Unique Transaction Number (UTN) not mandatory for filing income-tax returns

The Central Board of Direct Taxes has deferred the implementation of furnishing of the unique transaction number (UTN) for filing income-tax returns.

Accordingly, taxpayers filing their returns for the assessment year (AY) 2009-10 or any other earlier assessment years can do so without mentioning the UTN, as required under a notification (No 31 of 2009) issued in March, a CBDT release said.

The CBDT had earlier stipulated that income-tax assessees should furnish the UTN when they file their income-tax returns from this year (AY 2009-10), if they have to make claims for TDS (tax deducted at source) credit.

It was also specified that National Securities Depository Ltd would provide the UTN number for every TDS transaction in 2007-08 and 2008-09.

How UTN helps

The UTN was proposed to facilitate the verification of pre-paid taxes such as TDS with the data available in the NSDL system. The verification is important as no document is required to be filed with the return of income.

An official release issued today said that all deductors/collectors of tax deducted at source/tax collected at source (TDS/TCS) may continue to deposit their TDS/TCS and file their quarterly TDS/TCS returns according to the procedure existing prior to issuance of notification No 31.

The date from which notification No 31 will become applicable on TDS or TCS and deposited during the current financial year will be notified by CBDT subsequently, the release added.

Source: BusinessLine, Wednesday, Jul 01, 2009

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Entry load on Mutual funds to be abolished

Investments in mutual funds may not suffer deduction of ‘entry load’ for too long. In a move that will empower investors to determine the price they will pay for service received from a distributor, thereby reducing their cost of investing in mutual funds, the Securities and Exchange Board of India (SEBI) has asked fund houses to do away with entry load on all their schemes.

Entry load is the typical 2.25 per cent (maximum of 2.5 per cent) charge levied at the time of investing in mutual funds, mostly equity funds. While this may not seem like a conspicuous charge on paper, the levy goes to reduce the final number of units allotted to you. Such levy is almost entirely utilised by the fund house for paying the commission to the distributors for marketing their fund. In other words, a small portion of the money earmarked for investment — in the name of entry load — is paid to the distributor.

SEBI’s new proposals allow investors to directly make payments to the distributors for their services, instead of mutual fund houses deducting the same from the investment amount.

To provide an example: Had you invested Rs 10,000 in a fund which had an entry load of about 2.25 per cent and an NAV of, say, Rs 10 per unit, then, only 977.9 (10000/10.225) units would have been allotted to you, as the entry load of 2.25 per cent would have increased your cost per unit to Rs.10.225.

Under the new proposal, investors would be able to receive units for the entire amount of Rs 10,000 invested; they may have to draw a separate cheque in favour of the distributor towards a mutually agreed service fee.

This essentially means that an investor may have a choice of paying nil/small commission to an ‘no frills’ agent or go for a distributor who charges slightly higher fee, perhaps for other superior advisory service offered in addition. Viewed differently, investor will now be ‘aware’ of the commission they pay; there would be no hidden marketing charges.

Reason behind the move

While this proposal is clearly aimed at allowing the investor to decide what to pay for the service received by him/her, the move may also eliminate gratuitous churning of the portfolio by investors. In an entry load regime, distributors typically benefit more every time a fresh investment is made. Hence, it was not uncommon for distributors to recommend a switch between funds, causing churning.

Now, under the new proposal, the commission to be received by a distributor may be uncertain; the only other key source of the agent’s income would be the ‘trail commission’ received from the fund house for retaining a customer’s investments. So the motive for recommending fresh transactions may be less.

Role of invester

Once this proposal comes into force, investors may be prompted to immediately scout for a no/low commission distributor. Beware! For one, you may be sold a fund with a poor track record or one on which the agent receives a higher ‘trail’ commission. That may not be the best fund for your portfolio. Please bear in mind that a consistent long term track record and a risk profile that suits your appetite should be the key factors that determine your investment choice.

As we have always maintained, in the Indian market context, an entry load of 2.5 per cent or a commission paid to the distributor is a small sum, compared to the 12-15 per cent annualised return that a good equity fund can easily yield.

Two, if commissions on MFs go down, products such as ULIPs may look attractive from a distributor’s point of view given their lucrative commission. Ensure that you are not sold an ULIP when you do not want one. ULIPs are long term insurance-cum-investment products. They generally build in expenses upwards of 10 per cent, in the initial years. This sum would be deducted from your investment amount.

So as an investor, what should be your response to this change?

As always, ensure that you choose a fund based on its track record. Expenses or commissions come next.

Do not be diverted into buying ‘other’ products if your objective is to buy a mutual fund

If you are a less-informed investor and need advice, do not hesitate to pay a decent sum to a good financial advisor/distributor. There are no free lunches.

If you are a well-informed investor, making your own investment decisions, you can apply for funds directly through their portals or approach any of the local offices of the fund house you want to invest in. This way there would be no commission. If you wish to make such an investment through your online broking account, you may do so; this would however entail paying a fee.

As a distributor has to now reveal the commission that he receives from the fund house for the product, ask him for the same. That way, you will know whether you are paying too high a commission or otherwise.

There has been no indication so far as to the implementation date of this proposal. There are also other grey areas in implementation of the same, especially on the distribution side, which too may have to be addressed.

Source: Gconnect

The Ascent of Money by Niall Ferguson

The Ascent of Money Publisher: Penguin Press
Pub. Date: 2008
ISBN: 9781594201929
No. pages: 432

In this  book you will learn

  • How banking began
  • Why bubbles happen
  • What financial history tells about the present

Why you should read The Ascent of Money

Niall Ferguson offers a comprehensive collection of anecdotes and observations about the development of finance. He begins with a brief discussion of pre-money societies. Then, he carries you through the birth of banking in Renaissance Italy, the 18th-century Mississippi and South Sea bubbles, the role of Nathan Mayer Rothschild in the Napoleonic Wars, and the 20th-century transition from the gold standard to free-market derivatives and currency trading. getAbstract finds Ferguson’s book eminently readable, entertaining and informative. One caveat: the author’s approach is more that of a journalist than a historian, so he does not advance much of a comprehensive theory to explain the events he discusses, even the ones that are still occurring, notably, the financial crisis that began in 2008. This tasty financial history thoroughly covers who, what, when, where and how, a feast of facts with not quite enough “why” for dessert.

About the Author

Niall Ferguson is Laurence A. Tisch professor of history at Harvard University, senior research fellow of Jesus College, Oxford University, and a senior fellow of the Hoover Institution, Stanford University. His books include Paper and Iron, The House of Rothschild, The Pity of War, The Cash Nexus, Empire, Colossus and The War of the World.

No Charges for using other banks ATM

No Charges for using ATM says RBI

No Charges for using ATM says RBI

Cheers to all Bank Account holders as they need not pay any charges with effect from 01.04.09, for using the automated teller machines (ATM) of other banks, i.e., banks other than the one in which they have account.

During March-2008, The Reserve Bank of India (RBI) asked banks to limit charges for customers using automated teller machines (ATMs) of other banks to Rs 20 per transaction from 31st March 2008. It was also ordered by RBI that this service should be offered free of cost to customers from April 1, 2009. This would be irrespective of the amount and the bank where the customer holds the account.

Banks can, however, levy charges determined by themselves for withdrawals using credit cards and from ATMs located overseas.

RBI has taken the decision of exempting ATM service charges after analysing the public comments received on an Approach Paper released by it on December 23, 2007

To check the further details read this RBI Circular dated 10.03.08 on ATM Charges.

http://gconnect.in/gc/money-matters/no-charges-for-using-other-banks-atm.html

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