Sunday, January 26, 2014

RBIs Currency Withdrawal move on notes before 2005

The Reserve Bank on last Wednesday i.e.22nd of January,2014 decided to withdraw all currency notes issued prior to 2005, including Rs.500 and Rs.1,000 denominations,  after March 31 in a move apparently aimed at curbing black money and fake currencies.

"After March 31, 2014, it (RBI) will completely withdraw from circulation all bank notes issued prior to 2005. From April 1, 2014, the public will be required to approach banks for exchanging these notes," the RBI
said in a statement. (For full notification click / or copy paste this link- )
The public can easily distinguish the currency notes issued before 2005 as they do not have the year of printing on reverse side. The year of printing in a small font is visible at the middle of the bottom row in notes issued after 2005.
Although the RBI did not give any reason for withdrawal of pre-2005 currency notes, the move is expected to unearth black money held in cash. As the new currency notes have added security features, they would help in curbing the menace of fake currency.
FAQ to help you understand the issue:
Q: Will my currency notes become invalid from April 1?
 A: Partly. While you cannot use them for your normal transactions, you will still be able to go to a bank and have them exchanged.  
Q: Till when can I have my notes exchanged at the bank?
A: After July, persons seeking exchange of more than 10 pieces of Rs 500 and Rs 1,000 notes will have to furnish proof of identity and residence to the bank.  
Q: How can I tell whether a note is pre- or post-2005?
A: All notes printed after 2005 have the year printed in the middle of the bottom row. Pre-2005 notes do not have this feature.
Q: Why did RBI decide only on 2005 as the cutoff year?
 A: Notes issued since 2005 have a different design and colour and this will bring uniformity to the cash system. They also have more security features to tell apart from fakes such as added watermark, etc. These notes are thus better in fighting the counterfeit currency menace.  
Q: In what denominations do pre-2005 notes exist?
A: Pre-2005 notes in all current denominations -- from Rs 5 to Rs 1,000 -- are in circulation. Please note, it should not be mis-understood that only Rs.500 and Rs.1000 notes be exchanged. 
Q: What will RBI do to the pre-2005 notes withdrawn from the system?
A: Central banks typically destroy withdraw currency notes by shredding them.  
Q: What is the motive behind the RBI move?
A: While the central bank has not given an explanation, it is said the move is fight the counterfeit-currencies issue as well as to flush out black money from before 2005 that could still be held in cash.  
Q: What is the average lifespan of currency notes?
A: There is no official declaration on this. In the US, the estimated lifespan of a currency tender ranges from about six years for the USD 1 bill to 15 years for the USD 100 bill, according to the Federal Reserve website.
Q: Will the bank ask for PAN no.?
A: From now to July 1, you can exchange any number of notes with a bank, without any fear.
There is a rule that transactions above Rs.50,000 need a PAN verification, but we aren’t yet sure if that applies to the changing of notes.And you don’t have to go to your bank. You can go to any bank, and they will change your notes, for free.
Also note: After July 1, banks can ask for a proof of identity and residence if you want to exchange more than 10 notes. An aadhaar card should work for both cases. You aren’t required to give a PAN card.
How Much Pre-2005 Currency Notes Are There?
Here’s the “Notes in Circulation” from the RBI data:

This means about 3.4 trillion (343,700 crores) is “suspect”. Around half of this would have been churned back over the years, replaced normally. So in effect, this affects notes worth about 200,000 cr. (2 trillion) which is a fairly large chunk of money. The RBI needs to be prepared to replace that much.
The amount held by public as of December 23, 2005, was close to Rs4 trillion, according to RBI data. This amount stands at Rs12 trillion as of December 27, 2013. According to market estimates, 10-15 per cent of notes in circulation are fake notes.
“The RBI would have largely addressed the soiled note issue (currency printed up to 2005), but this move goes beyond the official figures,” said a banker at a foreign-owned bank.
The major reason behind the RBI move appears to be addressing the fake money and currencies that are out of the system (held in cash by individuals/businesses or black money). Most experts from the financial world said fake currencies, especially through neighbouring countries like Pakistan, were corroding the economy apart from cash that were eluding the banking system.
According to RBI spokesperson, the bank wants to bring about uniformity in the notes printed and hence such rationalisations were required. “The RBI has been communicating with banks on the security features of new currency notes for a while now. This move is in a way admitting the vulnerability of duplicating notes issued earlier,” said a managing director at a government bank.
Talks of hawala or illegal money laundering or investment in gold and real estate picking up have also started doing the rounds.
But then bankers and a few senior corporate executives said these weren’t possible now that the RBI has issued an official communique to surrender such notes that do not have the year of issue printed on the reverse of currency notes before 2005.
How exactly will the new banknotes help?
The post-2005 notes have added security features like machine-readable security thread that fluoresces in yellow on both sides under ultraviolet light; improved intaglio printing; see-through register which ensures half the numeral of each denomination is printed on the obverse (front) and half on the reverse; water-mark and electrotype watermark that can be viewed better when the banknote is held against light; optically variable ink which makes the colour of the numeral appear green when the banknote is held flat but blue when the banknote is held at an angle; dual-coloured optical fibres, seen under ultra-violet lamp; and, of course, year of printing. These features help banks across the world to stay ahead of counterfeiters.( For details click here- “New Security Features in Indian Rupee from 2005 RBI”( ))
Will people with loads of old currency notes (euphemism for black money) try to divert them to commodities like gold?
Well, some might. The jury is still out on whether this is a prudent move though.
If gold-sellers accept such old notes, what can they do? 
All such notes will eventually have to find their way to banks, a prospect that not all gold-sellers might relish.
The Result-
Black money: The impact is as good as demonetisation as currencies printed before 2005 will no longer be in circulation. The RBI has given an opportunity to exchange notes through banks only. This means hoarders of cash will automatically come under the lens if they approach banks.
They are likely to employ benami names or front companies to get notes exchanged for new ones at a premium of 10-15 per cent.
Corruption: Bank employees could resort to devious ways to make a quick buck or bail out
customers. Eventually the government and RBI win by giving a body blow to counterfeit notes and hoarders of cash.
Gold & real estate: Unlikely to have an impact as the move is to tackle fake currency. The move discourages cash transactions if currency does not have the year of printing mentioned on the reverse of the note.
My Take-
Don’t panic at all, most of us will not have to worry, yes there may be one or few commotion and mischevious moments, buy nothing else and that, though there are more questions on this move, yet the result is for better.

Monday, January 20, 2014

Basics of Insurance



Insurance offers peace of mind, security and a safety net. It allows for the unexpected to happen, and for your family to be able to manage.

There are many types of insurance, and clients buy insurance for many different reasons. As a Financial Advisor I am committed to guiding you through the maze of information, options and decisions in regards to insurance and protecting your family.

Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.

Let me first answer all those who say  “ I don’t  require Insurance ”……,such people give various reasons   to support and win this argument but in practical terms they are or may be unknowingly losing  a lot. Generally I ask following few questions to such people-

1.    Do you use Helmet while driving a bike?

2.    Do you have a Locker for Valuables?

3.    Do you have Lock and Key to your house or car or bike?

4.    Do you Plan something?

5.    Have you ever sealed an envelope or a parcel?

6.    Do you put aside certain portion of income as cash? and some other portion parked into savings?

7.    Do you have  alarm or central locking system installed in your car?

And if most or even one answer is YES, the person is at least unknowingly using or applying Insurance theory. These are day to day activities and some or the other way, knowingly or unknowingly we are using this concept.

Insurance is important for many reasons and can be used to:

  • Protect the income stream of your family (maintaining your standard of living)
  • Pay off debts and provide money at the death of the insured
  • Provide a source of retirement income
  • Fund a child's education
  • Create or sustain a family's wealth
  • Cover funeral expenses
  • Cover estate taxes - providing funds necessary to prevent the liquidation of assets
  • Cover the cost of living expenses and time off work due to sickness or injury
  • Ensure resources aren't drained in the event of an unexpected illness or injury
  • To protect entity from losses to Assets like car, home etc.

The bottom line is it provides peace of mind for you and your family.


Auto Insurance

Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision.

Coverage typically includes:

  • Property coverage, for damage to or theft of the car
  • Liability coverage, for the legal responsibility to others for bodily injury or property damage
  • Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses

Life Insurance

Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.

Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.

Property or home insurance

Leading financial institutes and insurance companies offer home insurance schemes under which the structure and/or contents of the home are protected as per the preference of the owner. The home insurance policy covers damage done by natural calamities as well as humans. To elaborate, the policy insures the damages done from fire, burglary (covers theft of jewellery, silver articles and precious stones), riots, terrorism (Optional cover), earthquakes, flood, aircraft damage, hurricane, bursting of pipes, damage done by road vehicles, lightning, landslides and explosion of hazardous material. The sum insured under the home insurance policy is for structure of the home; however, it is calculated according to the reconstruction value of the home i.e. the cost incurred after the damage and not according to the market value of the home. The reconstruction value is based on the material and labour used in the home. Similarly, while setting the value of the contents of the home, the future depreciation value is calculated.

Health Insurance or as we know as Mediclaim

Health insurance provides risk coverage against expenditure caused by any unforeseen medical emergencies. In current times of high medical inflation rates, failing to hold adequate amount of health insurance cover can prove to be a major personal finance disaster. This could lead to either poor health care because of non-affordability or spiral an individual into financial distress due to high medical bills.

There are two common mistakes when it comes to buying life insurance and health insurance.

  • People don't act at the right time, and
  • When they realize that they have made a mistake they try to over-compensate by buying too much insurance.

There is a popular saying about health insurance: "Buy health insurance when you don't want it, because you may not get it when you want it."

Currently, majority of the salaried professionals are provided health insurance cover by their organizations. Majority of the employees are increasingly dependent on such health insurance cover to counter their health contingencies. However, they often fail to assess their health insurance requirements and don't realize the benefits. It is advised that professionals opt for personal health insurance cover as well.

Casuality or Accident Insurance

This covers expenses or probable income loss incurred due to Accidents.

Critical Insurance

This is an extension of Medical insurance, which covers expenses due to Defined Critical illnesses and being insured under this, has an added advantage along with general medical insurance

Liability Insurance

Business, Employment insurance, Limited liability insurance etc are loss avoiding covers.

Travel and Baggage Insurance

This is designed for people who Travel for longer period or are travelling on regular basis, a term called frequent fliers. This may or may not cover Baggage insurance as per choice.

Above are certain commonly sold or taken insurances, others also exists, but will talk separately. I am even cutting short on above list details, and will write separately.

The contract of Insurance is valid for payment of the insured amount during:

  • The date of maturity, or
  • Specified dates at periodic intervals, or
  • Unfortunate event, if it occurs earlier.
After knowing Basics of Insurance, which insurance company to go through, is another question ? "Which and why of Insurance Company", I may handle sometime later, but below are number if companies offering there products in each category-
LIFE INSURANCE- 24 companies (as per IRDA site updated as on 2.9.13)
NON-LIFE / GENERAL INSURANCE - 27 companies (as per IRDA site updated as on 11.2.13)
I know, next obvious question is how to know which good or bad and what should be the filters to watch out for? I will handle this in simple manner later.; here I have to answer basic of Insurance.

So Why Insurance?-


Easy Regular Savings

Liquidity (in case of Life Insurance)

Tax Saving

Small payments, big losses or income covered

Actually and Practically thinking, this is only investment in which outgo is the least as compared to guarantee of inflow, especially in case of dire circumstances. Take any example and you will know.

Example: Life Insurance-

If a normal healthy person takes endowment policy which covers insurance of Rs.!0 Lacs, his or her outflow for next 20 yrs would be averagely around Rs.40000 p.a., now if in third year, normal death occurs to the insured, by just paying Rs.40000 p.a. a sum of Rs.10 Lacs is given to his/her family. If I put for a minute emotions apart, and look only from economics point, tell me which other investment gives such guarantee, and if you take a Term Insurance for same 10 lacs life insurance outflow would be much lesser.

Example: House and contents insurance-

As a part of Financial Planning, Risk Planning is also done and I also cover asset insurance. Recently I have given a quotation of around Rs.11000 p.a. for around Rs.1 cr. valuation of House and contents. This is merely 0.11% of the sum assured. Where else would I get such returns or for that matter guarantee.

Basic idea is  "PEACE OF MIND", while one is actively involved in day to day activities, which helps one concentrate more and excel in life.

All said and done, still if you ask me, one should ask self and get the answer of "WHY am I thinking of buying Insurance", that's your correct reason to buy insurance.....Also refer to my previous article on "Shortest Secret to Buying Insurance".


Monday, January 13, 2014

FDs vs FMPs-What is better?

We are sure that you as an investor must have come across this dilemma as to what to choose from – a Fixed Maturity Plan (FMP) offered by a mutual fund house, or a Fixed Deposit (FD). Well it’s confusing for an investor because both of them start with the word ‘Fixed’. So, now let us understand what exactly a FMP is and how it is different from a FD.

A Fixed Maturity Plan is a close-ended fund that invests in debt and money market instruments of similar maturity as the stated maturity of the plan. That means a 90 day FMP will invests in debt and money market instruments which mature in 90 days like 3-month Certificate of Deposits (CDs), 3-month Commercial Papers (CPs) etc. An interesting point to be noted here is that unlike a FD where your maturity amount is fixed, in a FMP only the period or time horizon of the fund is fixed. As such a 90-day FMP will cease to exist on maturity.

The distinguishing feature of a FMP is its indicative return unlike a FD where you know the fixed amount receivable at the end of the maturity period of your FD. So a 90-day FMP at a time where 3 month would not tell you what interest it would yield, but internals may provide you an indicative yield. This means at maturity there is a possibility of deviation from the indicative yields given at time of open offer period, while investing.

One can Invest in FDs anytime whenever the surplus is available , while to invest in FMPs one can invest only at the time of New offer period.

As far as investment tenure in concerned, both have various maturity options available for the investors.

Which is better from taxation prespective? In an interview to CNBC-TV18 personal finance expert Lovaii Navlakhi of International Money Matters explained the difference between Fixed Deposit (FD) and Fixed Maturity Plan (FMP).

He also spoke about the advantages and disadvantages of the same. The advantage of investing in a FD is that one can invest in it at any point of time and can also encash it, whereas FMP is illiquid, but has a tax benefit. One should compare the returns from fixed income products from tax implication point of view, he suggested.

FAQ: How can an investor best evaluate the advantages of a bank fixed deposit (FD) versus a fixed maturity plan (FMP)?
          There are few basic differences and for that we need to understand as below:
The bank FD is a very simple product. Firstly, if I invest upto Rs 1 lakh, I know the rate of interest at the time of investing in that product. If one is a senior citizen or the amount is large then the rate of interest is higher. Secondly, I can invest in a bank FD at any point of time whenever money is available to me. The FMP is advantageous from a tax point of view but disadvantageous from liquidity point of view that is you cannot encash it, though some FMPs are listed on the stock exchanges. Extending this comparison of FD versus FMP further; in any fixed income product the important thing is to compare the returns for the same period and also look at the tax implication. To give a simple example, for somebody who is in a 30 percent tax bracket and has invested in a bank FD, and is getting 10 percent per annum return then he is actually getting 7 percent post tax return. Versus that let us for somebody who has invested in an FMP for more than a year, which is giving 8 percent return then on the face of it, it looks like it is much lower than an FD. But because the FMP is more than one year, and I take the growth option; I will pay capital gains tax long-term of 10 percent and my rerun on that FMP is then 7.2 percent, so it is higher than the bank FD. There are some complications but if you compare it in this manner you will understand what is better for you.

In FDs , interest income is added to investor’s income and is taxable as per income slab also known as marginal rate of tax. With FMPs tax implication also depends upon the option of investment viz, Dividend or Growth. In Dividend option investors have to bear the dividend distribution tax(DDT).In growth option, returns earned are treated as capital gains (short term or Long term, depending on the investment tenure).In the case of short term capital gains(i.e. if investment is for less than 365 days),the interest income is added to the investor’s income and is taxed at marginal rate of tax. As for as longterm capital gains (means if investments are held for more than 365 days),the tax liability is based on lower of with indexation(charged at 20% plus surcharge) or without indexation (charged at 10% plus surcharge).With indexation benefit FMPs work out to be more tax efficient investments as compared to FDs.

Above illustration is just for better understanding purpose only and is old chart, so rate of tax, yield taken etc is not relevant, but will surely give an idea of how both can be compared in terms of returns after tax.

FAQ: One would want to know, which is the big season for FMPs? How do you choose between FMPs?

               The season is more to do with availability of underlying product. We must understand that when the FMP is being offered to you by the mutual fund, in turn they have identified where they are going to invest the money. Typically, if they are offering to you, let us say a 13 month FMP; they have to have products which are maturing in 13 months. Otherwise, there will be a big asset liability mismatch. Ideally, if you want to select a FMP, you should know what the underlying investments are? They are investing in which particular instrument? And whether there is any risk in those instruments etc? But the regulation does not allow mutual funds to share their portfolios in advance. So, to that extent it becomes a little bit of a black-hole. It is only the advisor, who can have a communication with the mutual fund house and understand what type of investments the mutual fund house is making although they won't know the specific names or the types of investments. Then based on the risk, the advisor can recommend it to his clients.

 FAQ: Looking at long-term objective of wealth creation, one would want to know how much of ones portfolio should he/she be investing in fixed income products like fixed maturity plan or fixed income mutual fund. And is there any need to keep money in bank FD or has it become irrelevant now?

                 The first thing for you is to determine what is the amount of monthly expenses you incur? Now, if one is a new investor keep two month expenses in your bank. Then take another one month expenses and put it in bank FDs. A bank FD is not irrelevant and we should have some money there where one is sure of rate of return. Then take maybe another three months expenses and put them in liquid funds or Ultra short Term funds. So, basically when you start to invest, you ensure that you are not going to face a crisis for your short-term needs and that you are not putting all the money in the equity markets and suddenly realising that you are losing a lot of money. Once that is done then the money that I have with me are for my long-term needs or for my goals that are going to occur from time to time in future. Depending on those goals, your advisor will suggest to you on your asset allocation?

Now that we have known basics of FMPs let us get little more deeper into the product and practicality.

FMP NAV and Asset Composition quality

Fund companies declare the NAV of their respective FMPs , which can be found on their websites, and they also declare half-yearly results which has a list of assets they own. 

Another important and little paradoxical point is while no one asks banks where they invest when some amount is invested in an FD, at the same time if some amount is invested in FMPs one needs to research and know where it is invested. While the portfolio is not declared at time of investing, but later you can check the same on AMCs websites for the portfolio composition. However, FMPs invest in high quality instruments, which are rated by atleast one rating agency.In lot of cases one would see that the amount that you have invested in FMPs are inturn lended to lot of Banks sometimes and still the FMPs give near to similar returns as to FDs. Though looking for,comparing, understanding and assessing the composition of the portfolio is not that a regular investor be able to do, atleast one should know where it is available.

The yields of the underlying instruments (such as CDs, commercial papers, bonds) at the time of offer is either mentioned in the offer document or can be checked in public websites. You will also do well to know if the FMP promises to invest in top-rated instruments and whether it takes any credit risk by going for instruments with mediocre credit rating. In 2008 - 2009, for instance, some FMPs had invested in debt instruments of real estate companies. At that point of time with the sector was going into liquidity crunch and  the investors felt jittery for the risk of default. 

Currently one can look for FMPs for short term and/or about a year’s time over the next few weeks. Note that FMPs are often open for a day or couple of days and do not reopen for investments. Hence, you will do well to keep tab of new offers, If you wish to invest. It is generally observed that, as and when March season arrives the short term FMPs may yield higher returns atleast on the shorter curve i.e. for shorter term.

Monday, January 06, 2014


With Christmas and New Year, we hear Bells ringing not only from Santa with bag full of Surprises, but also from each companies HR department for submission of Declaration on Investments and IT Declaration for A.Y.14-15 or F.Y.13-14.
Most of us try and scramble few pages on net and start searching for the budget, or some for rules on I.T..Most of us feel jittery and few have some of the following queries:

** What is the max I can save on Taxes?
** How much Tax I need to pay this yr.?
** How am I paying more tax than my Boss, Who has higher income to me?
** Everyone is Talking about 80 CCC,80 E,80 G,80@#@##_,so What is all about 80s?
** PPF, Insurance or FD for Tax Saving?
** How much benefit can I get from Home and Education loan?
** Can I get both HRA and Home loan Tax Saving advantage?
** How do I know about my Investment and Taxes?
any many many more.....

 I understand all this and hence am trying to list out few Important points and Sections ,with short explanations. Truly speaking I am also using here one of the companies details given to their employees, which I liked in some sense. I am hereby reproducing few of those and adding few ones and also explanations for all to understand easily and implement immediately.
Rules & Instructions                                                                     

1 Submission of Final Declaration Form should reach the HR/Payroll Department before 16/02/2014

2 For New Joinies or Late submissions of declarations, the forms recd. before 15th of a month will be considered for Tax calculations effective that month.                                                

3 All required details should be neatly/correctly filled in the form, else the same will not be considered.                                                      

4 Proofs/attachments are not required to be attached with Form, except the “Provisional Certificate/Statement” for Interest & Principal paid/payable in F.Y. 2013-14 for Housing Loan and “Medical / Institute Certificates” for the specified deductions U/s 80DD,80DDB,80U,80E      

5 Permanent Account No. (PAN) must be quoted on the Form. Please Note that Forms without PAN, will not be considered for Tax calculations.                                                         

6 Tax once deducted cannot be refunded by Payroll Department/Employer. Refund if any, has to be claimed by the employee from the Income Tax Department at the time of filing the Income tax return
7 Housing Loan Interest repayment deduction can only be claimed by the husband or the wife, based on an undertaking in case of joint properties/loans.  Both HRA exemption and Housing Loan Interest repayment exemption cannot be availed simultaneously except in following cases:
            1. If it is first year of construction completion & you have not yet occupied the said property for your residence. In such case both can’t be claimed simultaneously but only for a part of the year.                                                           

            2.Loan is taken to acquire a house property and the employee is unable to occupy it due to employment at a different place and is residing in a rented premises.                                                   

8 The effective age of Senior Citizen to avail the benefit under Section 80D, 80 DDB has been uniformly reduced to Sixty Years.                                                    

9 Section 80CCG: Rajiv Gandhi Equity Saving Scheme                                                         

   1. Scheme is applicable only to Individuals.                                                

   2. The maximum deduction will be 50% of investment up to Rs.50,000/- during the FY 2013-14

   3.The deduction will be at the rate of 50 per cent of the amount invested in equity shares/ equity oriented mutual fund.                                                   

  4.The Gross Taxable Income of the individual should not exceed Rs.15 lakhs.                  

  5.The assesse should be new retail investor in shares                                                         

  6. The investment based deduction will be available for 3 (Three) consecutive assessment years.
  7. There would be lock-in period for 3 years.          
10  Section 80D: Deduction under Section 80D is restricted upto Rs.15,000/- in respect of insurance premium of self , spouse & dependent children and a further deduction for Rs.15,000/- or (Rs.20,000 in case of Senior Citizen) is allowed for buying health insurance policy in respect of parents.                                                                                                                                                            Further, a deduction for Rs.5,000/- is also available from FY 2012-13 in  respect of preventive health checkup of self, spouse,  dependent children and parents of the assesse. However, deduction under this provision will be within the overall limit as prescribed above. Deduction for Rs.5,000/- could be claimed even if payment is paid in cash provided the overall limit of Rs.15,000/- is maintained.                                                

11  "Section 80DD : Provides for deduction in respect of maintenance including medical treatment of  handicapped dependent.(Quantum of deduction is Rs.50,000/- in respect of a dependent being a person with disability. In respect of dependent being a person with severe disability (80 % or multiple disability) quantum of deduction is Rs.1,00,000/- as against Rs.50,000/-. The employee is required to furnish a copy of the certificate issued by the medical authority in the prescribed form."  
 12   Section 80DDB : Provides for deduction of Rs.40,000/-( Rs.60,000/- for Senior Citizens) in respect of medical treatment of specified disease or ailment incurred by individual for himself or a dependent .You are required to furnish a certificate in prescribed Form No.10 –I from doctor prescribed in rule 11DD(2)                                                    
13    Section 80U : Provides for deduction to Employee, certified as disabled (handicapped) by medical authority (as per rules),  deduction of Rs.50,000/- (in case of severe disability Rs.1,00,000/- instead of Rs.50,000/-.)                                                      

14    Section 80E : Provides for deduction of total amount of interest paid on “Loan taken for Higher Education” for self, relative or dependent from notified Financial Institutions.                                                          
15    Section 80G: Any donation made for various approved  funds, charitable organizations, etc under this Section shall be claimed by the employee in their return of income. However, employee is eligible to claim deduction in case of donation made to Prime Minister's Relief Fund, Chief Minister's Relief Fund at 100% of the amount contributed towards such funds.                                                    

16     Deduction From Salary Income Under Section 80C/ 80CCC/80CCD (Maximum up to Rs.1,00,000)                                                 

            1. Life Insurance  premium paid by an individual on his/her life or on life of his/her spouse or on life of any child  of such individual. (subject to a maximum of 10% of the assured value)                                                          
            2. Contribution to Public Provident Fund in an account standing in the name of individual, the wife or husband and any child of such individual.                                                       

            3. National Saving Certificate                                                 
            4. Repayment of principal against a loan for purchase or construction of a residential house property. 
            5. Children Education Expenses i.e. full time tuition fees paid at the time of admission or thereafter, to any  university, college or school, excluding any payments towards any development fees or donation.or transportation facility (upto two children)                                                     

            6. Contribution to  Notified Pension Funds                                                     
            7. Fixed  Deposit  scheme  with scheduled  banks with a term not less  than  Five Years  - Account opened in current year eligible.                                                   

            8. Unit linked Insurance plan                                                  
            9. Annuity plan of Life Insurance Companies                                                            

            10. New Pension Scheme contribution                                                           
            11. Any other (please give details)                                                      

17        The maximum amount of deduction for item no.16(1) to 16(11) is Rs.1,00,000/-, Amount invested in excess of these limits is not eligible for  deduction                                                         


1) Additional Surcharges as applicable                                                           
2) Education cess  & Secondary & higher education cess -3% of Income tax.                 

3) Income category is the Net Taxable Income after allowed Deductions.                                  

4) Resident individual having total income upto Rs.5 Lacs will be provided a rebate of Rs.2,000/- or tax payable, which is lower.

 19   It is entirely the Employee’s responsibility to check the details in  Tax Computation Sheet (in the next month of submission of Form) for correctness of the information submitted to HR/Payroll & updated in his Tax computation. In case of any discrepancy he is required to highlight the same to HR & Payroll Dept. immediately. 
20  Few of the above instructions may vary from company to company & the information mentioned above is extracted from the Budget 2013-14 & the IT Act, on best effort basis. Hence, incase of any ambiguity or mis-match between what is stated here and the applicable act/rules, the latter will prevail.  

Please click below if you want standard FREE- "PROVISIONAL INVESTMENT FORM SALARY I.T. for F.Y. 13-14"- (In Excel Format) (alternatively can copy paste this link to browaer)

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