Income Tax Rates/Slab for Assesment Year 2011-12 (F Y 2010-11)

Individuals/HUFs

Upto Rs 1,60,000 - Nil

Rs 1,60,000 - Rs 5,00,000 - 10%

Rs 5,00,000 - Rs 8,00,000 - 20%

Above Rs 8,00,000 - 30%

Woman Resident

Upto Rs 1,90,000 - Nil

Rs 1,90,000- Rs 5,00,000 - 10%

Rs 5,00,000 - Rs 8,00,000 - 20%

Above Rs 8,00,000 - 30%

Present Tax Slab

Senior Citizen (>65yrs)

Upto Rs 2,40,000 - Nil

Rs 2,40,000- Rs 5,00,000 - 10%

Rs 5,00,000 - Rs 8,00,000 - 20%

Above Rs 8,00,000 - 30%

ULIP issue agreed to settle @ HLCC : RBI

Mr. D Subbarao today revealed that market regulator SEBI and insurance regulator IRDA had mutually agreed to settle the jurisdiction issue over ULIPs at the High Level Coordination Committee (HLCC).

Mr. Subbarao, who is also the chairman of HLCC disclosed that both the regulators-IRDA and SEBI-have mutually agreed to settle the issue bilaterally among themselves.

HLCC on the other hand is a high level forum chaired by RBI Governor and works as an interface among the various financial sector regulators. The forum constitutes representatives of the finance ministry along with banking, insurance, pension and capital markets regulators. Adding further on the settlement of the issue Mr. Subbarao said, What turned up is a legal issue. Perhaps there should be an agreement... to settle at the legal forum.

SEBI had been arguing that since the money raised through ULIPs is used by these companies for making investments into equity and debt markets, hence the same should fall under the regulation framework of SEBI and not IRDA. However, in its response to SEBI, IRDA had later asked the insurance companies to continue doing business on the usual lines.

Following the issue contradictory orders from the two regulators the Finance Ministry had intervened in an effort to persuade both SEBI and IRDA.The finance ministry's intervention was then followed by an issue of a fresh order by SEBI stopping the insurance companies from issuing any new unit-linked insurance products (ULIP). The 14 insurance companies that were affected under the ban by SEBI includes the likes of SBI Life, ICICI Prudential, Tata AIG, Aegon Religare Life, Aviva Life, Bajaj Allianz, Bharti AXA, Birla Sunlife, HDFC Standard Life, ING Vysya Life, Kotak Mahindra Old Mutual Life, Max New York Life, Metlife India and Reliance Life.

MARKET OUTLOOK

If we look at the Interest rate side, it should ideally go up. But it is coming down. If interest rate increases the corporate and big companies will be in trouble. So, they will not increase interest rate now. This is a very big factor.

On 29^th Jan 2010 Central bank surprised markets by raising banks' cash reserve requirements by more than expected and warned of mounting inflation, setting the stage for lifting interest rates in the coming months.

Banks worldwide will be restricted. US will come up with lot of restrictions for Banks. This can be a negative factor for the markets.

FII’s invest into India for Long term, Short term as well Medium term period. For FII’s India is small economy. We clearly don’t know for what Term they have invested in India. They can pull money from any one of the above as they have to pay back their loans and keep the money safe.

I believe that markets may see more downside in near-term. But things are unpredictable; you do not know how globally things pan out and in this to just map liquidity and say the markets will get supported because liquidity has a habit of chasing prices and vanishing when you need it most.

BHARTI AIRTEL ??

Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti Group has a diverse business portfolio and has created global brands in the telecommunication sector. Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles.

The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) –

1) Mobile Services

2) Airtel Telemedia Services

3) Enterprise Services

To talk about the Bharti price fall, it will not stop as long as it doesn’t take any decision to reply TATA DoCoMo`s 1ps/Sec Tarif. There would be occasional rallies after the results. I feel that Relcom also will travel along with Airtel to find new bottom as their new strategy is not the answer for DoCoMo. Airtel share holder can keep hope only upto the results.

Bharti would be timing of the announcement of new tariff which can match DoCoMo`s 1ps/sec plan.

There are two things to be addressed.

1) Is to retain the customer

2) Is to announce the Tariff (it can offer only 1ps/sec billing other wise customer will not take it.).

Both are complimentary one can not be without the other.

Bharti in particular can go down to Rs.310 and from there probably some buying support is likely to emerge. Start buying Bharti from current price and accumulate for every 5 to 10% dip. Bharti will do good business by adding more and more customers even with lot of competition in the sector. If one second pulse rate implemented good number of customers will be added to Bharti.

I think a stock like Bharti from these levels can easily give you a return of 25-30% in next 12-15 months.

Markets @ current levels

At this point of time i would be advising clients to be cautious. The rally may last as long as liquidity lasts but investors should be cautious. As of now there is no clear picture over what earnings growth in FY11 would be, so it was difficult to arrive at a fair value for the market based on earnings expectations.

If we look at the valuations,they are at the higher end. We are already trading at about 21-22 times. Markets have been able to meaningfully sustain above these levels at 2000 and early 2008. So,from a valuation perspective, the markets are now in a probably euphoric zone, it’s only liquidity or any of the unexpected positive news flows which could drive this market higher from here.

On FII and DII front, FIIs are buying and DIIs are not selling in this rally.There is a lot of momentum in the market. The volumes have steadily picked up these last few days and the breadth continues to be good. DIIs are not selling in this rally as they are following the insurance company's trend. Insurance company's sell when FIIs continue to buy and eventually the market comes down.

The SEBI Move to do away with Entry Load

SEBI in its eagerness to help mutual fund investors has done away with entry loads. The MF industry, which also includes 70,000-strong distribution personnel, is unhappy over the SEBI move to do away with entry load on fund schemes. The new regulations will hurt MF distributors badly, and to some extent, the industry too.

I believe that this move would ensure more transparency in the system. We have to wait and watch how this will be implemented.

If advisors have to collect two cheques from investors it may be a little tougher.

We will see many IFAs or agents moving out of this field as this will become less profitable in the short run. It will kill a large number of distributors who were making a living selling mutual fund products and contributing to the growth of this industry. The retail distributors will badly get affected by this move.

I think there would be a different model coming up with fee-based advice. The financial advisor can no longer remain a salesman. He now needs to be a professional who is qualified and knowledgeable to give advice on investments and linking it to various components of personal finance. He needs to upgrade his knowledge by undergoing certification programs such as Certified Financial Planner (CFP). Only the advisors who acquire and upgrade their knowledge and skills will be able to deliver value for fee taken from clients.

LIQUID & LIQUID PLUS FUNDS

Liquid and liquid plus funds are short-term debt funds; they are different in a few aspects.

Investment tenure is the major differentiating factor between liquid and liquid plus funds. The debt instruments held by liquid plus funds have a longer tenure than liquid funds.

Liquid and liquid plus funds can be redeemed within a day. However, if liquid plus funds are redeemed within a specified period, there can be an exit load (the minimum investment tenure and the exit load vary across fund houses). On the other hand, there is no exit load on liquid funds.

In terms of tax implications, a dividend distribution tax of 28.33% is charged on liquid funds, whereas it’s 14.16% for liquid plus funds (in case of individual investors). Liquid plus funds pay lower dividend distribution tax as compared with liquid funds, which make them more attractive.

Liquid plus funds are riskier. This is mainly due to two reasons a) liquid plus funds hold investments that have a higher maturity and b) there is no limit on the mark-to-market (MTM) component of liquid plus funds.

A fine balance between risk and return and better tax efficiency is encouraging investors to favour liquid plus funds over liquid funds, Anybody with a slightly longer call preferred liquid plus schemes rather than liquid funds,

TAX Implication on Liquid & Liquid Plus Funds:

Capital Gains Taxation
		STCG		LTCG
Individual		As per the tax slab applicable for the investor		11.33% without indexation OR 22.66% with indexation
Corporate		33.99% (30%+10%+3%)		11.33% without indexation OR 22.66% with indexation
The above figures include the tax rate + surcharge + cess SOURCE:www.valueresearchonline.com

The good aspect with LTCG is that the income tax authorities give you the option to include the benefit of indexation. Indexation is the process by which inflation is taken into account when doing the tax calculation. This is excellent because it reduces the amount of capital gains and consequently the amount you end up paying as tax.