Have you planned your income tax this year?

The financial year 2011-12 is coming to an end. It is time to finalise your income tax planning and savings. There are many sections under the Income Tax Act that enable you to reduce your income tax liability.

These are some sections you need to tap:

Section 80C

This section allows income tax exemptions and rebate to individuals. You can invest in certain specified instruments and reduce your taxable income by up to Rs 1 lakh under this section.

These are some of the major instruments that attract income tax benefits. You can invest Rs 1 lakh in one or more of these instruments to avail tax rebate under Section 80C:-

Provident funds (Employee Provident Fund and Public Provident Fund) Life insurance (term insurance and endowment plans) Pension plans Equity-linked savings schemes (ELSS) of mutual funds Specified government infrastructure bonds Repayment of housing loan (principal component) National Savings Certificate (NSC)

Section 80CCF:

This is an extension of Section 80C. The Income Tax Act allows you an additional rebate (in addition to the limit allowed under Section 80C) of up to Rs 20,000 when investing in notified infrastructure bonds. This section is a boost for infrastructure development in the country. There is an expectation that the investment limit in this section may be raised for the next year.

Home Loan Benefits:

A housing loan provides relief under the Income Tax Act. The repayment of the principal component of a housing loan attracts rebate under Section 80C of up to Rs 1 lakh. The interest payment on a housing loan attracts rebate of Rs 1.5 lakhs.

Medical Insurance:

The income tax benefit on purchase of medical insurance comes under Section 80D. You can claim a rebate in income tax on the premium paid to buy mediclaim policies. The maximum limit on the income tax rebate under this section is Rs 15,000. You can avail this deduction on medical insurance premiums paid for yourself, your spouse, parents and children.

Other Deductions (salaried individuals):

Medical allowance:

If an employer of a salaried individual offers a medical expense reimbursement allowance, an income tax deduction of up to Rs 15,000 per year against the relevant expenses is allowed.

LTA:

If an employer offers a leave travel allowance (LTA) as a part of the salary, one can avail an income tax deduction on the travel expenses. According to the norm, the LTA benefit can be availed twice in a block of four calendar years. Presently, the block applicable is from 2010 to 2013.

Review tax planning

These are some points you should keep in mind while reviewing your investment planning with respect to income tax optimisation :

Check limits:

First of all, exhaust the quotas of Section 80C and Section 80CCF. You can analyse the various options and invest to save tax under Section 80C.

Use allowances:

Salaried tax-payers should plan expenditure under medical allowance, child education allowance and conveyance allowance for maximum benefit.

Insure:

Investing in a medical insurance policy is another option to save tax, if your Section 80C limit is already exhausted. However, it is not advisable to take a medical insurance policy just for the sake of saving tax.

Source: EconomicTimes

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Muthoot Finance NCD issue to open on March 2

Muthoot Finance Ltd, a gold loan company, will launch another non-convertible debenture (NCD) issue on March 2, its Managing Director, Mr George Alexander Muthoot, has said.

The company will look at mobilising Rs 500 crore primarily from retail investors, including a green-shoe option of Rs 250 crore. The NCDs are to be listed at the Bombay Stock Exchange (BSE).

This will be third NCD issue by the company this fiscal. The first one was in August last year when the company mobilised Rs 690 crore at a coupon of 12 per cent. Muthoot Finance , through the second NCD issue in January this year, raised Rs 475 crore at a coupon of 13-13.25 per cent.

In the second NCD, more than 50 per cent of the money came in the 3-year and 5-year tenor NCDs, which carried a coupon of 13-13.25 per cent. More than 50 per cent of the investors were retail investors including many from North and Western regions, where the company is not that well known.

“We continue to focus on NCDs as we want to have diversified funding and not entirely rely on banks and mutual funds. Not relying on a single source is always better. We need funding as our loan book has grown by Rs 8,000-9,000 crore this year,” Mr Muthoot said.

The third NCD issue will have four variants — two years, three years, five years and five-and-a-half years. The company is likely to raise five-and-a-half year money at 13.25 per cent. The actual coupon rates for the NCD issue will be decided on February 29.

On why Muthoot Finance is looking to raise funds through listed NCDs in small doses, Mr Muthoot said the company had earlier not looked at listed NCDs. It is only in the current fiscal that it had gone in for listed NCDs and tested the market, he said

Muthoot Finance is going ahead with the proposed NCD at coupon of 13-13.25 per cent, despite wide expectations that interest rates will start softening post March.

“I am looking to diversify my funding even at the cost of 1 per cent more in interest rates. I may get money at 1-1.5 per cent cheaper after some months or years. My growth is coming now.

I can't wait for the interest to come down so that I can increase my loan book. When demand is there I should increase my loan book. The nature of my loan is only retail loans,” Mr Muthoot said.

krsrivats@thehindu.co.in

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RBI gives nod to ICICI bank to set up Infrastructure Debt Fund

ICICI Bank has received approval from the Reserve Bank of India (RBI) to set up an Infrastructure Debt Fund (IDF) - the first debt fund to get the government's go ahead.

Officials from the bank were not available for comments. Industry sources said that ICICI Bank will enter into an equity tie-up with an non-banking finance company ( NBFC) for the fund.

The new company will raise long-term money from investors to lend to infrastructure projects. Among others, IIFCL had announced plans to raise infrastructure debt as well as infrastructure equity funds.

In September, RBI allowed banks and mutual funds to set up IDF. In the 2010-11 budget, the finance minister had cleared the way for setting up of IDFs to increase find flow into infrastructure sector.

Source: EconomicTimes

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Citi exits HDFC with $722-million gain after tax

Citigroup Inc, the third largest lender by assets in the US, on Friday sold its entire 9.85 per cent stake in the country’s biggest housing finance company, Housing Development Finance Corporation (HDFC), for Rs 9,550 crore ($1.9 billion). The exit was meant to help the US bank shore up its balance sheet to meet the tighter Basel III requirements.

According to a release, Citi made a pre-tax gain of $1.1 billion (Rs 5,490 crore) and an after-tax gain of approximately $722 million (Rs 3,550 crore).

“The after-tax gain reflects Citi's tax liability to the US government,” said a Citi spokesperson.

The New York-based Citi sold a total of 145.3 million shares of HDFC at Rs 657.56 apiece through multiple block deals. “The sale of Citi’s remaining stake in HDFC is part of Citi’s ongoing capital planning efforts,” the bank said in a statement.

HDFC shares closed 3.62 per cent lower at Rs 675.9 on the National Stock Exchange (NSE) on Friday. The stock fell to as low as Rs 657.5 intra-day.

The transaction was at a six per cent discount to HDFC's closing price on Thursday, when Citi announced its exit plan. It had invited bids in the range of Rs 630-703.5 a share and received twice the demand than the shares of offer, according to brokers. Until yesterday, the HDFC stock had gained 7.6 per cent this year, underperforming the benchmark Sensex (which has added 17 per cent).

Citi, which was the largest foreign investor in HDFC, had first invested in 2005 but a significant portion was acquired when it bought Standard Life’s 9.3 per cent stake in HDFC for $673 million in 2006.

“We are pleased with the results of our investment in HDFC,” Citi India CEO Pramit Jhaveri said in a release. In June 2011, Citi had pared its stake in HDFC from 11.4 per cent to 9.85 per cent.

Besides Citi, private equity firm Carlyle had sold about 20 million shares in HDFC on February 1, raising about Rs 1,350 crore and nearly doubling the money from its 2007 investment in the lender.

In the past few weeks, global financial institutions, including Singapore’s sovereign fund Temasek Holdings, have sold stakes in Indian financial firms. Warburg Pincus had sold about 17.5 million shares in Kotak Mahindra Bank this month through open market deals to raise about $170 million.

Source: Business Standard

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HDFC RED to list new homes in Kochi

HDFC RED (Real Estate Destination), an online platform hub for the residential realty buyers, has announced its foray into listings for new homes in Kochi. The Kochi section on www.hdfcred.com lists approximately 320 property types across 100 unique projects and 30 developers.

HDFC RED is a specialised platform focussing only on the primary or developer properties in India. It is a platform for home buyers to do their initial research on properties available for sale, which is a huge task and saves a lot of time for a home buyer.

It allows home buyers to be better prepared and make informed decisions. Mr C.V.Ignatius, Additional Sr. General Manager and Regional Manager, Kerala, said HDFC RED aims to assist aspiring home buyers in identifying properties from the comfort of their homes.

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