Stocks and Stock Tips.....!!!

Stock Tips:-
Stock market is one of the most attractive platforms that help you to multiply your wealth. A beginner can enter into stock market only with the help of an expert because without prior experience one may not be able to understand the market dynamics. The working mechanism of stock market is very confusing; to get benefited from the market you should be tricky enough to manage according to the market fluctuations. Stock tips are very common these days; you can find stock tips in areas such as websites, newspapers, magazines, chat rooms, etc. Especially free stock tips are dominant everywhere - forums, newsletters, and a wide variety of publications exist exclusively to give stock tips to new investors.

When it comes to stock tips, everyone claim to be an expert. But the concern is that how reliable their tips are? However, not all stocks tips are the same. If you're looking for tips to buy/sell stocks, you should be very careful while considering the advice of experts because everything that you have heard or read may not be truth. Above all, you need to follow your common sense while deciding on a trading or investment decision. IndianMoney.com is one of the leading Stock Tips providers in Indian Stock Market. Our Stock Tips are aimed to help the investors in their investments by showing them the exact trends of stocks and index. IndianMoney.com Stock Tips are generated only after studying all the relevant technical and fundamental information.

Right time to buy stock:-


What is the right time to buy stocks? Most financial experts agree that the correct time to buy stock is right now. It is absolutely true that over a period of time stock market’s performance chart goes up, as a result the earlier you invest in stock the faster you will start seeing profits. If you wait for the perfect time to invest you will only delay investment and keep yourself of potential profits. If the stock market is doing well when you enter the market, you may prefer to buy less initially as stocks will be more expensive. However, you should invest when you have money and in fact you should invest as soon as you get money. The sooner you invest the faster your investment will grow.


Risks of Stock:-

Following are the two major risks associated with

• Failure of Company
• Buying an overvalued stock

Failure of Company :-

The major risk of stocks is that the company you are investing in will fail or will lose at any time. Short term performance of the company is depended on the market sentiments. There is a possibility, you may invest in a company that does not make profit, and when the company does not make profit, you lose money. If you buy a stock for Rs.100 and that company starts to lose its value in the market, fewer investors will purchase the stock again and in fact many investors will begin to sell. The value of your stock will decrease and if you wish to sell your stock you will end up in making loss. But it is better exit from the stock in such conditions.
 
Buying an overvalued stock:-


Other major risk is that buying an overvalued stock. Sometimes you might buy a stock that is overvalued. This means that you will buy a stock that initially seems to be good but will ultimately be proven to be valueless. This has happened in the past when hot and expensive stocks have become valueless overnight. Normally, this happens when a company seems to be on the launch of great profits and everyone hurries to buy stocks from them. If you buy a stock at this point, you would end up in paying more for the stock, simply because there's more demand for it. If ultimately the promise of great profits does not come true, then everyone will start selling their stock and stock prices will fall drastically.

Day trading:-

Day trading is a method of buying and selling stocks in a hurried manner. The people who start day trading will buy and sell the stocks in the same day. Since the price of a stock may fluctuate dramatically during trading hours one can make profit out of that. The whole point of day trading is to buy a stock and sell it very quickly and gain quick profit. While many newsletters and companies offer investors with day trading stock options, this type of online trading is very expensive and risky. Many traders pay huge money as brokerage fees and other charges in order to try day trading and many borrow money in order to do the same. If an investor loses money in day trading, then, they may wind up in severe debts.
How to buy a good Stock:-
When it comes to buying stocks, you have to follow certain steps so that you can make profit out of investment.

• Conduct research about the company
• Consider the Advice of a Professional
• Buy stocks only when you trust that Company

Conduct research about the company


Before investing in any stock conduct a reasonable research about the company. In other words we can tell that you should be very clear with all these aspects of the company such as; what is the main business of the company, what the company produces, what are the future plans of the company, etc. Based on this information you should be able predict how successful the company will be in the future. Researching before buying the stock reduces the chances of you will buy a company that is headed for bankruptcy rather than profits.
Consider the Advice of a Professional
As we have mentioned in the beginning there are 1000s of places there you can find stock tips. Your friends may know something about the stock market, your relatives might also know something about the market but you are far more likely to get quality and valuable advice from an adviser rather than an amateur investor. It is always better to consider stock tips providers like IndianMoney.com to get quality research tips.

Buy stocks only when you trust the Company:-

Those companies that you trust for your everyday needs -- the companies that make your clothing, your car, and other products that you rely on for quality -- are often a good lead for good investments. If you trust the company for the quality and notice that they produce consistently good products, chances are that other people will too. This means that the company's product may keep selling and the chances that you will make money on your investment are good.
Techniques used for Generating Stock Tips:-


Following are the two major techniques used for Generating Stock Tips. Apart from this there are many other factors that an analyst is considering while analysing the stock.

• Technical Analysis
• Fundamental Analysis

Technical Analysis (TA) as the name suggests is an analysis of financial markets based on data and observations. The principles of technical analysis derive from the observation of financial markets. TA is best arrived by using various methods, strategies and studies. The main objective of TA is to analyse the trend in the market, it also helps in analysing the behavior, resistance and support levels for a particular stock or index. While technicians use various methods and tools, the study of price charts is primary in TA. Technical analysts also widely use indicators, which are characteristically mathematical transformations of price or volume. These indicators help determine whether a stock is trending, and if it is, its price direction.
Fundamental Analysis (FA):-


Fundamental analysis is a stock valuation method which depicts the movements of stock prices by analysing the financial and economic data. The fundamental information that is considered for FA include a company's financial reports, and non-financial information such as estimates of growth in sales, growth in profits, industry comparisons, and economy-wide changes, changes in government policies etc. In simple terms fundamental analysis is like conducting a medical examination on a company to see how healthy it is., Factors such as company’s cash flow, earnings, return on equity are considered for Fundamental Analysis.



Technical analysis is often contrasted with fundamental analysis. Fundamental analysis studies the economic factors and its influence in financial markets but technical analysis based on the historical data it gives more importance to the study of price action alone. Some traders use technical and some uses fundamental analysis solely, while others use both types to arrive at a trading decision.
Source: http://indianmoney.com/article-display.php?cat_id=1&sub_id=12&aid=868&acat=&ahead=Stocks%20and%20Stock%20Tips.....!!!

Definition of Section 80C of the Income Tax Act and the benefits available

Section 80C has become effective with effect from 1st April, 2006 as a replacement to the earlier Section 88 with almost same investment mix available in Section 88. Even the section 80CCC on pension scheme contributions was merged with the above 80C. However, this new section has allowed a major change in the method of providing the tax benefit.

Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-exempt. One must plan investments well and spread it out across the various instruments specified under this section to avail maximum tax benefit. Unlike Section 88, there are no sub-limits and is irrespective of how much you earn and under which tax bracket you fall.

The total limit under this section is Rs 1 lakh. Included under this heading are many small savings schemes like NSC, PPF, life insurance, ELSS and other pension plans. Payment of life insurance premiums and investment in specified government infrastructure bonds are also eligible for deduction under Section 80C.

Most of the Income Tax payees try to save tax by saving under Section 80C of the Income Tax Act. However, it is important to know the Section in total so that one can make best use of the options available for exemption under income tax Act. This section provides tax rebate not only for the investments you made but also for the expenditures you incurred to acquire various assets.

The investments that fall under Section 80C can be broadly classified as contributions / investments to:

• Provident Fund


• Public Provident Fund


• Life insurance premium


• Pension plans


• Equity Linked Saving Schemes of mutual funds


• Infrastructure bonds


• National Savings Certificate

Besides these investments, the payments towards the principal amount of your home loan are also eligible for an income deduction. Education expense of children is increasing by the day. Under this section, there is provision that makes payments towards the education fees for children eligible for an income deduction.



In 2008, Senior Citizens Saving Scheme 2004 and the Post Office Five Year Term Deposit Account have been added to the basket of saving instruments under Section 80(C) of the Income Tax Act. An additional deduction of Rs.15, 000 under Section 80D has been allowed to an individual who pays medical insurance premium for his/her parent(s).



As given above, the limit under this section 80C is Rs.100, 000, irrespective of how much you earn and under which tax bracket you fall. Also, there are no sub-limits under this overall Rs 100,000 amount. Therefore, if you like, you can invest the entire amount in ELSS or NSCs. If you are repaying a home loan and the principal repayment amounts to Rs 100,000, then you can claim the entire amount as a deduction and thus no further savings will be needed.



All the above must be made from the current year\'s earnings and not past earnings.



Tips to avail the maximum benefits Under Section 80C:

(1) Explore the possible tax benefits, which can be availed from every Savings/Investments/Expenditures you do:

(A) Savings in Provident Fund:

Salaried income tax payee are usually have a forced saving which are eligible for deduction under section 80C. A fixed percentage of basic salary (ranges from 8.33% 12%) is deducted by your employer towards the Employees Provident Fund (EPF). Some employers allow higher deduction towards EPF. Thus, you should first of all check the total amount that is expected to be deducted towards EPF during the financial year. The total amount deducted from your salary will be eligible for investments under Section 80C.
(B) Interest earned from National Saving Certificates:

In case you have purchased NSCs during some earlier years, then the accrued interest as per the tables released by authorities is eligible for deductions under Section 80C.

(C) Home Loan Principal Repayment:

There is a provision that the payment made for repayment of the principal amount (not interest payment) of the Home Loan is eligible for a deduction under Section 80C if you have taken a home loan and you fulfill certain conditions.

(D) Tuition fee paid for your children education:

Most of the young couples and middle aged income tax payee incur quite high payments towards the education fees of their children. The expenditure incurred on education fees is also eligible for a deduction under Income Tax Act, Thus, if you are incurring expenditure towards education fee of your children, please check whether these are eligible for deduction under the IT Act.

(2) Lock in period in case of Tax saving investment/savings plans:

Tax saving investments; normally have a minimum lock-in period i.e. the period during which withdrawals are usually not allowed. If the same are withdrawn before the lock in period, these will be taxable in the year of withdrawal. For example, National Savings Certificates (NSC) has a lock-in period of six years, Public Provident Fund (PPF) has a lock-in of 15 years, Equity Linked Saving Schemes (ELSS) has a lock-in period of three years. Insurance policies have even greater period of lock in.

(3) Consider your life goals while making every investment to save tax:

You are saving every year and while saving you normally have some goal in mind, e.g. to meet the expenditure on education of children, purchase of a vehicle or house or marriage of your children. Therefore, you should always look at the investments from the angle whether it will meet your specific requirements on maturity. You should also try to diversify your savings in different instruments.



For instance, if you have already invested a fair portion of your money in equity (shares and mutual funds that invest in shares), avoid an ELSS. Opting for an ELSS means a huge portion of your investments will be in equity and that may not be what you want. Small savings schemes are usually preferred by the risk-averse people. Equity-linked savings schemes (ELSS) are a good option to consider for those with appetite for risk. ELSS tax savers are like any other diversified equity fund, but with a three-year lock-in, providing benefits under Section 80C.
Source: http://www.indianmoney.com/article-display.php?cat_id=1&sub_id=110&aid=105&ahead=Definition%2520of%2520Section%252080C%2520of%2520the%2520Income%2520Tax%2520Act%2520and%2520the%2520benefits%2520available

Stock Investment with Diversified Portfolio.....!!!

If you are a budding investor, got some spare money and thinking of investing in stock markets and for the first time you walk into broker’s office, tell your broker about your interest. The first thing that broker would be telling is “diversification or portfolio construction”. If you know the word its well and good, but if you don’t have any idea about it then you will be puzzled. You would have read that shares of your favorite company (e.g.: Infosys, Reliance or TCS) are trading well, so you tell your broker that you want to put all your money into stocks of that company. For a moment your stock broker will look at you as if you have fallen from sky, it’s because people living at the stock markets believe that if you don’t diversify then there are very less chances of you surviving in the market. Now, is it always necessary to have a diversified portfolio…..??? If yes then how much should an investor diversify? Are there any side effects of this so called diversification?
Being an investor you must have heard this particular word more than thousand times and I’m also sure that you would have read a lot on this topic, but most of the times the investors do not get the full meaning of portfolio diversification. If you ask what’s diversification most of the answers would be “having shares of many companies” or if he is an investor with bit of knowledge he would say “not putting all your eggs in one basket”. I would agree with the second person to some extent, but if asked to elaborate he will switch over to the first definition, which is incomplete. Diversification does not only refer to holding shares of different companies but holding the securities of many companies, fixed income securities, money market instruments etc, in what proportion we allocate or invest in these avenues depends on our risk taking ability, knowledge to analyze the economic conditions, companies etc.
Advantages of diversifying the Portfolio :-
Let’s have a look at some of the advantages of diversifying your portfolio

• By diversifying you will be able to hedge (evade) the risk (systematic and unsystematic).
• Even though there are fluctuations in the prices of the stocks in the market, you will have fixed returns.
• Diversification is very helpful for an investor who is looking out for investing in the companies for a long term. The reason is that he will be having a variety of securities in his portfolio and even if one company is going through a lean patch, other securities will be doing well.
• Diversification of portfolio helps during the worst times of the market, when the market has crashed.

Disadvantages of diversification:-

• The first and the most important thing is that by diversifying you will be losing an opportunity to make most of your investment. It’s just a matter of chance that one of companies in which you had invested gave a return of 15% and your portfolio return was 12%.
• Investing in too many securities means you will have to spend a lot of time to study the company, performance of its stocks. Not only this, you will have to spend a lot of time in order to manage the portfolio .

Over-diversification and under-diversification :-

Overdoing something is bad and under doing is not an exemption. This holds good in case of diversification. Over diversifying and under diversifying can harm your portfolio. Some of the reasons why investors go for over diversification are;

• They have lot of disposable income .
• They think, more the diversification more will be their earnings
• Interpreting market conditions in a wrong way
• It is a reason for them to be proud of themselves.
• Their relative or friend has shares of more companies .

Reasons for under diversification:-

• They are mostly risk averse investors
• They want to play safe in the stock market
• Wrongly interpreting the market conditions .

Portfolio Re-balancing: -
This is also called as portfolio evaluation and portfolio revision. Most of the investors must be wondering as to why there is a need for revising the portfolio. For example last year you had invested 75% in shares and 25% in bonds and your portfolio had given you returns of 15%. These figures look good but is it good to continue with the same portfolio…..??? experts say that investor must revise his portfolio. Some of the reasons that are given in support of their view are;

• The economic conditions are changing continuously, so the securities that had done well during previous year may or may not do well this year .
• The changes in the monetary policies, fiscal policies which are revised every now and then have their own implications on the market and which in turn have an effect on earnings of the investor.
• The changes that have taken place in the companies can also have an effect on the earning capacity of the company, hence affect earnings.
• The phase (Bullish or Bearish) of the markets have an implications on the earnings of a portfolio.
• Prices of shares keep changing and there are some phases when the share prices are very low. So to encash on this situation an investor needs to revise his portfolio. For example you are holding 100 shares (price of each share is rupees 90) of company XYZ. Your total investment in this case would be 9000 rupees. Now due to some news or changes in some policies which are not in favor of markets prices of all the stocks fall so is the case with these shares. Suppose the prices of this share falls to 75 rupees. Now same investor with same 9000 rupees can buy more number of shares if he had sold some of shares or thought of revising his portfolio.

Sources:- http://indianmoney.com/article-display.php?cat_id=1&sub_id=12&aid=899&acat=&page_id=3&ahead=Stock%20Investment%20with%20%20Diversified%20Portfolio.....!!!

HRA & Tax Calculation.....!!!

HRA stands for House Rent Allowance, it is an allowance provided by an employer to an employee. The main intention of this is to meet the cost of renting a home. Everybody whose salary package includes HRA is potentially eligible to get some deduction in Income Tax. Most, of the government and private employees have HRA as part of their salary package. In order to get income tax deduction for HRA, you must be paying rent for your accommodation; merely receiving HRA won’t help you to get tax benefit.

Are you eligible for deduction under HRA…..??? We have designed and prepared this article to make you understand how you can claim tax deduction for HRA and what is the maximum tax exemption limit allowed for that. You can get tax deductions on HRA only if you are paying a rent of more than 10% of your salary. In majority cases, the rent, especially in cities is well above salary. For the purpose of discussion on HRA, salary means your Basic + Dearness Allowance (DA).

Most of us think and are of the opinion that whatever rent we pay has exemption while calculating tax. But in fact the reality is different;
 
Salaried persons


It is exempt for a salaried person if house rent allowance (HRA) is provided to him as a part of compensation for the services rendered. The maximum amount of exemption that he can get is the amount paid by the employee*.

Other Individuals

Then what about other individuals, who do not receive HRA, government has made a provision under section 80GG, as per this, a non- Salaried Individual can also avail a maximum deduction of Rs 2000 every month i.e. 24,000 per annum.
 
How to claim HRA
You can claim HRA if you fulfill the following three conditions:

•You should have an HRA allowance as part of your salary package.
•You must be staying in a rented house and paying rent for it.
•Rent should exceed 10% of your salary.

What is the maximum available deduction on HRA

The actual HRA entitled to get tax exemption will be the least of the following.

•The actual amount of HRA received.
•40% of salary. This increases to 50% if you are staying in Chennai, Delhi, Kolkata or Mumbai.
•Rent paid minus 10% of Salary (Basic + Dearness Allowance)
Other Exemptions

•Rent given to your parents
•Took a home loan and bought a home but are not residing
•Home loan for a home in a city where you are not residing
Rent given to your parents


You can claim tax deduction on the rent given to your parents. If you are living with your parents and pay them rent they will be the landlords. One of them should declare it in his/ her personal income tax return to prevent litigation in the future.



Took a home loan and bought a home but are not residing

If you took a home loan and have bought a home but are not residing in it because of some genuine reasons you can get the following benefits

•Tax benefit on principal repayment under Section 80C

•Tax benefit on interest payment under Section 24

•HRA benefit

Home loan for a home in a city where you are not residing

In this case also you can avail the same benefits in the previous case such as;

•Tax benefit on principal repayment under Section 80C

•Tax benefit on interest payment under Section 24

•HRA benefitSource: http://indianmoney.com/article-display.php?cat_id=1&sub_id=110&aid=893&acat=&page_id=3&ahead=HRA%20&%20Tax%20Calculation.....!!!

Income Tax Exemptions.....!!!

In our previous article “How to calculate Income Tax…..???” We have depicted the calculation of Income Tax. We have received 1000s of comments on the article with appreciation. We are glad to know that you are benefitted from the article. In this article we are elaborating the topic by including the calculation of Gross total income (GTI), Net income, Tax Deductions, etc.

Income tax calculation is one of the easiest as well as toughest job a person needs to do. Easy in the sense all you need to do here is calculate your taxable income and find out the tax liability according to tax slabs and tough in a way that there are every chances that a person will commit mistakes while calculating his tax liability though he knows what is his income, investments and tax slab under which he falls. Then how to calculate the tax effectively and be error free and what are the things that an assessee needs to consider while calculating tax liability?
 
The income tax that a person needs to pay is calculated from the Net income or Taxable income. You can get this taxable income once you deduct all the deductions which come under section 80 from gross total income. Hence the first step in calculating the income tax would be to calculate gross total income.
Gross total income (GTI)
Gross total income is calculated by taking into consideration five heads of income they are

•Income from Salary
•Income from house property
•Income from business / Profession
•Income from Capital Gains
•Income from Other sources

Add up incomes from each head to get gross total income. For most of assessees they will be having income from all the heads of income except third one or income from business or profession.

Once you get the gross total income all you need to do is deduct all the exemptions so as to get the taxable income.
Source: http://indianmoney.com/article-display.php?cat_id=1&sub_id=110&aid=895&acat=&page_id=3&ahead=Income%20Tax%20Exemptions.....!!!

Tax Implication on House Property.....!!!

Income from house property
Income from house property is one of the five heads of income from which total taxable income is calculated.

Individual Income Heads

Following are the five heads of Income from which total taxable income is calculated.

1.Income from Salary
2.Income From House property
3.Income from Business or Profession
4.Income from Capital Gains
5.Income from Other Sources

Points to be taken care of while calculating income from house property

Following are the points which are very important and to be taken care of while calculating income from house property are;

•Income from house property is paid by the assessees’ who own house.
•If an assessee uses the house property for his profession or business then, income generated from this house comes under income from business not under income from house property.

For example; if Mr. X who owns two houses and uses one for occupation and second one for his business, then second house is considered while calculating income from business.

•The house property that we are taking into consideration under this head should be building, house, etc.
Types of House Property
When we are calculating under this head there are four situations

•Let-out house property
•Self occupied house property
•Deemed to be let-out property
•Partly self occupied and partly let out

Calculation of Income from House Property
Income from house property is calculated keeping in mind some of the concepts such as;

•Fair Rental Value: is the rent of the similar house in same locality.
•Actual Rent: is rent received during the previous year
•Municipal Value: refers to the rental value fixed by Municipality
•Standard Rent: refers to rent fixed in Rent Control Act.

There are two tables which are very much essential to calculate income under this head

Table.1: Computation of Gross Annual Value (GAV)

Step 1: Municipal Rental Value or Fair Rental Value ---------------- whichever is higher
Step 2: Answer of step 1 or Standard rent ----------------------------- whichever is lower
Step 3:Answer of step 2 or Actual rental value ---------------------- whichever is higher

The Answer of step 3 is Gross Annual Value.

Table 2: Computation of Income from House Property.
Particulars Rs: Rs:
Gross Annual Value
Less:Municipal taxes paid by assessee during previous year
Net Annual Value
Less:Deductions under Section 24
Income from House Property
Deductions that an assessee can claim

Before going to the calculation of Tax under various types of assessee you need to understand the deductions that can be claimed. Following are the major Deductions that an assessee can claim;

•Standard deduction
•Interest on borrowed capital
•Interest calculated on pre-construction period
•Vacancy Period
•Unrealized Rent

Standard deduction

This deduction can be claimed by all assessees. This deduction is given so as to compensate for all the repairs and expenditure that assessee has incurred on the house in previous year. This includes repairs, ground rent, insurance and these cannot be deducted once again. Standard deduction given is 30% of Net Annual Value, irrespective of whether amount spent is more or less than standard deduction calculated. This deduction is nil if the house is self-occupied.

Interest on borrowed capital

If an assessee has borrowed to build that particular house then the interest that he is liable to pay is given as a deduction. Capital borrowed before 1/4/1999 is given a maximum interest limit of 30,000 whereas capital borrowed after this period has interest upper limit up to Rs. 1,50,000 this is applicable for self occupied property. In case of let out property the whole of interest amount on borrowed capital is given as deduction.

Interest calculated on pre-construction period

It is allowed in 5 equal annual installments starting from the previous year in which house was acquired or construction was complete.

Vacancy Period

This is not a deduction but this is used in case of let-out property. Rent lost by assessee because of vacancy period can be subtracted while calculating Gross Annual Value.

Unrealized Rent

This too is not a deduction but is useful in calculating income from let-out house property. If an assessee has not realized rent then he can use it while calculating Gross Annual Value, but to claim this assessee has to make sure that he has furnished all required details, documents and adhered to rules and regulations.

Income from House Property

•Income from let-out House Property
•Income from Self Occupied Property
•Income from Deemed let-out House Property….
•Income from Partly self occupied and partly let out property…

Income from let-out House Property

Income from House which is let-out in the previous year is taken for consideration here. Even if the property is let-out for certain period say 6 or 8 months and then occupied by assessee, income from such house is taken as let-out property for the whole previous year. If the house is rented even for one day in the previous year then it is taken as let-out property and income taxable is calculated. As told above the assessee can claim unrealized rent and vacancy period for which house was unoccupied.

Example 1

Income from house property that Mr. X gets if
Municipal value= Rs 1,60,000
Fair Rent= Rs 1,80,000
Standard rent= Rs 1,70,000
Actual rent= Rs 20,000 per month (20000*12 months= Rs 2,40,000)

Municipal tax paid by owner= Rs 25,000
unrealized rent= Rs 30,000

Expenses on repairs= Rs 25,000

Solution:

In this case there is unrealized rent hence the actual rent will be 2,10,000 (2,40,000-30,000)

Calculation of Gross Annual Value

Step 1: 1,60,000 or 1,80,000-----------------------------1,80,000
Step 2: 1,80,000 or 1,70,000-----------------------------1,70,000
Step 3: 1,70,000 or 2,10,000* --------------------------- 2,10,000

Gross Annual Value = 210000

* 210000 = 240000 – 30000 (Actual rent – unrealized rent)

Computation of income from house property
Particulars Rs: Rs:

Gross Annual Value
Less:Municipal taxes paid by assessee during previous year
Net Annual Value
Less:Deductions under Section 24
2,10,000
25,000
1,85,000
55,500*

Income from House Property 1,30,000

* 30% of 185000 (Standard Deductions)

Income from Self Occupied Property

In case of income from self occupied property Gross Annual Value, Municipal taxes, Net Annual Value, Standard Deduction is taken as zero or nil, Simple reason is that self occupied property does not generate any income or rent. Only the interest on borrowed capital is taken into consideration.

Example 2: Mr. X owns a house and resides in the same then compute income from such house property. If,

Municipal value= Rs 3,00,000
Fair Rent= Rs 2,75,000
Standard rent= Rs 2,88,000
Municipal tax paid = Rs 30,000
Interest on the loan taken in 2006 to construct the house is 1,50,000 for previous year

Solution:

Particulars Rs: Rs:
Gross Annual Value
Less:Municipal taxes paid by assessee during previous year
Net Annual Value
Less:Deductions under Section 24
Nil
Nil
Nil

1,50,000*

Income from House Property -1,50,000

* 150000 is the interest paid on the capital borrowed

In case of borrowed capital for self occupied property, income from house property will no doubt be a loss, in such cases this loss is allowed to be set off against income from other sources.

Income from Deemed let-out House Property

When an assessee owns more than one house and has used all of them for residential purpose then only one house is taken for consideration under self occupied property and rest of the houses are taken as let out properties. Selection of house under self occupation is done in such a way that tax liability on assessee is reduced to the maximum extent.

Example 3:
An assessee owns two houses and has occupied both of them. Calculate total income under house property from given data

Particulars House 1 House 2
Municipal value 80,000 1,00,000
Fair Rent 90,000 90,000
Standard rent 1,00,000 95,000
Municipal tax paid - 10,000
Interest on the loan taken 20,000 30,000

In this case suppose that House 1 is taken as self occupied and House 2 as let-out house property.

Calculation of income from House 1:
Particulars Rs Rs
Gross Annual Value

Less:Municipal taxes paid by assessee during previous year

Net Annual Value
Less:Deductions under Section 24
Nil
Nil
Nil

20,000*

Income from House Property -20,000

* 20000 is the interest paid on the loan taken

Calculation of income from House 2:

Calculation of Gross Annual Value

Step 1: 1,00,000 or 90,000 ----------------------------- 1,00,000
Step 2: 1,00,000 or 95,000 ----------------------------- 95,000
Step 3: 95,000 or nil ------------------------------- 95,000

Gross Annual Value = 95000

Computation of income from house property


Particulars Rs Rs



Gross Annual Value

Less:Municipal taxes paid by assessee during previous year



Net Annual Value

Less:Deductions under Section 24

95,000

10,000

85,000

55,500*

Income from House Property 29,500

* 55500 = 25500 + 30000 [standard deduction (30% of 85000) + interest on loan (30000)]

Total income from house property (house1 & house2) = (-20,000) + 29,500

= Rs 9,500
Income from Partly self occupied and partly let out property

Partly let out here may be in terms of portion of the house let out or few months in previous year it is given on rent. In such cases the portion of the house that is occupied is treated as self occupied and that portion which is not occupied is treated as let out property. The calculation is done using the same two tables.
Source: http://indianmoney.com/article-display.php?cat_id=1&sub_id=110&aid=900&acat=&page_id=3&ahead=Tax%20Implication%20on%20House%20Property.....!!!

How to Buy the Best ULIP.....!!!!!

ULIP
ULIP stands for Unit Linked Insurance Plan. A United Linked Investment Plan (ULIP) is an instrument which combines the security provided by an insurance plan with the opportunities provided by an investment plan. It is a unique product which aims to integrate insurance as well as investment requirements. Its structure is similar to that of a mutual fund. This is how it works:

•You pay a periodic premium to the insurance company.
•A part of the premium is used to provide you with an insurance cover.
•The remaining amount goes to equity or debt market
•In the event of death, nominees are paid the sum assured
•In case of maturity of the policy total value of the fund will be paid to the policy holder.
 
5 steps to select right ULIP


We present a 5-step investment plans that will guide investors in the selection process and facilitate them to choose the right ULIP.

•Understand the concept of ULIPs

•Focus on your need and risk profile

•Compare ULIP products from various insurance companies

•Go for an experienced insurance advisor

•Does your ULIP offer a minimum guarantee?

•Read the fine print before investing in ULIP

Things to keep in mind while Selecting a ULIP



1. Buy insurance for risk cover

2. Do not consider insurance as an investment option

3. Preferably buy only a term policy

4. Do not prefer savings-linked insurance policies

5. Remember not to be carried away by persuasive agents and publicity.

6. Buy ULIP only if your horizon is long term.

7. Not insure yourself if you are a lone bird.

8. Do not insure if you are wealthy.

9. Do not insure the child

10. Read the fine print carefully
1. Buy insurance for risk cover


The purpose of an insurance policy is to protect the family members of a person from any financial complexities in case of his/her premature death. Such unfortunate eventuality to a breadwinner in the family can put the other family members in serious financial problems. Insurance seeks to offer financial help in such times.



2. Do not consider insurance as an investment option

The primary aim of the insurance policy is to provide a risk cover. Therefore a part of the premium paid is first appropriated towards this purpose. The balance amount is invested in financial instruments, which are generally very safe ones. Also, the commissions and charges are substantially higher than other investment options.



3. Preferably buy only a term policy

Term policies are pure insurance products with no investment option. They are the cheapest and the simplest among the available plans. But cheapest does not mean they are inferior to other costlier insurance policies. As far as the basic purpose of risk cover is concerned, there is no difference. And usually for most of us this term policy must be more than sufficient.



4. Do not prefer savings-linked insurance policies

In contrast to the term policies, savings-linked insurance policies are such as money-back, endowment and whole-life provide the risk cover and also give back some returns to the insured at the end of the policy term, in case nothing happens to him/her in the interim. The premiums of such policies are much higher than the term policies. This assurance of getting some returns at the end of the policy term is why most people choose for such savings-linked policies in comparison with term policies. Therefore, a person may be wealthier if he were to buy the cheaper term policy and invest the balance amount, which would have otherwise gone towards high premiums of saving-linked policies, like MFs. In this way he would be risk-covered and also generate higher returns.
5. Remember not to be carried away by persuasive agents and publicity.


From their business viewpoint the insurance companies and the agents may be keener to sell saving-linked policies in comparison with the term policies, as the premiums and commissions are much higher. And hence the advertisements and promotions may speak more about such policies. Therefore, it is for the insured to keep his interests & needs in mind and not be carried away by influential agents and publicity.



6. Buy ULIP only if your horizon is long term.

Unit Linked Insurance Policies (ULIPs) offer an alternative to traditional policies where the returns will be market-linked. Further, one can also choose one’s own investment objective amongst equity, debt and balanced funds. However, the charges in the first years are quite high. Thus the actual benefit of ULIP starts accruing only if one has a long-term investment horizon.



7. Not insure yourself if you are a lone bird.

Insurance is for the benefit of the dependents. Thus, if you are single with no one being financially dependent on you, it is not necessary for you to buy an insurance policy.



8. Do not insure if you are wealthy.

If you are a person of plentiful means, you have lots of wealth – properties, bank balances, investments, etc. in your absence; this may be more than enough for your family and dependents to continue living comfortably. A few lakhs of rupees from an insurance company may not make any material difference to their future financial security.



9. Do not insure the child

Any unfortunate eventuality involving a child is no doubt emotionally very shocking. But it usually does not hurt the family financially. Whereas, insurance cover is for justifying the financial difficulty, that may arise with the death of the insured. Therefore, taking a policy for a child is meaningless. It is a needless expense.



10. Read the fine print carefully

As they say ‘the devil is in the details’. Therefore, understand the characteristics of the policy, the charges etc., before you buy an insurance policy. Further, most insurance companies offer a 15-day look-in period after you have taken the policy. Go through the terms and conditions in the policy very carefully. And if you feel that it does not meet your necessity, you can cancel the policy. You may have to pay some administrative charges, but this would be much better than investing on to a bad policy for years to come.



Insurance is a long-term contract generally spanning over decades. Also, these contracts have very little flexibility. A wrong insurance product can financially injure for a very long time, unlike many other financial products. Therefore, one should be extra careful and cautious when deciding on how much to insure, how long to insure, which policy to buy, etc.



Why People Buy Insurance?



1. Tax Saving

2. To save/invest

3. Agent’s compulsion

4. To plan for retirement

5. To provide security for children’s education

6. Bank’s demand for security

7. Relatives’ recommendation to buy insurance

8. Friends’ influence

9. Parents’ influence

10. To cover life risk
What happens if payment of premiums is discontinued?


Discontinuing premium payment can be of two kinds such as;

•Discontinuance within three years of commencement
•Discontinuance after three years of commencement

Discontinuance within three years of commencement
If all the premiums have not been paid for at least three consecutive years from inception, the insurance cover shall cease immediately. Insurers may give an opportunity for renewal within the period allowed; if the policy is not renewed within that period, surrender value shall be paid at the end of third policy anniversary or at the end of the period allowed for revival, whichever is later.
Discontinuance after three years of commencement
In this case at the end of the period allowed for renewal, the contract shall be terminated by paying the surrender value. The insurer may offer to continue the insurance cover, if so opted for by the policy holder, levying appropriate charges until the fund value is not less than one full year’s premium. When the fund value reaches an amount equivalent to one full year’s premium, the contract shall be terminated by paying the fund value.
Source: http://indianmoney.com/article-display.php?cat_id=1&sub_id=13&aid=901&acat=&page_id=3&ahead=How%20to%20Buy%20the%20Best%20ULIP.....!!!!!