Finance Business Bank

Riding on a buoyant economy and making the most out of it with respect to direct taxes, the revenue department may consider reviewing direct tax rates and structures (income tax slabs) in the coming annual budget. This move comes as an aftermath of a 45% growth rate in direct tax revenues due to tax administration improvements, increase in voluntary compliance etc.

A week back the Finance Minister was seen saying that the Rs. 10,000 increase in tax slabs last year didn’t give much of a relaxation to the tax payers of the country. The ministry will also seek inputs from public, tax experts and industry associations on this. Let’s hope that this welcome move shall come into effect and lower the burden of taxation on the working class.

Starting January 4 2008, mutual fund investors wouldn’t need to pay the existing entry load of 2.25% while investing in a fund directly through the fund house’s website or through its own customer desk. This is applicable to further investments in existing portfolios, schemes and to new schemes launched henceforth; basically, for any new investment made on existing or new mutual fund schemes.

Initially, when mutual funds were sold through brokers, the entry load was used to pay commission to the brokers. When fund houses started selling their funds online and directly through their channels, the role of a broker ceased to exist. Still, the fund houses were charging entry load, which was questionable.

For an amount of Rs. 100000 (one Lakh) invested in a mutual fund, the entry load took Rs. 2250 away from the investment amount. Considering a one time investment of Rs 100000 made on a mutual fund having a yearly return of 30% for an investment period of 15 years, Rs. 2250 alone could get a potential return of Rs. 115168 (more than one Lakh), which the investor stand to lose.

The set motive of mutual funds was to allow small investors with small chunks of money to invest and get the benefit of scale from the stock market. But if you look at the entry load, it’s waived for investments greater than Rs. 5 Crore in most cases, thoroughly favoring large investors, which is contrary to its purpose. The irony is investors who are able to invest more than 5 Crore would normally be companies, who take the benefit of mutual funds, that are primarily meant for small investors. Also, normally companies won’t invest for longer time periods as compared to small investors. Thus, the entry load of a mutual fund was a deterrent factor for small investments.

The process behind this move from SEBI started in August 2007. And now, when it comes to effect on the start of the year, it has become nothing less than a great new year gift to the small investors.

Gone are the days on which people want to work till sixty for maintaining their earnings, promotions and stuff. Nowadays, may be due to high pressure jobs and stressful lives, people want to retire from their career and lead a peaceful life as early as possible.

This article from Economic Times would make some of you think of retiring early and plan your strategies accordingly. Now, what could be the first step for early retirement?

According to the article,

We spoke to financial experts, and also a few smart people who actually managed to retire early from their active careers, and asked them for tips on how to retire early. Everyone was unanimous about the first step - make sure retirement stays at the top of your priority list.

Well, which I feel is not incorrect; but how many of us have retirement planning as our top priority?

When cost of living skyrockets, smart ways to plan one’s pay packet to reduce his tax outgo and maximize his take home salary becomes relevant. Companies also realize the need to have a tax-friendly pay packet to help their employees get the better of their salary.

30 tax-smart ways to plan your pay packet could help you plan your compensation package and get the best out of it. According to the article that came on Rediff,

Saving a rupee in tax means you have a rupee more to save, spend or invest as you wish. So, when negotiating or reviewing your salary package, you should choose perks which are both useful for you and your family, and which are also tax-smart.

Have a look at the article.

Ever since the dematerialization of shares happened in India, stock trading has shifted its base to the internet world. It made share trading a lot easier for people and more of them started buying and selling shares through various websites, which provided equity investors with facilities to do online trading. Online trading became so much popular so that today websites not only provide facilities to do share trading but also for Futures and Options trading, Commodities trading, Overseas trading, IPO application, Mutual Funds etc. and more.

Here is a non-comprehensive list of websites through which you can do online share trading in India, on BSE and NSE, the leading stock exchanges of India. The websites are neither arranged in any particular order nor are they ranked here. And all of them provide more or less the same set of services. There could be a difference in customer service though!

ICICI Direct
ICICI Direct is owned by ICICI bank. They have one of the highest brokerage fees in India but also have a plethora of stock research information and trading tips available with them.

Sharekhan
Sharekhan is an old hand broker with a lot of experience in Indian stock markets.

Reliance Money
Reliance Money is owned by Anil Dhirubhai Ambani Group.

5paisa
5paisa.com is an IndiaInfoline owned online equity trading portal.

Geojit
Geojit, as a company, is in operation since 1987. As on today, it is the only company in which a government entity (Kerala State Industrial Development Corporation) has a stake.

Indiabulls
Indiabulls is a leading Financial Services and Real Estate company of India. They have over 640 branches across India.

There are other online equity trading brokers as well; like Motilal Oswal, Kotak Securities, Angeltrade, SMC etc. I will update the list with their information in future.

Investing in real-estate, or more specifically, on a house or flat, is something that interests the salaried class very much. Though the scenario appears bleak due to the recent CRR and Repo rate hike by RBI (which could lead to an increase in home loan rates), buying a real-estate is something that is still worth pondering.

Real-estate has certain advantages that other investment options don’t have. Let’s have a look at few of those advantages and see why investing in real-estate is still a better option.

Advantages
1) Property prices, in general, don’t show a downward trend, especially if selected at a location where there is ample scope for development. In such cases, it becomes a safer investment.
2) The rate at which real-estate prices increase sometimes even beat the stock market.
3) Inflation generally doesn’t affect real-estate (house/flat) returns because the costs of construction materials increase every year (with inflation). As a result, the cost of buying a house/flat is always going to increase with time. Hence properties will most probably be available at a higher price tomorrow.
4) Investing in a ready to occupy house/flat could save the money that you spend on a rented house. Till selling the flat, you can live in the flat and save on the rent amount.
5) If you are taking a home loan for buying the house/flat, the EMI could be afforded with 1) the money you otherwise pay as rent and 2) the tax savings (hence increased take home salary) you get on home loans.

Tax Savings
When you take a home loan, there are two ways with which you could save tax.
1) The principal component of the EMI is eligible for a deduction of up to 100,000 under Section 80C of Income Tax Act 1961. This is the same section under which Provident Fund, Insurance Premiums etc. are claimed.
2) The interest component of EMI is exempted up to 150,000.
3) If both husband and wife are working, then both can claim these exemptions for the same property, provided they have taken a joint loan and divide the principal and interest component of EMI among each other

Most of the new age companies deduct income tax before giving salary to the employees (Tax Deduction at Source or TDS). TDS is also done by banks and other financial institutions for returns on fixed deposits, short term gains on equities etc. How do you check whether the tax deducted from you through TDS have been paid to the exchequer by your company or the financial institution?

Tax Information Network (TIN) of Income Tax department, Government of India facilitates a PAN holder to view annual tax statement (Form 26AS) online.

It’s very straight forward involving few simple steps
1. You have to register your PAN number online
2. Get it verified by TIN
3. Start checking tax credit online

The verification can be done by either going to the nearest TIN-Facilitation Centre or asking them to visit your address. There is a small fee for the one time authorization. Rs 15 + service tax if the PAN holder visits the TIN-Facilitation Centre in person or Rs. 100 + service tax if the PAN holder opts for the TIN employee to visit him and do the verification.

Income Tax Department of India facilitates a tax payer to file his Income Tax returns online through their website. It is an easy process and following are the steps involved according to IT department website,

1. Select appropriate type of Return Form from the website (ITR-1/ITR-2/ITR-3/ITR-4)

2. Download and install Return Preparation Software for the selected Return Form

3. Fill return offline and generate XML file

4. Register and create a user id (PAN) and password at the website

5. Login and click on relevant form on left panel and select “Submit Return”

6. Browse to select XML file and click on “Upload” button

7. On successful upload acknowledgement details would be displayed. Click on “Print” to generate printout of acknowledgement/ITR-V Form

8. Incase the return is digitally signed; on generation of “Acknowledgement” the Return Filing process gets completed. You may take a printout of the Acknowledgement for your record

9. Incase the return is not digitally signed, on successful uploading of e-Return, the ITR-V Form would be generated which needs to be printed by the tax payers. This is an acknowledgement cum verification form. The tax payer has to fill-up the verification part and verify the same. A duly verified ITR-V form should be submitted with the local Income Tax Office within 15 days of filing electronically. This completes the Return filing process for non-digitally signed Returns

Here is the link to IT Department’s eFiling website.

In a landmark ruling, the Supreme Court has said that employers are not under any statutory obligation to collect supporting evidence and furnish it to tax authorities while assessing Conveyance and Leave Travel Allowance (LTA) of their employees. Currently, claims without supporting bills are taxed.

The verdict came as a result of a plea from companies including L&T and ITI.

Quoting Times of India,

In its defense, the revenue department had argued that assessee companies were under statutory obligation under Income Tax Act, 1961, and relevant rules, to collect documentary proof to show that their employee(s) had actually utilized the amount paid towards the leave travel concession and conveyance allowance.

Rejecting the plea, the court in its order said: “The beneficiary of exemption under Section 10(5) (of the Income Tax Act) is an individual employee. There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the declaration to be submitted by an employee(s).”

So, until the tax authorities come up with a circular/amendment to clear this out (which I guess they might), claim all your LTA and Conveyance allowances without showing any bills.

The balance sheet is one of the key financial statements of a company and is of particular interest to an existing or prospective shareholder of the company. Here’s an article from Rediff, which explains how to read a balance sheet.

Similar to balance sheet, cash flow statement is another key financial statement of a company and is a mandatory part of the company’s financial reports since 1987. It tells an investor how the company’s operations are running, where the money is coming from and how it is spent. This article describes what is a cash flow statement?

Two months from now, the financial year will come to and end and then starts the proceedings for filing tax returns. So, various ways for saving tax should be done in these two months. This ToI article, explains 10 smart ways to lower your tax bill.