Begin Your Tax Planning Now

Sunday February 1, 02:28 AM

Source: Indian Express Finance

Begin Your Tax Planning Now

By Rakesh Jain

It's the month of January and chances are that you have already been looking at your tax liability sheet for the financial year 2008-09. Tax planning involves the selection of the right tax saving instruments and making appropriate investments at the right time. In the current tax system, taxpayers can successfully condense their tax liabilities by engaging themselves in effective tax planning. Investment avenues that aid in tax-planning under section 80C include employee provident fund, public provident fund, national savings certificate, life insurance premium, Unit-linked insurance policies for instance, are ideal for creating a corpus for retirement for children's education, tax-saving fixed deposits (at least for five years with a scheduled bank) and infrastructure bonds. Public Provident Fund (PPF) and National Savings Certificate (NSC) schemes which though offer modest returns have become more popular since they offer a higher degree of safety. In the current scenario of falling stock prices, one cannot afford to lose sight of the safety of capital and hence investment in equity linked tax saving scheme (ELSS) is attractive.

No tax planning exercise is complete without a health insurance policy.

Why health insurance?

The rising cost of quality healthcare in India as well as the incidence of lifestyle diseases has created a need for health insurance. The health insurance policy will help you to save your investments and capital in the event of any critical illness in the family. The premium paid on health policy provides tax benefits as a deductible expense under the provisions of Section 80D of the Act. Deduction of premium lessens the taxable income. A health insurance plan is therefore an effective way to save tax along with risk cover.

Fifteen years ago, health insurance made its beginning in India with the introduction of a medical reimbursement plan primarily covering hospitalisation. However there was a need gap in the market for easy and hassle free insurance products. The entry of multiple insurance players had a cascading effect on several aspects of health insurance, and this has led to new products, practices and services.

Health and wellness form an important aspect of the balance in your life. To ensure that you are taken care of when the need arises, insurance companies provide you with a wide range of unique and innovative health insurance plans that cover much more than basic hospitalization.

ICICI Lombard's 'Health Advantage Plus' is a unique health insurance policy that covers unexpected medical emergencies like hospitalisation as well as outpatient department expenses (OPD) in the form of reimbursement of cost of medicines, drugs, ambulance charges and dental expenses. The 45 year age limit for 'no health check-up' for policy issuance is now extended to 55 years of age.

Individual health insurance plans cover the proposer singly and family insurance plans cover the entire family. Group health insurance schemes provide cover to salaried employees and are provided by their respective employer.

In case the group scheme is contributory for the employee, the amount contributed can be availed for tax break by the employee.

The amount of the tax to be paid is calculated on the nature of investments made and income earned. There are certain deductions and exemptions applicable on the taxable amount, depending upon the nature of income. To take advantage of these facilities tax planning is necessary.

The author is Director - Corporate Centre and CFO, ICICI Lombard

Steps in tax planning

Following are the steps in tax planning which would aid a person in making prudent tax plans to reduce their income tax liability and ensure a better tomorrow by making compulsory savings by investing in various tax saving schemes. These steps in tax planning are:

1. Compute the gross total income

2. Calculate tax payable on gross taxable income for a financial year

3. Check the impact of investment in various tax planning instruments on the liability

Tax planning must start from beginning of the financial year and not towards the end, because the sooner you start investing, the easier it gets.

Gold May Touch Rs.16,000 By April

Monday February 2, 04:35 PM

Source: Financial Express

Gold May Touch Rs.16,000 By April: Analysts

Gold prices are expected to touch a record high of Rs 16,000 per 10 gram in the next three months driven by uncertainty in the global financial markets and currency movements, say jewellery retailers and analysts.

Gold prices have shot up by 20 per cent to Rs 14,175 per 10 gram on February 2 compared to Rs 11,720 per 10 gram in the year-ago period.

Major jewellery manufacturers and retailers such as Geetanjali Gems Ltd and P P Jewellers and some analysts see the much possibility of gold prices touching Rs 16,000 per 10 gram by April, this year.

"Currently, gold prices are extremely volatile. Within a week or so, prices would hover in the horizon of Rs 15,000 per ten gram level. It may not be a surprise to see gold prices at Rs 16,000 per ten gram in the next three months," the Chairman of Gitanjali Group, Mehul Choksi, said.

Uncertainty in the global financial market and the rupee movement will be key drivers for gold prices, he said, adding that currently, there has not been a significant fall in demand in his stores due to price rise.

A similar projection was made by Chandni Chowk Jewellers Association, which sees a bullish price trend up to Rs 16,000 per 10 gram in the coming months.

Karvy Comtrade Research Head Harish G said, "Any upward movement in gold prices is determined by the strength of dollar and euro and an uncertain global economic environment".

Consumers, who have already seen gold at Rs 14,070 per 10 gram towards 2008-end, are currently resistant to buy at above Rs 14,000 level, which has reduced jewellery demand by almost 40 per cent. The pace at which gold prices rose in the last month (from Rs 13,200 per 10 gram to Rs 14,400 per 10 gram), clearly indicates that the yellow metal will no longer be cheaper.

Satyam Takeover: L&T Seen As Favourite

Monday February 2, 04:35 PM

Source: Financial Express

Satyam Takeover: LandT Seen As Favourite

Larsen and Toubro looks best placed to pounce on Satyam Computer Services if India's market regulator relaxes a rule on takeover pricing for the fraud-hit outsourcing company.

After spending around 7 billion rupees ($140 million) on its stake, LandT, India's leading engineering and construction firm, has become Satyam's biggest shareholder as the government-appointed board of Satyam is seeking a strategic investor for the firm.

"They have been looking to grow their IT business and have been looking at a large IT business, this will take it to a logical conclusion. They can merge LandT Infotech into Satyam," said V.K. Sharma, head of research at Anagram Stock Broking.

LandT built up a 4 per cent stake in Satyam by early January, only to be blindsided by its Jan. 7 disclosures of massive accounting fraud that have left the outsourcer struggling for survival. Satyam's founder chairman and former managing director are being held in jail.

As other potential bidders emerged for the company, LandT trebled its shareholding to 12 per cent to protect its interests and keep open the option of quickly raising the size and value of its own smaller outsourcing unit.

It could increase its stake further, but once its holding hits 15 per cent it would have to make an open offer for another 20 per cent of the company -- at the average share price over the last six months, according to Indian takeover law.

Satyam's market value has plunged to about $800 million from $7 billion in May 2008.

Currently, the mandated six-month average would work out to an offer price of about 325 rupees, according to Thomson Reuters data showed --versus Friday's close of 54 rupees. An average price over 10 days would work out to about 38 rupees.

US-based outsourcer iGate and India's Spice group, among others, have expressed interest to buy Satyam, attracted by the firm's global clientele such as General Electric and Nestle and bankers say LandT was unlikely to shy away from a bidding war.

"If any of the bidders look to build half of Satyam's business, it would take them 5 years. Right now, they are looking purely at cash accretion to their existing businesses," said Sanjeev Patkar, head of equities at Dolat Securities.

Last week, Satyam said fund manager Fidelity raised its holding in the company to 6.8 per cent and since then Fidelity has increased its stake further.

Bankers say foreign takeover interest is limited in Satyam given the lack of clarity on the company's books, and a number of class action lawsuits filed by US shareholders.

COMMITTED BUYER

Funding is unlikely to be a problem for LandT. Its senior vice-president for finance R. Shankar Raman said last week LandT had cash and cash equivalents of $920 million at the end of 2008.

Add in its existing sizeable stake, a strong brand image and relationships with domestic institutions and funds that owned more than 15 per cent of Satyam late last year, and bankers say LandT is well placed to see off other bidders.

State-run Life Insurance Corp, which owns 4.3 per cent of Satyam, is also the largest shareholder in LandT with a 17.4 per cent stake at the end of 2008.

"Going by what has happened, I believe LandT is committed to a deal. They would be prepared to go the distance," said a banker who has previously advised LandT. He declined to be named as he was not authorised to speak to the media. Satyam's board has named Goldman Sachs and India's Avendus to find a strategic bidder for the company.

Even if LandT loses a bidding war, it will probably gain in another way. Having raised its stake to 12 per cent from 4 per cent when Satyam shares were under 40 rupees, it lowered the average cost of its stake to about 80 rupees a share.

"It is playing into a bidding war. LandT need not worry about losing. It just increases the chances of exiting the investments at a profit," said a banker not involved in the deal.

In mid-January, Satyam's new board said it would take 8 to 12 weeks to restate its accounts for a number of years.

"Besides the floor price, the only other deterrent is the complete lack of clarity on Satyam's financials," said an analyst at a Mumbai brokerage, who asked not to be named as he was not authorised to speak to the media. He said a board seat might give LandT a better idea of the real state of accounts.