Can a holiday package be claimed for LTA exemption?

---

Holiday package can be claimed for LTA exemption, but the only thing to keep in mind is that LTA exemption is for spouse, dependent children, dependent brothers or sisters only, so if you have taken a holiday with your extended family or children who are no longer dependent on you, then you can't claim LTA exemption on that part of the expense. Another thing is that since LTA exemption can be claimed only for travel – if your holiday package included hotel and sightseeing (which it normally does) – you won't be able to take an exemption for that. The following points need to be kept in mind while taking the LTA or producing bills for it to get  LTA Exemption: Can We Claim LTA Every Year? One of the most common questions about LTA is whether it can be claimed every year or not? The answer is Yes – you can claim LTA every year, but you will not be able to claim LTA exemption ever year. Other Points About Tax On LTA If you do not wish to claim LTA in one particular year you can have your employer carry forward your LTA for the next year. For getting LTA tax exempt you will have to produce bills, but you can't get your LTA exempt every year. A supreme court judgment said that it's no longer mandatory for employers to collect travel bills. You can get your LTA exempt twice in a block of four years. Right now the block that is relevant is 2006-2009 2010 – 13. This block is decided by the Government so does not have a bearing on when you start your job and also these blocks are calendar years and not financial years. The bills can be air, rail or even a private rental company however the exemption is only for domestic travel so an international ticket won't do. The bills have to be for a journey that has been undertaken when you are on leave and should be for you and your family that is spouse, children and dependant parents, brothers and sisters. Your family can't claim the exemption if you have not accompanied them. If you and your wife both get LTA – both of you can't claim exemption for the same travel but you can avail exemption independently for different travels. So effectively between the two of you, you can claim exemptions four times in four years. If for some reason you fail to claim LTA exemption in the bucket of four years – you still have the option to claim exemption in the first year of the next block. Only travel bills can be used for LTA exemption, so a hotel bill can't be produced for claiming LTA exemption even though you might have stayed in the hotel during your leave. The maximum LTA for the purposes of LTA tax exemption is Rs.20,000 so normally most organizations design the salary structure in such a manner that they don't give the employees more than Rs. 20000 as LTA. In terms of proof for air travel – although there is no fixed rule as such, it might be a good idea to preserve the boarding pass along with the ticket to make sure there are no problems in claiming LTA exemption later on. LTA can only be claimed for the shortest distance between two places. So if you are planning to travel from Goa to Mumbai then you will be allowed exemption on tickets from Goa to Mumbai and back. You will not be allowed to produce tickets that are via some other place like Mumbai to Hyderabad and then from Hyderabad to Goa and so forth. LTA can only be claimed on tickets or rented private vehicles, you cannot show petrol or diesel vehicles for your own vehicles and then claim exemption on it. The above are just some of the points that need to be kept in mind while discussing LTA exemptions. I never liked tax, and have never been good with it, so there are many chances of a mistake, so please correct me if you see anything wrong. Let me give you an example of why I don't like tax. Here is this thing from the Income Tax Act that tells you how many children you can claim exemption for: HAS ANY CHANGE BEEN MADE IN RULES FOR EXEMPTION OF L.T.C. TO DENY THIS BENEFIT TO LARGE FAMILIES? Yes. Exemption of L.T.C. shall not be available to more than two surviving children of an individual after 1 st October 1998. However, this shall not apply in respect of children born before 1.10.98 and also in case of multiple births after one child. If an employee has before 1.10.98 even five children or more, exemption would still be available to all children. However, if an employee begets a third child after 1.10.1998, the L.T.C. for the third child will not be exempt.

Source: OneMint

--

Yours

Murali........

Good Afternoon

Hi Friends,

Good Afternoon...

Today's Word:
Polyonymous (adj):
   Syn: having or known by various names
    E.g: Common epithets of Shiva, the polyonymous Hindu god of destruction and regeneration, are Shambhu, Shankara, Mahadeva, and Mahesha.

Term of the Day - Indirect loan :
   Loan deal in which the actual lender may not be known to the borrower.
    For example, most automobile purchase loans are not financed by the car dealers (where the car buyers fill out and submit the loan applications) but by a third party. This party (usually a finance company, called the loan owner) is the one that approves the loan terms, receives the loan payments installments from the car buyers, and sues defaulting borrowers.

Joke:
Doctor: Your husband needs rest & peace. Here are some sleeping pills.
Wife: When must I give them to him?
Doctor: They are for you.

Today's investing mantra
"Bull markets go to people's heads. If you're a duck on a pond, and it's rising due to a downpour, you start going up in the world. But you think it's you, not the pond." - Charlie Munger

Today's Quote:
"The Most wasted of all days is one without laughter." - E E Cummings.

You can also see my GM Mail in : http://muralisankars.blogspot.com/
-------------------------------------------------------------------------------------------------
@ Thanks & Regards,
Murali Sankar S
"A Good Plan of Today is better than Great Plan of tomorrow's."

---

This e-Mail may contain proprietary and confidential information and is sent for the intended recipient(s) only. If by an addressing or transmission error this mail has been misdirected to you, you are requested to delete this mail immediately. You are also hereby notified that any use, any form of reproduction, dissemination, copying, disclosure, modification, distribution and/or publication of this e-mail message, contents or its attachment other than by its intended recipient/s is strictly prohibited. Visit us at http://www.polaris.co.in

---

Tax Saver Fixed Deposits with High Interest Rates

---

Tax Saver Fixed Deposits with High Interest Rates Posted: 19 Jan 2011 09:01 AM PST I updated my tax saver fixed deposits page today, and I thought I'd create a separate page to record some of the better paying interest rates on these tax saving FDs. With that in mind, here is a list with some of the best interest rates on fixed deposits that are covered under Section 80C that I could find. I'm sure there are some that I have missed, so if you know of any banks that pay well, please leave a comment or drop in an email, and I will update the list. S.No. Bank Interest Rate 1 Karur Vysya Bank 8.75% 2 Kotak Bank 8.75% 3 State Bank of Hyderabad 8.75% 4 State Bank of Travancore 8.75% 5 ICICI Bank 8.50% 6 IDBI Bank 8.50% 7 Punjab National Bank 8.50% 8 SBI 8.50% 9 Bank of Maharashtra 8.30% 10 Allahabad Bank 8.25% 11 Bank of Baroda 8.25% 12 HDFC Bank 8.25% 13 J&K Bank 8.25% 14 South Indian Bank 8.25% 15 Vijaya Bank 8.25% 16 Indian Overseas Bank 8.10% 17 Canara Bank 8.00% 18 Central Bank of India 8.00%

Number of income tax payers in India and US Posted: 18 Jan 2011 11:46 PM PST Business Standard has an article today about how salaried individuals may be spared from filing tax returns. It says that the Income Tax department is contemplating a proposal to make filing taxes exempt for salaried taxpayers who don't have any other source of income. So, a salaried individual will of course pay taxes, but won't have to go through the hassles of filing tax returns. The story goes on to say that banks and employers have the details of salaried people who don't have any other income, so in the future it might be possible to eliminate the need of having the individuals file tax returns, and get this information from other sources. This will obviously mean a lot less hassle for a lot of folks, and I hope this idea sees the light of day in our lifetime. What really caught my eye though was the number of people paying income tax in India. The story has this number at 35 million, which is about 3% of our population, and is quite low. Please note that this is not the total number of taxpayers because you pay indirect taxes on almost everything you use, so in that sense taxpayers will be quite high. Still, 3% is a very low number, and I thought I'd compare this with the number of people who pay personal income tax in the US. Here is how that chart looks like. In the US, about 45% of the population pays taxes, as the total population is about 307 million, and the number of returns filed for individual income tax is about 144 million. That's a huge difference between India and the US, and I'd think an indication of where India is headed in the years to come as more people join the organized labor force, and more electronic transactions bring in greater transparency.

Source: One Mint


--

Yours

Murali........

REC Infrastructure Bonds: Section 80CCF Infra Bonds

---

These bonds are issued with Section 80CCF benefits which means that they will get you reduction in your taxable salary of Rs. 20,000 over and above the Section 80C limit. I have done a detailed post on Section 80CCF FAQs earlier, so if you're new to this site or these bonds, it might be a good idea to check that out. That being said, let's take a look at some of the features specific to the REC infra bonds. Open and Close Date The REC 80CCF bond issue opened on January 12, 2011, and will close on March 28 2011. Interest Rate REC will offer two options – one with buyback facility, and the other one without a buyback facility, and the interest rates will differ on those options. Here is how it will work out. Options With buyback after 5 years Without buyback: Redeemable in 10 years Interest Rate 8.00% 8.10% Interest Payment Yearly Yearly Payment Date 31st March every year 31st March every year Buyback after 5/6/7/8/9 years Not Applicable Minimum and Maximum Investment The bonds have a face value of Rs. 5,000 and the minimum you have to buy is two bonds, so the minimum investment you can do is Rs. 10,000. There is no limit for the maximum, but since the main benefit of investing in infrastructure bonds is getting the tax break, and the cap on that is Rs. 20,000 – in a way that becomes the upper limit. You can get more than 8% on your money in shorter time frames in bank fixed deposits these days. Physical form or only Demat? REC has an option of physical form along with the Demat option, so even if you don't have a Demat account you can invest in these forms in the physical form. Tax Proof for the REC Infrastructure bonds When you buy the bond it will not be credited to your account immediately, and if you are buying it online you won't get any documentation that shows you purchased the bond. This has caused some troubles to people who had to submit tax proof at their work place. I'm not a tax expert but some people here have suggested that when they apply physically (and give their demat account number) – they get a receipt, which has been used for tax proof in their office. So, if possible, check with the people who do your taxes if that receipt will suffice, so that you don't get into any trouble later on. Credit Rating of REC These bonds like other infra bonds before them are unsecured, but REC itself has been graded very well by the rating agencies, and is a Navratna as well. AAA / Stable CRISIL CARE AAA CARE LAAA ICRA AAA (IND) Fitch How can you buy REC Infrastructure Bonds? If you are interested in buying the REC infrastructure bonds, then you will have to fill up the physical form, and submit it to one of the collecting branches. You will need documents like PAN, address proof, and Demat account proof to submit along with the application form. This link has got the list of bank branches where you can submit the application form. You can download the application form here. Alternately, you can look for an independent financial adviser in your area who can assist you with it, or see if your online trading account allows you to invest in these through their platform or not.

Source: One Mint


--

Yours

Murali........

E-Gold and E-Silver from NSEL

NSEL enables you to buy gold, silver and copper in electronic form, and hold it in a Demat account. This opens up another avenue for people interested in buying metals electronically, and now you have another option in addition to gold ETFs, and trading in the commodity exchange. An Overview of buying E-Gold, E-Silver or E-Copper through NSEL Opening a separate Demat and Trading account for trading in NSEL First of all you will have to open a Demat and Trading account with one of the authorized participants with NSEL. This has to be a separate trading account from the one that you might be using for trading stocks. There is a list of authorized depository participants (DPs), and you can open an account with any of these to start trading in NSEL. You can expect to pay an initial charge of about Rs. 350 or so for opening the Demat account depending on who you open this with, and then expect a slightly lower AMC (Annual Maintenance Charge) of about Rs. 250 or so every year on this account. Some DPs might offer you a scheme where if you give them a refundable deposit of Rs. 2,000 they will waive off the opening charges, and subsequent AMC, so you can check that up. Top open an account go to this link and look up a member in your city, and talk to them. You will require documents such as PAN, 3 passport photographs, bank proof, and address proof. Buying E-Gold, E-Silver or E-Copper through NSEL Once you have your account set up, you can then carry out transactions. You can buy gold, silver or copper, and one unit of the E-Series is equivalent in the following way: 1. E-Gold: 1 gram 2. E-Silver: 100 grams 3. E-Copper: 1 kilo The commission to transact is about 0.5% if you take the delivery, and 0.05% for intra – day trading. I use the word about because these might differ from one broker to the other, and I wanted to give you gauge of what you can expect. You can trade the E-Series from 10:00 in the morning to 11:30 in the night on weekdays, and the settlement is done on a T+2 basis. The price of the three contracts is visible on the website of NSEL, and once you buy a contract, it will be credited to your demat account after settlement. Converting E-Gold, E-Silver or E-Copper in Physical Form You can hold the E-Series products in Demat form, and you also have the option of converting it into physical form – this is known as rematerialization. There are two key things to note here: 1. Rematerialization is currently not done in every city, so if you need this option, then check with the agent first. 2. VAT: When you rematerialize you will have to pay some rematerialization charges (which will be in the range of Rs. 200 for 10 grams gold), but the VAT might be a bigger amount based on how much electronic quantity you hold. Currently, there are no holding charges, but I don't know how far this will continue, so you can expect to pay holding charges sometime in the future, if not immediately. Information I couldn't find on E-Series Products There were a couple of things that I wanted to find out, but wasn't able to get to, and I thought they were meaningful enough to be shared here, and see if anyone else knows about them. Does SEBI regulate these E-Series Products? If someone faces an issue with NSEL, or the E-Series products, then who should they address it to. Can they go to SEBI? Is SEBI actively regulating it or does it fall under the purview of some other agency. Does anyone hold the underlying physical gold? Gold ETFs hold underlying physical gold equivalent to the number of units of funds they have issued, and they publish the data periodically, but I didn't find information on who holds the physical gold, or if at all it is being held at somewhere at all times. If everyone who holds a E-Series contract requests for gold rematerialization then what will happen. Conclusion There are no silver ETFs right now, so this is an alternative if you're looking to invest in silver, but there are gold ETFs that you can look at if you're looking to invest in gold. This product doesn't have a long track record, so even if you are interested in buying E-Gold or E-Series – I'd say it's better to be safe than sorry, and start off with smaller quantities.

Source: OneMint


--

Yours

Murali........

Section 80C Tax Saving Schemes

---

Section 80C Tax Saving Schemes Posted: 05 Jan 2011 09:01 PM PST With the tax season fast approaching, I thought I'd do a post with the tax rates for the current year, and the investing options that can avail you tax deductions. These don't include things like loss from house property, or disability deductions, but are deductions that can be claimed under Section 80C or 80CCF when you invest a certain amount in some tax saving instruments. First, let's take a look at the tax slab for the current year: Income Tax Slab: Income Tax Rate Up to 1,60,000 Up to 1,90,000 (for women) Up to 2,40,000 (senior citizens older than 65) 0% 1,60,000 – 5,00,000 10% 5,00,000 – 8,00,000 20% More than 8,00,000 30% Education Cess: 3% of income tax & surcharge if the taxable income is more than 160,000. The cess is levied on the tax itself, so whatever is your final tax liability – take 3% of that and add to your tax to arrive at the tax due. Tax Saving Schemes The table that follows lists out tax saving schemes that entitle you to a reduction on your taxable income. What this means is that if you have a taxable salary of Rs. 9,00,000 and invest Rs. 1,00,000 in any of these tax saving schemes then your taxable salary gets reduced by 1,00,000, and you pay tax as if you only earned Rs. 8,00,000 in the year. The maximum investment column in this table indicates that the tax benefit ceases to exist for an amount in excess of what's indicated there. So, if you invest more than 70,000 in PPF – you will still be entitled to tax benefit on only Rs. 70,000. Also, note that the combination of these options will give you a maximum tax benefit of Rs. 1,00,000, so if you have already bought insurance worth Rs. 1,00,000 investing another Rs. 1,00,000 for ELSS will not get you additional tax saving. The only exception to this is the 80CCF Infrastructure Bonds, which reduce your taxable income by Rs. 20,000 over and above the Rs. 1,00,000 saved by the other options. Regular readers know it all too well, but it's my duty to remind you that I'm not a tax expert, and in fact hire someone else for my own taxes, so you need to keep that in mind while looking at this list, and consider it nothing more than a starting point. S.No. Name Maximum Investment Notes 1 Life Insurance Premium Paid 1,00,000 Policy should either be in your name, spouse's name or children's name 2 Contribution to Public Provident Fund 70,000 You can't add the employer's contribution to PF under this head. 3 Investment in NSC (National Savings Certificate) 1,00,000 Post office scheme with guaranteed returns. 4 Contribution to ULIPs 1,00,000 Do your due diligence before getting into these. 5 Contribution to ELSS Mutual Funds 1,00,000 Link to a post on ELSS here. 6 Contribution made to notified pension funds 1,00,000 UTI Pension fund is one example of this 7 Amount spent on children's education 1,00,000 For tuition fee only, and  a maximum of 2 children 8 Annual Repayment of Housing Loan 1,00,000 There are a lot of conditions in this that I'm not fully familiar with, so you need to consult an expert before banking on this. 9 Tax Saving Fixed Deposits 1,00,000 Term of 5 years  10 Premium Paid Towards Jeevan Suraksha 1,00,000 Pension plan with annuity for life. 11 Section 80CCF Infrastructure Bonds 20,000 This is over and above the 1,00,000 mentioned above. (Full post here) Please leave a comment if you see anything wrong or missing from this table, and I'll correct it.

Source: OneMint


--

Yours

Murali........

Dividend Declaration, Ex Dividend and Record Dates

---

I'd do a post on it with an example because there are quite a few dates involved, and it can sometimes get overwhelming. Let's take an example of Oil India Limited's Final Dividend to see how this works. The first date is of course the date on which the dividend is announced. Normally, this is when the Board of Directors recommend a dividend, and it is still subject to shareholder's approval. In our example – Oil India's Dividend was recommended on May 26 2010, when their directors said that the company will pay a dividend of Rs. 16 per share, if it's approved by the shareholders in their AGM (Annual General Meeting). The AGM was held on 25th September and the dividend was approved by the shareholders. But, the question is who gets the dividend? Since shares are traded throughout the year, and dividends declared just a few times in a year – it becomes necessary to fix a date, and say that whoever owns the shares on this particular date will be entitled to the dividend. This is called the "Record Date", and in our example this is 25th September 2010, so whoever has their name in the company's books on 25th September 2010 will get the 16 rupee dividend. However, there is another more important date, which is called the "Ex-Date". There is a time gap between when you buy a share, and when your name gets on to the company records, so if you buy Oil India shares on 25th September – your name will not be in the books of the company on 25th itself, and you won't get the dividend. You need to buy the share before the Ex Date because that ensures that there is enough time for your name to get into the company's registers, and get you the dividend. In this case the Ex – Date was 16 September 2010. This was much earlier than the 25th September 2010 Record Date because the company closed its books from 18th September to 25th September, and in other cases (especially of interim dividend) the Ex Date can be just one or two days earlier than the Record Date. So, if you want to buy a share for its dividend, then make sure you purchase it before the Ex Date. Dividend Record Date and Ex Dividend Date Do keep in mind however, that the share will lose in value on the Ex – Date because the person who buys the share on that date will not get the dividend. How can you find out the Ex Date? The easiest way to find the Ex Date is to lookup the info from the NSE Website. You can input the ticker on the search box on the home page, and when the price details open up on the next page, scroll to the bottom of the page and click on "Corporate Actions", and this will open up a table that shows you Ex Date for each announcement among other things. I don't think it makes much sense to buy a share a few days before the Ex Date in order to get the dividend because the share will lose in value as soon as you hit the Ex Date, so I'd say knowing this concept is good for your knowledge, but don't try to buy stocks too close to the Ex Date because the market is efficient enough to reduce the price of the share with the value of the dividend when the Ex Date is reached.

Source: Onemint


--

Yours

Murali........

Tax Saving ELSS Mutual Funds

Let me start off by telling you that there are plans to phase out the tax breaks on ELSS mutual funds with the introduction of the Direct Tax Code (DTC), so this avenue is going to be closed in the coming years. However, you can still invest in it this year and get tax breaks. These tax saving mutual funds are covered under Section 80C, which means that you can invest a maximum of Rs. 1 lakh in them, and reduce that amount from your taxable income. There is a lock-in period of 3 years on such funds, which means that you can't sell these funds within 3 years of your purchase date. I saw an interesting question on Value Research some time ago where someone had written in to ask what happens when they select the dividend re-investment option in the case of a ELSS fund. The dividend that is invested back in the scheme is considered fresh investment, so what happens is that this money is further locked in for three years, and this can create an infinite loop. I'm not sure what will happen going forward with DTC coming in, but it's best to play it safe, and go for the Dividend or Growth option of the ELSS you're buying. Before we get down to the options available under ELSS funds, let's recap the points discussed so far: The tax benefit of ELSS will be phased out with the introduction of DTC. The tax benefit is still available this year. There is a lock in of 3 years, so you can't sell these tax saving mutual funds within 3 years of purchase. If you use the dividend re-investment option then the amount re-invested will be treated as fresh investment, and will be locked in for 3 years from the time of re-investment. ELSS Mutual Fund Options I wrote a post on how to find tax saving mutual funds some time ago, and I used that information to get a list of all the ELSS mutual funds currently available in India, and then narrow down options from there. Then I looked at the funds that were around for 5 or more years, and took the 10 best performing out of them. After that I noted their expense ratio, as well as their inception date in the table below. Doing this gave me a list that has some tax saving funds that have been around for a very long period, and have done reasonably well over that period. The expenses are important because they eat up your returns, so I wanted to highlight them as well. The limitation with this list is that it doesn't contain any mutual funds that have been around for less than 5 years even if they performed well. For example – DSP Blackrock is a ELSS mutual fund that has been around for about 4 years, has done well during that time, but is missing from this list. Name Inception Date 5 year returns Expense Ratio Birla Sun Life Tax Relief – 96 March 1996 16.57% 1.96 Canara Robeco Can Equity Tax Saver March 1993 22.31% 2.38 HDFC Tax Saver March 1996 17.80% 1.86 ICICI Prudential Tax Plan August 1999 15.48% 1.98 SBI Magnum Tax Gain Scheme – 93 March 1993 16.32% 1.78 Principal Personal Tax Saver March 1996 16.42% 2.19 Franklin India Tax Shield April 1999 17.34% 2.10 Sundaram Tax Saver Nov 1999 17.73% 1.96 Sahara Tax Gain March 1997 22.31% 2.50 Reliance Tax Saver August 2005 15.14% 1.88 All data from Value Research This list is not sorted in any particular order, and that's deliberate because as soon as you sort something your brain tends to think of it as best to worst from top to bottom, but that's not the case. For mutual funds – the best mutual fund is the one that will give you the maximum return for your holding period, but since that's in the future, there is no way to really predict which one will do better than the rest. In the absence of that I compiled a list of long standing performers, and have presented you with that information, and if you think this criteria makes sense, then you can select one or two funds from this list for your investment.   I will also recommend going to Value Research and doing some more research, and playing with their tools because they do have a lot of good tools in there.

source: Onemint

--

Yours

Murali........

Income Tax Saving Avenue for FY 2010 - 11

 Here we can see the some of the Income tax exception available under 80C

1. Provident Fund (PF) contribution

2. Public Provident Fund (PPF) - only up to Rs. 70,000 in a year

3. Equity Linked Savings Schemes (ELSS) of Mutual Fund Companies

4. National Savings Certificates (NSC)

5. Tax Saving Fixed Deposits with Banks

6. Premium for Life Insurance or ULIP

7. Tuition Fees of children

Maximum of Rs. 1 Lack can be shown in those above Instrument. 

Apart from the above,
You can save Upto Rs. 20,000 in Infrastructure Bond. 

 And Repayment of home loan principal also you can show.

Comparison of 80C Investments as below: