Government policies keep changing with change in time. There was a time when converting deserts into green fields was considered necessary. The great canals were built in Rajasthan. It is not certain that the decision taken at that time was right or not, as Rajasthan is by its inherent nature, a desert. What is to be done for humanity’s benefit on and with a desert, as a desert, should have been the more natural consideration. More wiser methods could have been searched rather than trying to convert desert soil into green acreages.
In the Andamans, more and more people should have been involved in the project as it was not an agricultural project; it was a social project, a rehabilitation project. For example people from Bihar were brought to the Andamans and forest land was required to be converted into paddy land. But, as everybody know that the soil in the forests of Andamans is thin. Besides, this there is no fresh water available. Yet cultivation of rice was attempted in the Andamans. And we all know about the result. The settlers were not happy and it can be said, the soil was not happy.
So, we should not think that government policies and programs are, always, absolutely true. They are all subject to change with the time.
In our state, as all of you know better than I do, to the north there are mountain slopes, the terai and the Dooars. They cover 25 per cent of the total state’s area and hold 18 per cent of the population. Most of the time we experience landslides in the mountain slopes due to the action of gravity and seismic activities. Gravity cannot be changed, but there is something which can be done i.e. we can modify human interference where that interference accelerates or aggravates the problem of landslides. This is not only possible but necessary.
Then, coming to the biggest part of our state — the tract, also known as the Rahr. This covers 52 per cent of the area of the state and holds 49 per cent of the population. This area has a large plateau with red lateritic soil on which cultivation is not which is very painful. We have to understand that if nature has made laterites difficult to cultivate, nature has also given us a balance. The Rahr, which includes Birbhum, has large plains where red soil is good for farming, where agriculture should not be looked upon as a “low and indestructible form of life”, but something which can be made into a very productive enterprise.
Finally, there is the Eastern Deltaic plain — 23 per cent of our total area, with 33 per cent of the population. This area is the most fertile tract. The underground water table here is a matter for consideration. Excessive use of fertilizer can change the soil’s composition. Our agriculture minister has said in his remarkable speech, that what is needed is a balance between chemical fertilizer-based agriculture process and bio-farming.
I do not want to take much of your time by saying to you any more about what you know much better than I. But I would end on this note with what the great teacher, Sri Thakur Ramakrishna Dev had said, which is relevant for all times —Taka Mati, Mati Taka. He was perceptive, farsighted.
Let us not hold land as a fixed deposit which can be encashed as capital. I am all for capital, I am all for industry, but let industry and capital not look meanly upon soil as an encashable asset to be deposited into the profit graphs of private money. Soil, as our minister said, is the mother and we cannot afford to neglect it. It does not mean we can not do any activities on soil except agriculture. But the soil, fresh water and ozone, are the gifts of Creation.
Thursday, December 27, 2007
Monday, December 17, 2007
Tax break for Senior Citizen Savings Scheme bring smiles on faces of senior citizens
The finance ministry has extended tax benefits under section 80C to the Senior Citizen Savings Scheme. Tax paying senior citizens can now claim a deduction of Rs 1 lakh invested in the schemes from assessment year 2008-09. Now the senior citizens have a reason to cheer.
In August 2004 the Senior Citizen Savings Scheme (SCSS) was launched. Any person who is 55 or more and has retired on superannuation or voluntarily can invest up to a maximum of Rs 15 lakh in this scheme.
Under this scheme the interest is paid to the depositor at the end of every three months. Though withdrawal before five years of opening an account was not allowed in SCSS, the assured annual interest of 9 per cent vis-à-vis a 7 to 7.5 per cent interest in bank fixed deposits at that time made this scheme popular
However, in March last year the government announced that interest payment in SCSS was liable to tax deduction at source from the inception of the scheme.
Then why do we say that the scheme has turned out to be the most attractive among fixed return instruments? Let’s have a look at the other options and see how they match up.
The ministry has also extended the tax concession to the five-year post office term deposit, though the concession doesn’t add any glitter to the scheme that pays a 7.5 per cent interest compared with 8 per cent by National Savings Certificate and Public Provident Fund. Even banks are offering between 8.5 and 8.75 per cent for their tax saving as well as normal deposits of five years.
Senior citizens, who look for a regular interest income, usually prefer the post office monthly income scheme (POMIS). The scheme offers an annual interest of 8 per cent, which is paid out on a monthly basis. Till February last year, depositors in POMIS used to get a 10 per cent bonus on maturity after six years. Last year the government withdrew the bonus. But looking at the coming elections the finance ministry has restored the bonus (5 per cent) on POMIS.
Some banks such as the Oriental Bank of Commerce, Uco Bank, Bank of India have tax saving fixed deposits which still fetches a higher interest for depositors who are above 60 years. But in this there is a limit of Rs 1 lakh, one cannot invest more than this in these deposits, whereas in a Senior Citizen Savings Scheme, one can invest up to Rs 15 lakh at 9 per cent annual interest.
However, most of the banks are giving a higher interest to their senior citizen depositors even if the deposit is not a tax-saving one. Here there is no limit on the amount that can be deposited.
But, now that banks have started reducing their deposit rates, it would be a wise move to keep one’s money in Senior Citizen Savings Scheme where the depositor can renew it for a block of three years on maturity of the initial investment after five years.
In a Senior Citizen Saving Scheme depositor will have to take out the interest payment every quarter, this gives him the chance to increase the return by reinvesting part or the whole of the interest payout in a five-year recurring deposit (if regular payouts are not needed) in a bank giving more than 8 per cent interest.
For example, if you deposit Rs 1 lakh in an SCSS, you will get Rs 9,000 as interest every year or Rs 45,000 in five years. You can open a five-year recurring deposit with a monthly deposit of Rs 750 and earn an annual interest of 8 per cent. After five years, you will amass Rs 55,535 in the recurring deposit account. That is a gain of Rs 10,535 per Rs 1 lakh in five years. However, you cannot follow this strategy if it is a bank fixed deposit because banks pay a cumulative interest. Rs 1 lakh kept in a five-year bank fixed deposit will earn you an interest of Rs 56,051 at maturity.
SCSS is the best scheme for elderly people for claiming tax deduction and regular income. For capital buildup, choose bank fixed deposits. If you have retirement savings of Rs 30 lakh, keep Rs 10 lakh in an SCSS account and Rs 20 lakh in a five-year bank fixed deposit. From the SCSS account, you will earn Rs 22,500 every three months (Rs 7,500 every month). From the bank fixed deposit, you will earn Rs 1,86,167 every year, if you take out the interest at the end of every year.
In August 2004 the Senior Citizen Savings Scheme (SCSS) was launched. Any person who is 55 or more and has retired on superannuation or voluntarily can invest up to a maximum of Rs 15 lakh in this scheme.
Under this scheme the interest is paid to the depositor at the end of every three months. Though withdrawal before five years of opening an account was not allowed in SCSS, the assured annual interest of 9 per cent vis-à-vis a 7 to 7.5 per cent interest in bank fixed deposits at that time made this scheme popular
However, in March last year the government announced that interest payment in SCSS was liable to tax deduction at source from the inception of the scheme.
Then why do we say that the scheme has turned out to be the most attractive among fixed return instruments? Let’s have a look at the other options and see how they match up.
The ministry has also extended the tax concession to the five-year post office term deposit, though the concession doesn’t add any glitter to the scheme that pays a 7.5 per cent interest compared with 8 per cent by National Savings Certificate and Public Provident Fund. Even banks are offering between 8.5 and 8.75 per cent for their tax saving as well as normal deposits of five years.
Senior citizens, who look for a regular interest income, usually prefer the post office monthly income scheme (POMIS). The scheme offers an annual interest of 8 per cent, which is paid out on a monthly basis. Till February last year, depositors in POMIS used to get a 10 per cent bonus on maturity after six years. Last year the government withdrew the bonus. But looking at the coming elections the finance ministry has restored the bonus (5 per cent) on POMIS.
Some banks such as the Oriental Bank of Commerce, Uco Bank, Bank of India have tax saving fixed deposits which still fetches a higher interest for depositors who are above 60 years. But in this there is a limit of Rs 1 lakh, one cannot invest more than this in these deposits, whereas in a Senior Citizen Savings Scheme, one can invest up to Rs 15 lakh at 9 per cent annual interest.
However, most of the banks are giving a higher interest to their senior citizen depositors even if the deposit is not a tax-saving one. Here there is no limit on the amount that can be deposited.
But, now that banks have started reducing their deposit rates, it would be a wise move to keep one’s money in Senior Citizen Savings Scheme where the depositor can renew it for a block of three years on maturity of the initial investment after five years.
In a Senior Citizen Saving Scheme depositor will have to take out the interest payment every quarter, this gives him the chance to increase the return by reinvesting part or the whole of the interest payout in a five-year recurring deposit (if regular payouts are not needed) in a bank giving more than 8 per cent interest.
For example, if you deposit Rs 1 lakh in an SCSS, you will get Rs 9,000 as interest every year or Rs 45,000 in five years. You can open a five-year recurring deposit with a monthly deposit of Rs 750 and earn an annual interest of 8 per cent. After five years, you will amass Rs 55,535 in the recurring deposit account. That is a gain of Rs 10,535 per Rs 1 lakh in five years. However, you cannot follow this strategy if it is a bank fixed deposit because banks pay a cumulative interest. Rs 1 lakh kept in a five-year bank fixed deposit will earn you an interest of Rs 56,051 at maturity.
SCSS is the best scheme for elderly people for claiming tax deduction and regular income. For capital buildup, choose bank fixed deposits. If you have retirement savings of Rs 30 lakh, keep Rs 10 lakh in an SCSS account and Rs 20 lakh in a five-year bank fixed deposit. From the SCSS account, you will earn Rs 22,500 every three months (Rs 7,500 every month). From the bank fixed deposit, you will earn Rs 1,86,167 every year, if you take out the interest at the end of every year.
Friday, December 14, 2007
Five things to know about FD
Fixed deposit is most popular conventional investment amongst the domestic investors. More importantly, given its offering, it makes an appropriate choice for risk-averse investors. Here are some points that investors must look at in an FD.
1. Credit profile
Fixed deposit carry credit profile which is an indicator of the degree of risk connected with it in terms of timely repayment of the principal and interest payment. For example, an 'AAA/FAAA' rating is indicative of the highest level of safety. Typically, an FD with a higher rating would offer lower returns vise-versa an FD with a lower rating.
The additional return in a lower rated FD is in result a compensation for the higher risk borne. Investors would do well to decide on the quantum of risk they are willing to bear and then select an FD.
2. Rate of return
Rate of return or interest rate indicates the return that the FD investor will get. At any point in time, it is not unusual to find various entities like banks, small savings schemes and corporates offering differential returns on similar rated FDs. Investors on their part would do well to explore various options and select the FD that offers them the best return at a rating that suits them.
3. Interest payout options
Investors can generally choose between various interest payout options like monthly, quarterly, annually or on maturity. Ideally, the investor's need for liquidity should be used to determine which interest payout option is chosen. Selecting the interest payout 'on maturity' option can help investors benefit from the compounding effect and get a higher return.
4. Tenure
The FD's tenure is the period over which the investor stays invested. By and large, a longer tenure translates into a higher rate of return. Investors must match their investment tenure with their needs/objectives. For example, if the investor has an expense to meet 3 years hence, he can invest an appropriate amount in a 3-year FD to ensure that the maturity proceeds match his future obligation.
On the same lines, if there is 5-year investment tenure, then investments can be considered in tax-saving FDs; this will help the investor simultaneously benefit from tax sops under Section 80C.
5. Premature withdrawal
An often-ignored aspect of FD investing is the premature withdrawal clause. Investors opting for a premature withdrawal can be penalized by either being given a lower rate of return or zero interest depending on the terms and conditions of the FD. Investors would do well to acquaint themselves with the implications of a premature withdrawal before making an investment.
1. Credit profile
Fixed deposit carry credit profile which is an indicator of the degree of risk connected with it in terms of timely repayment of the principal and interest payment. For example, an 'AAA/FAAA' rating is indicative of the highest level of safety. Typically, an FD with a higher rating would offer lower returns vise-versa an FD with a lower rating.
The additional return in a lower rated FD is in result a compensation for the higher risk borne. Investors would do well to decide on the quantum of risk they are willing to bear and then select an FD.
2. Rate of return
Rate of return or interest rate indicates the return that the FD investor will get. At any point in time, it is not unusual to find various entities like banks, small savings schemes and corporates offering differential returns on similar rated FDs. Investors on their part would do well to explore various options and select the FD that offers them the best return at a rating that suits them.
3. Interest payout options
Investors can generally choose between various interest payout options like monthly, quarterly, annually or on maturity. Ideally, the investor's need for liquidity should be used to determine which interest payout option is chosen. Selecting the interest payout 'on maturity' option can help investors benefit from the compounding effect and get a higher return.
4. Tenure
The FD's tenure is the period over which the investor stays invested. By and large, a longer tenure translates into a higher rate of return. Investors must match their investment tenure with their needs/objectives. For example, if the investor has an expense to meet 3 years hence, he can invest an appropriate amount in a 3-year FD to ensure that the maturity proceeds match his future obligation.
On the same lines, if there is 5-year investment tenure, then investments can be considered in tax-saving FDs; this will help the investor simultaneously benefit from tax sops under Section 80C.
5. Premature withdrawal
An often-ignored aspect of FD investing is the premature withdrawal clause. Investors opting for a premature withdrawal can be penalized by either being given a lower rate of return or zero interest depending on the terms and conditions of the FD. Investors would do well to acquaint themselves with the implications of a premature withdrawal before making an investment.
Wednesday, December 12, 2007
Easy to open post office account than bank account
To open an account in a bank is tough a bank than to open an account in the post office. Moreover post office is within reach whereas at some places still the bank is still far off the reach of the common man. The bank norms know-your-account (KYC) are stricter than those for postal accounts.
Though postal savings have been hit by supersaver bank deposit schemes but it is easy to open account in it. For postal account a customer requires to provide only identity and permanent residence proofs. One can open an account with just Rs 50. Along with the cheque book facility, the minimum amount is Rs 500 to open a savings account. Retire persons opt for office saving accounts than in bank.
However RBI has simplified KYC norms for no-frill accounts but then also it is not easy to furnish details because of so many documents are required.
Even in a public sector bank branch one has to furnish a PAN card, income statement and proof of residence apart from other formalities under KYC norms. “Particularly in the rural areas, there have been complaints that branch managers stick to the letter of law and not the spirit, making it difficult for the financially-excluded to gain access to the system,” a banker admits.
Punjab National Bank (PNB) general manager (priority sector lending & lead bank division) S K Roy said, “The bank has been proactive in reaching out to the under banked population, taking banking to their doorstep. We are reaching out beyond our branch network through technology. We follow RBI’s simplified KYC norms to open no-frill accounts. PNB has over three lakh no-frill accounts. We also provide banking services through the use of biometric cards.”
In the 11th Five-Year Plan Dop brought up the idea of postal bank. According to the Dop the postal bank would be a subsidiary of the department with a banking license from RBI.
Moreover the number of bank branches in rural areas has been on the decline. The commercial bank branches in the rural area have declined from 35,134 in March 1991 to 30,572 in March 2006, according to the reports on financing of enterprises in the unorganized sector by National Commission. The report said it has also been reported that a large number of vacancies remain unfilled for long periods.
Invest India Market Solutions (IIMS) ED Sandeep Ghosh said, “Though the post office network is huge, it is present in the rural areas where most of the population doesn’t save. Those who save do so in bank accounts against postal accounts, higher returns being one of the reasons. According to the survey conducted earlier this year, of the 321 million working population, nearly one half doesn’t save since their annual income is less than Rs 50,000. It is not the lack of financial instruments or the lack of access as much it is about the capacity to save. Most initiatives in financial inclusion involve banks and not post offices, be it disbursal of state schemes or self-help group linkages.”
The survey conducted by IIMS Dataworks and Invest India Economic Foundation in 2006 is based on more than a million rural and urban households.
Though postal savings have been hit by supersaver bank deposit schemes but it is easy to open account in it. For postal account a customer requires to provide only identity and permanent residence proofs. One can open an account with just Rs 50. Along with the cheque book facility, the minimum amount is Rs 500 to open a savings account. Retire persons opt for office saving accounts than in bank.
However RBI has simplified KYC norms for no-frill accounts but then also it is not easy to furnish details because of so many documents are required.
Even in a public sector bank branch one has to furnish a PAN card, income statement and proof of residence apart from other formalities under KYC norms. “Particularly in the rural areas, there have been complaints that branch managers stick to the letter of law and not the spirit, making it difficult for the financially-excluded to gain access to the system,” a banker admits.
Punjab National Bank (PNB) general manager (priority sector lending & lead bank division) S K Roy said, “The bank has been proactive in reaching out to the under banked population, taking banking to their doorstep. We are reaching out beyond our branch network through technology. We follow RBI’s simplified KYC norms to open no-frill accounts. PNB has over three lakh no-frill accounts. We also provide banking services through the use of biometric cards.”
In the 11th Five-Year Plan Dop brought up the idea of postal bank. According to the Dop the postal bank would be a subsidiary of the department with a banking license from RBI.
Moreover the number of bank branches in rural areas has been on the decline. The commercial bank branches in the rural area have declined from 35,134 in March 1991 to 30,572 in March 2006, according to the reports on financing of enterprises in the unorganized sector by National Commission. The report said it has also been reported that a large number of vacancies remain unfilled for long periods.
Invest India Market Solutions (IIMS) ED Sandeep Ghosh said, “Though the post office network is huge, it is present in the rural areas where most of the population doesn’t save. Those who save do so in bank accounts against postal accounts, higher returns being one of the reasons. According to the survey conducted earlier this year, of the 321 million working population, nearly one half doesn’t save since their annual income is less than Rs 50,000. It is not the lack of financial instruments or the lack of access as much it is about the capacity to save. Most initiatives in financial inclusion involve banks and not post offices, be it disbursal of state schemes or self-help group linkages.”
The survey conducted by IIMS Dataworks and Invest India Economic Foundation in 2006 is based on more than a million rural and urban households.
Tuesday, December 11, 2007
Tax benefit extended to two post office savings schemes to bring high returns
The tax benefit extended to two post office savings schemes will help in correcting the e irregularities that had crept in when the government made 5-year bank deposits eligible for deduction under section 80C of the Income-Tax Act in the 2006-07 budget. Investments made this financial year onwards in either a five-year time deposit of the post office or senior citizen scheme will thus be eligible for deduction within the overall ceiling of Rs 1 lakh.
This move is going to benefit taxpayers who were planning to invest in the post office term deposits. The collection under the post office schemes had gone down due to the difference in the interest rate between the bank deposits and the postal schemes, a primary source of accumulation to the National Small Savings Fund (NSSF). The tax treatment for 5-year deposits announced last year only helped to further skew the balance.
The latest decision taken by the government under pressure from states will bring relief but will partly succeed in restoring the balance, given that banks continue to offer more competitive rates on deposits. Moreover, mutual fund yields are far more attractive. If there is a decline in the growth of fresh accumulation to the post office savings schemes has implications for financially weak state.
States were bided to borrow from the NSSF to part finance their annual budget and the share of a state’s borrowing from the NSSF depends on fresh collection in that state. To cover deficit in their expenditure plans, many states were forced to borrow from the market. For a state with a poor financial record, such market borrowings will be more expensive than loans from NSSF.
The decision to restore bonus at the rate of 5% on the 6-year 8% monthly income schemes upon maturity would enable returns on such deposits comparable with the yield on banks deposits and government securities. Such deposits yielding 8.3% annually, currently will return 8.9% with the bonus.
The post office being more reachable than commercial banks and having a balance of Rs 4.59 lakh crore in more than 16 crore accounts across eight schemes, such efforts to treat post office account holders on same level with those saving with the commercial banks will help increase equity among various classes of savers.
This move is going to benefit taxpayers who were planning to invest in the post office term deposits. The collection under the post office schemes had gone down due to the difference in the interest rate between the bank deposits and the postal schemes, a primary source of accumulation to the National Small Savings Fund (NSSF). The tax treatment for 5-year deposits announced last year only helped to further skew the balance.
The latest decision taken by the government under pressure from states will bring relief but will partly succeed in restoring the balance, given that banks continue to offer more competitive rates on deposits. Moreover, mutual fund yields are far more attractive. If there is a decline in the growth of fresh accumulation to the post office savings schemes has implications for financially weak state.
States were bided to borrow from the NSSF to part finance their annual budget and the share of a state’s borrowing from the NSSF depends on fresh collection in that state. To cover deficit in their expenditure plans, many states were forced to borrow from the market. For a state with a poor financial record, such market borrowings will be more expensive than loans from NSSF.
The decision to restore bonus at the rate of 5% on the 6-year 8% monthly income schemes upon maturity would enable returns on such deposits comparable with the yield on banks deposits and government securities. Such deposits yielding 8.3% annually, currently will return 8.9% with the bonus.
The post office being more reachable than commercial banks and having a balance of Rs 4.59 lakh crore in more than 16 crore accounts across eight schemes, such efforts to treat post office account holders on same level with those saving with the commercial banks will help increase equity among various classes of savers.
ICICI Bank launched NRO fixed deposit scheme for NRIs
ICICI Bank India’s second largest bank announced a new non-resident ordinary deposit feature, NRO Fixed Deposit Plus (NRO FD) for NRIs staying in US, UK, Canada and Singapore. This new feature introduced by Bank’s NRI Services division will allow NRIs to maximize their post tax yield on NRO fixed deposits.
With this scheme, namely NRO Fixed Deposit Plus, ICICI Bank has made available the benefit of concessional rate of Tax Deducted at Source (TDS) under the Double Taxation Avoidance Agreement (DTAA) as a standard product feature to its NRI customers.
However, plain vanilla NRO deposits, which earn interest equal to the high yield resident deposits, unfortunately are not eligible for the statutory tax benefits enjoyed by non resident external or foreign currency non resident deposits. Currently, interest on NRO fixed deposit is accountable to a tax of 30.9 to 33.9% if DTAA benefit is not allowed. Also, such a tax is deducted at source on plain NRO FDs. This makes the post tax yield on plain NRO deposits relatively unattractive for a intelligent investor.
With this scheme, namely NRO Fixed Deposit Plus, ICICI Bank has made available the benefit of concessional rate of Tax Deducted at Source (TDS) under the Double Taxation Avoidance Agreement (DTAA) as a standard product feature to its NRI customers.
However, plain vanilla NRO deposits, which earn interest equal to the high yield resident deposits, unfortunately are not eligible for the statutory tax benefits enjoyed by non resident external or foreign currency non resident deposits. Currently, interest on NRO fixed deposit is accountable to a tax of 30.9 to 33.9% if DTAA benefit is not allowed. Also, such a tax is deducted at source on plain NRO FDs. This makes the post tax yield on plain NRO deposits relatively unattractive for a intelligent investor.
Monday, December 10, 2007
Government announces 5% bonus on POMIA scheme
In post offices there is monthly income account scheme, recently the government has announced a 5% bonus for this (POMIA ) scheme. The government took this decision to draw investors who have moved away from banks because of higher interest rates.
From this one gets an early indication of what voters can expect in the 2008 Budget. In order to impress investors, the government announced five-year post office deposits and the postal department’s senior citizens savings scheme would be eligible for Rs 1-lakh income tax exemption.
The senior citizens savings scheme offered at post offices and the five-year postal deposits have now been brought in equality with five-year bank deposits in terms of tax exemption. While small investors have reason to cheer, but this move of government may push banks to hike interest rates on term deposits in order to maintain sheen.
The two post office schemes will be able to avail tax exemption benefit under Section 80C of the Income Tax Act, 1961 from April 1, 2007. This could also be a indicator that the government may consider of increasing the income tax exemption limit in the forthcoming budget.
The 5% bonus on the post office monthly income account (POMIA) scheme, will be given on deposits made in new accounts. This benefit will be available on investments in new accounts opened on or after December 8, 2007. Together with the bonus, the effective yield will be 8.9% as against 8.3% currently available under the scheme.
“The return of 8.9% compares very favorably with the return on bank deposits or government securities of comparable maturity,” the statement said.
The hike in interest rates by banks could clearly be seen on the postal small savings schemes’ fund. There was a sharp decline in the deposit mobilization by postal small savings to Rs 1,54,418 crore in 2006-07 from Rs 1,73,308 crore. In the first quarter of the fiscal (April-June, 2007-08), deposit mobilization was at Rs 31,002 crore whereas withdrawal was Rs 34,211 crore.
While there was demand that the five-year post office time deposit account and the senior citizens savings scheme should enjoy the same tax treatment as five-year bank deposits. The government looked at these requests in consultation with the state governments.
Last month, it invited the state finance ministers to send their responses to certain proposals. According to a press release, “These responses have since been received and examined carefully.”
A finance ministry statement said: “Government attaches great importance to promoting small savings. Small savings schemes are safe and secure avenues for keeping the savings of citizens, especially in semi-urban and rural areas. It is also important that the interest rates applicable to small savings schemes should be comparable to the interest rates that are available on other savings instruments of comparable maturity.”
A post-office time deposit account is a service similar to a bank fixed deposit. The duration of the deposits can be made for a minimum period of one year to two years, three years and a maximum five years.
But, the tax exemption would be available only for the five-year scheme, which offers 7.5% interest. The senior citizen scheme offers 9% interest.
From this one gets an early indication of what voters can expect in the 2008 Budget. In order to impress investors, the government announced five-year post office deposits and the postal department’s senior citizens savings scheme would be eligible for Rs 1-lakh income tax exemption.
The senior citizens savings scheme offered at post offices and the five-year postal deposits have now been brought in equality with five-year bank deposits in terms of tax exemption. While small investors have reason to cheer, but this move of government may push banks to hike interest rates on term deposits in order to maintain sheen.
The two post office schemes will be able to avail tax exemption benefit under Section 80C of the Income Tax Act, 1961 from April 1, 2007. This could also be a indicator that the government may consider of increasing the income tax exemption limit in the forthcoming budget.
The 5% bonus on the post office monthly income account (POMIA) scheme, will be given on deposits made in new accounts. This benefit will be available on investments in new accounts opened on or after December 8, 2007. Together with the bonus, the effective yield will be 8.9% as against 8.3% currently available under the scheme.
“The return of 8.9% compares very favorably with the return on bank deposits or government securities of comparable maturity,” the statement said.
The hike in interest rates by banks could clearly be seen on the postal small savings schemes’ fund. There was a sharp decline in the deposit mobilization by postal small savings to Rs 1,54,418 crore in 2006-07 from Rs 1,73,308 crore. In the first quarter of the fiscal (April-June, 2007-08), deposit mobilization was at Rs 31,002 crore whereas withdrawal was Rs 34,211 crore.
While there was demand that the five-year post office time deposit account and the senior citizens savings scheme should enjoy the same tax treatment as five-year bank deposits. The government looked at these requests in consultation with the state governments.
Last month, it invited the state finance ministers to send their responses to certain proposals. According to a press release, “These responses have since been received and examined carefully.”
A finance ministry statement said: “Government attaches great importance to promoting small savings. Small savings schemes are safe and secure avenues for keeping the savings of citizens, especially in semi-urban and rural areas. It is also important that the interest rates applicable to small savings schemes should be comparable to the interest rates that are available on other savings instruments of comparable maturity.”
A post-office time deposit account is a service similar to a bank fixed deposit. The duration of the deposits can be made for a minimum period of one year to two years, three years and a maximum five years.
But, the tax exemption would be available only for the five-year scheme, which offers 7.5% interest. The senior citizen scheme offers 9% interest.
Saturday, December 8, 2007
SBI hopeful Indian Inc to look homeward for loans
The public is now days going for other options of investment than going for small savings schemes announced by the government the main reason behind this is the low interest rates on these instruments.
For example, State Bank of India is offering a return of 8.5% on five-year deposits along with Section 80C benefits. The return on a five-year POTD scheme, however, is only 7.5%.
In the current financial year five-year fixed deposit schemes of banks, have been brought under Section 80C, in which some benefits have been given specially for the senior citizens. According to the clause under Section 80C the senior citizen will get the benefit of tax extension. The citizens whose age is above 60 or above 55 years who have opted for early retirement will be able to get the relief under the saving scheme. You may get a complete information for SBI fixed deposit scheme here also check their eligibility criteria.
Under the scheme, a senior citizen can invest up to Rs 15 lakh for a minimum period of five years. The return given by the government on the scheme is 9%.
Under section 80C, an investment up to Rs 1 lakh in instruments like PPF, National Savings Certificate, POTD and five-year bank fixed deposits are deducted from the taxable income of the depositors to calculate their tax liabilities.
Equity-linked savings schemes and insurance premium have also been included in this scheme. There has been boom in the share market for the last four years, equity-linked savings scheme of mutual funds and insurance have emerged as popular instruments.
In POMIA, one can invest up to Rs 4.50 lakh for six years and can use it as a monthly income scheme. The depositors will get a monthly income at the rate of 8% per annum. At the same time, on maturity after 6 years, they will get 5% of the principal amount they deposited.
But as the scheme has not been included in tax benefit schemes, neither the deposited amount nor the interest income is tax-exempted.
For example, State Bank of India is offering a return of 8.5% on five-year deposits along with Section 80C benefits. The return on a five-year POTD scheme, however, is only 7.5%.
In the current financial year five-year fixed deposit schemes of banks, have been brought under Section 80C, in which some benefits have been given specially for the senior citizens. According to the clause under Section 80C the senior citizen will get the benefit of tax extension. The citizens whose age is above 60 or above 55 years who have opted for early retirement will be able to get the relief under the saving scheme. You may get a complete information for SBI fixed deposit scheme here also check their eligibility criteria.
Under the scheme, a senior citizen can invest up to Rs 15 lakh for a minimum period of five years. The return given by the government on the scheme is 9%.
Under section 80C, an investment up to Rs 1 lakh in instruments like PPF, National Savings Certificate, POTD and five-year bank fixed deposits are deducted from the taxable income of the depositors to calculate their tax liabilities.
Equity-linked savings schemes and insurance premium have also been included in this scheme. There has been boom in the share market for the last four years, equity-linked savings scheme of mutual funds and insurance have emerged as popular instruments.
In POMIA, one can invest up to Rs 4.50 lakh for six years and can use it as a monthly income scheme. The depositors will get a monthly income at the rate of 8% per annum. At the same time, on maturity after 6 years, they will get 5% of the principal amount they deposited.
But as the scheme has not been included in tax benefit schemes, neither the deposited amount nor the interest income is tax-exempted.
Monday, November 26, 2007
Your Fixed Deposits in a company are now safe
Now day’s people invest their money in shares, fixed deposits of the companies. But if the company declares itself sick after taking money from the investors then the investor will be in a dilemma. At times you get such rude shocks if you have invested your hard earned money in the Fixed Deposits of a company and the company declares itself bankrupt then there are little chances of getting your money back.
In some cases, the company would be deliberately declared sick so as to defraud the investors of their money. Once the company is granted protection by the BIFR (Board of Industrial & Financial Reconstruction), the company has protection to claims made against it by its investors. Even to initiate legal action against the company so as to get your money back, you would have to get the permission of the board
This has changed; there was a judgment by the Karnataka High Court that deposits to the company were not in the nature of money lent, but money held in trust; as a result, the company could not use the legal protection for claims for recovery of this money. In a recent case, a litigant made the National Consumer Commission aware of this ruling by the Karnataka High Court and the instance was adopted by the National Consumer Commission.
The people who have invested in fixed deposits (FD) offered by a company — and discovered much later that the company has gone down under and that it has no plan of making good on its promise because it has been declared sick — feel easy. A 2001 judgment made by the Karnataka high court came to the forefront earlier this month in a case filed against Modern Threads (India).
A divisional bench in its judgment held that a deposit in a sick company is not a sum lent to the company, but a sum held in trust by the company till the time of maturity. Hence, a claim made for the return of a deposit cannot be termed as a suit for recovery of money, and so, the protection under SICA would not be available to the company.
Now that there is awareness of this past ruling and that too at the level of the National Consumer Commission, this will be a blessing to a number of people who have taken Fixed Deposits issued by companies and then left holding onto their emotions as their money has seemingly been mis-appropriated by the company and with almost zero chance of getting their money back. Now, they can use this case as an instance and approach the Consumer Courts to get their money back.
Sometimes, legal decisions have the potential to positively impact a large number of consumers all at once.
In some cases, the company would be deliberately declared sick so as to defraud the investors of their money. Once the company is granted protection by the BIFR (Board of Industrial & Financial Reconstruction), the company has protection to claims made against it by its investors. Even to initiate legal action against the company so as to get your money back, you would have to get the permission of the board
This has changed; there was a judgment by the Karnataka High Court that deposits to the company were not in the nature of money lent, but money held in trust; as a result, the company could not use the legal protection for claims for recovery of this money. In a recent case, a litigant made the National Consumer Commission aware of this ruling by the Karnataka High Court and the instance was adopted by the National Consumer Commission.
The people who have invested in fixed deposits (FD) offered by a company — and discovered much later that the company has gone down under and that it has no plan of making good on its promise because it has been declared sick — feel easy. A 2001 judgment made by the Karnataka high court came to the forefront earlier this month in a case filed against Modern Threads (India).
A divisional bench in its judgment held that a deposit in a sick company is not a sum lent to the company, but a sum held in trust by the company till the time of maturity. Hence, a claim made for the return of a deposit cannot be termed as a suit for recovery of money, and so, the protection under SICA would not be available to the company.
Now that there is awareness of this past ruling and that too at the level of the National Consumer Commission, this will be a blessing to a number of people who have taken Fixed Deposits issued by companies and then left holding onto their emotions as their money has seemingly been mis-appropriated by the company and with almost zero chance of getting their money back. Now, they can use this case as an instance and approach the Consumer Courts to get their money back.
Sometimes, legal decisions have the potential to positively impact a large number of consumers all at once.
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