How Parents can help you to save tax

How mom and dad can cut your tax


Right from birth, parents are always there to protect you. Now even when you feel independent, parents will be there to help you indirectly by letting you save more tax. They can bring down your tax liability in various ways, provided they are in a lower tax bracket or already retired. If your mom or dad falls in lower tax bracket, you can invest money on their name to save more income tax. It is not just income tax, but you may even earn higher interest as interest rate for senior citizens is usually more.

There are different ways by which you can save income tax by involving your parents directly or indirectly. Find below some of the ways to save more tax.



Invest in their name


You can invest money in your parents’ name if anyone of them falls under lower tax bracket. Every individual enjoys a certain exemption limit; e.g. in India, every adult gets a tax exemption of Rs 160,000/- ($ 3,600) every year. So, if you earn 160,000 or less, you do not have to pay any income tax. You can transfer some money to your parents’ account and invest in their name. It is not just limited to investment in banks; you can even buy shares and save 15% short term capital gain tax if the basic exemption limit has not been crossed.

Pay rent to your Parents


You can surely avail HRA exemption if you live with your parents. You can pay rent to them, but remember rent received will be taxable for your parents and the property must be registered on their name. So, if your parents fall in lower tax bracket, it will surely be helpful for you to save some tax.




Minimize losses in share market and save capital gain tax


As you know you can offset your short term losses with short term capital gains; but what if you have long term capital losses. You can not offset long term capital losses with long term gains or short term gains, so it is a complete loss of money. But if you will involve your parents, they can help you offset these long term losses against a gain from other assets such as property, debt funds, etc. and carry forward unadjusted loss for up to 8 financial years.

If you had bought some shares that are making loss in long term then you can make your parents buy these shares through off-market transaction. Off-market transaction is a private deal where no securities transaction tax is paid and the sale should be at the market price of the shares. So, open a demat account for your parents and minimize your losses.






Health Insurance Policy


Though taking a health insurance policy is always recommended, but it also helps you to save tax. Your taxable income can be reduced by up to Rs 15,000 if you take a health insurance policy, and in case your parents are senior citizens, there will be an additional deduction of Rs 20,000 for health insurance policy. Even if there would be no extra tax benefit, you must take health insurance for your parents; after all they also looked after your needs when you were a child.


Above are the few ways to save more income tax by involving your mom and dad. So, never overlook your parents, they will always be helpful throughout your life.

Things to consider before taking a home loan

Know your financial gains before taking a home loan


Everyone who does not own his/her flat, always think of one question, 'Whether to stay on rent or to buy own house'. Everyone has different opinions, different calculations. Those who holds enough money, buys their dream house irrespective of any calculations. Some persons fulfill their dreams by taking a home-loan. So, if you fall in the first category it is good for you and go ahead to fulfill your dream. But if you are not amongst those lucky ones and planning to take a loan, then better stop for a moment and think again.

Some Questions and Calculations

Now, you must do some calculations and also check whether you are into your own business or working under a boss. In case you are a working guy like me, you never know when you may have to switch your job and relocate to another city. If you need to relocate, you will be having two options:

- Stay on rent in another city and continue your home loan

- Sell your home and buy a new one in another city

For the option one, ask yourself, can you really afford giving away rent along with your home loan? If answer is yes, that’s really great and you must be living a happy and comfortable life. But, I believe most of the persons would not be able to say ‘Yes’. So, only option left with them is to sell off their home, but now you are not very sure how much money you will get for your home and in the recession like situations, you are likely to get much less price than you would have paid.

Now let us take a scenario where no such circumstances occur and you stay in your house for around 20 years even though it is quite unlikely to happen if you are in a job.

Suppose you have bought a house worth Rs. 4,000,000/- ($80,000) in India and took a loan of Rs. 3,200,000/- ($64,000) for 20 years at 12% interest rate.

Initially you have paid Rs. 800,000/- ($16,000) from your pocket for down payment plus some charges for Stamp duty and registration charges. Total will add up to Rs. 1,160,000/- ($23,200).

As per 12% rate of interest, your EMI would be more than Rs. 35,000/- ($700).

Total EMI amount after 20 years will be more than Rs. 9,600,000/- ($192,000).

In India, you will get tax exemption on home loans, so you can save around Rs. 2,000,000/- ($40,000).

Initially you have paid Rs. 1,160,000/- ($23,200), so if you will calculate loss of interest at 8%, you have lost around Rs. 4,240,000/- ($84,000).

This means your dream house has cost you Rs. 11,840,000/- ($236,800).

Are you sure you will get the same amount after 20 years or so?

Home Loan v/s Rented house

Now consider if you have been on arented apartment/flat with rent of Rs. 13,000/- ($260) per month. Every year rent increases by 10%, then you will be paying Rs. 7,400,000 ($148,000) in 20 years.

Initial deposit you will be paying is Rs. 25,000/- ($500).

Tax benefit you would be receiving on house rent will be Rs. 1,550,000/- ($31,000).

Interest amount that you will be losing for 20 years would be Rs. 91,500/- ($1,830) on the initial Rs. 25,000/- deposit.

So you would end up spending Rs. 5,941,500/- ($118,830) on rented house.

Now compare the amount you have spent:

For your own house: Rs. 11,840,000/- ($236,800).

For rented house: Rs. 5,941,500/- ($118,830).

On rent, you got nothing after 20 years, but you have your own house if you will buy one. Extra amount you have paid is Rs. 5,898,500/- ($117,970). This is the effective cost you paid for your home, seems to be a fair deal if you will get this amount after 20 years. But wait and look for another calculation.

EMI you paid: 35,000/-

Rent Paid: 13,000/-

Difference: 22,000/-

This amount you can invest monthly and can earn interest for 20 years.

So if you will invest the difference amount, you can invest some amount for 12 years and after that rent will be around 35,000 same as your EMI for home-loan. So if you will calculate the returned amount after 20 years, it will be somewhere near to Rs. 6,500,000/- ($130,000).

This is the amount that you will get with 100% surety without any risk even if there is another sub-prime crisis or so and now you may use this amount to buy your own house which is not 20 years old with less tension of getting relocated to another city at this age after 20 years. Another option you will be having to start some business with this amount and earn millions. What I will suggest is if your home-loan EMI is exceeding by 50% or less than your monthly rent, then you better go with home-loan and buy your dream home. Otherwise some one has truly said “Cash is King”.

Simple financial tips to retire early!

A normal retirement is known as superannuation. It is an event where on completing a certain age in the services of an organisation an employee is due to move over to spending life peacefully. Early retirement occurs when an individual retires before the required or generally accepted age of 58 or 60 years. Early retirement is possible for those who have saved a large enough corpus to take care of larger than usual number of years in the retired life.

The emphasis of this article is retiring early and enjoying retired life. This reduced employment tenure to support a larger post-retirement period requires an added confidence, a strong asset base and trusted income stream to enable the right decision making. Also, there should be some vocation to be pursued for fruitful utilisation and prestige during retired life.

The following are the three arrangements which need to be ensured before venturing out to retire early:

1. Accumulated corpus and wealth created

The sufficiency of the corpus for an enjoyable post-retirement depends on the length of such expected period and the extent of monthly expenses. Also crucial are the expected inflation, including lifestyle inflation, and the commensurate return expected from investing corpus. The emphasis is on striking a critical balance between the withdrawal rate from the corpus and an adequate rate of return on the corpus.

2. Management of corpus

There should be a robust and diversified asset base. A second house ensures a good market-linked income stream and a healthy appreciation in the asset along with tax benefits, if a loan is availed to buy the second house. A prolonged retirement period of around 35 years requires financial assets which provide an inflation-beating return.

An optimum asset allocation and an effective monitoring of the same in consultation with experts, usually Certified Financial Planner(CM) professionals who are trained in this aspect, ensures the protection of a sustained desired income stream.

3. Commencement of a new career

After taking an early retirement one can pursue an alternate career of choice. The time engagement, social networking and pecuniary aspects along with an image and reputation in society are other benefits. Managing a proprietorship firm or a partnership firm is the most effective way of such engagements. Taking up consultancy and advisory services or freelancing can also be explored on fee and commission basis.

One aspect that comes forth as a result of the above observation is the importance of health insurance. If health insurance is taken at an early age it will serve the purpose as well as the employer benefits would cease to be available earlier than normal retirement. Some other types of insurance such as accident, disability and critical illness cover must be taken to protect the retirement kitty.

Life gets more difficult as one gets older, thus it become imperative that if one is going to live longer s/he must start planning for it right away. Retirement planning is a relatively simple exercise which requires investing discipline and regular monitoring. However there are some important points which should be considered while planning for retirement.

1. Start early

If one wants to retire early, one has to start planning for it early. It is most practical to start at a young age, as soon as a person gets in to employment. A person has higher risk bearing capacity to enable her/him earn suitably higher returns. The effect of compounding does wonders to accumulate a sizable retirement kitty with the small streams of savings invested.

2. Set clear retirement goals

Oneshould be clear about one's expenses in relation to the income earned. The expenditure post-retirement and the lifestyle that one would like to maintain will give an idea on how much money is required as corpus on retirement and what quantum to be invested periodically at an expected rate of return.

3. Be disciplined

Since retirement is the most distant goal, the other short-term goals might take precedence and one has the tendency to dip into retirement savings for fulfilling other goals.

3. Approach a financial planner

A certified financial planner or CFP professional will help to identify the goals and suggest strategies to achieve them. The plan once made needs to be monitored periodically to ensure that it is moving in the right direction in the face of changing market dynamics. Such professionals are adept at taking all factors into account while crafting a wholesome financial plan, the retirement planning being an integral part of the same.

If one is able to follow all the steps mentioned here in a disciplined manner over the desired working time with the help of a financial planner then one can sit down and relax enjoying the sunset years.

Is Insurance an Investment Option?

A friend of mine over a phone asked me about insurance and whether he should invest in LIC’s xyz insurance scheme? This question comes to me many a times and I always suggest them few of my articles where I have shared the answer in bits and pieces but today I will answer this question with all the possible options and outcomes.

Let us begin with a very simple question which is why a need for insurance. The answer lies in any combination of the following options:

1. Investment
2. Tax Benefit
3. Insurance Benefit

I am sure your step towards insurance is guided by permutation and combination of above three options. Let us take each one of them one by one.

Investment

People make a mistake of investing in insurance for variety of reasons. I see many people give a very silly reasons like it makes them more systematic to investing on a regular basis and some have good genuine reason like they want a good solid lump-sum amount after an elongated time frame for some cause like marriage or child’s higher education…

No matter what your investment objective is, it should not cost you much and returns should be inline with other investment options available at your disposal. I am sure there will very few who would disagree on this and those who disagree are likely to be the insurance agents. 

Now ask for yourself. Does your insurance investment satisfy the above criteria?

I don’t think so. Why? Because insurance as a whole has a cost of being insured as well as many other administrative charges which a normal investor is unaware-of. If you know the charges you will feel like killing yourself for it (Pun Intended). For majority of policies it is close to 20% of the premium amount.

Tax Benefit

The next category of people who invest in insurance is tax payers. Many fall into the trap of Insurance as an option to save tax. I have couple of questions for them:

1. How much of your initial investment is actually invested?
2. Which funds your policy invests into to get returns they quote?

The answer to first question is always close to 80%. This means out of one lakh of your investment you only invested 80,000.

The answer to second question is they list me few funds. I can invest in similar to those funds directly or choose even better than those funds. If you have an insurance policy which invests in few selected category of funds why don’t you select those funds on your own and save 20k Rs. If you want me to suggest few good funds for 20,000 I will give you 50% discount as well. 

So next time someone asks you about insurance as a way to save tax don’t forget to ask him the two questions and then tell him bye-bye.

Insurance Benefits

So what if you need insurance? Go for Term Insurance. Ask your broker to get you a term insurance. Nothing more nothing less. If he is one among those brokers who suggest products based on what commission he will get, then you can be rest assured he will not get you the Term Insurance. He will suggest you lot of products and even compare them how bad is term insurance for you and may go ahead to add few misinformation. He will even tell you that you will be paying the premium without any return but the reality is here you are paying the money knowingly and in other policies you will still be paying the same amount but unknowingly.

Again going blindly for term insurance is not what I advise but go for an all possible combination and calculation. Let us say that you go with term insurance coupled with some other investment. Consider all your expenses and see which one gives you maximum benefits with least possible expense. You will see that most of the time it will be non-insurance product that wins.

Final thoughts

Insurance is something where you can live poorly so you can die rich and investment is something where you can build your wealth. Both cannot go hand in hand and so invest wisely. Share your thoughts in comments below.

Understanding the difference between Income and Wealth

Have you ever wondered why your salary is called income and not wealth and if you are a businessman, then your profit is called income and not wealth. Well my question is not in accounting terms but in Financial Planning terms. Well let us understand the difference between Income and Wealth from Financial Planner’s perspective.

Difference Between Income & Wealth

Income is something with which you maintain your life style. For example, with every month’s income, we maintain our existing lifestyle and not increase it substantially.
But if you were to sell a property which you were holding from years, you find that you can afford something which you could not afford with your income. Now in that case, you have created wealth and that wealth have substantial effect in increasing your life style.

Now when we invest, do we look for income creation or wealth creation?

Obviously, you will say that we look for wealth creation and not income creation after understanding the difference between income and wealth. But mind you that wealth creation is a very BORING process. Wealth creating takes time and you need right products to create wealth.

Think of few wealthy persons you know and look at the time they must have given to create that wealth. Now-a-days, we see that farmers are getting wealthy by selling their lands which they earlier used to cultivate. But then you look at the time they have given to create such wealth.

You probably will have n number of examples of people who have created wealth in Real Estate. But do you know many persons who have created wealth by investing in Financial Asset? You may not think of many. But let me ask you that don’t you know Mr. Mukesh Ambani or Mr. Ratan Tata or Mr. Azim Premji or any other rich businessman that you know in your vicinity. They all have created wealth. Now tell me which real estate Mr. Ambani owns? Must be an absurd question for you and you probably don’t know about it.

But what you know is that Mr. Ambani owns shares of Reliance or Mr. Azim Premji owns Wipro’s shares and the wealthy businessman you know may own 100% share of his business.

What do I really want to convey?

If you find your investment exciting and you are having fun, probably you are not making wealth. We don’t make wealth out of equity because, we look at equity as income creating tool. Buy Reliance at 2000 and sell at 2100.
Now financial instrument that makes wealth is equity and you understand equity as exciting investment that goes up and down every day. And those financial instruments which create income, we make them our BORING investment FD, NSC etc. How many of you look at your Fixed Deposit daily or your PPF account balance or your RD that you have in your post office.

But you want see the value of your mutual fund investment regularly, keep watching your equity portfolio as if tomorrow you need to sell it to marry your daughter.

What is Insurance – Investment or Expense?

What is Insurance & why we need Insurance is normally misunderstood by Indians. Most of the time, when we ask any investor about his investment portfolio, he/she invariably lands up saying that we have investments in some sort of insurance policy in LIC, ULIPs, Endowment Policy, Money Back Policy etc. In fact, over the last 50 years or so, LIC has taught Indians everything other than insurance. We all understand insurance as Tax Saving Instrument, Investment Tool but do we understand Insurance as Insurance. You must be surprised by our sentence, but that is the hard core fact of life.

What is Insurance?

It is a contract between the insured and the insurance company whereby the insured financial risk is covered by the insurance company. The risk can be of your vehicle, property, legal etc. So effectively, you pass on the risk to the insurance company and they charge you a nominal sum of money for taking that risk which is called  Insurance Premium.

Why Insurance?

It is said that Rama, Krishna, Bhishma and Buddha, knew the time when they would leave this world. To put simply, each of them come to live with their disciples with a mission or set of responsibility to fulfill. Does any one of us know when  something will go wrong with us and whether that time our responsibilities to fulfill. Does any one of us know when we something will go wrong with us and whether that time our responsibilities would be over or not? We all know that in life unexpected is always expected. Our life is full of uncertainties with lot of goals, short term goals, long term goals, known goals – unknown goals. We are all born with some responsibilities to fulfill…..but we do not know how much time we will get to fulfill those responsibilities.

What if anything goes wrong to us,  who will provide financial security to the family. Who will fulfill all the dreams that you would have  thought for. This is where insurance can help you. Insurance is one of the greatest inventions  in the field of personal financial products. But it becomes fatal to financial life and costly once you end purchasing a wrong insurance solution.

What Happens in Real Life?

The answer to this lies in 2 questions “why did I buy this insurance” and “what product I bought”. Typically you buy insurance product as investment and not insurance. That is why we say that Indians have actually not understood insurance in the right sense. First of all less than 5% of the Indian have insurance policy and add to this, out of those who are insured, the average life insurance cover is less than Rs. 90000/-.

We all understand insurance as an investment and land up buying EXPENSIVE Product.We all buy Endowment Money Back. ULIPs etc. Now when you buy an expensive product, you will actually be the loser and the manufacturer and the middlemen will be the winner. Is it not? All one need is to have a simple Term Insurance Policy/ Term Life Insurance Plan.

Mixing Insurance & Investment

Mixing insurance and investment is something we should totally avoid. When your insurance agent chase you, does he sell you insurance products? Or does he offer you investment opportunities and tax- saving schemes? In 99 of the 100 cases, agents don’t sell pure insurance. The insurance agents are driven by the first year  commission that they get and they are hardly bothered whether or not it is really right for you or not. In fact, that is the reason, why most of the investors we meet, say that they don’t see their agents after first premium. They make heavy commission by selling the product. Now we don’t have to explain that the commission that they make is actually deducted out of your investment and it could be as high as 70% of your premium.

Insurance is an Expense

Let’s try to answer the question through a analogy. Do you know that the world’s tallest building Burj Khalifa at Dubai, which is 828 meters high and has a foundation of 320 meters below the earth level made out of concrete and stainless steel. This means that to see a masterpiece you need to invest in its foundation. And we all know foundation has no visibility but it is a major part of cost. So any expense which gives a foothold and act as a security towards unforeseen circumstances, is worth spending.

Similarly is life insurance. We all must buy a simple insurance even before we start thinking of investing for future. Understanding insurance as an investment or mixing insurance & investment is not a wise decision.

11 Basic Financial Tips For College Students

As a college student, you understand and value the importance of your physical fitness and emotional well-being. But are you as fiscally fit as you are physically and emotionally? It may be time to learn "fiscal fitness" now for a lifetime of financial wellbeing.
Fiscal fitness means practicing smart money management techniques. Decisions you make about handling your money before and during college can have a huge impact on your future. Before making major financial decisions, educate yourself about options and be consistent in making informed financial decisions. Learning good personal finance skills now can help you reach your goals and find success sooner. Your life goals are important, and we want to make sure you have the money to make them a reality.
• Organize your files. Creating a paper and/or electronic filing system will make paying your bills on time and meeting deadlines easier. Record keeping also helps avoid potential disputes-disagreements regarding whether the terms you agreed to with banks, stores, or friends have been upheld including timing of payment and amounts. You'll also want to keep records for tax purposes.
• Make a budget and stick to it. A budget is just a self-imposed guideline for how much money you can spend and what you can spend it on. You will be amazed at how much farther your money goes when you have a budget. Life is unpredictable, so don't forget to allocate money for unexpected expenses in your budget.
• Buy used books. Many students and their parents are shocked to learn how much textbooks cost. Most campus bookstores sell used books that can help reduce this cost. You might also save money by buying or renting textbooks online.
• Leave your car at home. Cars cost more than just gas money. Don't forget about insurance, parking (and parking tickets!) and repair expenses. Walk, use public transportation, and/or ride a bike. You may also want to arrange a carpool with friends if public transportation isn't available.
• Watch the ATM fees. They can add up quickly. Look for a bank with free ATMs near your school.
• Choose the right meal plan. An unlimited plan may be tempting, but you might be satisfied with a less expensive plan. Also, if you've paid for a meal plan, be sure to use it! You're just paying twice if you eat out somewhere else.
• Save on snacks. If you can, avoid buying snacks at vending machines or convenience stores. Stock up at your local grocery store and keep them with you during the day to avoid more expensive and less healthy on-the-go options.
• Consider all the costs of living off-campus. Many students like the idea of trading dorm life for their own off-campus apartment, only to realize that there are more costs involved than they realized. Aside from rent, you will probably have utility bills and grocery expenses, at a minimum. You may also need to pay rental insurance and property maintenance fees. So before you decide to move off campus, learn what other expenses you'll be responsible for, in addition to rent.
• Use student discounts to your advantage. It's common for movie theaters, concert halls, restaurants, insurance and travel companies to offer steep discounts with a student I.D. Just ask!
• Start saving. A few Rupees here and there can make a big difference later in life. Saving and investing your money puts your money to work for you. If you have a job, pay yourself first. Have your bank automatically deposit a set amount from your paycheck into a savings account.
• Keep life in balance. Money management is important, but it's only a means to get you where you want to be in life. Strong values, good friends, and a solid education should all be part of your plan for success.

10 easy ways to save money

Saving money doesn’t have to be agonizing. There are lots of ways to reduce your costs and rein in spending that don’t require a lot of sacrifice.

What it will take is some effort and time. This will include calling retention departments, shopping competitor pricing and prioritizing your time to cut down on fast food or coffee runs.

“There is a tendency for people to stick their heads in the sand when it comes to really reviewing how they spend their money,” said Jeffrey Schwartz, Executive Director of Consolidated Credit Counseling Services of Canada, Inc. “A few simple changes to a person’s spending habits can save thousands of dollars a year without a huge disruption to their quality of life.”

These tips can help you save a bundle.

1. Just ask

The saying ‘if you don’t ask, the answer is always no’ applies to saving money. Whether it’s speaking with the retention department of a service provider, or asking for a discounted hotel rate, vocalizing your desire to save money and pay a reduced rate can go a long way.

Companies are driven to provide customers with positive experiences, hoping to retain future business. While it’s rare for a company to voluntarily offer a discount, they often have the wiggle room if asked.

And don’t be shy about looking cheap. According to a 2011 survey by Consumer Reports, people who asked for a discount usually got one. More than 80 per cent of survey respondents who bargained over apparel or jewelry received a discount, as did around 70 per cent of those who bargained over appliances or electronics.

2. Steer clear of spending triggers

If you’re an impulse shopper, steer clear of areas or stores that will entice you to make an unnecessary purchase. For many, this includes browsing online retail stores, or simply strolling around the mall.

If you’re an emotional shopper, avoid going to your favourite stores when you’re in a funk. You may end up buying something simply for its ‘retail therapy’ value.

3. Comparison shop

You can save hundreds of dollars each year by comparison shopping your services and asking for a better price from your service provider. Last year, I reduced my phone and television bill by $23 each a month by speaking with Bell’s retention department and changing my telephone plan.

To do this, I called several other companies, including Rogers, to get prices on their television packages. Armed with this knowledge, I called Bell to negotiate a better price.

By bringing these competitor prices back to our service provider, we reduced our television price from $44 a month to $30 a month.

It also turned out I was only using half of my monthly phone minutes. Given this, I changed to a 500 minute per month plan and reduced my phone bill to $42 from $51.

This same approach applies to a number of services, including insurance. When your car and house insurance is up for renewal, don’t be quick to sign on the dotted line. Take the time to call other providers, and see what price they can offer. Taking this information back to your current provider will motivate them to match or beat the quoted prices. Shopping insurance prices may take a few hours of time, but the savings will be worth it.

4. Cut your hydro

Home energy costs can really add up if you’re not careful. You can cut your lighting energy cost by 15 per cent each year by simply replacing your light bulbs.

According to Toronto Hydro, the average home has 30 light fixtures that consume close to $200 worth of electricity every year. Replacing five bulbs with Energy Star-qualified compact fluorescent light bulbs in areas that require more than three hours of light a day saves approximately $30 a year.

Also invest in a programmable thermostat, which can reduce heating and cooling costs by up to 10 per cent when properly set.

With summer heat just around the corner, fans are also a great use of energy and can help keep your bills down. If you run them at the same time as the air conditioner, you can raise the temperature setting by 2°C, reducing your energy use by at least 10 per cent.

5. Avoid late fees

One of the easiest ways to save is to avoid late fees and penalties. Set up pre-authorized payments for your bills to make sure you pay them on time. If you have a credit card that earns reward points, pre-authorized credit withdrawals will let you earn points and pay your bills on time.

If you are late making your credit card payment one month, you will pay $23.75 on a $1,500 balance, considering a 19% interest rate. This will continue to compound over the year and add up quickly.

Don’t forget to review your bills each month to check for billing errors.

6. Go on a credit card cleanse

If you’re scared to open your credit card bill each month, it may be time to put away the plastic. Based on your budget, take out the amount of cash you’ll need for the month and put it in envelopes for your various expenses, like bills and groceries. Having a set amount of money to spend on these items will help you avoid splurge items and not go over budget. When you wean yourself back on credit, you will have a better sense of your budget and how much you can spend.

7. Do regular car maintenance

It is often less expensive to regularly maintain your vehicle than pay for costly emergency repairs or maintenance. In fact, changing your oil regularly can add an additional 0.5 kilometres per litre of gas and replacing dirty or clogged air filters on older vehicles can improve fuel efficiency by as much as 14 per cent. Follow your suggested maintenance schedule to take full advantage of efficiencies.

8. Get rid of your landline

With free, online services like Skype, the need for a dedicated landline is becoming increasingly obsolete. Cutting your home phone can save you hundreds of dollars a year, and you don’t need to sacrifice personal connections or time chatting with family and loved ones. A basic phone package costs more than a mobile connection. By cutting your landline, you could save some.

If cutting your landline isn’t realistic for you or your family, call your provider and make sure you’re on a plan that is the most cost effective for your needs. This is another opportunity to speak with your provider’s retention department and ask them to reduce your monthly bill.

9. Get paid to shop

A lot of people shop online for its convenience, with popular items including books, clothing and electronics. So why not earn money while you’re at it? Ebates is a site that lets you earn cash back on your online purchases. Four times a year or more, Ebates will send you a cheque for the money you’ve earned, or transfer it to a PayPal account. The percentage of cash back varies depending on the retailer, but typically ranges between three to 12 per cent.

Membership is free and there are lots of participating retailers.

10. Travel smart

Take advantage of websites like Hotels.com and Expedia.ca to save on travel. These sites rely on a surplus of hotel rooms and airline tickets to offer up the lowest rate possible.

If you’re looking to cut down on your restaurant bill while on vacation or road trip, bring a cooler with drinks rather than stopping at rest stations or restaurants. Also, don’t be afraid to ask for a discounted room rate.

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?

General Car Financing Tips

In this article we are going to look at car financing tips to help you determine, which is your best option when buying a new car. There are many options that you have regarding car financing and the most common is always the loan. The loan is often easier for many to obtain over a lease option. So we will concentrate on loans for the general car financing tips.

When buying a car you need to know what your credit scores and history say. Sometimes a bank or loan office is going to try and offer you a worse deal than what your credit scores really reflect in order to make more money. They may fudge the credit score numbers to make it seem probable that you are more of a risk. Knowing what your credit scores are can help you determine if the loan company is on the up and up. You have two options for car financing. You can go through the dealership for financing or you can seek financing on your own. In either case know your credit score and history. Make sure there are no surprises.

If you are refused a loan because your credit is not sterling enough you will need to wait for a few months until your scores are in a place that you can obtain a loan. Don't try to find multiple loans when your credit has already been rejected chances are the other financing will refuse you and make your credit score worse.

When searching for a loan for car financing you are going to want to make sure you have researched the current market. You will want to know what the current car loan interest rates are for someone with sterling credit as well as someone with little credit or bad credit. If you know where the numbers are on average you can negotiate for a better loan. This will help in the long run. Remember you don't have to take any loan that seems fishy or just isn't what you hoped for. You have the right of refusal.

Keep in mind that a down payment towards a new car is going to help you with the loan. A car dealership is going to hope that they can get a little money from you up front and the car financing will appreciate this. It will lower the overall amount you need to borrow and make your payments more affordable.

Keep in mind that you can also trade in another vehicle. If the trade in value is a fair price you can also have the down payment to partially pay off the car. This will again lower the financing you need to obtain. You can also just trade in a vehicle without the down payment if that is what you would like to do.

There are many options and tips regarding car financing and overall using common sense and knowing where you stand financially is going to save you a lot of hassle and get you what you want.