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.

Gopal








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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.,).

Cheers,
Gopal
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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.

Cheers,
Gopal
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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:


WITHDRAWALS
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)
OR
l Member’s own share of contribution + Company’s share of Contribution with interest thereon
 
No.31
 
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)
OR
l Members own share of contribution  + Company’s share of contribution with interest thereon

No.31

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)
OR
l Members own share of contribution  + Company’s share of contribution with interest thereon  
No.31  
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.  
No.31


 68 BB : REPAYMENT OF LOAN
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)
OR
Members own share of Contribution + Company’s share of Contribution with interest thereon.
No.31
 
A certificate from the lending authority furnishing the details of loan and outstanding amount.  
68 J : ADVANCE FROM FUND FOR ILLNESS
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)
No.31
A certificate from the Medical Practitioner for hospitalisation or operation.
68 K : ADVANCE FROM THE FUND FOR MARRIAGE
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

No.31
Declaration by the member which is attested by the employer.

 68L : ADVANCE IN ABNORMAL CONDITIONS
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)
No.31
l Certificate from the Appropriate Authority.
68 M : ADVANCE TO MEMBER AFFECTED BY CUT IN THE SUPPLY OF ELECTRICITY
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
OR
l Rs.300/-
No.31
Certificate from State Govt. regarding cut in the supply of electricity.
68 N : GRANT OF ADVANCE TO MEMBERS WHO ARE PHYSICALLY HANDICAPPED
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.
No.31
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.

Cheers,
Gopal
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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
Benefits

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

Disadvantage
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.

Cheers,
Gopal
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POST OFFICE MONTHLY INCOME SCHEME (POMIS)

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

Name of the Scheme : POST OFFICE MONTHLY INCOME SCHEME (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.


Suggestion:

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.

Cheers,
Gopal
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