Showing posts with label Finance and Accounts... Show all posts
Showing posts with label Finance and Accounts... Show all posts

Sunday, November 20, 2016

Demonetization: An Attempt to clean-up decades long Corruption and Black Money.

 
The move to demonetize Rs. 500 and Rs. 1000 currency tenders by the union government of India on 9th of November 2016 (Tuesday), is a historic effort to clean up the decade's long corruption and black money. As Indian citizens, we all should be proud of the fact that we elected a government, which is capable of taking such brave decision for the long-term betterment of the country’s economy. Nevertheless, there’s a high possibility that a certain percentage of people might interpret this decision negatively in view of the fact that short-lived challenges are to be seen, which might have a profound negative impact and dethrone ruling party in the coming elections, not everyone happens to be aware of the decision’s long-term benefits. If unaccounted or black money isn’t eliminated, it would make the rich richer and the poor poorer. According to SBI, “Banks received deposits worth Rs. 53,000 crore since the government put out of circulation, high-value banknotes in an offer to drain illegal wealth. Nearly 14 lakh crore are held in Rs. 500 and Rs. 1000 notes now – nearly 86% of the total value of currencies of all denominations in circulation” . Ultimately, government will possess an adequate amount of money to invest in infrastructure, education, agriculture, and all other sectors to build India economically stronger.
Above all, every honest taxpayer should appreciate this decision. In the present economic situation, black money has inflated prices in real estate, gold and a few other sectors, making it a challenge for a common people to invest. However the government’s attempt to curb black money will significantly lower the prices in such sectors. According to Finance ministry’s report in 2012, “real-estate accounts for more than 50 per cent of the current black money market”. Demonetization would not only repair internal economic issues, but also tackles funding to terrorism. Also, corrupted government officials and politicians who have earned in illegal ways will have no other option to put that money into usage.
 
Some opportunists are also using this as an opportunity to earn.
A 10% premium will help you earn up to Rs 60,000 in just a few months if you can use three family members’ accounts.
Just as the government is busy in dealing with this panic situation, a lucrative trade has cropped up where the salaried class are tapped by the tax evaders who are exploring many ways to cut their "losses".
If you are a white-collared private sector employee, agents are likely to approach you with the offer of putting at least Rs. 2 lakh in your bank account, but you have to return only Rs 1.8 lakh after two-three months.
A 10% premium will help you earn up to Rs 60,000 in just a few months if you can use three family members' accounts. The premium may rise to as high as 25% if you can get higher number of bank accounts involving more family members. Higher the sum, better the premium.
As a guarantee to return the money, the people who are depositing the money in the account are also taking a cheque drawn by the bank account holder mentioning the proposed sum. The cheque will be encashed at a later date, mutually agreed upon.
"The scheme is working mostly on trust factor and is a win-win for both. The possibility of cheque bouncing is too little as it is now difficult to withdraw large sums of money from the banks.
 
Some FAQ's
Is this the first time demonetization happening in India?
No, this happened 2 times already. 1947 and 1978.
Is it a sudden decision by PM?
No, it’s not an overnight decision, whatever happened (Jan Dhan Yojana for bank account to all, Convert post offices to banks, foolproof Aaadhar for all, Real Estate Bill, GST, Benami transaction Act, Income Declaration Scheme, paper gold, NGO and public trust scrutiny, sophisticated technology to Income Tax department and RBI, More powerful Income Tax Department, Rupees demonetization) and whatever is going to happen (hopefully more reforms on the way) are very well planned by people working under PM.
Will Black money in Gold, Real estate and Benami increase?
Like mentioned above, it’s not a single step. There are many plans in pipeline, eventually everyone will be paying proper tax to government very soon regardless of the mode of black money holding.
What are the options available for Culprits?
Either culprits can deposit the money to bank and pay 60% in tax OR burn the notes and its equal to paying 100% tax to government. So, in any case nation will benefit. Second case is much easier for and more benefit for our nation.
Should Aam Aadmi/small businessmen be worried about tax scrutiny?
No, cash deposit more than 10 lacs in a year in your bank accounts are intimated to taxmen. So, you don’t need to worry about deposits till 10 lacs. At, worst case you need to explain to the taxmen that these are your lifetime savings and pay taxes if demanded. No need to worry for being honest.
What will be the future of cash Transactions?
Government will force everyone (buyer and seller) to open bank accounts and use debit/credit cards. So, everything will be accounted and taxed properly.
There is lot of pain and there will be side effects.
Yes, we have credit cards and can survive with that in metros and big towns, we need to understand the pain people are experiencing in other parts of the nation. All of a sudden their hard earned money became worthless. But on other hand, assume this move as a therapy for a blood sucking disease (black money) which will not be cured by other means and someday it will kill that patient (our nation). So, therapy will be painful and will have side effects for few days. We need to bear this instead watching our nation pulled down by the blood sucking culprits day by day.
 
Amaresh~

Wednesday, July 1, 2015

All about SIP (Systematic Investment Plan)

What is a Systematic Investment Plan?
Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.
How does it work?
A SIP is a flexible and easy investment plan. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme. You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.
Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.
Rupee-Cost Averaging
With volatile markets, most investors remain skeptical about the best time to invest and try to 'time' their entry into the market. Rupee-cost averaging allows you to opt out of the guessing game. Since you are a regular investor, your money fetches more units when the price is low and lesser when the price is high. During volatile period, it may allow you to achieve a lower average cost per unit.
Power of Compounding
Albert Einstein once said, "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." The rule for compounding is simple - the sooner you start investing, the more time your money has to grow.
Example
If you started investing Rs. 10000 a month on your 40th birthday, in 20 years’ time you would have put aside Rs. 24 lakhs. If that investment grew by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60.
However, if you started investing 10 years earlier, your Rs. 10000 each month would add up to Rs. 36 lakh over 30 years. Assuming the same average annual growth of 7%, you would have Rs. 1.22 Cr on your 60th birthday - more than double the amount you would have received if you had started ten years later!
Other Benefits of Systematic Investment Plans
Disciplined Saving - Discipline is the key to successful investments. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.
Flexibility - While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.
Long-Term Gains - Due to rupee-cost averaging and the power of compounding SIPs have the potential to deliver attractive returns over a long investment horizon.
Convenience - SIP is a hassle-free mode of investment. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.
SIPs have proved to be an ideal mode of investment for retail investors who do not have the resources to pursue active investments.
Please contact to learn more about Systematic Investment Plans and to start saving today!

Sunday, March 1, 2015

Union Budget 2015-16 highlights

Finance minister Arun Jaitley presented the first full-year Budget of Prime Minister Narendra Modi's government on Saturday 28th of Feb.
Here are the highlights of the Union Budget 2015:

Fiscal deficit
* Fiscal deficit seen at 3.9 per cent of GDP in 2015/16
* Will meet the challenging fiscal target of 4.1 per cent of GDP
* Remain committed to meeting medium term fiscal deficit target of 3 per cent of GDP
* Current account deficit below 1.3 per cent of GDP
* Jaitley says have to keep fiscal discipline in mind despite need for higher investment
Growth
* GDP growth seen at between 8 per cent and 8.5 per cent y/y
* Aiming double digit growth rate, achievable soon
Inflation
* Expects consumer inflation to remain close to 5 per cent by March, opening room for more monetary policy easing
* Monetary policy framework agreement with the RBI clearly states objective of keeping inflation below 6 per cent
* "One of the achievements of my government has been to conquer inflation. This decline in my view represents a structural shift."
Revenues
* Revenue deficit seen at 2.8 per cent of GDP
* Non tax revenue seen at Rs 2.21 trillion
* Agricultural incomes are under stress
Disinvestment
* Government targets Rs 410 billion from stake sales in companies
* Total stake sale in 2015/16 seen at Rs 695 billion
Market reforms
* Propose to merge commodities regulator with SEBI
* To bring a new bankruptcy code
* Jaitley says will move to amend the RBI act this year, and provide for a monetary policy committee
* To set up public debt management agency
* Proposes to introduce a public contract resolution of disputes bill
* To establish an autonomous bank board bureau to improve management of public sector banks
Policy reforms
* To enact a comprehensive new law on black money
* Propose to create a universal social security system for all Indians
* To launch a national skills mission soon to enhance employability of rural youth
* To raise visa-on-arrival facility to 150 countries from 43
* Allocates Rs 346.99 billion for rural employment guarantee scheme
Borrowing
* Gross market borrowing seen at Rs 6 trillion
* Net market borrowing seen at Rs 4.56 trillion
General anti-avoidance rules (GAAR)
* Government defers rollout of anti-tax avoidance rules GAAR by two years
* GAAR to apply prospectively from April 1, 2017
* Retrospective tax provisions will be avoided
Taxation
* To abolish wealth tax
* Replaces wealth tax with additional 2 per cent surcharge on super rich
* Proposes to cut to 25 per cent corporate tax over next four years
* Corporate tax of 30 per cent is uncompetitive
* Net gain from tax proposals seen at Rs 150.68 billion
* Proposes to rationalise capital gains tax regime for real estate investment trusts
* Expects to implement goods and services tax by April 2016
* To reduce custom duty on 22 items
* Basic custom duty on commercial vehicle doubled to 20 per cent
* Proposes to increase service tax rate and education cess to 14 per cent from 12.36 per cent
* Exemptions for individual tax payers to continue
* To enact tough penalties for tax evasion in new bill
* Tax department to clarify indirect transfer of assets and dividend paid by foreign firms
Infrastructure
* Investment in infrastructure will go up by Rs 700 billion in 2015/16 over last year
* Plans to set up national investment infrastructure fund
* Proposes tax-free infrastructure bonds for projects in roads, rail and irrigation projects
* Proposes 5 "ultra mega" power projects for 4,000MW each
* Second unit of Kudankulam nuclear power station to be commissioned
* Will need to build additional 100,000km of road
* Ports in public sector will be encouraged to corporatise under Companies Act
Expenditure
* Plan expenditure estimated at about Rs 4.65 trillion
* Non-plan expenditure seen at about Rs 13.12 trillion
* Allocates Rs 2.46 trillion for defence spending
* Allocates Rs 331.5 billion for health sector
* If revenue improves, hope to raise budgeted allocations for rural job scheme by Rs 50 billion
Investment
* Propose to do away with different types of foreign investment caps and replace them with composite caps
* To allow foreign investment in alternative investment funds
* Public investment needed to catalyse investment
Gold
* To develop a sovereign gold bond
* To introduce gold monetisation scheme to allow depositors to earn interest
* To introduce Indian-made gold coin to reduce demand for foreign gold coins
Subsidies
* Food subsidy seen at Rs 1.24 trillion
* Fertiliser subsidy seen at Rs 729.69 billion
* Fuel subsidy seen at Rs 300 billion
* We are committed to subsidy rationalisation based on cutting leakages

Finance minister's comments
* "We inherited a sentiment of doom and gloom. The investment community had almost written us off. We have come a long way since then."
* "We have turned around the economy, dramatically restoring macroeconomic stability and creating the conditions for sustainable poverty elimination, job creation, durable double digit economic growth."