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.

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.

Smart tips to grow your money

If you really want your money to grow – stocks is the only way to go'- Haven't you heard this umpteen times. Well, it holds true every time.

The reason being that stocks have the potential to earn at a rate higher than the rate of inflation and thus generate actual savings for you!

Traditional investments like fixed deposits are good and safe and one must have a part of their savings invested in such risk free options. However, your portfolio is not complete and balanced in the absence of stock investments.

If invested wisely, you can minimize the risk of loss in stocks and increase the earning potential of your hard earned money.

Here are some statistics for you:

Nature of Investment	% Returns after 5 Years	% Returns after 10 Years
Real Estate	30%	14%
Gold	10%	7%
Bank FDs	8.50%	12.50%
Equity	35%	16%

As compared to fixed deposits, investments in equity will pay 26.5 percent higher returns in 5 years. Even for a longer term, investment in stocks pay higher returns even in comparison to real estate and gold.

To begin with, when you purchase equity in a company, you must ensure that the stock prices are reasonable.  If you over pay for stocks of a company, naturally you will have to wait longer to make profits on them.

This is because, if you buy stocks at a time when the prices are soaring at unreasonable levels, you will have to face an immediate setback when the market comes to normal levels, and the stock price drops to its average range. 

To understand if the stock price is reasonable, you have to understand how stock prices are determined. The price for a stock depends upon the demand for it amongst buyers. The base line of a stock price is its EPS (Earnings per Share).

The market price of a stock is generally a multiple of its EPS. The multiple depends upon the demand the stock fetches. Demand for the stock depends upon company's reputation, customer relations, financials, current news feeds, economic environment in general, political news, market sentiments etc.

If you are new to the stock market, it is best not to buy stocks when the market is influenced by a certain news feed as market sentiments prevail over logic at such times.

For example, the Sensex shot up in mid 2009 after the Congress led UPA Government was elected in the Parliament. Such price upheavals are temporary in nature.

A calm market is good for new investors.  If you are looking at stocks as an investment it is best to hold stocks for long term. Further, one should invest in good companies with sound management.

Investing in stocks for the long term

If you invest in stock of good companies for the long term, say 5 years, you will most likely earn good returns on your investment. This is because, a good company with a stable history and excellent growth charts, will grow over time.

Its EPS will also move in a forward direction as the company grows. Over time the demand for the shares will also increase and so will the PE multiple. Therefore, your initial investment will multiply over tie if you hold on to the stocks. Also, companies pay dividends and issues bonus shares. These factors add to returns.

Here is a sample of growth in share prices of reputed companies. Even if the prices have moved up and dipped from time to time, over the long run, the share prices have risen and investors have profited!

Share prices of Tata Steels (June 2005 – June 2010)

 Share prices of Infosys Technologies [ Get Quote ] (June 2006 – June 2010)

Option of investing through mutual funds

If you are vary of investing in stocks or are confused about the company where you should put your money, the option of mutual funds may be right for you.

This way you can invest in stocks of different companies, though indirectly, and gain the benefits of the stock markets without having to research stocks, study the market etc.

Fund houses have researchers and experts to study and analyse stocks.

You automatically have a diversified portfolio since mutual funds invest in multiple companies and different industries- this reduces the risk factor. Further you can make a modest beginning since most mutual funds are available for a small investment of Rs 5,000.

Topsy-turvy markets: Do I invest or do I exit?

Markets dancing up and down: do I invest now or do I exit? This question is in the minds of almost all investors small or big; short-term or long-term. This is a problem because nowadays the markets are fluctuating so much that a 1 per cent to 2 per cent change per day has become quite common.

If one thought the market was weak two weeks ago and going down, this week the markets are looking up. So where does a salaried individual put his/her bet on? This article is to give some ideas particularly for the small investors.

Market fluctuations

The stock market fluctuates, that too when the overall economy is not that stable, it fluctuates a lot. This is true not only for India [ Images ] but across the world.

Again this is true not only in our times, but in all known history. To fluctuate is one of the basic characteristics of the stock market.

However, research -- or for that matter any five-year chart of the indices (Sensex or Nifty) -- shows that there is always a significant gain. The same is the case even for the 5 years ending December 2008, when the market has fell almost 50 per cent during the year.

What are the implications of fluctuation?

There are a number of negative aspects/scenarios to the short-term fluctuations.

1. Investments are still in negative even after the markets have gained.

If an investor had invested his/her funds at the peak of the market and stayed there, the funds would not have still recovered from the losses that they suffered in 2008. Will the investment ever recover? Should I exit, taking the loss?

2. The planned financial goal is here. But the market is still low.

The planned financial goal could have been the daughter's marriage, retirement, a housing down payment. But if one had the misfortune of a fall in the market happening right when the withdrawal was planned, it is definitely a long postponement of the plan (if possible) or financial trouble (if it could not be postponed). A requirement like a daughter's marriage cannot be postponed for want of money.

3. I have got a one-time lump sum of money.

A loving relative's gift or an unexpected bonus or an arrear due for 2 years may suddenly land in an investor's hands. One can be sure that the same will not happen often.  So when does one invest this money in the market?

A better perspective

A better perspective to investments in the stock market is that the loss or gain is only on paper till the shares are sold. So the investment that has a lower value today as in scenario 1 has not lost its true value, unless one sells it. All that it needs is time to give a better value.

This perspective however does not solve the problem, when an investment is time bound as in scenario 2 or 3.

The question is thus not whether there will be returns or not but how does one time the market to get better returns?

Timing the market: Is it possible?

Is this the solution? Again the answer is 'NO'. Because we could find the right time to invest in the market only retrospectively. No one could guess to what extent the market would react to certain economical news.

So too no one could guess accurately in advance at what level and when a market would turn down or up.

So timing the market is not really possible. However, any five years' graph will show a steady gain as discussed earlier. So can we use time in the market to our advantage?

Time in the Market –The Solution

 By increasing the time in the market by being invested for a longer period and by investing in a higher frequency, we can overcome the problems related to the fluctuations in the market.

This is definitely a solution that can be used to tackle the problems faced by the small investors.

By increasing the time in the market (investment period), fluctuations are over come. This requires planning earlier and investing at least for a period of five years.

Even the one time lump sum of money, can be invested over a period of, say, five months in smaller chunks. This will take care of the market ups and downs during the investment period.

Those who have invested for their retirement and their daughter's (or son's) marriage can practice the same but in reverse order. Rather than wait till the date of retirement for the withdrawal from the market, they could withdraw over a period of 6 months before the marriage.

This will not only help them in the run up to the event but also prevent losses from any sudden fall in the market.

Fluctuations are a basic nature of the stock market. An investor cannot wish it away. Nor should one avoid the stock market because of the fluctuations.

Timing the market for its ups and downs for making investments is not possible as accurate prediction is in the realm of speculation.

The better option is to stay in the market. This is done by increasing the time period of investment and by increasing the frequency of investment and withdrawal.

Do you know where to invest your money ??

 How many of you can confidently say that you are well aware of all the investment avenues available? Not all. There is a plethora of investment options available in the market today. But then the options must be selected based on the goals you want to achieve in life and the time frame in which you want to achieve it.

Let us take a trip down the different paths of investment world.

This is the first part where in we will explore different options available under equities:

Equity

I guess one of the most talked about asset class in recent years. So what is equity investment? It refers to buying and holding of shares or stocks in a stock market by an individual and funds in anticipation of income by way of dividend and capital gain as the value of the stock rises. Equity investment is a good form of long-term investments. There are various ways of investing in equity:

Direct investment: Refers to buying and selling (trading) in the stocks or shares on the exchange. In order to trade you need to have a demat account. As for trading you need to register with a broker or you can have an online trading account which is linked to your demat account and your bank account through which you can trade.

This form of investment in equities is for investors who regularly follow the stock market. Investors who are looking for developing long-term wealth should not indulge in speculative trading (buying and selling within a short span of time). Also investments in stocks or scripts should not be done based on tips that you have received from your friendly neighbor or relatives.

Investment should be done after a thorough analysis of the company, sector, and industry on the whole. We have heard many stories where people have lost their entire wealth by investing based on tips. Also do remember, one can never time the market. So be careful when you are investing directly.

Portfolio management services (PMS): In return for a fee, trained professional portfolio managers allocate your assets in various asset classes depending upon your personal investment goals and risk preferences. PMS is not restricted to only investing in equity and equity mutual funds. They also include investment in bonds. The advantage of this form of investment: professional expertise for your hard earned money, transparency and flexibility. You do not have to overlook in the day-to-day management. You are given an online user name and password that grants you an online access to your portfolio that keeps you up to date. The fee structure can also be selected either on performance or on a fixed basis.

The disadvantages: the minimum requirement for PMS is generally very high, that is., most of the PMS are offered where the portfolio offered to manage is at least Rs 25 lakh. The fee charged is also high. Generally losses are not shared when you opt for performance-based fees. This form of investment is especially good for high net worth individuals who have money but no time to monitor them.

Equity mutual fund: Mutual fund is the latest buzzword. After the debacle of US 64, the mutual fund industry took many years to get their act together. But now with stricter norms set by SEBI and more transparency mutual fund industry has developed in a big way. With more than 500 funds there are options available for each and every investor. Also, with investment of as low as Rs 1,000 (for systematic investment plan) and Rs 5,000 (lump sum investment) this form of investment attracts one and all.

So what is a mutual fund? A mutual fund is professionally managed collective investment scheme that pools money from many investors and invest it in stocks, bonds and various others securities and instruments. Mutual funds are divided into open ended and closed ended mutual fund.

Open-ended fund: Are funds in which you can buy or sell on any business working day. Just like shares value, mutual funds have net asset value on which you buy or sell your units. Unlike shares in mutual funds, units are allocated to an investor for the amount invested.

Closed-ended fund: Is a collective investment scheme where limited a number of units are allocated. New units are not allocated on a day-to-day basis. Generally closed-ended funds are traded on the exchange and one can trade their units on the exchange.

In this section, we will have a look at various forms of open-ended equity mutual funds. Equity mutual funds are sub-divided into:

Diversified equity mutual fund: A kind of mutual fund which invests in stocks of various companies of various sectors. Best bet to park your funds in.

Sector funds: Mutual fund whose investment objective is to invest stocks of companies of a particular sector like automobiles, pharma, banking, infrastructure and others. This type of fund can be risky if the sector does not perform well. So limit your exposure to sector funds.

Index fund: A type of mutual fund with a portfolio constructed to match or track the market index. It is relatively passive fund with broad market exposure and low operating cost.

Tax savers or equity linked saving schemes (ELSS): They are same like diversified mutual fund. The difference is investment in these funds have tax benefit up to Rs 1 lakh as it is exempted under section 80C. Also, ELSS has a three year lock-in period. Any withdrawal before this period means that you will not get the tax benefit under section 80C. Do keep in mind the risk factor while opting to invest in ELSS. Also, select growth or dividend payout option but not dividend reinvestment as dividend reinvestments go into the lock in period loop.

Why select mutual fund? Here's why. Low minimum investment amount, low management cost, low investment, professional management, diversification, liquidity and with entry load removed from August 1, 2009 make them all the more attractive.

Disadvantage of mutual fund: Backend load or exit load if investment redeemed within six months to one year. Many funds have high operating charges, decision-making is in someone else's hands and no tailor made portfolio.

The pros outweigh the cons and hence equity mutual funds form a very attractive form of investments. Mutual funds are especially for investors who do not have the time to follow the market and also who cannot shell out huge amounts. It is advisable to do a SIP in mutual funds as power of compounding and cost averaging works wonders to your hard earned money.

Derivative refers to a variable that has been derived from another variable. They have no value of their own. They derive their value from some underlying asset. For example a derivative of a share of Reliance Industries will derive its value from the share price of Reliance. Derivatives are specialised contracts wherein an agreement or an option to buy or sell the underlying asset of the derivate up to a certain time in the future at a pre-arranged price which is known as exercise price. The contract has a fixed expiry period between 3 to 12 months.

The value of the contract depends on the expiry period and on the price of the underlying asset. The underlying asset in derivative trading can be financial assets like shares, index, currency or can be commodities like soyabean, oil and others. We will right now be looking only at financial derivative trading whose underlying asset is equities.

The different forms of derivative contracts are:

Futures and forwards: Futures contract give the holder the opportunity to buy or sell the underlying asset at a pre-specified price some time in future. These contracts come in standardised format with fixed expiry date, time contract size and price. Forwards are similar contracts like future but the size, expiry date and price are customised as per the needs of the user.

Options: It is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset (it maybe an index or a stock) at a specific price on or before a certain date. The right to buy an underlying asset is known as call option. The right to sell the underlying asset is known as put option.

Financial derivative contract can be bought or sold by paying a premium. The upside in a derivative contract is unlimited. But again if you are a buyer of an option, your downside is limited up to the extent of the premium amount paid (Note: The seller of an option has an unlimited loss potential).

Futures and forwards too have an unlimited loss potential.

The advantages are you need to pay only 20 to 30 per cent of the contract price. You also have the option to first sell the lot of stocks and then buy them within the stipulated time. This is only possible in normal equity trading if you are an intra-day trader.

The disadvantage is there is a time frame to the contract. Not all the stocks are available in derivatives trading. Finally they are complicated and extremely risky.

Only investors who have a thorough knowledge of derivative trading and who can regularly follow the stock market should trade in them. It is not for investors who are looking to develop long-term wealth.

Who should be investing in equities?

Investors whose goals are long term, that is, more than seven years can invest comfortably in equities. As aptly said by Warren Buffet: If, when making a stock investment, you're not considering holding it at least ten years, don't waste more than ten minutes considering it.

If you want to achieve any of your goals in less than this time frame then equity is not the vehicle for you. Remember that emotions like greed and fear should have no place when investing in equities. Otherwise debt is the avenue for risk-averse safe fixed income generation.