Adjustment of Fringe Benefit Tax paid against Advance Income Tax for FY 2009-10

Good news to those who paid the Advance Fringe Benefit Tax (FBT) for the I Quarter of FY2009-10 and wondering how to get that back. The FBT was later on abolished in the Finance Act (2), 2009. 

In a circular, the IT dept has clarified that the Advance tax in respect of FB paid by the assessee can be adjusted against the Advance Tax for the FY 2009-10. If you do not have any tax liability, then you can claim refund of the FBT in their returns.

Below is the circular for your reference.


2/2010, Dated: January 29, 2010
F. N0.385/05/2010-IT (B)
Sub: Adjustment of “Advance Tax in respect of Fringe Benefits” for Assessment Year 2010-11 against “Advance Tax” – matter regarding. 

The Finance Act, 2005 introduced a levy namely Fringe Benefit Tax (FBT) on the value of certain fringe benefits as contained in Chapter XII H (Sections 115 W to 115 WL) of Income Tax Act, 1961. By the Finance (No. 2) Act, 2009 a new Section 115 WM was inserted to abolish the FBT with effect from Assessment Year (A.Y.) 2010-11. Consequently, benefits given to employees are taxed as perquisites in the hands of employees in terms of amendments to Clause 2 of Section 17 of Income Tax Act, 1961. However, during the current Financial Year 2009-10 some assessees have paid “advance tax in respect of fringe benefits” for Assessment Year 2010-11. In such cases the Board has decided that any installment of “advance tax paid in respect of fringe benefits” for A.Y. 2010-11 shall be treated as Advance Tax paid by assessee concerned for A.Y. 2010-11. The assessee can adjust such sum against its advance tax obligation in respect of income for A.Y. 2010-11 or in case of loss etc claim such payment as refund as advance tax paid in A.Y. 2010-11.

2. This circular may be brought to the notice of all officers in the field for compliance.

Hindi version to follow

(Ansuman Pattnaik)
Director (Budget)
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RBI hikes CRR by 75 bps to 5.75% in two stages

The Reserve Bank of India (RBI) has hiked its cash reserve ratio by 75 bps to 5.75% as against 5% at its credit policy meet today.
The move will be implemented in two stages. The first 50 bps hike will come into effect on February 13 while the next 25 bps hike will be effective February 27. A CNBC-TV18 poll had forecasted a 50 bps CRR hike. The move will result in a mop-up of Rs 36,000 crore by February end.

The central bank has left unchanged the reverse repo and repo rate at 3.25% and 4.75% respectively. It says the FY11 growth pace of 7.5% will continue amd has upped its March-end inflation forecast to 8.5%. The apex bank has also lowered its bank loan and deposit growth expectation to 15% and 16% respectively.

Bankers say that even if the CRR is raised, they have no leeway to raise rates because nobody is demanding money much these days.

Expected Outcomes
  • Reduction in excess liquidity will help anchor inflationary expectations.
  • The recovery process will be supported without compromising price stability.
  • The calibrated exit will align policy instruments with the current and evolving state of the economy.

Source : MoneyControl Flash News

This is in line with my expectations shared with you all on 24th Jan 2010. Expect the market to react today by going up ! Let me see.

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CA Exam results for Nov-09 exams postponed to 1-Feb-2010.

Results of the Chartered Accountants PE–II, PCE and IPCE held in November, 2009 scheduled to be announced on 29th January, 2010 will now be announced on 1st February, 2010. – (28-01-2010).

The results of the Chartered Accountants Professional Education (Examination-II), Professional Competence Examination and Integrated Professional Competence Examination held in November, 2009 scheduled to be announced on 29th January, 2010 will now be announced on 1st February, 2010.

Inconvenience caused is regretted.


Here is wishing all those who have taken this exam. You have a breathing time. I know the state of the those waiting for exams. You have a weekend to celebrate.

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Story with a message : Don't judge people by the look & act - understand them

As she stood in front of her class on the very first day of school, she told the children an untruth. Like most teachers, she looked at her students and said that she loved them all the same. However, that was impossible, because there in the front row, slumped in his seat, was a little boy named Teddy Stoddard. 

Mrs.Thompson had watched Teddy the year before and noticed that he did not play well with the other children, that his clothes were messy and that he constantly needed a bath. In addition, Teddy co uld be unpleasant. It got to the point where Mrs. Thompson would actually take delight in marking his papers with a broad red pen, making bold X's and then putting a big 'F ' at the top of his papers.

At the school where Mrs. Thompson taught, she was required to review each child's past records and she put Teddy's off until last. However, when she reviewed his file, she was in for a surprise.

Teddy's first grade teacher wrote, 'Teddy is a bright child with a ready laugh. He does his work neatly and has good manners... He is a joy to be around.."

His second grade teacher wrote, 'Teddy is an excellent student, well liked by his classmates, but he is troubled because his mother has a terminal illness and life at home must be a struggle.'

His third grade teacher wrote, 'His mother's death has been hard on him. He tries to do his best, but his father doesn't show much interest, and his home life will soon affect him if some steps aren't taken.'

Teddy's fourth grade teacher wrote, 'Teddy is withdrawn and doesn't show much interest in school. He doesn't have many friends and he sometimes sleeps in class.'

By now, Mrs. Thompson realized the problem and she was ashamed of herself. She felt even worse when her students brought her Christmas presents, wrapped in beautiful ribbons and bright paper, except for Teddy's. His present was clumsily wrapped in the heavy, brown paper that he got from a grocery bag. Mrs. Thompson took pains to open it in the middle of the other presents. Some of the children started to laugh when she found a rhinestone bracelet with some of the stones missing, and a bottle that was one-quarter full of perfume. But she stifled the children's laughter when she exclaimed how pretty the bracelet was, putting it on, and dabbing some of the perfume on her wrist. Teddy Stoddard stayed after school that day just long enough to say, 'Mrs. Thompson, today you smelled just like my Mom used to.'

After the children left, she cried for at least an hour. On that very day, she quit teaching reading, writing and arithmetic. Instead, she began to teach children. Mrs. Thompson paid particular attention to Teddy. As she worked with him, his mind seemed to come alive. The more she encouraged him, the faster he responded. By the end of the year, Teddy had become one of the smartest children in the class and, despite her lie that she would love all the children the same, Teddy became one of her 'teacher's pets..'

A year later, she found a note under her door, from Teddy, telling her that she was the best teacher he ever had in his whole life.

Six years went by before she got another note from Teddy. He then wrote that he had finished high school, third in his class, and she was still the best teacher he ever had in life.

Four years after that, she got another letter, saying that while things had been tough at times, he'd stayed in school, had stuck with it, and would soon graduate from college with the highest of honors. He assured Mrs. Thompson that she was still the best and favorite teacher he had ever had in his whole life.

Then four more years passed and yet another letter came. This time he explained that after he got his bachelor's degree, he decided to go a little further. The letter explained that she was still the best and favorite teacher he ever had. But now his name was a little longer.... The letter was signed, Theodore F. Stoddard, MD.

The story does not end there. You see, there was yet another letter that spring. Teddy said he had met this girl and was going to be married. He explained that his father had died a couple of years ago and he was wondering if Mrs. Thompson might agree to sit at the wedding in the place that was usually reserved for the mother of the groom. Of course, Mrs. Thompson did. And guess what? She wore that bracelet, the one with several rhinestones missing. Moreover, she made sure she was wearing the perfume that Teddy remembered his mother wearing on their last Christmas together.

They hugged each other, and Dr. Stoddard whispered in Mrs. Thompson's ear, 'Thank you Mrs. Thompson for believing in me. Thank you so much for making me feel important and showing me that I could make a difference.'

Mrs. Thompson, with tears in her eyes, whispered back. She said, 'Teddy, you have it all wrong. You were the one who taught me that I could make a difference. I didn't know how to teach until I met you.'


I checked the website of and found that there is nothing mentioned about Teddy or Theodore ! It may be a fiction. But, it has a point!

You can relate this to any situation. The teacher can be a Manager and Teddy be his sub-ordinate. I really like the way the story is made. Hats off to the person thought about this.
Thanks to Ramesh, my friend, who forwarded this story.

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100th Post & Completion of 1 year of blogging.


Thanks to Sendil (can say my statistician), who reminded me that I am due for my 100th posting and that can coincide with the completing of 1 year of my blog.

Yes, my first posting was on 25th Jan 2009. Time flies and today the blog is 1 year old and here is my 100th posting. I thought I won't achieve this milestone of 100 in 1 year. But thanks to the holidays, am able to spend time for blog.

Anand & Bala will shout at me for mentioning their names again. But, at the cost of their shouting, I would like to thank them for kindling my interest in writing a blog. Thanks buddies. I cant refrain from mentioning this.

Ashok and Raghavan are also a source of inspiration and keeps a tab on my posting and give regular feedbacks.

What is so special on this occasion? Nothing special, but I wanted to print all my postings and give a copy to my parents. They have not seen my blog. They will be really happy to see this. I want to enjoy seeing them happy.

I am indebted to all my friends, wife and parents, who have stood by me and forced me to achieve this.

I take this opportunity to wish all my friends a Happy Republic Day. Blog itself is a way of freedom to express one's thoughts. So, let us celebrate our status of a Republic country.

Jai Hind,


I am asking Sendil to click this post for publishing. When I write this, he is not aware of this. :-)

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2 sets of Standards under Companies Act for achieving IFRS convergence

The much awaited plans for the realistic IFRS roadmap is here. It has been decided to go in phases to facilitate smooth convergence.

Following is the press release issued by the Ministry of Corporate Affairs laying down the IFRS convergence road map, on Friday, January 22, 2010.

It is a good opportunity for the members to get into the IFRS, as we have time and also can learn from the experience of the first set of people adopting the IFRS.


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Results of the Chartered Accountants Exams - Nov 2009

Here comes the notification on the Announcement of results for the CA Exams conducted during Nov-09.

Good Luck to all those who are awaiting the results. I wish you all a Successful career as a Chartered Accountant.


January 21, 2010
The results of the Chartered Accountants Professional Education – II, Professional Competence Examinations and Integrated Professional Competence Examination held in November, 2009 are likely to be declared on Friday, the 29th January, 2010 around 2 P.M. and the same as well as the merit list (candidates securing a minimum of 55% and above marks and upto the maximum of 50th Rank) on all India basis will be available on the following website:


Arrangements have also been made for the students desirous of having results on their e-mail addresses to pre-register their requests at the above website, i.e., http://www.caresult from 22nd January, 2010. All those registering their requests will be provided their results through e-mail on the e-mail addresses registered as above immediately after the declaration of the result.

Further facilities have been made for students of Professional Education – II, Professional Competence Examinations and Integrated Professional Competence Examination held in November, 2009 desirous of knowing their results with marks on SMS. The service will be available through MTNL, India Times and Reliance.

For getting results through message students should type:

i) for Professional Education - II Examination result the following

CAPE2(Space) XXXXX (Where XXXXX is the five digit PE II examination roll number of the candidate)

e.g. CAPE2 00171

ii) for Professional Competence Examination result the following

CAPCE(Space) XXXXX (where XXXXX is the five digit PCE examination roll number of the candidate)

e.g. CAPCE 00197

iii) for Integrated Professional Competence Examination result the following

CAIPCE(Space) XXXXX (where XXXXX is the five digit IPCE examination roll number of the candidate)

e.g. CAIPCE 00297

and send the message to:

52001 - for DOLPHIN AND TRUMP users only

58888 - for all mobile services - India Times

51234] - for Reliance subscribers (Also accessible through R-World and Voice Portal – To call 51234815 from Reliance Mobiles)

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IPO - Thangamayil Jewellery Ltd - All that glitters is not gold!!!

All that glitters is not gold - Yes, here comes another Public Issue - by a Gold Jewellery  business. It is not a high end business, but a well known business in the city of Madurai (in Tamil Nadu - southern part of India).

There are very many players in this industry and not many get into the Stock Market to raise funds for the business. The reasons being:

1. They all operate in an unorganised sector

2. Most of the purchase and sales are in Cash

3. Lot of competitions and individual's taste differ, when it comes to jewellery.

4. If you are not updating your patterns and designs, you are out of the race.

There are very many players in the southern part of India, who has an established customer base and created a brand for themselves (GRT, Vummudiars, NAC etc.,). There are many business with big showroom and facilities - like Joy Alukas, GRT, Kazhana etc.,

All the above are fine. But, if you read the Red Herring Prospectus, you see that the company is planning to raise about Rs.29 crores by this IPO.

The price band is fixed at Rs.70 - Rs.75.

The issue is open between 27th Jan 2010 and 29th Jan 2010.

If you look at the objectives of the issue, they are planning to fund new retail outlets and more for the working capital. 

They plan from this IPO               - 29 crores,

Pre-IPO placement                       -  6 crores

Internal accruals                          - 13 crores

Total                                          - 48 crores

Land & Building                          -   8 crores

Interiors                                     -   9 crores

Working Capital                         - 23 crores

Other assets & Issue expenses  - 8 crores (inclg contingencies)

Total                                        - 48 crores

The company is also having a Debt (secured & unsecured) to the tune of Rs.53 crores!

It has a negative cash flows in 2005, 2007, 2008, 2009 & 6 months ended Sep-09!!!

With all the above and no big business in other parts of the State (forget about National presence), it is not worth investing in this IPO.

The only positive in this IPO is that the family running the business is well experienced in this trade and has a name in the city of Madurai.

The liquidity of the share and trading volumes would be a question mark.

I would prefer to invest in other stocks than this IPO, on fundamental basis, considering the high price band and the cyclical nature of the business. 

Only those who have a good risk appetite can subscribe to this issue.



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Third Quarter Review of Monetary Policy - Jan 2010

The RBI will review the Monetary Policy (III Quarter) on 29th Jan 2010. It has more impact on the personal finance and liquidity.

I feel that the Cash Reserve Ratio (CRR) would be increased by 50bps from the current level of 5%. Am not expecting any change in the repo or the reverse repo rates. Even if there is a change, it would not be more than 10bps.

What are the implications as an individual? As we all know that when the CRR is increased, the banks lending quantum decreases. So, they require more funds to meet the demand. In that process, the interest rates on Fixed Deposits will go up slightly. People also prefer Bank FD from a safety perspective.

With tighter norm, the liquidity will be curtailed and spending will come down. Since the spending decreases, the market will lower the prices to attract spending. By this, the inflation will also come down.

Hence, the move of RBI has more impact on the economy as a whole. The III Quarter review policy will be announced on 29th Jan 2010. So, we can see some positive movement in the Share market also from Feb. Again, it is time for budget and depending on the budget measures, the market will make its way.

In all, I am confident that this bull run will continue and even if the buget is not that good, it will be a temporary impact on the stock market.

Let us wait till 29th Jan 2010.

In the meantime, may I request your views / thoughts on how the RBI review outcome.

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Internal Audit of Stock Brokers

Today (23rd Jan), I attended the Professional Development meet of the Bangalore chapter of the Institute of Cost & Works Accountants of India. The topic was "Mandatory Internal Audit of Stock Brokers", presented by CMA.K.N.Mahesh. He is a Commerce Graduate and a Fellow Member of the ICWAI. He currently practicing as a Cost Accountant. He has experience in the Internal Audit of the Stock broking outfits, per the SEBI guidelines.

It was a nice session, well attended by members. He approached the topic by giving the reason for such a mandatory provision by SEBI and the scope for the Internal Audit.

He took us through the various areas that are audited, the method of conducting the audit (sampling, questionnaires etc.,), the pre-audit work required, etc.,.

He touched upon how the prevention of money laundering relate to the internal audit of the stock brokers. He also briefed about the various internal controls and checks that a broker should maintain and how those areas are audited.

He highlighted the risk management of the business and how it is being evaluated.

Though the program was for an hour, it extended by 30 minutes, as he took the questions posed by the members present and answering them. It is a huge area and he made sure that it is covered in an hour.

This is a new area, where the Cost & Management Accountants (CMAs) can venture into, in the capacity of Management Accountant.

I also had the opportunity to meet up with few members and befriended them.

It was a nice evening, with a learning.

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Is the stock market in for a correction?

The Nifty today (21st Jan 2010) fell by 128 points and the Sensex fell by 423 points, due to the negative trend in the Asian markets and the US markets. Adding fuel to the fire, the results of the majors are also not good - L&T, BHEL. So, the markets tumbled today. It may fall further as the US market is also not doing good - thanks to Obama being harsh on the banks. With the F&O expiry approaching for the Jan 2010, you can see some negative trends till end of Jan 2010.

If the market falls tomorrow (Friday), i would suggest to buy fundamentally good stocks, as it may go up soon. You can really use any downfall for the purchasing opportunity of good stocks.

I dont want to recommend stocks, as there are many sites, which does this job. So, note down few stocks and start buying them on dips for your investments.

Happy investing.

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Some Good News - Tax Exemption limit may be increased

With the growing cost and not a matching increase in the income, the Government is mulling over increasing basic exemption threshold for Income Tax liability.

I feel that a further exemption of about Rs.20,000-Rs.30,000 would be a good gesture for those, who did not get any increment during the last few years. This will ensure few bucks in the pocket of the individual and a hole in the government kitty.

Government is not keen on reducing the tax rates for the Corporates, citing that the exemptions they have would reduce the average tax rate.

Let us hope for the best in the coming buget.

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Quote your PAN to save excess deduction of tax from your income

The CBDTCentral Board of Direct Taxes (CBDT) in its notification stated that those who do not provide their Permanent Account Number (PAN) to the deductor, the tax to be deducted (Tax deducted at source - TDS) from their income (salary, fee, etc.,) would be at 20%. There are various rates ( 1% to 10%) for the TDS depending on the nature of transaction. This new notification will be effective 1-Apr-2010.

What are the impacts of this notification:
  1. Quote your PAN in all your communications, bills etc.,
  2. The deductee to inform the deductor and also the deductor to inform the deductee.
  3. Those without PAN will have to get their PAN, to save themselves from excess TDS
  4. More people / business will get their PAN soon.
  5. When you open a Fixed Deposit with bank and the interest paid/payable is more than Rs.10000 pa, tax will be deducted at 10%. If you fail to quote your PAN, tax would be deducted at 20%.
Let us look at a situation. A new business started in Jan 2010 and do not have a PAN. The business may start billing for the services and the customer will have to deduct the tax, as per the nature of transactions (say 5%). Since the new business failed to provide the PAN, the customer will deduct 20% from the bill. Now, the business cannot get back the excess 15% (20% - 5%) back from the customer. It has to file the return with the Income Tax department and adjust the excess TDS or claim refund (as the case may be).

It is a longer process to get the excess TDS adjusted or to get a refund. Why cut down your operating cash flow (net payment from customers)?.

Get your PAN and quote in all your transactions.

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IFRS based accounts for Small and Medium Enterprises (SME) deferred

Recently read an article in Economic Times on the IFRS adoption by Small & Medium Enterprises.

It is well known fact that change is very difficult. But if is for good, then it is not to be taken as a difficulty and should be welcomed. No pain - No gain. Given that there is a cost involved in adopting IFRS by SMEs, it was felt that the adoption to be deferred. Also, it need to be noted that the IFRS for SMEs are little lenient than the regular ones.

With the Income Tax department, still not able to appreciate the current Accounting Standard, moving to IFRS and that too separate on for SME and non-SMEs will create confusion. 

More than anyone, the Income Tax department should undergo training to appreciate the accounts presented under IFRS. 

Following is the news article, which appeared in The Economic Times:

NEW DELHI: Small and medium enterprises (SMEs) in the country will not have to prepare their accounts as per the International Financial Reporting Standards (IFRS) from April 1, 2011, saving them significant cost of switching to the more rigorous accounting standard A government-constituted core panel on IFRS has decided to exempt SMEs from the first phase of convergence falling due in 2011.

“The SME sector, which contributes significantly to the Indian economy, will continue to follow existing Indian accounting standards , which may be modified from time to time to make the sector more competent in the international arena,” said Uttam Prakash Agarwal , president, Institute of Chartered Accountants of India (ICAI).

Convergence to IFRS is a costly exercise which includes an overhaul of operational and IT processes apart from training costs. A small enterprise for this exemption is likely to be one where the investment in plant and machinery is more than Rs 25,00,000 does not exceed Rs 5 crore.

A medium enterprise is one where investment in plant and machinery is more than Rs 5 crore but does not exceed Rs 10 crore.

In November last year, the government had hinted at preparing a watered-down version of IFRS for the SMEs. “Industry preparedness in converging with IFRS is a key factor, specially for SMEs who may feel the convergence as cost-prohibitive ,” R Bandopadhyay , secretary in the ministry of corporate affairs, had said.

Stating company’s accounts as per IFRS will involve huge cost and is being considered world wide as a hurdle for SMEs.

Recently, a core committee of the government finalised the road map for IFRS convergence in India. The ICAI has said that all entities having net worth in excess of Rs 1,000 crore will have to follow IFRS. The list also includes all NSE and BSE listed companies, entities having foreign borrowings of more than Rs 500 crore, insurance entities , mutual funds, venture capital funds and all scheduled banks having operations outside India.

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Jubilant Fooodworks IPO - Will Dominos dominate the stock market

Jubilant FoodWorks which operates the Dominos Pizza, has opened its IPO on 18th Jan and closes on 20th ( Those who have an appetite ( I mean risk), you can invest in this IPO.

This is not a full fresh issue by the company. The promoters are offloading their shares to get listed and also issuing fresh shares. The ratio is Promoters offload (82%) and fresh issue (18%). So, the entire money is not going to the company and only 18% of the proceeds (i.e. Rs.54 crores, at the lowest price band of Rs.135) will be going to the company. 

The company plans to foreclose its Debts (Rs.35 crores) and use the balance  (Rs.19 crores)for Corporate expenses. What they have mentioned in their prospectus [page no. 42] sounds silly. The same is reproduced below for easy reference:

2. Fund expenditure for general corporate purposes
We intend to use a part of the Net Proceeds, approximately Rs. [●] million, towards general corporate purposes to drive our business growth. As of the date of this Red Herring Prospectus, we have not yet entered into any definitive commitment for any acquisition, investment or joint venture for which we intend to use the Net Proceeds.

Our management, in accordance with the policies of the Board, will have the flexibility in utilizing the sum earmarked for general corporate purposes and any surplus amounts from the Net Proceeds.

        They expect to utilise these funds in fiscal 2011

With no market comparison and a high PE, I would suggest wait and invest policy for this issue. We may get these shares at a better price in the market. Moreover, there is no leveraging, as they are planning to foreclose the debt and the market is very competitive in nature and more people getting into this area.

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Post Office Savings Schemes like NSC, KVP, MIS back in favour


Last week I posted on the benefits of the Post office saving schemes, I saw on The Economic Times yesterday in their ET Investors Guide an article titled "Savings schemes like NSC, KVP, MIS back in favour".

The author Bakul Chugan Tongia has summarised all the schemes and their benefits. Am happy that he also voiced my views. Request the readers to go through the same.

The link (copy paste in your browser) : 


For the benefit, I am re-producing the article below:

An anonymous author once said: “In the old days, a man who saved was a miser; nowadays, he is a wonder.” This precisely emphasises the way people have changed their perception about money. At the same time investment patterns have also seen drastic changes in the past few years. Today, only a few of us, would prefer the conventional ways of saving as riskier assets like, equities and related instruments are much more in demand.

Savings schemes offered by the neighbourhood post office, like the National Savings Certificate (NSC), Kisan Vikas Patra (KVP) and Monthly Income Scheme (MIS), may not be the talk of the investor-focussed shows on television, but given the volatility of the equity markets and uncertainty with respect to interest rates on bank deposits, the assured returns from these traditional savings vehicles have become appealling once again.

Of the three post office schemes, namely, the NSC, MIS and KVP, tax exemption up to Rs 1 lakh under section 80C of the Income Tax Act is available only to the NSC. The interest earned, however, is taxable for each of the three schemes, as also is in the case of interest earned on bank deposits. It is therefore the returns, and not the 80C benefit, that we would stress upon while comparing these schemes.


Though withdrawable after 2 years and 6 months, KVP will fetch the best returns only if held over the maturity period—that is, 8 years and 7 months. An investment in KVP will double at the end of the maturity period, implying a compounded annual growth rate (CAGR) of 8.4%. However, a withdrawal from KVP before the stipulated tenure would grossly impact the returns.

For instance, withdrawal from KVP on completion of 6 years would earn Rs 5,433 for every Rs 10,000 invested. This is worse than the NSC which returns Rs 6,010 for every Rs 10,000 invested after the maturity period of 6 years. As a matter of fact, even banks, which are currently offering interest rate of 7.5% for over 5 year tenure, compounded quarterly, return about Rs 5,620 for every Rs 10,000 invested.

On the other hand, if held for the entire tenure of 8 years and 7 months, every Rs 10,000 invested in KVP would return Rs 10,000, (double the investment) while a bank deposit, at the current prevailing rates, for the same period, would earn Rs 8,920 and NSC Rs 9,607. (It may however be noted that investment in NSC cannot be extended beyond 6 years). A KVP is thus recommended only if the investor can afford to stay invested till its maturity, otherwise, it is beneficial to choose either the MIS or NSC.


As the name suggests, this scheme is designed to provide a monthly income for the investors. A lumpsum amount invested today will earn a simple interest of 8% p.a. that will be paid out to the investor each month. MIS thus loses out on the benefits of periodic compounding of interest and would in fact turn out to be least beneficial of all schemes, including bank deposits if the interest so earned is not utilised efficiently

To make the most out of the MIS, it is recommended to invest the monthly interest receipts in a Recurring Deposit (RD) of a bank or the post office itself. While the post office currently offers a 5-year RD account, earning an interest rate of 7.5% p.a. compounded quarterly, banks today are offering rates varying from 6.5% to 7.75% p.a. for RD accounts of more than a 5-year tenure. And as banks offer RD accounts for periods ranging from 1 to 10 years, investors can easily operate an RD account for 6 years, coinciding with the maturity period of the MIS.

An added advantage to the investors of MIS is a bonus payout of 5% on the initial amount of investment. Thus, an investment of Rs 10,000, today, will fetch a simple interest of Rs 4,800 during the entire tenure of 6 years and an additional bonus of Rs 500 payable upon maturity, taking the total amount to Rs 5300 in 6 years. If an RD account operates simultaneously, a monthly investment of the interest received from MIS, Rs 67 in this example, in RD would fetch an interest of Rs 1,274 in six years. An investment of Rs 10,000 in MIS-cum-RD scheme would thus earn Rs 6,574 after 6 years. These returns are higher than not only those of bank deposits, at the prevailing rates, but also those of the NSC.


Currently earning an interest of 8% p.a. compounded every six months, NSC is the most popular among the three, given its 80C tax benefit. However, as far as the returns over a period of six years are concerned, MIS-cum-RD turns out to be a far better bet. Earning Rs 6,010 for every Rs 10,000 invested, the effective CAGR yield on NSC turns out to be 8.16% as against 8.79% in case of MIS-cum-RD. Thus, if 80C is not the criterion for investing, investors would indeed be better off with an MIS-cum-RD plan rather than an NSC
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Help for a cause !! Please Vote !!!!

Here is a unique opportunity to reach out and impact thousands of lives. Yes, sitting at your desk and vote can help educate 40,000 young Indians all over our country!

One of India’s most trusted and credible NGOs, GiveIndia is taking part in a competition on Facebook to win a US$1 million grant. The winner will be the NGO that gets the highest number of votes from Facebook users. The prize of $1 million will help put or keep 40,000 children across India in school for one year!

Imagine we coming together to spread the word and help the underprivileged children of India. The impact would be tremendous and GiveIndia would be able to gather the votes we need to win.

Voting in the competition is for one week only, from Friday, January 15 – Friday, January 22, 2010. Can we make a difference in the next 5 days? We sure hope so! 

The link for voting, where you can also see more details of the competition is


There’s been lots of talk about how social media can bring change and make an impact on the world we live in. Well, here is one tangible way for us to take a small action that could have a HUGE outcome.

In case you have more questions about this, please write to and a GiveIndia team member would be happy to reply.


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Tribute to Jyoti Basu

Jyoti Basu an icon in Indian Politics is no more with us. He is highly respected for his commitments and convictions.

He was instrumental in the formation of CPI (M) in 1964. In his political career spanning over 6 decades, he led the party by example.

He holds the longest serving Chief Minister for a State - 23 YEARS. If you add the period of being a Deputy Chief Minister, he scores a clear Quarter Century. God is impartial - otherwise he would have scored a CENTURY in another 4 years.

India will remember Jyoti Basu for his strong leadership skills, management style and strong convictions.

Let us pray for the departed soul to rest in peace.


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ELSS : Equity Linked Savings Scheme

When you are looking at the stock market going up and still afraid to invest in the market, here is an option for you - It is a mix of Mutual Fund and a tax saving instrument. It is called the Equity Linked Savings Scheme. Let us see the benefits of the ELSS:
  • Benefit under Section 80C of the Income Tax (within the overall limit of Rs.1,00,000)
  • The dividends declared is exempt from tax
  • The scheme is for a minimum period of 3 years. This is called Lock in period
  • Since the Fund manager knows that the fund is untouched for 3 years, he has the full freedom to invest to get a good return
  • Being invested for 3 years and more, the proceeds is treated as Long Term Capital Gain and exempt.
  • Since it invest in Stock Market and debt instruments, you get a good return, better than Bank FD, NSC, PPF etc.,
Some points to be noted:

  • But investment in Mutual Funds are subject to market risk.
  • Minimum lock in period of 3 years.
If you have invested in an ELSS for 3 years, you can withdraw the same after 3 years and invest in the same fund. This will be treated as a fresh investment and you get Section 80C benefit. Of course, again 3 years lock in period would apply.

Looking at the tax free return, tax benefit on investment I would suggest this investment, if you have shortfall under Section 80C (apart from investing in your Employee PF, PPF, Insurance premium, Housing loan repayment etc.,).

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Wisdom atlast - Worth reading

I got this story through a mail forward. Thought of sharing, as it has lot of values.

There is very instructive incident involving the life of Alexander, the great Greek king. Alexander, after conquering many kingdoms, was returning home. On the way, he fell ill and it took him to his death bed. With death staring him in his face, Alexander realized how his conquests, his great army, his sharp sword and all his wealth were of no consequence.

He now longed to reach home to see his mother’s face and bid her his last adieu. But, he had to accept the fact that his sinking health would not permit him to reach his distant homeland. So, the mighty conqueror lay prostrate and pale, helplessly waiting to breathe his last. He called his generals and said, “I will depart from this world soon, I have three wishes, please carry them out without fail.” With tears flowing down their cheeks, the generals agreed to abide by their king’s last wishes.

“My first desire is that,” said Alexander, “My physicians alone must carry my coffin.”

After a pause, he continued, “Secondly, I desire that when my coffin is being carried to the grave, the path leading to the graveyard be strewn with gold, silver and precious stones which I have collected in my treasury.

“The king felt exhausted after saying this. He took a minute’s rest and continued. “My third and last wish is that both my hands be kept dangling out of my coffin.”The people who had gathered there wondered at the king’s strange wishes. But no one dare bring the question to their lips.

Alexander’s favorite general kissed his hand and pressed them to his heart. “O king, we assure you that your wishes will all be fulfilled. But tell us why do you make such strange wishes?”

At this Alexander took a deep breath and said: “I would like the world to know of the three lessons I have just learnt. I want my physicians to carry my coffin because people should realize that no doctor can really cure any body. They are powerless and cannot save a person from the clutches of death. So let not people take life for granted.

The second wish of strewing gold, silver and other riches on the way to the graveyard is to tell People that not even a fraction of gold will come with me. I spent all my life earning riches but cannot take anything with me. Let people realize that it is a sheer waste of time to chase wealth.

And about my third wish of having my hands dangling out of the coffin, I wish people to know that I came empty handed into this world and empty handed I go out of this world.”

Alexander’s last words: “Bury my body, do not build any monument, keep my hands outside so that the world knows the person who won the world had nothing in his hands when dying“.

With these words, the king closed his eyes. Soon he let death conquer him and breathed his last.

Moral of the story: Earn for your living. Love others and be kind to others.

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Voluntary Contribution to Employees Provident Fund

Those who are employed and getting salary contribute towards Employees Provident Fund @ 12% on their Basic and DA. The employer will also contribute an equal amount. This is also an excellent investment opportunity.
The rate of interest offered currently is : 8.5%. The interest earned is not taxable.
The contribution made from your salary are eligible for deduction under section 80C (upto Rs.1,00,000).

There is another provision also in the Employees Provident Fund scheme. You can contribute more than your stipulated contribution of 12%. This is called voluntary contribution.
  • The member has to contribute at the rate of 12% of his basic pay, D.A. & retaining allowance if any. 
  • In case the member wants to contribute more than this, voluntarily, he can do so at any rate he desires. i.e. upto 100% of basic and D.A. 
  • But the employer is not bound to contribute at the enhanced rate.
  • You can vary your contribution by intimating to your payroll department of HR department.
Can we withdraw the money that I have contributed? Following are the provisions relating to that:

Types of Benefit Eligibility Eligible Amount Form
Documentary Support
The purchase of site for construction of house
5 Years of membership of the Fund (Minimum balance in member’s a/c should be Rs. 1000/-)
* The purchase should be in favour of member or member &  spouse.

l 24 months wages (Basic & DA)
l Member’s own share of contribution + Company’s share of Contribution with interest thereon
A declaration from the member that, dwelling site or dwelling house/flat or the house under construction is free from encumberances  and the same is under the title of the member or the spouse (notification dated 25.2.2000) 
The Construction of House  
5 Years of membership of the Fund

(Minimum balance in member’s a/c should be Rs. 1000/-)
* The purchase should be in favour of member or member &  spouse.

l 36 months wages (Basic+DA)
l Members own share of contribution  + Company’s share of contribution with interest thereon


A declaration from the member that, dwelling site or dwelling house/flat or the house under construction is free from encumberances  and the same is under the title of the member or the spouse (notification dated 25.2.2000)

The purchase of dwelling flat  
5 Year of membership of the Fund

(Minimum balance in member’s a/c should be Rs. 1000/-)
* The purchase should be in favour of member or member &  spouse.

l 36 months wages (Basic+DA)
l Members own share of contribution  + Company’s share of contribution with interest thereon  
A declaration from the member that, dwelling site or dwelling house/flat or the house under construction is free from encumberances and the same is under the title of the member or the spouse (notification dated 25.2.2000) 
Additions, Alterations or improvements to the dwelling house  
5 years from the date of completion of dwelling house
12 months basic or members own share of contribution with thereon.  

Types of Benefit Eligibility Eligible Amount Form
Documentary Support
Advance from the fund for repayment of loan
10 years membership of the fund & member should have taken loan from Govt. Body
36 month wages (Basic + DA)
Members own share of Contribution + Company’s share of Contribution with interest thereon.
A certificate from the lending authority furnishing the details of loan and outstanding amount.  
Types of Benefit Eligibility Eligible Amount Form
Documentary Support
Advance from the fund for illness viz. hospitalisation for more than a month, major surgical operation or suffering from TB, Leprosy, Paralysis, Cancer, Heart ailment etc.
Stay in Hospital at least for a month
6 moths wages (Basic + DA)
A certificate from the Medical Practitioner for hospitalisation or operation.
Types of Benefit Eligibility Eligible Amount Form
Documentary Support
l Advance from the fund for Marriage of self/son/daughter/ sister/brother etc.
l Advance from the fund for education of Son/Daughter
l 7 years membership of the fund & minimum balance in member’s account should be Rs. 1000/-
l 50% of member’s own share of contribution

Declaration by the member which is attested by the employer.

Types of Benefit Eligibility Eligible Amount Form
Documentary Support
Grant of advance in abnormal conditions, Natural calamities etc.
l Certificate of damage from appropriate authority.
l State Govt. declaration.
l Rs. 5000/- or 50% of member’s own share of contribution (To apply within 4 months)
l Certificate from the Appropriate Authority.
Types of Benefit Eligibility Eligible Amount Form
Documentary Support
Grant of advance to members affected by cut in the supply of electricity
l The advance may be granted only to a member whose total wages for any one month commencing from the month of January 1973 were 3/4th or less than 3/4th of wages for a month
l Wages for a month
l Rs.300/-
Certificate from State Govt. regarding cut in the supply of electricity.
Types of Benefit Eligibility Eligible Amount Form
Documentary Support
To Physically Handicapped member for purchase of an equipment required to minimize the hardship on account of handicap.
Production of medical  certificate from a competent medical practitioner to the effect that he is physically handicapped
Basic wages+ DA for six months
or own share of contribution with interest or cost of equipment which ever is least.
Certificate from the Medical practitioner to the effect that the member is physically handicapped..
Note: For calculation/ computing the period of membership U/P 68B, 68BB, 68K, total service exclusive  of periods of break under the same employer before the scheme is applied to him, as well as period of membership of the fund is always included.

For a long term benefit, I suggest this for employees. This gets deducted from your salary and you need not run around to make the investment. With a good tax free interest and government backing up the amount, it is a fantastic investment.

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Public Provident Fund (PPF)

Here comes the darling of all the Post Office Schemes. The Public Provident Fund (PPF) has many benefits. It can be used both as an Recurring Deposit and as well as a tax saving investment. It has many benefits. But it is a long term investment scheme spanning over 15 years.

Opening Of Account

PPF Account can be opened by any adult in his/her names or as guardian of a minor.

Such account can be opened in any Head Post-Office, G.P.O., any Selection Grade Post Office, any branch of the State Bank of India and selected branches of other Nationalised Banks.

Amount of investment

Minimum   : Rs.     500 in a financial year
Maximum  : Rs. 70,000 in a financial year
Deposits can be made in lump sum or in12 monthly installments.

Rate of Interest

Deposits are payable on maturity after 15 years along with interest at the rates declared by the Government from time to time. The rate declared w.e.f.1-3-2003 is 8% per annum compounded annually.

Loans and Withdrawals
  • Loans can be availed from the 3rd financial year excluding the year of deposit . Amount of such loans must not exceed twenty five per cent of the amount that stood to his credit at the end of the second year immediately preceding the year in which the loan is applied for.
  • There is also facility to obtain withdrawal of a part of the balance after the expiry of 5 financial years from the end of the financial year (7th Financial year) in which the first subscription has been made. 
  • Such withdrawal may be made only once in a financial year and shall be limited to 50% of the balance at the close of the fourth year immediately preceding the year of withdrawal or at the end of the preceding year, whichever is lower, less the amount of loan, if any which remains to be repaid.
Maturity Period
  • The normal maturity period is 15 years from the close of the financial year in which the initial subscription was made. 
  • An account, on the expiry of 15 years, may be extended for every block of 5 years.
Tax Relief
  • Interest earned is completely free from Income Tax under section 10(a)(i)
  • Contribution to PPF is allowed as deduction under section 80C

Deposits in this account are not subject to attachment under an order or a decree of Court and are also free of Wealth Tax.
Tax benefits make it more attractive

The only disadvantage that I notice is the long duration of 15 years. But we can make sure that it is not a disadvantage.

My suggestions are:
  • Start a PPF account in SBI or a Post Office at your early age (even at the age of 16)
  • You can start an account on your minor child also
  • Start contributing whatever is possible in the initial years and increase over a period.
  • Start contributing on a monthly basis like a RD.
  • Please make sure that your amount is credited to your account before 5th of the month, to earn interest for that month.
Given the bank deposits are giving around 6% without tax benefits, a Tax Free interest @8% is worth investing for your investment. With tax benefits (for contribution and also on interest) it is an excellent investment avenue.

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Having seen the PORD in the last post, let us see the POMIS.


Interest           : 8% monthly
Maturity Period : 6 years
Limit of Deposit
  Min : Rs. 1,500
  Max: Rs.4,50,000 for single Account & Rs.9,00,000 for joint Account

The maximum limit to be held by an individual will be the deposits in his/her single accounts together with his/her share of the deposits in the joint account which should not exceed Rs.4,50,000/-

Place of Deposit : Post Offices

Opening of Account

  • An account under the scheme may be opened by depositing Rs. 1500 or multiples thereof.

  • Any number of accounts may be opened under the scheme, but the total deposit shall not exceed Rs.4.5 lakhs in case of a single account and Rs. 9 lakhs incase of a Joint Account.

  • Account can be opened in any departmental post office and is transferable from one post office to another Nomination facility is available.

Mode of Deposit
Deposit may be made in cash or cheque or demand draft.
Payment of Interest

  • Deposit under this scheme shall bear interest at the rate of 8% per annum payable monthly.

  • Rs.60,000/- will fetch an interest of Rs. 390/- per month.

If so authorised monthly interest shall be deposited by the post office in the Savings Bank Account of the depositor at the post office where deposit has been made subject to the condition that by so depositing the interest maximum limit on balances in Savings bank Account is not exceeded.

  • The monthly interest from the account will be automatically deposited in the SB Account.

  • It will be credited on the business date immediately proceeding the due date falls on Sunday/holiday.

  • If the deposit made on 29th ,30th or 31st do not come in the following month, payment will be made on the last date of the following month

Premature Closure of Account

An investor may be permitted to withdraw the deposit and closure of the account, at any time after expiry of one year from the date of opening of the account subject to the condition that:

  • If the account is closed on or before expiry of three years opening of such account, an amount equal to two percent of the deposit shall be deducted and remainder paid to the depositor and

  • If the account is closed after expiry of three years opening of such account, an amount equal to one percent of the deposit shall be deducted and remainder paid to the depositor.


With the current Bank FD giving just less than 7%, it is better to get 8% in POMIS.

Here comes the double saving !! Invest in POMIS and the monthly income can be credited to the Saving Bank account with the Post Office. Give a standing instruction to debit your SB account to create a monthly Recurring Deposit. With the monthly interest in POMIS, create an RD.

Happy investing.

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