How To Bequeath Wealth – Joint Accounts, Nominations and Wills

There are three ways to pass on your wealth to another person after your death: joint accounts, nominations and a will. It is important to structure these three instruments in the best possible manner, so that your wealth can be easily transferred to the right persons after your death, without your dependents having to face any unnecessary legal or financial hassles.

Here is some more information on these three instruments:

• Joint Accounts: A joint account is an account that is shared between two or more individuals. It can be held in two modes: ‘either or survivor’ mode and ‘former or survivor’ mode. In the ‘either or survivor’ mode, the joint account holder can operate the account along with the primary account holder, while he or she is alive. In the ‘former or survivor’ mode, the joint account holder will only be able to operate the account after the death of the primary holder. Some financial instruments that allow you to specify a joint account holder are bank accounts, fixed deposit accounts, mutual fund accounts and real estate properties. Usually, joint accounts are created to avoid probate, and are shared between two relatives (eg. spouses).
• Nominations: When a person opens a bank account or buys some types of financial products, they will have the option to nominate someone to receive their wealth in the event of their death. The nomination form is usually a part of the common application form; however, it is not mandatory to fill it, and the nomination section may be crossed out if the applicant does not wish to nominate anybody. If filled, the applicant can generally change the nomination anytime in the future, by filling another form. Some financial products that allow nominations are life insurance policies, bank accounts, fixed deposit accounts and mutual fund accounts. 
• Wills: A will or testament is a legal declaration by which a person (called the testator), names one or more persons to manage his/her estate after death. A testator may also name certain people who will receive specified parts of their wealth/property, after death. If a person does not have a will at the time of their death, inheritance laws for that person’s particular religion will generally apply. 

Of the above three instruments, a joint account is the most powerful instrument for transferring wealth, followed by nominations, and then a will. Below are some best practices, which you could consider while bequeathing your wealth:

• If you are very sure that you want your money to go to a certain individual (like your spouse), ensure that you have a joint account with him/her, with yourself as the primary account holder. 
• Ensure that the nominee for a financial instrument is the same person to whom you have willed your money in case of your death. It could be a big mistake to mention Person A as a nominee, but Person B as the will beneficiary, and such an oversight could cause a lot of unnecessary fights and legal hassles among your loved ones. 
• If you had opened bank accounts or bought financial products many years ago (like mutual funds, fixed deposits, life insurance policies or real estate property); re-check the nominee’s name that you had entered for each account/ investment. If you wish to change the nominee’s name, fill in the appropriate form and do so. Else, you can also leave the nominee field blank, so that the beneficiaries in your will can easily claim the wealth. 

You can also read about three common mistakes people make while bequeathing wealth.

Have you ever given a thought about who will receive your wealth or property after your death? Which of the above instruments do you prefer using for bequeathing your wealth: joint accounts, nominations or a will?

Bequeathing Wealth - Three Mistakes People Make

Have you ever thought about who will collect your wealth after your death? Well, there are three ways that a person can pass their wealth to another person: joint accounts, nominations and a will. Some people may use all three of them, while some people may not know anything about bequeathing their wealth.

Here are three common mistakes which people make while bequeathing their wealth:

1. Not knowing what a joint account means

You can make anyone a joint account holder in some financial instruments, such as bank accounts, fixed deposits, mutual funds or real estate properties. Most people choose to make their spouse the joint account holder. This method is more powerful than making a nomination or a will, and ensures that the joint account holder will be able to operate your account after your death, instead of just having to withdraw the balance.

Here, there are two modes you can select: ‘either or survivor’ mode and ‘former or survivor’ mode. If you choose ‘either or survivor’ mode, the joint account holder would be able to operate the account along with you, while you are alive. If you choose 'former or survivor' mode, then the joint account holder would only be able to transact after your death. In fact, he or she would become an owner of the account after your death, without any problems.

2. Ignoring or forgetting old joint account holders

Many people create joint accounts with their parents, siblings or friends when they are young and unmarried; but later on in life, want to pass on their wealth to their spouse and/or children. To do this, they may enter the name of their spouse as a nominee, or draft a will (for stronger documentation). However, once they die, such a will or nomination will be USELESS, because the account still has a legitimate owner: the other joint account holder/s.  In case of joint accounts, the wealth can only be passed on if all the holders, not just the primary and secondary holder, are dead.

Note: Nominations can be used to leave someone your wealth only if there are no other people to claim it, while a 'will' works to transfer the rights to another person, after the owner passes away.

3. Laziness in changing old nominations or old wills

Many people don’t bother to change old nominations in various financial products, like life insurance policies, mutual funds or bank accounts; thinking that a ‘will’ will override all such nominations. They may have nominated one person to get their wealth in the event of their death, but mentioned some other person’s name in their final will. This could lead to a lot of complications and court cases, as the nominees and the will beneficiaries, fight to claim the wealth. In many cases, courts have awarded such wealth to the old nominees, rather than the person/s mentioned in the will (usually when clear directions were not given).

Such confusion can also happen if a person has made an old will, decades back, and forgotten to change it to include new family members (spouse or children).  A common example is bequeathing property to a sibling, who may not want to transfer it to the widow or children of his brother, after his brother’s death.

Filing Late Income Tax Returns in India

The deadline for filing Income Tax Returns for salaried individuals has recently passed. If you are one of those people who have missed the 31st July deadline for filing taxes, then don’t fret, you may still be able to file your late IT returns with zero penalties.

The website of the Income Tax Department of India says that, ‘a tax return may be furnished any time before the expiry of two years from the end of the financial year in which the income was earned’. This means that if you earned your income during FY 2008-09, you may file a belated return anytime before 31st March, 2011. Of course, you may lose certain benefits available to those who file their returns on time, but it is better to file them late than never...

All late income tax returns filed after 31st July, 2009 are termed as a ‘belated return’. People who have zero net tax payable are lucky. If you file your late income tax return before the end of the current financial year, that is, 31st March, 2010 and all your taxes are paid, then no penalty or interest will be imposed on you. However, you may forego some of your rights as a taxpayer, such as:

- You will not be able to carry forward your losses.
- You cannot claim a tax refund.
- You cannot revise your return.

If you still have some tax dues, while filing the delayed income tax return, then you will be charged one per cent interest per month on the outstanding tax payable amount from March 2009. Partial months are considered to be full months.

Those who miss the 31st March, 2010 deadline may still file their belated tax returns within the next financial year. The Income Tax Department will accept late returns till 31st March, 2011 with a late filing penalty of Rs.5000. This means you would have to pay one percent interest per month on the outstanding tax payable amount plus a penalty of Rs.5000.

One of the main advantages of filing Income Tax Returns is that it is useful while applying for loans. Whether you need a housing loan, vehicle loan or a loan for any other purpose, most loan managers at banks will always ask for the Income Tax Returns of the past 2 years, as proof of your financial ability. If you are planning to take a loan in the future, either for yourself or your loved ones, then filing of income tax returns, even belated, is a necessity.

Tax Slabs in India - 2009

Well, last year Finance Minister P.Chidambaram reduced the tax burden on people paying income tax by changing the tax slabs in India. This article offers information about the income tax rates in India for different categories of income tax payers such as men, women and senior citizens. It also provides details about final tax calculation, best deductible investments and other tax saving strategies for Indians. Here are the Income Tax Rates for the year 2008-2009.

Income Tax Slab 1 - Zero Tax
Male salaried individuals pay zero tax if their net taxable income is Rs.1,50,000 and below. For women the zero tax limit is Rs. 1,80,000 while for senior citizens it is Rs. 2,25,000. According to the income tax department, only individuals (both men and women) who are of the age of 65 years and above are considered to be senior citizens. By investing prudently and using salary allowances, it is possible to bring down incomes which are much larger than this to this level.


Income Tax Slab 2 - Ten Percent Tax
People earning between Rs. 1,50,001 to 3,00,000 fall in this category. Men have to pay 10 percent of the amount greater than Rs. 1,50,000 while women have to pay 10 percent of the amount between Rs. 1,80,001 and Rs. 3,00,000. Senior Citizens pay a rate of 10 percent of the amount between 2,25,000 and Rs. 3 lakhs as income tax in India.


Income Tax Slab 3 - Twenty Percent Tax
Indian Citizens earning between Rs. 3,00,001 to 5,00,000 have to pay this income tax rate. In this bracket, salaried men have to pay Rs 15,000 plus 20 percent of the amount between Rs. 3,00,000 and Rs. 5,00,000. Women pay Rs. 12,000 + 20 percent of the amount between Rs. 3 - 5 lakhs while senior citizens pay Rs. 7,500 plus 20 percent of the amount between Rs. three - five lakhs.


Income Tax Slab 4 - Thirty Percent Tax
All Indians earning a salary of above Rs. 5,00,000 fall in this category. Men have to pay Rs.55,000 plus 30 percent of the amount greater than Rs. 5,00,000. Women salaried taxpayers have to pay Rs. 52,000 + 30 % of the income more than Rs. 5,00,000 while for senior citizens it is it Rs. 47,500 plus 30 percent of the income above Rs.5 lakhs.

Income Tax Surcharge - In addition to the above income tax rates, a 10 percent surcharge (tax on tax) is applicable if the taxable income after taking into consideration all the deductions is above Rs. 10 lakh.

Education Cess - All taxes in India are subject to an education cess, which is 2 percent of the total tax payable. With effect from the assessment year 2008-09, Secondary and Higher Secondary Education Cess of 1% is applicable on the subtotal of taxable income.

These are the current income tax slabs and rates for the financial year April 2008 - March 2009. The Annual Budget is expected to be announced at the end of this month, and it is hoped that the Finance Minister Mr.P.Chidambaram introduces a new system of taxation, tax
slabs, investment and expense deductions that reduces the tax rate in India even further for next year.



Some More Articles about Saving Income Tax in India -

- Income Tax Slabs in India - 2010
- Calculating Taxable Income for Saving Tax
- Best Tax Saving Investments For Deduction
- Your Family As A Tax Saving Strategy

Tax Saving Strategy - Family and Interest on Investments

How To Avoid Paying Taxes On Interest On Investments

The interest on some investments such as Bank Fixed Deposits and National Savings Certificates is taxable. This reduces the initial rate offered by banks from around 10 per cent to about 6 percent, leaving you with hardly any earnings from this type of investment.

One loophole out is Section 56 of the Income Tax Act. This section basically exempts cash gifts between relatives. This includes relatives such as parents, spouse, siblings and adult children. As you know, the basic threshold for paying income tax is Rs. 1.50 lakh for men, Rs. 1.80 lakh for women and Rs. 2.25 lakh for Senior Citizens above the age of 65 years. For this tax loophole to work, it is necessary that your relatives have zero income or income which is much less than the basic income tax threshold for their age/sex.

Now here comes the tricky bit - All you have to do to save tax on fixed deposits is to gift large sums of money to your wife, parents or adult children and invest this cash in fixed deposits or some other investment of your choice. The resulting interest on the fixed deposit, if below the basic threshold limit is completely free of tax. Let's take an example -

Mr. Singh is a Senior Manager in an IT firm. His wife and 80 year old mother are housewives, while his 19 year old son is a college student with no earnings. After using up all the tax saving investment and expense options, Mr.Singh has Rs. 30 lakh spare for investing. As the share market is down, he decides to avoid shares, mutual funds and life insurance. The next best thing is fixed deposits, the only negative point being that the interest on such an investment is taxable.

Hence, he makes use of the above income tax loophole. He gifts Rs. 10 lakh each to this wife, mother and son. This is in turn invested in fixed deposits that earn 10 percent per year in his wife, mother and son's name. Each relative earns around Rs 1 lakh as interest from this investment. However, this interest is not taxable as it is below the basic threshold taxable limit of Rs. 1.80 lakh for wife, Rs. 2.25 lakh for mother and Rs 1.50 lakh for son respectively.

If Mr.Singh had invested the above funds himself, he would have to pay full tax on the Rs.3 lakh interest earned, which would have been a straight loss. Since, he had relatives he could trust, he saved a lot of cash for the family and also gave them financial security.

Of course, you might not have Rs. 30 lakh to spare after household expenses and tax, but whatever savings you have, you can put this tax saving strategy to good use to avoid paying taxes on various investments such as fixed deposits and national savings certificates that have taxable interest.

Read More:
- Tax Slabs in 2009
- Best Tax Saving Investments
- Calculating Taxable Income for Salaried Individuals

Income Tax for Salaried People in India - Tax Slabs

Income tax calculation for salaried individuals in India - Tax Slabs

This is my third post and provides information about the final tax calculation and tax slabs after deduction of eligible investments and expenses for men, women and senior citizens of India. According to the income tax department, only individuals (both men and women) who are of the age of 65 years and above are considered to be senior citizens.

Slab 1 - Rs. 1,10,000 and below - Zero Tax
Salaried individuals who are men have to pay zero tax if their net taxable income is Rs.1,10,000 and below. For women the zero tax limit is Rs. 1,45,000 while for senior citizens it is Rs. 1,95,000. By investing prudently and using salary allowances, it is possible to bring down even very high incomes to this level.

Slab 2 - Rs. 1,10,001 to 1,50,000: Ten Percent Tax
Men have to pay 10 percent of the amount greater than Rs. 110,000 while women have to pay 10 percent of the amount between 145,001 and 1,50,000. Senior Citizens pay zero tax in this income tax slab.

Slab 3 - Rs. 1,50,001 to 2,50,000: Twenty Percent Tax
In this bracket, salaried men have to pay Rs 4,000 plus 20 percent of the amount between Rs. 1,50,001 to 2,50,000. Women pay Rs. 500 + 20 percent of the slab amount while senior citizens pay 20 percent of the amount above 1,95,000. The Rs.4000 for men and Rs.500 for women is the amount for the previous 10 % tax slab.

Slab 4 - Above Rs. 2,50,000: Thirty Percent Tax
Men have to pay Rs.24,000 plus 30 percent of the amount greater than Rs. 250,000. Women salaried taxpayers have to pay Rs. 20,500 + 30 % of the income more than Rs.2,50,00 while for senior citizens is it Rs. 11,000 plus 30 percent of the income above the tax slab.

Surcharge
A 10 percent surcharge (tax on tax) is applicable if the taxable income after taking into consideration all the deductions is above Rs. 10 lakh.

Education Cess
All taxes in India are subject to an education cess, which is 3 percent of the total tax payable.

These are the current income tax slabs and rates for the financial year April 2007 - March 2008. After the Annual Budget is announced at the end of this month, the Finance Minister Mr.P.Chidambaram may come out with a new system of taxation, tax slabs, investment and expense deductions. If he does so, I will surely keep you informed.

Here are my other posts on calculating Income Tax in India
-Tax Slabs in 2009
- Deducting Office Allowances and Reimbursements
- Deducting Investments and Expenses

Best Tax Saving Investments For Deductions

Saving tax for salaried individuals in India – Top Tax Saving Investments

I am writing about how to avoid paying tax or paying as little as possible tax in three blog posts – calculating taxable income, deductions before tax and tax slabs. This section is about a few common ways to save tax by reducing your net taxable income through investments, expenses and loans.

Tax Deductions Through Investments

According to Section 80C of the Income Tax Act, you can reduce your taxable income by Rs.1 lakh by investing in certain investments. These investment can be from any one source or a combination of sources such as Public provident fund, national savings certificate, tax saving mutual funds, pension plans, fixed deposits and life insurance policies. Since, the returns on investment, risk factors, term of deposit and entry load or commissions vary for each type of investment, here is some information about each type to help you select the best according to your needs. They are arranged as the best investments for young salaried tax payers in India according to the ones which I prefer the most –

1. Equity Linked Savings Scheme (ELSS) – High Risk. Also known as tax saving mutual funds, an ELSS has the lowest lock in period of 3 years. As the money invested in an ELSS is invested by mutual funds in diversified stocks in the stock market, there is no guaranteed return. Dividends and profits from redemption of units after the term period is tax free. If you buy directly from the mutual fund instead of a broker/distributor, then you pay zero entry load, else entry load is around two percent. Remember, in the long run, the stock markets always see a rise.

2. Bank or Post Office Fixed Deposits – Low Risk. Only investments made in scheduled banks for a period of five years or more can be counted as a Bank Fixed Deposit. The interest on such fixed deposits is around 8-9 percent. Income from interest is taxable. Forms are available at bank and post office counters.

3. National Savings Certificate – Low Risk. It comes in denominations of Rs.100, 500, 1000, 5000 and 10,000. The forms are available at any post office. The maturity period is six years while the interest rate is 8 percent compounded half yearly. If you pay in cash, you will be given the National Savings Certificate then and there. If you pay by cheque, you will have to wait a week before you can collect the NSC certificate from the post office. Interest is taxable.

4. Life Insurance Policy – If you are looking for life insurance cover along with investment, then you should choose one such policy that offers a guaranteed return on maturity. If you have a huge loan to pay off and a family it is better to go for a cheap traditional term insurance where you don't get the premium back but have a huge insurance cover in case of any untoward incident. Premiums can vary and may be paid monthly, quarterly, annually or in a lump sum depending on the policy you choose. Term of the policy can vary from five years till twenty years and more. Money received from an insurance company as proceeds of an insurance policy (by way of an insurance claim, or by maturity) is generally exempt from tax.

5. Government Infrastructure Bonds – Low Risk. The main problem about these tax saving bonds are that they are open and available only for a fixed period. As many bonds open around February, they miss the January 31 deadline of submitting investment proof prevalent in most offices. The major institutions that offer these bonds are ICICI, IDBI and Rural Electrification Corporation. Term periods can range from five to seven years and interest may vary from 6 to 9 percent per annum. Forms for Tax Saving bonds are available at local distributors that sit on the pavement outside major banks. Companies like ICICI have not come out with tax saving infrastructure bonds for a long period now.

6. Public Provident Fund – Low Risk. The investment limit is Rs.500 to Rs.70,000 per year - in multiples of Rs.5. The main problem about this scheme, is that you have to remember to invest an amount of at least Rs.500 annually for 15 years or your account will become defunct. Interest rate is 8 percent per annum compounded while the lock in time period is15 years. Another negative point is that as interest rates are on the downside and they are routinely changed by the government they may see a further fall. As interest for the financial year is calculated on the lowest balance after March 5th, make sure you invest before that date. PPF Accounts may also be made in name of your spouse or kids for tax benefit. You can open a Public Provident Fund Account at main post offices, branches of the State Bank of India and some nationalised banks.

7. Pension Plans – High Risk. Life insurance companies such as LIC, Tata AIG Life, Aviva, ICICI Prudential and Bharti Axa Life offer such pension plans. On maturity, the investor receives one-third of the amount while the remaining 2/3rd goes into an annuity that provides regular income in the form of pension. Only premiums till Rs.10,000 per year are eligible for deductions from total income. Like Unit Linked Insurance Plans (ULIP’s), a substantial amount of the money invested into Pension Plans goes into paying ‘fund charges’ and commissions. Plus, the annuity received by the insured investor is taxable. Terms can extend from 10 years upwards. Though some return may be guaranteed – a large part depends on the debt market, share market and inflation.


8. Unit Linked Insurance Plan – Very High Risk. This is by far the worst tax saving instrument to invest your money in. A huge amount of commission, charges and entry load is deducted from the amount you have invested. The remainder is invested in a set of funds that invest in the debt and share market in different proportions. In some cases, this commission may be around 50 per cent of the amount invested. Most telecallers sell this type of policy, and if you ask them how much will actually be invested, they pretend they don’t understand the question. An ICICI Prudential executive however told me that one third would go in extra charges – that is a whopping 33.3 percent. Term period is usually five years and above while returns are not guaranteed.

7. Senior Citizens Saving Scheme – Only people over the age of 60 years and retired personnel over 55 years are allowed to invest in this scheme. This scheme is available at all public sector banks in the country. Investments have to be made in multiples of Rs.1000 till a maximum of 15 lakhs for a period of five years. The deposit made gets an interest of 9 percent per year from the date of deposit which is computed quarterly. Interest is taxable and is deducted at source.

You can also check out Prem Arora's post for more information on tax saving schemes.

Tax Deductions For Expenses

Other than the investments above that qualify for a deduction from total income, there are also certain expenses that are tax deductible such as home loans, education loans, tuition fees, medical insurance premium and treatment for specified terminal diseases. Here is some information about the most common expenses which are tax deductible in India.

1. Home Loan – If you are repaying such a home loan, the principal amount of the loan taken can be counted as a deduction under Section 80C of the Income Tax Act.

2. Tuition Fees of Children – The tuition fees of upto two children at school, college and university level may also be taken as a deduction from total income thus reducing the amount on which tax will be calculated.

3. Interest on Home Loan - According to Section 24, a tax exemption of up to Rs. 1,50,000 is allowed on the interest paid for a home loan in the current financial year.

4. Medical Insurance Premium - Section 80 D - An amount of up to Rs.15,000 for individuals and Rs.20,000 for senior citizens as premium towards a medical insurance or mediclaim policy is tax deductible. This also includes medical insurance for dependents such as spouse, children or parents on the condition that you paid the premium.

5. Education Loan – Section 80E - The yearly limit for deduction is Rs. 40,000 (for both the principal and the interest). Only loans taken for higher education - fulltime studies in any graduate or post-graduate, professional, and pure and applied science courses - may claim deduction. The deduction will be available for a maximum of eight years starting from the day you start repaying the education loan.

6. Donations to a charity - Section 80G – All donations to specific charitable organizations such as the Prime Minister's Relief Fund, CARE and Help Age India are eligible for a 100 percent tax relief. Donations to other charitable institutions and trusts get only 50 per cent tax relief.

7. Other Deductions - Under Chapter VI , there are also other deductions available for handicapped people and medical treatment of disabled dependents (up to Rs.50,000). Also, deduction for medical treatment for specified diseases such as neurological diseases, cancer, AIDS and hemophilia are allowed up to Rs.40,000 for individuals and Rs. 60,000 for senior citizens.

There are other deductions also available on certain other expenses, but since they are not applicable to most tax payers in India, I have not mentioned them. After deducting all the above mentioned investments and expenses from your total gross income, you are left with your 'Net Taxable Income'. The next post will provide information on the tax slabs and tax calculation on net taxable income for different categories of people such as male salaried individuals, women and senior citizens.

Did you find this section on the best deductions to reduce income tax for salaried individuals in India helpful? Do you have any other tips or information to add?

Here are my other posts on calculating Income Tax in India

Deducting Office Allowances and Reimbursements
Deducting Investments and Expenses
Tax Slabs

Saving tax for salaried individuals – Calculating Taxable Income

Paying zero tax for salaried individuals in India – Calculating Taxable Income

I am writing this article on how to avoid paying tax or paying as little tax as possible in three blog posts – calculating taxable income, deductions before tax and tax slabs. I have always found it very confusing to calculate tax and have lost a bundle of cash through past oversights. Here, I have posted all the information I know about saving income tax for salaried people in India, so that it is a ready reference whenever I need to calculate tax.

Calculating Taxable Income in India
First, you need to calculate your gross income from salary. This includes house rent allowance and provident fund contribution which are paid monthly. If you are a new employee, it depends on how many months you have worked with your current employer. Other than basic pay, dearness allowance and commissions that are fully taxable, most Indians have the following major component allowances included as part of their salary. If you have not been provided a few of these benefits in office, just skip to the next step.

1. House Rent Allowance – If a portion of your salary is marked as House Rent Allowance or HRA and you are paying rent, then submit rent receipts. The house should not be in your kids, spouses or your own name. As this is the biggest saving from the tax burden, it helps if you exchange houses with relatives/friends whose house is in the name of a non-earning member.

The total amount of rent paid or the amount earmarked as House Rent Allowance in your payslip, whichever is less, will be deducted from your gross income from salary. However, it should not be more than 50 percent of salary for those living in metro cities or 40 percent of salary for others. If you are paying more than Rs.5000 per month as house rent, you will have to submit a lease document and your rent receipts should have a revenue stamp. Rent receipt books are available at any stationary shop for around Rs.15.

2. Medical Reimbursement: Up to Rs. 15,000 per year is tax free if supported by bills. (Company pays Fringe Benefit Tax on this amount of 6.8 percent of 20 percent of the amount). If you don’t claim it, it is taken as part of your income and is taxable. There are some spurious chemists and doctors who take cash bribes to make fake medical bills. These are the same folks who make excuses to give bills to legitimate customers buying medicine for illnesses. However, it is better to invest an extra Rs.15,000 in deductible investments than to use this method, as you will earn more in the long term.

3. Conveyance allowance: Up to Rs. 800 per month (Rs. 9,600 per year) is tax free if it is mentioned in your salary as conveyance allowance. No bills are required for this amount.

4. Phone Bills: You can claim the amount allocated to you in your Cost to Company (CTC).
(Company pays Fringe Benefit Tax on this amount of 6.8 percent of 20 percent of the amount). If you don’t claim it, it is taken as part of your income and is taxable.

5. Employee Stock Options: The company has to pay Fringe Benefit Tax of 33.99 percent on the difference between market value and purchase price on the vesting date.

6. Leave Travel Allowance – This is tax free for the salaried individuals and family and can be claimed for only two journeys in every four years. The current year block for which LTA is non taxable is 2006-2009. Also, mode of travel should be –
- Airline - economy fare of the national airlines ‘Indian’
- Railway - first class AC fare
- Road - deluxe/first class public transport buses.

After deducting all the allowances that you have claimed and including the unclaimed portions, you also need to include taxable income other sources. This income could consist of any or all of the following such as – salary from previous employer, bonuses, income from house property, sale of paintings, other capital gains and freelancing. This gives you your ‘Gross Total Income’.

Information about deductions from ‘Gross Total Income’ is given in the next post called ‘Deductions’. Did you find this section on how to save income tax for salaried individuals in India helpful? Do you have any other tips or information to add?

Here are my other posts on calculating Income Tax in India -

Deducting Office Allowances and Reimbursements
Deducting Investments and Expenses
Tax Slabs

Mutual Funds - Change Of Bank Mandate

Mutual Funds India - Change of Bank Mandate

After transferring my savings from HDFC Bank to my ICICI Bank account, I had to change the bank mandate of all the investments I had made so the dividend, if any was directly credited to my new account. Here are a few tips to help you send new details like a change of bank account or change of address without any delay or confusion.

The change of bank details, redemption, switch and change of address slip of some mutual funds like Kotak Mahindra, HSBC, Tata Mutual Fund, HDFC, UTI and Chola DBS are handled by CAMS Investor Service Center and should be sent to -

CAMS Investor Service Center,
Ground Floor, No.178/10,
Kodambakkam High Road,
Opp. Hotel Palmgrove,
Nungambakkam - Chennai - 600034.
Phone - 044-39115563, 39115565, 39115567

Franklin Templeton Mutual Fund is not handled by CAMS and has to be sent to their Delhi address at -

Franklin Templeton Mutual Fund India
F-126, Himalaya House, 12th Floor,
23, Kasturba Gandhi Marg.
New Delhi - 110001
011- 23722786, 044 - 24407700
service@templeton.com
18004254255 - Customer Care Number from MTNL Phones Only.

HDFC Mutual Fund asks for a photocopy of a crossed cheque of the new bank account which has to be sent with the Change of bank details slip either to the Cams Investor Center listed above or the HDFC Mutual fund address at -

HDFC AMC Limited 4th Floor ,Mohan Dev Building 13, Tolstoy Marg New Delhi-110001
Ph:011 66324000, 011 41522189-93,41012587-589 (Extns 101-104) Fax :011 23351318

Like Franklin Templeton Mutual Fund even Principal Mutual fund handles change of bank details or change of address requests at their Delhi office. Send forms to -

Principal PNB Asset Management Company Private Limited - AMC
310-311, Ansal Bhawan,
16, Kasturba Gandhi Marg - New Delhi -110001
Toll Free No . 1800225600
011-66115111

Chola Mutual Fund - Since there is no change of bank mandate slip or form attached to the account statement, you have to write a letter stating the new bank details like bank name, branch, account number, type of account and the scheme you are invested in which can be sent either to the Cams Chennai address above or the following address in Delhi -

CAMS Investor Service Center,
304 -305, 3rd Floor,
Kanchenjunga Building,
18, Barakhamba Road,
New Delhi - 110001
Phone - 011 - 30482468, 30482469.
camsdel@camsonline.com
Toll Free No - 1800-425-2267, 044- 28521839

I hope this is the information which you are looking for.

HDFC Bank - Totally Sucks

HDFC Bank totally sucks - How HDFC Bank left me cashless during the Diwali Season !

This HDFC Bank saga started around four days before Diwali when I found a HDFC Bank letter on the stairs of my apartment building. Assuming it was a HDFC Bank credit card offer, I almost did'nt open it. It's good that I did though, and was totally shocked by what the HDFC Bank letter read regarding by salary account.

"We observe that there has been no salary credit in your account from July-September 2006.............we learn from your previous employer that you have since left the organization.........the captioned salary account would need to be closed..........visit our nearest branch during working hours within 30 days from the date of this letter along with your debit card and unutilized cheque leaves.......to continue a banking relationship with us , you will need to open a normal savings account...........treat this matter as urgent .......failing which we will be constrained to block operations in your account. " Srinivas Iyer, HDFC Bank.

This was like a bolt from the blue, considering I had left the company mentioned more than two years ago. Also, I had lakhs (hundred thousands) invested in HDFC Bank, plus term deposits and mutual funds. Thinking there had been a mistake, I called up the HDFC Bank customer care center and was in for a ruder shock !

Cyberkitty : I recieved this letter from HDFC Bank......blah blah
HDFC Bank : It's your fault, you should have informed the bank whenever you switch jobs. Now you have to open a new account.
Cyberkitty: Haven't you heard 'customer is king', is this the way you treat a valued customer who has invested so much in HDFC bank ? I have given this bank account number for direct credit of divident from mutual funds and stocks. Think of the inconvinience ?
HDFC Bank : It's your mistake, there is nothing that can be done, come to the office and close your account.
Cyberkitty: I can easily transfer my 'huge' balance to my ICICI Bank Account. In these days of intense competition in the banking sector, do you really want to lose a customer. I can also tell lots of folks about the lack of service at HDFC Bank.
HDFC Bank: It's your mistake. If you want to go to ICICI Bank then go ! Submit your debit card and cheque book at our office to close your account or we will disable it.

Shit scared of losing my cash, I cut a cheque and transferred every drop of money to my ICICI Account by depositing the HDFC Bank Cheque in the ICICI automatic cheque machine. I asked at ICICI if they forced customers to close an account on quitting a job and the answer was no, they just change the salary account to a regular one. Since, I did not have much cash in my ICICI account, I could not do the Diwali shopping that I had planned for as I had to wait for the HDFC Bank check to be cleared. HDFC Bank took nearly a week to clear my check.

HDFC Bank has always been tardy when it comes to dealing with customers. The ATM's never seem to be stocked with cash. I have never recieved my internet banking password despite many reminders neither has my friend recieved her ATM Card pin code. I have not visited HDFC Bank with my debit card and cheque book to close the account as I don't want to face more rude service. Anyway I heard they automatically close the account if the balance falls below Rs.10, so good riddance to them !

Dear Mr. Aditya Puri, (CEO, HDFC Bank) these policies won't take your bank very far, you know. Closing accounts of folks who don't earn you fat profits by applying for credit cards, home loans, education or car loans make seem cost effective, but in the long run you will lose out on the very funds that enable you to give out these loans .

I should have closed my HDFC Account, the day I heard top executives were involved in the demat account and IPO scam, but it's better late than never, i suppose.

Did any blogger face a similar problem with HDFC Bank ?

How To Get Out Of Debt

How to Get Out of Debt

It is almost impossible to get out of debt for folks trapped in the debt web. My day job involves writing articles and promotional material for credit card, debt consolidation loan and payday loan companies that encourages Americans to apply for these services which only leads them into more debt. I have always felt quite guilty about having to write this because I know for sure that these services are real harmful and can only lead to a person getting further caught up in the debt trap. This is why I have written this blog post on 'how to get out of debt' - to advise folks on how to get out of debt and to clear my conscience.


1. The first way to get out of debt is to pay back more than the minimum amount on your credit card. The faster you repay the amount, the less interest you pay and the more you save. Start with paying off the highest interest credit cards first and then move on to the lower ones. If you have a credit card for a long time you can call up the company call center and ask them to lower your interest rate and other charges. Everything is negotiable - you can also threaten you may have to declare bankruptcy and get them to lower your charges, after all it is better for them to get something rather than nothing. ( this is what debt consolidation firms do) . Save as much money as you can by giving up on luxuries and find the money to make the payments.

2. Another way to get out of debt is to pay back all your outstanding balances ASAP - cash out all your savings, investments in mutual funds, stocks and other investments and use the money to pay the outstanding debts. This is because the debts usually eat up more interest than your investments pay you. It is best to get rid of the debt first and then save up some more which you can invest later.

3. Don't be ashamed to borrow from family and friends - you'll get the money just because you share the same genes or for love. The borrowed money is usually interest free and there are no late charges if you fail to pay it back on time as promised. But remember to get out of debt, you may have to do other stuff to help them out like babysitting, picking up kids etc. which is not that bad considering your debts are paid off.

4. Get rid of your credit cards - as soon as you finish paying back the debt of a credit card, cut it up and destroy it so you are not tempted to use it again. Soon you will have just one credit card remaining, lock that up in a box and open it only in case of an accident or death. A good way to get out of debt is to stop credit card companies from calling you with new offers by dialing 1-888-5-OPTOUT. Here you will get the neccessary information to stop your contact information from being sold. For all other purchases use a debit card - this is to make sure you only spend what you have and only buy what you need.

5. The best way to get out of debt is to Save money - Don't buy things you don't need. Live way below your means till your debts are paid off. Things you can save a lot on are -

(a) Food - skip eating out at restaurants or ordering takeaway. Cook and eat home food only, it's healthier. Miss a meal or skip dessert - you can even lose a lot of weight this way. Stop buying coffee, tea, smokes or alcoholic drinks - they cost quite a lot per month and only leads to bad health, for which you would have to pay for later at the doctor's. Drink plenty of water instead of coke or other soft drinks, you'll get a healthy glowing complexion and also save a lot of cash.

(b) Transport - try and use public transport. Get out of debt by walking or riding a bicycle, if your office/mall is nearby. You'll save a lot on fuel and get a free workout that will lead to a shapely, healthy body. Maintain your car well so that you can get a good price when you sell it later and use it only for long distance travel which is absolutely neccessary.

(c) Shopping - make a shopping list and stick to it. Don't bother about commercials or brand names, choose the cheaper item off the shelf. You may be thinking, ' Oh ! what if Mr. Smith sees me', trust me, people are too bothered about their own problems and nobody cares a damn. Save coupons and buy in bulk cause it costs less and can get you out of debt real fast. Don't buy unneccessary things that are currently considered the cool 'in' thing to have - you'll see that after some time it will serve no purpose. Don't buy a new television or sofa set if you have one that is in a ok condition. NEVER BUY ANYTHING ON CREDIT. If you can't afford it, skip it and think about buying the newest model at a cheaper rate at a later date when you have the money.

(d) Utilty Bills - save gas, water and electricity. Use lights and heat only if you are in the room, don't keep them on in every room or on during the day. Use only one phone, call less.

(e) Other things - forget about donating money to charity, you need it the most. Anyway most of the money just goes into the pockets of social workers and hardly ever reach the folks they are meant for. Another way to get out off debt is to stop splurging on clothes, cosmetics, spa's, hairdressers and fitness centres. Also avoid going to amusement parks, vacation, holding parties etc. until the debts have been paid off and you have some savings. If a wedding is neccessary, have a real low budget one and invite a few friends only - take a few photos and you'll have great memories.


6. The worst thing you could do is to take another loan to pay off your debts or transfer credit card balances to a new card with a lower interest rate. Don't borrow against life insurance policies, 401 k retirement plans or take home equity loans. This may seem ok in the short run, but remember that this is just another loan and comes with an additional interest rate and extra charges too. Many are just introductory offers, and charge a higher rate after some time and can take ages to get you out of debt.


7. Filing for bankruptcy should be the last resort to get out of debt - It should not happen if you follow the above points. Filing for bankruptcy may seem the easy way out but there are many disadvantages to this. You could go to jail, have to pay through your nose for a lawyer and court fees, your relationships could breakdown and a lot of stress. What's more your credit score will decline and you may never get a loan again in your life. Plus you lose quite a lot of property to pay some of the debt. Some payments still have to be made even after filing for bankruptcy like alimony, child support, taxes, unlisted loans and student loans.

So instead of wasting time searching online for cheap credit cards, debt consolidation or payday loan sites, why don't you make a list of your debts and call the companies to reduce your interest rates. This will go a long way in reducing your burden and you can get out of debt real quick. Take this from someone who actually sells these services !

I hope this helps you in your quest to get out of debt. If you need any more information email me at cyberkitty123@gmail.com or post a comment at my blog.