Sunday, May 25, 2008

Filing your Income Tax Return Online

A good new for all those who are paying the agent for filing their income tax returns. Now you can file your income tax returns online.

Steps to file income tax online

  • Visit the incometaxindia website (www.incometaxindiaefiling.gov.in/portal/index.jsp) and register as a new user.
  • Fill your personal details and your permanent account number (PAN) inside the box provided on the form and click on the 'Register' button.
  • Once you click on the 'Register' button you will be taken to a form that will automatically have your address and other details (as submitted by you for getting a PAN). You will just have to put your own password, telephone number, e-mail and click on the 'Submit' button.
  • And you will be taken to a page that has links for e-filing your tax returns for the assessment year 2006-07 and 2007-08. Assessment year is a period of 12 months starting from April 1 and ending on March 31 the following year. Previous year is the financial year immediately before the assessment year.
  • Income earned in the previous year is taxable in the assessment year.
Let's take an example to make it simple.
Let's take April 1, 2006 to March 31, 2007 as the assessment year. The previous year corresponding to this assessment year will be April 1, 2005 to March 31, 2006.

So the income earned in the previous year April 1, 2005 to March 31, 2006 is taxable in the assessment year starting from April 1, 2006 to March 31, 2007.

Similarly, income earned in the previous year April 1, 2006 to March 31, 2007 is taxable in the assessment year starting from April 1, 2007 to March 31, 2008.

  • Now let's say you click on e-filing for A.Y. 2007-08. You will be taken to a page from where you can download an excel utility that helps you file online income tax returns.
  • Choose which category you belong to (salaried employees with only salary income will have to download ITR-1).
  • Fill in the required data asked for in the excel sheet.
  • Save the excel file on your local machine.
  • Click on 'Submit return' link in the middle on the left hand side to upload the saved excel file to the income tax of India's server.

After uploading excel file successfully a form will pop up in your computer's window. This is in acknowledgement that you have filed your returns online successfully. Take a print out of this form and fill in the verification part which duly needs to be posted to your nearest local income tax office.


Take due care that if you upload the file today then the income tax department should receive the verification form duly filled and signed in the next 15 days by post. If not you will have to go through the entire procedure again.

If you are already raising your eyebrows then here's a solution to it: digital signature. This is something that will make your e-filing income tax returns really paperless.

Digital signature is like your electronic identity that confirms that the person who has submitted all the details is really 'YOU'. Companies like Safe Scrypt (http://www.safescrypt.com/solutions_and_services/digital_certificate_services.html) will do it for you, again online and for a fee. As per the IT Act 2000 they are legally as valid as physically signed documents in any Indian court of law.

Filing your income tax returns is now really possible at the click of a mouse.

Wednesday, May 21, 2008

Mutual Fund information

Mutual fund Basics and Definition

A mutual fund is a financial intermediary that allows a large number of investors to pool their money together with a predetermined investment objective. The pooled money will be invested into specific securities(usually stocks or bonds) by the fund manager. When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund. Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in (you don't have to figure out which stocks or bonds to buy). By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification. They offer regular investors a chance to diversify their portfolios, which is something they may not be able to do on their own.

There are different kinds of mutual funds to cater to varied investment objectives: Growth Funds, Income Funds, Balanced Funds, and Liquid Assets Funds, also known as Money Market Funds. Having explained mutual funds lets see the different types of mutual fund.

Types of Mutual fund

Mutual fund can be classified into the following two categories:

a. MF according to Maturity Period

Depending on the maturity period, there are two basic types of mutual funds. Open-ended mutual funds and Closed-ended mutual funds

Open ended mutual fund
"Open-ended" or "Open" mutual funds are the most common type of mutual funds in which Investors may purchase units from the fund sponsor or redeem units at the valuation promised in the fund documents, usually on a daily basis. An open-ended Mutual fund is one that is available for subscription and repurchase on a continuous basis. These Funds do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.

Closed ended mutual fund
"Closed-ended" or "Closed" mutual funds are traded as financial securities, once they are issued, and holders must sell their units on the stock market to receive their funds back. A close-ended Mutual fund has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

a. MF according to Investment Objective

Based on investment objective the fund can be classified as follows:

Equity Funds
Equity funds or Growth funds invest a major part of their corpus in equities. The composition of the fund may vary from scheme to scheme and the fund manager’s outlook on various scrips. The Equity Funds are sub-classified depending upon their investment objective, as follows:

  • Diversified Equity Funds
  • Mid-Cap Funds
  • Sector Specific Funds
  • Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon. Equity funds rank high on the risk-return matrix.

Debt Funds
Debt fund is also known as income fund. The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.

These Funds invest a major portion of their corpus in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:
  • Gilt Funds: Invest their corpus in securities issued by Government, popularly known as GoI debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.
  • Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.
  • MIPs: Invests around 80% of their total corpus in debt instruments while the rest of the portion is invested in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.
  • Short Term Plans (STPs): Meant for investors with an investment horizon of 3-6 months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.
  • Liquid Funds: Also known as Money Market Schemes, These funds are meant to provide easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

Balanced Funds
These funds, as the name suggests, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.

Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly.

Money Market or Liquid Fund
These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.

Gilt Fund
These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.

Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges.

Top Fifteen Mutual Funds

Following is the list of top fifteen mutual funds for the last one year. The ranks are based on the Mutual funds performance in the last year. The mutual funds ratings displays the top mutual fund companies during the last year.

Rank: 1
MF Name: Reliance Diversified Power Sector Fund - Growth
NAV (Rs.): 66.96
Last 12 Months %: 65.95
Since Inception: 59.88

Rank: 2
MF Name: DWS Investment Opportunity Fund - Growth
NAV (Rs.): 37.06
Last 12 Months%: 50.52
Since Inception: 35.27

Rank: 3
MF Name: Reliance Regular Savings Fund - Equity - Growth
NAV (Rs.): 23.54
Last 12 Months%: 44.28
Since Inception: 33.14

Rank: 4
MF Name: DBS Chola Opportunities Fund - Cumulative
NAV (Rs.): 42.38
Last 12 Months%: 43
Since Inception: 14.71

Rank: 5
MF Name: Standard Chartered Premier Equity Fund - Growth
NAV (Rs.): 21.77
Last 12 Months%: 42.66
Since Inception: 33.82

Rank: 6
MF Name: ICICI Prudential Infrastructure Fund - FII Growth
NAV (Rs.): 15.2
Last 12 Months%:
Since Inception: 21.49

Rank: 7
MF Name: UTI Gold Exchange Traded Fund
NAV (Rs.): 1279.55
Last 12 Months%: 40.88
Since Inception: 21.08

Rank: 8
MF Name: Gold BeES
NAV (Rs.): 1276.57
Last 12 Months%: 40.72
Since Inception: 26.15

Rank: 9
MF Name: ICICI Prudential Infrastructure Fund - Growth
NAV (Rs.): 28.64
Last 12 Months%: 40.41
Since Inception: 45.52

Rank: 10
MF Name: Canara Robeco Infrastructure Fund - Growth
NAV (Rs.): 20.57
Last 12 Months%: 38.93
Since Inception: 33.47

Rank: 11MF
Name: Sundaram BNP Paribas SMILE Fund - Growth
NAV (Rs.): 25.77
Last 12 Months%: 37.18
Since Inception: 33.33

Rank: 12
MF Name: BOB Growth Fund - Growth
NAV (Rs.): 43.61
Last 12 Months%: 36.13
Since Inception: 36.8

Rank: 13
MF Name: Taurus Discovery Stock
NAV (Rs.): 23.34
Last 12 Months%: 36.1
Since Inception: 9.94

Rank: 14
MF Name: DWS Alpha Equity Fund - Growth
NAV (Rs.): 72.68
Last 12 Months%: 36.01
Since Inception: 44.93

Rank: 15
MF Name: Tata Infrastructure Fund - Growth
NAV (Rs.): 33.86
Last 12 Months%: 35.26
Since Inception: 42.2

Investment Declaration

It's usual that your company will send a piece of document with a lot of columns that need to be filled up during the first two months of the financial year. Typically, this means that you have to declare the investments, which you will be making, during the current financial year.

And this document is rather important because you will need to back this document with actual proof at the end of the year. Else, the take-home salary will have to bear the brunt of your negligence. There are different approaches followed by individuals for this. These include:
A conservative approach: A conservative's approach is to invest Rs 30,000 in Provident Fund, Rs 35,000 in Equity-Linked Saving Schemes and another Rs 15,000 National Saving Certificates. That means a total investment of Rs 80,000 which misses the target of Rs 1 lakh (Rs 100,000) that they need to invest for maximum tax benefits.

And this approach is followed because they are worried about the impact, if they are unable to carry out their investments properly. In order to save themselves any trouble, they mention a lower figure.

Also, they are also worried that about the consequences if the break-up of the investment changes. However, they need not worry about this because the total amount indicated in the declaration has to be same. And as long as this is maintained, it is perfectly fine.

It's important to remember that a conservative approach can lead to higher tax incidence. That is, if you were to invest a higher amount than proposed, it could lead to lower tax benefits.
Before going for such an option, it's important that you mention this to your company's finance department so that they are aware of your latest position and tax you accordingly.

The carefree approach: This approach is more common because here the individual just puts some arbitrary figures against various heads in their investment declaration.
For instance, a person might put Rs 10,000 as premium on medical insurance and Rs 1 lakh as total investment for Section 80C benefits.

There is a serious risk in this approach because just putting down some numbers without thinking through the process could lead to serious loss, in terms of reduction in tax benefits.
Similarly some wrong amount might be mentioned that will disallow the expenditure. A very good example of this is allocating Rs 1 lakh for PPF when the maximum permissible is just Rs 70,000. So another Rs 30,000 that could have been invested in other instruments will now get wasted.

The exact approach: This is a systematic approach wherein all the options are considered and then, allocated to different instruments. For instance, allocating Rs 50,000 to PPF, another Rs 40,000 to ELSS and Rs 10,000 to NSC is a perfect example of proper allocation.
Of course, the latter approach runs the risk of changes being introduced during the year, but it is still an acceptable one because the final number should tally.

Sunday, May 18, 2008

Claim for Sensex. BSE not the owner of SENSEX.

Challenging the Bombay Stock Exchange (BSE), which has applied to register Sensex as its trademark, Deepak Mohoni, a stock market analyst here, has filed a plea with the Trademark registry claiming that the word had been coined by him to denote the BSE sensitive index in his newspaper columns before BSE started using it.

Apart from filing his application with Trademark registry, Mohoni has also moved a legal suit in Pune district court under Section 134 of Trade Market Act to stake his claim in respect of coining of the word.

According to Mohoni, he used the word Sensex first in 1989 in a newspaper column to Nickname a long, clumsy phrase- BSE SENSITIVE INDEX.

He claims that BSE started using it much later from 1995 in its publications. "I decided to file my application before Trademark registry when I came to know that BSE was moving to register SENSEX as it trademark," Mohoni said.

He has now been served a notice by BSE through its lawyers contending that the word was exclusively associated with Bombay Stock Exchange services and could not be registered as trademark by any other party.

Ranjan Nehru, the lawyer for Mohoni, has submitted in his plea that his client enjoyed an exclusive right over the word SENSEX, the term which was convenient, attractive and innovative.

Tuesday, May 6, 2008

Demat Account Basics

Definition of Demat Account
Demat Account is an account where you can maintain an account of stocks you have in an electronic format. Demat Account or Dematerialized account is a safe and convenient means of holding securities just like a bank account is for funds. Today, practically 99.9% settlement (of shares) takes place on demat mode only. Thus, it is advisable to have a Beneficiary Owner (BO) account to trade at the exchanges.
Now nobody is interested to keep shares in physical forms and going for electronic based filing of shares. This has changed the style of operation in main Indian stock markets like BSE Sensex ( Bombay Stock Exchange Sensitive Index) and Nifty (National Stock Exchange of India) and its brokers.

How to Open a Demat Account
To start dealing in securities in electronic form, one needs to open a demat account with a DP of his choice. It is like opening a bank account. You have to approach a depository participants to open an online trading or demat account. Most of the banks are DPs too.
There are many private banks and also private sectors which opens Demat Account and give good service. These company and sector has their different rules and regulation and charges. Some of the banks and sectors where you can open your demat account:
ICICI bank
HDFC bank
Centurion Bank
SBI bank
Eureka Securities
Sharekhan
India Infoline
Indiabull
Religare
Reliance money
Geojit

Depository
The two depository, NSDL and CDSL is responsible for keeping stocks of investors in electronics form.
NSDL stands forNational Securities Depository Ltd
CDSL stands for Central Depository Services Ltd

Depository Participants
DPs are agents who connect depository with Investors. It is like a bank branch with which you can open a demat account to buy or sell shares.

Charges and Fees
There will be an annual account maintenance fee and a transaction fee for your demat account and it will vary between DPs.

Documents required for opening a Demat account
Few documents with the application form is required to open a demat account. As per latest Govt of India rule PAN (Personal Account Number) card is must for opening a demat account. The documents required to open a demat account are
1. Photo Copy of PAN Card (Mandatory)
2. Two Passport size photos
3. Address Proof – Ration Card/Passport/Driving License/Voter’s ID Card/BSNL Telephone/LIC Policy
4. Latest Bank Statement and photocopy of Bank Passbook

Who can open a Demat account
Anyone who is above 18 years old and wish to open a demat account.

Microsoft withdraws bid to acquire Yahoo

Microsoft has abandoned its three-month old bid to buy Yahoo after the two failed to agree on acceptable price. Microsoft had earlier offered USD 47.5 billion which translated into USD 33 per share but Yahoo wanted $57 billion or $37 a share.
Microsoft announced its decision to withdraw after talks between its Chief Executive Steven A Ballmer and Yahoo co-founder Jerry Yang in Seattle last morning failed to produce an agreement. Microsoft had made an unsolicited bid to buy Yahoo so as to compete with Google search engine.
Ballmer in a letter to Yang pointed out that Microsoft had already raised its bid by about $5 billion and despite its best efforts, Yahoo has not "moved towards accepting our offer."
"After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal," said Ballmer.
"Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo undesirable as an acquisition for Microsoft," he wrote.
"We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo and the market as a whole," Ballmer said in the letter posted on the Microsoft website.
No immediate comment was available from Yahoo.
In a statement, Ballmer expressed confidence that Microsoft move towards its goal to pursue its online efforts on its own.

Saturday, May 3, 2008

Reliance Power Ltd acquires 3 coal mines

Reliance Power Ltd's chairman Anil Dhirubhai Ambani on Friday said it has acquired three coal mines in Indonesia with total reserves of two billion metric tonne.
The acquisition was made by its wholly-owned subsidiary Reliance Coal Resources Pvt Ltd (RCRPL), which plans to invest Rs 2,400 crore in mine and related transportation infrastructure to take the capacity of these mines to over 25 million metric tonne per annum.
"Reliance Coal Resources has acquired 100% economic interest in three coal concessions in Indonesia," Reliance Power said.

Thursday, May 1, 2008

Navratna Status to PowerGrid

The Government on Thursday granted the coveted 'Navratna' status to PowerGrid Corporation of India Ltd, giving the transmission major financial autonomy to take independent decision on investments up to Rs 1,000 crore.
R Bandhopadhyay, Secretary in the Department of Public Enterprises said "We have issued the order after the company fulfilled some of the criteria, like taking 50 per cent non-official independent directors on the board" .
With the grant of the Navratna status, the board of PGCIL will be able to take decisions on investments up to Rs 1,000 crore, or 15 per cent of its networth, without seeking approval of the government.
Bandhopadhyay said PGCIL now joins the club of 15 Navratna companies which include NTPC, ONGC, SAIL, BHEL and NALCO.

No hike in Interest rates, says Chidambaram.

Finance Minister P Chidambaram on Thursday said he is not expecting interest rates to rise following the Reserve Bank of India’s (RBI’s) decision to hike banks’ mandatory reserve requirements.
To tame inflation, the RBI on Tuesday raised the cash reserve ratio (CRR), the money banks have to keep as deposit with the central bank, by 0.25 percentage points to 8.25 per cent. India’s wholesale prices-based inflation rate has been hovering over 7 per cent for the last few weeks.
“By and large, banks have welcomed and appreciated the stance of the RBI. They (banks) were quite happy that only the CRR had been hiked and policy rates had been left untouched,” Chidambaram said after a meeting with state-owned bank chiefs.
“They (banks) do not expect the CRR hike to impact interest rates. So, going forward in the reasonable future I do not expect any increase in interest rates by state-run banks,” he said.
Chidambaram, who reviewed the performance of the public sector banks, said agricultural loans grew by 23.33 per cent, while loans to small and medium enterprises grew by over 36 per cent during 2007-08.
Personal loans increased by 16.3 per cent, of which, housing loans grew by 16.44 per cent and automobile loans by 23.01 per cent.
Chidambaram also expected banks to return a better performance in 2008-09. The RBI has projected 20 per cent growth in advances and 17 per cent growth in deposits for 2008-09.
Gross bad debt of the public sector banks declined to 2.17 per cent in 2007-08 from the previous year’s 2.7 per cent.
Chidambaram also urged banks to focus on debt-swap schemes, where they offer loans to farmers to pay off local money lenders.
The finance minister also underlined the need for banks to lend more to persons of non-farming professions such as artisans, barbers and cobblers in rural areas.
He urged them to review their derivative portfolios and make sure customers understand them fully. Chidambaram expected loans to the housing sector to increase without impacting interest rates as the RBI had changed housing loan portfolio norms.