Monday, June 30, 2008

How to check whether your employer/financial institution have deposited your TDS?

Most of the new age companies deduct income tax before giving salary to the employees (Tax Deduction at Source or TDS). TDS is also done by banks and other financial institutions for returns on fixed deposits, short term gains on equities etc. How do you check whether the tax deducted from you through TDS have been paid to the exchequer by your company or the financial institution?

Tax Information Network (TIN) of Income Tax department, Government of India facilitates a PAN holder to view annual tax statement (Form 26AS) online.

It’s very straight forward involving few simple steps
1. You have to register your PAN number online
2. Get it verified by TIN
3. Start checking tax credit online

The verification can be done by either going to the nearest TIN-Facilitation Centre or asking them to visit your address. There is a small fee for the one time authorization. Rs 15 + service tax if the PAN holder visits the TIN-Facilitation Centre in person or Rs. 100 + service tax if the PAN holder opts for the TIN employee to visit him and do the verification.

This is the link to do it.

Sunday, June 29, 2008

Best banks of India

The Financial Express has released their annual “India’s Best Banks Awards”, which is based on the performance of Indian banks on various parameters such as Strength and Soundness, Growth, Profitability, Efficiency/Productivity and Credit Quality.

The top two banks in the following categories:
• Indian Overseas Bank
• Indian Bank
• State Bank of Hyderabad

New private sector
• AXIS Bank
• HDFC Bank

Old private sector
• Karur Vysya Bank
• Federal Bank

Foreign banks
• Bank of America

Best performance on the following parameters:
Strength & Soundness
• Canara Bank

• Deutsche Bank AG

• Standard Chartered Bank

• Bank of America

Credit Quality
• Yes Bank

Via and more details here.

Friday, June 27, 2008

Advantages of investing in Real-estate

Investing in real-estate, or more specifically, on a house or flat, is something that interests the salaried class very much. Though the scenario appears bleak due to the recent CRR and Repo rate hike by RBI (which could lead to an increase in home loan rates), buying a real-estate is something that is still worth pondering.

Real-estate has certain advantages that other investment options don’t have. Let’s have a look at few of those advantages and see why investing in real-estate is still a better option.

1) Property prices, in general, don’t show a downward trend, especially if selected at a location where there is ample scope for development. In such cases, it becomes a safer investment.
2) The rate at which real-estate prices increase sometimes even beat the stock market.
3) Inflation generally doesn’t affect real-estate (house/flat) returns because the costs of construction materials increase every year (with inflation). As a result, the cost of buying a house/flat is always going to increase with time. Hence properties will most probably be available at a higher price tomorrow.
4) Investing in a ready to occupy house/flat could save the money that you spend on a rented house. Till selling the flat, you can live in the flat and save on the rent amount.
5) If you are taking a home loan for buying the house/flat, the EMI could be afforded with 1) the money you otherwise pay as rent and 2) the tax savings (hence increased take home salary) you get on home loans.

Tax Savings
When you take a home loan, there are two ways with which you could save tax.
1) The principal component of the EMI is eligible for a deduction of up to 100,000 under Section 80C of Income Tax Act 1961. This is the same section under which Provident Fund, Insurance Premiums etc. are claimed.
2) The interest component of EMI is exempted up to 150,000.
3) If both husband and wife are working, then both can claim these exemptions for the same property, provided they have taken a joint loan and divide the principal and interest component of EMI among each other.

Thursday, June 26, 2008

Commodities and their weightages in WPI calculation of India, Part II

In case you are reading this post first, this is the second article of a four part series. Please go to the first part and then read on.

From the first part,
India uses 435 commodities for its WPI based inflation calculation. On a broader level, the 435 commodities are grouped into,
1. Primary Articles
2. Fuel, Power, Light & Lubricants
3. Manufactured Products

This post covers the first of the main groups, Primary Articles, which has a group weightage of 22.02525%. Primary Articles are further classified in various sub-groups and sub-sub-groups as shown below.

Primary Articles
  1. Food Articles
    1. Food Grains (Cereals & Pulses)
      1. Cereals
      2. Pulses
    2. Fruits & Vegetables
      1. Vegetables
      2. Fruits
    3. Milk
    4. Eggs, Meat & Fishes
    5. Condiments & Spices
    6. Other Food Articles
  2. Non-Food Articles
    1. Fibers
    2. Oil Seeds
    3. Other Non-Food Articles
  3. Minerals
    1. Metallic Minerals
    2. Other Minerals
Following table shows the sub-group, sub-sub-group and individual commodity weightage of the constituents of Primary Articles.

In the next part, we will cover Fuel, Power, Light & Lubricants, its sub classifications, individual commodities and their weightages. Do visit again.

- Commodities and their weightages in WPI calculation of India, Part I
- Commodities and their weightages in WPI calculation of India, Part II
- Commodities and their weightages in WPI calculation of India, Part III

- Office of the Economic Adviser, Ministry of Commerce and Industry, Govt. of India

Related Articles
- How is WPI inflation rate calculated in India?
- Inflation rates of India
- Base year and number of commodities used for inflation calculation in India
- The magic of Inflation

Wednesday, June 25, 2008

Online share trading websites of India

Ever since the dematerialization of shares happened in India, stock trading has shifted its base to the internet world. It made share trading a lot easier for people and more of them started buying and selling shares through various websites, which provided equity investors with facilities to do online trading. Online trading became so much popular so that today websites not only provide facilities to do share trading but also for Futures and Options trading, Commodities trading, Overseas trading, IPO application, Mutual Funds etc. and more.

Here is a non-comprehensive list of websites through which you can do online share trading in India, on BSE and NSE, the leading stock exchanges of India. The websites are neither arranged in any particular order nor are they ranked here. And all of them provide more or less the same set of services. There could be a difference in customer service though!

ICICI Direct
ICICI Direct is owned by ICICI bank. They have one of the highest brokerage fees in India but also have a plethora of stock research information and trading tips available with them.

Sharekhan is an old hand broker with a lot of experience in Indian stock markets.

Reliance Money
Reliance Money is owned by Anil Dhirubhai Ambani Group.

5paisa is an IndiaInfoline owned online equity trading portal.

Geojit, as a company, is in operation since 1987. As on today, it is the only company in which a government entity (Kerala State Industrial Development Corporation) has a stake.

Indiabulls is a leading Financial Services and Real Estate company of India. They have over 640 branches across India.

There are other online equity trading brokers as well; like Motilal Oswal, Kotak Securities, Angeltrade, SMC etc. I will update the list with their information in future.

Monday, June 23, 2008

How to increase your take home salary?

When cost of living skyrockets, smart ways to plan one’s pay packet to reduce his tax outgo and maximize his take home salary becomes relevant. Companies also realize the need to have a tax-friendly pay packet to help their employees get the better of their salary.

30 tax-smart ways to plan your pay packet could help you plan your compensation package and get the best out of it. According to the article that came on Rediff,
Saving a rupee in tax means you have a rupee more to save, spend or invest as you wish. So, when negotiating or reviewing your salary package, you should choose perks which are both useful for you and your family, and which are also tax-smart.
Have a look at the article.

Saturday, June 21, 2008

Commodities and their weightages in WPI calculation of India, Part I

As on today, India uses a basket of 435 commodities and a base year of 1993-94 for its Wholesale Price Index (WPI) based inflation rate calculation. The 435 commodities used for finding WPI range from food items like rice, wheat to petroleum products to medicines and are given weightages depending upon their importance and impact on the economy. Discussions are going on to revise the number of commodities to 980 and base year to 2004-05.

The 435 commodities are divided to various groups and subgroups. Individual commodities, and as a result, groups and subgroups have weightages. On a broader level, the 435 commodities are grouped into,

1. Primary Articles
2. Fuel, Power, Light & Lubricants
3. Manufactured Products

Primary Articles consist of food grains, fruits and vegetables, milk, eggs, meats and fishes, condiments and spices, fibers, oil seeds and minerals. Fuel, Power, Light & Lubricants consist of coal and petroleum related products, lubricants, electricity etc. Manufactured Products consist of dairy products, atta, biscuits, edible oils, liquors, cloth, toothpaste, batteries, automobiles etc. The group weightages are 22.02525%, 14.22624% and 63.74851% for Primary Articles, Fuel, Power, Light & Lubricants and Manufactured Products respectively. The total adds up to 100.

There are three more parts to this article. In the first part, we will cover Primary Articles, its sub classifications, individual commodities and their weightages. Second part is for Fuel, Power, Light & Lubricants, its sub classifications, individual commodities and their weightages and third part deals with Manufactured Products, its sub classifications, individual commodities and their weightages.

- Commodities and their weightages in WPI calculation of India, Part I
- Commodities and their weightages in WPI calculation of India, Part II
- Commodities and their weightages in WPI calculation of India, Part III

- Office of the Economic Adviser, Ministry of Commerce and Industry, Govt. of India

Related Articles
- How is WPI inflation rate calculated in India?
- Inflation rates of India
- Base year and number of commodities used for inflation calculation in India
- The magic of Inflation

Tuesday, June 17, 2008

Dealing with sudden wealth

What would you do if you get rich through a windfall? May be through sale of a property or receiving an inheritance or through an insurance settlement or getting lucky in a lottery draw!

This article that came in Times of India goes into the details of such a situation. According to them,
Most beneficiaries are not prepared for the consequences of sudden wealth. They are often clueless about how to deal with a large amount of money. Studies show that more than 35% of lottery winners declare bankruptcy in 10 years.
They key to face such a situation is, invest properly! Have a look at the article.

Wednesday, June 11, 2008

How India contributes to global oil price increase?

The price hike on petroleum products in India, barring kerosene, seems to have settled down comfortably into Indian minds. But, like I have written previously, the global crude oil price increase has not been completely transferred to a price hike in retail prices of petrol and diesel. Subsidies still rule Indian petroleum retailing!

The actual plunge is softened by the cushion made on the back of oil companies, central government and state governments. They suffer heavy losses through regulatory restrictions and tax cuts to make petrol available cheap for the common populace. As a consumer, one would feel great about the cushioning, but is it good for the global petroleum price? I would say no!

Economics says, whenever there is an increase in price of any commodity, its demand comes down forcing it to be sold at a lower price. That is, the increase in price is brought down by a decrease in consumption. Similarly, in an ideal case, when crude oil price increases, people start using it less making its demand go down, there by decreasing its price.

In India, since the government and companies suffer losses to maintain petrol/diesel prices low, people are not experiencing the actual effect of the price rise. As a result the demand for oil is not coming down (people are not reducing consumption) in the way it should have. For example, if petrol price was 10 rupees more than its current price, more people than now would resort to public transport than taking their own vehicle and the consumption would have come further down. In that case, India would have imported less oil, reducing global demand for oil and hence the price.

Along with the demand problem mentioned above, when you consider the fact that India is a fast growing and highly populated economy, you would know how much impact will it have on global crude oil demand and thus its price.

Reports say that oil products sales grew by 10.9 percent in India for the year ended February 2008, which is funded by an estimated oil subsidy of 200,000 Crore! China, which is a similar economy as India (fast growing and highly populated) had a 7.8 percent growth in oil consumption during the same period. And these two giants could easily contribute to the increase in crude oil prices as the demand supply conundrum is not allowed to happen ‘freely’ in these two countries.

Friday, June 6, 2008

Petrol price vis-à-vis diesel and kerosene prices

The price of crude oil has touched $132 a barrel. As 1 barrel is 159 litres, assuming a rupee/dollar exchange rate of 42, cost of crude oil (or petrol) per litre should have been around 35 rupees (plus manufacturing and transportation costs, profit). But petrol is sold at Rs. 56 per litre!

The main reasons for such a difference are two.
1. Import duties/sales tax on crude oil/petrol by central and state governments
2. Petrol price is increased disproportionately for the cross subsidization of kerosene and diesel as the later two are common man’s fuels

Kerosene is used by millions of poor in India and a rise in kerosene price would affect them severely. Diesel is used in trucks and trains which do mass transportation of essential commodities. Since a huge hike in these two would affect the concerned and the common populace very badly, government usually refrains from increasing their prices, or if increased, less compared to that of petrol.

But there are few things that need to be considered. One, kerosene is widely used for adulterating petrol as there is a price difference between them. Two, most of the (luxury)cars nowadays have diesel variants to exploit the price difference meant for a different cause. But then the sheer number of Indian common man may justify government’s decision to continue subsidizing kerosene and diesel.

Did you know that petrol sells at Rs. 113.30 a litre in Turkey, while it is just Rs. 2.12 a litre in Venezuela?

After the recent surge in global oil prices, and a subsequent increase of petrol/diesel prices in India, Rediff has compiled this great article about world’s costliest and cheapest petrol.

Thursday, June 5, 2008

CFDs: Contract for Difference

An agreement between buyer and seller of an asset saying that the seller will pay the buyer the difference between current value and end of contract time value of the asset, is called a Contract for Difference or CFD. Conversely, if the difference is negative then the buyer pays the seller. Thus, in a CFD, the seller makes money when the asset value decreases while the buyer makes money when the asset value increases, over the contract tenure.

CFDs allow investors to speculate on asset price movements and do trading without actually owning the asset. It is much similar to margin trading such as short selling and short covering. In CFDs the investors can have longer contract durations, which will allow them to take long term positions.

CFDs were first traded in UK where they had the benefit of being exempted from stamp duty. Soon investors realized its potential to trade on leverage on an asset than just obtaining tax exemption. And thus started the growth of CFDs world over! Today they are traded in most of the leading stock exchanges in the world.

Today we have lot of websites that deal with online stock trading, especially for the trading of CFDs, like One Financial. They provide a wide range of trading instruments and also an investor can trade with a large number of exchanges through their site. Being a website they also have the advantage of geographic independence (anyone can trade from anywhere).

Online CFD providers like One Financial make the task of CFD trading a lot easier for investors. They are one of the few sites where investors can open a demo CFD account to get themselves acquainted with the interface and processes involved in CFD trading. For all those newcomers in the field of CFD trading, they have a CFD for beginners section in their website.

CFDs are indeed an interesting investment opportunity for investors!

Wednesday, June 4, 2008

Effects of Oil price hike

The government has hiked petrol price by Rs. 5, diesel price by Rs. 3 and gas cylinder (14.2 Kg) price by Rs. 50 on the wake of global crude oil price increase while the price of kerosene remains unchanged. The move is also accompanied by several reductions in customs and excise duties related to oil.

Though the rise in oil prices will be a relief for oil marketing companies like BPCL, HPCL etc, their losses will not covered completely by the rise. All the measures (price hikes and duty cuts) will reduce their loss by Rs. 21,000 Crore (1 Crore = 10 Million)after a cost of Rs. 22,600 Crore to the government due to the reduction in income from duties. Still, there will be a gap of Rs. 29,000 Crore, which indicates that the rise is not enough and there could be another oil price increase in future.

The rise in oil prices will definitely add salt to the wounds already created by inflation surge. Since oil prices are directly or indirectly linked to food and other commodities used by the common populace, inflation is most likely to increase in the days to come. Strong correlation that the oil has with inflation!

So, will it lead to a decrease in the usage of petrol? Quite possible, as people who own vehicles would try not to use it more and would prefer alternative methods like car pooling, public transport etc. There is also a chance that the cost of public transport (transport buses, cabs, ricks etc.) may increase.

In all possibility, I feel, the middle and upper classes will manage to escape from the pinch, but it’s the lower class that is going to suffer, as usual!!

Monday, June 2, 2008

SEBI to introduce Currency Futures

The Market regulator SEBI has announced that it will introduce exchange traded currency futures in the next three months. The currency future is suggested to have a minimum price of $1,000, which would be introductory.

SEBI also pointed out that next they would be working on interest rate derivatives.

Currency futures and interest rate derivatives are financial instruments that are used to hedge financial risks. They are highly used in developed markets like the US. This is a clear sign of the Indian markets becoming more matured and advanced.

More news here!

Sunday, June 1, 2008

Are you game for an early retirement?

Gone are the days on which people want to work till sixty for maintaining their earnings, promotions and stuff. Nowadays, may be due to high pressure jobs and stressful lives, people want to retire from their career and lead a peaceful life as early as possible.

This article from Economic Times would make some of you think of retiring early and plan your strategies accordingly. Now, what could be the first step for early retirement?

According to the article,
We spoke to financial experts, and also a few smart people who actually managed to retire early from their active careers, and asked them for tips on how to retire early. Everyone was unanimous about the first step - make sure retirement stays at the top of your priority list.
Well, which I feel is not incorrect; but how many of us have retirement planning as our top priority?