Monday, 6 May 2013

Mutual Funds Colour Coding All you need to Know

Mutual Funds Colour Coding:-  All you need to know

SEBI has created  new guidelines and colour coding for all types of Mutual Funds .
there are only three colours Brown,Yellow,Blue. From June onwards it will be Implimented.

 Blue Colour Indicates Less Risk. That means a retired person can Invest in these Products
Eg:Gilt Funds,Debt Funds,Fixed Maturity Plan,Income Fund, Liquid funds these will carry BLUE color

Yellow Colour will Indicate Meduim Risk Associated with that product
Eg:Hybrid Funds like Monthly Income Plan (MIP),Balanced Funds etc....

Brown Colour will Indicate High Risk and not recommended for Retired Persons
Eg: Equity Oriented, Sectorial Funds,  Index fund,  large-cap fund,  small-cap funds
Below documents and Images were downloaded from sebi website please refer to it, if problem with viewing documents/images click here

But I think Only three Colours will not going to help.. this is really Insane. Lets look at it, Index fund has less risk than the Sectorial funds but these will be considered as the Same risk(Brown), and Hybrid Funds where there is 70% equity and there are some funds where there is only 10% equity these are also rated as same(Yellow)..

If  there were more colours it would have been better but we can’t do anything...As a Financial Planner what I would request is Please Do your research well or Consult your Financial Adviser, these colours are just a glimpse and not show us the exact picture.

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Abdul Zelani.

Monday, 25 March 2013

What is GST Goods and Service Tax in India?

What is GST Goods and service tax? What does it mean to you?
If you are resident of India you should know the GST, because it is going to affect you
Ø  GST Goods and Service Tax? It is an indirect tax that will lead to replace of all other indirect taxes such as octroi, central sales & state-level sales tax, excise duty, customs, service tax, and value-added tax (VAT) with a single GST. Both the state and the central governments will impose GST on almost all goods and services produced in India or imported into the country.
Ø  Direct Taxes such Income, Corporate taxes will not be included in GST
Ø  One of the major benefit is a single tax(GST) rather than 7 -8 types of indirect taxes
Ø  As of now goods transportation have huge problem because of different state tax structure. different taxes for different states. Now if GST is implemented goods will move freely with in state borders. this will help all infra and transportation (packers and movers) with a single tax all over in country.
Ø  According to a report by the National Council of Applied Economic Research, GST is expected to increase economic growth by between 0.9 per cent and 1.7 per cent. Exports are expected to increase by between 3.2 per cent and 6.3 per cent, while imports will likely rise 2.4-4.7 per cent, the study found.
Ø  The highest rate of taxation under GST will be around 15 per cent in the first year, and eventually come down to 12 per cent in the second year. By comparison, the current rate of the various indirect taxes levied in India amounts to roughly 20 per cent. Goods deemed necessary or of basic importance will be taxed at a lower rate.
Some states fear that a uniform tax rate, if lower than their existing rates, will dent collections. However, the central government has said it will compensate states for the potential revenue loss. Mr Chidambaram has set aside Rs. 9,000 crore towards the first instalment of the balance of central sales tax (CST) compensation.

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Friday, 22 March 2013

What is Cyprus? and What happening there and Why?

What is Cyprus ?
Cyprus is a country near Greece and Russia. The currency of Cyprus is Euro ,That means it is a Part of the Euro Zone.

What is the problem?Imagine you are told that you need to pay 10% tax on deposits that you have in your savings bank account. The European Central Bank proposed that savings depositors in Cyprus should pay around 10% of the bank balance to bail out the banking sector. This is a sort of a wealth tax imposed on those who have a saving account in the Cyprus bank. Cyprus agreed to over $ 12 bn bail-out to help its troubled banks and to service government debt or pay an interest to lenders. The size of the bailout is half of Cyprus GDP of $ 23.5bn. However, later the Cypriot Parliament rejected such a deal.

The government has proposed the Bank deposit Tax to push the revenues of the Cyprus government  but the bill was rejected by their Parliament members, it is at high fiscal crunch. Cyprus Country has Asked Euro Zone and IMF and World Bank for help but the help provided is not adequate so it has approached Russia (Vladimir Putin) and asked for help. Russians Have invested so much of money in Cyprus Banks. Now everyone knows that Cyprus’ financial system is bad because of which they are withdrawing their money from Cyprus banks which is causing to lose the liquidity of the country and money outflow from the country. So they have shut down all the Banks of the country so that no large amount will be withdrawn from the country. But ATM’s will work normally to help the normal people day to day needs. So, the money of so many people is stuck in Cyprus and everyone is eagerly waiting for the banks to reopen.

Why is Russia so interested to help Cyprus?
Cyprus, being an island, has the capacity to produce natural gas and large amount of Russian money is with the Cyprus Bank. If Russia will give financial help then Cyprus will pledge the natural gas reserves of their country. If not they have to withdraw from Euro and start their own currency

Why has this happened?
As per the data, Cyprus has lent so much money to its neighboring county Greece  which is also using the same currency(Euro) when times were good. But now Greece is not in a stage to return money. and the Tourism is also went down .so they were unable to generate huge Revenues.

Cyprus's borrowing costs have risen steadily because of its exposure to Greek debt. Two of Cyprus's biggest banks are among the largest holders of Greek bonds in Europe and have a substantial presence in Greece through bank branches and subsidiaries. As a result, Cyprus experienced numerous downgrades of its credit rating in 2012 and has been cut off from international money markets. 

What’s the future of Cyprus?
If the banks opened without a financial aid from Russia, IMF, World bank, then people will start withdrawing money from the banks and country will lose its reserves and Banks will be out money. then ECB(European Central bank) has no option other than to Dismiss him from Euro zone(Currency will be changed in the Cyprus).As a tax heaven country.most of the countries will suffer for their collapses

What’s the effect on India?

As it’s tax Heaven Country(Cyprus) we(India) are also playing a Small role in this. We have a great Exposure Towards the Euro zone. India’s equity markets rely heavily on money injected by FII(foreign institutional investors). A weak sentiment in global equity markets directly hurts foreign flows into India. Daily FII flows into Indian equities slowed to around $ 20m to $ 30m over the past three days from well over $ 100m last week, according to the Securities and Exchange Board of India data. If the US dollar strengthens against the euro, it could put a further pressure on the rupee, according to CARE, the rating agency. This could make FIIs wait and watch the situation and slow down foreign flows to India If Cyprus colla[ses then we will be at a great risk.

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Thursday, 28 February 2013

Full Budget analysis 2013-2014 in Simple language Explained

Budget analysis of FY13-14 (draft)

As the Policy, Every year last working day of February the budget will be announced for succeeding year by FM(finance minister)
Every Budget has some thing to do and will effect every one Including children,Women,Old people,Rikshavalas,Billionares bla bla.. so we have to understand and interpret what ‘ll be the effect on us..As a MBA student it is mandatory to Analyse the BudgetHighlights: and Interpretation
As an Employed Individual of India

As a Tax Paying Individual,There are no changes in Slab rates
.But FM has given 2,000 Rs Credit whose Income will dosen’t increase 5,00,000 i.e Suppose your final taxable Income is 3,80,000 as a rule 2 lakh is exempted and the you are liable to 10 % on 1,80,000 only(3,80,000-2,00,000) i.e you need not to pay 18,000.your total tax is 18,000-2,000=16,000.

If your Anuual Taxable Income is above 1 crore then you have to pay 10% of now it was 5% only.There are only 42,800 people who will be affected with this

Education Cess remains same at 3%

A person taking a loan for his first home below `25,00,000 during the period 1.4.2013 to 31.3.2014 will be entitled to an additional deduction of interest of upto `100, of now the deduction was 1,50,000 so totally we will get 2,50,000 tax deduction fot intrest paid This will promote home ownership real estate and to a number of industries like steel, cement, brick, wood, glass etc. besides jobs to thousands of construction workers.

Rajiv Gandhi Equity Savings Scheme will be liberalised to enable the first time investor to invest in mutual funds as well as listed shares The incom limit will be raised from 10,00,000 to 12,00,000

There will be Women bank for Women,By women it’s PSU Bank

Macro Economics:
At present the revised fiscal budget target was set to 5.2%.anf for the Next year the target was set to 4.8%
By 2025 India will become  5Trilion dollor present we are 2 trillion dollor(100 lakh crore Rs) economy.

In 2011-12, the tax GDP ratio was 5.5 percent for direct taxes and 4.4 percent for indirect taxes. These ratios are one of the lowest for any large developing country but in 2007-08, the tax GDP ratio was 11.9 percent.

Diff between FDI and FII where an investor has a stake of 10 percent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 percent, it will be treated as FDI

FIIs will be allowed to participate in the exchange traded currency derivative segment to the extent of their Indian rupee exposure in India. FIIs will also be permitted to use their investment in corporate bonds and Government securities as collateral to meet their margin

About Budget:- Total Budget’s Expenditure is 16,65,966 in which 33.33% is Planned Expenditure(Allocations to every ministry).and remaining Non planned Expenditure(Subsidies to food grains,fertilizers,salaries to govt employees,interest on loans taken).

FM said that,We were Imported a 100 million tonnes of coal during April to dec,2012.though India is having a huge capacity to produce coal.This is also dragging the Fiscal fulfil the needs of power generating companies, india needs huge coal so In 2015 India ‘ll go for PPP with CIL for the coal production in large amount.

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Banks and Capital Markets: As an Investor
STT has decreased to 0.001 % for equity cash segement from 0.1%(only when we sell).and for Equity futures 0.01% from 0.017%.but where as Newly Commodity Transaction Tax too has imposed and the rate will be same as equity futeres i.e 0.01%.

GAAR will come effect from April 1st,2016.

Agricultural Credit has been increased by 1.25 trillion rupees to 7 trillion.(1 lak crore=1 trillion)

The interest subvention scheme for short-term crop loans which is @4% will be continuec and extends to private banks too.... very negative news due to these two points bankex has fell 2.5% all mjor banks were down by average 7%

Banks will be permitted to act as insurance brokers so that the entire network of bank branches will be utilised to increase penetration

atleast one ATM is mandatory for every branch.

To provide greater support to MSMEs, FM has enhanced the refinancing capability of SIDBI from the current level of  5,000 crore to 10,000 crore per year

Fm made a proposal to amend the SEBI Act to strengten the regulator is under Consideration

About Corporate Companies: As a Industrialist and Analyst.
Increase in the surcharge from 5 percent to 10 percent on domestic companies whose taxable income exceeds 10 crore per year. In the case of foreign companies will be increased from 2 percent to 5 percent.(only for one year)

dividend distribution tax or tax on distributed income increases the current surcharge of 5 percent to 10 percent..(only for one year)

Educations cess same with  3%

Excise duty on cigarettes has  increased 18 percent  so it will become costly and effect ITC profits.
SUV service tax increased by 3% from 27% to 30%.
FM said,one half of property transactions are not having PAN to control this Every Immovable property of above 50 lakhs ‘ll claim 1% TDS.... i.e 1% of your transaction will be given to income tax at the time of property transfer but we can claim that amount through TDS.if you want to file TDS we need PAN card.
Direct Tax Code(DTC) Which is going to replace Income Tax Act,1961 is work in Progress..
GST Which is going to reshape all indirect taxes like VAT,Service Tax,duty,customes etc... in single form of GST(Goods and service Tax).but state govt are showing less interest because they will lose revenues from VAT etc...but FM assures some compensation for this.if it happens then it will be very good for india.
There is no change in  basic customs duty of 10 percent for non-agricultural products.
There is also no change in the normal rate of excise duty of 12 percent and the normal rate of service tax of 12 percent.

On motorcycles with engine capacity of 800cc or more duty from 60 percent to 75 percent; and on yachts(luxury private boats) and similar vessels from 10 percent to 25 percent

mobile phones priced at more than 2000, duty raised to the 6 percent.

To encourage domestic production of set top boxes as well as value addition, duty raised from 5 percent to 10 percent.
Small and medium enterprises, including start-up companies, will be permitted to list on the SME exchange without being required to make an initial public offer (IPO), but the issue will be restricted to informed investors. This will be in addition to the existing SME
platform in which listing can be done through an IPO and with wider investor participation.
A company investing `100 crore or more in plant and machinery during the period 1.4.2013 to 31.3.2015 will be entitled to deduct an investment allowance of 15 percent of the investment.

At present, service tax does not apply to air conditioned restaurants that do not serve liquor. The distinction is artificial, and I propose to levy service tax on all air conditioned restaurants.

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Over all the budget was good.As a Student,As a employee of 10 % bracket,and as a Investor.the  Budget was satisfactory.But when we come to the Industry it was worrying.Due to the heavy Corporate surcharge(10%),DDT,Mandatory spending of 2% income in CSR etc....these will definetly effect the Net profit of companies. Atleat all corporate net income will be decreased by 10%(approximately) and even companies will don’t distribute dividend for next year because FM said for next only there will be DDT,so every company will skip this year dividends and pay next year.

Direct Tax Code and Goods and Service Tax was not yet declared.. if this Implemented it will be Global structure of taxation and tax evasion will be decreased.
DTH settop box,AC restrents,Cigarates,Silk clothes,SUV,Private ships(yothe)  price will be increased
Vocational cources,Education material,Venture Capitalist loans these are some positives of Budget.
“Robin Hood budget by targeting Premium Class and Luxury goods and life style was targeted”

Thank you,

                                                                                                                        Abdul Zelani,

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