General Anti Avoidance Rules (GAAR) India

What is GAAR ?


GAAR abbreviation stands for general-anti-avoidance rules and it has been introduced in India due to VODAFONE case ruling in favour of this company by the Supreme Court. The new rules were supposed to come into effect from 01 April, 2012 have been deferred.


GAAR Implications in India


Indian Government is trying to give powers to income tax authorities as implementation of GAAR provides tremendous powers to deny tax benefit to an entity if a transaction has been carried with the sole intention of tax avoidance. Due to powers in the hand of taxmen, now innocents may be harassed by them.

FII & FDI money coming to India through Mauritius route will now become taxable.

Increased litigations.

GAAR – Worst Scenario


The onus lies on the assesse to prove that there is no tax benefit and the transaction is not an avoidance transaction.


GAAR – Example


To make it easier to understand GAAR; we can say that suppose a person or a company is setting up business in Gulf Country and its clear intention is to claim exemption from capital gains tax, in such a scenario Indian govt has the right to deny the legitimate claim for exemption provided under DTAA as it falls under tax avoidance and Indian govt is trying to plug the loopholes.

5 steps to finding the best savings account

Follow our expert tips to find the best savings account for you:

Step 1: Find the best account and switch 

Switching to a Best Rate savings account can earn you considerably more interest. Just because your savings account paid a good rate when you opened it, don’t rely on your provider to still be giving you a good deal. To find out what rate of interest you’re getting at the moment, and to see how much better off you could be, use our new Savings Rates Booster.

Once you've switched to a Best Rate account, keep an eye on your rate and be prepared to switch again if it starts to fall. If you’d rather not have to switch regularly, go for one of our savings accounts which are Best for Consistency.

Step 2: Use your tax-free cash Isa allowance

The interest you earn in a savings account is taxable, so it makes sense to use your annual £5,640 tax-free cash Isa allowance before putting any money into a savings account if you want to get the best return on your money. In an ordinary savings account, any interest you earn will be taxed at 20% if you're a basic rate taxpayer and 40% if you're a higher-rate taxpayer, so not using your Isa allowance means you are giving away interest to the taxman. To get the best return on your money, make sure you choose a Best Rate cash Isa.

Step 3: Decide how and when you want to access the account

If you're after the best interest for your savings, the chances are you will have to bank online, as the majority of the Best Rate savings accounts are internet-only. If you've got your heart set on a branch-based account, then you will probably have to settle for a slightly lower interest rate.

You also need to decide whether you want easy access to your money, or whether you're happy to give some notice. Traditionally notice accounts paid higher rates than easy access savings accounts, although today this is no longer the case, so there’s usually no need to tie your money up unless you particularly want to. If you want a notice account, our Best Rate notice accounts are the best available.

Step 4: Fixed rate or variable? 

You need to decide whether you want to receive a fixed rate of interest, or whether you’re happy for it to change, usually when the base rate changes. Variable rate account interest rates go up and down, broadly in line with the Bank of England base rate, and are often tiered to pay more interest the higher your balance. Some variable rate accounts are actually tied to the Base Rat.

Fixed rate accounts usually pay a favourable rate of interest for a fixed period of time, but in return you have to tie your money up for the same length of time – for example 1,2 or 3 years. Generally speaking, the longer you are willing to tie your money up for, the higher the rate of interest you’ll get. However, you have to be sure you won’t need to get your hands on your money, and you take the risk that if interest rates start to go up you won’t be able to benefit. 

Use our Best Rate tables to find the best fixed rate accounts available, no matter how long you want to tie your money up for. 

Step 5: Decide whether you want to invest a lump sum, or a regular monthly amount 

Regular savings accounts often offer attractive rates of interest and can be a good bet if you want to save a regular monthly amount, but are not an option if you have a lump sum. Because they have a maximum monthly investment, there is a limit to how much interest you can earn. They also usually only offer the good rate for a fixed period of time, so you need to make sure you know when the interest rate drops.

Types of Market Structures

There are four basic market structures: perfect competition, monopoly, monopolistic competition and oligopoly.

In a perfect competition market structure several firms are present who all produce identical products and are all sold at market price. The entry barriers to this market are low and the only factor determining sales is price. Since no one producer can affect prices, the demand curve for such a market is horizontal i.e. perfectly elastic. An example of this could be onions produced from a certain region.

On the other end of the spectrum is the monopoly market structure. In such a market there is usually just one seller. The entry barrier is very high to this kind of market. The cost of investment, copyright or holds over resources are some examples of high entry barrier. The railway network of any country is an example of a monopoly.

When it makes natural sense to have one firm produce a product it is called a natural monopoly. Public utilities, electronic defense equipment are government sponsored natural monopolies.

Covering the middle ground of market structure in one form is monopolistic competition. In this scenario firms do not produce identical products. There exist in the products difference in features, price, branding and so on. The shampoo market demonstrates this. Despite the same end use, i.e., cleaning hair and scalp, the firms producing them market their differences. Removal of dandruff, stopping hair fall, more luster are some of the differentiators they advertise. Consumers are loath to shift unless there is a very high (>10%) increase in price.

In an oligopoly market there are a few players who need to keep an eye on each other’s strategy. The cement industry or airline manufacturing industry are good examples. In both these industries the economies of scale are very high making entry barriers in these segments high. The different firms differentiate on the basis of some features, their offerings being good substitutes to each other. In this market structure demand elasticity is more than that of a monopoly.

The following table highlights and compares the features of these four types of market structures.

Source

Tax Strategy To Save Money

1. Term insurance: If we invest in long term investment plans from insurance companies like ULIPs or endowment plans it is likely that if the DTC is introduced our premiums due next year will not be tax deductible if it does not meet the criterion. Premature withdrawals and lapsed policies are punished very severely by the charges on these policies. A term policy on the other hand will always be tax deductible and will do enough to protect you. 

2. Equity Linked Savings Scheme (ELSS): Even though we might only have the ELSS for one more year, it is still the best tax-saving equity investment available to us. Several viewers have expressed concern about redemption pressure these funds might face after the DTC comes in. But remember, money invested in ELSS has a 3-year lock-in which means it won’t be possible for investors to pull all their money out at once. So pick a well managed fund, with a good track record this year and invest in spurts over the next 2 months. 

3. Infrastructure Bonds: With an assured return of 9% over 10 years these bonds make a very strong case, work in the added tax deduction and there is little reason for us to skip this option. 

4. Health Insurance: For example your dad just had a knee replacement surgery that billed for over Rs 5 lakh. Irrespective of the tax deduction, there is no excuse for not having enough health insurance, especially for the senior citizens in your families. 

5. Home Loans: Our home loan principal repayment might not be tax deductible under the DTC, but that is not going to stop us from buying and owning homes. If you have a running loan this year make the most of it.

15 Things You Must Know About Your Money

1. You think too much about your money. Stop doing that because your money doesn't think about you.
2. You are not your money and your money is not you but you best look after each other anyway. You might be together for a while.
3. You’ll never have more money to save and invest than you do right now, so find a way to save and invest more of what you've got.
4. You don’t have aIl-have-less-money issue. It’s a how-you-manage-your-money issue.
5. You’ll never be perfect with managing your money, so aim for getting better.
6. You’ll never live in the future or the past, so find a way to be happy with your money in the now.
7. Your financial life doesn't get better, you do. Life is life – it will happen to you. It’s your job to get better in the middle of it all.
8. Your ‘average’ financial position is not the problem. It’s the consequence.
9. Even though you might not feel it, think it, believe it or hear it, you are good enough with your money than most experts would have your believe.
10. Your happiness works from the inside-out. Money really can’t buy you more happiness.
11. Your money is your responsibility, not anyone else’s. So stop blaming others when things go wrong.
12. Master your fear of not having enough money in the future, and you’ll master your life.
13. Real success is not about what you earn, own, achieve or win but who you become along the way. So work towards ‘becoming’, not towards ‘having’.
14. If you’re in the luckiest 1 per cent of humanity that has money, you owe it to the rest of humanity to think about the other 99 per cent.
15. Money just brings out the basic traits in you. If you were a jerk before you had money, you are simply a jerk with a billion rupees.

The Basics of Buying Your First Home

Buying a first home is perhaps one of the most important decisions most of us will ever make. It ranks up there with choosing a college degree, career, marriage, and children.

Fortunately, saving for a home can be within everyone’s reach, because you can get there by working smarter — not harder — at some things you already do today. Learn about down payments, costs, reserve funds and other things to get your dream home.

But that’s not to say it’s going to be easy, given the high costs involved in buying a house today. The general rule of thumb is that you can afford to buy a house that’s three times your annual household income. With that in mind, here are some general costs you can expect to incur when buying a house:

Down Payment: The down payment will be the most onerous and significant expense by far. Down payments can vary from no down to all down, but 20% of the purchase price is what you’ll generally need to get the most favorable mortgage terms and avoid the purchase of mortgage insurance.

Closing Costs: Closing costs are all the fees required to complete the home sale, including local government fees, title insurance, appraisals, points, and tax escrows. These typically vary between 2-3% of the purchase price.

Reserve Funds: Saving at least three months of housing payments will provide you with some peace of mind after your home purchase — especially if you decide to pay property tax separately from your mortgage payment. This also lets you avoid having to dip into credit card debt.

Now that you know roughly what you’re going to need to save, you’re ready to get started on the road to home ownership. Mint sees that road as having three distinct phases: Cleaning, Foundational, and Building.

Getting your Financial House in Order:

Even before you begin saving for your first home, there are a couple of critical short-term goals you’ll want to meet.

1. Pay off your debts and avoid carrying any balance on your credit cards. The finance charges alone are a virtual wall between you and your ability to make a large investment like a new home.

2. Improve your credit report and score. A good credit score can help you quality for a loan with the best deal in terms of points and rates. Check out FreeCreditReport.com for a free credit report and credit score.

Lay a Strong Foundation:

1. Determine how much you need and by what date.

* Assume 15-25% of the home price will be needed up front for your down payment and closing costs

* Estimate three months of mortgage payments using tools like this payment calculator from Yahoo.

* Remember, if you’re already paying rent today, you’ll need to save only the difference between your monthly rent and your estimated monthly mortgage.

2. Open a separate, high-interest savings account, money market account or a certificate of deposit (CD) that serves as your New-Home Fund.

3. Calculate what you’ll need to save monthly to get to your goal by your target date. 

4. Lastly, setup direct deposit with your employer so that a portion of your paycheck is automatically transferred into a separate “home fund.” You’ll barely feel a thing, and before you know it, you’ll be glad you did.

Start Building:

1. Make some decisions on where you’re going to save. By the way, it makes sense to include the entire family in this part of the process. It’s always easier to make sacrifices when everyone is shooting for the same goal.

2. Track your spending and saving regularly. 

Financial Tips For Young Adults

Unfortunately, personal finance has not yet become a required subject in high school or college, so you might be fairly clueless about how to manage your money when you're out in the real world for the first time. If you think that understanding personal finance is way above your head, though, you're wrong. All it takes to get started on the right path is the willingness to do a little reading - you don't even need to be particularly good at math. 

To help you get started, we'll take a look at some of the most important things to understand about money if you want to live a comfortable and prosperous life.

Learn Self Control

If you're lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you'll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it's better to wait until you've actually saved up the money.

Take Control of Your Own Financial Future

If you don't learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they're doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.

Know Where Your Money Goes

Once you've gone through a few personal finance books, you'll realize how important it is to make sure your expenses aren't exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you'll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise. In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time.

Start an Emergency Fund 

One of personal finance's oft-repeated mantras is "pay yourself first". No matter how much you owe in student loans or credit card debt and no matter how low your salary may seem, it's wise to find some amount - any amount - of money in your budget to save in an emergency fund every month.

Start Saving for Retirement Now 

Just as you headed off to kindergarten with your parents' hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you'll have to invest to end up with the amount you need to retire and the sooner you'll be able to call working an "option" rather than a "necessity".

Guard Your Health 

If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you're uninsured, don't wait another day to apply for health insurance; it's easier than you think to wind up in a car accident or trip down the stairs. You can save money by getting quotes from different insurance providers to find the lowest rates.

Have you started with your personal financing?