Smart Indian Investor

New Direct Tax Code (DTC) and other updates

phani414 — Sun, 25 Jul 2010 17:12:53 +0000

An Article in “Jago Investor” blog explains the new proposed DTC in lucid clear way. The link is below –

http://www.jagoinvestor.com/2010/07/changes-in-new-direct-tax-code-dtc.html

PersonalMoney.in has this useful article on the Children Insurance Plan

http://www.personalmoney.in/choose-the-best-childrens-insurance-plan

New Pension Scheme (NPS) > PPF ?

phani414 — Tue, 20 Jul 2010 17:41:29 +0000

There was a huge talk last year about the new Social Security scheme launched by the Government of India. Lets analyze if it is really better than the Public Provident Fund scheme (PPF).

Investment Requirements -

NPS scheme is applicable to any citizen of India (18-55 years) who can invest a minimum of Rs 500 a month or Rs 6,000 annually. There is no maximum limit on amount you can invest. You will have to bear a penalty of Rs 100 per year of default and will need to pay it with the minimum amount to reactivate the account. Also, dormant accounts will be closed when the account value falls to zero.

Annual maintenance charges are 350 Rs per year and there are very nominal charges for opening the account/ Transaction charges etc.

Benefits -

The normal retirement age has been fixed at 60 years. You will start receiving your pension from this age. At 60, A phased withdrawal of portion of the total amount is allowed but the lump sum benefit has to be availed only if you turn 70 years. Remember This is basically a pension scheme not a Fixed deposit. If the subscriber dies before he or she turns 60, the nominee can receive the entire pension corpus.

Tax Benefits -

The withdrawals from the New Pension Scheme (NPS) will no longer be taxed. For this scheme, the government has proposed EEE (exempt-exempt-exempt) method of taxation – exemption at all the three stages of deposit, appreciation and withdrawal. The NPS was less popular than the Public Provident Fund (PPF) due to taxation at withdrawal. Now, the NPS is likely to emerge as the best vehicle for retirement planning.

How Does this work –

Equity E Option -

Index Funds

C Option -

FDs, Debentures, liquid funds and bonds

G Option -

Government Securities

You have to select a mix of above 3 options by %. Default option is to invest split your total amount in the following format (50 per cent in E, 30 per cent in C and 20 per cent in G). You can only invest 50% maximum in Equity. If you select Auto Select option, as your age grows the fund decreases the % allocated to equity and increase that of C and G to offer you better investment protection.

NPS Auto Select option is expected to provide 12-18% returns per year based on the mix of options selected. But the % is not assured by the plan.

For more information about this scheme contact local branches of State Bank of India, UTI, ICICI Prudential, Kotak Mahindra, IDFC and Reliance. Visit http://en.wikipedia.org/wiki/New_Pension_Scheme_%28India%29 for more information.

Final Word –

NPS looks like a great alternative to the PPF for those who are looking for a pension instrument. Particularly most of the Software jobs in India don’t have any pension option as a result they might find this as an attractive alternative. But PPF has maturity limit of 15 years after which you can withdraw the entire amount. So, PPF is more attractive in case of planning for an event, lets say to you children education or marriage. You keep investing every year and the accumulated amount can be withdrawn after 15 years and used for your needs. Both are attractive in their own ways.

Have you heard about the PPF?

phani414 — Sun, 17 Jan 2010 23:40:35 +0000

For an average investor who wants peace of mind and decent returns on his investment what is better Investment vehicle than the Public Provident Fund (PPF) offered by Government of India. It also acts as a tax saving instrument allowing you to save 70,000 Rs per annum taxable income under 80C section of Income Tax. The maturity period of the account is 15 years and the Rate of interest is 8% compounded annually. It is mandatory to at least deposit 500 Rs every year into your account. Currently under 80C section it is EEE (Exempt-Exempt-Exempt), so neither the principle or the interest is taxable. It is recommended to open a PPF account early in your career and have a substantial deposit every year to have a good corpus built up by maturity.

Even though PPF offers consistent long term investment opportunity, it is being neglected by most due to its low 8% rate. But considering the current Deposit interest rates hovering around 7%, why not plan something for the future via PPF. The investment is Exempt from taxable income and offers consistent 8% rate for 15 years. For anybody who is worried about such a long term investment let me remind you that there is also an option of securing a loan on the deposit amount.

For more information contact Local Post Office or State Bank Of India and affiliates.

Also visit – http://www.indiapost.gov.in/Netscape/15yearsPPF.html

Download Rules PDF Here

Whats Different about this blog?

phani414 — Sun, 17 Jan 2010 23:31:47 +0000

Well.. the first question you will and in fact you should ask is what is different about this Blog? There are numerous websites out there offering News, Views, Technical Analysis, Recommendations etc. Not only these web sites claim themselves that they offer the best investment advice (which some of them genuinely do), they also make you look at investment like a casino game. These websites always give you targets where you should buy, exit and in how much time. Remember none of these websites predicted the great crash of 2008. So there is no point in trusting them in these boom times. This blog is built on single purpose that all those other websites and blogs are not built on. That is “Rational Investment”.

What is unique about this blog -

1. Medium term or long term investments are of focus of this blog. This blog does not offer short term or near term recommendations.

2. There will be only plain suggestions blogged here. There wont be any concrete target where you should exit a particular stock. I will try to point out good stocks which have potential to grow and how is the outlook in long term.

3. Along with stocks there are numerous other options and avenues of investments which offer 10-12% returns per year which are less risky and offer good diversification and beat the inflation. I will try my best to cover them too.

4. There will be updates about the news and view that matter to an average long term investor.

Just dive in and leave your feedback.

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