Sunday, July 22, 2012

Know your PAN

Some times you have to get your PAN number or get the details of First Name/Father's name as given in PAN.

These services are already present in the income tax government website. You can Know you PAN details by just going through this link - Know your PAN which will open the screen as shown below.
When you just know your surname you can go through this link and give your DOB and surname to get the complete PAN details. This will give you your PAN number if you have forgotten it. Please note that, it is illegal to have two PAN numbers associated with your name.

Know your PAN page from income tax government website
Know your PAN
After submitting your Surname and Date of Birth, your PAN details will be shown to you similar to the screen below.

PAN details screen from government website.
Your PAN details

This will really come in handy if you need to reset your password and you want to know the correct name as entered in PAN or want to know your PAN number immediately.
Please add your comments.

Tuesday, July 17, 2012

How to e-file your income tax returns

Income tax returns can be easily filed online for free with the help of government's income tax website. This can be done even if you don't have any digital certificate.

Follow these simple steps:
1. Go to the income tax website.
Income tax india e-filing home page.

2. Register using the above link. The username will always be your PAN number. If it says you have already registered and you haven't done so, then you might have to call the income tax department to get it resolved. This can happen only if you have given the details to another person for filing your income tax return.
3. Once you have registered, download the relevant ITR form. Use this link. Fill the excel file by following the instructions downloaded. This would ask you to enable macros. The instructions will be present as a README file when you download.
4. Validate the sheet and create XML using the macro buttons available in the excel sheet. This will create the xml file in the same location of the excel sheet.
5. Click on the Select Assessment year as shown in the below screen to upload the XML you created.

The image from the income tax india efiling website for showing how to upload XML.
File your returns online

6. If there is no Digital certificate, select No in the above screen and upload the XML file after selecting the corresponding ITR in this screen. If you have a digital certificate, your returns are filed. Otherwise, you have to send to the CPC, Bangalore address mentioned in the screen to complete the filing of returns. You can send the ITR-V generated within 120 days after filing your returns online.

It has become now mandatory for those who earn more than 10 lakhs to file their returns online.

Saturday, February 4, 2012

MBS - Mortgage Backed Securities

Securitisation is a process of liquidizing the assets held with financial institutions. If there are many auto loans given by a bank and instead of raising money through deposits and giving further loans, Banks can also do the following to increase its profits.

- Bundle all the auto loans and form a security.
- Raise the money through prospective clients with the help of other financial institutions.

The risk lies with the bank and this gives more liquidity to the bank and the money generated through this process can be availed in giving further loans.

In India, Securitisation has been there for long. Please visit this site for more details.

Consider the Home loans now. Banks have done the due diligence and have approved home loans for 20 people for 1 crore. The mortgage would be the home for the bank.

Now, If I am a person A thinking having very less money but ready to lend money for a prospective buyer who buys home and wants my part of interest back. Say, I have only Rs. 20000/- and want the interest for that alone to come to me.

Banks think, my whole 20 crores is locked up in the home loans. I also want the liquidity. This way, Investment banks created a security out of the mortgages in the bank and sold in the market and people like Person A bought it. The things that are not bought will remain with bank and investment bank. This gives more returns than FD and Person A is happy in taking the risk. Bank is happy in getting more money and Investment bank is happy on making its commission on forming the product.

Friday, February 3, 2012

Market Zooming to 6000

Okay. Nice title to keep most of them interested.

Its very hard to time the Stock market and in fact, one can't predict the market move. If you want to know whether the market will zoom to 6000, the answer is YES.
But the real question is when?

One cannot really predict the market and it always gives surprises. There will always be some positive news and negative news around and market will hear the part of it and behave in the bullish trend even when there is a bear around the corner.

Simply, to get good returns,
Put a SIP and invest more during the bearish period in a good equity Mutual fund like DSP Blackrock Top 100.

If you are a good stock picker and want to beat the market, do the fundamental analysis and have patience. Its just the buy and hold strategy. Book profits when your target is hit.

To summarize, one cannot really predict the market at any time. One can wildly guess the way market movement and he can just be lucky in guessing. There is no denying the fact that returns in market is superior than any other means for long periods (>5 years)

By the way, I don't think market would be reaching 6000 by June-2012 for sure.

Sunday, January 22, 2012

Leverage - Analysis

Leveraging in simply increasing your exposure in something with some money that you don't have and thereby inherently increasing the risk.

Typical example for a normal common man would be 'Buying a house' - Where most of the money is given as a loan by the bank and he is thus said to be leveraged.

For a equity investor, few of the other examples would include Stock Futures, Options and Margin Intraday trading.

Without the money in hand, only the risk will be increased in each of the case and typically Leveraging is the concept where you will be get high returns along with high risk.

For example, Reliance is at Rs. 800/- now. you think, it will go Rs. 860/- in next 3 days.

You have Rs. 5000/- in hand, which you can afford to lose. Remember, you shouldn't be taking risk on a capital that is required next day for your need.

Option 1:
Buy 6 shares
- 6 * 800 - Rs.4800 spent.

- 60 * 6 - Rs. 360/-

Option 2:
Buy 60 shares
- 60 * 800 - Rs. 48000 spent (Rs. 43000 in margin)

- 60 * 60 - Rs. 3600/-

You can clearly see that Leveraging gives you a greater benefit in rewarding. But it goes without saying that it has higher risk. What if, Reliance goes down?

If you have bought only 6 shares, you can afford to hold it. But if you have bought in margin you are locked. You have to book losses and the losses would be heavy as well.

So, Leveraging would help in having high risk and give high rewards.

Liquidity - Analysis

An asset is said to be more liquid if it can be converted to cash quickly, without changing much of its value. Gold, Cash, good blue-chip Stocks are excellent examples of liquid assets.

Real estate, PPF, ULIPs and other complex products are excellent examples of illiquid assets.
PPF is safe but illiquid as it has a lock-in period.

So, why does it really matter to me?
It is important to have some emergency fund in liquid form. If your expenses for a month is around Rs. X/-, you need to have Rs. 6X/- as contingency emergency fund in liquid form.

How does it affect a bank or investment bank?
Bank lends money based on the documents and collateral. If the collateral is a illiquid asset, the risk is more. They might not be able to get the money on time.

Investment banks and Hedge funds also creates complex products to help banks in creating more money to lend more. If the underlying asset is illiquid, the risk would be more.

The risk is actually, we might not able to sell the asset at the right price at the right time and cannot generate the cash-flow required at the stipulated time. So, automatically we have to bend to reduce our price for the asset which could be valued more if it could be sold without any hurry.

To generate more returns on the personal front for the contingency fund and to have it in liquid form, we can have some part in savings bank, some part in liquid fund and some more in sweep-in FD/index fund. What do you think?

Where do you keep your contingency funds?