Post Office Savings Schemes

Scheme

Interest payable, Rates, Periodicity etc. 4.0% per annum on individual/ joint accounts.

Investment limits and Denominations

Salient features including Tax Rebate Cheque available. Tax Free. facility Interest

PostOffice Savings Account

Minimum INR 50/-.

5-YearPost Office Recurring Deposit Account

On 10/-

maturity

INR INR for

Minimum INR 10/- per month or any amount in multiples of INR 5/-. No maximum limit.

One withdrawal upto 50% of the balance allowed year. value R.D. INR. after allowed one on Full maturity Accounts 50/-

account

fetches continued

738.62/-. Can be another 5 years on year to year basis.

restricted to that of denomination in case of death of depositor subject to fulfillment of certain conditions. 6 & 12 months deposits advance earn rebate.

PostOffice Time Deposit Account

Interest annually calculated quarterly. Period 1 A/c 2 A/c 3

payable but

Minimum limit.

INR

200/-

and

in

Account opened individual. investment

may

be by The under of Act,

multiples thereof. No maximum

this scheme qualify Rate yr. for the benefit Tax Section 80C of the Income 1961 from 1.4.2007.

7.70%

7.80%

yr.

yr.

A/c 5 A/c 8.2% annum

8.00% yr. 8.30% per w.e.f. In multiples of INR 1500/Maturity period is 5 years. Can be prematurely encashed after one year Bonus on respect with certain No in MIS conditions maturity of Maximum INR 4.5 lakhs in single account and INR 9 lakhs in joint account.

PostOffice Monthly Income Account Scheme

01.12.2011

is admissible

accounts opened on or after 01.12.2011. 15year Provident Account Public Fund 8.6% per annum w.e.f. 01.12.2011 Minimum INR. 500/- Maximum INR. 1,00,000/- in a financial year. Deposits can be made in lumpsum or in 12 installments. Deposits qualify for deduction income 80C of Interest Withdrawal permissible year from under IT from Sec. Act. is is every 7th

completely tax-free.

financial year. Loan facility available from 3rd Financial year. No attachment under court decree order. National Savings Certificate (VIII issue) INR. 100/- grows to INR 150.90 after 5 years. Minimum maximum INR. limit of 100/available INR. No in 100/-, A single holder type certificate purchased can by be an

denominations 10,000/-.

500/-, 1000/-, 5000/- & INR.

adult for himself or on behalf of a minor or tax to a minor. under Deposits qualify for rebate Sec. 80C of IT Act. The interest accruing annually but deemed

to be reinvested will also Section Act. qualify 80C of for under IT deduction

Senior Citizen Savings Scheme

9%

per

annum,

There shall be only one deposit in the account in multiple of not INR.1000/maximum

Maturity period is 5 years. may than jointly spouse. and 55 a A depositor more in operate

payable from the date of deposit of 31st March/30th in the & Sept/31st December first shall on 30th Sept instance be 31st June, and

exceeding rupees fifteen lakh.

account

individual capacity or with Age should years or has on or the to that is one on subject

thereafter, interest payable March, 30th 31st

be 60 years or more, more but less than 60 years who retired superannuation otherwise account the the opened

December.

date of opening of condition account within

month of receipt of retirement allowed benefits. one Premature closure is after year on deduction of 1.5% interest & after 2 years 1% interest. TDS is deducted at source on interest if the interest amount is more than p.a. INR The under 10,000/-

investment

this scheme qualify

for

the

benefit Tax

of Act,

Section 80C of the Income 1961 from 1.4.2007.

Bank Loans in India

Due to the unequal distribution of wealth, India has arrived at a situation where the affluent class gets richer and richer and the underprivileged becomes poorer. To bridge this financial gap and to satisfy their day to day requirements, Bank plays a vital role by offering various loans to the finance seekers. Hence every borrower should have prior knowledge on the various Bank Loans in India, which are eligible for meeting their financial objectives.

Types of Bank Loans Offered by Banks in India

The various Loans offered by Banks in India are mentioned as under: Personal Loans Personal Bank Loans are the credits which a bank offers to its customer to meet his instant personal requirements ranging from home renovation to purchasing of new laptop, a getaway with family or for reimbursing the credit card liabilities, for buying a new car or for child's education, etc. Personal loan simplifies the cash flow of the customer besides handling its immediate needs. Personal Loans Eligibility For salaried Individuals For Self-Employed Individuals 25 years and 65 years respectively

Minimum and Maximum 21 years and 58 years respectively Age

Maximum Annual Income Minimum years in service/ business Loan Amount ---Loan Tenure Interest Rates Mode of Repayment

` 1,20,000 1 year ` 50,000 to ` 50,000 to 1 years to 7 years 12-24%. Post-dated cheques or Standing orders to debit from personal A/c

` 1,50,000 3 years ` 15,00,000 ` 15,00,000 1 years to 7 years 12-24%. Post-dated cheques or Standing orders to debit from personal A/c

Home Loans To buy a dream home is the dream of every person. Home Loan has helped in changing every Indian's dream into reality. However, the every increasing property rates and escalating rates of interest sometimes act as an obstacle. Therefore, before opting for a home loan it is advisable to check every prospect of the product. Home Loans Eligibility Minimum and Maximum Age Maximum Annual Income Minimum years in service/ business Loan Amount ---Loan Tenure Interest Rates For salaried Individuals 21 years and 65 years respectively ` 1,00,000 1 year ` 2,00,000 to ` 2,00,000 to 5 years to 20 years 9-16% For Self-Employed Individuals 21 years and 70 years respectively ` 1,50,000 3 years ` 2,00,00,000 ` 2,00,00,000 5 years to 20 years 9-16%

Tax Benefits on Home Loans: Any person who opts for home loan is entitled for tax benefits under Income Tax Act, 1961 on principal and the interest amount in the form of deductions from the chargeable earnings. Bank Loans against Property Property Loan or Loan against property is a kind of loan which is allowed by the bank on the condition of keeping the customer's current assets as a security with them. These loans are very useful when other resources of financing get exhausted. It is significant to recognize that a loan against property is not similar to mortgage. While loan against property is obtained from the bank by allocating customer's current assets as a security against the credit, a mortgage is an instrument for purchasing an asset. On the basis of the current market situations, the paid up cost of the asset and other aspects, the cost of the credit against asset can range anywhere from 40% to 60% of the asset costs. Loans against Property Eligibility For salaried Individuals For Self-Employed Individuals

Minimum and Maximum Age Maximum Annual Income Minimum years in service/ business Loan Amount ---Loan Tenure Loan to cost ratio 60% of residential cost Tax Rebate

21 years and 60 years respectively ` 1,20,000 1 year ` 2,00,000 to ` 2,00,000 to 1 years to 15 years 60% of residential cost 50% of commercial cost NIL

21 years and 65 years respectively ` 1,50,000 3 years ` 1,50,00,000 ` 1,50,00,000 1 years to 15 years 50% of commercial cost

NIL

Business Loans Before starting a business, the entrepreneur should be mentally and financially prepared to encounter the fiscal setbacks during the process. To bail the companies out from the fiscal crunch, several banks in India offers business Loans both for meeting urgent official growth and expenses. Other details of Business Loans offered by Banks in India are: Business Loans Car Loans Every individual want to own a car. Hence, the need for car loans emerges at some point or the other. While selecting a car loan it is always wise to scrutinize the various options accessible in the market besides analyzing its fiscal suitability. Car Loans Eligibility Minimum and Maximum Age Maximum Annual Income Loan Amount ---Loan Tenure Loan to cost ratio For salaried Individuals 21 years and 60 years respectively ` 1,00,000 ` 1,00,000 (new) and ` 50,000 (old) to ` 1,00,000 (new) and ` 50,000 (old) to 1 years to 7 years 85-90% of car cost For Self-Employed Individuals 21 years and 65 years respectively ` 60,000 ` 20,00,000 ` 20,00,000 1 years to 7 years 85-90% of car cost

Education Loans Education Loans offered by various banks in India provide much required assistance to fund your child's education when all other resources of finance get exhausted. Education Loans are offered by almost every Indian bank thus providing ample opportunity to students to undergo higher education both in India and abroad. Education Loans Eligibility For Students

Minimum and Maximum Age Expenses covered Loan Amount for studies in India Loan Amount for studies abroad Repayment Period

16 years and 26 years respectively course and examination fee, refundable deposits, procurement of books, travel expenses Upto ` 10,00,000 Upto ` 20,00,000 5-7 years

Bond Market in India

The Bond Market in India with the liberalization has been transformed completely. The opening up of the financial market at present has influenced several foreign investors holding upto 30% of the financial in form of fixed income to invest in the bond market in India. The bond market in India has diversified to a large extent and that is a huge contributor to the stable growth of the economy. The bond market has immense potential in raising funds to support the infrastructural development undertaken by the government and expansion plans of the companies. Sometimes the unavailability of funds become one of the major problems for the large organization. The bond market in India plays an important role in fund raising for developmental ventures. Bonds are issued and sold to the public for funds. Bonds are interest bearing debt certificates. Bonds under the bond market in India may be issued by the large private organizations and government company. The bond market in India has huge opportunities for the market is still quite shallow. The equity market is more popular than the bond market in India. At present the bond market has emerged into an important financial sector.

The different types of bond market in India

Corporate Bond Market Municipal Bond Market Government and Agency Bond Market Funding Bond Market Mortgage Backed and Collateral Debt Obligation Bond Market

Mutual Funds
Mutual funds can be defined as the money-managing systems that are introduced to professionally invest money collected from the public. The Asset Management Companies (AMCs) manage different types of mutual fund schemes. The AMCs are supported by various financial institutions or companies. Investment in mutual funds in India means pooling money in bonds, short-term money market, financial institutions, stocks and securities and dishing out returns as dividends. In India, Fund Managers manage the mutual funds. They are also referred to as portfolio managers. The mutual funds in India are regulated by the Securities Exchange Board of India.

Types of Mutual Funds

Mutual funds have different structure and aims, which in turn enable us to classify them into various major categories. These categories are: Closed-end mutual funds Open end funds Equity mutual funds Mid cap funds Large cap funds Growth funds Balanced funds Exchange Traded Funds (ETFs) Load mutual funds and No-Load mutual funds Value funds International mutual funds Money market funds Sector mutual funds Fund of funds (FoF) Index funds Regional mutual funds

Benefits of Mutual Funds Mutual funds are preferred for their cost-effectiveness and easy investment process. By investing all the money in a mutual fund, investors can buy stocks or bonds at lower trading charges. This is indeed one of the main benefits, which is not available otherwise. You don't need to see which stock or bond would be better to buy. Another advantage is diversification. Diversification stands for diffusing money across various different categories of investments. There is every possibility that when one investment is down, the other can be up. In simple terms, this is helpful in reducing risks.

Transparency, flexibility, professional investment management, variety and liquidity are some of the other benefits of the mutual funds, which are not found in case of other investments to such an extent. Risk versus Reward Volatility in the market activity can be referred to as the risk in the mutual fund investment. The sudden upward and downward sentiments of the markets and individual issues can be attributed to several key factors. These factors comprise: Inflation Interest rate changes General economic scenario

The aforementioned factors are the main cause of worry amongst the investors. Most of the investors fear that the value of the stock they have invested will fall considerably. However, it is here one can notice its reward angle. It is this element of volatility that can also bring them substantial long-term return in comparison to a savings account.

List of Mutual Fund Companies in India

Some of the popular firms that deal in mutual funds in India are: Reliance Mutual Funds HDFC ABN Amro AIG Bank of Baroda Canara Bank Birla Sun Life DSP Merrill Lynch DBS Chola Mandalam AMC Escorts Mutual Deutsche Bank ING HSBC ICICI Prudential LIC JP Morgan Kotak Mahindra Lotus India JM Financial Morgan Stanley State Bank of India (SBI) Sahara Mutual Funds Sundaram BNP Paribas Taurus Mutual Funds Tata

UTI Standard Chartered

Best Mutual Funds in India

Before knowing about the arguably best mutual funds in India, it is important to know the factors that actually decide their fate in the market. In order to get an actual ideal of the best performing mutual funds in the market, one needs to track its current Net Asset Value or NAV. NAV stands for the latest market value of the holdings of a fund that brings down the fund's liabilities, which are generally indicated in terms of per share amount. On a daily basis, most of the funds' NAV is decided. This is determined after the trade closes on certain financial exchanges. The net asset value of the mutual funds is ascertained at the end of the trading day. An increase in NAV signifies rise in the holdings of the shareholder. The Fund Firm will then do the transaction on the shares along with the sales fees. While open-ended net asset value of the mutual funds is issued daily, the close-ended NAV of the mutual fund is released on a weekly basis. You can calculate net asset value of the mutual fund easily. Track the latest market value of the net assets of the fund and then subtract that by the number of outstanding shares.

Top mutual funds in India

Here are some of the top mutual funds in India that are listed below : Reliance Mutual Fund The DSP ML Tiger Fund SBI Magnum Contra Fund HDFC Equity Fund Prudential ICICI Dynamic Fund SBI Mutual Fund >> More Investment in India

CRR Cash reserve ratio is the cash parked by the banks in their specified current account maintained with RBI.

SLR Statutory liquidity ratio is in the form of cash (book value), gold (current market value) and balances in unencumbered approved securities. CRR Cash reserve ratio is the cash parked by the banks in their specified current account maintained with RBI.

Bank Rate : Repo Rate : Reverse Repo Rate : Marginal Standing Facility Rate:

6.0% 8.50% 7.50% 9.50%

Derivative A derivative instrument derives its value from an underlying product. There are basically three derivatives a) Forward Contract- A forward contract is an agreement between two parties to buy or sell an agreed amount of a commodity or financial instrument at an agreed price, for delivery on an agreed future date. Future Contract- Is a standardized exchange tradable forward contract executed at an exchange. In contrast to a futures contract, a forward contract is not transferable or exchange tradable, its terms are not standardized and no margin is exchanged. The buyer of the forward contract is said to be long on the contract and the seller is said to be short on the contract. b) Options- An option is a contract which grants the buyer the right, but not the obligation, to buy (call option) or sell (put option) an asset, commodity, currency or financial instrument at an agreed rate (exercise price) on or before an agreed date (expiry or settlement date). The buyer pays the seller an amount called the premium in exchange for this right. This premium is the price of the option. c) Swaps- Is an agreement to exchange future cash flow at pre-specified Intervals. Typically one cash flow is based on a variable price and other on affixed one.

Income tax slab 2011-2012

February 27, 2011 by financeminister
Here is the latest income tax slab rates for Year 2011-2012. This tax table based on the latest income tax slab is a ready reference for calculating your income tax for year 2011-12. Quick highlights Base slab for general tax payers increased to 1.8 lakh from original 1.6 lakh Senior citizen age reduced to 60 years from last years 65 years. Senior citizen now include people between 60 and 80 years. Also increased the base slab for senior citizen to 2.5 lakh from previous years 2.4 lakh A new category called "Very Senior citizen" added for people above 80 years.

To find out how much is your savings due to the latest tax slabs, you can use our free income tax calculator to do a quick calculation. Click here

Income tax slabs 2011-2012 for General tax payers

Income tax slab (in Rs.) 0 to 1,80,000 1,80,001 to 5,00,000 5,00,001 to 8,00,000 Above 8,00,000 10% 20% 30% Tax No tax

Income tax slabs 2011-2012 for Women

Income tax slab (in Rs.) 0 to 1,90,000 1,90,001 to 5,00,000 5,00,001 to 8,00,000 Above 8,00,000 10% 20% 30% Tax No tax

Income tax slabs 2011-2012 for Senior citizen (Aged 60 years but less than 80 years)
Income tax slab (in Rs.) 0 to 2,50,000 2,50,001 to 5,00,000 5,00,001 to 8,00,000 Above 8,00,000 10% 20% 30% Tax No tax

Income tax slabs 2011-2012 for Very Senior citizen (Above 80 years)
Income tax slab (in Rs.) 0 to 5,00,000 5,00,001 to 8,00,000 Above 8,00,000 0% 20% 30% Tax

Income Tax Saving Schemes

Modifications By Union Budget 2010 According to Union Budget 2010-11, a few changes have been made in Income Tax Saving Schemes structure. Here is a glimpse to new additions in tax saving methods :

The relaxation limit under section 80C has been inceased to Rs. 2 lakhs. The presumptive tax limit has also been raised to Rs 60 lacs. Announcement of a deduction of Rs 20000 on investment in infra bonds

In India, the middle class feels the heat of Income Tax more than anyone else. However the intensified tax system poses great stress on the earner's thinking to manipulate different ways to save tax. Here is a list of certain steps which can help you save your income and minimize your Income Tax. House Rent Allowance Applicable If A portion of your salary is marked as House Rent Allowance or HRA You are paying rent of your house The house should not be in your kids, spouses or your own name. The total amount of rent paid or the amount earmarked as House Rent Allowance in your payslip, whichever is less, will be deducted from your taxable income. It should not be more than 50 percent of salary for those living in metro cities or 40 percent of salary for others If you are paying more than Rs.5000 per month as house

Conditions Max Deductions

Limitations

rent, you will have to submit a lease document Rent receipts should have a revenue stamp. Section 80C and Section 80D Section 80C Deductions Section 80C of the Income Tax Act allows certain investments and expenditure to be taxexempt. The total limit under this section is Applicable If Contribution to Provident Fund or Public Provident Fund Payment of life insurance premium Investment in pension Plans Investment in Equity Linked Savings schemes (ELSS) of mutual funds Investment in specified government infrastructure bonds Investment in National Savings Certificates (interest of past NSCs is reinvested every year and can be added to the Section 80 limit) Payments towards principal repayment of housing loans.Also any registration fee or stamp duty paid. Payments towards tuition fees for children to any school or college or university or similar institution. (Only for 2 children) Upper Limit is Rs. 1,00,000 (Rupees One lakh) which can be any combination of the above list.

Conditions Deductions Limitations

The investment can be from any source and not necessarily from income chargeable to tax.

Section 80D Medical Insurance Applicable If Premium paid on medical insurance for oneself, spouse, parents and children Cheques paid by proprietor firms The house should not be in your kids, spouses or your own name. Up to Rs 30,000 (additional to Rs.1,00,000 savings) Up to Rs. 20,000 (for senior citizens)

Conditions Deductions

Interest on Housing Loans (See Next Section) Life Insurance Plan

Applicable If Conditions Max Deductions Limitations

All life insurance plans gives you the tax benefit You should have Life Insurance Policy Complete amount invested in life insurance policy is tax free. Payout from life insurance policy is tax free. Go for plan which is suitable to your life and your financial planning. You need not buy every year new policy. If you think that you have already invested enough in life insurance plan but want to invest again then you should go for ULIP plans.

Home Loans Applicable If Conditions Max Deductions You have taken a Home Loan from any bank The house should be in your kids, spouses or your own name. Only principle repayment can be exempt Tax deduction on the interest component comes under section 24 and will depend upon whether home is rented or self occupied. Over a period of time the principle payment increase and the interest payment decrease.

Limitations

Education Loans Applicable If Conditions Max Deductions Limitations You have taken an Education Loan from any bank The loan should be in your kids, spouses or your own name. Only principle repayment can be exempt The interest that you pay will be tax deductable.

Tax Deductions on Investment Investment in under monthly income scheme of the post office Investment in Debentures or Bonds of an institution/ authority/ public sector company/ cooperative society or other such organization notified by central government. Investment in with banking institutions Investment in under other schemes which are notified by central government like national saving schemes, time deposit schemes, recurring deposit schemes. Investment in units of UTI and Mutual Funds (under Section 10(23D) of the Income Tax Act)

 Investment in such authorities which are working for planning & development of cities and village Investment in financial institution working for Industrial Development of India Investment in co-operative societies Investment in under National Deposit Schemes as notified by Central Government Investments and Payments National Savings Certificate (NSC) Investments Interest Rate Maturity Period Upper Limitation Lower Limitation Availability of Loans Mode of Operation Max. Deductions In multiple of Rs. 100/Return at interest rate of 8% 6 years No Rs.100/Yes Singly, jointly, or by a minor with his/her parent or guardian Under section 88 of the Income Tax Act, 1961 any person can take benefit in income tax on amount invested in this scheme Under section 80L of Income Tax Act, 1961 there is a provision of benefit on interests coming from scheme.

Public Provident Fund (PFF) Investments Interest Rate Maturity Period Upper Limitation Lower Limitation Availability of Loans From your Salary Return at interest rate of 8% 15 years Rs. 70,000/Rs. 500/The first loan can be taken in the third financial year from the date of opening of the account, or upto 25% of t credit he amount at at the end of the first financial year. Singly, jointly, or by a minor with his/her parent or guardian (Nomination facility available) Under Section 88 of Income Tax Act, 1961 there is a provision of tax benefit by investing in this scheme

Mode of Operation Max. Deductions

 Interest on this scheme is tax free.

Special Schemes for Retiring People Government Employees Interest Rate Maturity Period Upper Limitation Lower Limitation Max. Deductions Return at interest rate of 8% 3 years Total retirement benefit Rs.1000/According to Income Tax Act, 1961 interest on this scheme is tax free. Public Sector Employees: Interest Rate Maturity Period Upper Limitation Lower Limitation Mode of Operation Max. Deductions Return at interest rate of 9.5% payable half-yearly on 30th June and 31st December respectively 3 years Total retirement benefit Rs.1000/Retired PSU employees in his/her own name or with the spouse, jointly. According to Income Tax Act, 1961 interest on this scheme is tax free.

Dividend According to Income Tax Act,1961 there is a provision benefit in Income Tax if assessee has an income as a dividend on investment in any of the following: Shares Mutual Funds Unit of UTI This dividend can be given by any company or co-operative society. Infrastructure Bonds: Investment in bonds issued by specified Infrastructure companies is also eligible for Section 80C deductions. Investment in Infrastructure bonds is just one of the various options available for the purpose of Section 80C deduction.

Bank Term Deposits: Term deposits with scheduled bank for minimum tenor of 5 years. Term deposit with Post Office: Minimum tenor 5 years. NABARD Bonds: Investment in notified bonds issued by National Bank for Agriculture and Rural Development (NABARD) is also eligible for Section 80C deduction. Post Office Schemes It is one of the best Income Tax Saving Scheme. It can be operated by either singly or jointly. In case of minor, with parent/ guardian. It is available throughout the year. There are several types of post office schemes depending upon the type of investment and maturity period. Post office schemes can be divided into following catagories: Monthly Deposit Saving Deposit Time Deposit Recurring Deposit

India Insurance Policies at a Glance

Indian insurance companies offer a comprehensive range of insurance plans, a range that is growing as the economy matures and the wealth of the middle classes increases. The most common types include: term life policies, endowment policies, joint life policies, whole life policies, loan cover term assurance policies, unit-linked insurance plans, group insurance policies, pension plans, and annuities. General insurance plans are also available to cover motor insurance, home insurance, travel insurance and health insurance. Due to the growing demand for insurance, more and more insurance companies are now emerging in the Indian insurance sector. With the opening up of the economy, several international leaders in the insurance sector are trying to venture into the India insurance industry.

PERSONAL FINANCE PLANNER

(A) Income Tax Slabs for Financial Year 2011-12. The following tax rates will be applicable for the Financial Year ending March 31, 2012 (Financial Year 2011-12) - (Assessment Year 2012-13):

Income Range

s. 180,000 0,001 to Rs. 1,90,000 0,001 to Rs. 2,50,000 0,001 to Rs. 5,00,000 0,001 to Rs. 8,00,000 Rs. 800,000

General Senior Citizens (nonWomen (Men and Women senior (Below above 60 years of and 65 years age), but below 80 nonof age) years women) Nil Nil Nil 10% Nil Nil 10% 10% Nil 10% 10% 10% 20% 20% 20% 30% 30% 30%

Very Senior Citizens (Men and Women above 80 years of age) Nil Nil Nil Nil 20% 30%

Till previous year, the senior citizens were those who were above 65 years The concept of Very Senior Citizen has been added only from this year (FY 2011-12) Surcharge is not applicable Education cess is applicable @3% on income tax

********************************************************************* **************************

Important Rules for filing of Tax Return

1. Filing of income tax is compulsory for all individuals whose gross annual income exceeds the maximum amount which is not charageble to income tax (e.g. Rs.2,50,000 for Senior citizens, Rs.1,90,000/- for women below 65 years of age and Rs.1,80,000/- for all other resident individuals 2. The last date for filing of income tax return is usually July 31 for individuals (sometimes the same is extended). 3. The penalty for non filing of income tax return is Rs.5,000/-

(1) Deductions from Taxable Income (Section 80C) :VARIOUS INVESTMENTS OPTIONS AVAILABLE TO INDIVIDUALS AND TAX BENEFITS AVAILABLE UNDER EACH OF THEM - Financial Year 2011-12
A new section 80C was introduced (replacing section 88) from the financial year 2005-06. Under this Section, a deduction of upto Rs.1,00,000/- is allowed from Taxable Income in respect of the investments made in some specified schemes. The schemes are similar as were available in Section 88 earlier. Now there are no sectoral caps and individuals can save in any of the schemes upto Rs.1,00,000/- (now even in PPF it is allowed upto Rs. 1 lac as against only Rs.70,000/- upto November, 2011). The tax payers can plan their investments / savings so as to achieve their financial goals. The details of such schemes alongwith some major features of each of these are given below : (updated in December, 2011)

Saving Scheme

Sec. under which Tax Benefit available

Return

Tax benefits for earnings (i.e. interest received / dividend received)

Lock in Period and other Remarks 5 years (reduced wef Dec 2011 from 6 years to 5 years for new investments). The yield on these NSCs will now vary and will be 25 bps above the 5 year government bond yields 3 years Varies from scheme to scheme Varies from scheme to scheme (15 to 20 years)

National Saving Certificates - ( NSC scheme )

8.40% (increased from 8.00% Section 80C to 8.40%wef Dec 2011)

Taxable

Equity Linked Savings Varies from Dividend is tax Section 80C Schemes (ELSS) year to year free Varies from Life Insurance Varies from Section 80C scheme to Policies year to year scheme Varies from Unit Linked Varies from Section 80C scheme to Insurance Plan (ULIP) year to year scheme Varies from issue to issue. These Infrastructure Bonds Section 80C Taxable are around 8%+ in Dec 2011

3 to 5 years

Contribution to EPF / Section 80C 8.50% GPF

Interest earned Till retirement (loans are is tax free permitted)

Public Provident Fund (PPF)

15 years and extendable. Withdrawals Increased allowed after 7 to 8.60% Interest earned years. Yield on PPF will Section 80C from earlier is tax free vary and will be fixed at 8.00% wef 25 basis point above the Dec 2011) 10 year government bonds. Section 80C 8.40% Taxable Till maturity of NSCs

Interest accrued in respect of NSC VIII issue

Tuition Fees including admission fees or college fees Not paid for full time Section 80C Not applicable Not applicable applicable education of any two children of the assessee. Repayment of Not Housing Loan Section 80C Not applicable Not applicable applicable (Principal) Varies Bank Fixed Deposits Section 80C (around Nil 5 Years 8.00%) As per the guidelines issued in December Senior Citizens 2011, there will be Savings Scheme 9% in Dec Section 80C Taxable spread of 100 basis 2004 (from financial 2011 points above the 5 year year 2007-08) bonds yields for this scheme. Post Office Time Deposit Account Section 80C (from financial 2007-08)

PS Note : Now some of the above investments (like PPF, NSCs, Senior Citizens Saving Schemes etc.) are linked to the benchmark of 10 year government bond yields, and thus the return on these investments will vary as and when the yield

on government bonds changes. Therefore, now remember that you will not have fixed rate of return on these investments. HOW TO MAKE BEST USE OF SECTION 80C OR BACKGROUND AND KNOW ALL ABOUT SECTION 80C

1A) Section 80CCF

: Infrastructure Bonds :

Section 80CCF allows you to invest an additional Rs. 20,000 in infrastructure bonds, and such an investment will be reduced from your taxable income in addition to the Rs.100,000 deduction you get from the other instruments listed above. You will get the tax benefit only in the year in which you have invested in these instruments. This means that if you buy bonds before 31st March, 2012, worth Rs. 20,000, an amount of Rs. 20,000 will be deducted from your taxable income while calculating tax this year

(2) Deductions Under Section 80CCC(1) :

Under this section, the contributions by individuals towards "Pension" schemes of LIC or any othr Insurance company, is allowed as deduction of Rs.10,000/-. However, as provided under section 80CCE, the aggregate deduction u/s 80C, and u/s 80CCC and 80CCD can not exceed Rs.1,00,000/-. Thus effectively, now these are covered under the maximum limit of Rs.1,00,000/- under section 80C.

(3) Deductions Under Section 80 D :

Basic Deduction under Section 80D, Mediclaim premium paid for Self, Spouse or dependant children is allowed upto Rs 15,000. In case any of the persons specified above is a senior citizen (i.e. 65 years or more as of end of the year) and Mediclaim insurance premium is also paid for such senior citizen, deduction amount is enhanced to Rs. 20,000. Additional deduction: Mediclaim premium paid for parents. Maximum deduction Rs 15,000. In case any of the parents covered by the Mediclaim policy is a senior citizen, deduction amount is enhanced to Rs. 20,000.

However, you have to remember that the premium paid by any mode of other than cash is eligible. Note prior to 1st April 2009, premium payment was required to be paid only by cheque. However, now even the payments through Credit card or other on line mechanism are allowed. Thus, now all payment modes except cash payment are accepted

(3A) Deductions Under Section 80 E :

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 postgraduate 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.

(4) Deductions Under Section 24(b) :

Under this section, interest on borrowed capital for the purpose of house purchase or construction is deductible from taxable income upto Rs.1,50,000/- is deductible from income. (certain conditions are to be fulfilled)

TAX FREE INCOMES :

Some of the incomes are completely exempted from income tax and that too without any upper limit. The following incomes which are tax free :(a) Interest on EPF / GPF / PPF (b) Interest on GOI Tax Free Bonds / Tax Free Bonds issued with specific stipulation to this effect (c) Dividends on Shares and Mutual Funds. Dividend income from companies / Equity Oriented Mutual funds is completely exempt in the hands of investors. Dividend is also tax free in the hands of investors in case of debtoriented Mutual Fund schemes. (However, the Asset Management Company is liable to deduct 22.44% distribution tax in case of non individuals / non HUF investors and 14.025% in case of individuals or HUF investors.) (d) Capital receipts from Life Insurance policies i.e. sums received either on death of the insured or on maturity of Life insurance plans. However, in case of life insurance policies issued after March 31, 2004, exemption on maturity payment u/s 10(10D) is available only if premium paid in any year does not exceed 20% of the sum asssured; (e) Interest on Saving Bank account with Post Office (upto Rs3,500 for single account holders and Rs7000 for joint accoun tholders) (f) Long term capial gains on sale of shares and equity mutual funds after 01/10/2004, if security transaction is paid / imposed on such transactions.

GIFT TAX :
Gift tax was abolished with effect from October 1, 1998. The gifts are no longer taxable in the hands of donor or donee. However, w.e.f. September 1, 2004, any gift received by an individual or HUF will be included in taxable income, if the amount of tax exceeds Rs.25,000/-. However, gifts received from any of the following will continue to remain tax free :(i) Spouse;

(ii) Brother or sister; (iii) Brother or sister of the spouse; (iv) Brother or sister of either of the parents of the individual; (v) Any lineal ascendant or descendant of the individual (vi) Any lineal ascendant or descendant of the spouse of the individual

Capital Gains :
Capital gains arise when an individual sells at a profit certain assets like property or shares or mutual funds or bonds etc The treatment of such income is not the same as income from other sources. There are two types of capital gains, viz Short Term Capital Gains or Long Term Capital Gains. (a) Short Term Capital Gains : Capital gain is considered as Short Term Capital Gain, if immovable property is sold / transferred within three years of acquiring the same. Similarly, if shares or other financial securities such as mutual funds are sold within one year of purchase, the profit earned is treated as Short Term Capital Gain. Short term capital gain is included in the gross taxable income and normal tax rates are applicable. However, w.e.f. 1st October, 2004, the short term capital gains from sale of equity shares or units of equity oriented mutual fund schemes are taxed only at a flat rate of 10%, irrespective of the tax slab on other sources of income, provided securities transaction tax is paid on such sale. (b) Long Term Capital Gains : Capital gain is considered as the Long Term, if the immovable property is sold after three years from purchse, or financial securties such as shares, deep discount bonds, units of open ended or close ended schemes of mutaula funds are disposed (i.e. sold / redeemed / transferred) after holding the same for more than twelve months, then the gain is considered to be long term capital gain. Long term capital gains on transfer of listed shares / units of equity oriented mutual funds schemes has been exempted from tax w.e.f. 1st October, 2004, provided securities transaction tax has been paid on such sale. For assets other than the listed shares / units of mutual funds schemes, tax is payable in respect of long term capital gains at a flat rate of 20% and the amount of gain has to be adjusted for inflation through indexation benefit. Long term capital gains tax in respect of bonds and debt securities or debt oriented mutual fund schemes listed on stock exchanges is payable at a flat rate of 10% of the capital gains amount. In case an individual wishes to avail the benefits of indexation, then tax has to be paid at normal long term capital gains tax rate of 20%.

Section 54EC of the I-T Act, 1961 : Relief from Capital Gains Tax
You can make good use of this Section to save Taxes specially when you sell some property. The Income Tax laws provides for taxes on long-term capital gains at 20 per cent for individuals and foreign firms and 30 per cent for domestic companies. However, Section 54EC of the I-T Act, 1961, provides relief from capital gains tax. Under this Section, gains on transfer of a long-term capital asset can be exempted from tax if the money is invested in bonds of specified institutions such as NABARD, the Rural Electrification Corporation (REC), SIDBI or the National Highway Authority of India. Such bonds are redeemable after three years. However, to save tax, you have to invest in these bonds within six months from the date of transfer of

the original asset. Thus investing in these bonds will effectively mean that your money is locked in for three years. If you want to buy a new property one or two years after transferring the original asset, you will have to either wait or look for alternative funds. After the lock-in period or on the maturity of the bonds, the investor is free to put in his money in any kind of asset. However, the interest on the bond is taxable. On the other hand, State Bank of India, offers SBI Capgains Plus Scheme where lock-in period is absent, a slightly higher interest rate compared to the capital gain tax saving bonds is offered. The proceeds of the sale of the capital asset can be parked in the fixed deposit scheme under the Capgains Plus plan at an interest rate marginally higher than what bonds under Section 54 EC would fetch. The interest earned will be taxed at prevailing rates. However, unlike the bonds under 54 EC, the depositor cannot put the money in a different kind of asset. The plan stipulates that re-investment should be made on the specified asset only. Therefore, this scheme is a boon for people who have sold their property but haven't been able to purchase the property within the stipulated period. Once a final decision is taken on the property you want to reinvest in, you can opt for an exit from SBI Plan, but you will need to get a certificate of consent from the assessment officer.

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