What is HUF (Hindu Undivided Family) HUF is a concept when mostly there were joint familys and people used to have family income. Individuals do have there own income and you can have a seperate family income which belongs to all the members of that family. If your name is Mr. Suresh Bafna and you are married then you can also have your own Suresh Bafna HUF. Your HUF comes into existence naturally on the day you get married. Any Hindu including Sikhs and Jains can form a HUF file any time after his marriage. once they have a child, then child is automatically a member of his father's HUF. Eldest male member is the KARTA (Karta is the person who manages the affairs of the HUF) of the HUF family. however recently even female member can be the karta. Steps needed to create a HUF Income tax file. 1. Applying for a PAN card of HUF link 2. Opening a Bank Account in HUF name 3. Rubber stamp of HUF. Coparcener is someone who has the right to demand the share of the HUF; coparceners are generally the Karta (Main decision maker of family, usually the Father , but an amendment has been brought which stated that Females can become Karta; there can be an all female HUF as well), then sons and daughters. HUF is treated as seperate individual file for income tax purpose and it gets all the same benefit and exemptions as of individual. How can you put capital or Funds into HUF 1. Ancestral Property - If there is ancestral property, then income from that property can be classified as HUF income or if ancestral assets are sold then money received from such sale can be transferred to HUF
Movable or immovable property received through a Will by way of inheritance is exempt from tax
2. Gifts - Gifts received by members of HUF on Birthdays,Marriage anniversary are exempt from tax up to Rs 50,000. Gifts received from relatives of members of HUF are exempt from this rule.
NOTE: Do not transfer your own assets or funds into the HUF, any income arising from this asset will be clubbed with your own income and you will be taxed on it. However if you transfer money from your asset and invest in tax free income generating instruments like ELSS mutual funds dividend income then no tax, as it is tax free income.
3. Gifts at the time of marriage are exempt from tax, whether from a friend, relative or colleague. Hence if a member of the HUF is getting married, the gift can be made to the HUF, and it will be exempt from tax in the hands of the HUF.
4. Loans - HUF can take interest free loans from relatives of the members 5. Business - Member or Karta can run a business under HUF name and income arising out of this business can be called as HUF income.
Any income received by the HUF can be further invested into various investment avenues such as mutual funds, fixed deposits, property and so on, and the profit or interest earned will be taxable in the hands of the HUF, as it is income of the HUF.
How to save TAX using HUF If your salary income is 5lakhs and you want to start a side bussiness and earn another 5 lakhs then you can do that bussines in HUF and that income can be called of as HUF income. TAX calculation case 1 (without HUF you have one pan card) Personal Income 5 lakh Business Income 5 lakh Total income is 10 lakh Invest benefit 80c 1 lakh Basic deduction 2 lakh so total taxable income is 7 lakh. (tax laibilty = 90,000 approx) case 2 (with HUF File you have 2 pan card) Personal Income 5 lakh Invest benefit 80c 1 lakh Basic deduction 2 lakh Taxable income is 2 lakh ( tax liability 20,000) HUF Income 5 lakh invest benefit 80c 1 lakh basic deduction 2 lakh Taxable income is 2 lakh (tax liability 20,000) so when you use HUF then your TAXABLE income is (2+2) 4 lakhs only as against earlier without HUF you have taxable income of 7 lakhs. so you are saving approximately Rs. 50,000 PER YEAR when you have a HUF file. FORMAT OF HUF CREATION DEED ( optional )
FORMAT OF HUF CREATION DEEDS
I, ____________________________ son Of ___________________________________ Residing at ____________________________________________ aged ___Adult do hereby declare-
That I am Karta of ____________________________________________
That I received on behalf of the H U F gift of Rs. ___________ by way of CASH/CHEAUE from my FATHER ________________________________(name of relative of karta of HUF) ondt. _______________ this formed the corpus of the HUF.
That the HUF at present is consisting of the followings members-
I)Shri _____________________, Adult, Residing at _________________
II)Smt. _____________________, Adult, Residing at _________________
III)Kumari _________________-Minor, Residing at ___________________
That the above statements are true to the best of my knowledge & belief. Declare this on_________________
Reliance Mutual Fund is getting into consolidation phase last week they merged Reliance Natural Resources Fund and today they announced merging of RELIANCE INFRASTRUCTURE FUND into Reliance Diversified Power sector Fund.
The date for the merger is 7 September 2013.
Investors of either of the fund can exit from 8th August 2013 till 6 September 2013 without paying any exit load.
S & P BSE Power Index fund will be the benchmark for Reliance Diversified Power Sector Fund.
Reliance Natural Resources Fund is getting merged with Reliance Vision Fund effective September 7, 2013.
Reliance Vision Fund will change few of fundamental attributes slightly. Post-merger, the scheme can invest 65-100 per cent of its assets in equity related instruments, against previous 60-100 per cent. Debt and money market instruments can comprise 0-35 per cent share against previous 0-30 per cent.
Reliance Natural Resources Fund was launched in January 2008 and till date it has given negative returns it was amongst few of the worst performing funds from Reliance Mutual Fund. The fund was launched at a time when markets were at peak but this fund has always been an under performer and has less returns then the benchmarks and has been a laggard in its peer group.
If you have any kind of compile error then just install this utility which is an xml parser
(ITR2 uses macros and xml hence you get this error)
If problem still persist try the solutions mentioned on below forum
ust install "
msxml 6.0 service pack1 "
for all type of compile errors In ITR excel
you can download this utility from the link below
One Mr. Shah a neighbour of mine showed me his policy taken from Aviva Life Insurance Lifesaver plus with Balanced Fund = 100%. He was purchasing a flat and wanted to surrender and see how much will he get back. He had paid 4 installment of Rs. 50,000 totalling to Rs. 2,00,000.
The details of the policy are as follows.
Base plan = 2,50,000
Policy Term = 20 years
Annual Installment = 50,000
policy start date = November 2009
Balanced Fund = 100%
1. policy admin charges : Rs. 660 First year (Rs 52 per month )
2. Fund Management charges : 1.25% per annum for balanced fund
3. Premium Allocation charge : (White collar Robbery)
a) Rs 20,000 First year (40% of first year premium)
b) Rs 15,000 second year (30% of 2nd year premium)
c) Rs 2,500 third year (5% on third year premium)
d) Rs 1,000 fourth year onwards (2% on fourth year premium)
4. Mortality charges as per age mortality column
1st year :
Amount invested : 50,000
Total charges : 22,327
Actual Investment : 27,680
Fund value: 30,552 ( Even at 10% return it will only be around 30,552)
Amount Invested : 50,000
Total charges : 17,968
Acutal investment : 32,032
Fund value : 68,988
Amount Invested : 50,000
Total charges : 6,326
Actual investment : 43,674
Fund value : 1,24120
Amount Invested : 50,000
Total charges : 5,774
Actual Investment : 44,226
Fund value : 1,85,423
So even after 4 years of investing Rs 2 lakhs you will end up with a fund value of Rs. 1,85,423
Now if you want to surrender this policy you will get back only Rs 1,39,423 because you have to pay there surrender charges which is 25% of the fund value after 4 years.
Had he invested in PPF or even simple Fixed Deposit he would have got 2 lakh plus as ppf gives more then 8%, he would have easily got more then 2,43,330 Approx (Balanced mutual fund or debt fund would have also given more then this because they have total charges cap of 2.5%)
He has been robbed of Rs 1,03,907 (2,43,330 - 1,39,423)
Who is responsible for this day light robbery ?
1. IRDA (regulator who regulates such policy)
2. Company ( who design this products )
3. Agent (who mis-sold the policy)
4. customer (who did not read the policy before buying)
The interesting part about this is the initial document has all this charges written in black and white in fine print.
RBI acts as a banker to the government participating in open market operations, maintaining price stability and ensure adequate flow of credit to productive sectors.
Open Market operations (OMO)
RBI sells or buys government securities in open market transaction depending upon whether it wants to increase liquidity or reduce it.
Reserve Requirements (CRR and SLR)
CRR or cash reserve ratio refers to a portion of deposits which banks have to keep with the RBI. This serves two purposes. It ensures that a portion of bank deposits is totally risk free and secondly it enables RBI to control liquidity in the system and thereby inflation. To control inflation RBI increases CRR and on other hand if it wants growth then RBI reduces it.
SLR is Statutory Liquidity Ration refers to the amount that all banks requires maintaining in cash, gold or approved securities with RBI. This helps RBI to control liquidity in the market.
It is the interest rate which RBI charges to banks for collateralized short term loan.
Reverse Repo Rate
Reverse Repo is the rate which RBI pays to banks. When banks have surplus liquidity and there are not enough borrowings from banks by consumers banks park money with RBI and earn some interest called reverse repo rate.
It is the interest rate at which banks, FIs and other approved entities in the interbank market can get financial accommodation from RBI.
Debt Instruments are contracts in which one party lends money to another on pre determined terms with regards 1) Interest rate, 2) periodicity of interest and 3) tenure of debt after which principal is repayed.
Few common examples of Debt Instruments are Fixed Deposit, NSC, PPF, Bond, Debentures etc
'Bond' is the term used for debt instruments issued by government and 'Debentures' is the term used for instruments issued by corporates or private sector.
There are bonds which are listed on stock exchanges after issuance and are traded regularly on marked to market basis. Trading platform for government securities are NDM - 'Negotiated Dealing System' and WDM- 'Wholesale Debt Market' also called NEAT(National Exchange for Automated Trading) on BSE and NSE.
Terms used in Bonds
Principal : Principal is the actual amount lent or invested or Face value of the bond.
Maturity : Maturity is the length of time until principal amount of bond must be repaid.
Coupon : Is the amount of Interest paid per year expressed as a percentage of the face value of the bond. It is mostly paid semi annually (It is called coupon as intially each bond used to have coupons attached to the bonds and holders receive the interest by stripping off the coupons and redeming them)
Different kinds of bonds
Coupon Bond : Debt obligation of semiannual interest payments generally called bearer bond or vanilla bond
Zero Coupon Bond: This bonds do not pay interest but are issued at deep discount to the face value. this are also known as deep discount bonds
Floating Rate Bond : Bond with variable interest rate is called floating rate bond. The adjustments are tied to certain money market instruments and are set every six months.
Callable Bond : Bond that can be redeemed by the issuer prior to its maturity.
Putable Bond : Bond holder can force the issuer to repurchase the bond before maturity.
Convertible Bond : Bond which can be converted to companys equity at predetermined date at the discretion of the bond holder.
Amortizing Bond: A class of debt in which a portion of principal amount is paid along with periodic interest.
DEBT INVESTMENTS THUMB RULE : Price of Bond is inversely proportional to the interest rate.
Lets look at an example. A 10 year GOI (Government of India) bond offering 7% fixed coupon has been auctioned today with face value of Rs. 100. We assume we bought it on issue and this bond gets listed on exchanges at Rs. 100. Aftere 3 months due to monetary measures taken by RBI the interest rate in market falles by one percentage to 6%.
As the bond is marked to market and traded. it has to be valued every day. so market price post interest rate cut will go up as the bond carries a higher coupon rate then prevailing market interest rate. However if the interest rate would move upward the same bond would be traded at discount price. therefore we follow the first thumb rule of interest rate and current price of a bond move in opposite direction.
Now the question is how much % price of a bond change due to changes in interest rate. in above case 1% rate cut in interest rate will affect all future cash flows to be received from this bond to the remaining tenor. We can then say that all future coupons will be re-invested at a lower interest rate and resulting in fall in YTM on the day of valuation.
Ideally, Retail Investor should invest as per ASSET ALLOCATION. 30% Debt ( PPF - 30%, Long term MF Debt fund -30%, Tax free
Bonds -10%, Bank FDs -10%, Traditional LIC - 10%, short term liquid fund -10% ) 30% Real Estate (1st own home, 2nd Home for Rental Income, 3rd Commercial property & 4th
Land or plot)
30% Equity (Large cap MF -30%, ELSS - 30%, Midcap/Smallcap - 30%, Direct large cap shares -10%)
Interest rates on PPF (Public provident Fund) and other small savings scheme has been reduced.
PPF Interest rate was 8.8% for year 2012-2013 has now been reduced by 0.1% to 8.7% for year 2013-2014, with effect from 1st April 2013.
Similarly Post office Monthly Income Scheme (MIS) will earn an interest of 8.4% for 5 year maturiy.
The National Savings Certificates (NSC) having maturity of 5years and 10 years will attract 8.5% and 8.8% interest respectively, reduced by 0.10% from previous year.
Securities transaction tax is reduced.STT on mutual fund and exchange traded fund redemption is reduced to 0.001% from 0.25% earlier. STT on MF/ETF purchase and sale on exchanges is reduced from 0.1% to 0.001%, only on the seller.
STT on futures has come down to 0.017% to 0.01 % CTT has been introduced on non agro based commodities at the same rate applicable to equity futures of 0.01% to make it par with STT
But there was some good news for travellers. If you are going abroad, you are allowed Duty-free shopping upto Rs 50,000 for a male passenger and Rs 1 lakh for a female passenger.