“I think the markets would continue be in the current range even for the next week...the Budget is not as negative as people are making it to be”
— Ambareesh Baliga, VP, Karvy Stock Broking
|“The proposal for an additional deduction of Rs 15,000 to those who pay medical insurance premium for parents is a welcome step” |
— Sandeep Bakshi, MD & CEO, ICICI Lombard General Insurance
|“Valuations are looking good after the decline in the stock market...the growth rate will be around 20-25%”|
— R Rajagopal, CIO, DBS Cholamandalam Asset Management
|“A volatile market is detrimental to IPOs. The retail investor is jittery about listed stocks, so they are bound to be cautious about new listings”|
— Prithvi Haldea, MD, Prime Database
|Source: Financial Express, Economic Times and Business Standard|
|The ATM growth story|
|Figures are number of ATMs in India|
|TOP 3 with least public holding|
|COMPANY||TOTAL PROMOTERS||TOTAL PUBLIC AND OTHERS|
|As on 31 Dec, 2007; all figures in percent|
|What to expect|
|Convenience of taking care of your family's health|
|Flexibility to switch between funds/plan options|
|Option to pay top-ups|
|Income tax benefit under sections 80C, 80D and 10 (10)D|
|Annual premium Rs 5,000 (Health Plus); Rs 10,000 (Wealth+Health)|
Right on track
The Indian Railways carries “more than the entire world’s population every year”, which works out to a mind-boggling 18 million passengers daily, according to the chairman of the Railway Board. In a sense, then, you are, as a taxpayer and as a passenger, a shareholder in one of India’s largest companies.
And so, the better it does, the more you will benefit in the form of lower fares, better services and increased network. Which is one reason to give the annual Railway Budget a second look. By now, you’ll know all the details of the fare reductions and benefits extended to various sections of the population.
But did you know that much of this was possible because you, and millions of others, account for 26% of the annual earnings of the Railways? Earnings per passenger grew by 9.6% (average) over the last year, while the number of passengers grew by 6% in the same period. The highest earnings came from First AC, First Class and AC Chair Car fares, which, incidentally have seen the maximum fare reduction—7% for First AC compared with 6% for general sleeper class.
|Revised rates for 2007-8|
|AC I||AC II||AC III ||SLEEPER|
|Revenue per passenger (Rs)||1,618 ||940 ||663 ||230|
|Percentage cut in fare ||3.5%*||2%*||5%#||6%#|
|* Discounts are for the peak season. They are doubled in the lean season.|
|# Discounts are valid for higher capacity coaches only.|
Budget 2008 has cleared the confusion regarding tax treatment of funds received through reverse mortgage. Reverse mortgage is essentially a loan against a home that a senior citizen would not have to pay back for as long as he lives in that house.
The Income Tax Act will be amended to provide that reverse mortgage would not amount to ‘transfer’ (read sale) and the stream of revenue received by the senior citizen would not be ‘income’ and therefore not subject to income tax. This was one of the biggest hindrances in the growth of the scheme; launched last year, only 160 odd policies have been sold till now.
However, while the clarification might generate demand, it is still unclear about how the interest accrued to the lender would be treated for tax purposes. This might be a dampener for banks and might prevent them from aggressively pushing their products, according to experts.
This has, however, not stopped LIC Housing Finance from entering the market after Dewan Housing Finance first launched a product in September 2006. The loan offering from LIC will be offered at a fixed interest rate, subject to reset every five years.
The maximum loan balance will be 90% of the property value and the loan balance will include interest till maturity. To begin with, the company will launch the scheme in Delhi, Mumbai, Kolkata, Hyderabad, Chennai, Lucknow and Bangalore.
— Rakesh Rai
|LIC housing reverse mortgage|
|Loan amount||Up to Rs 50 lakh|
|Interest rate||Fixed (to be reviewed after 5 years) |
|Property||Should have at least 20 years of residual life|
|Payment||Monthly, lumpsum or a combination of both|
Good savers, always
Indians earn more. Indians spend more. But the good news is that they also save more. The Economic Survey 2007-8 reveals that per capita income of Indians clocked a growth of 7.2% and per capita consumption increased by 5.3% last year. There is a significant gap between the two figures and it is this difference that has made the government and your -coffers heavier.
Most of what Indians don’t spend, they save. In 2007-8, gross household savings remained almost constant at 23.8% to gross domestic product (current prices). This indicates an increase in savings in absolute terms. But if you are wondering why savings did not jump drastically, don’t look beyond the tax man.
Income tax and service tax collections swelled by nearly 21% last year. While much of this may be attributed to increase in volume—tax rates remained unchanged last year and tax slabs changed only slightly— some of it may be due to the extension of service tax to cover many new services.
As is usually the case with rising per capita consumption, the share of luxury items— including durable goods, entertainment services, transport and communications— in the household consumption basket is growing at over 10%, while the share of food items has declined.
The overall increase in household consumption is a good sign. Deeper pockets of both the government and taxpayers should ensure sustained demand in the economy and hence a continuation of the growth cycle.
|Using money right|
|GROWTH IN PER CAPITA|
|YEAR ||INCOME (%)||CONSUMPTION (%)|
|Per capita Income and consumption (at 1999-00 prices)|
Income is taken as GDP at market prices
Source: Economic Survey 2007-08
Do you know why you’ve invested and what you’re invested in? Starting this issue, you can check your financial wisdom quotient here.
1 Equity-linked savings schemes or ELSS have the longest lock-in period when compared with other taxsaving options under Section 80C
2 When paying income tax, you have to pay a surcharge of 10% no matter what your annual income is
3 I have to pay tax on my provident fund withdrawal if I close the account after six years
4 Phishing is when a bank sends you an invitation to join an anglers’ club
Give yourself 0 for every Yes and 1 for every No
0-1: Better luck next time (and do take the time to read this magazine. There’s plenty of information that could prove useful)
2-3: You’ll do—your grasp of your finances seems pretty good, though, of course, it could be better!
4: Obviously a know-it-all. Just make sure to keep reading and keeping your knowledge up-to-date
What’s hot, what’s out
Tracking the frequency with which the 10 most exciting, most riveting, most watched auctions take place on eBay helps you get a sense of what is selling and what is not. Jewellery has consistently topped the charts, with mobile phones being bought in twice the time it takes for a piece of jewellery to be sold.
One glaring change is the extra time taken by most of the top 10 items to be bought—an MP3 player which used to go every 13 minutes in August 2007 now takes 33 minutes.
|1||4 ||3 ||2 ||5 ||7 ||9 ||6 ||- ||-|
|1||6||7 ||8 ||3||2 ||5 ||9 ||- ||- |
No fine print
Hot on the heels of standardising monthly holdings across mutual funds, the Securities and Exchange Board of India (Sebi) is planning to simplify the offer document of mutual funds’ new fund offerings.
This is yet another step towards investor protection and awareness, and will help investors make better decisions when filling up the offer document. Says AP Kurian, chairman, AMFI: “Sebi is in consultation with us to make this a standard template across fund houses.”
The new rule will also reduce the costs and time involved for mutual fund houses to prepare and file offer documents with Sebi.
Never mind high interest rates and a see-sawing Sensex, the consumer confidence of Indians is riding high, according to the MasterCard Worldwide consumer confidence index. The survey creates a forward looking index over the next six months and the Indian consumer seems to be way ahead of consumers in other countries across South Asia, Middle East and Africa.
“These results are unexpectedly buoyant, as the survey measures sentiment among middle-class consumers in the major metros. It is also striking that the confidence of Indian consumers is as high as those in countries enjoying an unprecedented oil boom,” says Suman Bery, director-general, National Council for Applied Economic Research.
The current index score of 86.6 is the highest on record for India since the survey commenced in 2004. The scores, ranging from 0 to 100, are based on responses to five variables. A score of over 50 says that consumers are optimistic about the economic climate. “Looking at the stock market confidence, Indians clearly believe in the India story,” says Nitin Gupta, GM South Asia, MasterCard Worldwide.
|QUALITY OF LIFE||62.2||27.7||10.1|
|The survey was conducted at the end of 2007, for the six months from January to June 2008|