Investing In Debt Instruments in These Times
Dr. Sanjiv Agarwal
Volatility in the stock markets discourage the investors to invest in stocks and equities which is otherwise considered lucrative, given the capital appreciation it commands and the tax free dividend it yields. Investments in stocks is, however, not every body's cup of tea as it requires a lot of market study, research on stocks and a game of timing the entry and exit. In short, stocks are best for professional investors. While mutual funds do provide a safe haven for small and retail investors, their under-performance and lack of guaranteed returns demotivate the investors to stay invested in mutual fund schemes. The only option investors are left with is debt instruments i.e., where the investment is in a debt security repayable as per terms of the instrument and returns are offered in the form of fixed or floating interest rates. On risk matrix, if secured, these are safe as principal amount remains intact and returns are known and fixed, free from volatility.Now a days, even debt instruments come with varying interest or return options. With volatility in interest rates, it is increasingly becoming difficult to invest blindly in any debt instrument. One needs to invest wisely keeping time horizon, tax angle and return or yield in mind. The debt market scenario now offers a plenty of options in the form of Government securities, bank's fixed deposits and other deposit plans, corporate bonds and securities, company fixed deposits and debt mutual funds. Not only this, tax free bonds are also available where interest earned is also tax free and like dividend income, such interest is not subjected to levy of income tax. Otherwise interest income is liable to charge of income tax.
Public provident fund offers tax free interest and interest yield currently is 8.7%, is safe as it is backed by Government, is reasonably liquid as withdrawals are permitted and is fully tax free – withdrawals, maturity amount as well as interest income. Since the term is for either 10 or 15 years, one can start early for PPF. Tax free bonds such as those issued by HUDCO, NHB, NHAI etc. also offer tax free yield of around 8.5 -9 percent, are credit rated, generally safe being issued by public sector companies, provide liquidity through stock exchange listing and are good for high net worth investors. However, such bonds suffer from capital gain tax.
Interest earned on bank fixed deposits, debentures of companies and corporate fixed deposits is taxable but bank deposits enjoy high safety. While the bank's returns range between 8.5% – 9%, post tax yield is 20% to 30% lower. Company deposits may yield more returns of about 9-12%, but these are relatively less safe, though a good credit rating may provide some comfort.
Company deposit are ideal for those investors who can take risks for higher return and track the companies and their promoters closely. These also offer a lower flexibility, liquidity and high taxation.
Keeping in view all the pros and cons of investing in fixed income securities, one needs to have a mix of debt, equity and other assets in the portfolio. Within debt, with changing times, lot of variety is available which needs to be harnessed.
Whistle Blowers Protection Act, 2011
Whistle Blowers Protection Act, 2011 is an Act of the Parliament of India which provides a mechanism to investigate alleged corruption and misuse of power by public servants and also protect anyone who exposes alleged wrongdoing in government bodies, projects and offices. The wrongdoing might take the form of fraud, corruption or mismanagement. The Act will also ensure punishment for false or frivolous complaints.
The Act was approved by the Cabinet of India as part of a drive to eliminate corruption in the country';s bureaucracy and passed by the Lok Sabha on 27 December 2011.The Bill was passed by Rajya Sabha on 21 February 2014 and received the President';s assent on 9 May 2014.The Act has not come into force till now.
Intent
An Act to establish a mechanism to receive complaints relating to disclosure on any allegation of corruption or willful misuse of power or willful misuse of discretion against any public servant and to inquire or cause an inquiry into such disclosure and to provide adequate safeguards against victimization of the person making such complaint and for matters connected therewith and incidental thereto.
Salient Features
- The Act seeks to protect whistle blowers, i.e. persons making a public interest disclosure related to an act of corruption, misuse of power, or criminal offense by a public servant.
- Any public servant or any other person including a non-governmental organization may make such a disclosure to the Central or State Vigilance Commission.
- Every complaint has to include the identity of the complainant.
- The Vigilance Commission shall not disclose the identity of the complainant except to the head of the department if he deems it necessary. The Act penalizes any person who has disclosed the identity of the complainant.
- The Act prescribes penalties for knowingly making false complaints.
Regards,
VMVSR
ICAI disciplinary panel decisions were forged'
Shishir Arya, TNN | May 23, 2014, 01.07AM ISTNAGPUR: One more controversy has erupted in the Institute of Chartered Accountants of India (ICAI). The premier body of financial watchdogs had been in the news over a land purchase scandal at Nagpur a couple of years ago.
A member of the institute's disciplinary committee has formally registered a complaint before ICAI's central council, alleging that many orders in cases of professional misconduct by chartered accountants were issued without his signature. Not only that, his findings and remarks in the cases were tampered with, which could have led to the watering down of verdicts of the committee.
The allegations cast doubt on ICAI's role as a regulator of the profession. If found to be true, there are chances that the power of adjudicating in disciplinary cases may go out of ICAI's hands, said a senior chartered accountant requesting anonymity.
A member of the institute's disciplinary committee has formally registered a complaint before ICAI's central council, alleging that many orders in cases of professional misconduct by chartered accountants were issued without his signature. Not only that, his findings and remarks in the cases were tampered with, which could have led to the watering down of verdicts of the committee.
The allegations cast doubt on ICAI's role as a regulator of the profession. If found to be true, there are chances that the power of adjudicating in disciplinary cases may go out of ICAI's hands, said a senior chartered accountant requesting anonymity.
I-T asks Sampath to explain why he has claimed tax relief
Written by Ritu Sarin | New Delhi | June 9, 2014 12:11 am
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A scrutiny of documents shows that the CEC has since been questioned about the sale of a property measuring 600 square yards in the upmarket Banjara Hills area in Hyderabad. Source: (PTI photo) Summary
Department says Hyderabad property sold by CEC not 'residential', so doesn't qualify for exemption.
Related
Earlier this year, the Income-Tax department released data which showed that over 15 lakh people across the country had come under its scanner since they had purchased or sold immovable property valued at Rs 30 lakh or more.
It now transpires that among the transactions selected for scrutiny was one for a sale of property in Hyderabad by Chief Election Commissioner V S Sampath. While the first communication from the I-T department's investigation wing went out to the CEC in February, the latest missive from the I-T — listing transaction details on which it has now sought clarifications — was received by him on April 24, even as the general election was on.
A scrutiny of documents shows that the CEC has since been questioned about the sale of a property measuring 600 square yards in the upmarket Banjara Hills area in Hyderabad. The property was sold by Sampath in July 2011 to a company named Aditya Convention Centre and Holiday Resorts and, subsequently, in November, he purchased an apartment in Safdarjung Enclave in South Delhi for almost the exact price which he got as a share of his Hyderabad property: Rs 1.66 crore.
An equal amount was received by his wife and daughter each and the total value of the sale deed was Rs 5 crore.
The I-T department has in its latest communication asked the CEC for "clarifications'' on several points. They include: the classification of income shown by him; whether the income (for purchase of property) was actually from the sale of the earlier property and most importantly, why he finds himself eligible for not paying capital gains tax as per Section 54 of the I-T Act. The I-T authorities have also pointed out that exemption from paying capital gains tax can only be granted if a residential property is sold and a residential property purchased (within a two-year period) and that the property sold by Sampath in Hyderabad, in fact, was two pieces of vacant land and a small outhouse and could therefore not be classified as a "residential'' property.
When contacted Sampath told The Indian Express that while he had sent an initial reply to the I-T department, following the receipt of the longer list of queries he has sought an extension of time for dispatching the reply.
"My chartered accountant will soon be giving the clarifications to the department. The issue was first taken up by the department when a mention of my PAN card number was missing in one of the property transactions. That has been sorted out,'' he pointed out. "I have mentioned the sale of property in Hyderabad which I had bought for an insignificant amount in 1986 and the purchase of a small builder flat in Delhi in my I-T returns. I will now also give the remaining clarifications to the department.'' On Wednesday, 6 August 2014 11:17 AM, Lawyersclubindia Newsletter <newsletter@lawyersclubindia.com> wrote:
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