Friday, February 29, 2008

Taxpayers may gain up to Rs 44,000 per year

The increase in tax slabs in undoubtedly great news for the salaried. The news gets even better for those in the higher tax brackets. The adjustment for the income tax slabs has been done in such a way that people in the high income category – say above Rs 2.5 lakhs per annum - stand to gain even more. To put this in numbers, a person who had a taxable income of Rs 5 lakhs would have be paying a tax of Rs 99,000 – before any cess on his income in the income tax slabs that prevailed till now. However, under the new income tax slabs, his tax liability would come down to Rs 55,000 translating into cool tax savings of Rs 44,000 per year. That is a huge amount of money. So, how has this magic come about? To consider this, look at the tax slabs. The minimum exemption limit has gone up by Rs 40,000. That’s good enough. What is better is that the next slab of 20% which earlier kicked in from Rs 1, 50,000 and extended till Rs 2, 50,000 will now only kick in from Rs 3 lakh onwards. The good news does not end here; in the prevailing regime the 30% tax bracket started from Rs 2.5 lakh onwards. In the latest budget, the 30% tax bracket only starts from Rs 5 lakhs onwards. This is the revision that will do the magic for the high income earners. And, all this is not taking into account the impact of deduction on account of Section 80C. The huge jump in interim slabs means that many people will just fall out of the highest tax slab into the tax slab below after they start claiming deductions they are entitled to under Section 80C. This is one budget middle class salary earners are unlikely to forget. So what does the revision in the tax slabs mean for various tax payers. For a person whose taxable income after all deductions was Rs 2.5 lakh, tax savings could be around Rs 14,000; for someone with an income of Rs 5 lakh, it could be around Rs 45,000; for someone with a salary income of Rs 7.5 lakh, tax saving would be Rs 44,000. Taxpayers having salary of above 10,00,000 will have to pay the surcharge of 10% and the education cess of 3%. When these are put together the gain will come to Rs.49,852.

The old tax slabs were:
Upto Rs 1,10,000 – Nil
Rs 1,10,001 – Rs 1,50,000 – 10%
Rs 1,50,001 – Rs 2,50,000 – 20%
Above Rs. 2,50,000 – 30%
The new tax slabs are:
Upto Rs 1,50,000 - Nil
Rs 1,50,001 – Rs 3,00,000 – 10%
Rs 3,00,001 – Rs 5,00,000 – 20%
Above Rs 5,00,000 – 30%

(source:economictimes.com)

Wednesday, February 27, 2008

10 golden rules to become rich!

Once you decide to put your money to work to build long-term wealth, you have to decide, not whether to take risk, but what kind of risk you wish to take. Here are 10 investing rules that can make you rich:

1. There's no escaping risk
Once you decide to put your money to work to build long-term wealth, you have to decide, not whether to take risk, but what kind of risk you wish to take.
Yes, money in a savings account is dollar-safe, but those safe dollars are apt to be substantially eroded by inflation, a risk that almost guarantees you will fail to reach your wealth goals.
And yes, money in the stock market is very risky over the short-term, but, if well-diversified, should provide remarkable growth with a high degree of consistency over the long term.

2. Buy right and hold tight
The most critical decision you face is arriving at the proper allocation of assets in your investment portfolio -- stocks for growth of capital and growth of income, bonds for conservation of capital and current income.
Once you get your balance right, then just hold tight, no matter how high a greedy stock market flies, nor how low a frightened market plunges. Change the allocation only as your investment profile changes. Begin by considering a 50/50 stock/bond-cash balance, then raise the stock allocation if:
You have many years remaining to accumulate wealth.
The amount of capital you have at stake is modest.
You don't have much need for current income from your investments.
You have the courage to ride out the stock market booms and busts with reasonable equanimity.
As these factors are reversed, reduce the 50 per cent stock allocation accordingly.

3. Time is your friend, impulse your enemy
Think long term, and don't allow transitory changes in stock prices to alter your investment program. There is a lot of noise in the daily volatility of the stock market, which too often is 'a tale told by an idiot, full of sound and fury, signifying nothing'.
Stocks may remain overvalued, or undervalued, for years. Realize that one of the greatest sins of investing is to be captured by the siren song of the market, luring you into buying stocks when they are soaring and selling when they are plunging.
Impulse is your enemy. Why? Because market timing is impossible. Even if you turn out to be right when you sold stocks just before a decline (a rare occurrence!), where on earth would you ever get the insight that tells you the right time to get back in? One correct decision is tough enough. Two correct decisions are nigh on impossible.
Time is your friend. If, over the next 25 years, stocks produce a 10% return and a savings account produces a 5% return, $10,000 would grow to $108,000 in stocks vs. $34,000 in savings. (After 3% inflation, $54,000 vs $16,000). Give yourself all the time you can.

4. Realistic expectations: the bagel and the doughnut
These two different kinds of baked goods symbolize the two distinctively different elements of stock market returns.
It is hardly farfetched to consider that investment return -- dividend yields and earnings growth -- is the bagel of the stock market, for the investment return on stocks reflects their underlying character: nutritious, crusty and hard-boiled.
By the same token, speculative return -- wrought by any change in the price that investors are willing to pay for each dollar of earnings -- is the spongy doughnut of the market, reflecting changing public opinion about stock valuations, from the soft sweetness of optimism to the acid sourness of pessimism.
The substantive bagel-like economics of investing are almost inevitably productive, but the flaky, doughnut-like emotions of investors are anything but steady -- sometimes productive, sometimes counterproductive.
In the long run, it is investment return that rules the day. In the past 40 years, the speculative return on US stocks has been zero, with the annual investment return of 11.2% precisely equal to the stock market's total return of 11.2% per year.
But in the first 20 of those years, investors were sour on the economy's prospects, and a tumbling price-earnings ratio provided a speculative return of minus 4.6% per year, reducing the nutritious annual investment return of 12.1% to a market return of just 7.5%. From 1981 to 2001, however, the outlook sweetened, and a soaring P/E ratio produced a sugary 5% speculative boost to the investment return of 10.3%.
Result: The market return leaped to 15.3% -- double the return of the prior two decades.
The lesson: Enjoy the bagel's healthy nutrients, and don't count on the doughnut's sweetness to enhance them.

5. Why look for the needle in the haystack? Buy the haystack!
Experience confirms that buying the right stocks, betting on the right investment style, and picking the right money manager -- in each case, in advance -- is like looking for a needle in a haystack.
Investing in equities entails four risks: stock risk, style risk, manager risk, and market risk. The first three of these risks can easily be eliminated, simply by owning the entire stock market -- owning the haystack, as it were -- and holding it forever.
Owning the entire stock market is the ultimate diversifier. If you can't find the needle, buy the haystack.

6. Minimize the croupier's take
The resemblance of the stock market to the casino is not far-fetched. Yes, the stock market is a positive-sum game and the gambling casino is a zero-sum game . . . but only before the costs of playing each game are deducted. After the heavy costs of financial intermediaries (commissions, management fees, taxes, etc.) are deducted, beating the stock market is inevitably a loser's game. Just as, after the croupiers' wide rake descends, beating the casino is inevitably a loser's game. All investors as a group must earn the market's return before costs, and lose to the market after costs, and by the exact amount of those costs.
Your greatest chance of earning the market's return, therefore, is to reduce the croupiers' take to the bare-bones minimum. When you read about stock market returns, realize that the financial markets are not for sale, except at a high price.
The difference is crucial. If the market's return is 10% before costs, and intermediation costs are approximately 2%, then investors earn 8%. Compounded over 50 years, 8% takes $10,000 to $469,000. But at 10%, the final value leaps to $1,170,000 -- nearly three times as much . . . just by eliminating the croupier's take.

7. Beware of fighting the last war
Too many investors -- individuals and institutions alike -- are constantly making investment decisions based on the lessons of the recent, or even the extended, past. They seek technology stocks after they have emerged victorious from the last war; they worry about inflation after it becomes the accepted bogeyman, they buy bonds after the stock market has plunged.
You should not ignore the past, but neither should you assume that a particular cyclical trend will last forever. None does. Just because some investors insist on 'fighting the last war,' you don't need to do so yourself. It doesn't work for very long.

8. Sir Isaac Newton's revenge on Wall Street -- return to the mean
Through all history, investments have been subject to a sort of law of gravity: What goes up must go down, and, oddly enough, what goes down must go up. Not always of course (companies that die rarely live again), and not necessarily in the absolute sense, but relative to the overall market norm.
For example, stock market returns that substantially exceed the investment returns generated by earnings and dividends during one period tend to revert and fall well short of that norm during the next period. Like a pendulum, stock prices swing far above their underlying values, only to swing back to fair value and then far below it.
Another example: From the start of 1997 through March 2000, Nasdaq stocks (+230%) soared past NYSE-listed stocks (+20%), only to come to a screeching halt. During the subsequent year, Nasdaq stocks lost 67% of their value, while NYSE stocks lost just 7%, reverting to the original market value relationship (about one to five) between the so-called 'new economy' and the 'old economy.'
Reversion to the mean is found everywhere in the financial jungle, for the mean is a powerful magnet that, in the long run, finally draws everything back to it.

9. The hedgehog bests the fox
The Greek philosopher Archilochus tells us, 'The fox knows many things, but the hedgehog knows one great thing.' The fox -- artful, sly, and astute -- represents the financial institution that knows many things about complex markets and sophisticated marketing.
The hedgehog -- whose sharp spines give it almost impregnable armour when it curls into a ball -- is the financial institution that knows only one great thing: long-term investment success is based on simplicity.
The wily foxes of the financial world justify their existence by propagating the notion that an investor can survive only with the benefit of their artful knowledge and expertise. Such assistance, alas, does not come cheap, and the costs it entails tend to consume more value-added performance than even the most cunning of foxes can provide.
Result: The annual returns earned for investors by financial intermediaries such as mutual funds have averaged less than 80% of the stock market's annual return.
The hedgehog, on the other hand, knows that the truly great investment strategy succeeds, not because of its complexity or cleverness, but because of its simplicity and low cost. The hedgehog diversifies broadly, buys and holds, and keeps expenses to the bare-bones minimum.
The ultimate hedgehog: The all-market index fund, operated at minimal cost and with minimal portfolio turnover, virtually guarantees nearly 100% of the market's return to the investor.
In the field of investment management, foxes come and go, but hedgehogs are forever.

10. Stay the course: the secret of investing is that there is no secret
When you consider these previous nine rules, realize that they are about neither magic and legerdemain, nor about forecasting the unforecastable, nor about betting at long and ultimately unsurmountable odds, nor about learning some great secret of successful investing.
In fact, there is no great secret, only the majesty of simplicity. These rules are about elementary arithmetic, about fundamental and unarguable principles, and about that most uncommon of all attributes, common sense.
Owning the entire stock market through an index fund -- all the while balancing your portfolio with an appropriate allocation to an all bond market index fund -- with its cost-efficiency, its tax-efficiency, and its assurance of earning for you the market's return, is by definition a winning strategy.
But if only you follow one final rule for successful investing, perhaps the most important principle of all investment wisdom: Stay the course!

(source:visionbooksindia.com)

Tuesday, February 26, 2008

Evergreen Investments Wins Prestigious NQR and DALBAR Awards

Wachovia has once again earned national recognition for customer service. This time, Evergreen Investments took home the honors.
Evergreen received top sales and customer service recognition for its 2007 performance from the National Quality Review and DALBAR, Inc., two of the nation’s leading benchmarks for customer service in the financial services industry.
“We continue to set extremely high standards for our firm – leveraging the best-in-class benchmarks that NQR and DALBAR have set – to pursue our vision of being a leader in the investment management industry,” said Dennis Ferro, president and chief executive officer of Evergreen Investments.
This is the third year Evergreen has been named a DALBAR "Triple Crown" winner for having achieved excellence in all three of the organization’s categories. The DALBAR Awards symbolize achievement of the highest tier of service within the mutual fund industry and are awarded only to those firms that exceed industry norms.
Also, Evergreen Service Company's Transaction Processing and Client Services Teams were among a select group of firms that received a 5-Star performance rating – the highest possible for 2007 – from the National Quality Review’s Transaction Processing Review and Telephone Customer Service. The service analyzes the accuracy and timeliness of transactions processed by financial service organizations. “These distinguished recognitions underscore our commitment to providing a consultative, collaborative client experience,” Ferro said. “They show our dedication to our goal of delivering excellent client service and products through experienced and knowledgeable investment professionals.”
For the ninth year in a row, and the tenth year overall, Evergreen received a DALBAR Mutual Fund Service Award for service provided to shareholders, maintaining the firm’s fifth place ranking.
For the fifth consecutive year, Evergreen Retail Sales Company joined the Evergreen Service Company in receiving recognition of outstanding achievement as a recipient of the DALBAR FISQE (Financial Intermediary Services Quality Evaluation) Pre-Sales Award for sales support provided to investment professionals, maintaining the firm’s sixth place ranking.
For the third consecutive year, Evergreen Service Company received the Service Award for FISQE Post-Sale service support provided to investment professionals. The firm moved up one spot from its 2006 ranking to place seventh for 2007.
The DALBAR Performance Evaluation of Mutual Fund Services Program measures and evaluates the call center service provided to mutual fund shareholders. The DALBAR FISQE Program measures and evaluates sales support delivered to financial advisors. Both programs focus on key areas of customer service, including accommodation, attitude and expertise of representatives.
Evergreen’s awards follow the recent announcement that Wachovia was ranked No. 1 in the American Customer Satisfaction Index for the seventh year in a row.

(source:www.evergreeninvestments.com)

Monday, February 25, 2008

Larsen & Toubro CMD Naik conferred Danish knighthood

Larsen & Toubro Chairman and Managing Director A M Naik has been appointed as Knight of the Order of the Dannerbrog (name of Danish flag) by Queen Margarethe of Denmark. The Knight Cross was formally presented to Naik by ambassador of Denmark Ole Lansmann Poulsen here today. It is in recognition of contribution made by Naik in Indo-Danish relationship. The ambassador said it is a rare honour and very few foreigners have received it. Naik is currently also the consul general of Denmark in Mumbai. Poulsen said there is large potential for enhancing trade relations between Denmark and India. So far 75 Danish companies have made investment in India making Denmark 19th biggest investor in the country. Meanwhile, Naik said the company has zeroed in on Hazira in Gujarat to set up its power plant where it will make boilers and turbines. The foundation stone will be laid in one month and plant will be commissioned over the next 24 months, he said.
(source : Economic Times)

Sunday, February 24, 2008

India's 'in-a-hurry' young generation - Steve Hamm, BusinessWeek.com

Ravikiran's parents took the safe route. In post-colonial India, even though they had college degrees, they chose low-paying but secure government jobs. Today, they live with their three sons in a modest concrete house in a working-class section of Bangalore.
While colorful paintings of Hindu gods adorn their walls, the furniture is mostly plastic chairs and steel cots. For Ravikiran M.S., their eldest son, security and stability simply aren't enough. The 24-year-old programmer is brimming with ambition.
He rides a motorbike to work and hopes to buy a car. And he expects quick promotions, dreaming of becoming a CEO. "I want the posh life," he declares.

Ravikiran is typical of India's in-a-hurry younger generation. With the tech-services boom, the country's college grads are coming of age in a time of economic optimism, and unlike their parents and grandparents, this group has vibrant job prospects and high hopes.
The challenge for companies is to harness their energy while reining in inflated expectations. If these young people feel they're being short-changed in terms of either salary or advancement, the best and brightest will find work elsewhere, shift careers, or leave the country. "It's a very different generation," says S Gopalakrishnan, chief executive of Indian tech giant Infosys Technologies. "They want immediate rewards."
Proving ground
This pattern will be repeated in other emerging nations as prosperity spreads. So India is becoming a proving ground for managing the global workforce, with companies developing new schemes to keep the younger generation engaged.
The likes of MindTree Consulting [Get Quote], Infosys [Get Quote], and IBM (IBM) have revamped their orientation programs to better engage young people, tapped men and women under 30 to serve on management committees, and launched mini-MBA programs for eager young managers.
"India is going to be a lab for lessons that we'll apply to other countries," says Lyndon Rego, manager of innovation at the Center for Creative Leadership in Greensboro, N.C., which develops leadership training programs in emerging markets.
The challenge for companies is to address both the desires and frustrations of the younger generation. These become abundantly evident in the cafes and bars of Bangalore. As the city has developed into India's Silicon Valley, it also has become the country's bar-hopping capital.

"We need capitalism with a human face," says P.B. Devaiah, a 20-year-old industrial engineering major at a local college. Sitting with friends at Java City, a crowded coffee shop, he complains that much of the programming in India is the equivalent of sweatshop labor, where new hires are expected to spend as much as 12 hours a day writing code. "We're being used as machines," Devaiah says.
When the conversation turns to social issues, India's young people are likely to erupt in grousing about arranged marriage, the caste system, and interactions with Westerners -- all of which should concern employers. Caste attitudes, for instance, clash with merit-based corporate values, and young techies sometimes feel they're treated poorly by American and European clients.
"We're not Martians. We're human beings," says a young woman engineer at a Bangalore tech firm.
One of the biggest concerns is the changing role of women. The tech industry was once almost exclusively male, but by last year about 35% of employees were women.
Nasscom, the software industry trade group, says that will rise to 45% by 2010. The rise of women in tech has taken companies by surprise, and they're scrambling to react. At software and research outfit MindTree, for instance, 40% of new hires last fall were female, compared with just 23% of the company's overall workforce of 5,500.
And these young women tend to be more outspoken than their male counterparts. At MindTree, a council run by a top female scientist now addresses gender issues.
"They have to learn to adjust"
Veena Parashuram is one of this new generation of Indian women. The 26-year-old engineer grew up in a village so primitive that she never used a spoon, fork, or napkin until she went away to boarding school at age 10.
When a teacher told her girls could become anything they wanted, "my mind opened up," she says. Although her parents wanted her to submit to an arranged marriage and settle in their village, she went to engineering school in Bangalore and the Netherlands, where she met a German man.
The couple married to ease the difficulties of getting work permits, but Parashuram says "the concept of marriage is pretty weird." While she's planning a traditional Indian wedding, she says, she doesn't "like to follow rules that were set down hundreds of years ago."
Companies are starting to coddle this new generation from Day One, helping to smooth the transition between school and work.
MindTree, for instance, revamped its initiation process because young hires felt "they got lost in a sea of people," says HR chief Puneet Jetli. Under the new program, called Orchard, each new hire is placed in one of three groups called "houses" and assigned to a manager called a PAL, or "parent, anchor, and leader."
The company redesigned an entire floor of a Bangalore building to give each house an assembly space, lockers, and classrooms. On a recent visit, a small group clustered around a young man strumming a guitar and singing Hotel California. The houses begin and end their days in these rooms with meetings and the occasional Q&A with a top MindTree executive.
"The senior people at MindTree are very caring," says Deepthi R. Halbhavi, a young woman who completed the eight-week induction program last fall. "They treat us like we're their children."
Still, there are plenty of tensions between companies and young employees. Many Indian engineers are fascinated with cutting-edge technologies, yet much of the work for clients calls for tried-and-true techniques.
And while young people are eager to get promotions and overseas assignments, there are practical limits to how quickly they can advance. "They have to learn to adjust," says T.V. Mohandas Pai, director of human resources at Infosys. "It's almost like growing up."
It's also a two-way street. Infosys executives understand that they can't simply empathize with their young employees, but must also learn from them.
So Infosys set up something called the Voice of Youth Council: a dozen people under 30 who sit on the executive management committee, which deals with business strategy and HR policies. The youth contingent was instrumental in establishing a program for spotting and nurturing innovation. Being in the group is "very empowering," says Bela Gupta, 24, the council's youngest member.
While not every ambitious young Indian will sit on a management council or become a boss, there's huge pressure on companies to identify and train those with leadership potential.
Facing a shortage of competent managers, IBM last year devised an in-house mini-MBA, called ProPel, aimed at keeping hungry recruits on board and giving them the training they need to oversee a growing staff. The program consists of testing, seminars, on-the-job training, databases for sharing the tricks of the trade, and e-mail quizzes about the appropriate response to workplace problems.
The program might be a good match for the likes of Ravikiran, the Bangalore programmer who wants a "posh life" as an executive. He got a master's degree in computer applications before going to work a year ago at software shop Torry Harris Business Solutions.
When Ravikiran's father landed a job in the government engineering office, he stuck around for 37 years. Ravikiran, by contrast, is already plotting his next career move. "I don't want to be lost in the crowd," he vows. "I envision a path, and I go for it."
Nerd herding
What's the key to wooing software geeks in developing countries? Harnessing the Global N-Gen Talent Pool, a July report by Toronto consultancy New Paradigm Learning (newparadigm.com), recommends managers find out whether pay or location is more important to far-flung employees.
Example: In India, young workers often want to stay close to mom and dad, so companies should locate in smaller cities and offer benefits to extended family members. That may cost less than competing for talent in larger locales -- and make for more loyal workers.

Saturday, February 23, 2008

India General Budget - 1 (source: Economic Times)

Income tax payers are likely to get a major relief in the Budget 2008-09, as the government prepares itself to please the middle class in the election year. Finance Minister P Chidambaram can give a marginal but visible relief to personal income tax assessees this year, as tax collections have substantially improved over the past three years, sources said. With buoyant tax collections in 2007-08, there is significant pressure on Chidambaram to reduce the effective rates. The Minister himself has acknowledged that with better tax compliance, there could be a case for cut in rates. The minimum income threshold limit for income tax payer could be raised from Rs 1,10,000 to Rs 1,25,000 or Rs 1,30,000, sources said. Similarly, the income threshold for 30 per cent tax rate could be raised from the current Rs 2,50,000 per annum, sources said, adding that this had been kept constant since fiscal year 2005-06.

Tax payers would get a relief of Rs 1,500 to Rs 2,000 even if the Finance Minister decides to raise the minimum income threshold limit of income tax by Rs 15,000 to Rs 20,000 to offset the impact of inflation and submission of Sixth Pay Commission report later this year. An announcement on the new income tax code is also expected in the Budget. The Finance Minister had earlier said that the code, aimed at simplifying the tax laws, would be put for public comments shortly. Apart from pleasing his party colleagues and voters, the tax relief will also help Chidambaram to address the recent slow down in industrial production. More income in the pockets of consumers will boost demand for consumer goods as well as household savings for investment. Another option before the Finance Minister, the sources said, could be to increase the ceiling limit for savings under section 80C from Rs 1,00,000 to a more reasonable level of Rs 1,25,000. The increased limit could be specified for investment in infrastructure sector, which requires around 500 billion dollars investment over the next five years. According to tax consultancy firm KPMG, India needs to realign its income tax slabs to attract more investment. In neighbouring China, although the maximum marginal tax rate is 45 per cent, it is applicable on income over RMB 1,00,000 per month which translates to Rs 5,47,000 approximately. China has also said it would lower income tax rates this year to attract more investment. KPMG also pointed out that the Indian economy has witnessed a year-on-year inflation rate of more than 4 per cent every year in the last three years, which means that effectively the minimum threshold of real income on which the maximum marginal rate sets in is all the more lower. Another benefit which could be relooked at is the tax sop on interest payable in case of loans taken for purchase of house property. Presently, interest up to Rs 1,50,000 per annum is allowed as a tax deduction if the property is used for self occupation.