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Monday, July 30, 2012

Tax Returns Filing Tips

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For most Generation Y professionals, tax is something they would rather not be involved with. These bright youngsters can tackle the toughest corporate challenge but fumble when it comes to their own tax planning. It needn't be like that. Tax planning may appear complicated but once you get the hang of it, it can be empowering and rewarding. Just spend a little time to understand what it is all about and the knowledge will benefit you for the rest of your life. Here are some basics of tax planning.


Do you have to pay tax?


That depends on how much you earn and under what heads. Some salary components such as the basic salary, dearness allowance, special allowance and bonuses are taxable. Others such as house rent allowance, conveyance and other reimbursements are exempt subject to rules.
But apart from the income from your employer, you may also earn interest on fixed deposits, bonds and on the balance in your savings bank account. If you invest in stocks or funds, there may be dividend income and capital gains as well. If you own property, there may be rental income coming in.


If the income you earned in a financial year (1 April to 31 March) exceeds the basic exemption limit of 1.8 lakh ( 1.9 lakh for females), you have to pay tax on it.


Tax deduction at source


Your employer calculates the tax payable and deducts it from your salary. But since tax is payable on the combined total income, the TDS by your employer may not suffice unless your income from other sources has been factored in. If you changed jobs during the year, you must report the income from the previous employer as well. If you don't do that, you will end up availing the basic exemption twice, which will lead to a big tax outstanding at the end of the year.


Before your employer deducts tax, you are asked if you have made any tax saving investments or are eligible for any other deduction or exemption. You can invest up to 1 lakh in any option under Sec 80C. Some of these are automatic-your contribution to the PF, for instance. The other options are PPF, NSCs, tax saving FDs, ELSS mutual funds, life insurance policies and pension plans. There are other deductions too. Medical insurance policies for yourself or your parents are eligible for deduction under Sec 80D. If you submitted documentary proof of all these investments to your employer within the stipulated time, the TDS will be low.


Do you have to file your return?


The CBDT has exempted taxpayers with an income of less than 5 lakh from filing their tax return. However, you can avail of this exemption only if you have income from salary and bank interest. Also, this interest should not exceed 10,000 in a year and you should have paid the tax due on it. You should also not have any tax refund due.


If you have paid more tax than due, the only way you can get it back is by filing your return. Don't look at filing your tax return as a painful exercise. Instead, think of it as sending a bill to the Income Tax Department demanding a refund of the amount you overpaid in taxes during the previous year. The sooner you do it, the better it is for you because the faster your tax refund reaches you.


Understanding your Form 16


Your employer must have given you a Form 16, which is a certificate of the TDS from your salary. For most salaried individuals, the Form 16 has nearly all the details they need to put in their tax return form. But if they have other investments as well, the details need to be filled in the tax return form.


A refund is not the only reason to file your tax return. Your return is a declaration of your income and will come handy when you are seeking a loan, buying property, going abroad or even taking a large insurance cover. Banks want to see your income details before they extend a loan. Many countries want to know if you are financially stable before they issue you a visa. Insur ance companies want to know if the cover you want is commensurate with your income. The income tax return is your single sheet answer to all these queries.


Not filing your return can have serious reper cussions. You can be slapped with a penalty of up to 5,000 even though all your taxes are paid Besides, it will unnecessarily raise suspicion and the income tax department may scrutinise your finances further.


How to file your return


You can file your return online or offline, by your self or with the help of a tax professional. It is advisable to take the help of a tax professional at least for the first time. A chartered account ant will be able to guide you on how to fill up the form and choose the ITR form that is applicable to your case. Once you get the hang of it, you can start filing your return by yourself. Online fil ing is very simple and doesn't require too much effort. There are websites that guide you at every step of the process. They even choose the cor rect ITR form for you based on your income so there is zero chances of you going wrong. For as little as 200-250, some portals even cross check your return before it is filed to ensure it is error free. It is a small fee to pay for peace of mind.

Happy Investing!!

 

We can help. Call 0 94 8300 8300 (India)

 

Leave your comment with mail ID and we will answer them

                                                OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

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    1. Largecap Funds        Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds     Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds    Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds             Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds              Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds             Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

No need to file IT return for Salary up to Rs 5 lakh

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Invest Mutual Funds Online

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Call 0 94 8300 8300 (India)

Salaried employees earning up to Rs 5 lakh a year need nod file income tax returns from this year

 

Salaried employees earning up to Rs 5 lakh a year need nod file income tax returns from this year, the Finance Ministry said.

 

The exemption from filing I-T returns is applicable only if "the total income of the employee does not exceed Rs 5 lakh... (and) the annual interest earned from savings bank account is less than Rs 10,000" for assessment year 2012-13.

 

Filing I-T returns is, however, necessary to claim refunds.

 

The last date for filing tax returns is July 31.

 

There are about 85 lakh salaried persons in the country whose yearly income, including earnings from other sources like bank deposits, does not exceed Rs 5 lakh.

 

The exemption will be permitted only if the assessee has received a certificate of tax deduction in Form 16 from the employer. The employees have to report income from interest on savings bank account to the employer to become eligible for exemptions.

 

Earlier, it was obligatory for all salaried persons to file income tax returns under the Income Tax Act, 1961.

 

Meanwhile, the tax department said special counters will be set up in Delhi and 'Tax Kiosks' in various parts of Mumbai to assist people in filing income tax returns.

 

Unlike the previous years, the tax department will not set up any return receipt counters are at Pragati Maidan in New Delhi.

 

"Instead returns will be received at Civic Centre, opposite Ramlila Ground, New Delhi, from July 26 to 31.

 

The Mumbai Income Tax Department will set up 'Tax Kiosks', manned by Tax Return Preparers, at various locations in city to assist individual and HUF taxpayers in preparation and filing of the returns. A tax payer will have to pay Rs 250 to avail services of TRPs.

 

'Tax Kiosks' will be functional in certain residential areas on July 22 and in certain offices on July 24 and 25.

 

At present, income of Rs 2-5 lakh attracts 10% tax, Rs 5-10 lakh 20 per cent and above Rs 10 lakh, 30%.

Happy Investing!!

 

We can help. Call 0 94 8300 8300 (India)

 

Leave your comment with mail ID and we will answer them

                                                OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds        Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds     Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds    Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds             Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds              Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds             Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

File your Wealth Tax Return

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Mutual Fund Application Forms

Call 0 94 8300 8300 (India)

 

If you own certain assets worth more than 30 lakh, you are liable to pay wealth tax and file your return by July 31


The din generated by income tax returns tends to push the other taxes into the background. The wealth tax is the neglected child of the direct taxes family. However, remember that ignoring wealth tax can lead to serious problems for a taxpayer, with the penalty ranging from 100% to 500% of the unpaid tax. In extreme cases of willful default, a taxpayer may be punished with imprisonment ranging from six months to seven years.

Wealth tax raked in only 787 crore for the exchequer in 2011-12, which was a piffling 0.16% of the total direct tax kitty of 4,93,912 crore. The securities transaction tax brings in seven times as much revenue as the wealth tax.


This laxity on the part of the government has encouraged taxpayers to ignore their wealth tax liability. According to the Wealth Report 2012 of the Boston Consulting Group, India's rich are becoming richer. Nearly 28,000 Indian households crossed the threshold to become dollar millionaires (financial investments of over 5.5 crore) in 2011. Though financial assets do not invite wealth tax, real estate and gold, two favourite investment options of the super rich, are included. However, this is not reflected in the wealth tax collection, which has grown at a tardy pace, to say the least (see chart). However, this could change soon. A committee headed by former CBDT chairman, MC Joshi, has sought stricter punishment for tax evasion. The panel wants the minimum imprisonment for income tax and wealth tax evasion to be three years.

Most investors in real estate have no idea about the tax implication of buying a second property. A second house won't attract wealth tax only if it is rented out for at least 300 days in a year. It can be a double whammy for the owner if the house is lying vacant, for he will not only have to pay tax on the notional rental income, but the value of the house will be added to his net taxable wealth. This is why savvy investors prefer to put money in commercial real estate, which does not attract wealth tax.


An increased focus on wealth tax compliance can bring in significant revenue for the exchequer. The best part is that there cannot be any political opposition to such a move because the law already exists.


Tax experts also say that the current limit of 30 lakh is not in sync with reality. A small flat or plot of land in a metro will easily land even a middle-class family in the wealth tax net.


However, there's good news in store. The original Direct Taxes Code had proposed to raise the threshold of assets for wealth tax to 50 crore and reduce the tax to 0.25%. It had also sought to bring financial assets under the tax ambit. The revised DTC has not specified the limit, but has hinted that financial assets will not be included and that the threshold needs to be raised. Till that happens, make sure you pay your wealth tax and file the return to avoid a missive from the taxman.

Wealth tax primer

WHAT IS TAXABLE?

• More than one house, if it is unoccupied; ornaments; luxury cars, watches, yachts and aircraft; over 50,000 in cash.


HOW MUCH IS THE TAX?

• 1% of the value of the assets exceeding 30 lakh.


WHAT IS EXEMPT?

• Any one residential property.

• Commercial property.

• Financial assets

• Any outstanding loan taken to buy the asset.


FILING DEADLINE AND FORM

• Wealth tax return has to be filed by 31 July.

• You have to use the four-page Form BA for filing the return.


WHAT IS THE PENALTY?

• 1% interest for every month of delay.

• Penalty for evasion is 100-500% of the evaded amount.

• In extreme cases, even jail. 

Happy Investing!!

 

We can help. Call 0 94 8300 8300 (India)

 

Leave your comment with mail ID and we will answer them

                        OR

You can write back to us at prajnacapital [at] gmail [dot] com

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds        Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds     Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds    Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds             Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds              Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds             Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Friday, July 27, 2012

File your Wealth Tax Return

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Mutual Fund Application Forms

Call 0 94 8300 8300 (India)

 

If you own certain assets worth more than 30 lakh, you are liable to pay wealth tax and file your return by July 31


The din generated by income tax returns tends to push the other taxes into the background. The wealth tax is the neglected child of the direct taxes family. However, remember that ignoring wealth tax can lead to serious problems for a taxpayer, with the penalty ranging from 100% to 500% of the unpaid tax. In extreme cases of willful default, a taxpayer may be punished with imprisonment ranging from six months to seven years.

Wealth tax raked in only 787 crore for the exchequer in 2011-12, which was a piffling 0.16% of the total direct tax kitty of 4,93,912 crore. The securities transaction tax brings in seven times as much revenue as the wealth tax.


This laxity on the part of the government has encouraged taxpayers to ignore their wealth tax liability. According to the Wealth Report 2012 of the Boston Consulting Group, India's rich are becoming richer. Nearly 28,000 Indian households crossed the threshold to become dollar millionaires (financial investments of over 5.5 crore) in 2011. Though financial assets do not invite wealth tax, real estate and gold, two favourite investment options of the super rich, are included. However, this is not reflected in the wealth tax collection, which has grown at a tardy pace, to say the least (see chart). However, this could change soon. A committee headed by former CBDT chairman, MC Joshi, has sought stricter punishment for tax evasion. The panel wants the minimum imprisonment for income tax and wealth tax evasion to be three years.

Most investors in real estate have no idea about the tax implication of buying a second property. A second house won't attract wealth tax only if it is rented out for at least 300 days in a year. It can be a double whammy for the owner if the house is lying vacant, for he will not only have to pay tax on the notional rental income, but the value of the house will be added to his net taxable wealth. This is why savvy investors prefer to put money in commercial real estate, which does not attract wealth tax.


An increased focus on wealth tax compliance can bring in significant revenue for the exchequer. The best part is that there cannot be any political opposition to such a move because the law already exists.


Tax experts also say that the current limit of 30 lakh is not in sync with reality. A small flat or plot of land in a metro will easily land even a middle-class family in the wealth tax net.


However, there's good news in store. The original Direct Taxes Code had proposed to raise the threshold of assets for wealth tax to 50 crore and reduce the tax to 0.25%. It had also sought to bring financial assets under the tax ambit. The revised DTC has not specified the limit, but has hinted that financial assets will not be included and that the threshold needs to be raised. Till that happens, make sure you pay your wealth tax and file the return to avoid a missive from the taxman.

Wealth tax primer

WHAT IS TAXABLE?

• More than one house, if it is unoccupied; ornaments; luxury cars, watches, yachts and aircraft; over 50,000 in cash.


HOW MUCH IS THE TAX?

• 1% of the value of the assets exceeding 30 lakh.


WHAT IS EXEMPT?

• Any one residential property.

• Commercial property.

• Financial assets

• Any outstanding loan taken to buy the asset.


FILING DEADLINE AND FORM

• Wealth tax return has to be filed by 31 July.

• You have to use the four-page Form BA for filing the return.


WHAT IS THE PENALTY?

• 1% interest for every month of delay.

• Penalty for evasion is 100-500% of the evaded amount.

• In extreme cases, even jail. 

Happy Investing!!

 

We can help. Call 0 94 8300 8300 (India)

 

Leave your comment with mail ID and we will answer them

                        OR

You can write back to us at prajnacapital [at] gmail [dot] com

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds        Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds     Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds    Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds             Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds              Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds             Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund



Thursday, July 26, 2012

Want to Beat Inflation? Liquid Funds Could be an answer


I get about 7% on my savings money. Yes, please read again – I get about 7% on my savings money. And we all know that our basic savings bank account provides only 3.5%. So, how have I doubled my return on basic savings? 

 I have been a strong advocate of getting your money to beat inflation. When all things around you become dearer (costlier) and your money doesn't keep pace with this increase in cost, you are not only doing disservice to your future but also punishing yourself for all the effort you have put in the past to generate this income. The closer you are to overcoming the effects of inflation, the better you are at making your money sweat it out for you.

We have all been wisely advised to keep at least a few months of our salary in our savings account. This is essential to fight any unexpected requirements that may come up in our daily lives. However, what if you had an equally convenient option to park your savings money in another well-regulated, transparent, easy to understand, low-risk product? A mutual fund!

Dear reader, I am referring to the simpleton – Mr Liquid Fund! He has another name too, Mr Cash Fund.

A liquid or a cash fund is built on three tenets –
Ø       high liquidity,
Ø       low risk,
Ø       stable returns.

Think about it, isn't this but, what you get in your savings account too? Of course, I have to emphasise here that you are guaranteed 3.5% by your bank, whereas, any mutual fund in our country cannot guarantee returns on their products. But the question I ask myself and my family members is – how important are guaranteed returns when you know that the risk you take is very low? I bring you to another fundamental rule in investing your money – if the incremental risk one takes isn't as much and the reward one can expect from that investment decision is way more than what one gets at present, one should take the plunge. Any investment carries risk, but the bigger question you need to ask is "How much risk?"

Post May 1, 2009, Sebi regulations have ensured that liquid funds do not invest in underlying instruments that have more than 91 days to mature. This provides a strong foundation for minimal interest rate risk.

For the next three-to-six months, our economy is expected to witness great hunger for overnight and short-term money (this is what the investment world calls — tight liquidity). In conditions of tight liquidity, there is more demand for cash but less supply. Therefore, the most commonly used resort by our banks to manage this shortage is to go and borrow money from the Reserve Bank of India (RBI). When the banks do such overnight borrowing, the investment world calls it repo. Whenever you get to read that the repo volumes are high, it means that there is shortage of overnight money in the financial markets. This presents us with an opportunity to make our savings money sweat it out a little more – and that can be achieved by investing it into liquid funds. The mutual fund industry has over 50 different liquid funds for you to choose. Buying them today is a breeze with many online platforms. These funds have no entry or exit loads and you are free to take out your money any day after your investment.

For those of you who are a bit more savvy, ultra short-term debt funds could be your logical next step. If you want to promote a noble cause, donate the extra income you generate from liquid funds as compared to your savings account to a good charity. Are you ready?

Some investment tips for the 80 plus investor


   In the last few years, India's growth story has centered around the youth which has been on a spending spree. Hence, most of the economic activity has focused on wooing this segment. This is reflected in the number of malls that are coming up or the scorching pace at which mobile phones are hitting the market. Amid this environment, it was a pleasant surprise when the Finance Minister came up with tax sops for those aged above 80. He even referred to them as super senior citizens.

   With life expectancy improving, many families have at least one individual who has celebrated his 80th birthday. With many of them having a good lifestyle and ability to manage their life independently, wealth management is also a necessity. The Finance Minister seems to have recognised this.


   Investors in this category can manage money slightly differently. One is to manage their funds themselves and the other is to lend their name to their family members. With the income tax limit being raised to Rs 5 lakhs for these investors, you are bound to see a number of joint investors in the coming days. For instance, a family member can have a fixed deposit along with a super senior and enjoy a higher tax-free income.
   

Here are some tips for these investors:

Be wary of wrong advice   
Many senior citizens are easy targets as they are not aware of many cotemporary investment options. It is important for an investor to feel comfortable with a product rather than invest in it just for the sake of keeping pace with the times. Hence, stick to products that are easy to understand and do not require constant monitoring.

Maintain liquidity   
Retired investor do not have the luxury of investing in long-term and illiquid investment products and in the case of super senior citizens, the word lock-in should not be part of the investment planning. Avoid products that don't allow access.

   After factoring in these crucial factors, invest in products which generate cash flows and don't pose any threat to the capital. Only after taking into account the liquidity needs, mildly riskier options like monthly income plans can be considered. As pointed out earlier, stick to vanilla options like fixed deposits, debentures or company deposits with good credit rating. Avoid loans even if a banker is willing to give you one based on your pension income.

   Those who have the luxury of surplus income can consider setting aside money in balanced funds of mutual funds. Thanks to wage revisions, a number of senior citizens have the luxury of earning a pension income of Rs 4-5 lakhs and may be left with a small surplus.

If healthcare costs are taken care of, such individuals can look at monthly income plans of mutual funds with the dividend option or even balanced funds.

Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now
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Transact Mutual Funds Online Invest Online
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