Why one should book profit in existing tax-free bonds and invest in new issues

Prashant Mahesh, ET Bureau, Nov 27, 2012

You may see a slew of tax-free bonds hitting the market soon. As per a Central Board of Direct Taxes (CBDT) notification, 10 companies NHAI, IRFC, IIFCL, HUDCO, NHB, PFC, REC, JNPT, Dredging Corporation and Ennore Port can issue tax-free bonds worth Rs 53,500 crore during the current financial year.

Rural Electrification Corporation (REC) is likely to hit the market first with its public issue of tax-free bonds in December. The issue is likely to open for subscription on December 3. Though the interest rates for REC's tax-free bonds are yet to be announced, as per the CBDT circular, there will be a ceiling on the coupon rates based on the reference government security (G Sec) rates.

The rate offered will be the reference G-Sec rate less 50 basis points for retail investors; while in the case of institutional investors, the rate will be reference rate less 100 basis points. That means since the 10-year benchmark currently offers a yield of 8.21%, the 10-year REC paper for retail investors is likely to offer 7.71%, while the 15-year could offer 7.86%. Does that entice you? Even if it does, you have to check the rates available on issues already listed on the secondary market.

Yes, you can either buy tax-free bonds on the public issue from the primary market or buy bonds of NHAI, REC, IRFC, HUDCO, among others, which are already listed on the stock exchange. "Investors need to compare the yield they can get in the secondary market with the primary market offering. Since the already listed bonds give you a yield between 7.2 and 7.5%, which as of now looks lower than the primary market offering where REC could offer 7.71-7.86%. Hence new investors should apply through the primary market. Existing investors may book profits by selling their existing tax-free bonds in the secondary market and invest again through the primary markets," says Ajay Manglunia, senior vice president (fixed income) at Edelweiss Capital.

Calculate before you act

Now, if you are invested in, say, the taxfree 8.2% 10-year NHAI bond (face value Rs 1,000) in January 2012 through the primary market, the math would work out like this: This bond trades at Rs 1,077 in the secondary market. Since it trades at a premium to its offer price, the yield for a prospective investor falls. So, for anyone who buys these bonds now, the yield will be only 7.18%. Also, since the bond is 10 months old, the balance tenure will be 9 years and 2 months.

As against this, you are expected to get 7.71-7.86%, from REC. Thereby subscribing to the REC bonds will be more lucrative, as there is a gain of 50 to 70 basis points. Similarly, the 15-year HUDCO bond trades at Rs 1,119. If you were to buy this, you will get a yield of 7.49%. So if you sell these bonds and subscribe to fresh offering from REC in the primary market you stand to benefit. "You get to invest in a higher tenure paper, and also have a chance of higher capital appreciation," says Deepak Punjwani, head (debt markets) at GEPL Capital. So if you hold 8.2% NHAI 10-year paper, by selling it you benefit in two ways. First, you make capital gains; and second, you also have an option to buy into a longer tenure paper (say 15-year REC bond at face value).

A longer term paper would work better because interest rates are expected to fall in the near future. "One basis point change in yield on a 15-year bond can change the price of the bond by 8 to 10 paisa, where as one basis point change in yield on a 10-year bond can change the price by 7 paisa," says Deepak Panjwani.

Do not wait

Given the fact that growth is slowing down and inflation is moderating, the Reserve Bank of India may be forced to cut interest rates. The central bank may cut interest rates by 50-100 basis points in the next one year, feel experts. Typically, whenever a series of issuances are lined up, investors try to wait and watch for the best coupon rates.

However, experts advise against following such a strategy now. "Most of the expected tax-free bonds are from PSUs. Even if there is a marginal difference in rating, it does not make much sense to wait. Rather there is a risk that further issuances could be at lower yields," says Ajay Manglunia. Hence investors should apply at the earliest. "The forthcoming issues will have a higher limit for retail investors at Rs 10 lakh as against Rs 5 lakh in the earlier issuances which increases your chance of allotment," says Vikram Dalal, managing director, Synergee Capital.

Banks strut their own stuff, go slow on selling MFs of other AMCs

Banks strut their own stuff, go slow on selling MFs of other AMCs 

Several bank distributors are now only selling mutual funds floated by their own subsidiary asset management companies. Though bank distributors still claim to have an "open architecture", few are selling mutual fund products based on their performance.

According to an industry source, a PSU bank, which runs a relatively new fund management business, has completely stopped selling funds of other asset management companies. Senior management of the bank, according to the source, has asked its officials to go all out to sell funds of its subsidiary asset management company.

The whole-hearted bank support has done good for the fund house as it has managed to ramp up its asset base in a few months' time. 

(Contributed by Shailesh Menon)

http://m.economictimes.com/PDAET/articleshow/9803179.cms

15 years returns of SIP ; Importance of choosing the right Mutual Fund

The importance of choosing a RIGHT Mutual Fund

Following is the results of SIP Investment of Rs.5000 every month for 15 years in Best and worst Mutual Funds. Returns as on May 31,2010 (source : valueresearch)

BEST 

1. HDFC Equity Fund        - 120,17,370 (more then a crore. YES becoming crorepati is easy !)
2. Franklin India Bluechip   -   94,87,199
3. Magnum Multiplier         -   51,56,455

WORST 

1. Taurus Discovery       -  21,31,190
2. LIC MF Equity         -   21,83,562
3. JM Equity                 -   24,78,042

JUST the deciscion to select the right mutual fund can make you a HUGE difference in the long term.
I am sure nobody can predict and choose the Best Mutual Fund but they can definately select a good reliable fund based on its historical performance and increase your chances of selecting winner who will definately be amongst the top few Mutual Funds.

Source : http://www.mfexpert.com/2010/07/15-years-returns-of-sip-importance-of.html

source : 

Crorepati with just Rs. 100

This was the first lesson my grandmother taught us. We have big joint family and lots of kids in the home. Every kid had a separate piggy bank that was safeguarded in the grandmothers cupboard. It was in those early days we use to get lots of gifts during Diwali or birthdays or on some special occasion. But the seed fund was provided right at the time of birth and all the childs money is saved separately. All this money was collected by all the kids and put in there piggy bank and everybody really tried to increase there AUM :-) in a piggy bank. As years progressed we started getting pocket money and awards on various achievements in schools etc. This investment grew slowly and slowly into near about lacs by the time we achieved adulthood.

My dad told me once that he has kept just Rs. 100 for his grandchild in FD. I said "sau rupaiya mein kya hoga dad". He asked what do you think this Rs.100 will be in 50 years I said maybe one thousand or at most 2 thousand. he asked me again what will it be in 100 years. I said maybe 5 thousand at the most. He explained me with following table saying that if you invest your money in FD which gives a return of 9% year on year. Its like doubling your investment every 8th year.

1 year = Rs. 100
8 year = Rs. 200
16 year = Rs. 400
24 year = Rs. 800
32 year = Rs. 1,600
40 year = Rs. 3,200
48 year = Rs. 6,400
56 year = Rs. 12,800

64 year = Rs. 25,600
72 year = Rs. 51,200
80 year = Rs. 102,400
88 year = Rs. 204,800
96 year = Rs. 4,09,600
108 year = Rs. 8,19,200

Look at the power of compounding its exponential rise. Just Rs. 100 can make you a lakhphati.

Now if you take a look at average returns of any diversified equity mutual fund for last 10 years Its MORE then 15%. Let us safely assume an average return of 15% which means roughly doubling your money every 5 year.

1 year = Rs. 100
5 year = Rs. 200
10 year = Rs. 400
15 year = Rs. 800
20 year = Rs. 1,600
25 year = Rs. 3,200
30 year = Rs. 6,400
35 year = Rs. 12,800
40 year = Rs. 25,600
45 year = Rs. 51,200
50 year = Rs. 102,400 (Lakhpati)

55 year = Rs. 204,800 (Lakhpati)
60 year = Rs. 4,09,600
65 year = Rs. 8,19,200
70 year = Rs. 16,38,400
75 year = Rs. 32,76,800
80 year = Rs. 65,53,600
85 year = Rs. 1,31,07,200 (crorepati)
90 year = Rs. 2,62,14,400
95 year = Rs. 5,24,28,800
100 year = Rs. 10,48,57,600 (More then 10 crores)

Its amazing, its awesome, I feel like dancing once I complete 100 years :-)
But the point is maybe not 100 years not 50 years but you can definitely plan for your retirement and you can save at least Rs 100 per month for 20 years or more and you will end with handsome money when you retire.

Thats what I call Financial Independence !!

Source : http://www.mfexpert.com/2008/04/crorepati-with-just-rs-100.html

Source : 

How to calculate Surrender value, Loan Value of an LIC policy ?

    In order to find a surrender value of a LIC Policy, first you need to find out is PAID UP Value.

PAID up Value = [(No of years premium paid X S.A) / Policy Term] + [Bonus X S.A / 1000]

where S.A = Sum Assured

Example: from LIC Wings Ready Reckoner book, Mr. A has taken an Endowment policy of 30 years term on 15.7.1983 for S.A of 2 lakhs and has paid premium upto date till 15.7.2007 i.e 25 years. Now he wants to know how much is the surrender value.

First let us find out the Paid up value by using the above formula
Paid up value = [25 X 2,00,000 / 30] + [ 1583 X 2,00,000 /1000] = [ 166667 + 316600]= Rs 4,83,267
* Bonus is given from the bonus chart of LIC for 25 years Endowment plan
* Most of the people would get a reminder from LIC with details of your bonus , you can just put the total bonus amount in the second part of above formula or you can also call up 1251 from MTNL or BSNL and get the bonus information by just entering the policy number.


SURRENDER VALUE = Surrender value factor X Paid up value / 100

for above example surrender value factor from lic chart is 65.84 so substituting we get
Surrender value = 65.84 * 4,83,267 / 100 = Rs 3,18,183

Loan Value = 90% of Surrender Value (approximate)
In above case you can get loan of up 90% of Rs 318183 = Rs 2,86,365

http://www.mfexpert.com/2009/02/how-to-calculate-surrender-value-loan.html

SOURCE: 

Bank IFSC code finder

To get the IFSC code of banks please click:

http://bankifsccode.com/allindiabanklist.php

Income Tax rates

INCOME TAX CALCULATOR/SLABS


CALCULATOR


http://www.finance.pushpi.com/income-tax-calculator-2011-12.htm

SLAB

Income tax slab for AY 11-12
New Income Tax Slabs for ay 11-12 for Resident Senior Citizens (FY 2010-11)
S. No.	Income Range	Tax percentage
1	Up to Rs 2,40,000	No tax / exempt
2	2,40,001 to 5,00,000	10%
3	5,00,001 to 8,00,000	20%
4	Above 8,00,000	30%
Income Tax Slabs for ay 11-12 for Resident Women (below 65 years) (FY 2010-11)
1	Up to Rs 1,90,000	No tax / exempt
2	1,90,001 to 5,00,000	10%
3	5,00,001 to 8,00,00	20%
4	Above 8,00,000	30%
New Income Tax Slabs for ay 11-12 Others & Men (FY 2010-11)
1	Up to Rs 1,60,000	No tax / exempt
2	1,60,001 to 5,00,000	10%
3	5,00,001 to 8,00,000	20%
4	Above 8,00,000	30%

 IN ADDITION 2% Educess cess+1% Secondary and Higher education cess(SHEC)=3%Total

New Income tax slab for AY 12-13
New Income Tax Slabs for ay 12-13 for Resident Senior Citizens above 60 years (FY 2011-12)
S. No.	Income Range	Tax percentage
1	Up to Rs 2,50,000	No tax / exempt
2	2,50,001 to 5,00,000	10%
3	5,00,001 to 8,00,000	20%
4	Above 8,00,000	30%
New Income Tax Slabs for ay 12-13 for Resident Senior Citizens above 80 years (FY 2011-12)
S. No.	Income Range	Tax percentage
1	Up to Rs 5,00,000	No tax / exempt
2	5,00,001 to 8,00,000	20%
3	Above 8,00,000	30%
Income Tax Slabs for ay 12-13 for Resident Women (below 60 years) (FY 2011-12)
1	Up to Rs 1,90,000	No tax / exempt
2	1,90,001 to 5,00,000	10%
3	5,00,001 to 8,00,000
		No tax / exempt
2	1,80,001 to 5,00,000	10%
3	5,00,001 to 8,00,000	20%
4	Above 8,00,000	30%

Various forms

Forms


Sundaram  - http://www.sundarammutual.com/uploaddir/application_form_equity/application_form_equity.pdf
Birla Sunlife - http://mutualfund.birlasunlife.com/LinkClick.aspx?fileticket=%2bnrqVWTKu8E%3d&tabid=116

Relianace MF - http://www.reliancemutual.com/Downloads/Application-Forms.aspx

ICICI PRU MF - http://www.icicipruamc.com/Downloads/ApplicationForm.aspx#

DSP BLACK ROCK MF http://www.dspblackrock.com/downloads/downloads.asp#

IDFC MF   http://www.idfcmf.com/downloads/Kim/COMMON-KIM-FORM.pdf

UTI MF http://www.utimf.com/Funds/FundDocuments/UTI-Common-Equity-Form-1.pdf

HDFC MF http://www.hdfcfund.com/Downloads/ApplicationForm.aspx?ReportId=CF5CD6D4-A526-4503-B0C0-74D3EF9CA779#

F TEMPLETON MF http://www.franklintempletonindia.com/pdf/forms/Equity%20KIM_web_A4.pdf

TATA MF  http://www.tatamutualfund.com/

PRINCIPAL MF https://www.principalindia.com/General/MediaContactTest.aspx

Passport form: https://passport.gov.in/pms/OnlineRegistration.jsp

Good Restaurant around Camac Street

Formation of a company under companies Act ( as on March 2011)

How to form a company?

The whole process of formation of a company may be divided into four stages, namely:

(i) Promotion
(ii) Registration
(iii) Floatation/Raising of Capital
(iv) Commencement of Business.

(i)   Promotion

        Who is a Promoter?

 The term promoter is “a term not of law but of business”, usefully summing up, “a number of business operations familiar to the commercial world by which a company is brought into existence”. However, the persons assisting the promoters by acting in a professional capacity do not thereby   become promoters themselves . 

 Legal Position of a Promoter

    Promoter stands in a fiduciary position towards the company. In other words, he is not allowed to make

   secret profits .

 Pre-incorporation contracts are Void-ab-initio. However, pre-incorporation contracts shall be valid if:

The contract is made for the purpose of the company and the contract is warranted by the term of in

corporation. The company adopts the transactions after incorporation.

(ii)                        Registration/Incorporation

Private Company - Minimum Number of Members required – 2.

Public Company - Minimum Number of Members required – 7.

Steps

 1.   Application for availability of name: Three names in order of priority conforming to the provisions of the Act and the Guidelines issued by Department of Company Affairs in this regard:

   Name to end with the word(s) ‘Limited’ or ‘Private Limited’, as the case may be, except:

Section 25 Companies

Govt. Companies (need not use Pvt. Ltd.

Name should not be identical or too similar to the name of an already existing company.

Should not include the name of a registered trade mark.

2. Preparation of Memorandum and Articles of Association

Memorandum defines and limits the scope of activities of a company.

     Contents of Memorandum

Name clause

Registered office clause

Object clause

Liability clause

Capital clause

Subscription Clause

3. Preparation of other documents

Power of Attorney in favour of a professional to effect registration.

Consent of Directors (in case of a Public Company)

Particulars of Directors, Manager, Secretary, etc. in the prescribed form.

Notice of registered address - to be supplied within 30 days of incorporation.

      Statutory Declaration

To the effect that all requirements of law with respect to incorporation have been duly complied with. The declaration to be signed by:

Advocate of Supreme Court or High Court; OR

C.A../C.S. practising in India and associated with the formation of the company; OR

Director, Manager, Secretary of the company (as named in the Articles)

(ii)                        Floatation/Raising of Capital

         (iv)    Commencement of Business

A. Certificate of Incorporation :       Effect of Certificate of Incorporation (Section 34)

   On incorporation, the association of persons becomes a body corporate by the name contained  in  the memorandum, capable forthwith of exercising all the functions of an incorporated company and having perpetual succession and a common seal but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound-up as is mentioned in the Act.

  B  Conclusiveness of Certificate of Incorporation is COC (Section 35)

Conclusive to the effect that all requirements of law relating to  registration & matters  precedent &  and incidental thereto have been duly complied with.