HUDCO (Housing and Urban Development Corporation), next in pipeline after Indian Railway Finance Corp. launching its tax free bond. To elucidate further, tax free means, the interest received from these bonds will not be taxed. They are very much different from 80CCF infrastructure bonds, as the investments in this bonds will make your taxable income reduce by that amount you have invested (maximum Rs.20, 000), but the interest earned is taxable here.

The issue opens on 27 Jan, 2012 and closes on 06 Feb, 2012. The bond is available with a face value of Rs. 1000 and the bond size is of Rs. 4,684.72 crores. Minimum investment which has to be made is of Rs. 10,000 and further in multiples of Rs.1, 000 thereafter. The bond will be listed on both NSE and BSE. They have been rated by Fitch as Fitch AA+ and CARE AA+ by CARE. The allotment will be on first come first serve basis as, the issue is expected to over –subscribe.

The issue have reserved 30% for retail investors, 25% for HNIs and 45% for QIPs. The issue is available with two different investment options, one with 10 years and other with 15 years of maturity period. Well the issue offers different interest rates for both retail investors and other category of investors. Individuals and NRIs investing less than Rs. 5 lakhs will be categorized as retail investors. NRI can apply in either of the category. The issue is available with a step-down feature, which means the benefit of higher interest rate which will be availed by retail investor will not be forwarded to the buyer of the bond in the secondary market. The buyer of the bond in the stock exchange will be getting interest rate applicable for other categories, i:e, HNIs and QIPs.

Details of the issue

Considering any option offering interest rate above 8% is a good option to invest in. Further for investors looking for options other than fixed deposits can pick such tax free issues as, they are more lucrative in comparison to bank FD’s.

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The Finance Ministry has allowed Indian Railway Finance Corporation to raise Rs.10, 000 crore through tax free bonds this fiscal year. The proposed amount will be utilized for financing select capacity development work. The ministry has also permitted Housing & Urban Development Corp., Power Finance Corp. and the National Highways Authority of India to sell such tax free bonds.

The issue for Indian Railway Finance Corp. Starts on 27^th Jan, 2012 and will close on 10^th Feb, 2012. The issue size is of Rs. 6,300 crore having a face value of Rs.5000 for each bond. The minimum investment is of Rs. 10,000 and further in multiples of Rs.5, 000 thereafter. The issue is available with two investment options, one with 10 year maturity and another with 15 year maturity, interest in both cases paid annually.

The issue has been highly rated by CRISIL as CRISIL AAA and CARE AAA by CARE. The bond is expected to get listed on both NSE and BSE. The lead managers to the issue are SBI Capital Markets Ltd., A.K. Capital Services Ltd. and ICICI Securities Ltd. Indian Bank is the trustee for the bond holders.

The current issue sounds different as because, 30% of the issue is reserved for retail investors, and are likely to get higher interest rates in comparison to other category. An individual investing less than Rs. 5 lakh will be considered as retail investor. They are advised to subscribe directly for the issue as the early birds would avail the benefit of higher interest rates rather moving to stock exchanges. Purchasing from them makes you devoid of getting higher interest even though you are a retail investor.

The details of the issue:

Well the idea behind the issue is to offer higher interest rates to retail investors who subscribes to the issue on priority basis and subsequently reducing the same. This would benefit the Indian Rail as they need not end up paying higher rates as some sell the bonds on exchanges before maturity. Hope the issue attracts more subscription from retailers this time, attracting NRI‘s also who can apply under any of the category. The current tax free issue is considered a good choice for investors looking for fixed income products.

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Exchange Traded Funds are one of the best financial tools available in the present scenario, gaining recognition globally. It took nearly 5-7 years to gain significance in India. It was introduced in India with a size of Rs. 21 crore and as of now the size has shown a significant rise to Rs. 700 crore with six ETFs.

Nifty BeES, the most popular and first Exchange Traded Fund in India was introduced by BENCHMARK, an Asset Management Company on 8^th of January, 2002. They very closely replicate S&P CNX Nifty Index of the Indian Capital Market. It provides a very wide exposure to its investors at the lowest possible unit size. Each Nifty BeES unit consist of approximately 1/10 of the S&P CNX Nifty Index value. They are traded and settled in dematerialized form, very much similar to that of share trading in the Capital Market. Benchmark Mutual Fund calculates and publicizes its real-time NAV. For updated NAV information one can visit website www.benchmarkfunds.com and Reuters Page BEES01.

Information on Nifty BeES

Benefits related to Nifty BeES

1) Easily tradable: They can easily be bought and sold just like shares, at the price flashing on the trading screen through, any NSE terminal. They very closely correspond to the value of S&P CNX Nifty Index.

2) Cost-effective: They attract no load as do other mutual funds schemes do. However, the annual expense ratio along with management fees is charged up to a maximum amount of 0.80% of the Daily Average Net Assets. The cost can further be reduced to 0.65% for assets over Rs. 500 crore.

3) Convenient: As they listed and traded on NSE can also be bought and sold through telephonic conversation with broker just like equities. It provides you the facility to place limit orders and change the price with the changing market scenario. They can be held in your DP account with all your other holdings.

4) Highly liquid: Nifty BeES, are highly liquid just because it easily facilitates buying and selling, arbitrage with index futures, arbitrage by authorized participants with the underlying shares.

5) Avoids biasness: The value of Nifty BeES is totally dependent on the performance of S&P CNX Nifty along with demand and supply structure in the market, thus avoiding biasness on the part of fund manager.

6) Transparency: As they closely track the performance of S&P CNX Nifty Index, one just need to keep a track of the broad market as a whole thus leading to convenience any transparency.

7) Diversification: Staying invested with Nifty BeES allows you the benefit of staying invested with 50 scrip’s of Nifty, thus trims down the risk.

8 ) Avoid rigorous research: Staying invested with a single stock requires proper analysis of the stock, management quality, its future prospects as well as its current valuation which is precluded in case of ETFs. Further trading in a pre-defined portfolio structure provides advantage to long term investors by preventing them from the cost of short term trading involved in traditional structure.

Nifty BeES are on the top of the priority list in comparison to other index funds just because of its low tracking error and expense ratio. Further being traded and listed on NSE provided ease of transaction. Even investing through SIP in Nifty BeES can be considered a wise decision.

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We all have seen an excellent student in our educational time converting in to an under-performer. This transformation may be due to financial crisis which makes him loose his confidence. Present education structure is not affordable for middle and lower section of society. The educational cost is so high, especially in cases of higher studies like, management, aviation, designing, etc that it becomes unaffordable to the mass section of the society.  Educational loans provided by banks is the only solution left which acts like a backbone for the individuals who wish to opt for higher educational studies.

Well a quite number of banks provide this facility with different interest rates. On your part, look for banks offering attractive interest rates benefiting you along with other various other options. Following are some of the factors which have to be considered:

Interest rates: Interest rate differs from one bank to another. Some offer fixed rate while others offer floating rate of interest. In case of fixed rate the interest remains same throughout the loan period whereas, in case of floating rates the rates keep on changing as per current market scenario. Pick the best offering cheaper rates in comparison to other banks. Various websites and tools are available to provide a gauge on it.

Time-frame for making payments: Normally banks have a repayment period of 5-7 years. Whereas, for educational loans it starts after moratorium period which is normally 6 months after getting the 1^st job or 1 year after completion of course whichever is earlier. IDBI Bank provides a tenure of (5-7 years), UCO Bank (5-7 years),Canada Bank(7 years),etc.

Charges: Banks charge various charges like, processing fees, documentation fees, prepayment and pre-closure charges along with interest rates. The charges are different for different banks and also vary for individuals studying in India or abroad. Take care and pick the one imposing lower charges. UCO Bank, Bank of India, Axis Bank don’t charges any processing fees whereas, PNB charges 0.5%with a maximum of Rs. 5000 for abroad and nil if in India.

Processing time: Different bank have different processing time and is crucial to know as you by what time you get the loan amount. Be alert and look for the time provided by institute to submit the fees.

Discount, insurance and other freebies: Girl student taking admission in premier institutes can avail the benefit of discount. Look whether the institute is within the list of banks premier institutes and discount is available on the same. Few banks propose facility of free insurance along with loan and reduce the same along with loan EMI. Well some banks like Allahabad Bank offer free debit card, IDBI offer discount on interest rates for physically challenged students, OBC offer personal accident insurance for Rs. 20 lakh, etc.

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Wealth tax being a direct tax is imposed at the rate of 1% on the net assets over and above Rs. 15 lakh. Whereas, filing wealth tax return date is very much common to that of filing income tax return. The wealth tax is filed in form “BA” and has to be submitted on relevant date.

The previous article on wealth tax mentions the taxable items however, there are few items which are exempted and not included in the list.

Following items are related to building and is exempted

1)    House allotted by company to its whole time employee drawing an annual gross salary of less than Rs. 5 lakh, for residential purpose

2)    Houses mend for residential or commercial purposes forming a part of stock-in-trade

3)    Any house acquired by the payer with an intention of conducting any business of profession of his own

4)    Residential asset let out for a minimum period of 300 days in the previous year

5)    Any asset involving a nature of a Commercial establishment or complexes

• Motor car used by the tax payer for business purpose or running them on hire basis or stock-in-trade.
• Urban land

1)    Any urban land on which construction of building is not allowed under any law as of now

2)    Land occupied by any building constructed with the prior consent of the responsible authorities

3)     Any land acquired by the tax payer for industrial purpose, left unused for a period of 2 years from the date of acquisition

4)    Any land owned by tax payer as stock-in-trade for a period of 5 years from the date he has acquired it

5)    Property held by a trust or held for any legal obligation towards public for any charitable or religious cause in India

6)    Furniture, apparels and electronic items for personal use.

7)    Coparceners interest in a HUF property

8)    Jewellery belonging to former Ruler, except his personal jewellery, identified by Central Government before 01-04-1957 or by CBDT after this date as a part of ancestral property

9)    Residential building and palaces belonging to former Rulers

10) Property belonging to Indian repatriates who have returned back to India with an objective of staying permanently in India are out of the purview of wealth tax for 7 years and include the following,(a) can brought into India(b) value of property brought into India(c) cash held in any non-resident account in any bank in India on the date of his return to India(d)a house or a part of house, plot of land belonging to an individual or HUF(e)any investment in shares, debentures, UTI mutual funds are exempt from wealth tax.

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