Monday, 27 August 2007

Indo Japan Currency Swap...

India and Japan have entered into currency swap agreement. This agreement specifies that in the event of either country facing currency/forex crisis can swap local currency for dollars with the other country. That means, if any BOP or forex crisis arises for India, then Japan will buy Indian Rupee and sell Dollars to India and vice-a-versa.

Japan has entered into similar arrangements with other asian countries also. In the current scenario, the deal does not have any importance as almost all the asian countries are holding huge forex. But the significance of deal will realised in the event, crisis like that of Asian Financial crisis in 1997 and recent Indonesian forex woes.

Currently Chinese Remnibi is gaining ground and along with that inflation is also galloping in china, this could lead to adverse effect on chinese trade surplus (nevertheless china is experience huge upsurge in its trade surplus---thanks to artifical limit on chinese yuan)
Inflation in china may lead to increase in demand for imported goods vis-a-vis home manufactured goods.

anyways, if that happens, that would mean good days for Indian products as the cost advantage of chinese products may get eroded. The current inflation ion china is around 7%.

Friday, 10 August 2007

How to become a crorepati?

The setting objectives plays an important part in any individual's quest to achieve various goals in life. Objectives help channelise the thought process and thereby initiate appropriate action, which is in line with the goal that the individual has set out to achieve.

With respect to financial planning and youth, financial objectives play an important part in helping individuals achieve their dreams and goals in life. Financial objectives act as the first step towards determining the course of action needed to achieve various goals.

For example, youth can aspire to become Crorepatis (millionaires) one day. And through erfectly legal means! We are not trying to advocate any kind of illegal activity like going to a casino and gambling with your money or betting on horse races (which is legal by the way!). This goal is very much achievable in our view provided individuals plan their finances wisely. This article outlines a strategy for the youth of today to become a Crorepati.

Suppose an individual aged 25 years wants to become a Crorepati by the age of 40. This means he has 15 years to achieve the goal. He wants to know how much he will need to save per month/annum to achieve the target.

Assuming a rate of return of 15% per annum (p.a.) and an investment tenure of 15 years, the individual will need to save Rs 210,171 every year to become a Crorepati (refer Table 1 at end of article. Effectively, the individual would need to invest Rs 16,414 every month.

Of course, the above figures would vary with a change in the 'given' set of variables. For example, assuming that the individual had 20 years to become a Crorepati; he would need to invest a sum of Rs 97,615 per annum (or Rs 7,624 per month), other variables remaining the same. If we were to reduce the rate of return to 12% p.a. and the tenure were 20 years, then it would need an investment of Rs 138,788 p.a. (or Rs 10,974 per month).

Individuals could also be faced with another kind of dilemma; they know how much they can invest but would like to know the time it would take for them to become a Crorepati. An illustration would make things easier to understand. six months to achieve the magic figure of Rs 1 crore (refer Table 2). Conversely, if his investments were to increase to Rs 100,000 p.a. and his expected rate of return were to fall to 12%, it would take him 22 years and six months to achieve his target.

However, the numbers given above assume certain factors to be 'given'. For example, it is assumed that the individual Let us suppose an individual can invest Rs 50,000 p.a. and his expected rate of return is 15% p.a. on his investments. It will take him approximately 24 years and will be a disciplined investor and he will continue to invest the specified amount(s) diligently every month/year and that he will not deviate from his investment plan. If viewed differently, it
takes patience, discipline and belief on part of the investor to stay on course of the journey the entire distance.

Individuals therefore need to bear the minute details in mind before embarking on their journey to becoming a Crorepati. As we have shown, becoming a Crorepati is not 'mission impossible'- in our view, it is 'mission achievable'!

* Rs 1 crore = Rs 10 million

Source: To download full article click here.

Monday, 30 July 2007

How costly can the delay in filing tax returns be?

First, what are the due dates?
Assessees having income from salary have to file return of income before July 31 of the assessment year. This is the ‘due date’ prescribed in section 139(1) of the Income Tax Act, 1961.
Self-employed businessmen and professionals, and those deriving income from let-out property too have to file their returns by this date.
However, businessmen and professionals with aggregate turnover/annual receipt exceeding Rs 40 lakh (in the case of business) and Rs 10 lakh (in the case of profession) have time up to October 31 for filing their return of income.
Are there any benefits in filing by the due date?
An assessee filing return by the ‘due date’ provided in the statute is eligible to file a revised return if he discovers any omission or wrong statement therein. Time limit for filing revised return is one year from the end of the assessment year or before completion of assessment. No penalty would be levied for filing a revised return on voluntary basis.

So, by filing late, does one lose the revision option?
Yes. If an assessee does not file his return within the ‘due date’ and files his return subsequently, he cannot have the benefit of revising the return, as the return filed beyond the ‘due date’ is treated as ‘belated return’.

Any other advantages of sticking to the deadline?
The taxpayer gets the advantage of carry forward and set off of losses, such as loss from business and loss under the head ‘capital gains’. If the return is filed beyond the ‘due date’ mentioned in section 139(1), these losses cannot be carried and set off against the income of subsequent years.
Yet another advantage of filing return before ‘due date’ is the eligibility for interest on tax refund from April 1 of the assessment year.

Can delay, therefore, be wasteful for ‘refund’ cases?
Yes, because where the return is filed after the ‘due date’, interest on refund is paid only for the period from the month of filing the return to the date of refund. In other words, no interest is paid for the period from April 1 of the assessment year to the date of filing the ‘belated return’.

Do those with ‘nil’ tax liability have anything to fear?
Where the return is filed beyond the ‘due date’, the taxpayer has to pay interest if any, on tax liability existing beyond tax deducted at source (TDS) or tax collected at source (TCS) or the advance tax paid. The question of interest does not arise where tax due for payment is ‘nil’, as would be in the case of most salaried people who pay their taxes through the TDS route. Legally, a taxpayer can file his return before the end of the assessment year without any penalty (however with penal interest under section 234A). Again, the question of penal interest does not arise in the ‘nil’ cases discussed above. For the assessment year 2007-08, return of income could be filed up to March 31, 2008.

How costly can delay in filing IT return be?
Apart from interest and penal interest, there are other implications. If the return is filed after March 31, 2008 but before March 31, 2009 the AO (Assessing Officer) could levy a penalty of Rs 5,000 under section 271F. Even when there is no further tax payable on the income admitted, penalty under section 271F is leviable for the delay. If the return is filed after March 31, 2009 then such return would become an invalid return.
source: HINDU