India Tax Payer - Forum

Posted: 22-03-2011

Inflation, the globally dangerous evil has promoters all over the world. Libyan issue, the Tsunami-earthquake of Japan and the rising fuel prices most prominently cater to the growth of inflation.

When it comes to banks, things are the same but hopes still exist to reduce taxes on longer and shorter terms of deposits. RBI, the master of money keeps hiking its repo rates to increase liquidity yet constantly failing in its measure... The RBI increases its repo rates by 25 base points or half a percent. This hasn’t really helped banks and RBI as well...  The repo and reverse repo, though incremented doesn’t drastically change anything. Many analysts conclude that there would be lot more hikes than what it is now from RBI in the near future deducing it to be around 6.5 to 7.5%.

Coal, Iron and Crude oil prices have gone up the ladder ensuring that there is an absolutely negative impact on the global economy. The crude oil prices are in and around $115 a barrel and this is the worst case of the lot.

Banks basically face loss when customers demand for early takeaways of money in case of deposits. Banks have even taken the chance of eliminating the penalty for what they withdraw in the specified premature period. Causing a direct loss to the banks, this again results in RBI increasing its repo rates. To ensure there is uniformity in interest rates, the only way for the retailers is to go for long term deposits where they can reasonably avoid large taxations.

Banks show choices like if there is a lakh deposited then there would be a five year period out of taxation which literally means a tax holiday. Whatsoever the interests that result from the deposit if more than what it has to be, then the extra that comes out is completely taxable. Otherwise schemes wouldn’t make any logical sense.

Once it comes to longer termed fixed deposits then there is one main norm that needs to be kept in mind. Banks while structuring a long term deposit clearly state that the money that is being deposited couldn’t be asked for a retreat in the earlier terms. When the interest rates hike and the investor has surplus funds flowing then he neither can transfer it to his savings account nor can he deny taxation for the surplus.

One of the most successful ideologies implemented is the MF or the Mutual funds. These are basically investments made with linkage of shares on the market. The invested fund is divided into shares and the bank floats these in the market. The rates keep on however multiplying leading to a reasonably good hike in the share values. The NAV or the Net Asset Value is calculated at the end of maturity and this would primarily be the value of the investment made with better and larger increments made than its original value. Long term capital gains are more in case of fixed maturity plans. When an investor deals with real estate then after a fixed period of around 2 or 3 years he has to pay taxes of around 10 or 20 % depending upon indexation process. This indexation table will have values which need to be indulged in the manipulation of taxes for the real estate….

Furthermore there are lots of other taxes saving plans coming up but all that people and RBI hope is to completely chop inflation down though a lot of measures prove ineffective...

For more comprehensive news visit http://epized.blogspot.com/