Wednesday, December 17, 2008
Cadre Review and Restructuring of Income tax Department
Cadre Review and Restructuring of Income tax Department In light of the DoPT, Government of India, decisions pursuant to the 6th Central Pay Commission recommendation, a Cadre Review exercise has been initiated for restructuring of Income tax Department to enable and equip the Department to meet challenges of today and tomorrow. A Cadre Review committee has been constituted in this regard. The report shall be submitted to CBDT within 3 months.
Thursday, December 11, 2008
Section 80C, tax planning and investments
Learning how to plan your taxes is a major part of choosing an investment strategy. In this article we will look at Section 80C, one of the most important provisions for investors in the tax laws.
What is Section 80C?
The government, in order to encourage savings, gives tax breaks to certain financial products as discussed in Section 80C of the Income Tax Act. These investments are often referred to as 80C investments.
Up to a limit of Rs 1 lakh, the money that you invest in these products is deductible which means that you don't have to pay income tax on it. Thus if you are in the 30 per cent tax bracket and you invest the maximum allowed you save Rs 30,000 in taxes.
There are a wide range of investments you can make to claim the Section 80C benefit. To keep things simple we will focus on two categories: Small savings schemes and ELSS (equity linked savings schemes). Other 80C products include your provident fund, the repayment of principal on your home loan and your life insurance premium.
Small savings schemes
These include the public provident fund (PPF) and National Savings Certificate (NSC). They offer a return of around 8 to 8.5 per cent which is quite low compared to typical returns in equity products. Furthermore, there is a relatively long lock-in period, 15 years for the PPF and 6 years for the NSC. Their main advantage is that they offer a guaranteed return unlike equity-based products.
Equity linked savings schemes
These are basically mutual funds which are specially created to provide tax benefits. As with regular mutual funds there is no guaranteed return and you can lose money in a period of falling stock prices as has happened in the first half of 2008. However, ELSS usually provides a higher return than small savings schemes and also a lower lock-in period of three years.
Examples of ELSS include Franklin India Taxshield and HDFC Taxsaver. More you will find in our other blog bestmutualfundindia.blogspot.com. As with regular mutual funds, these schemes pursue a range of investment strategies: For instance, some may focus on large cap stocks while others may focus on small and mid cap stocks. It makes sense to invest in more than one scheme to diversify some of your risk.
Making a choice
How do you decide to allocate your Rs 1 lakh 80C limit? This will depend on your other financial decisions; for example whether you have taken a home loan or purchased life insurance. As to the decision between small savings schemes and ELSS two of the most important factors are your attitude to risk and inflation.
As recent months have shown so clearly, stock markets are a lot riskier than small savings schemes. However, the flip side is that riskier investments like stocks offer a higher rate of return particularly over the long run. From the perspective of a young investor who may not need most of her/his investment money till retirement it probably makes sense to tilt towards riskier assets.
The other important consideration when evaluating returns is to adjust for inflation.
In other words, if your investment generates a return of 8 per cent and inflation is 7 per cent, then your inflation-adjusted return is only one per cent. When inflation moves into double digits you are actually making a negative inflation-adjusted return, as is happening currently. This is a fundamental problem with any investment product that offers a fixed return at a time of high and rising inflation.
By contrast stocks are a better hedge against inflation especially in the long run. Though inflation increases the costs of firms it also allows them to charge a higher price to their customers thereby protecting profits to some extent. This in turn means that stock prices and equity-based products can offer better protection from inflation over a number of years though not necessarily in the short run.
What about the element of timing when it comes to equity schemes? For instance, stocks have clearly taken a pounding in the last six months. However this doesn't necessarily mean it's a bad time to invest in stocks; valuations in some companies look quite attractive now and over a three-year horizon you could see decent returns.
From the point of view of the average investor it's probably best to take timing out of the picture by following a systematic investment plan which means you invest a fixed amount every month.
Small savings schemes and ELSS each have their advantages and disadvantages. Based on your investment strategy and particularly your attitude towards risk you have to choose how much to invest in them as part of your Section 80C investments.
Sunday, December 7, 2008
Latest news about enhanced Grade Pay to Inspectors and some other posts.
In the matter of assigning higher Grade Pay to Inspectors etc. the following development has take place :
a) orders to cover ADI(OL) have already been issued
b) the case of A.O and P.S being common category has been delinked
and is being dealt with such categories in other departments and it will
be settled as and when DOPT takes a final decision in the matter.
c) In this case of Inspectors, the Deptt. of expenditure has raised certain
queries over the functions of the feeder cadres and the same is being
replied. The Board has strongly supported the case of Inspectors.
In respect of the three awards, the Board has already taken up the matter with the DOPT for holding a formal meeting to finally clinch the issue.
The minutes of the meeting between CBDT and staff side indicating that mobile phone facilities would be provided to all employees connected with operational work has been issued.
Source : Income Tax Employees Federation.
Upgradation in computerization in Income Tax Dept.
Income Tax dept is in the job of massive upgradation. It has decided to consolidate it’s distributed databases in different locations into a central database. The central database is located at
They have also taken a significant step in networking. All Income Tax offices in the country is now going to be ON Line. The IT people will assess the returns with it’s Departmental software all over the country. M/s Bharti Airtel has been entrusted with the network expansion. The Dept has switched over from the state owned BSNL to Airtwl for this purpose. They will provide State of
The Dept software for assessment – AST is also being upgraded to cope with the new envioronment. This exercise is being looked after by TCS. Greater security has been introduced in the system by providing RSA secure token to each user to prevent any unauthorized access to the sensitive data of the database.
Te whole system upgradation including supply of hardware is being provided by IBM. They will also manage the troubleshooting of the system in no time to enable the taxmen to focus on their job.
Friday, December 5, 2008
e-payment of Direct Taxes
Remember , this is the time to pay your installment of Advance Tax.
Corporate and those assessee , liable to audit u/s 44AB will have to pay their all kind of Direct Taxes ONLINE.
What is e-payment of taxes?
Similar to booking tickets or making payments online.
All Direct Taxes e.g. Income Tax, Corporate tax, FBT, BCTT (TDS, Advance tax, self assessment tax) to be paid online using net banking facility.
Mandatory for all Companies and 44AB cases from 1stApril 2008 to pay taxes through e-payment facility using net banking account.
Credit/debit card facility is yet to be in operation
Taxpayer can make tax payment from any location without going to Bank branch.
Amount of tax debited to his bank account electronically and credited to GOI .
Log in to websiteof Income Tax Department: www.incometaxindia.gov.in
Choose the button‘pay taxes online’
How do I make e-payment?
How do I make online tax payment sitting at home/office?
1. Open a net-banking account with any of the banks listed above.
2. Go to website www.incometaxindia.gov.in , click on ‘pay taxes on-line’.
3. Fill in the required challan online. Help is available on screen as FAQ, downloads etc.
4. Make tax payment through net-banking account online.
5. A challan counterfoil will be available instantaneously on the screen with CIN (challan identification number). The Challan Identification Number (CIN) on this counterfoil should be quoted in Return of Income.
6. Print the counterfoil and also save it in the computer if required.
7. Check if your payment has reached the Income Tax Department at https://tin.tin.nsdl.com/oltas/servlet/QueryTaxpayer .
Which Banks offer e-payment facility?
1. Axis Bank
2. State Bank of
3. Punjab National Bank
4. Indian Overseas Bank
5. Canara Bank
6. Indian Bank
7. Bank of
8. Corporation Bank
9. State Bank of Bikaner & Jaipur
10. State Bank of Travancore
11. State Bank of
12. Vijaya Bank
13. HDFC Bank
14. Oriental Bank of Commerce
15. State Bank of
16. Bank of
17. IDBI Bank
18. State Bank of
19. Bank of
20. State Bank of
21. State Bank of Saurashtra
22. Union Bank of
23. Allahabad Bank
24. Dena Bank
25. Syndicate Bank
26. ICICI Bank
Note: Credit/Debit card payments are not yet available
Source : Income Tax and NSDL
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