Union Bank of India brings down benchmark lending rates by 0.1%

Union Bank of India, a state-run lender, has lowered the benchmark lending rates by 0.1% to 10.65%, a development which signal reversal of the high interest rate regime.

According to Union Bank of India, “Our asset liability committee, in its quarterly review of interest rates, has decided to bring down the base rate by 10 basis points from 10.75% to 10.65% with immediate effect.”

With 13 rates increases effected by the Reserve Bank of India (RBI) in the last 20 months, the banks have been forced to pass on the surging cost of funds to their customers. The rate cut by Union Bank of India has been the first such action by a bank in the current cycle.

This move has come a fortnight after the RBI paused its monetary tightening strategy and also signalled relaxing of policy rates going ahead in the mid-quarter policy review on December 16.

Should you put your money in company FDs

Those who swear by fixed deposit (FD) have never had it so good. The rates offered by banks are high. Now, they have even better news from companies. There are around 100 companies offering FD schemes currently, and most of them offer at least 1% to 4% more than bank FDs. A three-year FD from Mahindra Finance, for example, gives 10.5%, while one from Jaiprakash Associates offers 12.50%.

Compared with this, the State Bank of India and HDFC Bank offer 9.25% and 8.5%, respectively, for a three-year FD. You don't need to be an investment wizard to figure out that the rates offered by the companies are the best you can pocket and you should park some money in their FD schemes. But, don't commit the mistake of equating a company FD with a bank FD, say experts. This is because bank deposits are covered by a guarantee from the Deposit Insurance and Credit Guarantee Corporation of India, which assures repayment of Rs 1 lakh in case of default by a bank, but there is no such guarantee for company deposits. The safety of the FD rests firmly on the financial position of the company. That is why you have to be extra careful while choosing and investing your money in a company FD.

Which investments are eligible for deductions u/s 80C?

The following investments/payments are inter alia eligible for deduction u/s 80C:-

Nature Of Investment	Remarks
Life Insurance Premium	For individual, policy must be in the name of self or spouse or any child's name. For HUF, it may be on life of any member of HUF.
Sum paid under contract for deferred annuity	For individual, on life of self, spouse or any child of such individual.
Sum deducted from salary payable to Govt. Servant for securing deferred annuity for self, spouse or child	Payment limited to 20% of salary.
Contribution made under Employee's Provident Fund Scheme	-
Contribution to PPF	For individual, can be in the name of self/spouse, any child & for HUF, it can be in the name of any member of the family.
Contribution by employee to a Recognised Provident Fund.	-
Subscription to any notified securities/notified deposits scheme.	-
Subscription to any notified savings certificates.	e.g. NSC VIII issue.
Contribution to Unit Linked Insurance Plan of LIC Mutual Fund	e.g. Dhanrakhsa 1989
Contribution to notified deposit scheme/Pension fund set up by the National Housing Bank.	-
Certain payment made by way of instalment or part payment of loan taken for purchase/ construction of residential house property.	Condition has been laid that in case the property is transferred before the expiry of 5 years from the end of the financial year in which possession of such property is obtained by him, the aggregate amount of deduction of income so allowed for various years shall be liable to tax in that year.
Subscription to units of a Mutual  Fund  notified  u/s 10(23D)	-
Subscription to deposit scheme of a public sector company engaged in providing housing finance.	-
Subscription to equity shares/ debentures forming part of any approved eligible issue of capital made  by a public company or public financial institutions.	-

Tuition fees paid at the time of admission or otherwise to any school, college, university or other educational institution situated within India for the purpose of full time education.	Available in respect of any two children.
Any term deposit for a fixed period of not less than five years with the scheduled bank.	This has been included in Section 80C by the Finance Act 2006.
Subscription to notified bonds issued by NABARD	This has been included in Section 80C by the Finance Act 2007 and has come into effect from 1.4.2008.
Payment made into an account under the Senior Citizens Savings Scheme Rules, 2004	This has been introduced by Finance Act, 2008 and shall come into effect from 1.4.2009.
Payment made as five year time deposit in an account under the Post Office Time Deposit Rules, 1981	This has been introduced by Finance Act, 2008 and shall come into effect from 1.4.2009.

It may be noted that the aggregate amount of deductions under sections 80C, 80CCC and 80CCD are subject to an overall ceiling of Rs.1 lakh.
Source: Income Tax Depa

What are perquisites

"Perquisite" may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages.
"Perquisite" is defined in the section17(2) of the Income tax Act as including:
(i) Value of rent-free/concessional rent accommodation provided by the employer.
(ii) Any sum paid by employer in respect of an obligation which was actually payable by the assessee.
(iii) Value of any benefit/amenity granted free or at concessional rate to specified employees etc.
(iv) The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assesssee.
(v) The amount of any contribution to an approved superannuation fund by the exployer in respect of the assessee, to the extent it exceeds one lakh rupees; and
(vi) the value of any other fringe benefit or amenity as may be prescribed.
Source: Income Tax Department

What are allowances and which are exempt?

Allowance is defined as a fixed quantity of money or other substance given regularly in addition to salary for meeting specific requirements of the employees. As a general rule, all allowances are to be included in the total income unless specifically exempted. Exemption in respect of following allowances is allowable to the exent mentioned against each :-
House Rent Allowance:- Provided that expenditure on rent is actually incurred, exemption available shall be the least of the following :
(i)    HRA received.
(ii)   Rent paid less 10% of salary.
(iii) 40% of Salary (50% in case of Mumbai, Chennai, Kolkata, Delhi) Salary here means Basic + Dearness Allowance, if dearness allowance is provided by the terms of employment.
Leave Travel Allowance: The amount actually incurred on performance of travel on leave to any

place in India by the shortest route to that place is exempt. This is subject to a maximum of the air economy fare or AC 1st Class fare (if journey is performed by mode other than air) by such route, provided that the exemption shall be available only in respect of two journeys performed in a block of 4 calendar years.
Certain allowances given by the employer to the employee are exempt u/s 10(14). All these exempt allowance are detailed in Rule 2BB of Income-tax Rules and are briefly given below:
For the purpose of Section 10(14)(i), following allowances are exempt, subject to actual expenses incurred:
(i) Allowance granted to meet cost of travel on tour or on transfer.
(ii) Allowance granted on tour or journey in connection with transfer to meet the daily charges incurred by the employee.
(iii) Allowance granted to meet conveyance expenses incurred in performance of duty, provided no free conveyance is provided.
(iv) Allowance granted to meet expenses incurred on a helper engaged for performance of official duty.
(v) Academic, research or training allowance granted in educational or research institutions.
(vi) Allowance granted to meet expenditure on purchase/ maintenance of uniform for performance of official duty.

Under Section 10(14)(ii),  the following allowances have been prescribed as exempt.

Type of Allowance	Amount exempt
(i)      Special Compensatory Allowance for hilly areas or high altitude allowance or climate allowance.	Rs.800 common for various areas of North East, Hilly areas of UP, HP. & J&K and Rs. 7000 per month for Siachen area of J&K and Rs.300 common for all places at a height of 1000 mts or more other than the above places.
(ii)     Border area allowance or remote area allowance or a difficult area allowance or disturbed area allowance.	Various amounts ranging from Rs.200 per month to Rs.1300 per month are exempt for various areas specified in Rule 2BB.
(iii)    Tribal area/Schedule area/Agency area allowance available in MP, Assam, UP., Karnataka, West Bengal, Bihar, Orissa, Tamilnadu, Tripura	Rs.200 per month.
(iv)    Any allowance granted to an employee working in any transport system to meet his personal expenditure during duty performed in the course of running of such transport from one place to another place.	70% of such allowance upto a maximum of Rs.6000 per month.

(v)     Children education allowance.		Rs.100 per month per child upto a maximum 2 children.
(vi)    Allowance granted to meet hostel expenditure on employee's child.		Rs.300 per month per child upto a maximum two children.
(vii)    Compensatory field area allowance available in various areas of Arunachal Pradesh, Manipur Sikkim, Nagaland, H.P., U.P. & J&K.		Rs.2600 per month.
(viii) Compensatory modified field area allowance available in specified areas of Punjab, Rajsthan, Haryana, U.P., J&K, HP., West Bengal & North East.		Rs.1000 per month
(ix)    Counter insurgency allowance to members of Armed Forces.		Rs.3900 Per month
(x)     Transport Allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of residence & duty.		Rs.800 per month.
(xi)    Transport allowance granted to physically disabled employee for the purpose of commuting between place of duty and residence.		Rs.1600 per month.
(xii)    Underground allowance granted to an employee working in under ground mines.	Rs.800 per month.
(xiii)   Special allowance in the nature of high altitude allowance granted to members of the armed forces.	Rs. 1060 p.m. (for altitude of 9000-15000 ft.) Rs.1600 p.m. (for altitude above 15000 ft.)
(xiv)   Any special allowance granted to the members of the armed forces in the nature of special compensatory highly active field area allowance	Rs. 4,200/- p.m.
(xv)   Special allowance granted to members of armed forces in the nature of island duty allowance. (in Andaman & Nicobar & Lakshadweep Group of Islands)	Rs. 3,250/- p.m.

Heads of Income Tax - India

Heads of Income Tax - India

• Salary
• Income from House Property
• Profits and gains of business or profession
• Capital gains
• Income from other sources

NHAI to raise Rs 10,000 Cr through tax-free bonds from Dec 28

C.P. Joshi, the Union Minister for Road Transport & Highways, has announced that National Highways Authority of India (NHAI), an autonomous body under Ministry of Road Transport & Highways is going to raise upto Rs. 10,000 crores through Public Issue of Tax Free Secured Redeemable Non Convertible Bonds. He said that 29 PPP projects have been awarded by NHAI till November 30, 2001, out of which 27 on BOT (Toll) in addition two projects on BPT (Annuity). About 21000 kms of roads to be awarded by NHAI in next 3 financial years as per Work Plan considered for revised financial projections. He also said that about 4200 km length of roads have been awarded by NHAI up to November, 2011 against a target of 7300 km for financial year 2012. Peak cumulative outstanding debt is expected to be Rs. 57000 crores in 2016-17 as per the revised financial projections for the implementation of NHDP. The proposed tax free bonds of Rs. 1000 crores will be one part of the market borrowings, he added.

The issue opens on 28th December, 2011 and is expected to remain open for 14 days (minimum 3 days). The issue will be of Rs. 5000 crores with a green shoe option to retain additional Rs. 5000 crores. The coupon rates will be 8.2% for 10 years and 8.3 % for 15 years. To benefit retail investors, 30% of the Bonds issue has been reserved for them. NHAI intends to deploy the Issue proceeds towards financing of the various projects being implemented by it under the NHDP and other NH projects as approved by Government of India.

NHAI is entrusted with management of a network of 70,934 km of National Highways in India. It has been authorized by the CBDT notification to raise funds upto 10,000 Crore through public issue of Tax Free Secured Redeemable Non Convertible Bonds of face value of Rs. 1,000 each in the nature of Debentures having tax benefits under the Section 10(15)(iv)(h) of the Income Tax Act, 1961, as amended, in one or more tranches in the Financial Year 2011-12.. For this purpose, it has filed the Draft Shelf Prospectus dated November 23, 2011, Shelf Prospectus dated December 13, 2011, Addendum to the Shelf Prospectus dated December 22, 2011 and Prospectus Tranche -1 dated December 22, 2011 (referred as the “Prospectus”) with the designated stock exchange, BSE Limited (“BSE”). The Prospectus has been filed with the National Stock Exchange of India Limited (“NSE”) and Securities and Exchange Board of India (“SEBI”) also. The Issue size under Tranche-1 aggregates to ` 5,000 crores with an option to retain over-subscription upto Rs. 10,000 crores.

These Bonds are being issued in two series viz. Tranche 1 Series 1 and Tranche 1 Series 2 having a tenure of 10 years and 15 years respectively. The coupon rate for the Tranche 1 Series 1 and Tranche 1 Series 2 would be 8.20% per annum and 8.30% per annum respectively. The interest is payable annually on October 1st of each year.

The Tranche 1 Bonds proposed to be issued have been rated as ‘CRISIL AAA/Stable’ by CRISIL, `CARE AAA` by CARE and ‘FITCH AAA (IND) with stable outlook’ by FITCH. The rating of the Bonds issued by CRISIL and CARE indicate highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. The rating of the Bonds by FITCH indicates highest rating assigned in its national rating scale. This rating is assigned to the "best" credit risk relative to all other issuers or issues in the country. The Bonds offered through this Issue are proposed to be listed on the BSE and the NSE.

The Issue shall remain open from December 28, 2011 to January 11, 2012 with an option to close earlier or extend up to a maximum period of 30 days at the discretion of the Board of NHAI subject to necessary approvals, by intimating through an advertisement issued in a leading national daily. However, the Issue shall remain open for a minimum of 3 days. The funds raised through this Issue will be used for part financing of the various projects being implemented by NHAI. SBI Capital Markets Limited and A.K. Capital Services Limited are the Lead Managers to the Issue. Additionally, ICICI Securities Limited and Kotak Mahindra Capital Company Limited are also involved for marketing of the Issue.

CBDT to concentrate on big corporates and salaried employees to achieve target Read more: CBDT to concentrate on big corporates and salaried employees to achieve target

With direct tax collection target of Rs 5.85 lakh crore  looking difficult to meet,the Central Board of Direct Taxes (CBDT) on Monday said it will concentrate on big corporates and salaried employees to mop up the revenue.There is a concern… IIP and GDP are down.It will be difficult to achieve budget estimate, CBDT Chairman M C Joshi said.He,however,said the department was working hard to achieve the target given to it in the Budget.We will monitor tax deducted at source (TDS) and concentrate on bigger assessees, he said. The economic growth slowed to 6.9% in the second quarter against 8.4% in the same period last year.The industrial growth is slowing and in October the factor output measured on IIP shrunk by 5.1%.The CBDT chief said,as on December 17,the direct tax collection has been Rs 3.16 lakh crore.

Deductions under Income Tax India Act 1961

 Section 80 C

Section 80C replaced the existing Section 88 with more or less the same investment mix available in Section 88.  The new section 80C has become effective w.e.f. 1st April, 2006.  Even the section 80CCC on pension scheme contributions was merged with the above 80C.  However, this new section has allowed a major change in the method of providing the tax benefit.  Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-exempt.  One must plan investments well and spread it out across the various instruments specified under this section to avail maximum tax benefit. Unlike Section 88, there are no sub-limits and is irrespective of how much you earn and under which tax bracket you fall.

The total limit under this section is Rs 1 lakh. Included under this heading are many small savings schemes like NSC, PPF and other pension plans. Payment of life insurance premiums and investment in specified government infrastructure bonds are also eligible for deduction under Section 80C

Schemes eligible for Section 80C benefits

• PPF
• ELSS - Mutual Funds
• NSC
• KVP

• Life Insurance
• Senior Citizen Saving Scheme 2004
• Post Office Time Deposit Account

Section 80CCC
Any individual who makes a contribution for any annuity plan of the Life Insurance Corporation of India or any other insurer is eligible for a deduction of the amount paid or Rs. 10,000, whichever is less. When an individual or his nominee receives any amount under the following circumstances it will be taxed as the income of the individual or his nominee, in the year of withdrawal or the year in which the pension is received:

• On the surrender of the annuity plan or
• As pension received from the annuity plan. 

Section 80CCD
The deduction for contributions to a pension scheme of the Central Government is available only to those individual who have been employed by the central government on or after 1st January 2004, and will be allowed for any amount deposited in such a pension scheme. But, in this case, deduction of more than 10 per cent of the employee's salary shall not be allowed.

The contributions to the fund are also made by the Central Government. Deduction will be available for any contribution which is made by the Central Government or 10 per cent of the employee's salary, whichever is less.

When the individual or his nominee receives any amount out of the scheme which meets the following descriptions, it shall be taxed in the hands of the recipient.

• On closure/ opting out of the pension scheme; or
• As pension received from the annuity plan.

The term 'salary' here includes Dearness Allowance (if considered for retirement benefits), but it excludes other allowances and perquisites.

The aggregate deduction under the Sections 80C, 80CCC and 80CCD cannot exceed Rs 1 lakh as whole

Section 80D
Any Premium which is paid for medical insurance that has been taken on the health of the assessee, his spouse, dependent parents or dependent children, is allowed as a deduction, subject to a ceiling of Rs 10,000.

Where any premium is paid for medical insurance for a senior citizen, an enhanced deduction of Rs 15,000 is allowed. The deduction is available only if the premium is paid by cheque.

Section 80DD
Deduction under this section is available to an individual who:

• Incurs any expenditure for the medical treatment, training and rehabilitation of a disabled dependant; or
• Deposits any amount in schemes like Life Insurance Corporation for the maintenance of a disabled dependant. An annuity or a lump sum amount is paid to the dependant or to a nominee for the benefit of the dependant in the event of the death of the individual depositing the money, from the said scheme,

A deduction of Rs 50,000 is available. Where the depandant is with a severe disability, a deduction of Rs 1,00,000 is allowed. (As per AY 2009-10)

If the death of the dependant occurs before that of the assessee, the amount in the scheme is returned to the individual and is taxable in his hands in the year that it is received.

An individual should furnish a copy of the issued certificate by the medical board constituted either by the Central government or a state government in the prescribed form, along with the return of income of the year for which the deduction is claimed.

The term 'dependent' here refers to the spouse, children, parents and siblings of the assessee who are dependant on him for maintenance and who themselves haven't claimed a deduction for the disability in computing their total incomes.

This deduction is also available to Hindu Undivided Families (HUF).

Section 80DDB
An individual, resident in India spending any amount for the medical treatment of specified diseases affecting him or his spouse, children, parents, brothers and sisters and who are dependant on him, will be eligible for a deduction of the amount actually spent or Rs 40,000, whichever is less.

Note:- For the complete list of disease specified, refer to Rule 11DD of the Income Tax Rules.

For any amount spent on the treatment of a dependent senior citizen an individual is eligible for a deduction of the amount spent or Rs 60,000, whichever is less is available.

The individual should furnish a certificate in Form 10-I with the return of income issued by a specialist working in a government hospital.

If any amount of medical expenditure is borne by the employer or is reimbursed under an insurance scheme, the eligibility of the deduction is the reduction to that extent. This deduction is also available to Hindu Undivided Families (HUF).

Section 80E
Under this section, deduction is available for payment of interest on a loan taken for higher education from any financial institution or an approved charitable institution. The loan should be taken for either pursuing a full-time graduate or post-graduate course in engineering, medicine or management, or a post-graduate course in applied science or pure science.

The deduction is available for the first year when the interest is paid and for the subsequent seven years. Up to March 2005, deduction was available for the repayment of principal and interest aggregating to Rs 40,000 a year.

Section 80U
It is deduction in the case of a person with a disability. An individual who is suffering from a permanent disability or mental retardation as specified in the persons with disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, shall be allowed a deduction of Rs 50,000. In case of severe disability it is Rs. 75,000.

The assessee should furnish a certificate from a medical board constituted by either the Central or the State Government, along with the return of income for the year for which the deduction is claimed. 
 

Retirement planning through dividends - By TaxNirvana.com

Dividend is tax free in individual’s hands but it is not regular. If you have surplus funds, you should invest them in equity mutual funds and get tax-free income from dividends. For emergency funds requirement you can sell a part of your portfolio, money gets credited in your account within 2 days. The risk of investment in equity versus keeping in fixed deposit can be minimized by regular investments for long term only. In the long term, equity has given the best return among all the assets including real estate. In 2008, the recession that started from America was a result of default in home mortgage and prices of houses came down very sharply. Hence, keeping all your money in real estate is also risky. Diversify into other assets like equities and mutual funds.

How to plan retirement through dividends:

You should start a Systematic Investment Plan or SIP in equities if you know the markets and have an appetite for higher risk otherwise mutual fund is the best option. Mutual funds reduce the risk by investing in number of companies, sector and asset class like bonds etc. Moreover, mutual funds have the professional expertise for investing in equities and offer a lot of flexibility to customize as per your required funds flow and risk profile.

What is Advance Tax - By TaxNirvana.com

Taxpayers are required to pay tax during the year on the basis of their own computation of income. The advance tax is payable on total income of the year from all sources i.e. salary, business, profession etc. (including capital gain, interest, rental income or lottery/prize money).
The advance tax is payable if it exceeds Rs.10,000 for the year.
In the case of an individual, advance tax needs to be deposited as below:

• 30% of advance tax payable on or before 15th September
• 60% of advance tax payable on or before 15th December
• 100% of advance tax payable on or before 15th March

What is the penalty for not depositing advance tax?
In case of default in payment of advance tax, 1% p. m. interest is paid in addition to the tax payable amount, under section:

• 234B - If you have not paid the advance tax i.e. 90% of total tax payable before 31st March.
• 234C - If you have not paid the installment in time i.e 30% before 15th Sept, 60% before 15 Dec and balance before 15th March.  

Who need not deposit advance tax?
If your total tax payable is below Rs 10,000, you are not obliged to deposit advance tax as per income tax laws. Also, if your main source of income is salary and all other income (like interest) has been declared to your employer, there is no need to deposit advance tax. However, salary income needs to be included if salary details under the previous employer are not given to the new company on joining.