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Have You Declared Interest Income?

@timesgroup.com

Bengaluru: Preparing to file your

tax return? Make sure you have included all the interest income earned
during the year. Although interest
earned from infrastructure bonds,
fixed deposits and recurring deposits is fully taxable, taxpayers often
ignore this income in their returns.
This is a common misconception.
Almost nine out of
10 taxpayers go
Almost nine
wrong in reporting
out of 10
their interest intaxpayers
come, said Sudhir
go wrong in
Kaushik, co-founder
reporting
of Taxspanner.com.
their interest
Almost 30% of the
income
respondents to an online survey conducted by ET Wealth
last year believed that the interest
from infrastructure bonds and taxsaving fixed deposits was tax-free.
Taxpayers also confuse the exemption
for savings bank interest under Sec 80
TTA. Almost 29% of the respondents
believed that interest of up to `10,000
from bank FDs is tax-free in a year.
There is also a misconception that
there is no need to report the income
if the bank has deducted TDS. But

A Secret
Meet Where
Dollar was
Shanghaied

The US dollar has just been

knocked down and forced to
serve the interests of the
world against the will of the
American people. The dollar
has been Shanghaied! The
term Shanghaied refers to
the 19th-century practice of
sailors forced to serve against
their will on vessels bound for
Shanghai. Tactics used included kidnapping and trickery.
In the 19th century, trade
between the US and China
was booming. But there was
shortage of able-bodied
seamen to sail the cargo
vessels. Each vessel had a
boarding officer whose job it
was to find the crew.
Boarding officers were paid
by the number of bodies they
could round up. This pay was
called blood money.
Full Story On Commodities Plus

How Interest is Taxed

Taxability of
Interest

Instrument

Where Taxpayers are Going Wrong

Instrument

TDS

PPF

Tax free

Not applicable

Tax-free bonds

Tax free

Not applicable

NSCs

Fully taxable

No TDS

Post Office term deposit

Fully taxable

No TDS

Kisan Vikas Patra

Fully taxable

No TDS

Infrastructure bonds

Fully taxable

Senior Citizens Saving Scheme

Fully taxable

Fixed deposits

Fully taxable

Recurring deposits

Fully taxable

Savings bank account

Tax free up to
`10,000 a year

10% TDS on interest

earned. More tax
payable if investor in
20-30% tax bracket
No TDS

correctly declare the interest income

they earned during the year in their
tax returns. Such interest income
should be shown in the return of income even in cases where Form 15G
or 15H has been filed if the earning is
not exempt under Section 10 of the
Income-tax Act and the total income
of the person exceeds the maximum
amount not chargeable to tax, said
the circular. For taxpayers up to 60

30% believe interest

earned on tax-saving
infrastructure bonds is
not taxable

They are tax saving bonds but

interest is fully taxable. 45% of
the 637 respondents who got
this wrong are in the highest
tax bracket

31% say no tax

payable if they invest
in FD or RD on behalf
of wife or child

Income has to be clubbed

with their own and taxed
accordingly. Over 30% who got
this wrong are in the highest
tax bracket

computerised surveillance system

in the tax department will immediately pick up the discrepancy. Last
year, the tax department sought information of all bank accounts held
and taxpayers should not forget to
include saving account interest from
all of these in their tax returns. If
you miss any, it amounts to concealment of information, said Archit
Gupta, founder and CEO, ClearTax.

BUILDING A FUND PORTFOLIO

Large-Cap Funds Offer Better Prospects

Prashant.Mahesh@timesgroup.com

Mumbai: Investors looking to build

a fund portfolio should focus on
schemes that invest in large-cap
stocks rather than midcaps, said
fund managers. Mid-cap funds have
outperformed the large-cap funds
over the last three years. Even in last
one year, the fall in this category of
funds has been lower than large-cap
funds. But this strength has resulted
in mid-cap stocks continuing to
trade at a premium to large caps.
Fund managers said it makes little
sense to continue investments in
mid-cap stocks at this juncture.
Valuation wise, large-caps are
better poised. We believe large-

cap stocks are currently available

at a discount to small- and mid-cap
stocks (based on price-to-earnings
ratio). They present a reasonable
investment opportunity, says
Sankaran Naren, chief investment officer at ICICI Prudential
Mutual Fund.
In March 2013, the Nifty traded at a
PE (price-to-earnings) ratio of 17.41
times, a discount to the Nifty Midcap
100s PE of 16.44. Now the Nifty
Midcap 100 trades at 23.58 times, a
premium to the Niftys PE of 20.83.
Wealth managers, however, are
sceptical about the near-term prospects of these schemes. Distributors
and wealth managers said many retail investors, encouraged by the
continued strength in mid-cap

WORLD-CLASS OPPORTUNITIES

Why Investors Like

India Over China
Chiranjivi.C@timesinternet.in

ETMarkets.com: In 2015, India

emerged as the worlds fastest growing
large economy with its 7.4% GDP
growth rate outstripping Chinas
6.9%. Direct allocation of equity
investment by US investors into
India outpaced Chinas as of
December, 2015.
S i n c e t h e l a s t we e k o f
February, we have seen improvement in investor sentiment towards India. I think there is quite a
significant change in global investor
sentiment towards emerging mar-

k e t s , s a i d Ro b e r t P a rk e r o f
Credit Suisse.
According to Hugh Young, MD - Asia,
Aberdeen Asset Management, the reason why equity investors favour India
over China is the availability of worldclass companies.
The difference of India compared with China is that it has
some world-class companies that
are available for investment. You
have the classic multinationals
like the Unilevers of this world,
you have some wonderful home-grown
companies like HDFC, the pharmaceutical giants and some IT services companies, he said.

Banks Take the Battle

to Mobile Wallet Players
Mumbai: Banks are taking
the battle to mobile wallet companies, armed with their readymade payment systems, wide
merchant network and an on
tap customer base, attempting
to reclaim a turf which just a
couple of years ago was their
fiefdom.
In the past year, large lenders
like ICICI Bank, State Bank of
India, Axis Bank and HDFC
Bank, which together control
around 40% of local banking
assets, have launched new payment instruments as they seek
to prevent customers from moving money to newly emerging
non-bank companies.
SBIs Buddy, ICICIs Pockets,
HDFC Banks PayZapp and
Axis Lime are the new kids on
the block, challenging the likes
of Paytm, MobiKwik and
Citrus Pay. It is an evolving
space and the shift is towards
digital transactions. None of
us know the pace of the shift.
Everyone is trying to experiment with the space, said
Axis Bank Chief Executive
Shikha Sharma.
While wallets have had to
spend millions to get their

Interest on savings bank

accounts is tax-free under
Sec 80TTA. FD and RD interest
is fully taxable

years, an income of `2.5 lakh a year is

not taxable. For senior citizens, the
limit is `3 lakh.
Dont think you can avoid reporting
your interest income. If the interest
exceeds `10,000 in a year, the bank or
bond issuer will deduct TDS and
credit it to your PAN number in your
Form 26AS. If you dont mention that
TDS (and the income on which it was
deducted) in your tax return, the

REGAINING LOST GROUND Banks launch payment instruments to stop

customers from moving money to emerging non-bank companies

Joel Rebello & Pratik Bhakta

Taxability of Interest

29% think that interest

of up to `10,000 from
bank FDs is tax-free
in a year

The online survey was conducted on 4-5 August, 2015, and had 2,158 respondents

TDS is only 10%, and if your income

puts you in the 20% or 30% tax bracket, you have to pay the additional tax.
Of course, if the income is below the
basic exemption limit, the TDS will
be refunded when the investor files
his return.
These mistakes can put taxpayers
in a tight spot now. In a circular issued last week, the Central Board of
Direct Taxes has asked taxpayers to

SHOW ME THE MONEY

JOHANNES VERMEER, Mistress and Maid

branding done, banks are leveraging their existing brand

value to lure customers away
from wallet players. Tie-ups
with new tech innovators are
also keeping bank costs low.
Investments in this business
for us is in terms of deployment of resources as platform
has been provided by our technology partner, said Manju
Agarwal, deputy managing director, corporate strategy and
new businesses, at SBI. Ease in

small-value payments attracted the bank to this space,

Agarwal added.
Parag Rao, head of cards and
merchant acquiring at HDFC
Bank, said he has been leveraging the banks merchant and
customer base to offer attractive discounts for PayZapp users. We want to facilitate all
forms of transactions that the
customer uses. In the physical
world, the user can use the
credit card and the debit card

while in the mobile world he

can use wallets, Rao said.
HDFC Bank dominates card
spending with a 3 lakh strong
network of point of sale terminals. It is this offline success that it wants to replicate
online.
However, wallet companies
say banks cannot ensure
enough attention to this business to make a difference.
They point out to the fact that
spending through debit and
credit cards is still nascent despite an exponential increase
in cards issued.
Reserve Bank of India data
show that the number of outstanding debt and credit
cards has increased more
than three times in six years
to 669.61 million in January
2016. However, people still
prefer to pay in cash after
withdrawing it from ATMs.
Banks are excellent settlement engines, but when it
comes to user experience, we
have been able to train 123 million people over the last five
years to make digital transactions without glitches. People
trust us with their money,
said Nitin Mishra, head of
products at Paytm, Indias largest wallet company.

Cant Rule Out

Possibility of
50 bps Rate Cut

Deutsche Banks Taimur Baig on

Emerging Markets and Interest
Rate Trajectory XX PAGE 11

BENGALURU, MONDAY, 28 MARCH 2016

I-T DEPARTMENT turning the heat on taxpayers who do not declare interest income thinking it is tax-free

Chandralekha.Mukerji

MONEY
MATTERS

ANIRBAN BORA

stocks, are keen to allocate money

there. Many retail investors poured
money into these funds since late
2013. With an earnings recovery a
couple of quarters away, any volatility could lead to a sharp correction
in mid-cap stocks first. Investors
could book profits in mid-cap funds
and switch to large-cap funds, says
Anup Bhaiya, MD, Money Honey
Financial Services.
As per data from Value Research,
the equity (midcap) funds category
has given an average return of
25.08% over the last three years,
compared to the large-cap fund categorys 13.08%. Over the last one
year, the category has fallen by
4.43% as against large-cap funds
which fell by 8.58%.

TECHNICAL CALLS

Use Corrections
to Take Long Bets
Equity markets may remain volatile this week ahead of the
F&O expiry, but the underlying trend is positive and the
Nifty is headed towards 7900 levels, according to technical
analysts. They advise investors to build long positions
with a stop loss at 7400.
What Is In
Store: The
underlying
trend of Nifty
as per smaller
and larger
NAGARAJ
timeframe is
SHETTI
still positive.
Technical Research
The upside
Analyst,
HDFC securities
breakout of the
significant resistance of 7550
levels and the positive indication
of momentum oscillator are
suggesting the possibility of
further upmove in the market
for the near term. The upside
target for Nifty could be around
7900-7950 levels for this week
or by next, from where one may
expect beginning of a reasonable
correction.
What Could Investor Do:
Investors may continue with
long positions in Nifty/sectors
and stocks and wait for more
upmoves to be achieved in
the coming week. Any intraweek dips to 7600 could be a
buying opportunity. Banking,
automobiles, IT, metal, realty and
infra are expected to perform in
line with the broader market.
What is in
store: A decisive
move below
7,643 would
indicate change
BIRENDRAKUMAR in trend. There
are positive
SINGH
expectations
AVP Technical
from the RBI.
Research,
Systematix Shares
Hence, the index
downtrend would be restricted
and is likely to find support in
7,583-7,405 levels. If it holds the
support of 7583-7405, a pullback
can be expected, which would

What Is In
Store: Nifty has
made inside
day candlestick
pattern on daily
charts. Nifty
PUNEET
March 7600 put
KINRA
is also having
AVP-Technical
good open
Research Analyst,
Bonanza Portfolio
interest build
up. Immediate support for Nifty
is 7600 level and 7600-7550
level may act as good support for
the coming week. On the upside,
Nifty has resistance at 7900
levels and Nifty may reach here
in the next few days.
What Could Investor Do: Expected
rate cut may keep the sentiments
positives. Traders and investors
may trade with long side bias. On
upside, Nifty may face resistance
around 200-DMA at 7900 levels.
On downside, Nifty has a major
support at 7400 levels. The Nifty
should expire above 7550-7600
support zone. Buy Bajaj Auto in
`2356-2340 range for a target of
`2525 with a stop loss at `2310.
Also, Buy Yes Bank in `849-840
range for Target of `880 with a
stop loss at `830.
lead to 7846-7972 levels.
What Could Investor Do: Any
correction should be utilised to
initiate long positions; strong
support is placed at 7583-7405.
In case of a bounce-back from the
support, a target of 7846-7972
is possible. Maintain a stop loss
of 7,405. High-risk traders can
initiate short position on Monday
if the Index trades weak below
7,643, with a strict stop loss of
7,730, cover short position and
initiate fresh long position in the
range of 7,583-7,405.