All you need to know about saving taxes using ELSS

The last month of the financial year sees investors rushing to save tax by investing in tax-saving instruments. You can save tax by investing upto Rs 1.5 lakh in equity-linked savings scheme (ELSS) under section 80C of the Income Tax Act.

What are tax saving or ELSS schemes? How much can one invest in them?

An equity-linked savings scheme (ELSS) is a mutual fund that gives the option to save tax. These funds invest in equities and investors can choose the dividend or growth options. You can invest any amount up to 1.5 lakh in an ELSS scheme to save tax.

ELSS schemes offer growth and give investors the opportunity to earn higher returns in the long run. However, as is the case with all mutual fund schemes, there is no guarantee of any fixed returns.

What is the process to invest in an ELSS scheme?

Once an investor is KYC compliant, he can invest in an ELSS scheme just like any other mutual fund scheme.

Investment can be done by writing a cheque and filling the relevant form, or can be also done on line.

Does ELSS have any advantage over other tax-saving options under section 80C?

ELSS has the smallest lock-in period of three years.

Compared to this, the Public Provident Fund (PPF) has a minimum lock-in of 15 years, and allows only conditional withdrawal before that. The EPF is usually locked in for the term of your employment. Other tax-saving products like Tax-saving Fixed Deposits, or the National Savings Certificate (NSC) are locked in for a period of five years and above. The National Pension Scheme (NPS) is locked in until you reach 60 years of age, and only allows conditional withdrawals. ELSS also has intermittent cash flows in the form of dividends which are tax free, if one opts for the dividend option. Also, in an ELSS you do not pay any tax on dividend or at the time of redemption.

What should an investor do with his ELSS funds, once the lock-in period is over?

Investors have the option to continue holding the mutual fund units after three years or redeem them. Financial planners say investors could continue holding them if the funds perform in line with their expectations in order to meet their financial goals.


Source : By Prashant Mahesh, THE ECONOMIC TIMES

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Demonetisation: Currency recall could cost India a massive Rs 1.28 lakh crore, says CMIE

The cost of withdrawing high-denomination currency notes to wipe out black money from the country will be about Rs 1.28 lakh crore during the 50-day window till December 30, the Centre for Monitoring Indian Economy (CMIE) said.

The overall cost could be much higher, the private economy watcher estimated. The demonetisation invalidated 86% of the Rs 17.8 lakh crore of currency that was in circulation on October 28. “A steady stream of news reports of empty mandis, low footfalls at malls and drop in business in restaurants, stressed factories paint a grim picture of the effects of a sudden withdrawal of liquidity from markets,” CMIE said in a report on Thursday.

Emphasising that all estimates are conservative and limited to the 50-day window, CMIE said the government and the Reserve Bank of India are estimated to bear a cost of Rs 16,800 crore, largely on account of printing new currency notes and transporting them to banks, ATMs and post offices.

CMIE said businesses are expected to pay the biggest price of the demonetisation, which became effective on November 9, and the immediate impact could be about Rs 61,500 crore, or 48% of the total cost of the exercise.

“We estimate the direct impact on business in terms of the drop in discretionary spending by households. This alone adds up to more than half a trillion rupees during the 50-day period till end of December,” it said. After enterprises, the other big sector to get hit is banks, which, according to CMIE, “lose a lot more.”

Wage levels of bankers are higher than those of the average person in the queue and banks suffer overheads and operational costs in terms of recalibrating ATMs to dispense new notes. “Banks would do little else during this 50-day period and we estimate that they would bear a cost of Rs 35,100 crore,” it said.

People standing in queues to exchange or deposit old currency notes bear 12% of the total cost and could lose Rs 15,000 crore in foregone wages during the period. The long-term impact could be more, CMIE said.

“All estimates are admittedly conservative. All estimates are limited to the 50-day window. However, the impact of low liquidity, broken supply chains and loss of confidence in consumers is likely to impact the economy over a longer period,” CMIE said.



Source : Economic Times

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No more over-the-counter exchange of old notes

Facing severe attack in the wake of difficulties thrown up by demonetisation, government tonight extended till December 15 the facility of using old Rs. 500 notes in public utilities and included more services like mobile recharge but stopped the over-the-counter exchange of defunct currencies and use of Rs. 1,000 notes.

From now on payment of fees up to Rs. 2,000 per student has been allowed in schools and colleges run by central and states governments, municipalities and local bodies.

Payment towards pre-paid mobile top-up to a limit of Rs. 500 per recharge has also been allowed while purchase from consumer cooperative stores will be limited to Rs. 5,000 at a time, an official release said.

Current and arrears dues payments will be limited to only water and electricity, a facility that will continue to be available only for individuals and households.

However, the release said payments for the transactions under all the exempted categories will now be accepted only through old Rs. 500 notes.

“Considering that the Ministry of Road Transport and Highways have continued the toll free arrangement at the toll plazas up to December 2, it has been decided that toll payment at these toll plazas may be made through old Rs. 500 notes from December 3 to December 15,” it said.

Foreign citizens will now be permitted to exchange foreign currency up to Rs. 5,000 per week. Necessary entry to this effect will be made in their passports, it said.

Explaining the reason for discontinuance of exchange of the defunct notes, the release said it has been observed that over-the-counter exchange of the old notes has shown a declining trend.

It has further been felt that people may be encouraged and facilitated to deposit their old Rs. 500 and Rs. 1000 notes in their bank accounts. This will encourage people who are still unbanked, to open new bank accounts, it said.

Consequently, it said, there will be no over-the-counter exchange of old notes after midnight tonight.

The exemptions were initially announced by Prime Minister Narendra Modi when he disclosed the demonetisation scheme on November 8. Subsequently there have been modifications in these measures.

The release said the government has been reviewing the issues arising out of the cancellation of the legal tender character of the high denomination notes.

The Government has also been receiving various suggestions in this regard. After due consideration of all relevant aspects, decisions relating to certain operational aspects of the Scheme have now been taken, it said.

There has been large scale criticism of the government in the wake of severe hardships faced by a cross-section of people following demonetisation of high denomination currency.


Source : Thehindubusinessline

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60 per cent of SBI ATMs are calibrated, operational

As of Wednesday, State Bank of India has managed to calibrate 60 per cent of its ATMs.

The rest would be done within the next five days, the bank's Chairperson, Arundhati Bhattacharya, said on the sidelines of SBI's Community Service Banking organised at the bank's Administrative Office premises in Coimbatore.

She also admitted that though 60 per cent of the ATMs were calibrated, most of these automated teller machines were loaded with the new Rs. 2,000 currency, because the new Rs. 500 note was not available in the first few days. “It has just started to come in.”

“The machines have been calibrated to dispense the new Rs. 500 as well. Every State is getting covered, but at a slower pace. As the higher denomination currency came first, it was important to put in (load) some bulk. The new note will be available in Chennai from today and Coimbatore will get it soon enough. Once the new currency gets distributed we will load these on the ATMs,” she said.

She allayed rumours about the difficulty in getting the new Rs. 500 currency calibrated. “When we calibrated for Rs. 2,000, we did so for Rs. 500 as well,” she said.


Source : Thehindubusinessline

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SBI, associate banks merger on track

State Bank of India Chairman Arundhati Bhattacharya on Thursday said that the merger of associate banks with SBI is on track and remains unaffected because of the demonetisation move.

“There is a separate team working on this and they are not into demonetisation exercise,” she told reporters in Coimbatore.

She said the demonetisation exercise has impacted branch working. “But this has not impacted any other team working alongside. So the merger exercise is on track. We have to receive the Government approval, there are several steps along the way. Once approved, we will come together,” she said, unwilling to commit on a timeline.

The SBI chief is in the city to take part in a leadership summit titled “Insight – The DNA of Success”, organised by Isha Leadership Academy.


Source : Thehindubusinessline

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