Infrastructure Bonds and Demat Account

Better sense seens to have prevailed over the issuers of Infrastructure Bonds . After the first of the issues from IFCI , which issued these bonds only in compulsory demat mode, IDFC , L&T are not so particular about the compulsory demat mode . Must be the low key responce to the issue that is forcing current issuers to, not only extend the issue period but also to issue these Infrastructure Bonds in non demat mode, provided KYC guidelines are adhered to

KYC guidelines :

You must already have a KYC compliance letter , which you must have used for your MF investments , else you must submit these documents along with Bonds application

a) PAN card photocopy

b) Address proof

You can check if you are KYC compliant from this link http://www.cvlindia.com/inquiry_kyc01.asp

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Tax Deduction at Source (TDS)

Tax deduction at source , is the tax which a person responsible for making a payment has to deduct from the amount he is paying , in lieu of the tax the receiver of the amount is suppose to pay and deposit it into the government coffer, quoting PAN of the receiver of the amount .

This one of the most effeciant ways of tax collection for the government .

Take the case of the transaction that took place between Vodafone and Hutch . When Hutch sold its telecom business to Vodafone , as per law Vodafone which was making the payment , should have resorted to TDS and must have paid Hutch the balance amount . But they did not , claiming that both Hutch and Vodafone , were Non Indian companies ( or some reason like that ) .

But now the Indian courts have decided that Vodafone , must have deducted TDS before they paid Hutch , hence the TDS amount , which must ideally have been paid by Hutch, would now have to be paid by Vodafone and the amount involved is a staggering $2 billion as TDS along with another $2 billion as penalty.

For lesser mortals like us , we see our employer resorting to TDS every month when our salaries are credited . Now the question is how do we check if that amount has been credited to the government.

Well this is what you could do
Log on to the website http://www.incometaxindiaefiling.gov.in/ and register here . After you login in navigate to My Accounts > View Tax Credit Statement (Form 26AS)

you will able to see all the TDS credits in your account across different financials years

What is Dividend Stripping

Imagine a situation where a investor would buy MF units just before the record date of a MF dividend , pockets the dividend and then sell the unit at a loss , thus showing it as a capital loss and then tries to adjust the capital loss with some other capital gains is known as dividend stripping .

Let me give you an example , suppose you bought some units of MF at an NAV of Rs.25 , after few days , the AMC annouces a dividend payout of Rs.3 per unit . So on the date the dividends are paid out to you the NAV of the scheme gets adjusted to Rs.22 ( 25-3 ) . Now, if you look just at the NAV , yes you are in a loss , but since dividends have already been credited to your account you are actually not at a loss .
Also note here that in case of Equity MFs , dividend is totally tax free in the hands of the Investor

Government figured this loop hole , and bought a fix for this and this is the fix
If an investor buys MF units within THREE months prior to the record date of a dividend, and then sells those MF units within NINE months after the record date, any capital loss from the transaction would not be allowed to be set off against other capital gains of the investor, up to the value of the dividend income exempted.

How many Bank account you ought to have

I would recommend that a salaried person , Ideally must have atleast three accounts

First of the account is the Salary account , the account into which your salary would get credited , this account would not be used for any other purpose other then salary credit . The day you change your job and the new employer is not able to use the existing account this account must be closed

Second account would be your Investment Account , this account would be used to route all your investment , all your premium payments ,credit card payments,all ECS, all bill payments . Take care to choose a bank for this account ,which would provide internet banking ( with a very good customer care ), bank which would proactively make sure that it is enrolled as preferred payment bank across various vendors and service providers.

Third account would be your Emergency account , this account would be used to put some or substancial money for emergency and This account must be , no excuse, has to be a sweep account , so that money lying here will not just lie idle, but earn optimal interest .

What is advantage of splitting accounts , well
1) When closing old unused salary account , you are sure , you will never receive DDs,ECS request , which will be drawn on the closed account , as all investment were routed through Investment account

2) You want to find detail of all payments , Investments made , Dividends received just get a statement of your Investment account and lo .. all details are there for you

3)You are concerned , that you may accidently invest money in illiquid instrument , money meant for emergency , that would never happen as your emergency cash is in a totally different account

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How to store your important documents

The latest scanners allows you to not only scan your important documents , but would also allow you to scan a set of related documents into a compact PDF document and then email them, so that it can be access online or write it on to a DVD .

This is a very elegant way to of storing documents . Imagine what you can do with this feature

a) Scan all you tax returns say in blocks of five years as a single PDF document
b) Scan all your educational marks card/Certificate as a single PDF document
c) Scan all your documents like Driver License , PAN card as a single PDF document
d) Scan all your Life Insurance Policies as single document , so your family can easily find them

There could be more uses ...above would be good list to start off with

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How not to miss your payment due dates

I'am sure everyone of us have quite a few bills that we have to pay once a year , which make them so much harder to remember . These could include our Life insurance premiums , Health insurance premiums , Accident insurance premiums , Property taxes ,Vehicle insurance premiums, could be renewal of some annual maintaince contract, Well is there a way we could make our life a little easy to remember these . Well Yes , try and use the reminder calender for example use the google calender , make sure you take care of these when you set the reminders

a) Set a recurring reminder , so you get a reminder every year

b) Make sure you set the reminder atleast a week to ten days ahead of your due day , so that you have enough time to pay the amount.

c) Include enough details in your reminder , so that you know exactly what the reminder is for and approximate amount you would need to pay.

So the little time spend to set these reminders , would be well spent , if you could avoid late payments fee or policies being lapsed .

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Reduce fix cost overheads

Further to my earlier post , regarding keeping cost low . I would say , we would need to keep an eye on cost , not just during investing , but in other aspect of spending too,Take you mobile phone plan , if you are an employee of a MNC or rather of a well known Indian corporation , do make it a point to check with your HR for corporate Mobile Tariff plans . Not only will these corporate plans have lower monthly rentals ,but would also have very competitive call rates and also they will not have CLIP charges associated and also have a feature called CUG ( Closed User Group ) free calling , That is unlimited free calls between number on coporates plans of same company.

So if the service provider is OK , you can pick more then one connection or change plans of exisiting connection to the corporate plans , so that people who you frequently calls say spouse , parents , use the other connection , and you can end up with unlimited free calls at a fraction of the cost

Any recurring cost , be they Internet connections Plans, Magazine subscriptions,Cable TV subscription plans , there is always scope to optimise and cut on wasteful expense .

The bottomline is to keep recurring cost low , because , in long run benefits of optimising recurring cost would be phenomenal , as it could also help you get into a "optimise" mindset

Let us try to do the simple things first .