Don’t evade tax, save tax! there is nothing like a relaxed mind and happy soul!

There are many way of looking at a single topic. The currency exchange is definitely tedious with the limit on transactions and long cues. But we salaried and tax payers need not worry much, it i just the currency crunch and loose change crisis, which will eventually solve and change our currency management habbits.

As law abiding taxpayers of India, we can take some learnings from the situation and do some introspection. You may say, I am paying taxes on salary, goods as well as services, then what kind of introspection we need to do?

We create the blackmoney pool with our hard earned taxed money

1. To avoid paying high amounts of taxes on gold jewellery purchase, often encourage cash transaction paving a way to make the whole white money into black by the jeweller

2. To stay away from high fee and taxes we partner with real estate developers to transact in part cash

So, basically our fear of paying taxes create the option for creation of black money.


Apart from avoiding these transactions in future, we should take Tax saving instruments

seriously to get higher, less taxed or complete tax free returns. Apart from the 80c instrument, there are many investment instruments which are tax efficient.

  • Debt Funds – More efficient for the hiher tax bracket segment
  • Equity – Return on equity shares as well as mutual funds investments n long term (more than 1 year) period is cmpletely tax exempted, whatever the amount is.
  • Dividend on equity, equity mutual funds are tax free in the hands of the investors
  • D-mat Gold – Handling cost, making charges are nil, making it much efficient investment compared to the physical gold. So, it is advisable to go for gold ETFs, or the sovereign gold funds
#save tax #black money #invest in Equity mutual funds

Be a smart investor, stay clutter free, there is nothing like a relaxed mind and happy soul!

#Sovereign #gold bonds make a comeback for Indian investorswith 5th tranche on Sep 1, 2016

What is on offer

Govt.of India announced launching of 5th tranche of #sovereign #gold #bonds,hitting the market, issue opens on 1st September and closing on 9th Sept, 2016. The offer is strictly for Indian residents, institutions, university, charitable institution etc. The gold bonds are priced at Rs. 3150/- per unit, signifying 1 unit is equivalent to 1gm of #gold. One can apply for 1gm and maximum of 500 gms. The tenor of the bonds is 8 years with exit option 5th year option. It also earns interest of 2.75% on the initial capital investment payable semi-annually. The investment amount is protected upto the no of units and the eqivalent amount of the gold prices.

Also read – 



Why invest in Sovereign gold bonds?

1. It’s a paper form of gold, no issues of storage and safety
2. It earns you interest on the capital invested.
3. It can be used as loan collateral (Loan to value ratio to be maintained as guided by RBI)
4. It can be traded on demat format
5. Long term tax exempted on redemption

Disadvantages

1. Unlike GOLD ETF, it has moderate liquidity (cannot be sold as easily as GOLD ETF)
2. The premature transfer will attract capital gain tax
3. Only demat format can be traded, paper format will not be available for trading in stock exchanges.
4. Your bonds will be redeemed on maturity, while  in case of GOLD ETF, you can keep it as long as you want.
5.There is no guarantee of capital protection on the amount invested, only the units which will be protected, the redemption amount will be based on the prevailing gold prices.
6. Interest earned will be taxable as per taxation laws in india

What is NCD and what makes it so attractive as an investment instrument

What is NCD and what makes it so attractive

NCD is a fixed income instrument Apart from taking bank loans Corporates, NBFCs raise money through issuing debentures. It is a financial instrument issued by corporates to support their business needs. There are two type of debentures, convertible debentures and non-convertible debenture. Convertible debentures are unsecured bonds and can be converted into equities or stocks at a future date as specified by the issuer.

NCD is financial instrument used for taking loan from the financial market. It cannot be converted into equity shares of the issuer in a future date, hence it offers higher interest rate. The NCD offers atleast 1.5 – 2% higher interest than any fixed deposit by a reputed bank and company deposits. NCDs come in both secured and unsecure form, secured #NCDs are backed by assets. Unsecured NCDs entails higher risk.

Added Edge
1. What makes it more attractive is, in the falling interest regime, the bond prices may surge, hence the value of the funds.
2. No TDS deducted on the demat form of investment (physical form does)

Points for the new investors
1. Once you come to know about a new NCD offer, check with your stock broker for online application.
2. Like any other IPO, it has a NCD comes with opening and closing dates
3. NCD offers coupon rate. Coupon rate is the interest rate paid on a bond by its issuer for the term of the security. For example, if a NCD issue comes with a face value of Rs. 100 and coupon rate 10%, the interest earned will be Rs. 10 per annum. However, in the tenure if the NAV price falls or surge, it will have no impact on the interest pay out, it will continue as Rs. 10 per year throughout the tenure. Hence, coupon rate is fixed on the offer price and continue through maturity 
4. Check for the credit rating allotted by #ICRA, #CRISIL, #CARE (triple A rating Suggest good financial health of the issuer, double A may give higher coupon rate, triple A ensures safety of your capital)
5. NCDs are also traded on stock exchanges. Apart from the new offers, investors can also buy exiting NCDs through stock exchanges, however, one need to be double careful and seek guidance from financial planner.  
6. Interests are generally paid through direct credit, RTGS, ECS and NEFT mode. It may offer monthly/ quarterly/ annually/ cumulative options.
7. Tax – The investment is taxed at short term (less than a year) and long term (debt investment more than a year are taxed at 10%) depending on the holding period. The interest will be taxed as per the tax bracket of the investor.
8. This is as liquid as a bank fixed deposit. However, there is no penalty fee for pre-mature withdrawal of this investment
9. Additional Features – Some NCD public issues offer special rate of interest to Senior citizens or to shareholder.

Pros

1. It’s #liquidity is as good as any fixed deposit in bank, which has a specific tenure but can be withdrawn any time. However, FD may charge a penalty fee on interest accrued.. but incase of NCD, there is no penalty.
2. If it is compared with company fixed deposit, company deposits (a popular instrument in the senior citizen segment with 0.25- 0.50% extra interest)comes with various conditions for pre-mature withdrawal, for eg – lock-in periods, penalties etc.
3. NCDs come with Rating from #ICRA #CRISIL #IndiaRatings #CARE which gives a clarity to the investor on the risk involved, higher the rating, lower is the risk (AAA being the highest category, followed by AA, A, A-, BBB and so on)
4. Incase of bankruptcy, NCD holders get preference over shareholders

Cons
1. Incase interest rate increase, the value of the NCD may fall, sometimes even below the Face Value.

2. Though, the instrument can be traded on the exchanges, one may not find a buyer for NCDs if the trade volumes on bourses are low.

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