Documents needed while filing Income Tax Returns

Typically, as a salaried tax payer you'll need to have the following items at hand for filing your Income Tax Return. This might vary on a case by case basis.

Here’s a quick guide to the documents you will need for the Assessment Year 2012-13 that will help you prepare and file your Income Tax Return.

PAN number

Verify your PAN number online with the Income Tax Department before filing your Income Tax Return by going to this link: https://incometaxindiaefiling.gov.in/portal/knowpan.do

Form-16 issued by your employer

A Form-16 is a statement issued by your employer which has details of your Salary, the taxable salary amount after various perks and allowances, the TDS deducted by your employer, the deductions you have claimed and the overall tax due. TDS is Tax Deducted at Source. Your employer will have already deducted some portion of your salary and deposited it with the Income Tax Department.

This is a good starting point to start preparing your tax return.

Bank statements / passbook for Interest Income on bank deposits.

Note that you have to declare all Interest Income earned in the Financial Year 2011-12 in your Income Tax Return. A lot of people forget to do this, so please go through your bank statements and find out the Interest received.

Statements of Interest Income besides Bank deposits

Sometimes you may have fixed deposits which may have matured, debentures which yield interest. Take a look and make sure to declare this income on your Tax Return.

TDS certificates issued to you by your bank and others

TDS may have been deducted on your Interest Income by your bank. Check whether any TDS was deducted. You can ask the Bank to issue you a TDS statement. Declare these TDS entries in your Tax Return to reduce your tax liability.

Form 26AS

This is one of the most important documents that you should look at while preparing and filing your Income Tax Return.

Form 26AS reflects all the Income Tax received by the Income Tax Department with respect to you. This is a tax credit statement which shows TDS payments, voluntary tax payments made by you.

 Link to Indian Government site to view Form 26AS

This Form-26AS should match all your TDS certificates issued to you by your employer, your bank etc.

If there is a mismatch you may have a tough time getting your tax refund. In case there is a mismatch between your TDS certificates and Form-26AS, you should contact your employer or your bank. They might have to inform the Income Tax Department of the TDS they have deducted.

Proof of investment under Section 80C

Investments done under LIC, NSC, PPF, school fees of your children qualify for Section 80C deductions.

Payment towards the principal of your Housing Loan also qualifies for deductions under Section 80C. The maximum limit for claim under section 80C is Rs. 1 Lakh.

Charitable donation statements

Donations that can be claimed for tax deductions under Section 80G.

Typically the receipt issued by the charitable organization you donate to mentions the eligibility under Section 80G.

For making sure you can avail of your tax deduction, make sure you quote the PAN number of the charitable organization.

Interest paid on housing loan.

If you pay EMI towards housing loan for a house that you live in: The Interest paid on housing loan is eligible for tax saving. The upper limit for tax saving is Rs 1,50,000.

If you pay EMI towards housing loan for a property that you rent out to others: The Interest paid on housing loan is eligible for tax saving. There is no upper limit for Interest paid exemption on rental property.

Other (less common) documents:

Proof of investment under Section80CCF:

Investments in Infrastructure bonds upto Rs. 20,000 can be claimed as tax deduction under section 80CCF.

Proof of investment under Section 80E:

Interest Paid on Education loan is tax deductible and can be claimed under Section 80E.

Proof of investment under Section 80D:

Medical Insurance payments for your family and your parents can be claimed here.

Proof of Disabilities

If you have disabilities, you might want to check up on Section 80U. If you have dependents with disabilities then check on Section 80DD.

Stock trading statement:

If you have sold any stock in the Financial year 2011-12, then you might have had Capital Gain or Capital Loss. This has to be declared in your Income Tax Return. Take a look at your brokerage account and then declare your Capital Gain.

Capital gain on sale of property

In case you sold any property or house or land or anything of value, you may have had a Capital Gain or Capital Loss. You have to declare this in your Income Tax Return.

Overall the key take away is - Look at your Form-26AS to ensure that your records match those of the Income Tax Department.

Highlights of Union Budget 2011-2012

Finance minister Pranab Mukherjee on Monday presented to Parliament India's budget for the coming financial year beginning in April.

Following are the highlights of the budget:

TAXES ( Read full story on taxes ) 
* Standard rate of excise duty held at 10 percent
* Personal income tax exemption limit raised to 180,000 rupees
* To reduce surcharge on domestic companies to 5 percent
* To raise minimum alternate tax to 18.5 percent from 18 percent
* Direct tax proposals to cause 115 billion rupees in revenue loss

FISCAL DEFICIT 
* Fiscal deficit seen at 5.1 percent of GDP in 2010-11
* Fiscal deficit seen at 4.6 percent of GDP in 2011-12
* Fiscal deficit seen at 3.5 percent of GDP in 2013-14

SPENDING 
* Total expenditure in 2011-12 seen at 12.58 trillion rupees
* Plan expenditure seen at 4.41 trillion rupees in 2011-12, up 18.3 percent

REVENUE 
* Gross tax receipts seen at 9.32 trillion rupees in 2011-12
* Non-tax revenue seen at 1.25 trillion rupees in 2011-12

GROWTH, INFLATION EXPECTATIONS 
* Economy expected to grow at 9 percent in 2012, plus or minus 0.25 percent
* Inflation seen lower in the financial year 2011-12 ( Read story )

DISINVESTMENT 
* Disinvestment in 2011-12 seen at 400 billion rupees

BORROWING 
* Net market borrowing for 2011-12 seen at 3.43 trillion rupees, down from 3.45 trillion rupees in 2010-11

POLICY REFORMS 
* To create infrastructure debt funds
* To boost infrastructure development with tax-free bonds of 300 billion rupees
* Food security bill to be introduced this year
* To permit SEBI registered mutual funds to access subscriptions from foreign investments
* Raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion
* Public debt bill to be introduced in parliament soon

SECTOR SPENDING 
* To allocate more than 1.64 trillion rupees to defence sector in 2011-12
* Corpus of rural infrastructure development fund raised to 180 billion rupees in 2011-12
* To provide 201.5 billion rupees capital infusion in state-run banks in 2011-12
* To allocate 520.5 billion rupees for the education sector

AGRICULTURE 
* Removal of supply bottlenecks in the food sector will be in focus in 2011-12
* To raise target of credit flow to agriculture sector to 4.75 trillion rupees
* Gives 3 percent interest subsidy to farmers in 2011-12
* Cold storage chains to be given infrastructure status
* Capitalisation of National Bank for Agriculture and Rural Development (NABARD) of 30 billion rupees in a phased manner
* To provide 3 billion rupees for 60,000 hectares under palm oil plantation
* Actively considering new fertiliser policy for urea

ON THE STATE OF THE ECONOMY ( Read: Pranab on economy )
* "Fiscal consolidation has been impressive. This year has also seen significant progress in those critical institutional reforms that will pave the way for double digit growth in the near future."
* Food inflation remains a concern
* Current account deficit situation poses some concern
* Must ensure that private investment is sustained
* "The economy has shown remarkable resilience."

ON GOVERNANCE 
* "Certain events in the past few months may have created an impression of drift in governance and a gap in public accountability ... such an impression is misplaced."
* Corruption is a problem, must fight it collectively

( Read full story on Union Budget 2011-2012 ) 

Read more: Highlights of Union Budget 2011-2012 - The Times of India http://timesofindia.indiatimes.com/home/union-budget-2011/Highlights-of-Union-Budget-2011-2012/articleshow/7592642.cms#ixzz1FEi3Oj8e


(Source: Times Of India )

5 ways working couples can save income tax !!

In some cases one spouse, say the wife, may be paying the life insurance premium (LIP), say of Rs 25,000, and her total income is say Rs 215,000 she may like to pay the life insurance premium herself so as to get deduction under Section 80C and bring down the total income to Rs 190,000 so that she may not be liable to pay any tax for the fiscal year 2010-2011.
It may be that in her husband's case full deduction may not be available for Rs 100,000 under Section 80C and his income may be liable to the maximum rate of tax.
Then, it would be better and worthwhile to claim the deduction in her husband's name rather than that of the wife.
This is because deduction of LIP under the higher income tax slab would lead to a higher overall tax deduction for both.


2. House ownership and HRA
Sometimes, the spouses have a possibility of saving income tax on house rent allowance within the family, particularly where one of them owns a house.
For example, A is a landlady and is staying in her house with other members of her family.
If her husband gets a house rent allowance which can be claimed exempt from income tax, then he may pay house rent to his wife and claim exemption in respect of the house rent so paid by him from house rent allowance to the extent deductible under the provisions of Rule 2A.
In the above case, the landlady Mrs. A is also employed and she gets a rent, say of Rs 30,000 per month from her husband and the husband is able to take full benefit of the amount by way of exemption of house rent allowance, then this will result into a lower rate of tax because of deductibility of 30 per cent deduction from the rent under Section 24.
Thus, even if Mrs A were to pay tax on Rs 360,000 rent she would not pay tax on the whole of it but only on Rs. 360,000, less 30 per cent thereof, i.e., Rs 360,000, minus Rs 108,000 on Rs 252,000 only.
The effective highest rate would be 21 per cent only.
Thus, a saving of 9 per cent of income tax on Rs 360,000, i.e. Rs 32,400 would be possible in the case of this couple.
Different income tax saving would be possible in different cases.


3. Plan your drawings
As far as possible, drawings should be made by the spouse having the higher income so that the taxable income from investments made by him attracts less tax than by the person having a lower income.


4. Create an HuF
Both husband and wife should, by having gifts from some older relations in the family have a separate Hindu Undivided Family so as to claim an additional  separate exemption of Rs 160,000 through proper tax planning for the FY 2010-11 (A.Y 2011-12).


5. Save tax through trusts
If a working couple has children, say, one son and one daughter, each one can form a trust for the would-be spouse of one child separately in such a manner that the initial exemption of Rs 160,000 under the provisions of Section 164 of the Income Tax Act is available.
If the couple does not have a child, then the husband can have a trust for the unborn son, and the wife a trust for the unborn child daughter to get a separate exemption of Rs 160,000 each.
Besides, if you worship some deity, you can have a private religious trust for one's chosen deity.
Such a trust would be liable to assessment as a separate taxpayer under the category of artificial juridical person and would enjoy a separate exemption of Rs 160,000.
This is how working couples can save a fair amount of income tax through proper planning.

Direct Tax Code: What does it mean to tax savers?

(Source: www.investmentyogi.com)

The Direct Tax Code (or DTC) has recently been proposed by the Government of India, to bring about a change in the whole taxation system of the country. The new tax code aims to make the system more efficient and easy for tax payers, with simplified rules and regulations. It is a step towards replacing the four decade old Income Tax Act of India.

The new DTC would impact both individuals as well as corporate with changes in taxation slabs, Public Provident Funds, insurance policies, home loans, mutual funds and shares.

Drafts of the DTC

The first draft: The Finance Minister floated the first draft of the DTC in August 2009 and kept it open for public comments. Here is a peek on a few of the proposals made in the first draft:

• Proposal to exempt tax if income is Rs 1.6 lakhs in a year. The tax slabs further would be 10 per cent from Rs 1.6 lakhs to Rs 10 lakhs, 20 per cent between Rs 10 lakhs and Rs 25 lakhs, and 30 per cent above Rs 25 lakhs
• Deduction levels for savings raised to Rs 3,00,000
• Wealth tax to be levied on wealth over Rs 50 crore
• Proposal of a uniform corporate tax rate of 25 per cent
• Securities transaction tax abolished

The revised draft of the DTC

Further to the 1,600 comments received, the second draft of the DTC was floated recently. It brought certain changes in retirement schemes, home loans and capital gains, to name a few.

DTC revised draft: What it offers investors

The second draft of the DTC is much simpler and offers investors a whole deal of exemptions, unlike the first draft. The revised draft was aimed towards promoting long term savings.

Capital gains tax

Equity: Investments in shares and equity based mutual funds would now be taxed using a new concept of 'Deduction' instead of the earlier Indexation method.

Certain deductions will be applied to long term capital gains of one year and above. This would be a percentage of the profits earned.  After the deductions are made, the balance amount would be added to the income and then taxed at applicable rates. Currently there is not much clarity on the percentage of deduction. Also, the holding period of shares, as of now, will be one year, from the end of the financial year, when the shares were bought.

For short term capital gains of less than one year, the entire amount will be included as a part of the income and taxed at applicable rates.

Debt, gold and real estate: Capital gains of less than a year, from gold, gold ETFs, debt and real estate investments would be added to the  taxable income, and normal slabs would apply. For all capital gains of more than a year old, gains will be added to the taxable income after adjusting for indexation benefit.

The base date for indexation values would however now be shifted to April 1, 2000 instead of the earlier April 1, 1981.

Life insurance policy, pension or annuity plans and provident funds

All pure life insurance policies, pension or annuity plans, PPF and EPF would come under 'EEE' and not 'EET' structure. This means that it would be completely tax free.

Understanding 'EEE' and 'EET'

EEE: Amount invested or contributed would be 'Exempt', the returns or the interest generated would be 'Exempt' and lastly the final maturity amount would also be 'Exempt' from tax.

EET: Amount invested or contributed would be 'Exempt', the returns or interest would be 'Exempt', but the final maturity amount would be 'Taxed'.

This proposal of EEE status for all retirement products would prove beneficial to pensioners and senior citizens. The first draft of the DTC included such schemes under 'EET' Status.

ULIP's and endowment plans

The DTC includes ULIPs and endowment plans under EET. The money received on maturity from such plans would now be taxed.

Tax on rental income: Tax would be applicable only on the actual rent received for the house. So, if there is no rental income earned, no tax is to be paid.

Earlier, it was proposed that tax was to be paid even if your house was not rented, by considering a notional rental amount.

Home loans: The interest on home loans would be exempt up to Rs 1.5 lakhs. However, the principal portion would now not be covered under section 80C. The first draft had proposed to remove all tax benefits on home loans, both on the principal and the interest. This has now been changed, bringing a relief for all home loan borrowers.

The crux of the DTC is to introduce moderate levels of taxation, expand the tax base and check tax evasion. There is however some areas which still require clarity.

The actual bill is still to be introduced in the parliament, and by this time we may probably see further amendments. It is expected to come into being by April 2011.

Why you don't get reimbursed fully for mediclaim ??

Have you ever heard somebody saying, "My hospital bill was Rs 75,000 and my sum assured for mediclaim was Rs 2 lakh, but still the insurance company did not give me the claimed amount."

A very common case that you may have come across these days.

To understand why this happens we should first understand the whole concept of insurance. Simply put, when a large number of people with similar profiles run a similar risk and where only a few will actually be affected then all the members of the group pool in the expected loss and the pooled amount is paid to the member(s) who actually suffers the loss. Let us take an example to understand this:

There is a group of 33-year-old males with similar lifestyles and health status in a city who run the risk of incurring expenses on hospitalisation due to illness, disease or accident. Now assume that statistics show that two people out of them will need to be hospitalised and on an average would incur an expense of Rs 1.25 lakh each.

That means the total expenditure of the group for hospitalisation is likely to be Rs 2.5 lakh for the year. If we divide that by 100 then if each member pays Rs 2,500 (essentially a premium) then the total collection is Rs 2.5 lakh, an amount needed to reimburse the members who actually suffer the loss.

So the basic thing to understand in this example is that it is your own contribution (premium) that comes back to you if you suffer a loss. Thus it is in the interest of each member of the group to try and ensure that the people in the group have the least probability of incurring the loss and, if at all, they incur the loss then they should spend the minimum amount possible to recover from the loss.

Theoretically lower the probable loss, lower will be the premium.

Now many things in this example are difficult to assume. Suppose if the probability is wrong and the numbers of people who need to be hospitalised are four instead of two and therefore the total expenditure on those four people is Rs 5 lakh.

The amount available in the pool is only Rs 2.5 lakh which means only the first two gentlemen will get the claim amount and the last two will not get anything.

Obviously this is unfair on people who fall sick later in the year. There is also a question of what to do with the money collected from the group at the beginning of the year before it is required for reimbursement to eligible members of the group. This is where the insurance company steps in.

Firstly, it markets the policy to a large number of people since insurance works on the principal of large numbers. Larger the number of people who pay premium lower is the probability that the assumed loss figure based on past experience will be exceeded. In any case the insurance company bears the loss if it underestimates the amount of loss that will be incurred.

Obviously while working out the premium it will keep a buffer. It also administers the reimbursement process to check on the genuineness of the claim and the amount of claim. Obviously it also has a profit margin for doing all this work.

Now let us understand the adjustments required to be made to the premium calculated in the above manner.

Firstly not everybody will have the same risk profile. For example not everybody will be aged 33 years as assumed in our example.

Other things remaining the same, somebody aged 40 will have a higher probability of incurring hospitalisation expenses as compared to a 33-year-old. Thus the premium will need to be adjusted for such differences in risk profile whose impact on the probable loss is determinable.

There could be differences in risk profile whose impact on the probable loss is not determinable. Best example could be a pre-existing disease. Whilst clear it increases the probability of the loss by how much and is difficult to assess. Hence most companies would provide a buffer period before they accept risks arising from such pre-existing conditions.

In some cases the risk profile may be so high that the person just cannot belong to the group.

For example if somebody is already suffering from an organ failure, the probability of her/his incurring the loss is so high as compared to a healthy individual that it is not possible to include him in a standard group at all.

In such cases the insurance company will not provide the cover at all so as to not jeopardise the cover of the larger group.

Second adjustment required is on account of the expenses required to be incurred to make good the loss. Now typically when you are hospitalised for a disease then depending on the hospital, the class of room and the doctor you choose the actual expenses can vary by as much as 300 to 400 per cent.

Thus if you choose to get a heart bypass done by admitting yourself in a twin sharing room in a specific hospital it could cost you as low as Rs 1.5 lakh but if you go to a plush hospital and get admitted in a suite room under a star doctor it may cost you upwards of Rs 10 lakh also.

So for the same disease the actual amount spent to make good the loss can vary significantly. If the entire loss is covered then the tendency for the insured is to go for the most expensive treatment possible thus increasing the burden on the pool. This is sought to be minimised by the concept of sub-limits and co-pay requirements.

Nowadays quite a few mediclaim policies provide sub-limit for daily room rent at one per cent of the sum assured and two per cent of the sum assured for ICU.

Some policies also provide for sub limit for doctors' fees. This is to make sure that you choose an option that is in line with the assumptions taken at the time of calculation of the premium.

Of course you are free to use a room with a higher room rent or a doctor with a higher fee but would need to pay the surplus yourself. The second feature to limit the expenses is the concept of co-pay.

All of us have heard (and have probably experienced) how some hospitals charge more if you are covered by insurance or conduct unnecessary tests/procedures to puff up the overall bill. Now if the cost is to be met entirely by the insurance company you may not have any incentive to make sure that such unnecessary charges are incurred/levied.

Now if a certain percentage of the expenditure has to be paid by you (even if it is only 10 to 20 per cent) you will make sure that such excess is not included in the bill thus bringing down the loss ratio for the entire pool. This is the rationale behind co-pay.

So sub-limits and co-pay are the two most common reasons for the full bill amount not being paid despite the overall amount of expense incurred falling well within the overall sum insured.

Then there is a list of items such as TV charges, telephone expenses, personal expenses such as shaving charges (unless required for medical reasons), meals for patient or attendant, etc., that are in any case not covered by any mediclaim policy.

In theory therefore a mediclaim policy that has sub-limits and/or co-pay requirements should be cheaper than a policy that does not have such requirements.

However in practice it is not always so, as each insurance company works with its own set of probabilities on how many people will be hospitalised from a particular group and what will be the expenditure incurred to recover from the loss and the buffer required to be kept.

So it is very much possible that a company that does not have any sub-limits or co-pay may still be cheaper than a company that has those features.

Caution: The example worked out above has been simplified to make it understandable to a layperson and has several simplistic assumptions.

The benefits of filing income tax return ...

Source (investmentyogi.com)
We have heard many a times that every individual whose total income exceeds the maximum exemption limit is obligated to furnish his/her Income Tax Return or ITR.

But what is the benefit of filing ITR -- especially for those below 30 years of age or those not in the higher tax bracket? Why should any person voluntarily go and submit his income details to the tax authority? Isn't it more logical not to disclose income details and avoid paying tax altogether?

Standard Income Proof: ITR is considered a customary income proof not only in India but also globally. If you are looking for higher education or employment abroad, ITR is the largely accepted income proof.

Speeds your loan application process: Apart from a good credit history (or past repayment track), the fact that you are filing your ITR regularly gives you speedier access to credit and at better terms -- although not necessarily a larger line of credit, but surely a better rate.

It also provides the impression to the financier that you are a law abiding citizen and will repay the loan within time.

Power of PAN: Permanent Account Number or PAN issued by the IT authority is not only a prerequisite for filing ITR but is also now mandatory for all financial transactions -- from opening a bank account, or purchasing mutual funds to real estate for investment. So it makes sense to get yourself one even if you don't have much income to boast of.

Claim your tax refund: Filing ITR is not always about paying tax. It can be used as a means to reduce your tax liability! Yes, you heard us right. Take for instance, salaried employees for whom TDS has been cut during the financial year can claim refund if the tax outgo has been more than the actual tax payable.

Important note:

Every person with taxable income (over and above the tax exemption limit) should file an income return, even if her/his tax liabilities have been taken care of by the employer through tax deducted at source (TDS); persons whose salaries have been subjected to TDS are also required to file return because they may have earned from sources other than salary (house property income, capital gains, etc.).

The entire tax payable on your income has to be paid before filing the return of income either by way of tax-deducted at source (TDS), advance tax or self-assessment tax. Ensure that it is done before the ITR is filed.

Not only for refund, you also need to file your income return if you are claiming carry forward of loss (say, from long term capital asset or from any other source of income). In such cases, filing returns within the due date is a must.

Avoid wilful tax evasion: In certain cases, you may even be liable for prosecution for intentional avoidance of tax payments. 'Better late than never' is the best policy when it comes to income tax payment.

Popular FAQs of income tax return filing:

What is financial year, previous year and assessment year?

Answer: For the purpose of calculating income tax, financial year (FY) is the period during which the income has been earned. The income earned in a FY is assessed to tax in the following year, that is, the assessment year (AY).

For example, income earned in FY 2009-10 (April 1, 2009 to March 31, 2010) will be assessed for tax in the year 2010-11. FY and previous year are the same; they are used interchangeably.

Tax gets deducted from my salary every month (by way of TDS). Do I still need to file ITR?

Answer: Yes. Filing of tax is compulsory for every person whose gross total income, that is, the income under the five heads (salary, house property, capital gains, business income, and other sources) before allowing for any deductions (under chapter VI A of Income Tax Act, 1961), exceeds the basic income tax exemption limit (IT Rate slab given at the end of the article).

What if I miss the deadline of July 31st?

Taxyogi: If there are no balance taxes to be paid, no interest or penalty will be levied if you file your return in less than 1 year from the end of the relevant assessment year (AY). However, there is a penalty of Rs 5,000 if you fail to file by that date. In case there are tax arrears, a penalty of 1 pr cent per month will be charged as interest on such taxes due.

TDS is NIL on my income. Do I have to file return?

Answer: It is not mandatory to file your IT return if your taxable income is below the maximum exempted limit. However, if your gross total income exceeds the basic exemption limit, then you have to file a tax return even if no tax was deducted at source.

I don't have a PAN card. Can I file my income return?

Answer: The Permanent Account Number (PAN) is a compulsory for filing your ITR. If you have not obtained a PAN card till now, you should immediately apply for one.

What is advance tax? How is it different from ITR filing? Is there a penalty if I don't pay this tax?

Answer: Advance tax means 'payment of tax in advance'. Payment of advance tax is compulsory on the income earned during the financial year for every person liable to pay tax in India. Non-payment or short payment of advance tax will attract penal interest.

However, there is no need to pay advance tax if:

i) The total tax liability for the financial year is less than Rs 5,000; or

ii) If the employer has deducted TDS from the salary.

Where do I file my return?

Answer: Filing of ITR can be done in 2 ways:   

i) Offline/Traditional paper filing: Traditional filing involves hiring a CA or a tax consultant to file tax returns, or personal submission of forms by visiting the nearest Income Tax Office (ITO).

ii) Online filing: Online or E-filing was enabled by the Income Tax Department a couple of years back. It is an improved and hassle-free method of tax filing; here, filing is done through the Internet. E-filing of IT Returns can be done with or without a digital signature. Logon to www.TaxYogi.com for filing your tax returns online.

Income Tax slabs/Basic Exemption limits for individuals for FY 2009-10 (AY 2010-11):

(a) Male Assessees (< 65 years of age):

(b) Female Assessees (< 65 years of age):

(c) Senior Citizens (> 65 years of age):

Personal finance management tips for women .....

Women need to handle their finances differently from men. Mainly because of the differences in the earning patterns and priorities that women set for themselves their finances should be managed in a different manner.

The basic goals of personal finance remain the same, i.e.,

• Ability to meet daily expenses and lead a quality life
• Provide for emergencies and unplanned expenses and
• Savings for life after retirement

However, the way in which men and women achieve these goals is different. While men earn money uninterruptedly throughout their working lives, women often need to take a break, especially when they have children.

Other reasons like orthodox family backgrounds, change in location after marriage, change in spouse's job location, household responsibilities etc can also require women to put their career on the back burner. We have the much debated case of Mrs. Sudha Murthy- wife of Mr. Narayana Murthy [ Images ], founder of Infosys [ Get Quote ].

The couple was instrumental in building the Infosys dream. As the business started taking shape, the couple decided that one person was required to take care of their home and family. Mrs. Murthy gladly stepped aside to be the homemaker and let her husband fulfill his dream. Cases of women going abroad on a dependent visa with their husbands are not uncommon.

So, if a woman earning Rs. 50,000 per month takes a 5 year break from her job because she wants to be at home with her child, her earnings and thus savings take a hit of Rs 30 lakh (Rs 3 million). We have not yet considered any increment in her salary.

If we consider that her salary increments by 20 per cent each year, her loss of earnings will come to Rs. 44.65 lakh (Rs 4.47 million).  That's a big number. Also, when she resumes work, she may have to compromise on the job profile, position and hence salary. Therefore, the percentage of savings should be higher for women during their working life.

Besides, the life expectancy for women is higher than men. So, the amount of retirement savings for women should also be higher. Statistics show that, on an average, women live 5 years longer than men, earn 25 per cent less during their life time and work 11 years less in their careers.

Importance of having an individual personal plan separate from your spouse

It is important that women have a separate personal finance plan from her family, be her parents or her husband. With changing times the need for separate finances has increased. The rise in divorce rates is alarming. The surety of life is also lower with increase in accidents and stress related ailments. If a woman handles her own finances she is well prepared to handle money matters individually if the need arises. Knowledge of different investment avenues, savings and expenses is important to run a family. A separate personal finance portfolio will prepare a woman to face financial challenges.  Also, she will not have to bear a monetary loss in the event of a divorce.

Finance products and benefits that cater to the needs of women

There are many products that are created for women. For example, insurance companies have special policies for women. The country's banking system has several products launched for the female audiences. Our tax system also relaxes the tax bar for women. Income up to an amount of Rs 1,90,000 is not taxable for women. This limit is Rs 1,60,000 for men. Here are a few products catering to the needs of women:-

Product Name	Features	Provider name
Jeevan Bharti Insurance policy	The policy does not lapse in the event of failure to make premium payments for a few years. It covers critical illnesses related to women	LIC [ Get Quote ] of India [ Images ]
Smart Privilege Account	The bank offers automatic insurance coverage for critical illness related to women. The debit card linked o the account fetches discounts on certain products from Lakme Beauty Salon, Dominos etc	UTI Bank [ Get Quote ]
HDFC [ Get Quote ] Women's Advantage debit card	The card offers various advantages like discount on locker fees, insurance packages, free bill payment services etc	HDFC Bank
Home Loans	The bank offers low interest rates to women – 0.25 per cent lower rate than prevailing interest rate.	Punjab National Bank [ Get Quote ]

A personal finance plan for women should include the following:

•      Regular Income – even when women take a break from their careers, it is a good idea to earn income from working a few hours a day. Taking tuitions, teaching a hobby etc are common ways to earn a regular income even when one is not working full time.
•      Keep an emergency fund. Do not touch it unless it is a real emergency.
•      Save and invest as much as you can. Invest in 'high return' investments. Some part of the savings should go in to stocks and mutual funds as they have a high earning potential. Look for women oriented products.
•     Time your investments for known expenses likes children's education or marriages
•     Demarcate clear boundaries with your spouse for routine expenses. It will be easier to determine personal monthly expenses and hence monthly savings.
•     Track your savings and investments regularly.
•     Have a financial plan. Save as much as you can at an early age when you have limited responsibility.

Assuming you plan to save 50 per cent of your income every month and wish to invest in different investment products, you could compartmentalise your investment into various risk categories:

Life Insurance policy 1	10 per cent of savings
Life Insurance policy 2	10 per cent of savings
Health Insurance policy	5 per cent of savings
Fixed Deposits, NSCs, PF, PPF, Emergency funds	45 per cent of savings
Stocks and mutual funds	20 per cent of savings
Gold and other jewellery	10 per cent of savings

You can change the portfolio as per your risk appetite. Life Insurance is a must. However, it is advisable that you set aside the money for making premium payments even when you are not working.