IDFC offers tranche 2 of long term infrastructure bonds

The Infrastructure Development Finance Company has announced the public issue of the second tranche of long term infrastructure bonds of face value of Rs 5,000, in the nature of secured, redeemable, non-convertible debentures, having benefits under Section 80CCF of the Income Tax Act, 1961, for an aggregate amount not exceeding Rs 4,400 crore.

This is the issue of the second tranche of long term infrastructure bonds having benefits under Section 80CCF of the Income Tax Act, 1961, by the company within the overall aggregate limit of Rs 5000 crore for the financial year 2011-12. The issue of tranche 2 bonds opened for subscription on January 11, 2012, and will close on February 25, 2012, or earlier, as may be decided by the board of the company. In the event of an early closure or extension of the issue, the company shall ensure that notice of the same is provided to the prospective investors through newspaper advertisements on or before such earlier or extended date of Issue closure.

Ratings: The tranche 2 bonds have been rated as (ICRA) AAA by ICRA and Fitch AAA(Ind) by Fitch. While the ICRA rating indicates stable outlook and the highest degree of safety for timely servicing of financial obligations, the Fitch rating indicates a long term stable outlook.

Issue structure:

The Tranche 2 Bonds will be issued in two series - Series 1 Tranche 2 Bonds and Series 2 Tranche 2 Bonds and will carry an interest rate of 8.70% per annum. The Tranche 2 Bonds will carry a minimum Lock-in period of Five (5) Years from the Deemed Date of Allotment and can be redeemed after Ten (10) Years from the Deemed Date of Allotment. The Tranche 2 Bonds also have a buy back option at the end of five (5) years. The Minimum Subscription will be two (2) Tranche 2 Bonds and in multiples of One (1) Tranche 2 Bond thereafter. For the purpose of fulfilling the requirement of minimum subscription of two Tranche 2 Bonds, an applicant may choose to apply for two Tranche 2 Bonds of the same series or two Tranche 2 Bonds across different series.

Security: The Tranche 2 Bonds are fully secured with first floating pari passu charge over certain receivables of the Company and first fixed pari passu charge over specified immoveable properties of the Company. The security cover is 1.0 times of the outstanding Tranche 2 Bonds at any point in time.

80CCF Benefit: The Bonds have been classified as "Long Term Infrastructure Bonds" and are being issued in terms of Section 80CCF of the Income Tax Act, 1961. In accordance with Section 80CCF, an amount, not exceeding Rs. 20,000 per annum in the year of investment, paid or deposited as subscription to Long Term Infrastructure Bonds during the previous year relevant to the assessment year beginning April 01, 2012, shall be deducted in computing the taxable income of a resident individual or Hindu Undivided Family ("the HUF"). In the event that any applicant applies for Tranche 2 Bonds exceeding Rs. 20,000 per annum in the year of the investment, the aforesaid tax benefit shall be available to such applicant only to the extent of Rs. 20,000 per annum in the year of the investment.

The first tranche of the Bonds was issued by the Company in December, 2011 on the terms set out in the Shelf Prospectus and the Prospectus - Tranche 1 dated November 11, 2011 for an aggregate amount of Rs. 532.62 crore. The funds raised through the public issue of Tranche 1 Bonds and Tranche 2 Bonds will be utilized towards "Infrastructure Lending" as defined by Reserve Bank of India ("the RBI") in the Regulations issued by it from time to time, after meeting the expenditures of, and related to the Issue. The Tranche 2 Bonds will be in the nature of Debt and will be eligible for capital allocation and accordingly will be utilized in accordance with Statutory and Regulatory requirements of Reserve Bank of India and the Ministry of Finance.

The Lead Managers to the Bond Issue are Karvy Investor Services Limited, HDFC Bank Limited - Investment Banking Division, ICICI Securities Limited, JM Financial Consultants Private Limited and IDFC Capital Limited. The Co-Lead Managers to the Issue are Bajaj Capital Limited, RR Investors Capital Services Private Limited and SMC Capitals Limited. The Registrar to the Issue is Karvy Computershare Private Limited.

Source: Moneycontrol.com 

Tax Planning For FY 2011-12 Where To Invest & Save Tax ?

The current financial year is going to be completed on 31st March, 2012. Everybody will be in planning How to Save Income Tax? Here we will discuss all about Tax Planning. We should pay taxes every year as responsible citizens. However, the law allows certain “tax-deductible” savings and we owe it to ourselves to benefit from these options, which could translate into future savings. Every citizen has a fundamental duty to pay taxes honestly and a fundamental right to avail of all the tax incentives that the law provides. Therefore, through prudent tax planning, not only can we reduce our income-tax liability but also secure our future through compulsory savings. Let us see how one can do successful tax planning to enjoy optimum benefits.

Know The Tax Slabs/brackets:

The Most Important Section For Individual Tax Payers For Tax Saving – Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Under this section, you can invest a maximum of Rs 1 lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000.

  

Qualifying Investment options under Section 80C

Investment options with Section 80C can be segregated as follows: 

Provident Fund & Voluntary Provident Fund: Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer’s contribution. While employer’s contribution is exempt from tax, your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF).

Public Provident Fund: An account can be opened with a nationalized bank or Post office. The current rate of interest is 8%, which is tax-free and the maturity period is 15 years. The minimum amount of contribution is Rs 500 and the maximum is Rs 10,00,00.

National Savings Certificate: These are now 5-year small-savings instrument, where the rate of interest is 8% and is compounded half-yearly. The interest accrued every year is liable to tax but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.

Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can be included in section 80C deduction. If you are paying premium for more than one insurance policy, all the premiums can be included. Besides this, investments in unit-linked insurance plans (ULIPs) that offer life insurance with benefits of equity investments are also eligible for deduction under Section 80C. The things are however going to change after the introduction and implementation of DTC.  So be careful if you are buying new insurance policies just to save tax. You may be in for shock later on. So better consult your financial planner (not insurance agent).

Equity-linked savings scheme (ELSS): An ELSS (equity-linked savings scheme), offered by mutual funds, is a diversified equity scheme with a three-year lock-in period, providing tax benefits under Section 80C of the IT Act. As 80-100% of the corpus in a diversified equity scheme is invested in the equity market, the performance of these funds is in line with market trends.

Tax benefits for ELSS, however, will become history once the new DTC comes into force on April1, 2012. So this year is probably is the last opportunity for anyone looking to save tax through ELSS.

Home Loan Principal Repayment: Your EMI consists of two components, namely principal and interest. The principal component of the EMI qualifies for deduction under Section 80C. Even the interest component can save you significant income tax – but that would be under Section 24 of the Income Tax Act.

Stamp Duty and Registration Charges For Home: The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C. However, this can be done only in the year in the year of purchase of the house.

Five-Year Bank fixed deposits: Tax-saving fixed deposits (FDs) of scheduled banks with tenure of five years are also entitled for section 80C deduction.

Children’s Tuition Fees: Apart from the above, things like children’s tuition fees expenses that can be claimed as deductions under Section 80C. However, you need receipts to claim the same.

Senior Citizen Savings Scheme 2004 (SCSS): A recent addition to section 80C list, Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Current rate of interest is 9% per annum payable quarterly. Please note that the interest is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on these deposits won’t earn any further interest. Interest income is chargeable to tax.

5-Yr post office time deposit (POTD) scheme: POTDs are similar to bank fixed deposits. Although available for varying time duration like one year, two year, three year and five year, only 5-Yr post-office time deposit (POTD) – which currently offers 7.5 per cent rate of interest –qualifies for tax saving under section 80C. Effective rate works out to be 7.71% per annum (p.a.) as the rate of interest is compounded quarterly but paid annually. The Interest is entirely taxable.

Investment Option To Save Taxes!

What are the investment schemes where investors can save taxes?

An investor can save taxes by investing under the following sections of the Income Tax Act, 1961:

v  Section 80C (Investment avenues are discussed below in detail)

v  Section 80D (Health insurance premium etc)

v  Section 80E (Educational loan)

v  Section 80G (Donation to specified institutions)

v  Section 80U (Deduction for handicapped people)

v  Section 24 (Housing loan interest)

Under Section 80C tax deduction an individual could invest up to a maximum limit of Rs 1 lakh in one or more of the following options put together:

v  PPF (Public Provident Fund): Under this scheme the maximum investment permissible in a financial year is Rs 100,000

v  EPF (Employees Provident Fund)

v  Life Insurance Premium

v  Pension Plan premium (under Sec 80CCC)

v  ULIP

v  ELSS (Equity linked saving scheme)

v  NSC (National Savings Certificate)

v  5-year bank fixed deposit

v  5-year post office time deposit

v  Infrastructure bonds / NABARD rural bonds

v  NPS (New Pension Scheme) under Sec 80CCD

A Liitle Known But An Excellent Tax Saving Option - My Personal Favorite

All You Need To Know About Equity Linked Saving Scheme (ELSS)

Most of the people during the tax saving season (JAN-FEB-MAR) rush up for tax saving to invest upto 1 lac which qualifies for tax exemption under section 80C. And end up in paying LIC premium, PPF, NSC, 5 year bank FDs and other traditional tax savings instrument. Let us tell you one another option available: ELSS

What is ELSS?

ELSS - Equity Linked Savings Scheme is a type of mutual fund which is qualified for tax exemption under section 80C. Let’s dig into more information on this scheme.

  Ø  An ELSS is a mutual fund scheme that invests in equity and equity related securities.

  Ø  ELSS is just like a diversified equity fund in terms of their portfolio.

  Ø  They have a 3 year lock-in period.

  Ø  ELSS offers a tax deduction under section 80C upto investments of RS. 100000.

Advantages of ELSS over NSC and PPF

  Ø   Main advantage of ELSS is its short lock-in period of 3 years in comparison to any other tax saving instrument. Maturity period of NSC is 6 years and PPF is 15 years.

  Ø   Since it is an equity linked scheme earning potential is very high compared to PPF or NSCs.

  Ø  Investors who want periodic dividends can consider the dividend payout option under the ELSS category, wherein the dividends received are also tax free. In fact, this is the only investment option under Section 80C which provides interim cash flow during the lock-in period.

  Ø   Investor can opt for Systematic Investment Plan (SIP) rather than having to put money in lump sum.

Disadvantages of ELSS

  Ø   Risk factor is high compared to NSC and PPF.

  Ø  Returns are not guaranteed as these depend upon the market.

  Ø   Premature withdrawal is not allowed but it is allowed in other instruments in some specific conditions.

How can an investor buy ELSS from mutual funds? How is the return in the ELSS compared to other schemes like PPF and NSC?

ELSS could be open-ended or close-ended in nature. Majority of ELSS schemes are open-ended. This means they are open for subscription on all business days. As the name suggests, the scheme primarily invests in equity market by buying equity stocks of companies listed on the stock exchanges.

The units of the scheme are offered at the NAV (net asset value). The NAV is announced for all business days and keeps changing primarily depending upon the movement in the prices of stocks held in the portfolio of the scheme.

Equity as an asset class has given a higher return over the long term. ELSS has the potential to give substantially higher returns as compared to that from PPF or NSC over the long-term. The returns from PPF or NSC are in the range of 8 per cent and at times may not beat inflation.

Returns from ELSS could fluctuate depending upon the performance of the equity market and also the stock selection criteria of the particular fund manager. Returns from ELSS could even be negative in the short to medium term. As on 31st December, 2009, the average compounded annualised growth rate (CAGR) over 3 and 5 years period for the ELSS category of funds was 8.2 per cent and 20.1 per cent respectively. So ELSS is recommended for longer duration and SIP is the ideal method to invest in ELSS.

ELSS also scores over other tax-saving schemes since it offers tax-free return (long-term capital gains and dividends are totally tax-free as per the current tax structure). Only PPF offers tax-free return but it has a maturity period of 15 years.

What should be the criteria for choosing ELSSs offered by the different MFs?

The investor should apply the following criteria while selecting an ELSS for an investment:

Ø  The track record of the fund at least over the last 3 to 5 years. One should not attach too much importance to the recent 1-month or 3-month performance.

Ø  It is not necessary that the investor should select an ELSS based on its large size.

Ø  The discerning investor could also look at the portfolio of the scheme to ensure that it is well-diversified across market caps.

Ø  If the investment amount is more than Rs 20,000, then probably the investor could select two ELSS funds instead of one.

How much should one invest in ELSS?

The amount that needs to be invested in ELSS would depend on your risk profile as well as the other investments already committed towards PPF, EPF, insurance etc. A young investor with longer time horizon could use the entire limit of Rs 1 lakh for investing in ELSS if s/he is not investing in other tax-saving instruments under Section 80C whereas an aged investor could decide on a mix of three or four investment options. But, an investor should not ignore the ELSS option because this is the only option which has the potential of delivering higher returns.


Disclamier: This is not a recommendation. This is only for information use only. Please consult your personal financial advisor for the suitability of this or any other investment product. If you don't have a qualified personal advisor, please feel free to contact Your Financial Coach at satinder @yourmoneyyourway.in

All You Wanted To Know About Post office Monthly Scheme (PO MIS)

All You Wanted To Know About Post office Monthly Scheme (PO MIS)

The post-office monthly income scheme (MIS) provides for monthly payment of interest income to investors. It is meant for investors who want to invest a sum amount initially and earn interest on a monthly basis for their livelihood.  This scheme offers monthly income and is a safe, guaranteed-by-the-government option. The MIS is not suitable for an increase in your investment. It is meant to provide a source of regular income on a long term basis. The scheme is, therefore, more beneficial for retired persons. The MIS is not suitable for an increase in investment. It is meant to provide regular income on a long term basis.

Who is eligible to open the account?

Only individuals can open the account. Only one deposit is available in an account either single or joint (two or three).

Minimum and Maximum Investment

The minimum investment in a Post-Office MIS is Rs 1,500 for both single and joint accounts. The maximum investment for a single account is Rs 4.5 lakh and Rs 9 lakh for a joint account.

Duration
The duration of MIS is six years.  

Interest

The post-office MIS gives a return of 8% interest on maturity. A 5% bonus is paid on maturity of the fund, therefore, the effective yield works out to 8.9% per year.

Tax Benefit                     

The interest earned is fully taxable. There is no tax deducted at source (TDS). The investment in PO MIS is exempt from wealth tax.

Withdrawal
Premature closure of the account is permitted any time after the expiry of a period of one year of opening the account. Deduction of an amount equal to 5 per cent of the deposit is to be made when the account is prematurely closed. Investors can withdraw money before three years, but a discount of 5%. Closing of account after three years will not have any deductions. Post maturity Interest at the rate applicable from time to time (at present 3.5%). Monthly interest can be automatically credited to savings account provided both the accounts standing at the same post office.

How to Open PO MIS Account

You can open a post office MIS at any post-office in India. When you open an MIS, you will get a certificate issued by the post office. In addition, the investor is provided with a passbook to record his transactions against his MIS.

Nomination
You can specify the nominee at the time of opening the account, or at any time later.

Be Smart & Intelligent With Your Money.
Your Life! Your Money! Your Way!

All You Wanted To Know About Senior Citizen Saving Scheme 2004

All You Wanted To Know About Senior Citizen Saving Scheme 2004

Government of India introduced Senior Citizens Savings Scheme, 2004 (SCSS) with effect from 1st November 2004. As the name suggests this scheme is meant for senior citizens. This is the safest investment option and an excellent avenue of investment and return for Senior Citizens. 

What are the salient features of the Senior Citizens Savings Scheme, 2004?

Tenure of the scheme	5 years which can be extended by 3 more years
Rate of interest	9 per cent per annum. The same will be payable on 31st March, 30th June, 30th September and 31st December each year.
Frequency of computing interest	Quarterly
Taxability	Interest is fully taxable
Whether TDS is applicable	Yes, Tax will be deducted at source
Investment to be in multiples of	Rs. 1000/-
Maximum investment limit	Rs. 15 lakh
Minimum eligible age for investment	60 years (55 years for those who have retired on superannuation or under a voluntary or special voluntary scheme). The retired personnel of Defence Services (excluding Civilian Defence Employees) shall be eligible to invest irrespective of the age limits subject to the fulfillment of other specified conditions
Premature withdrawal facility	Available after one year of holding but with penalty
Transferability feature	Not transferable to others
Tradability	Not tradable
Nomination facility	Nomination facility is available
Modes of holding	Accounts can be held both in single and joint holding modes. Joint holding is allowed but only with spouse
Application forms available with	Post Offices and designated branches of 24 Nationalised banks and one private sector bank
Applicability to NRI, PIO and HUFs	Non resident Indians, Persons of Indian Origin and Hindu Undivided Family are not eligible to open an account under the scheme.
Transfer from one deposit office to another	Transfer of account from one deposit office to another in case of change of residence is permitted

Can a joint account be opened under the scheme with any person?

Joint account under the SCSS, 2004 can be opened only with the spouse.

What should be the age of the spouse in case of a joint account?

In case of a joint account, the age of the first applicant / depositor is the only factor to decide the eligibility to invest under the scheme. There is no age bar/limit for the second applicant / joint holder 

What are the withdrawal and pre-mature withdrawal conditions?

No withdrawal shall be permitted before the expiry of a period of five years from the date of opening of the account. The depositor may extend the account for a further period of 3 years.

Premature closure of account is permitted

1. After one year but before 2 years on deduction of 1 ½ % of the deposit.

2. After 2 years but before date of maturity on deduction of 1% of the deposit.

In case of death of the depositor before maturity, the account shall be closed and deposit refunded without any deduction along with interest.

Whether both the spouses can open separate accounts in their individual capacity with separate limit of Rs.15 lakh for each of them?

Yes. Both the spouses can open individual and / or joint accounts with each other with the maximum deposits upto Rs.15 lakh each, provided both are individually eligible to invest under relevant provisions of the Rules governing the scheme.

What happens to the accounts if both the spouses are maintaining individual accounts and not any joint account and one of them expires?

If both the spouses have opened separate accounts under the scheme and either of the spouses dies during the currency of the account(s), the account(s) standing in the name of the of the deceased depositor / spouse shall not be continued and such account(s) shall be closed 

In case of a joint account, if the first holder / depositor expires before maturity, can the account be continued?

In case of a joint account, if the first holder / depositor expires before the maturity of the account, the spouse may continue the account on the same terms and conditions as specified under the SCSS Rules. However, if the second holder i.e. spouse has his / her own individual account, the aggregate of his/her individual account and the deposit amount in the joint account of the deceased spouse should not be more than the prescribed maximum limit. In case the maximum limit is breached, then the remaining amount shall be refunded, so that the aggregate of the individual account and deceased spouse’s joint account is maintained at the maximum limit.

Whether any income tax rebate / exemption is admissible?

No income tax / wealth tax rebate is admissible under the scheme. The interest income from the scheme is fully taxable. The prevailing income tax provisions apply.

Is TDS applicable to the scheme?

Yes, TDS is applicable to the scheme as interest payments have not been exempted from deduction of tax at source.

Whether any minimum limit has been prescribed for deduction of tax at source?

Tax is to be deducted at source if the interest paid or payable exceeds Rs.5000/- during the financial year.

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Your Life! Your Money! Your Way!

All You Wanted To Know About Kisan Vikas Patra

Kisan Vikas Patra (KVP) is a saving instrument that provides interest income similar to bonds. Amount invested in Kisan Vikas Patra doubles on maturity after 8 years & 7 months. Some people have a misconception that only a farmer can invest money in Kisan Vikas Patra. However, it is absolutely false. Anyone wishing to invest money at safe places can go for Kisan Vikas Patra.

How to Invest

One can invest in any head post office / sub-post office in cash, demand draft, or local cheques.

Who Can Invest

Kisan Vikas Patra can be purchased by the following:

• An adult in his own name, or on behalf of a minor
• A Trust
• Two adults jointly

Tabs and Denominations

Kisan Vikas Patra are available in the denominations of Rs 100, Rs 500, Rs 1000, Rs 5000, Rs. 10,000 and Rs. 50,000. There is no maximum limit on purchase of KVPs. 

Withdrawal
Premature encashment of the certificate is permissible from 2 ½ years though no interest will be payable in that case.

Who is not Eligible

• Commercial Companies and institutions are not eligible to purchase KVP.
• NRIs and Hindu Undivided Families cannot purchase Kisan Vikas Patra.

Maturity

• Facility of reinvestment on maturity.
• Maturity proceeds which are not drawn are eligible for Post office Savings account interest for a maximum period of two years.

Salient Features

• KVPs can be pledged as security against a loan to Banks/Govt. Institutions.
• KVPs are transferable to any Post office in India.
• KVPs can be transferable from one person to another person before maturity.
• Nomination Facility is available in case of KVPs
• Duplicate can be issued for lost, stolen, destroyed, mutilated and defaced KVPs

Tax Benefits

No income tax benefit is available under the Kisan Vikas Patra scheme. Interest income is taxable, however, the deposits are exempt from Tax Deduction at Source (TDS) at the time of withdrawal. KVP deposits are exempt from Wealth tax.

Be Smart & Intelligent With Your Money.
Your Life! Your Money! Your Way!