Did you miss the tax filing deadline? Not to worry

The last-minute rush of filing tax returns is over. Hounded by the 31 July deadline, most people manage to scrape through, filing their returns on time.

Yet, there are some who, for one or the other reason, fail to do so. If you are among the latter and worried about breaching the law or facing a heavy penalty, don't press the panic button just yet. You can still file your returns and chances are you won't have to pay a penalty.

"About 10% of the people end up filing their returns after the due date," says Mehul Sheth, a Mumbai-based chartered accountant. Adds Sunil Talati, former president of the Institute of Chartered Accountants of India (ICAI): "The return for income earned in the financial year ending on 31 March 2011 should ideally be filed by 31 July for non-business taxpayers. But if the taxpayer has missed the deadline in spite of having four months in hand, he can do so till 31 March 2013."

In such a case, the penalty to be levied would depend on the status of the tax to be paid.

If tax has been paid

If you have paid your taxes, there's little to worry because you can file the returns before 31 March 2012 without paying a penalty. "But if you push the new deadline and file the return only after 31 March 2012, the assessing officer may impose a penalty of Rs 5,000," says Sheth. This amount may depend on the discretion of the assessing officer.

If tax has not been paid: If you have not cleared the taxes, you will have to pay a penalty at the rate of 1% per month for the period after 31 July. If the tax due is more than Rs 10,000, you are supposed to pay an advance tax on your income in three tranches (see table). In such a case, the 1% penalty per month will be applicable from the period you have not paid the tranche.

If Form 16 has an error

If your employer has made an error in Form 16 and this has crept into your returns, it will have to be corrected. Says Talati: "In case a rectification is required, you should go ahead and file the return anyway. Subsequently, you can request your employer to correct the mistake, and after you receive the fresh Form 16, you can file the revised return."

Talati cautions against taking an initiative to file the return by using the correct information instead of the wrong one in Form 16. "You should not file the return using details that were missed out by the employer as the computerised system is such that if there is a mismatch, you won't get credit," he informs.

You can file the revised returns after you have convinced your employer and rectified the mistake."Don't delay filing your returns because of rectifications in Form 16 as there is a possibility that the assessing officer may not believe your claims," says Sheth

If you don't have money to pay tax

For those who delayed filing the return because they could not afford to pay the heavy tax, borrowing and paying might be a good idea.

"The rate of interest payable to the Income Tax Department is higher compared with the market rate. Besides, you should avoid being blacklisted as a late taxpayer," adds Talati.

"Although the IT Department enforces similar norms for those who file their returns on time and those who delay these, it is likely to pick your returns for scrutiny if you are a habitual late filer to find out whether the delay is a bid to conceal income," says Talati.

While you have the option to file your tax returns after the due date, you must avoid doing so. This is because you could lose out on a major benefit. If you have suffered a capital loss in a particular year and want to set it off in another year, it needs to be carried forward. "However, you will not be able to claim this benefit if you have not filed the returns by 31 July," warns Sheth.

Source : ET

RBI hikes key rates by 50 basis points

As part of the First Quarter Review of Monetary Policy 2011-12, the Reserve Bank of India (RBI) announced an increase in the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points. The repo rate will accordingly move up from 7.5% to 8.0%. The marginal standing facility (which is at 100 basis points above the repo rate) will be at 9%. The rate hikes are the eleventh successive hike since March 2010.

In a survey conducted among 22 economists by Bloomberg News, 20 estimated a 25 basis points rise, while the remainder expected no change.

In the Policy Statement the central bank maintained its economic growth forecast of 8% for the current fiscal year while it revised the baseline projection for WPI inflation for March 2012 upward to 7.0%.

As per the RBI the considerations behind the policy move were as under:

• First, demand pressures have remained strong. As indicated by RBI in its previous Policy Statement (3 May 2011), inflation was expected to remain elevated in the first half of 2011-12. Actual inflation so far has been even higher than expected. In particular, non-food manufactured product inflation has been significantly higher than the average rate of 4% over the last six years. Crude oil prices remain volatile and are a major risk factor. The recent increase in domestic administered fuel prices and the minimum support price for certain food items will also keep inflation under pressure.

• The second consideration that shaped the RBI’s policy decision is that there are signs that growth is beginning to moderate, particularly in respect of some interest rate sensitive sectors. However, there is no evidence, as yet, of a sharp or broad-based slowdown. Several indicators such as exports and imports, indirect tax collections, corporate sales and earnings and demand for bank credit suggest that demand is moderating, but only gradually.

• Although the impact of past monetary policy actions is still getting transmitted, considering the overall growth-inflation scenario, the RBI determined that it is necessary to persevere with the anti-inflationary stance.

　

Monetary Policy Stance was as under:

• To maintain an interest rate environment that moderates inflation
  And anchors inflation expectations;

• To manage the risk of growth falling significantly below trend; and,

   Finally, to manage liquidity to ensure that monetary transmission
   Remains effective, without exerting undue stress on the financial
   System.

　

The Expected Outcomes of today’s policy actions are the following:

• First, the cumulative impact of past actions on demand will be
   Reinforced

• Second, the credibility of the commitment of monetary policy to  
  Controlling inflation, and thereby to keeping medium-term
  Expectations anchored, will be maintained;

• Third, the policy actions will reinforce the point that in the absence of
  Complementary policy responses on both demand and supply sides,
  Stronger monetary policy actions are required.

Some insurance companies include ayurveda under their cover

Till some time back, health insurance policies used to cover only allopathy treatment while ayurveda , homeopathy, naturopathy and unani treatments were left out of the ambit. Despite having a comprehensive health insurance plan, individuals who preferred such systems had to pay out of their own pockets.

These policyholders can now breathe easy as some insurance companies have started including alternative forms of treatment under their cover, especially ayurveda. "Ayurveda being the most prevalent of the alternate systems, we have designed a product to cover treatments under ayurvedic hospitalization," says S S Gopalarathnam, MD, Cholamandalam MS General Insurance.

While some insurers only offer it under their group policies, others have started offering it to individual health insurance seekers. PSU insurerNew India Assurance and standalone health insurance provider Star Health and Allied Insurance are other insurance firms that have started covering ayurvedic treatments under individual policies.ICICI Lombard General Insurance covers it under government scheme and Future Generali Insurance offers it to corporate group insurance buyers.

"Our policies as such do not cover any other line of treatment besides allopathy . However, in group policies, we do offer tailor-made packages to corporate clients to cover ayurvedic treatment subject to certain conditions," saysShreeraj Deshpande, head of health insurance at Future Generali. Few insurance policies cover unani treatment

How did the need to cover alternative forms of medicine in health insurance arise? According to S S Gopalarathnam, managing director, Cholamandalam MS General Insurance , "During various focus group discussions with customers and agents, we found that for chronic ailments like spondilytis, arthritis and epilepsy, many people preferred alternate streams of treatment such as ayurveda, siddha and homeopathy , etc."

Though the coverage has been expanded, there are curbs on the amount and situations under which it can be claimed. New India Assurance's extends cover to individuals undergoing treatment with the help of Ayurvedic, homeopathic and Unani systems of medicine. "Such claims will be covered only to the extent of 25% of sum insured. Also, they need to have availed of the treatment at a government hospital to be eligible for the claim," informs Segar Sampathkumar, deputy general manager, New India Assurance.

Similarly, Star Health also covers non-allopathic treatment, except Naturopathy , costs under itsUnique Health Insurance Policy, "up to 25% of sum assured or a maximum of Rs 25,000 per occurrence, per year." Chola Individual Health line Insurance policy provides coverage for ayurveda during hospitalization, prior and post hospitalization. A policy holder can get treated in any of the government registered ayurveda hospitals across the country and claim if hospitalized for more than 24 hours.

Naturopathy treatments are excluded in all policies, while few cover unani and homeopathic. This is because other forms of treatments have no standard treatment protocols and highly varied costs thus making it difficult to actuarially compute the cost to be covered.

Even under ayurveda, select procedures are covered to ensure people do not misuse a policy for a basic rejuvenation procedure.

"We do not cover the unani system of medicine. Under ayurveda, hospitalization for panchkarma (five actions) meant to purify the whole body by eliminating accumulated toxins, is covered on a case to case basis," explains Deshpande. It is important to note that there is no standalone cover available for covering alternative treatments. You will have to buy a standard health insurance cover from these select insurers and others who start offering the non-allopathic coverage.

Before you head for alternative treatment and make a claim, see whether the treatment is listed in the insurance policy document.

 

Source : ET

QE3 could push inflation in emerging markets

These days, there is a lot of talk and speculation on the possibility of another round ofquantitative easing in the US - QE3. The Federal Reserve has already implemented two rounds of quantitative easing (financial stimulus) to bring the economy back on track after the 2008-09 recession. The second round of quantitative easing (QE2) worth USD 600 billion concluded last month. There are speculations in the markets that the current situation of a slow economic recovery, slow rate of new job creation and overall fragile economic growth in the US may lead to another round of quantitative easing - QE3.

With this round of quantitative easing, the Federal Reserve will look at providing extended assistance and stimulus for economic activity in the US by keeping the interest yields onbonds low, and thereby forcing investors to invest in riskier assets such asequity . The idea is that these investments in the economy will in turn create a wealth effect and result in more consumers spends. This will increase the wheel speed of the US economy.

At present, there are many counter arguments and debates going on as the previous rounds of QE did not deliver the results up to expected levels. Analysts believe another round of a large QE package can impact the markets in more ways than one, and therefore investors should track the developments around this issue.

These are some of the expected results globally in case the Fed goes ahead with QE3:

Impact on dollar

The dollar is expected to weaken against major world currencies. The Fed will expect a weaker dollar to have a positive impact on the current trade imbalances. However, the cross currency movements will depend on several other global factors too such as developments around the sovereign debt crisis in Europe.

Impact on global inflation

The QE3 is expected to increase liquidity in the markets. It can, hence, aggravate the inflation rate further. The inflation rate is manageable in the developed countries due to slow the economic activity. However, it will hurt emerging markets like India which are already facing a high rate of inflation.

Impact on commodities

The prices of global commodities went up quite a bit during the last QE phases. The main reasons for the price rise include risk aversion , weakness in the US dollar and sharp cross currency movements.

The commodity prices have corrected over the last couple of months as the QE2 effect faded off. Analysts believe another round of quantitative easing will trigger another cycle of high commodity prices in the global markets. In fact, there have already been some in global commodities over the last few days over speculations on the QE3 package announcement.

Impact on domestic markets

Broadly, QE3 will be good news for emerging markets including India. The QE will increase inflow of funds to emerging markets from foreign institutional investors. The fund inflows here have slowed down considerably since the beginning of this year due to signs of economic recovery in the developed countries.

Analysts believe a part of this excess cash (generated as a result of QE3) will be channelled to emerging markets as these countries are better-positioned in terms of economic growth. In the domestic markets, the foreign institutional investor funds are expected to remain strong in the short to medium terms. This will keep the markets in a bullish momentum. On the flip side, this will mean challenges related to high liquidity and the high inflation rate will persist.

 

Source : ET

Global and domestic factors investors need to track

The domestic markets remained range-bound last week with some crucial announcements expected over the next few days. In the US, the government borrowing is about to hit the ceiling of USD 14.3 trillion and policymakers are debating on raising this limit as against taking tough measures to bring the fiscal deficit under control.

On the other hand, in the European markets, there is uncertainty over the financial bail-out ofGreece and the chances of the crisis spreading to other larger countries in the region. The developments here can impact the sentiments in the global stock markets.

Therefore, it is advisable for investors to stay cautious in the markets and avoid taking any significant positions in equity-based instruments .

The currency markets had a lot of volatility. There were sharp movements in the valuations of the US dollar and Euro. In the short term, the markets are expected to remain choppy with a negative bias.

Investors should track these factors:
GLOBAL FACTORS

The sentiments in the global markets improved slightly towards the end of the week as policymakers agreed to give Greece a financial bail-out package. This calmed the fear for the time being that Greece may default in the near term. However, analysts believe that while the nervousness in the region may calm down for the time being, there can still be more nervousness , going forward.

On the other hand, there is nervousness on the possible raising of the government debt ceiling in the US, and slow growth rate in the economy there. The markets here are expected to remain choppy in the short term due to the uncertainties in the global markets.

INFLATION SLOWS DOWN
The weekly food inflation rate recorded a slowdown and stood at 7.58 percent for the week ending July 9. The drop in food inflation is mainly due to a decline in the prices of onion, milk, egg and meat.

The lower inflation number has come at a crucial stage as the Reserve Bank of India (RBI) is expected to review the monetary policy in the coming week. This slower growth in the inflation rate can prompt the RBI to defer a further hike in key interest rates.Banks and corporates have already requested the RBI to stop the rate increases as the interest rates have already reached quite a high level.

GOLD PRICE PEAKS
The price of gold touched an all-time high of USD 1,600 last week backed by so-called 'haven buying' by large fund houses due to the global uncertainties. Ana-lysts believe it will continue to do well in the short to medium terms due to the debt crisis in Europe and US.

In the US, the Federal Reserve is considering another round of stimulus package (QE3) to push the slow growth in the US economy . Investors should wait for a correction to take fresh positions.

MONSOON

The monsoon has been heartening this year so far. However, going forward, you should track the timing and spread of the monsoon across the country. Last year, the rainfall was weak during the start of the season but picked up towards the end, and therefore it ended almost normal. However, this delayed monsoon impacted the farm yields.

The monsoon's progress this year has been quite good so far and its impact is visible in the drop in agri commodity prices. This is a good sign for the markets. However, it is a bit early to come to conclusions as it is still the beginning of the crucial sowing season and a continued normal rainfall is needed to ensure a healthy farm yield.

Checklist for exemption from filing IT returns

It's time to file your income tax returns for the year 2010-11. In the current year, the Central Board of Direct Taxes (CBDT) has exempted certain segments of taxpayers from filing tax returns. However, there are certain conditions attached in order to be eligible for the exemption. So, before deciding on not filing the income tax returns, you need to be aware of the conditions. You may also be required to file the income tax returns, even if the income is less than Rs 5 lakh.

According to the amendment, salaried individuals with a taxable income of less than Rs 5 lakh will not have to file income tax returns in the current assessment year. The finance ministry has issued a notification to this effect. This was announced by the finance minister in the Union Budget speech for 2011-12. As such, individuals with a total taxable salary income of less than Rs 5 lakhs in the financial year 2010-11, after allowing all deductions, will be exempt from filing tax returns this year.

Some conditions to be met:

Salary only source of income

An employee will be required to declare his permanent account number (PAN) to his employer and obtain a certificate of tax deductions in Form No 16. Another condition is that an individual should not have any income from sources other than his salary. He should have earned income only in the form of salary and savings bank interest.

So, if you have income from fixed deposits, mutual funds, shares, property etc, you will be required to file the returns.

Single employer

It is to be noted that the entire income of an individual must accrue from a single employer. In case an individual has changed jobs or worked in two or more jobs, he will have to file the IT returns even if his total salary income is below Rs 5 lakhs during the year.

No interest income over Rs 10K

Another condition is the earnings from interest. In case a person has interest income of more than Rs 10,000 from his savings deposits, he cannot claim the exemption from filing returns. However, in case he has interest income of less than Rs 10,000, he will need to declare it to his employer and have the tax deducted, so as to be eligible for the exemption.

Not applicable in case of refund claim

In case an individual wants to claim a refund, he will have to file the returns. There is no escaping from filing returns in case one has paid excess tax and wishes to claim a refund. The exemption will not be applicable in cases where notices are issued for filing the income tax returns under Section 142(1), Section 148, Section 153A or Section 153C of the Income Tax Act.

Not applicable in case of loss claim

In case one has incurred some losses or has carried forward losses of any prior year, under any year, he will be required to file his returns before the due date. He cannot claim exemption. Else he will forfeit the right to carry forward the losses.

So, persons receiving salary from more than one employer, having income from sources other than salary and interest income from a savings bank account, or having refund claims will not be covered under the scheme. One should check these conditions first and then take the decision of not filing returns

 

Source : ET

Factors that can influence market sentiments in short to medium terms

 

The domestic stock markets have been through a good rally over the last three weeks and have gone up by more than 10 percent in this time. The current rally has surprised everyone in the markets as they have gone up contrary to the general expectations, mainly due to sustained buying by foreign institutional investors (FIIs). The markets are in a momentum due to the buying by FIIs.

However, investors should not get too optimistic in the markets as there are several factors at the domestic as well as global levels that can turn the market sentiments around in the near term. You should use the current market rally to book profits or exit from under-performing stocks and stay in cash to use the correction phases to invest in favourably-placed fundamentally-strong stocks.

These are some of the prominent factors that can influence market sentiments in the short to medium terms:

Global factors

There are many concern areas as far as the developed economies are concerned. In the US, the economy is growing at a slower-thanexpected rate. Analysts are following the economic data points closely as the support of the quantitative easing has ended in June. On the other hand, there are huge concerns on the high sovereign debt mounted by the US government to fund the stimulus packages.

In Europe, the stronger countries are doing well but some countries (Greece, Portugal, Italy and Spain) are still struggling with the risk of a sovereign default. Greece recently got another round of debt funding required to avoid a sovereign default. There are fresh concerns on the financial conditions of Portugal and Italy.

Rising inflation has forced the European Central Bank to increase the interest rates. This may worsen the situation further for the financially struggling European nations. In Asia, China has started fighting inflation aggressively and there is a concern that the monetary tightening measures there can result in a slowdown in its economic growth rate. In short, there are several factors at the global level that can trigger negative sentiments in the markets in the near term.

Domestic factors

The inflation rate and crude oil price are the two most significant factors here keeping the markets nervous over the last several months. Although the inflation rate has come down to a single digit, it is still quoting at a high level when compared to the Reserve Bank's comfort level. The Reserve Bank of India (RBI) has tightened the monetary policy several times. Yet, it has not yielded the desired results in controlling the inflation rate. Analysts believe the RBI will increase the interest rates further in the short term, and this will trigger negative sentiments in the markets.

On the other hand, the crude oil price also softened a bit over the last few weeks, but analysts believe it is just a temporary dip due to the release 60 million barrels of oil by the US and the International Energy Agency from strategic stockpiles.

Investors should track the movements in the inflation rate and crude oil price to get a sense of market sentiments. The stock markets are driven by sentiments, and the short-term direction is mainly driven by momentum. If the markets are in a positive momentum, they tend to over-react to the positive developments and over-look the negative ones. Similarly, when the markets are in a negative momentum, they tend to over-react to even minor negative developments and ignore the positive ones.

Currently, the markets are in a positive momentum and have had a good amount of buying over the last few weeks. Investors should not get over-optimistic in the markets due to the shortterm euphoria, buy look for correction phases to buy fundamentally-strong stocks.

 

 

India biz confidence seen hurt in Q3

Subdued economic activity and high inflation are likely to hurt business confidence in India in the current quarter, says US-based research firm Dun and Bradstreet.


"The uncertain domestic political scenario, coupled with the ongoing turmoil on the global front, such as the prevalence of the sovereign debt crisis in the euro region, movement in international crude oil prices and the weak recovery in the US, are expected to adversely affect overall economic growth in the near future," Dun & Bradstreet (India) President and CEO Kaushal Sampat said.

He further said the progress of the monsoons and the impact of rising lending rates on domestic demand conditions and inflation may play a significant role in determining the business sentiment over the next quarter.

The report further said the Indian corporate sector's subdued confidence regarding profit expectations hints toward impending pressure on business
margins in the July-September quarter

The Business Optimism Index (BOI), which measures the pulse of the business community, decreased by 4.2 per cent vis-a-vis the year-ago period to 143.6 points for the third quarter of 2011. In comparison to the second quarter of 2011, the BOI was down by 21.7 per cent.

For calculating the composite BOI, each of the six parameters -- net sales, net profits, selling prices, new orders, inventories and employee levels -- is assigned a weight. The parameter weights are then applied to these ratios and the results aggregated to arrive at the Composite Business Optimism Index.

It was observed that all the six optimism indices have decreased compared to the previous quarter, the report said. 



According to the report, the employment scenario in the country is likely to improve in the coming quarter, with 47 per cent of respondents expecting the size of their workforce to increase during the third quarter of 2011.

In comparison, 48 per cent intend to keep the number of employees unchanged and another 5 per cent anticipate a decline


Source : Indian Express

How to insure more than Rs 1 lakh in your bank

If you are an indolent investor prone to piling up idle cash in your savings account, here's an eye-opener. If the bank were to collapse, you will get back only Rs 1 lakh of your money, whether it is in a savings account, current account or as a fixed deposit. So what should you do? Confine your cash savings to Rs 1 lakh? With a bit of smart account management, you can increase this amount.

The maximum amount of Rs 1 lakh is insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) for all commercial banks, including the branches of foreign banks functioning in India, local area banks and regional rural banks.

If you tweak your bank account portfolio, you can insure a higher amount

In case of co-operative banks, you will need to check if it is covered under the DICGC because if a bank has not been paying the premium for the insurance scheme for three consecutive years, it ceases to be covered.

According to the DICGC, the cover is for the combined deposits worth Rs 1 lakh at all the branches of a bank. However, if you tweak your bank account portfolio, you can insure a higher amount. One way is to have different acounts with different combinations.

For instance, a joint account with your wife, in addition to an individual one in the same bank, will be considered a separate account. Here again Rs 1 lakh will be insured. This will help you insure up to Rs 2 lakh with the same bank

If primary holder is different then they will be considered as separate accounts

KVS Manian, group head, retail liabilities and branch banking, Kotak Mahindra Bank, says, "Very few customers are aware that the money is insured up to Rs 1 lakh per holding combination. Suppose I have an individual account and another in my daughter's name, where I am the guardian, both accounts are protected up to Rs 1 lakh. This is because both the accounts are owned independently."

Similarly, if you have two joint accounts, and in each case the primary holder is different, these will be considered as separate accounts. "If Hari and Ramu have a joint account, where Hari is the first holder, and there is another joint account, where Ramu is the primary holder, then both the accounts will be considered separate and will be covered for Rs 1 lakh each," says a DICGC senior official.

Spread your money in various accounts

So you can spread your money in various accounts to take advantage of this facility. We have worked out an example where Mr A can insure up to Rs 4,06,000 depending on the balance in each account that he holds and the different capacities in which it is held.

What if, like Mr A, you have Rs 50,000 in savings bank and Rs 1 lakh in fixed deposits in the same bank and in the same capaity? Says RK Bansal, executive director, IDBI Bank: "Both accounts are considered as one and insured only up to Rs 1 lakh. This includes the interest accrued on the deposit. As a bank, we are calculating the interest every quarter and this is shown as a liability for the bank and, hence, it too is covered, subject to the limit of Rs 1 lakh."

It is important to clear pending dues

However, if you have any pending dues, you will have to clear these before you can file the claim in case of an unforeseen event. According to RBI regulations, "Banks have the right to set off their dues from the deposit amount. The deposit insurance is available after netting such dues."

It is important that you clear these dues even if the bank goes bust. If you do not do so, your credit history is bound to be marred and you will find it difficult to get a credit card or a loan from any other bank.


Article by khyati Dharamsi