The content on this page is courtesy Centre for Investment Education and Learning (CIEL).

Contributions by Girija Gadre and Arti Bhargava.

1
Base rate,
determined by a
bank as per RBI
guidelines, is the
minimum rate below
which a bank is not
permitted to lend to
its customers.
2
Base rate linked
pricing system for
loans and advances
was started on July 1,
2010. It replaced the
Bank Prime Lending
Rate (BPLR). Earlier,
banks could lend
below the BPLR.
3
Since a bank cannot
offer loans at rates
lower than the base
rate to any of its
customers, it makes
it easy for borrowers
to compare and
choose a lender.
4
Lending rates may
include customer
specific charges
and be higer than
the base rate. Rates
vary according to
type of loan,
borrower, security,
and amount.
5
Base rate has to be
reviewed and
notified at least
once in a quarter. It
can be modified by
the banks Board
or its Asset
Liability Manage-
ment Committee.
THE MONEY QUESTION
Can those with limited income and no savings history become successful investors?
Points to note
Securities Transaction Tax paid can be
downloaded in a consolidated format
and is reflected in Form 26AS.
If tax has been deducted but not paid
by the deductor to the government,
Traces enables identifying and com-
plaining about such discrepancy.
Internet banking accounts can be
linked to Traces to enable logging in
and reconciling taxes paid.
Paper
Work
Using TRACES
Traces (TDS Reconciliation Analysis and
Correction Enabling System) is an online
facility provided by the Income Tax Depart-
ment at www.tdscpc.gov.in. The objective
of this facility is to enable both payers and
deductors of TDS to view taxes paid online,
reconcile them for purposes of filing returns
and seeking refunds.
SMART THINGS TO KNOW: Base Rate
Downloads
Form 16/16A can be downloaded from
Traces, which is an acceptable proof of
taxes deducted at source. Annual tax
statement (Form 26AS) can also be
downloaded to show all taxes paid
including advance taxes and self-
assessment.
Registration
Individual tax payers who like to view
taxes deducted on their incomes have
to first register by providing details of
their PAN, email, and mobile numbers
and create on online account with a
username and password. The system
then generates an email for activating
the account.
Facilities
Users can view all transactions where
taxes have been deducted at source,
including salaries. Tax that has been
collected on behalf of the taxpayer,
including advance taxes paid and self-
assessment taxes deposited can be
viewed by logging in.
AIR
The Tax Information Network main-
tained by the government requires
specified entities to file details of
specific transactions as an Annual
Information Report (AIR). These
include transactions in cash, property,
shares, bonds, mutual funds and cred-
it cards. Taxpayers can view and
download the AIR pertaining to their
PAN from Traces.
A
mit perhaps belongs to the class of
investors that thinks that unless
they have a large amount of mon-
ey, they may not be able to build
meaningful assets. He might also
have resigned to the fact that his income is just
about adequate for his needs, leaving less to
save. It is never late to start saving and invest-
ing. There are three things he can do:
The first thing is to see how much of his in-
come is used for expenses that are absolutely
unavoidable. Mandatory expenses include
monthly groceries, electricity and utility bills,
childrens school fee, and such things that he
knows his family cannot do without. Whatever
remains of his income, after these mandatory
expenses have been met, is his savings poten-
tial. Amit should take the time to see what this
number is and target saving a good portion of
this amount instead of resigning to a per-
ceived inability to save.
The second thing to do is to save first and
spend later. Just as his PF and tax is deducted
even before the salary is available for spending,
he should set up some systematic investments
that are made as soon as his salary is credited to
his bank account. The amount can be as small as
`5,000, but it will add up to a nice sum over a
period of time.
The third thing to do is to define a few finan-
cial goals. Without a specific requirement in
mind, Amit may not be able to find the motiva-
tion to cut back on expenses and seriously try to
save and invest. If the goals are important
enough, such as his childrens education or his
own retirement, Amit will stop before spending
and begin to save.
Everyone needs financial planning. The abil-
ity to face any future need with confidence
comes only when part of the current income is
set aside and invested. Amit should take the first
steps, and as he sees the build-up of his wealth,
he will be motivated to do more.
Amit Pal is a middle-aged, mar-
ried, salaried man with two teen-
age children. Except for the house
he lives in, Amit does not have
much by way of assets. He worries
if it is too late to start and whether
he can inculcate the saving habit
at all.
14
Financial Planning The Economic Times Wealth, July 7-July 13, 2014