Saturday, February 27, 2010

Income tax calculator - FY 2010 - 2011

Budget 2010 was really a boom for citizens. The new tax slab announced is almost saving upto 51,000 for any person paying tax. The tax slab announced are

Slabs (Rs) Rate
0 – 160000 0
160001 – 500000 10
500001 – 800000 20
800001 and above 30

Old tax slabs:

Slabs (Rs) Rate
0 – 160000 0
160001 – 300000 10
300001 – 500000 20
500001 and above 30


Taxable income (Rs) Tax -before budget Tax after budget Saving
(Rs) (Rs) (Rs)
200000 4120 4120 0
500000 55620 35019 20601
1000000 210120 158619 51501
1200000 271919 220419 51500
1500000 364619 313119 51500
2000000 519119 467619 51500
2500000 673619 622119 51500
4000000 1137119 1085619 51500

Female individual taxpayer

New tax slabs:

Slabs (Rs) Rate
0 – 190000 0
190001 – 500000 10
500001 – 800000 20
800001 and above 30

Old tax slabs:

Slabs (Rs) Rate
0 – 190000 0
190001 – 300000 10
300001 – 500000 20
500001 and above 30


Taxable income (Rs) Tax -before budget Tax after budget Saving
(Rs) (Rs) (Rs)
200000 1029 1029 0
500000 52529 31929 20600
1000000 207029 155529 51500
1200000 268829 217329 51500
1500000 361529 310029 51500
2000000 516029 464529 51500
2500000 670529 619029 51500
4000000 1134029 1082529 51500

Senior Citizens

New tax slabs:

Slabs (Rs) Rate
0 – 240000 0
240001 – 500000 10
500001 – 800000 20
800001 and above 30

Old tax slabs:

Slabs (Rs) Rate
0 – 240000 0
240001 – 300000 10
300001 – 500000 20
500001 and above 30


Taxable income (Rs) Tax before budget Tax after budget Saving
(Rs) (Rs) (Rs)
200000 0 0 0
500000 47379 26780 20599
1000000 201879 150379 51500
1200000 263679 212179 51500
1500000 356379 304879 51500
2000000 510879 459379 51500
2500000 665379 613879 51500
4000000 1128879 1077379 51500

You can download the 2010 tax calculator for 2010-2011

Auto Company Enjoy - Budget 2010

Finance Minister's Union Budget 2010 was positive for auto companies. Government hiked the excise duty by 2% — to 10% from 8% earlier. The industry, was expecting the duty hike and some quarters had expected a 4% hike.

The FM’s announcement came as a relief to the sector. Auto stocks like Maruti Suzuki, Tata Motors and Ashok Leyland were up between 2% and 5%.

Company NameLast PricePrev Close% Chg
TVS Motor70.3565.96.75
Tata Motors711.2667.46.56
Bajaj Auto1817.651712.356.15
Ashok Leyland49.6546.95.86
Mah and Mah1007.75957.15.29
Hero Honda1777.651700.254.55
Maruti Suzuki1459.951399.94.29

The auto companies will pass the hike to customers with minor price hike, which will slow down sales.
Another minor positive for auto companies was the weighted increase in research and development (R&D) exemption — though the pharmaceutical industry is the main beneficiary of the move.

The FM aims to implement direct tax code (DTC) and the goods and service tax (GST). Both tools, which would overhaul the country’s tax system, are to be implemented by April 2011. The GST aims to bring other taxes like excise, VAT, CST and other taxes under one umbrella and the GST rate may be lower than the combined total of the current taxes.

The hyper growth in the sector was also aided in part by the stimulus packages (excise duty cut from 14% to 8% and slashing of interest rates) that the government had unveiled in late 2008 and early 2009 when sales slumped.
FM says, weighted deduction reduced from 150% to 200% for in-house R&D, which is positive for auto companies. TVS Motor, Tata Motors, Bajaj Auto, Ashok Leyland, M&M, Hero Honda and Maruti rallied 4-6.7%.

Friday, February 26, 2010

Infrastructure Bonds - Additional Tax Saving

Infrastructure Bonds or Tax-Saving Bonds is to save taxes as provided under Section 88 of the Income Tax Act, 1961. The two significant economic factors playing in the investment decisions of Infrastructure Bonds are Inflation and interest rate movements. For exmaple, price of a bond will fall if interest rates rise and vice-versa.

Infrastructure Bonds are available through ICICI Safety Bonds and IDBI Flexibonds. They can reduce tax liability by upto Rs 20,000 per annum, in addition to the 1,00,000 tax excemption provided under Section 80C. Infrastructure Bonds provide investors the option of purchasing and holding the instruments either as physical certificates or in the demat form. The Tax-Saving Bond from ICICI for the month of July 2001 provides two options:
  • Face value of Rs 5,000 for 3 years at the rate of 9.00% interest payable annually
  • Deep Discount Bonds with a face value of Rs 6,600. These bonds are available for Rs 5,000, and are issued for 3 years and 4 months, after which they are redeemed at their face value. These infrastructure bonds are suitable for an increase in the investment. The terms for the IDBI Bonds are similar also.

Apart from the above Infrastructure Bonds, Rural Electrification Corporation (REC) has come out with an issue of tax-saving infrastructure bonds for investors seeking to utilize the additional Rs 30,000 qualifying limit for investments in Infrastructure Bonds, India.

Infrastructure Bonds do not offer any protection against high inflation since the rate of interest they offer is pre-determined. Against Infrastructure Bonds by pledging them with a bank one can borrow from banks. The amount depends on the market value of the bond and the credit quality of the instrument. Moreover, it should be noted that although Infrastructure Bonds are considered to be safe, there is no assurance of getting the full investment back.

Wednesday, February 10, 2010

Savings Account - Change in Interest Calculation

Savings account is something, which is almost there for 95% of the citizen and its more than one account in different banks, so think of the number of savings account in India. Well that drags us to large number, and we shall talk about that in different post. Lets target on the method banks use to calculate the interest paid out for our savings account.

There is actually a change in the way interest is calculated, and the bill was passed by RBI last year around march '09, to be effective from apr '10. You may wonder why there was 1year time given to implement this change, well RBI has given banks sufficient time to upgrade their software with the new calculation. Atleast lets be happy that RBI has decided to help customers.

Current Calculation(till march 2010): Interest paid monthly for the minimum amount in your account between 10th and last day of the month(30 or 31). Total interest is paid either quarterly or halfyearly.

New Calculation(from april 2010): Interest paid daily for the minimum amount available on that particular day. Total interest will still be paid quarterly or halfyearly.

Simple Example

Opening balance = Rs 32,000

Deposit on 13th = Rs 25,000

New Balance = Rs 57,000

Interest (old method) = Rs 93 (3.5 per cent of Rs 32,000)

Interest (new method) = Rs 132

Actually this is the case for all these decades and banks are almost fooling us with this surplus amount. With current method of calculation, banks get surplus funds(zero-cost funds) and use them to lend it to us. Also notice banks give us simple interest and when they lend they charge compound interest, so do not have excess money in savings account, invest wisely. RBI is well aware of these funds, but they recently changed the way savings account interest has to be calculated. It will take effect from April 2010.

Enjoy more interest on your savings account.

Monday, February 8, 2010

Gold Investing - Detailed Guide

Gold has become the major investment nowdays and here is a link for beginners to understand the forms of gold investment

Investing in gold

Sunday, February 7, 2010

Buying gold? We tell you the best mode

Indians love Gold the most, even though other precious metals exist. The shine for Gold has not reduced with Platinum, Indians are still interested in Gold. There are many forms to buy Gold

Jewelry is a traditional form of buying gold in India. However, its not for investing reasons, rather as jewelry, it carries a heavy loss in form of wastage and making charges. This wastage and making charges vary from 10% to 35% based on the designs. Gold coin from Jeweller are best, a detailed explanation is given in my other post

Bank coins is not an investment idea as that banks charge for their coins is anywhere between 5 and 10 per cent. The bank coins have lesser liquidity as they are not bought back by the banks.

World Gold Council coins issued by jewelers have lesser premium over the market price (1 to 2 per cent) and are redeemed at the market price when one takes them for selling off.

Bullion bars are great for investment but minimum investment is much higher for a common investor to invest.

Gold Exchange Traded Funds (ETFs) are really hot these days. These are like MFs who only deal with gold. Its a safe and easy way to buy Gold and the charges are very less and the gold can be accessed electronically. The disadvantage is that one never gets to ‘see’ one's holdings.

Value-averaging investment (VIP): Improved Systematic Investment Plan (SIP)

We all know Systematic Investment Plan has yielded higher returns. Almost all the mutual funds have SIP option. An improved version of SIP is Value Averaging Investment (VIP), which most of the international finance institutions are already following and yielded better returns than SIP.

In India, One mutual fund – Benchmark funds – has already implemented this method with one of their funds, with good results. In VIP the monthly amount of money invested varies based on the formula compared to SIP where the invested amount remains constant.

Strategy: The idea is to keep the value of the portfolio at an average value during the tenure of the investments. Money invested in periodic intervals in a portfolio varies in such a manner that the portfolio value keeps tending towards a pre-determined value based on a target rate of return. Since portfolio might grow or shrink from month to month, the targeted value for the portfolio might come nearer to or recede farther from the actual value, so the subsequent investment tries to compensate by investing less or more in the portfolio.

Example: Lets assume you have decided to invest Rs.5000 every month for next 1year. We shall fix a reasonable return rate as 15%. First month we pay Rs.5000 and assume the portfolio had 2% growth, so after one month, Rs.5000 will be Rs.5100. Our expected value after one-month, is (given the target return of 15 per cent), Rs. 5063 and out portfolio is already Rs.37 higher, so our investment second month is Rs.5000 - Rs.37 = Rs.4963.

Suppose if the portfolio had decreased 10%, our portfolio value after one month is Rs.4500, which is Rs.563 less than our target (15% target), so our second month investment will increase to Rs.5563 to achieve 15% target return.

Ultimately the logic is you end investing more in downward markets and invest less during upward market. Long run, assuming the equity markets generally trends upwards, this process holds the promise of better return over an equivalent SIP.

Happy Investing.

Powered by Blogger.