Finance | Budget 2006| Income Tax

Hello

Today the Budget for FY 06-07 was presented by the Finance minister and the important point to each one of us is whether there has been any change in the IT rates, which will directly affect our take home salary.

So, the happy news is: There is No change in income tax rates

 

Other details related to IT:

1. The one-by-six scheme for mandatory filing of tax returns has been abolished and an increase in the Securities Transaction Tax across the board has been proposed.
(one-by-six scheme refers to the six conditions such as credit card, foreign travel etc -if you satisfy even one of these conditions you have to fill your IT return)
2. The minister did not bow to the demand of industry to withdraw the Fringe Benefit Tax but he modified it to remove some of the glitches in its implementation. Similarly, he ruled out withdrawal of Banking Cash Transaction Tax

 

More details on the Budget 2006 ....soon.

Check http://ndtvprofit.com for brief details.

 

Regards

Kanuj

 

Please check my blogs for more information

http://financially-strong.blogspot.com/

http://taxably-strong.blogspot.com/

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Finance | Tax | Save while the going's good-d day is near

Save While The Going’s Good
The D-day is only a few weeks away. Arnav Pandya examines your chances of saving your hard-earned money in these taxing times

Publication:Economic Times Bangalore; Date:Feb 20, 2006; Section:ET Big Bucks; Page Number:17

IT’S the last couple of months of the financial year and the countdown has begun. These months are taxing for most people as the scramble for making the requisite tax-saving investments reaches a climax. With each passing day, investors get pushed into a corner and in many cases end up making investments that are not the optimum or the best choice for them. ET Big Buckstakes a look at the situation with some guidance on how to go about this process.

The first thing that investors need to know is that each day is precious and hence, the earlier one starts the lesser the load will be at a later stage. The first step is to determine the total amount of such investment. One can divide the tax saving investments into two broad categories. One category includes the investments under Section 80C and Section 80CCC where the combined limit stands at Rs 1 lakh for the financial year ’05-06 while the second consists of other deductions like payment of medical insurance premium, donations etc.

The benefit of making the necessary investments is that of deduction from the taxable income. Now, with rebates being abolished from the tax provision, most of the benefits that are present are through the feature of deductions. Under a deduction, the amount of the benefit is reduced from the income to arrive at the taxable income and then the tax is calculated on the remaining part of the income. For example, if the income of an individual is Rs 3.4 lakh and there is deduction of Rs 90,000 that one is eligible for, then the taxable income comes to Rs 2.5 lakh on which the tax will be calculated.

The tax saving investment process also has to be brought in line with the overall financial planning for an individual because this part can also fulfil some of the objectives of the overall financial plan. First, consider the overall deduction of Rs 1 lakh. At this stage of the financial year, the individual can use the process of backward calculation to arrive at the figure that still needs to be invested.

Before other things, one has to look at the investment that is already made. For example, for a salaried employee there will be a contribution to provident fund, which is a compulsory deduction made each month from the salary paid. Another common investment many people make is the payment made each year as insurance premium or the tuition fees paid for children.

Many people run up quite a sum through such fixed payments and this makes the job of making the remaining investments a bit easier. The next decision to be made is whether the remaining portion of the investment required to finish the limit of Rs 1 lakh should go into debt, balanced or equity.

For those who are conservative and would not like to take much risk, the debt option is the route to follow. The age factor as well as the risk-taking ability will come into play here. Taking a bit of due diligence even within this can help an investor gain a bit. Lock-in period of the funds and the stability of returns along with the post-tax return figure are important factors to consider. For example, if one wants a steady earning rate, then the National Savings Certificate, which gives an 8% compounded semi-annually, will be a good option. However, in this case there is no payout and the individual will be able to get the return amount figure only at the time of maturity. On the other hand, the public provident fund scheme (PPF) will give a return of 8%, which is tax free and thus boosts the post-tax return figure. But there is no guarantee on the rate remaining at this level as it can change anytime in the interim period and from that date onwards the entire amount will be charged at the new rate. However, for most investors till the time PPF moves under the new exempt, exempt, tax (EET) system completing the maximum amount of Rs 70,000 allowed would be a preferable choice.

If one would like to go in for a slight element of risk then the hybrid option of pension schemes floated by mutual funds are a good choice. On the traditional front of insurance, one can select a policy only because the insurance is required and not because there is an investment to be made. Insurance companies are still strongly pushing unit-linked products, but investors need to make their own calculations to see whether these schemes suit them.

Finally, there is also an equity choice in the form of equity-linked savings schemes (ELSS) floated by mutual funds. These schemes invest their corpus in equity shares and there is a lock in of three years for investors. These are hot selling products at the moment because of the bull run in the markets and those who have put in money in the last three years in such schemes have seen very good returns. Anyone looking to invest in such schemes needs to know that there is chance of capital erosion in this area if the market and consequently the portfolio of the scheme show a negative performance.

Another point to note while investing in equities is that the investment should be regular and spread out so that there is not much risk concentrated in a single product. With just more than a month remaining in the financial year this might not be possible and hence investors might have to make do with just a couple of investments in the current financial year. This is a factor that one must consider while putting sums at this stage in ELSS schemes.

Apart from the basic Rs 1 lakh limit there are some other benefits that can be availed by individuals. Amounts paid as medical insurance premium up to Rs 10,000 in a year are allowed as a deduction for an individual and such coverage is a useful, if not a compulsory investment for people who are not covered for medical emergencies. Repayment of principal in education loans is also allowed as a deduction for individuals.

Another area where several people get a deduction and a benefit is by donations to specific institutions and trusts. These donations are eligible for a deduction at a certain percentage depending upon the institution to which the amount is donated.

Finance | LTA rules (HPGDIC)

1. The first step is LTA amount should be allocated in FBP. The maximum amount that can be allocated from FBP is Rs 40000/- per annum. To avail LTA you should have completed 6 months service in HP

2. Claiming LTA as non taxable
a. to fill up LTA claim form
b. Fill up LTA exemption Form
c. Attach all original travel tickets
d. To avail 5 working days privilege leave
3. Original tickets for having traveled in  I a/c train or Bus or Air (including boarding pass) to be attached. If you travel by taxi then you will be eligible to claim exemption only the Ist Class AC fare.  For which you should provide the details of fare from the internet site.

4. Only travel (ticket costs) will be taken for exemption. Boarding and lodging or incidental expenses in the places visited are not qualified for any exemption.

5. Exemption is allowed for the travel made from one place to another and return ie from place A to B and B to A. and not any deviation in the journey. Therefore, journey made for visiting multiple places ( tourist) is not eligible for exemption

6. LTA exemption can be claimed twice in a block of 4 years ie calender year. The current block is 2002, 2003, 2004 and 2005. Next block of 4 years is 2006,2007,2008 and 2009.

7. In case, only one exemption is claimed in this block of 4 years, you can carry forward one exemption to next block of 4 years . In other words, you can claim exemption thrice in the block of  next 4 years if you had availed only one exemption in the current block of 4 years

8. You can claim LTA exemption for the journey made by self, wife, dependant children, dependant parents, dependant brothers and dependent sisters provided dependants are declared by you in HR records at the time of joining duty.

9. Travel tickets to be submitted within 15 days from the date of return of journey
10. International travel will not be allowed under IT rules for claiming LTA
10. Above all, please note that final responsibility in proving the correctness of bills lies with employee only

Finance | LTA FAQs

Hello
FBP Allocation Time has come. Though this mail comes very late, but due to health reasons and some research reasons, I couldn’t send it earlier.

Most of us might be in dilema about LTA which is nothing but Leave Travel Allowance.
After my research I found the following information :
LTA is  a monetary benefit that you get on the expenses you incur when you travel. One can claim it twice in the block of four calendar years. This block is not calculated with the start of your employment. The government defines these blocks. Presently the block is 2002-2005. Since it is the calendar year and not the financial year, it will be from January 1, 2002 to December 31, 2005. The next block of 4 years is 2006,2007,2008 and 2009.If you fail to take the exemption in the first block of four years then you could carry forward maximum one exemption to the next block and avail three exemptions in the next block of four years. . You can claim LTA exemption for the journey made by self, wife, dependant children, dependant parents, dependant brothers and dependent sisters provided dependants are declared by you in HR records at the time of joining duty.

I had raised certain queries to the HP Payroll Helpdesk about LTA since I had filled LTA last year and had not claimed it.

Following are those for you
Question 1 :  I have a doubt in the FBP allocation as the following line in your mail, I couldn t follow. "Unclaimed /Excess-claimed LTA for the period May 2005 to Jan 2006 will be carried forward to the new FBP period starting Feb 06/recovered" I had declared 16000 as LTA in the last FBP allocation.I have not claimed any LTA till now, not in any FBP cycle. I couldn t follow what you meant by the above sentence. 1. Will the LTA already cut from my salary will given back in the February Salary? 2. If the LTA is being carried forward, do I need to declare LTA in the new FBP? I would be really thankful to you.

Answer : in your last FBP period (May to April) if you have allocated Rs.16000 towards LTA, then you are eligible for an amount of Rs.12000/= on a prorata basis (ie) 16000/12*9 months. As you have not claimed the amount the amount of Rs.12000/= will be carried forward to next year so that you can claim the same during the course of this FBP period. Asssume that you have claimed your all the allocated LTA amount of Rs.16000/= then you will be recovered in your Feb month a sum of Rs.4000/= being the excess claimed LTA on a prorata basis ( FBP for 9 months). Yes you can allocate towards LTA in the new FBP period.

Question 2 : Reference to solution provided for call. kindly excuse me, I could not get one thing of the solution you have given me. As you have said, Rs 12000 will be carried forward as LTA for next year, but in case I declare 12000 as LTA for the latest FBP allocation, will 12000/12=1000 per month still be deducted from my salary or will it be assumed that the LTA per month has already been deducted(I am referrring to the 16000-4000=12000 carried forward from last FBP allocation).

Answer : Only when there is a change in the FBP period this calculation holds good. If there is no change in the FBP period then there will not be any recovery.

There are certain Rules and Regulations for claiming LTA. I could get my hands on the same from the HP Payroll. I'll try to upload them to the group files section.

Following links will also help you in knowing more about LTA.
1. FAQ on Leave Travel Allowance :  http://in.rediff.com/getahead/2005/jun/06lta.htm
2. How often can you claim LTA? : http://in.rediff.com/getahead/2006/feb/07lta.htm
Courtesy : Rediff Finance

Thanks & Regards
Kanuj

Finance | Credit Cards | Why have plastic money

GET THE BEST DEAL FROM YOUR CREDIT CARD

 

“Charge it!” has become like a fashion statement and it is commonly heard in various service establishments like malls, multiplexes and hyper markets. People buying food or shopping for clothes using their credit cards has now become a trend. A credit card is supposed to be used for necessities and not as a luxury. • Before marching down to a credit card agent, ask yourself some questions like do you want to pay for the credit every month or carry a balance instead? The type of credit limit should also be taken into consideration. Some credit cards offer a lot of benefit packages, think of the package that would suit your needs. • If you want to carry on a balance, look for the credit card that offers the best interest rate or the annual fee offer. However, if you prefer to pay for the credit every month, then look on the one that offers the lowest interest rate. • Credit limit determines how far you can go with your card. Think of the lowest limit that would fit your needs, not your lifestyle. • Credit card companies offer tremendous bonuses on their cards. Before you sign up for these packages, think wisely! Will they really benefit you or are they just there to make your credit life miserable? • Always choose the credit card that offers the lowest annual percentage rate (APR). APR's could either be a ‘fixed’ or a ‘variable’ rate. This is to be taken into consideration if you're deciding on carrying a balance. • Some credit cards offer a grace period of 25 days before they charge the interest on the purchase. But some of them may not. Look for those that have one. The longer the grace period, the better the deal. • You also have to check on other fees attached to the credit card. These are the penalty rates as well as other charges like over the limit charges and late payment charges. When choosing a card, always remember to get the one that would best fit your needs and at the same time the best deal you could get out of it on a long term basis. You are only to get one so don't rush into one that looks good. You always have the liberty of comparing one credit card to another.
The Need For Credit
All credit card users must be familiar with the jargon associated with a credit card like limit, debt, secure, and unsecure. For people to whom a credit card is a new way of life, let us find out the basics of a credit card. It is always a good idea to do a proper study before one goes in for a new credit card. With the kind of offers and promotions offered by the banks of today, it has certainly become a task for one to choose the card that would suit him just right. An unsecured credit card refuses to a free and clear credit card that does not require a deposit and is definitely not a prepaid card. An unsecure credit card also implies that one has a fine credit statement, as one need not pay in advance for the use of such card. Though the credit limit offered initially would be lower, it would gradually increase as per the use of one's card. A difficulty in securing an unsecure credit card is past credit fiascos. One can recover his credit by making regular payments and purchases on a secured card. A credit card application is the way with which one can have plastic money in hand. By providing one's credit history, work history, and banking information, one allows the givers to dig into his credit record. Once an approval is made and the credit limit is set, the card is all ready to be swiped. As we wind up this article, let us also keep in mind that using a card has a tagline called responsibility. Credit cards have caused people to overspend; yet with proper management, it could turn out to be your best money lender.
ORIGINS OF THE CREDIT CARD
The origin of the credit card can be traced back to 1914, when American company Western Union began issuing metal plates to customers who would buy on credit. The transactions would be recorded on these plates. However, the credit card as we know it took another 40-odd years to evolve. An American gentleman, Frank McNamara was acutely embarrassed in a New York restaurant, when he realised that he had forgotten to carry his wallet. When he finally got out of the restaurant --- after plenty of apologising --- McNamara was suddenly struck by the idea of replacing cash with a more convenient alternative. And that’s how “The Diners Club” card was born. So now you know who to thank --- or blame!
ADVANTAGES OF A CREDIT CARD
Tosum it in a line, a credit card provides you with convenience, safety, morepurchasing power and a host of fringe benefits. What’s more, credit cards todayhave assumed different avatars. You have Add-on cards (for a family member), ATMcards (to withdraw instant money), co-branded cards, petrol cards (Citibank+IndianOil, for instance in India) debit cards, smart cards ---- the innovations areendless. You get more too. Most cards offer privileges like free insurance,discount coupons and invitations to exclusive events. Yes, for many the creditcard  is become a vital necessity. If you haven’t got one yet, go for it by allmeans. But read more in this section on how not to misuse your credit card andget into financial trouble.
INSURANCE ALONG WITH YOUR CARD
Mostcards today offer personal accident insurance cover as a value-added serviceonce you subscribe. Of course the value and scope of the insurance is differentfor each card. A few cards (in India) offerup to Rs 10 lakh of insurance, and what’s more they cover your spouse too.So before going infor your card, you’d do well to check out what each card company is offering interms of insurance. Remember too that the card company is offering the insurancein a tie up with an insurance company. That means the responsibility ofhonouring the commitment made is not with the card company but with theinsurance firm. So check whether the card company has tied up with a reputedinsurance firm. It’snot only accident insurance that’s on offer. Some credit card firms also providemedical and household insurance too.

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