Investing where? Gold or silver?

It is really important for an investor to first understand the economy and the financial systems prevalent in the market before he decides what to invest in. With the cost of crude oil having increased considerably per barrel, the GOI has also acted by increasing the price of petrol and diesel severely.


Should an investor buy more gold or silver?

Precious metals were the best performing assets for the second consecutive year and also for the fourth time in the last five years. Investors enjoyed a 42% return by investing in precious metals in 2010. Silver performed much better than other precious metals in the market in 2010 with prices rising by an astounding 80% which is two and half times the rise in price of gold (29%).

Along with being deemed a safe investment, the relatively low supply of the metal as compared to the high demand has also contributed to the steady increase in price. In the first two months of 2011, silver's price has increased at a steady 9.3%.

Judging by the present market scenario, investing in precious metals will be a very wise decision. And it will make more sense to invest in silver than in gold….at least now!

Some parameters one should consider before investing in gold or silver?

One of the main reasons investors prefer investing in these two metals is the stability witnessed in the market. Liquefaction is also an easy process for gold or silver bars and coins. However, purity of the mineral is of utmost priority and should be given due importance.

Another important factor governing the decision on whether to invest in gold or silver is the price. Though the variation in the price of gold or silver is not as unpredictable as that of shares and equities, there still is a noticeable difference on a daily basis. But when you are investing a large sum of money then this can make a lot of difference. Hence, one should study the market carefully and invest when the price is relatively low.

Choosing the right vendor is also very important. If carefully observed then the price variations with wholesalers, retailers and commercial banks can be clearly observed. So one should watch out for the purest gold available at a comparatively low price. For a regular investor, it makes sense to invest at regular intervals. This way one can take advantage of the market volatility. Investing in both gold and silver makes sense for a regular investor as he can diversify and can have a steady return irrespective of market fluctuations.

Different forms of investing in gold and silver:-



Bar: One of the most traditional ways, dealing with bars is very simple too.

Coins: This sort of investment depends on the weight of the gold or silver coins.

Accounts: Swiss banks provide a Gold-account option which aids in transactions involving the precious metal.

Gold Exchange Trade Funds: This method helps gold transactions through the stock exchange.

Spread betting: This involves predicting the rise and fall in the price of gold or silver before investing in it.

Investing with mining companies: This is just like investing in the stock exchange. The only difference is that here one deals with shares from mining companies.

When is the right time to sell gold or silver?

With the current financial slump, people are selling their gold and silver as a means to make some extra cash. But with the price of the two precious metals having reached an all-time high, it would probably be wise to hold on to it and see how far the prices soar and then cash in at the opportune moment.

There are two factors that govern the decision of the timing of a transaction involving gold or silver. The value of the US Dollar at that moment and the investor's financial situation. Usually, the price of gold is inversely proportional to that of the US dollar. But most investors don't have pure gold lying around in large quantities. So unless you are investing or speculating on a really large amount of gold or silver, the drop in the US Dollar's value will not matter.

How to pay off your education loan

Many young people have a serious problem on their hands today - they have a degree which does not help them get a nice job. They have taken a loan to get that degree, and they have no place to stay in a big city.


Welcome to the American lifestyle. Children who have left their houses to go to a bigger city to get a degree - quite likely an MBA are wondering what to do. The actual scenario may be a little different from case to case, but it is somewhat like this:

Here is a boy or girl from a not-very-well-off family who has been enticed into doing an MBA with a huge bank loan. However, by the time the student completes the course the market is in a downward spiral and he/ she is unable to find a job. Actually not enough jobs are being created. In this situation what can a student do? Well, here are some useful tips:

1. Go get a job, any job: It is quite surprising as to how people can sit at home and twiddle their thumbs WAITING to see what to do in life! Go get a job, any job. This has to be the most important advice for an MBA graduate or also an engineering graduate! If you think an MBA degree should get you a Rs. 500,000 job at the least, it may not always happen in real life. I have seen MBAs working on a starting salary of Rs. 6500 (year 2009) and are not badly off for it!

2. Stop thinking sales job should not be done: There are many MBA students who have unfortunately got into a mindset that sales jobs are bad. Sales people bring in the money for the organization to run, so selling is not so bad after all. If you ever want to be a CEO, go and learn how to sell. Other tasks can be outsourced, but if you have a product, YOU NEED to be passionate about it. Learn selling skills is very important – do quick arm-chair researches on how many Managing Directors have reached that post from the sales side of the organization. If you have to be on your own, then you need to be passionate about sales. That is one very important characteristic that venture capitalists will look for if you are seeking funding for your project.

3. Try to defer your student loans: Just check out the possibility of deferring your student loan repayment. The bank may agree to charge you interest for the deferred period, but at least the day-to-day worry about the month end payment is postponed. If your parent has given the guarantee, keep them informed and let them know that you will not be able to meet the commitment either in full or part.

4. Take no chance with insurance: Ensure that your vehicle insurance, medical insurance and life insurance payments are up to date! These are the easiest of payments to skip, and tempting too. Do not delay or neglect to pay - if you break your leg you still need medical insurance. Make sure that you have a cheap term insurance and some minimum medical insurance at least.

5. Keep your chin up: Learn to laugh about what is happening in your life. I am sure that this is easier said than done. I recently heard of a client whose daughter was in coma for 9 days. Would not have been easy, but he was holding his chin up. So remember, tough times do not last, tough people do.

6. Move back to your parent’s house: If you have moved from your town to a city to study or take up a job, seriously reconsider moving back. It is all right to come to town for interviews instead of incurring rent at a new place. This is really a tough call - it is a mix between wanting to be where the action is and saving some money. Tough call kids, but you have to take the call.

7. Join groups: Alumni, HR groups - any group to keep in touch with the corporate world. All colleges have (and need) such groups which meet - accounting, finance, Human Resources, just about anything. There is some chance of meeting a potential employer!

8. Some small companies will happily let you work for free! Well, if they offer you Rs. 5,000 per month, do not get into an ‘I am a MBA’ kind of aggressive mode. Just take it. Yesterday heard of a kid who moved from Rs. 5k a month in a production house (media companies are perhaps the worst exploiters!) in the year 2007 to freelancing today at a price of Rs. 80,000 a month (year 2010). Yes, on an assignment basis! It pays to have a worn out sole and some time spent in the sun.

9. Learn some skills: Public speaking, dramatics, Excel, Power-point, basics of business finance, sales marketing, and written communication - all are useful skills. See what you can learn for free, and what you can learn cheap. Offer to do some marketing for the organizer – tell him you will get them five people signing up – and can you attend for free? No harm in asking. See if you can get something free or for a pittance. Learn everything that you think is transferable...all this can add up.

10. Be clean: Say no to drugs, tobacco, alcohol - all these have a terrible way of catching up in your corporate life later on. Be clean, be clean, be clean, need one say more? No drunken driving, getting into trouble for anything illegal. And do not get into some bravado about doing something like this and putting it on Facebook. Enough numbers of HR people keep prowling FB for tell tale signals.

11. If you rely just on job websites for a job, you are doomed! Be on job sites, be on networking sites, be on Facebook, be on LinkedIn, just connect, call, meet and get a job. If you still cannot get a job (be honest to yourself, not to me) there is something wrong with your attempt.

12. Keep that credit card at home: If you do not know how you will repay a loan, do not take the loan. Carrying a credit card with you everywhere is not a great way of avoiding temptation. If you know you cannot resist the urge to buy, destroy the credit card. Get a new card when you have a job. By that time if you have learnt to live without a credit card, rejoice! An eight percent growth economy creates enough jobs. You will find yours, for sure.

Harshad scam crores released

The custodian appointed to look into the 1992 securities scam today released payments worth Rs 2,196 crore to the income tax department and the State Bank of India from the liquidated assets of Harshad Mehta’s group of companies.


Nearly 19 years after the share scandal shook the BSE, Satish Loomba, the custodian (trial of offences relating to transactions in securities), handed over cheques worth Rs 1995.66 crore to B.P. Gaur, the director-general of investigation (central) of income tax, and Nilima Mansukhani, the chief commissioner of income tax in his Nariman Point office.

Another cheque of Rs 199.25 crore was given to B. Sriram, the chief general manager (securities) of the SBI.

The amounts were released after the Supreme Court on Monday declined to stay the distribution order by Justice D.K. Deshmukh of the special court, Mumbai, on payments to the IT department and the SBI.

Justice Deshmukh had issued the order on February 25. The payments were released on the basis of undertakings given by the department of revenue and the SBI that the amounts would be brought back, if ordered by the special court.

Loomba told reporters that the nearly Rs 2,000 crore payment had settled the IT department’s claims of principal amount of dues from Mehta’s companies.

He said according to court orders, the IT department’s claims had to be settled before those of banks and financial institutions. If any money remained, claims related to interest and penalties would be settled for the IT department as well as banks and financial institutions, he said.

The custodian said of the Rs 4,500 crore obtained from liquidation of Mehta’s companies, Rs 4,000 crore had already been disbursed. The rest would be distributed according to apex court orders, Loomba said.

He said of Rs 1,717 crore in claims from banks and financial institutions, nearly Rs 1,000 crore was claimed by the SBI, Rs 500 crore by Standard Chartered Bank and the rest by other banks and FIIs. He said after the nearly Rs 200 crore payment, the SBI had now received the principal amount totalling Rs 800 crore.

The custodian is the principal administrative officer appointed under the Special Court (trial of offences relating to transactions in securities) Act of 1992 to deal with the securities scam and the recovery of huge amounts of money lost by the banks.

Under the act, the officer has the powers for attachment, management and liquidation of assets of notified persons and functions under a system of concurrent judicial review by a special court comprising sitting Bombay High Court judges.

With today’s payments, the custodian has released over Rs 4,000 crore worth of payments from the liquidated assets of Mehta’s group of companies.

Courtesy: - The Telegraph,Kolkata.17/03/2011.

Skype and the Sendai earthquake and tsunami - free WiFi and Skype Credit vouchers

A great move by Skype. Skype and the Sendai earthquake and tsunami - free WiFi and Skype Credit vouchers

3 essential finance resolutions for and from 2011

The start of the New FY is a great time to put in place practical resolutions for your personal finances. Here are 3 simple resolutions that are within the reach of everyone, irrespective of your knowledge of finance or your current income level.

1. "I will be a smart saver to protect myself against inflation"

Inflation is a hidden tax that eats away into our money. For example, food inflation is currently being reported as running at approximately 14%. That means that assuming your income stays the same, your money will only be able to buy lesser food than it was able to in the past. The purchasing power of your money is being eroded.

The best thing for you to do is to put your money into instruments that generate a long-term rate of return that is higher than inflation. Only then can you maintain the purchasing power of your money. As far as possible, avoid fixed deposits and fixed income instruments, especially if you are young. Rather, invest in equity mutual funds or instruments where the after tax-return is higher than the long-term inflation rate.

2. "I will prioritize productive assets over consumptive assets"

All of us are tempted to buy the latest mobile phone, fashion accessory, or use our money towards eating out and going to the movies every other day. After all, we work hard so we deserve all the pleasures of life. However, by spending our money this way, all we are doing is "consuming", with no real asset to show at the end of the day.

No one is suggesting that you totally stop the discretionary spending that gives you pleasure. Rather, recognize that if you prioritize building assets that can give you income, in just a few months you will likely have more sources of income to spend on discretionary items. So, before you use your bonus or pay rise to buy that hot new gadget which will get obsolete in no time anyway, use these funds to invest. Thereafter, use the returns from these investments for whatever consumption you still want to do.

3. "I will spend 1 hour in every month from the FY reviewing my financial goals for 2012 and onwards"

History suggests that those who take time to identify their goals in life are usually better prepared to achieve them. It should be obvious that if you don't know what you want to achieve, you might just wander directionless, and you might not be happy with where you end up.

So, if you want to buy a house, upgrade your car, get out of debt, or pay for your child's education - whatever the goal, spend at least 1 hour in March reviewing what you want to achieve, and then consciously create a plan to achieve this.

All of us have busy lives and chances are that most resolutions don't last beyond March. However, if you stay realistic about the above, come March you will be financially much happier.

Good Luck.

Taxation Of Non Resident Indian

General Information


Under the Income Tax act, every person who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year. But the total income of an individual is determined on the basis of his residential status in India.

Resident and Non Residents

The income tax to be paid by an individual is determined by his residential status. An individual can be termed as a 'resident' if he stays for the prescribed period during a fiscal year i.e. 1st April to 31st March either for

 182 days or more

 60 days or more (182 days or more for NRIs) and has been in India in aggregate for 365 days or more in the previous four years

 However, the criteria of 60 days are extended to the first criteria of 182 days for any one of the following instances:

 1. If you reside abroad for the purpose of employment.

 2. If you reside abroad as the member of the crew of an Indian ship.

 3. If you are an Indian citizen or a person of Indian origin who comes to India on a visit.

Any person who does not satisfy these norms is termed as a 'non-resident'. A resident individual is considered to be 'ordinarily resident' in any fiscal year if he has been resident in India for nine out of the previous ten years and, in addition, has been in India for a total of 730 days or more in the previous seven years. Residents who do not satisfy these conditions are called individuals 'not ordinarily resident'.



In recent times the Government of India has opened the Indian market and economy to attract more foreign capital and technical know-how. The foreign investors may be Indian Nationals who resided outside India and other foreign investors including corporations. A person who resides outside India is technically known as 'non-resident'. The residential status of an individual does not depend upon the nationality or domicile of that person but it depends upon his stay in India during the previous year.



In case of an assessee, other than an individual, the residence depends upon the place from which its affairs are controlled and managed. If the control and management of the affairs of a foreign company is, during the previous year, located wholly in India, it shall be treated as resident in India. Where part of the control and management of the affairs of a foreign company is situated outside India, it shall be treated as a non resident company.



Status Indian Income Foreign Income

Resident and ordinarily resident Taxable Taxable

Resident but not ordinarily resident Taxable Not taxable

Non Resident Taxable Not taxable

Life insurance IPO a distant dream

Domestic life insurance firms are in no hurry to hit the market with their initial public offerings (IPOs) even if the regulator announces the guidelines now, according to a research report by HSBC. According to the report, the hitches — such as limits on foreign direct investment, a 10-year track record and the absence of IPO guidelines — that have prevented floats by domestic life insurers will be removed this year. However, it believes “only a brave Indian insurer” will come out with an IPO now, given the impact of the new regulations on unit-linked insurance plans (Ulips) and the pending direct tax code (DTC) bill. New policy sales by private firms have fallen 20.78 per cent to 88,45,283 till the end of January this fiscal from 1,11,65,771 a year ago. The decline in the sale of individual regular premium policies was sharper at 22.7 per cent — from 1,05,67,140 to 81,68,782. “New business margins are also under pressure given the imposition of fee and surrender penalty caps in Ulips,” the report said. Following the new guidelines, the share of unit-linked business to total policy sales came down to 48 per cent from 52 per cent before September 2010. Though the premium income (of private players) from new policy sales during April-January rose 5.84 per cent year-on-year, it came on the back of a steep increase in the premium rates of Ulips. “Some insurers have started offering more guarantees on unit-linked products (such as NAV guarantee, capital protection) as they are not subject to Irda cap on charges and are hence high-margin business,” the report said. “Insurers have also tried to tap traditional products that are also not subject to caps on charges and fees. However, it will be difficult for private insurers to compete on profitability because the Life Insurance Corporation of India is able to fund higher policyholder participation rate with free reserves accumulated over past generations.” The DTC, if implemented unchanged in March 2012, could result in a collapse in sales and significantly lower earning for the life insurance sector. The current DTC proposal will strip Ulips of all tax advantages and also does not provide relief to existing Ulips. The latest published draft proposals for DTC provide for only Rs 50,000 tax deduction for life insurance premium, medical insurance premium and tuition fees taken together compared with Rs 1 lakh available for deduction now. Besides, the insurers’ corporate tax liability will also increase to 30 per cent from 14 per cent. R. Krishnamurthy, former managing director of SBI Life Insurance Company and the present MD (distribution channel) of Towers Watson, had said, “Many domestic promoters of life insurers will be in a dilemma because these changes will put capital strain and promoters having non-financial sector as core business will find it difficult to pump in money in their insurance venture.” Source: The Telegraph, Calcutta March 9,2011

Reliance Life with Japanese firm

  

Japan’s largest life insurer Nippon Life Insurance Company is in talks to pick up a 26 per cent stake in Reliance Life Insurance Company of the Anil D. Ambani group.

Nippon Life will reportedly pay close to 60 billion yen ($723 million) for the stake in Reliance Life, the arm of Reliance Capital Ltd, according to a report in Japan’s Asahi newspaper.

So far, the group has made a capital infusion of around Rs 3,100 crore in Reliance Life.

However, a spokesperson for Reliance Capital declined to confirm reports that its insurance arm was in talks with Nippon Life.

The entry of Nippon is expected to benefit Reliance Life as it will not only be able to gain access to more capital but also tap into the skills of the Japanese insurer. On the other hand, the latter will gain an entry into India where a huge potential for insurance business is seen despite it having low penetration currently.

At present, there are 23 life insurers who have set up operations in India. A significant number of these players (21) have tie-ups with foreign partners.

Reliance Life has an 8 per cent market share in the private sector when it comes to new business premium. It has more than 1,200 branches and over 200,000 agents. As on December 31, 2010, its total funds under management stood at Rs 17,355 crore. For the third quarter, the company’s total premium was placed at Rs 1,447 crore, of which renewal premium stood at Rs 857 crore.

The insurer had earlier said it could engage a foreign partner ahead of its proposed initial public offering.

Senior officials had then indicated that if the partner picked up the entire 26 per cent, the float may be postponed.

Costly Affair

Patients will now have to pay more for treatment in big private hospitals and getting their medical tests done in diagnostic centers as the government has brought these under the service tax net.

All private air-conditioned hospitals having more than 25 beds will now attract 5% services tax.

The burden will be on 75- 80% of patients in India who still don’t have health insurance cover and pay from their pockets for their treatment. For instance, a patient running hospitalization bill of Rs 20,000 having to fork out Rs 1,000 extra or 5% as tax to the government.

Similarly, patients will also have to pay 5% more for medical tests in diagnostic centers. This means, a diabetes patient who pays anywhere between Rs 60-100 for a routine monthly blood test will need to shell out as much as Rs 60 more in a year.

The tax on diagnosis is detrimental to preventive healthcare and early diagnosis which is the key to address the mounting burden of chronic non-communicable diseases, estimated to cost India $237 billion in national income over the next 10 years.

 Hospitals air-conditioning is used primarily to control infections, unlike in hotels where it is used for comfort. This (tax on air-conditioned hospitals) is a retrograde step for the industry.