After imposing a 1% tax deduction at source on property transactions above a threshold, the government plans to make it mandatory for people to show proof of this tax payment to get their properties registered.

"Buyers will need to show income tax challan to get their property registered from October," a finance ministry official said.

Finance Minister Pranab Mukherjee in the budget proposed 1% tax deduction at source ( TDS) by the buyer from the consideration paid to the seller if the value of the property is more than 50 lakh in metro areas and more than 20 lakh in other places.

Sellers can claim credit in lieu of this on the basis of a one-page form to be notified soon after the passage of the Finance Bill, the official said.

The rule will cover all home and land transactions, except farmland.

While the move is aimed at checking generation and use of black money by bringing most property deals under the radar of the income-tax department, tax experts say there could be a rush in property deals in the next six months to avoid hassles.

Buyers have a six months window to avoid compliance hassles.

The government is expected to make some allowance for deals struck before October but registered later when it notifies the rules.

Tax officials say the new rule will ensure a steady flow of information to the income-tax department on property deals.

Real estate is considered to be one of the most widely used means to generate and park black money. Cash component in land and property transactions could be as high as 60%, according to some estimates.

Builders, however, say the new rule is unlikely to help curb black money but will definitely add to the woes of property buyers.

It is not clear what benefit will accrue to the government from this move

The government should then provide an easy mechanism for buyers to deposit the amount

 

Lalit Kumar Jain, president of the Confederation of Real Estate Developers' Associations of India, the apex body for private real estate developers, said the buyer of a property will have to deduct the amount and submit it. It adds to the woes of the customer and administratively it is not a practical suggestion

Buyers will need to provide details about the property, themselves and the seller in the tax deduction form.

Jain said it will affect the seller's liquidity as well because he will get a lower amount.

For developers selling homes it would mean loss of opportunity and interest income, he said.

Long-term capital gains tax is levied at the rate of 10%.

The mutual fund with an attitude and over . 8,000 crore in assets and 19 lakh customer accounts has quit the game. Fidelity International has sold its stake in FIL Fund Management (the asset management company) to L&T Finance. It entered India in 2005, when Fidelity launched its first equity fund. Fidelity's much-criticised "we-do-not-work-with-IFAs" stance was soon revised, but it refused to publish monthly data like its competitors did, sticking to quarterly disclosures even today. Seven years later, the fund house has decided to call it quits.

Let us start with clearing some basic concepts. What is being sold is the stake of the asset management company (AMC). The investors' money is in the mutual fund, and is secure with the custodians. The price paid and the accumulated losses are all not on the balance sheet of the schemes. Investors will be impacted qualitatively by the transaction, since their trustees and fund managers will change. There is no quantitative impact. The NAV of the funds will continue to be valued based on the market price of what is in the portfolio. There will be no mark-up or mark-down due to this sale.

The new asset manager is L&T Mutual Fund whose sponsor is L&T Finance, a profit-making NBFC. Acquiring Fidelity's mutual fund business is part of the strategy for the group to become large and multi-faceted in the financial services business. The call to take is whether L&T Mutual Fund will deliver performance on the schemes it has acquired. There are three reasons to be cautious on this count. First, the fund house hardly manages . 200 crore of equity funds which are currently not in the top of their league. The debt funds, on the other hand, are doing well. Second, the equity fund managers of Fidelity will handover the management to L&T's newly assembled team, and leave after a period of transition. Investors do not know if the new team will do better, or fail to live up to the expectations. Third, active investors who do not like the uncertainty may leave, making it tough for the fund managers to retain and grow assets.

Investors who do not like the change have the option to quit, without paying exit load. The sale transaction is now pending Sebi approval after which investors in Fidelity's schemes will be given a 30-day notice to quit if they so wish. Those who do not exercise the option will move to the new management. Investors in Fidelity Tax Saver, where a period of three years is not over since investing, will not be able to exit due to mandatory lock-in. They will move into the L&T Tax Saving Fund by default. There are funds that were floated by Fidelity, which were investing abroad, and using feeder funds. Investors in these funds - Fidelity International Opportunities Fund and Fidelity Global Real Assets Fund may be at risk.

The communication from L&T Mutual Fund to investors will specifically indicate which fund will be merged into which one, what the new names will be, and which funds may be closed. Investors in the Fidelity's schemes should ideally await for that communication before deciding on the exit option. Most errors in fund selection are made when investors exit and enter funds in haste and with limited information. Sale of an AMC is a major event, but it should trigger caution, not panic.

   Many dream of a financially secure future, but not all manage to get there. Regular savings can provide phenomenal returns over the long run. Despite countless financial obligations and huge debts, one must set aside a fixed amount every month. This can be a contingency buffer or surplus that can bail you out of financial crisis. Wouldn't it be wonderful if your small contributions grew into a huge avalanche of wealth over a period of time?

   The power of compounding is phenomenal. Your savings grow exponentially with time, and the sooner you start the more will be the quantum of returns. For example, assume a person sets aside Rs 1,000 in an instrument each year. If the returns were 10 percent compounded annually, at the end of one year, the investment would have grown to Rs 1,100. At the end of the second year, the investment would have grown to Rs 1,210. At the end of 10 years, Rs 1,000 would have grown to Rs 2,594.

   If an individual invests Rs 1,000 every year, in 10 years at a 10 percent rate of interest, his investment would have grown to Rs 17,531. Such is the power of compounding. Compounding is reinvesting of income at the same rate of returns to constantly build the principal amount, year after year.

 
   This New Year, make a resolution to save regularly and benefit from the power of compounding to build a corpus. Rule 72 will help you decide on the investment tenure to double your money. By dividing 72 by the annual rate of returns, you can estimate the number of years it will take for the initial investment to double.

   If you invest Rs 100 at a compounding interest of 10 percent per annum, according to rule 72, the approximate timeframe required for the investment to double is 72 divided by 10, that is 7.2 years. Instruments like the safe cumulative fixed deposit or recurring deposit offered by banks or the more aggressive systematic investment plan offered by mutual fund houses allow you to get into a regular saving habit.

   The actual returns on investments vary significantly even for the smallest rate differential. Hence, it is crucial for investors to pick the best rate of returns. Suppose Rs 100 is invested annually at a nine percent compounded rate for 10 years, the returns at the end would be to the tune of Rs 1,656. Suppose the rate of returns was a few percentage points higher at 11 percent, the returns at the end of 10 years would be Rs 1,856. Further, greater investment durations bring you larger returns.

   In the current high interest regime, where the cost of borrowing is high, people who have taken a home loan and a personal loan may be walking on tight finances. The increasing cost of living and high inflation levels may increase the strain on the wallets. Periods of economic recession and slowdown are difficult to predict. Hence, it makes sense to make saving a regular habit and benefit from the power of compounding.