04 KALEIDOSCOPE
Dear Finergo,
I had brought a land in my native town two
years ago (Oct 5, 2006). Now I wish to settle in
Chennai and want to sell the land. What will be
the amount of tax I have to pay?
Jeevesh G,
Chennai
Dear Jeevesh,
When you sell land anytime before 36
months it will attract short-term capital gains
tax. Since you have brought your land with in
the past 24 months, your gain (profit) will be
added to your annual income and then taxed as
applicable.
The gain is calculated as follows:
1. Full sale price
2. Less expenses
3. Less cost of acquisition
4. Less cost of improvement or development
during the 2 years.
Please mail your queries to finergo@goer-
go.in. Your queries will be replied by mail as
well printed in this column at the editor’s dis-
cretion. All the answers will be neutral and your
personal details will be strictly kept confidential.
■ AUM: Asset under Management – Is the cur-
rent value of funds that a mutual fund handles/
invests on behalf of its customers.
Example: If 1000 investors each invest Rs
1000 on Oct 1, 2008 then AUM = 1000*1000 =
1000000. But say on Oct 5 the value of each Rs
1000 grows to 1010, then AUM on Oct 5 will be
1000*1010=1010000.
■ NAV (Net Asset Value): It is the worth of
each unit of a mutual fund. For example, say
you buy 100 units of XYZ mutual fund for Rs. 10
each. Hence you have spent Rs. 1000. The AUM
will be 1000. But to run the mutual fund there
will be certain expenses and liabilities like tax
etc. Say it amounts to Rs. 80. Then the NAV is
calculated as follows –
(Value of assets – Sum of Expenses and liabil-
ities) divided by number of units.
Example:
NAV= (1000-80)/100=9.2. Assuming the value
of the assets (investments which the fund has
done) grows to 1400 and expenses rises to 140
then the NAV will be (1400-140)/100 = 12.6
(This column will try to simplify personal
finance related jargon)
ERGO Monday, November 10, 2008
Are Indian banks safe?
The positives of our financial system
T
he recent crash of a number of
banks and financial institutions
in USA (Washington Mutual,
Lehman Brothers, AIG, etc.)
and Europe has triggered a lot of
speculation that Indian banks will al-
so fail. This has triggered a lot of
frenzy in withdrawing cash and de-
posits from banks particularly pri-
vate banks.
There are some inherent positives
in our financial system and society,
which prevents crashes as in the US.
We will look at the societal reasons
first:
1. The Indian consumers have al-
ways been pro-savings than
spending.
■ Even today the national average
in savings rate is close to 26 per cent.
■ The US society fades in front of
this as it is predominantly spending
oriented.
2. We love our homes and have
strong emotional attachment to it.
■ I often hear my clients (young
and old) say that their home is “ac-
tually their flesh and blood”, “benefit
of sweat and tears for ……. Years”,
“anchor for my life”, “my image in to 1.65/1000 people in 2008 ■ RBI & SEBI have put in a won-
the society”. ■ In the U.S., the number of indi- derful set of rules and regulations
■ The majority of us would prob- vidual bankruptcies has nearly 3.28/ and complimentary monitoring
ably sacrifice a 50 per cent hike in a 1000 people. mechanism that ensures that banks
different city to be in our own home ■ Have you heard of anyone in and other financial institutions in-
town your circle filing for an IP (Insolven- cluding their intermediaries have to
■ The housing bubble as in the US cy Petition)? Insolvency basically adhere to safe practices.
would not happen in India for the means that you have no means to 2. Absence of creative and exotic
above reasons. Hence the banks pay your loans (debts) and you allow financial tools
(lenders) are safe. all your assets to be taken over by ■ Again thanks to the Regulators,
3. We pride ourselves in promptly your lenders (creditors). our financial system depends on
paying off debt. Hence you see that as a society, we conservative and traditional banking
■ We are hurt when a cheque inherently are safe for the banks to practices for earning their profits.
bounces operate in. This conservatism has prevented so
■ We pay up all our loans on time. called exotic tools from entering the
Sometimes even borrowing more to The positive points of our system. These practices can give
pay of an existing loan. financial system: higher profits but carry high risks
■ In the U.K., the number of indi- 1. Excellent Regulatory Mecha- too.
viduals filing for insolvency is close nism Our banks will continue to be safe.
This column will list top five mutual funds based
on their performance over a period of 3 years.
For month ended Sep 30, 2008