies. Compare different stocks you are planning to invest on. Search for an experienced stock broker or a reputed firm which can guide you best in this regard. However don’t depend on them blindly and keep a track of market rates of the stocks you invest on. All these helps you to make proper judgments and lessen the amount of risk involved with investing.
• If you are opting for investment in stock market as one of the debt solutions, you should first learn to identify the right time to buy and sell. The money you invest in buying stocks and the time you finally sell off your stocks are two most significant areas of concern. You better not to be greedy while investing. Once you start buying and selling at the right time nothing can stop you from gaining profit and paying off your debts.

Few things to keep in mind while investing

• Stocks have their individual time phases and cycles. Thereby it goes through constant ups and downs. Your job is to identify the exact time when you can maximize your profits. Follow the “buy and hold” strategy properly to earn profits in stock investment.
• Investing in single company or stock is not a very good option. This is because the moment that particular company or stock sinks you lose all your money. Try to experiment with different companies and stocks. This offers a greater chance of profits.
• If you listen to daily stock market result, it can sometimes distract you from making the right decision and can put unnecessary pressures on your head. Remember since stock investment is a long time procedure, daily result does not affect it all the times.
• Evaluate the stock properly before you invest. Don’t invest on it only because it has a cheaper price.
• Remember the basics of stock investing. You buy shares in the ownership of a company. You are not at all liable for company debt and you are free to claim your assets if it declares bankrupt in future.

If you plan your investment carefully, Stock markets are able to provide you with higher returns than other investment sectors. If you can avoid the mistakes in stock exchange investment and act patiently, you can surely gain greater profits and lead a debt free life in future.

Direct Tax Code Updates for 2012

Direct Tax Code (DTC) was much awaited since Government announced it last year in 2009. DTC was supposed to be applicable from the financial year of 2011, but as a major update, it has been postponed for another financial year, i.e. 2012. So, DTC will now be applicable only from year 2012.

Finance Minister, Pranab Mukherjee has tabled the draft of Direct Tax Code on Monday, 30th August 2010 in Parliament.

Major highlights and changes to check in DTC are:

• Postponed DTC to be applicable from April 1, 2012
• Income Tax slabs has been changed and raised giving some relief to tax payers
• Exemption of Rs 100,000/- under 80C is limited to PF,  Pension and Annuity Funds
• Additional deduction of Rs. 50,000/- provided
• No change in long term capital gain tax for listed securities and equity mutual funds
• Change in formula for short term capital gain tax
• STT to remain there
• Corporate Tax is maintained at 30%
• MAT is increased to 20%
• 5% Tax on Maturity of Mutual Funds and equity oriented Life Insurance
• 5% Tax on Dividend Distribution (DDT) for equity mutual funds
• Tax break for SEZs

The above mentioned updates for new tax code may differ in the final draft as it has now been postponed by one year. This is actually the third revised draft after being first proposed by the cabinet.


Revised Tax Slabs:
0 - 2 lacs : No Tax
2 - 5 lacs : 10%
5 - 10 lacs : 20%
Above 10 lacs : 30%

Additional 50,000/- is for health insurance, pure life insurance, education and any medi-claim type of policy.

If there will be some changes or modifications required in the above points, they will be updated. Still there are few points need some clarification. Nothing is clear about LTA whether it will become Taxable or remain Non-Taxable.
As an update, Finance Ministry has cleared that individuals will continue to enjoy the benefits of LTA as before. So, nothing much really changed for individual tax payers except the changes done for Sec 80C.

ELSS (Tax Saving Mutual Funds), ULIPs, Tax Saving FDs will not come under section 80C from April 2012.

Tax Saving Fixed Deposit

Financial year of 2010 – 2011 may be the last year for you to invest in tax-saving fixed deposits. There is a question in everyone’s mind, what can be the effect of abolishment of tax-saving FDs, NSC for investors and banks? For those who still are not aware of upcoming tax-code for the financial year of 2011-2012, Pranab Mukherjee, Finance Minister of India, has proposed a new tax code for the financial year 2011. As per the new tax code, there will no income tax benefits under section 80C for Tax-Saving Fixed Deposits, NSCs, and ELSS.

If the current proposal gets passed by assembly next year, you will not be able to avail tax-benefits for FDs under sec 80C from the financial year of 2011 onwards. So, it may be the last chance for you to put some money in these tax-saving FDs. As an investor, you must invest some amount of money in this tax-saving instrument. You can check for interest rates offered by major banks (SBI, ICICI, HDFC and other private & government banks), so whenever you find an increase in interest rate, invest some amount to avail tax benefits.

These FDs comes with a 5 year lock-in period, and the investment options that will be available after the new tax-code implementation will not be much flexible. ULIPs could be the only option available for you to invest money with a lock-in of 3 years, but as per the various studies, ULIPs do not give much return before 7-10 years.

So, if you want liquidity of money along with tax-saving, tax-saving fixed deposits can be the good option to look out for in the financial year of 2010-2011. As an investor and tax-payers, we may lose some freedom after the new tax code implementation, so utilize the current year to get the maximum benefit.

Update:
As an update, direct tax code has been delayed by one year, i.e. 2012. So, you have an option to invest in Tax Saving Fixed Deposits for one more year, i.e. 2011. Click on the link to find the updates of new tax code for 2012.

New Income Tax Code for 2010 - 2011 by Pranab Mukherjee

Government on Friday, 26th Feb 2010 has proposed new income tax code for the financial year 2010 - 2011. As per the new tax code, positive modification has been introduced in tax slabs.

There will be no income tax till Rs. 1.6 lakh (1,60,000) same as before.
But there are good changes done for other slabs-

There will be only 10% tax from 1.6 lacs to 5 lacs changed from 1.6 - 3 lacs
20% tax from 5 lacs to 8 lacs changed from 3 - 5 lacs
30% tax on the income above 8 lacs.

To give infra sector a boost, additional Rs. 20,000/- tax break is given for infra bonds. Now one can invest upto Rs. 20,000/- in infrastructure bonds.

This is a positive step taken by Finance Minister Pranab Mukherjee to cheer the tax payers in the country. Share Market also welcome the budget and gained more than 2%.

New Proposed Tax Code for Winter 2009 by Pranab Mukherjee

Government on Wednesday, 12th August 2009 proposed a new tax code for Winter session of Parliament 2009. As per the new tax code which is believed to be effective from financial year 2011, Government has indicated radical tax reforms by moderating income tax rates, abolishing STT (Security Transaction Tax) and increasing deduction amount for savings to Rs. 3 lakh.

If the proposal gets passed, then it will be a sign of joy for many income tax payers. Government has proposed different tax slabs and increased the slabs significantly high. Now there would be only 10% tax till Rs. 10 lac of income. So you would have to pay tax on Rs. 8,40,000 (10,00,000 - 1,60,000), i.e. only Rs. 84,000/-.

And if your income crosses Rs. 10 lac, then it would be 20% on the income above Rs. 10 lakh upto Rs. 25 lakh. Above 25 lacs, it would be charged at 30% rate.

As per Finance Minister, Mr. Pranab Mukherjee, Government is abolishing STT but 'long term capital gain tax' may again get introduced on the securities trading. This draft also proposed a exempt-exempt-tax versus an exempt-exempt-exempt (EEE) for savings.

The new code seeks to consolidate and amend the law relating to all direct taxes, that is, income-tax, dividend distribution tax, fringe benefit tax and wealth-tax so as to establish an economically efficient, effective and equitable direct tax system which will facilitate voluntary compliance and help increase the tax-GDP ratio.

As an update, this draft was open for public suggestions and now a second draft is expected to come in the month of June 2010 after considering suggestions. Now, it is expected that Government  may drop the exempt-exempt-tax (EET) proposal for taxation of savings as this was one of the most controversial clauses in the first draft of the DTC.

Major Updates on Direct Tax Code

Click here for New tax code for the year 2010 - 2011.

Investment Ideas

When it comes to money management, everyone tries to figure out the income, monthly expenses, and then try to save more money. But most people forget to invest money, or they just put money into the savings account. If all your money is in savings account or sitting idle, you can never grow your money. And you will make the age-old statement False - "Money makes Money". So you need to invest your money into proper instruments to grow your money as per your needs. Read more about different investment ideas at the following link.

http://www.moneymanagementideas.com/investment-ideas.html

Managing personal expenses during recession

Managing your own expenses sound very simple or you may have got several advices and most of the persons thinks he/she is good in managing their expenses but what happens is they do not consider what is going in the market, how are the conditions in the country or globally. These scenarios can also affect you, like in the current case of recession or when oil prices fluctuates from $70 to $150 and then again to less than $40. So if you will plan your expenses by considering the ongoing trends, it will help you in case some unexpected happens.

Someone may lose his/her job, may be you were planning to sell some of your property or investment in equity market to have some extra cash or to meet some unavoidable expenses but suddenly you found property prices started falling steeply and the market is behaving quite badly. So it is always better to check the current market trend, and control and manage your personal expenses to have some extra cash in your bank account. Also make a habit to invest some part of your savings in some plans/instruments which offers guaranteed returns.

Now what happens is most of us thinks that we do not spend on un-necessary things, so how we can reduce our expenses. But there are various ways in which we can save some significant amount of money. Do not spend much on outings, reduce your dinner outings, and prepare food at home. You can reduce your long drives that are meant for fun only. Reduce time of outgoing calls to your friends, talk to the point. You can also change your mobile postpaid plans as per your current needs.

Shop less and buy only what you really need, do not buy un-necessary items. Buy limited clothes and jewellery. Always search on internet before shopping to know what all offers are there in the market and from where you can get that product/service with better prices.

Suppose if you go to office in your car, and if you have some of your colleagues from the same or near-by area, you can go with option of car-pooling. It will save your fuel cost to some extent and also the maintenance cost of your car will be reduced. Switch on less number of lights in the day time, better to open windows, you will get fresh air and light and also will save on electricity bill cost and this habit should be used in general also, as it saves the environment too from getting polluted.

If you are living in a rented flat or apartment, then do not rent a lavish apartment, get a smaller one as per your needs and not as per your guests needs. After all it is your money that will be saved and can be used during hard times. So if you will peep inside your expenses, you may get some more loop-holes and extra ways to reduce the expenses and live a happy and consistent life forever.

Savings and Investments

Today in this global economic crisis, everyone is worried about future money, where to put hard-earned (or how so ever you may have got) money as to get better and secure returns. And as per current situations, it is really a tough job to give good advice and many people have again started looking for our traditional savings instruments like PPF, NSC and other stuffs. And there is no doubt, that these instruments will ever fail or may not give you returns. These are really guaranteed instruments where one is always sure how much money he/she will be receiving at the day of maturity.

But always do a good amount of research before putting all your money even in these instruments. There are large numbers of schemes present where you will get guaranteed returns, and all have some different rate of interest or some have taxable interest, some are tax-free. And if somebody is not interested in saving tax while depositing money, you may find other schemes with some higher returns. So always analyze yourself, your requirements, do some research and then invest your money.

Now the question arises, should we stop putting our money into equity market?
The answer for this question is with you only. You have to analyze how much risk appetite you have. But as per some rules or equations defined by experts, one should have equity exposure depending on your age, and the formula is 100 - (your present age). Suppose you are 30 years old, then 70% (100 – 30) equity exposure you can have. But if you have faced this present heat, then you will certainly doubt this and I too start having doubts on these equations. So answer is with us only, how much we can expose ourselves to this market segment.

What I’ll suggest someone is always first do your investment of Rs. 1 lac under section 80c, if you come under tax bracket. And if you can afford home-loan, it is best to utilize that for 80c. But if you cannot afford home-loan and as per current property rates in metros, it is really difficult to take one. In this case, you have to make proper planning, do a thorough research, which options are best and again how much equity exposure you can afford. For section 80c, the best options that I like is to put some money around 15-30% in PPF (Public Provident Fund), do not confuse with PF or EPF. Some percentage of money (around 20-25%) you can put in Tax-Saving Fixed deposits, now I’ll prefer PSU banks like SBI, PNB or any other such bank instead of private banks irrespective of better services offered by private banks, and you may have got the reason for that…

Now you have done almost 55% of your savings, now time comes for equity exposure. For me it is a must to put some money in this segment also, just to move ahead than inflation but yeah with a risk involved. But ELSS as per overall records, have always given 10-20% returns if you invest for a period of minimum 5 years, may be there would be some exceptions that I may have missed-out. So I’ll suggest exposure for around 20-30% in this market. You may also consider going for ULIPs if you are really a fan of it, but for me it is a kind of No-No, you may find some of the reasons in my earlier post. It is always better to have term insurance plan than to go for ULIP. You can put 5-10% in LIC term plans.

Now your savings for section 80c have almost finished, and you can analyze your needs and make some calculations and change the above figures as per your needs and risks. And you will not end up in losses, I bet.

Now the big question comes for those reading this article, if I do not want to save tax, then what?

Then again I will repeat, analyze your needs and risk appetite, sorry for repetitions…
Again I’ll suggest you to go for PPF just to get secure returns but yeah with 15 years lock-in period, but your money is secure with Tax-Free returns. Go for some Fixed-deposits as per your need, check the interest rates, duration, and put your money in small chunks in order to have some liquidity.
Go for good Mutual Funds, ‘good’ you will find by doing some research. And if you have good risk appetite, you may expose to direct equity, but it needs some time to regularly check your portfolio, and if you are some what new to this, read my earlier article, you may find some good tips.
You can also go for commodities, like you may invest in Gold, I do not mean go and buy some jewellery or a bar, but go for Gold ETFs, again you may refer to my earlier post for the benefits of that.

And one thing more, do not invest all your money, always have some good amount of money into your savings account, you never know when you may need some urgently.

Well I think this is enough in this article, if I’ll get some other better options I’ll let you know. And if you have some better options or any other comments, please post a comment so that everyone will come to know about that. Always share your knowledge, it will only grow…

ULIPs vs MFs

To invest your money in ULIPs (Unit-Linked Insurance Plans) or MFs (Mutual Funds), and to chose in between them, there are many factors that you have to look upon.

Firstly you must know for how many years you want to put your money, means for short-term, mid-term or long-term, same case as with equity market but here you do not have to track it daily or weekly. Once in a month or two is more than enough.
And secondly whether you want to have life-insurance coverage with your plan or not.

Major factor here is time-period, as ULIPs are beneficial only if you want to invest for more than 5-10 years. In case of ULIPs initial years charges are too high. So if you have time horizon for more than 10 years and also want some life-insurance benefit then you can go for ULIP plan. And if you basically want to invest money for some less time period then you should go for MFs. Again in MFs there are several plans available to you like complete equity, and some with combination of debt and equity, so you can invest and take plan as per your risk appetite.

Also if you do not want any life coverage then MF is always a better option. And you can go for separate life-insurance policy which is pure life-insurance policy (term-insurance plan) with no money-back. If you want to go for pure life-insurance, then you can take policy for any amount, and it depends on person to person how much that person wants to give to his/her dependents in case of any mishappen.

Insurance companies themselves admit that if your investment horizon is anything less than 7 years, don't even consider a ULIP. This is because, the charge structure in a ULIP is vastly different from a mutual fund. In the first year, a large chunk of the charges are recovered from investors. It could be as high as 40 per cent, in terms of some annual charges, fund management charges and some other charges as well.

ULIP tend to be expensive propositions (in comparison with mutual funds) during the initial years. However, over longer time horizons, the expenses balance out and ULIPs work out to be cheaper as compared to mutual funds. However, even if the lower expenses of a ULIP vis-à-vis that of a mutual fund scheme were to be considered, the latter would still surface as the better option.

You can make adjustments to your mutual fund portfolio. If you believe you have made a wrong investment decision, you can redeem your investment in a particular mutual fund and invest in another one. Such adjustments are not entirely feasible in a ULIP. If you want to switch in a better ULIP plan of another company, then again you have to start afresh, means again you have to pay those heavy initial charges.

Switch over between ULIPs of different insurance companies is not possible in case their performances are below par. Worse, most ULIPs do not even disclose details about their fund management and their portfolio to the investors.

A simple mutual fund or even a few blue-chip stocks would get you much higher returns and keep your portfolio simple to understand.

So if you want to get the benefits of long term investment and risk cover in one single product, ULIP is the product for you. So it is not an issue, of whether a mutual fund is better or a ULIP. It is about your need. Both can co-exist in your basket of needs. So identify your needs with a financial planner and then pick the product suitable for you. In a ULIP, your premium is divided into your risk cover and your investment. That means, out of the total premium that you pay, a certain percentage will be deducted as risk cover to provide for your insurance and the balance will be invested in a fund. Your risk cover charge will increase every year with your age. As a result the investment allocation will reduce.

Check out various other low risk investment options to invest your money.