My Original Project On Budget 2011

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals
ABSTRACT
Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenues to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings. The money you earn is partly spent and the rest saved for meeting future expenses. Instead of keeping the savings idle you may like to use savings in order to get return on it in the future. This is called Investment. One needs to invest to and earn return on your idle resources and generate a specified sum of money for a specific goal in life and make a provision for an uncertain future One of the important reasons why one needs to invest wisely is to meet the cost of Inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or service in the future as it does now or did in the past. The sooner one starts investing the better. By investing early you allow your investments more time to grow, whereby the concept of compounding increases your income, by accumulating the principal and the interest or dividend earned on it, year after year. The three golden rules for all investors are: Invest early Invest regularly Invest for long term and not short term
This project will also help to understand the investors facet before investing in any of the investment tools and thus to scrutinize the important aspects for the investors before investing that further helped in analyzing the relation between the features of the products and the investors requirements.
INTRODUCTION
OBJECTIVES OF THE PROJECT: The purpose of the study was to determine the saving behavior and investment preferences of customers. Customer perception will provide a way to accurately measure how the customers think about the products and services provided by the company. Todays trying economic conditions have forced difficult decisions for companies. Most are making conservative decisions that reflect a survival mode in the business operations. During these difficult times, understanding what customers on an ongoing basis is critical for survival. Executives need a 3rd party understanding on where customer loyalties stand. More than ever management needs ongoing feedback from the customers, partners and employees in order to continue to innovate and grow. The main objective of the project is to find out the needs of current and future customers. For this report , customer perception and awareness level will be measured in many important areas like: To understand all about different investment avenues available in India. To find out how the investors get information about the various financial instrument To find out how the investor wants to invest i.e. on his own or through a broker. To find out the saving habits of the different customers and the amount they invest in various financial instruments. In which type of financial instrument they like to invest. How long they prefer to keep their money invested. What is the return that they expect from the investment. What are the various factors that they consider before investing. To find out the risk profile of the investor. To give a recommendation to the investors that where they should invest. To give a suggestion to my company where our fund lacks in the market & how it should be rectified. After all as a management trainee I will try to get some valuable knowledge from my seniors in the organization as well as from my faculty guide which will help me in the future. To evaluate the consumer attitude towards saving and decision making regarding investments.
VALUE ADDITION TO THE COMPANY

This report will help the company to strengthen customer intimacy. The report on various investment avenues available In India will help the company in many areas like. It will help the company to understand the expectations the customer have about their company from the perspective of financial performance and corporate social responsibility. It will provide fresh insights which can help their business continue to flourish. The company can identify the particular service requirements of different types of customers. The company can understand the problem areas. The company can evaluate new services initiatives. The study will help in gaining a better understanding of what an investor looks for in an investment option. It can be used by the financial sector in designing better financial instrument customized to suit the needs of the investor. It will help agents and brokers in marketing the existing instruments. It will provide knowledge to the customer about the various financial services provided by the company to their customers. It can help the company to understand what is the requirement of the different categories of customers This report will be developed in order to empower companies with detailed primary market research needed to make well informed decisions and it will provide independent measurement and validation of the health of companys relationship with their customers. These are the various advantages which will give some value addition to the company in understanding the awareness level of the customer about the various investment options and what is the perception of the investors with regard to the investments they want to make.
INTRODUCTION OF BUDGET 2011

Key Features of Budget 2010-2011 CHALLENGES To quickly revert to the high GDP growth path of 9 per cent and then find the means to cross the double digit growth barrier. To harness economic growth to consolidate the recent gains in making development more inclusive. To address the weaknesses in government systems, structures and institutions at different levels of governance. OVERVIEW OF THE ECONOMY India among the first few countries in the world to implement a broad-based counter-cyclic policy package to respond to the negative fallout of the global slowdown. The Advance Estimates for Gross Domestic Product (GDP) growth for 2009-10 pegged at 7.2 per cent. The final figure expected to be higher when the third and fourth quarter GDP estimates for 2009-10 become available. The growth rate in manufacturing sector in December 2009 was 18.5 per cent the highest in the past two decades. A major concern during the second half of 2009-10 has been the emergence of double digit food inflation. Government has set in motion steps, in consultation with the State Chief Ministers, which should bring down the inflation in the next few months and ensure that there is better management of food security in the country. CONSOLIDATING GROWTH Fiscal Consolidation With recovery taking root, there is a need to review public spending, mobilize resources and gear them towards building the productivity of the economy. Fiscal policy shaped with reference to the recommendations of the Thirteenth Finance Commission, which has recommended a calibrated exit strategy from the expansionary fiscal stance of last two years.
It would be for the first time that the Government would target an explicit reduction in its domestic public debt-GDP ratio.
Tax reforms On the Direct Tax Code (DTC) the wide-ranging discussions with stakeholders have been concluded Government will be in a position to implement the DTC from April 1, 2011. Centre actively engaged with the Empowered Committee of State Finance Ministers to finalise the structure of Goods and Services Tax (GST) as well as the modalities of its expeditious implementation. Endeavour to introduce GST by April, 2011 Peoples ownership of PSUs Ownership has been broad based in Oil India Limited, NHPC, NTPC and Rural Electrification Corporation while the process is on for National Mineral Development Corporation and Satluj Jal Vidyut Nigam. This will raise about Rs 25,000 crore during the current year. Higher amount proposed to be raised during the year 2010-11.
Fertiliser subsidy A Nutrient Based Subsidy policy for the fertiliser sector has been approved by the Government and will become effective from April 1, 2010. This will lead to an increase in agricultural productivity and better returns for the farmers, and overtime reduce the volatility in demand for fertiliser subsidy and contain the subsidy bill. Petroleum and Diesel pricing policy Expert Group to advise the Government on a viable and sustainable system of pricing of petroleum products has submitted its recommendations. Decision on these recommendations will be taken in due course.
Improving Investment Environment Foreign Direct Investment Number of steps taken to simplify the FDI regime. Methodology for calculation of indirect foreign investment in Indian companies has been clearly defined.
Complete liberalisation of pricing and payment of technology transfer fee and trademark, brand name and royalty payments.
Financial Stability and Development Council An apex level Financial Stability and Development Council to be set up with a view to strengthen and institutionalise the mechanism for maintaining financial stability. This Council would monitor macro-prudential supervision of the economy, including the functioning of large financial conglomerates, and address interregulatory coordination issues. Banking Licences RBI is considering giving some additional banking licenses to private sector players. Non Banking Financial Companies could also be considered, if they meet the RBIs eligibility criteria. Public Sector Bank Capitalisation Rs.16,500 crore provided to ensure that the Public Sector Banks are able to attain a minimum 8 per cent Tier-I capital by March 31, 2011. Recapitalisation of Regional Rural Banks (RRB) Government to provide further capital to strengthen the RRBs so that they have adequate capital base to support increased lending to the rural economy. Corporate Governance Government has introduced the Companies Bill, 2009 in the Parliament to replace the existing Companies Act, 1956, which will address issues related to regulation in corporate sector in the context of the changing business environment. Exports Extension of existing interest subvention of 2 per cent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises. Agriculture Growth Government will follow a four-pronged strategy, covering (a) Agricultural production
Rs. 400 crore provided to extend the green revolution to the eastern region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern UP, West Bengal and Orissa. Rs. 300 crore provided to organise 60,000 pulses and oil seed villages in rainfed areas during 2010-11 and provide an integrated intervention for water harvesting, watershed management and soil health, to enhance the productivity of the dry land farming areas. Rs. 200 crore provided for sustaining the gains already made in the green revolution areas through conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity.
(b) Reduction in wastage of produce Government to address the issue of opening up of retail trade. It will help in bringing down the considerable difference between farm gate, wholesale and retail prices. Deficit in the storage capacity met through an ongoing scheme for private sector participation FCI to hire godowns from private parties for a guaranteed period of 7 years. (c) Credit support to farmers Banks have been consistently meeting the targets set for agriculture credit flow in the past few years. For the year 2010-11, the target has been set at Rs.3,75,000 crore. In view of the recent drought in some States and the severe floods in some other parts of the country, the period for repayment of the loan amount by farmers extended by six months from December 31, 2009 to June 30, 2010 under the Debt Waiver and Debt Relief Scheme for Farmers. Incentive of additional one per cent interest subvention to farmers who repay short-term crop loans as per schedule, increased to 2% for 2010-11. (d) Impetus to the food processing sector In addition to the ten mega food park projects already being set up, the Government has decided to set up five more such parks. External Commercial Borrowings to be available for cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat.
Infrastructure Rs 1,73,552 crore provided for infrastructure development which accounts for over 46 per cent of the total plan allocation. Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore to Rs 19,894 crore. Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year. India Infrastructure Finance Company Limited (IIFCL) IIFCLs disbursements are expected to touch Rs 9,000 crore by end March 2010 and reach around Rs 20,000 crore by March 2011. IIFCL has refinanced bank lending to infrastructure projects of Rs. 3,000 crore during the current year and is expected to more than double that amount in 2010-11. The take-out financing scheme announced in the last Budget is expected to initially provide finance for about Rs. 25,000 crore in the next three years. Energy Plan allocation for power sector excluding RGGVY doubled from Rs.2230 crore in 2009-10 to Rs.5,130 crore in 2010-11. Government proposes to introduce a competitive bidding process for allocating coal blocks for captive mining to ensure greater transparency and increased participation in production from these blocks. A Coal Regulatory Authority to create a level playing field in the coal sector proposed to be set up. Plan outlay for the Ministry of New and Renewable Energy increased by 61 per cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11. Solar, small hydro and micro power projects at a cost of about Rs.500 crore to be set up in Ladakh region of Jammu and Kashmir. Environment and Climate change National Clean Energy Fund for funding research and innovative projects in clean energy technologies to be established.
One-time grant of Rs.200 crore to the Government of Tamil Nadu towards the cost of installation of a zero liquid discharge system at Tirupur to sustain knitwear industry. Rs.200 crore provided as a Special Golden Jubilee package for Goa to preserve the natural resources of the State, including sea beaches and forest cover. Allocation for National Ganga River Basin Authority (NGRBA) doubled in 201011 to Rs.500 crore. Schemes on bank protection works along river Bhagirathi and river GangaPadma in parts of Murshidabad and Nadia district of West Bengal included in the Centrally Sponsored Flood Management Programme. A project at Sagar Island to be developed to provide an alternate port facility in West Bengal.
INCLUSIVE DEVELOPMENT The spending on social sector has been gradually increased to Rs.1,37,674 crore in 2010-11, which is 37% of the total plan outlay in 2010-11. Another 25 per cent of the plan allocations are devoted to the development of rural infrastructure.
Education Plan allocation for school education increased by 16 per cent from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11. In addition, States will have access to Rs.3,675 crore for elementary education under the Thirteenth Finance Commission grants for 2010-11. Health An Annual Health Survey to prepare the District Health Profile of all Districts shall be conducted in 2010-11. Plan allocation to Ministry of Health & Family Welfare increased from Rs 19,534 crore in 2009-10 to Rs 22,300 crore for 2010-11. Financial Inclusion Appropriate Banking facilities to be provided to habitations having population in excess of 2000 by March, 2012. Insurance and other services to be provided using the Business Correspondent model. By this arrangement, it is proposed to cover 60,000 habitations. Augmentation of Rs.100 crore each for the Financial Inclusion Fund (FIF) and the Financial Inclusion Technology Fund, which shall be contributed by Government of India, RBI and NABARD. Rural Development Rs. 66,100 crore provided for Rural Development. Allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme stepped up to Rs.40,100 crore in 2010-11. An amount of Rs.48,000 crore allocated for rural infrastructure programmes under Bharat Nirman. Unit cost under Indira Awas Yojana increased to Rs.45,000 in the plain areas and to Rs.48,500 in the hilly areas. Allocation for this scheme increased to Rs.10,000 crore. Allocation to Backward Region Grant Fund enhanced by 26 per cent from Rs.5,800 crore in 2009-10 to Rs 7,300 crore in 2010-11. Additional central assistance of Rs 1,200 crore provided for drought mitigation in the Bundelkhand region.
Urban Development and Housing Allocation for urban development increased by more than 75 per cent from Rs.3,060 crore to Rs.5,400 crore in 2010-11. Allocation for Housing and Urban Poverty Alleviation raised from Rs.850 crore to Rs.1,000 crore in 2010-11. Scheme of one per cent interest subvention on housing loan upto Rs.10 lakh, where the cost of the house does not exceed Rs.20 lakh - announced in the last Budget - extended up to March 31, 2011. Rs.700 crore provided for this scheme for the year 2010-11. Rs.1,270 crore allocated for Rajiv Awas Yojana as compared to Rs.150 crore last year. Micro, Small & Medium Enterprises High Level Council on Micro and Small Enterprises to monitor the implementation of the recommendations of High-Level Task Force constituted by Prime Minister. Allocation for this sector to be increased from Rs.1,794 crore to Rs.2,400 crore for the year 2010-11. The corpus for Micro-Finance Development and Equity Fund doubled to Rs.400 crore in 2010-11. Unorganised Sector National Social Security Fund for unorganised sector workers National Social Security Fund for unorganised sector workers to be set up with an initial allocation of Rs.1000 crore. This fund will support schemes for weavers, toddy tappers, rickshaw pullers, bidi workers etc. Rashtriya Swasthya Bima Yojana benefits extended to all such Mahatma Gandhi NREGA beneficiaries who have worked for more than 15 days during the preceding financial year. A new initiative, Swavalamban will be available for persons who join New Pension Scheme (NPS), with a minimum contribution of Rs.1,000 and a maximum contribution of Rs.12,000 per annum during the financial year 2010-
11, wherein Government will contribute Rs.1,000 per year to each NPS account opened in the year 2010-11. Allocation of Rs.100 crore made for this initiative. Skill development National Skill Development Corporation has approved three projects worth about Rs 45 crore to create 10 lakh skilled manpower at the rate of one lakh per annum. An extensive skill development programme in the textile and garment sector to be launched by leveraging the strength of existing institutions and instruments of the Textile Ministry to train 30 lakh persons over 5 years. Social Welfare Plan outlay for Women and Child Development stepped up by almost 50 per cent. The ICDS platform being expanded for effective implementation of the Rajiv Gandhi Scheme for Adolescent Girls. Saakshar Bharat to further improve female literacy rate launched with a target of 7 crore non-literate adults which includes 6 crore women. Mahila Kisan Sashaktikaran Pariyojana to meet the specific needs of women farmers to be launched with a provision of Rs 100 crore as a sub-component of the National Rural Livelihood Mission. Plan outlay of the Ministry of Social Justice and Empowerment enhanced by 80 per cent to Rs.4500 crore. With this enhancement, the Ministry will be able to revise rates of scholarship under its post-matric scholarship schemes for SCs and OBC students. Plan allocation for the Ministry of Minority Affairs increased by 50 per cent from Rs.1,740 crore to Rs.2,600 crore for the year 2010-11. STRENGTHENING TRANSPARENCY & PUBLIC ACCOUNTABILTY Financial Sector Legislative Reforms Commission to be set up to rewrite and clean up the financial sector laws to bring them in line with the requirements of the sector.
Rs 1,900 crore allocated to the Unique Identification Authority of India (UIDAI) for 2010-11. UIDAI will be able to meet its commitments of issuing the first set of UID numbers in the coming year A Technology Advisory Group for Unique Projects (TAGUP) to be set up to look into various technological and systemic issues for effective tax administration and financial governance. Independent Evaluation Office (IEO) chaired by the Deputy Chairman, Planning Commission to be set up to evaluate the impact of flagship programmes.
Security and Justice Allocation for Defence increased to Rs. 1,47,344 crore including Rs 60,000 crore for capital expenditure. About 2,000 youth to be recruited as constables in five Central Para Military Forces from Jammu and Kashmir in the year 2010. Planning Commission to prepare an integrated action plan for the thirty-three left wing extremism affected districts. Adequate funds will be made available to support the action plan. Government has approved the setting up of the National Mission for Delivery of Justice and Legal Reforms to help reduce legal backlog in courts from an average of 15 years at present to 3 years by 2012. BUDGET ESTIMATES 2010-11 The Gross Tax Receipts are estimated at Rs. 7,46,651 crore The Non Tax Revenue Receipts are estimated at Rs. 1,48,118 crore. The net tax revenue to the Centre as well as the expenditure provisions in 201011 have been estimated with reference to the recommendations of the Thirteenth Finance Commission. The total expenditure proposed in the Budget Estimates is Rs. 11,08,749 crore, which is an increase of 8.6 per cent over last year. The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs. 3,73,092 crore and Rs. 7,35,657 crore respectively. While there is 15 per cent increase in Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over the BE of previous year.
Fiscal deficit for BE 2010-11 at 5.5 per cent of GDP, which works out to Rs.3,81,408 crore. Taking into account the various other financing items for fiscal deficit, the actual net market borrowing of the Government in 2010-11 would be of the order of Rs.3,45,010 crore. This would leave enough space to meet the credit needs of the private sector. The rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per cent for 2011-12 and 2012-13, respectively. Against a fiscal deficit of 7.8 per cent in 2008-09, inclusive of oil and fertilizer bonds, the comparable fiscal deficit is 6.9 per cent as per the Revised Estimates for 2009-10. Conscious effort made to avoid issuing bonds to oil and fertilizer companies. Government would like to continue with this practice of extending Government subsidy in cash, thereby bringing all subsidy related liabilities into Governments fiscal accounting.
PART B TAX PROPOSALS The Centralized Processing Centre at Bengaluru is now fully functional and is processing around 20,000 returns daily. This initiative will be taken forward by setting up two more Centres during the year. The Income Tax department has introduced Sevottam, a pilot project at Pune, Kochi and Chandigarh through Aayakar Seva Kendras, which provide a single window system for registration of all applications including those for redressal of grievances as well as paper returns. The scheme will be extended to four more cities in the year. Automation of Central Excise & Service Tax, has already been rolled out throughout the country this year. Similarly, a Mission Mode Project for computerization of Commercial Taxes in States has been approved recently. With an outlay of Rs. 1133 crore of which the Centres share is Rs. 800 crore, the project will lay the foundation for the launch of GST. The income tax department to notify SARAL-II form for individual salaried taxpayers for the coming assessment year. Scope of cases which may be admitted by the Settlement Commission expanded to include proceedings related to search and seizure cases pending
for assessment. Scope of Settlement Commission also expanded in respect of Central Excise and Customs to include certain categories of cases that hitherto fell outside its jurisdiction. Bi-lateral discussions commenced to enhance the exchange of bank related and other information to effectively track tax evasion and identify undisclosed assets of resident Indians lying abroad. Direct Taxes Income tax slabs for individual taxpayers to be as follows Income upto Rs 1.6 lakh Income above Rs 1.6 lakh and upto Rs. 5 lakh Income above Rs.5 lakh and upto Rs. 8 lakh Income above Rs. 8 lakh Nil 10 per cent 20 per cent 30 per cent
Deduction of an additional amount of Rs. 20,000 allowed, over and above the existing limit of Rs.1 lakh on tax savings, for investment in long-term infrastructure bonds as notified by the Central Government Besides contributions to health insurance schemes which is currently allowed as a deduction under the Income-tax Act, contributions to the Central Government Health Scheme also allowed as a deduction under the same provision. Current surcharge of 10 per cent on domestic companies reduced to 7.5 per cent. Rate of Minimum Alternate Tax (MAT) increased from the current rate of 15 per cent to 18 per cent of book profits. To further encourage R&D across all sectors of the economy, weighted deduction on expenditure incurred on in-house R&D enhanced from 150 per cent to 200 per cent. Weighted deduction on payments made to National Laboratories, research associations, colleges, universities and other institutions, for scientific research enhanced from 125 per cent to 175 per cent. Payment made to an approved association engaged in research in social sciences or statistical research to be allowed as a weighted deduction of 125 per cent. The income of such approved research association shall be exempt from tax.
Benefit of investment linked deduction under the Act extended to new hotels of two-star category and above anywhere in India to boost investment in the tourism sector. Allow pending projects to be completed within a period of five years instead of four years for claiming a deduction of their profits, as a one time interim relief to the housing and real estate sector. Norms for built-up area of shops and other commercial establishments in housing projects to be relaxed to enable basic facilities for their residents. Limits for turnover over which accounts need to be audited enhanced to Rs. 60 lakh for businesses and to Rs. 15 lakh for professions. Limit of turnover for the purpose of presumptive taxation of small businesses enhanced to Rs. 60 lakh. If tax has been deducted on payment by way of any expense and is paid before the due date of filing the return, such expenditure to be allowed for deduction. Interest charged on tax deducted but not deposited by the specified date to be increased from 12 per cent to 18 per cent per annum. To facilitate the conversion of small companies into Limited Liability Partnerships, transfer of assets as a result of such conversion not to be subject to capital gains tax. The advancement of any other object of general public utility to be considered as charitable purpose even if it involves carrying on of any activity in the nature of trade, commerce or business provided that the receipts from such activities do not exceed Rs.10 lakh in the year . Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore for the year.
Indirect Taxes Rate reduction in Central Excise duties to be partially rolled back and the standard rate on all non-petroleum products enhanced from 8 per cent to 10 per cent ad valorem. The specific rates of duty applicable to portland cement and cement clinker also adjusted upwards proportionately. Similarly, the ad valorem component of excise duty on large cars, multi-utility vehicles and sports-utility vehicles increased by 2 percentage points to 22 per cent.
Restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. Central Excise duty on petrol and diesel enhanced by Re.1 per litre each. Some structural changes in the excise duty on cigarettes, cigars and cigarillos to be made coupled with some increase in rates. Excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc to be enhanced. Compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch packing machines to be introduced.
Agriculture & Related Sectors Provide project import status with a concessional import duty of 5 per cent for the setting up of mechanised handling systems and pallet racking systems in mandis or warehouses for food grains and sugar as well as full exemption from service tax for the installation and commissioning of such equipment. Provide project import status at a concessional customs duty of 5 per cent with full exemption from service tax to the initial setting up and expansion of Cold storage, cold room including farm pre-coolers for preservation or storage of agriculture and related sectors produce ; and Processing units for such produce. Provide full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks. Provide concessional customs duty of 5 per cent to specified agricultural machinery not manufactured in India; Provide central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax to the storage and warehousing of their produce; and Provide full exemption from excise duty to trailers and semi-trailers used in agriculture. Concessional import duty to specified machinery for use in the plantation sector to be, extended up to March 31, 2011 along with a CVD exemption. To exempt the testing and certification of agricultural seeds from service tax. The transportation by road of cereals, and pulses to be exempted from service tax. Transportation by rail to remain exempt.
To ease the cash flow position for small-scale manufacturers, they would be permitted to take full credit of Central Excise duty paid on capital goods in a single installment in the year of their receipt. Secondly, they would be permitted to pay Central Excise duty on a quarterly, rather than monthly, basis.
Environment To build the corpus of the National Clean Energy Fund, clean energy cess on coal produced in India at a nominal rate of Rs.50 per tonne to be levied. This cess will also apply on imported coal. Provide a concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units and also exempt them from Central Excise duty. Ground source heat pumps used to tap geo-thermal energy to be exempted from basic customs duty and special additional duty. Exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from Central Excise duty. Central Excise duty on LED lights reduced from 8 per cent to 4 per cent at par with Compact Fluorescent Lamps. To remedy the difficulty faced by manufacturers of electric cars and vehicles in neutralising the duty paid on their inputs and components, a nominal duty of 4 per cent on such vehicles imposed. Some critical parts or sub-assemblies of such vehicles exempted from basic customs duty and special additional duty subject to actual user condition. These parts would also enjoy a concessional CVD of 4 per cent. A concessional excise duty of 4 per cent provided to soleckshaw, a product developed by CSIR to replace manually-operated rickshaws. Its key parts and components to be exempted from customs duty. Import of compostable polymer exempted from basic customs duty.
Infrastructure Project import status to Monorail projects for urban transport at a concessional basic duty of 5 per cent granted.
To allow resale of specified machinery for road construction projects on payment of import duty at depreciated value. To encourage the domestic manufacture of mobile phones accessories, exemptions from basic, CVD and special additional duties are now being extended to parts of battery chargers and hands-free headphones. The validity of the exemption from special additional duty is being extended till March 31, 2011.
Medical Sector Uniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption from special additional duty prescribed on all medical equipments. A concessional basic duty of 5 per cent is being prescribed on parts and accessories for the manufacture of such equipment while they would be exempt from CVD and special additional duty. Full exemption currently available to medical equipment and devices such as assistive devices, rehabilitation aids etc. retained. The concession available to Government hospitals or hospitals set up under a statute also retained. Specified inputs for the manufacture of orthopaedic implants exempted from import duty. Infotainment To address the difficulties experienced by film industry in importing digital masters of films for duplication or distribution loaded on electronic medium vis-avis those imported on cinematographic film, owing to a differential customs duty structure, customs duty to be charged only on the value of the carrier medium. The same dispensation would apply to music and gaming software imported for duplication. In all such cases the value representing the transfer of intellectual property rights would be subjected to service tax. Provide project import status at a concessional customs duty of 5 per cent with full exemption from special additional duty to the initial setting up Digital Head End equipment by multi-service operators. Precious Metals
Rates on precious metals indexed as follows: On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams On silver from Rs.1,000 per kg to Rs.1,500 per kg.
Basic customs on Rhodium a precious metal used for polishing jewellery reduced to 2 per cent. Basic customs duty on gold ore and concentrates reduced from 2 per cent ad valorem to a specific duty of Rs.140 per 10 grams of gold content with full exemption from special additional duty. Further, the excise duty on refined gold made from such ore or concentrate reduced from 8 per cent to a specific duty of Rs.280 per 10 grams.
Other Proposals Full exemption from import duty available to specified inputs or raw materials required for the manufacture of sports goods expanded to cover a few more items. Basic customs duty on one of key components in production of micro-wave ovens, namely magnetrons, reduced from 10 per cent to 5 per cent. Value limit of Rs. 1 lakh per annum on duty-free import of commercial samples as personal baggage enhanced to Rs. 3 lakh per annum. Outright exemption from special additional duty provided to goods imported in a pre-packaged form for retail sale. This would also cover mobile phones, watches and ready-made garments even when they are not imported in pre-packaged form. The refund-based exemption is also being retained for cases not covered by the new dispensation. Toy balloons fully exempted from Central Excise duty. Reduction in basic customs duty on long pepper from 70 per cent to 30 per cent; Reduction in basic customs duty on asafoetida from 30 per cent to 20 per cent; Reduction in central excise duty on replaceable kits for household type water filters other than those based on RO technology to 4 per cent; Reduction in central excise duty on corrugated boxes and cartons from 8 per cent to 4 per cent; Reduction in central excise duty on latex rubber thread from 8 per cent to 4 per cent; and
Reduction in excise duty on goods covered under the Medicinal and Toilet Preparations Act from 16 per cent to 10 per cent. Proposals relating to customs and central excise are estimated to result in a net revenue gain of Rs. 43,500 crore for the year.
Service Tax Rate of tax on services retained at 10 per cent to pave the way forward for GST. Certain services, hitherto untaxed, to be brought within the purview of the service tax levy. These to be notified separately. Process of refund of accumulated credit to exporters of services, especially in the area of Information Technology and Business Process Outsourcing, made easy by making necessary changes in the definition of export of services and procedures. Accredited news agencies which provide news feed online that meet certain criteria, exempted from service tax. Proposals relating to service tax are estimated to result in a net revenue gain of Rs 3,000 crore for the year. Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore for the year. Proposals relating to Indirect Taxes estimated to result in a net revenue gain of Rs.46,500 crore for the year. Taking into account the concessions being given in the tax proposals and measures taken to mobilise additional resources, the net revenue gain is estimated to be Rs. 20,500 crore for the year.
INTRODUCTION OF INVESTMENT
OBJECTIVES OF THE PROJECT: The purpose of the study was to determine the saving behavior and investment preferences of customers. Customer perception will provide a way to accurately measure how the customers think about the products and services provided by the company. Todays trying economic conditions have forced difficult decisions for companies. Most are making conservative decisions that reflect a survival mode in the business operations. During these difficult times, understanding what customers on an ongoing basis is critical for survival. Executives need a 3rd party understanding on where customer loyalties stand. More than ever management needs ongoing feedback from the customers, partners and employees in order to continue to innovate and grow. The main objective of the project is to find out the needs of current and future customers. For this report , customer perception and awareness level will be measured in many important areas like: To understand all about different investment avenues available in India. To find out how the investors get information about the various financial instrument To find out how the investor wants to invest i.e. on his own or through a broker. To find out the saving habits of the different customers and the amount they invest in various financial instruments. In which type of financial instrument they like to invest. How long they prefer to keep their money invested. What is the return that they expect from the investment. What are the various factors that they consider before investing. To find out the risk profile of the investor. To give a recommendation to the investors that where they should invest. To give a suggestion to my company where our fund lacks in the market & how it should be rectified. After all as a management trainee I will try to get some valuable knowledge from my seniors in the organization as well as from my faculty guide which will help me in the future. To evaluate the consumer attitude towards saving and decision making regarding investments.
PROJECT DESCRIPTION Mutual Fund:Mutual fund is a pool of money collected from investors and is invested according to stated investment objectives Mutual fund investors are like shareholders and they own the fund. Mutual fund investors are not lenders or deposit holders in a mutual fund. Everybody else associated with a mutual fund is a service provider, who earns a fee. The money in the mutual fund belongs to the investors and nobody else. Mutual funds invest in marketable securities according to the investment objective. The value of the investments can go up or down, changing the value of the investors holdings.NAV of a mutual fund fluctuates with market price movements. The market value of the investors funds is also called as net assets. Investors hold a proportionate share of the fund in the mutual fund. New investors come in and old investors can exit, at prices related to net asset value per unit. Emergence of Mutual Funds:Mutual Funds now represent perhaps the most appropriate investment opportunity for most small investors. As financial markets become more sophisticated and complex, investor need a financial intermediary who provides the required knowledge and professional expertise on successful investing. It is no wonder then that in the birthplace of mutual funds-the U.S.A.-the fund industry has already overtaken the banking industry, with more money under Mutual Fund management than deposited with banks. The Indian Mutual Fund industry has already opened up many exciting investment opportunities to Indian investors. Despite the expected continuing growth in the industry, Mutual Fund is a still new financial intermediary in India. History of Mutual Funds:In the second half of 19th century, investor in UK considered the stock market is good for the investment. But for small investor it is not possible to operate in the market effectively. This led to establishment of an investment company which led to the small investor to invest in equity market. The first investment company was the ScottishAmerican Investment Company, set up in London in 1860.
Mutual Fund Industry in India:Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value of money decreases over a period of time. One of the options is to invest the money in stock market. But a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. Diversification means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously. In 1963, the government of India took the initiative by passing the UTI act, under which the Unit Trust of India (UTI) was set-up as a statutory body. The designated role of UTI was to set up a Mutual Fund. UTIs first scheme, called. In 1987 the other public sector institutions set up their Mutual Funds. In 1992, government allowed the private sector players to set-up their funds. In 1994 the foreign Mutual Funds arrives in Indian market. In 2001 there is a crisis in UTI and in 2003 UTI splits up into UTI 1and UTI 2. The history of Indian Mutual Fund industry can be explained easily by various phases:Benefits of Investing in Mutual Funds Professional Management: Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.
Diversification:
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. Return Potential: Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Low Costs: Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Liquidity: -
In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. Transparency: -
You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook. Flexibility: -
Through features such as regular investment plans, regular withdrawal plans and
dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience. Affordability: Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. Choice of Schemes: Mutual Funds offer a family of schemes to suit your varying needs over a lifetime. Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI. Disadvantages of Investing Mutual Funds:Professional Management: Some funds doesnt perform in neither the market, as their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professionals are any better than mutual fund or investor himself, for picking up stocks. Costs: The biggest source of AMC income is generally from the entry & exit load which they charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon. Dilution: Because funds have small holdings across different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.
Taxes: When making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capitalgain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.
Types of Mutual Funds

Mutual fund schemes may be classified on the basis of its structure and its objective:By Structure:Open-ended Funds:An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. Closed-ended Funds:A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. Interval Funds:Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices. Money Market Funds:The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term
instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. Load Funds:A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history. No-Load Funds:A No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to work. Tax Saving Schemes:These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.
Various types of Mutual Funds:
Equity Funds: Equity funds are considered to be the more risky funds as compared to other fund types, but they also provide higher returns than other funds. It is advisable that an investor looking to invest in an equity fund should invest for long term i.e. for 3 years or more. There are different types of equity funds each falling into different risk bracket. In the order of decreasing risk level, there are following types of equity funds:AGGRESSIVE GROWTH FUNDS:In Aggressive Growth Funds, fund managers aspire for maximum capital appreciation and invest in less researched shares of speculative nature. Because of these speculative investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than other equity funds. GROWTH FUNDS: Growth Funds also invest for capital appreciation (with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in companies that are expected to outperform the market in the future. Without entirely adopting speculative strategies, Growth Funds invest in those companies that are expected to post above average earnings in the future. SPECIALTY FUNDS: Specialty Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. Criteria for some specialty funds could be to invest/not to invest in particular regions/companies. Specialty funds are concentrated and thus, are comparatively riskier than diversified funds. There are following types of specialty funds: Sector Funds:Equity funds that invest in a particular sector/industry of the market are known as Sector Funds. The exposure of these funds is limited to a particular sector (say Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is why they are more risky than equity funds that invest in multiple sectors.
Foreign Securities Funds:Foreign Securities Equity Funds have the option to invest in one or more foreign companies. Foreign securities funds achieve international diversification and hence they are less risky than sector funds. However, foreign securities funds are exposed to foreign exchange rate risk and country risk. Mid-Cap or Small-Cap Funds:Funds that invest in companies having lower market capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds. Market capitalization of Mid-Cap companies is less than that of big, blue chip companies (less than Rs. 2500 crore but more than Rs. 500 crore) and Small-Cap companies have market capitalization of less than Rs. 500 crore. Market Capitalization of a company can be calculated by multiplying the market price of the company's share by the total number of its outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of Large-Cap Companies which gives rise to volatility in share prices of these companies and consequently, investment gets risky. Option Income Funds:While not yet available in India, Option Income Funds write options on a large fraction of their portfolio. Proper use of options can help to reduce volatility, which is otherwise considered as a risky instrument. These funds invest in big, high dividend yielding companies, and then sell options against their stock positions, which generate stable income for investors. DIVERSIFIED EQUITY FUNDS: Except for a small portion of investment in liquid money market, diversified equity funds invest mainly in equities without any concentration on a particular sector(s). These funds are well diversified and reduce sector-specific or company-specific risk. However, like all other funds diversified equity funds too are exposed to equity market risk. One prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times. ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time of filing the income tax return. ELSS usually has a lock-in period and in case of any redemption by the investor before the
expiry of the lock-in period makes him liable to pay income tax on such income(s) for which he may have received any tax exemption(s) in the past. Equity Index Funds: Equity Index Funds have the objective to match the performance of a specific stock market index. The portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index. Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and therefore, are more risky. VALUE FUNDS:Value Funds invest in those companies that have sound fundamentals and whose share prices are currently under-valued. The portfolio of these funds comprises of shares that are trading at a low Price to Earnings Ratio (Market Price per Share / Earning per Share) and a low Market to Book Value (Fundamental Value) Ratio. Value Funds may select companies from diversified sectors and are exposed to lower risk level as compared to growth funds or specialty funds. Value stocks are generally from cyclical industries (such as cement, steel, sugar etc.) which make them volatile in the short-term. Therefore, it is advisable to invest in Value funds with a long-term time horizon as risk in the long term, to a large extent, is reduced. EQUITY INCOME OR DIVIDEND YIELD FUNDS: The objective of Equity Income or Dividend Yield Equity Funds is to generate high recurring income and steady capital appreciation for investors by investing in those companies which issue high dividends (such as Power or Utility companies whose share prices fluctuate comparatively lesser than other companies' share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as compared to other equity funds. DEBT / INCOME FUNDS:Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial institutions, governments and other entities belonging to various sectors (like infrastructure companies etc.) are known as Debt / Income Funds.
Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors. In order to ensure regular income to investors, debt (or income) funds distribute large fraction of their surplus to investors. Although debt securities are generally less risky than equities, they are subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. To minimize the risk of default, debt funds usually invest in securities from issuers who are rated by credit rating agencies and are considered to be of "Investment Grade". Debt funds that target high returns are more risky. Based on different investment objectives, there can be following types of debt funds:Diversified Debt Funds: Debt funds that invest in all securities issued by entities belonging to all sectors of the market are known as diversified debt funds. The best feature of diversified debt funds is that investments are properly diversified into all sectors which results in risk reduction. Any loss incurred, on account of default by a debt issuer, is shared by all investors which further reduces risk for an individual investor. Focused Debt Funds: Unlike diversified debt funds, focused debt funds are narrow focus funds that are confined to investments in selective debt securities, issued by companies of a specific sector or industry or origin. Some examples of focused debt funds are sector, specialized and offshore debt funds, funds that invest only in Tax Free Infrastructure or Municipal Bonds. Because of their narrow orientation, focused debt funds are more risky as compared to diversified debt funds. Although not yet available in India, these funds are conceivable and may be offered to investors very soon. High Yield Debt funds: As we now understand that risk of default is present in all debt funds, and therefore, debt funds generally try to minimize the risk of default by investing in securities issued by only those borrowers who are considered to be of "investment grade". But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those issuers who are considered to be of "below investment grade". The motive behind adopting this sort of risky strategy is to earn higher interest returns from these issuers. These funds are more volatile and bear higher default risk, although they may earn at times higher returns for investors.
Assured Return Funds: Although it is not necessary that a fund will meet its objectives or provide assured returns to investors, but there can be funds that come with a lock-in period and offer assurance of annual returns to investors during the lock-in period. Any shortfall in returns is suffered by the sponsors or the Asset Management Companies (AMCs). These funds are generally debt funds and provide investors with a low-risk investment opportunity. However, the security of investments depends upon the net worth of the guarantor (whose name is specified in advance on the offer document). To safeguard the interests of investors, SEBI permits only those funds to offer assured return schemes whose sponsors have adequate net-worth to guarantee returns in the future. In the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI) that assured specified returns to investors in the future. UTI was not able to fulfill its promises and faced large shortfalls in returns. Eventually, government had to intervene and took over UTI's payment obligations on itself. Currently, no AMC in India offers assured return schemes to investors, though possible. Fixed Term Plan Series: Fixed Term Plan Series usually are closed-end schemes having short term maturity period (of less than one year) that offer a series of plans and issue units to investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the exchanges. Fixed term plan series usually invest in debt / income schemes and target short-term investors. The objective of fixed term plan schemes is to gratify investors by generating some expected returns in a short period. GILT FUNDS:Also known as Government Securities in India, Gilt Funds invest in government papers (named dated securities) having medium to long term maturity period. Issued by the Government of India, these investments have little credit risk (risk of default) and provide safety of principal to the investors. However, like all debt funds, gilt funds too are exposed to interest rate risk. Interest rates and prices of debt securities are inversely related and any change in the interest rates results in a change in the NAV of debt/gilt funds in an opposite direction.
MONEY MARKET / LIQUID FUNDS:Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt instruments. These securities are highly liquid and provide safety of investment, thus making money market / liquid funds the safest investment option when compared with other mutual fund types. However, even money market / liquid funds are exposed to the interest rate risk. The typical investment options for liquid funds include Treasury Bills (issued by governments), Commercial papers (issued by companies) and Certificates of Deposit (issued by banks).
HYBRID FUNDS:As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities, debts and money market securities. Hybrid funds have an equal proportion of debt and equity in their portfolio. There are following types of hybrid funds in India: Balanced Funds: The portfolio of balanced funds includes assets like debt securities, convertible securities, and equity and preference shares held in a relatively equal proportion. The objectives of balanced funds are to reward investors with a regular income, moderate capital appreciation and at the same time minimizing the risk of capital erosion. Balanced funds are appropriate for conservative investors having a long term investment horizon. Growth-and-Income Funds: Funds that combine features of growth funds and income funds are known as Growth-and-Income Funds. These funds invest in companies having potential for capital appreciation and those known for issuing high dividends. The level of risks involved in these funds is lower than growth funds and higher than income funds. ASSET ALLOCATION FUNDS: Mutual funds may invest in financial assets like equity, debt, money market or non-financial (physical) assets like real estate, commodities etc.. Asset allocation funds adopt a variable asset allocation strategy that allows fund managers to switch over from
one asset class to another at any time depending upon their outlook for specific markets. In other words, fund managers may switch over to equity if they expect equity market to provide good returns and switch over to debt if they expect debt market to provide better returns. It should be noted that switching over from one asset class to another is a decision taken by the fund manager on the basis of his own judgment and understanding of specific markets, and therefore, the success of these funds depends upon the skill of a fund manager in anticipating market trends. COMMODITY FUNDS:Those funds that focus on investing in different commodities (like metals, food grains, crude oil etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a commodity fund that invests in all available commodities is a diversified commodity fund and bears less risk than a specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in gold, gold futures or shares of gold mines) are common examples of commodity funds. REAL ESTATE FUNDS:Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized assets of housing finance companies, are known as Specialized Real Estate Funds. The objective of these funds may be to generate regular income for investors or capital appreciation. EXCHANGE TRADED FUNDS (ETF):Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like a single stock at index linked prices. The biggest advantage offered by these funds is that they offer diversification, flexibility of holding a single share (tradable at index linked prices) at the same time. Recently introduced in India, these funds are quite popular abroad. FUND OF FUNDS:-
Mutual funds that do not invest in financial or physical assets, but do invest in other Mutual Fund schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a portfolio comprising of units of other mutual fund schemes, just like conventional mutual funds maintain a portfolio comprising of equity/debt/money market instruments or non financial assets. Fund of Funds provide investors with an added advantage of diversifying into different mutual fund schemes with even a small amount of investment, which further helps in diversification of risks. However, the expenses of Fund of Funds are quite high on account of compounding expenses of investments into different mutual fund schemes. FUND STRUCTURE AND CONSTITUENTS:Mutual funds in India have a 3-tier structure of Sponsor-Trustee-AMC .Sponsor is the promoter of the fund. Sponsor creates the AMC and the trustee company and appoints the Boards of both these companies, with SEBI approval. A mutual fund is constituted as a Trust. A trust deed is signed by trustees and registered under the Indian Trust Act. The mutual fund is formed as trust in India, and supervised by the Board of Trustees. The trustees appoint the asset management company (AMC) to actually manage the investors money. The AMCs capital is contributed by the sponsor. The AMC is the business face of the mutual fund. Investors money is held in the Trust (the mutual fund). The AMC gets a fee for managing the funds, according to the mandate of the investors. The trustees make sure that the funds are managed according to the investors mandate. Sponsor should have atleast 5-year track record in the financial services business and should have made profit in atleast 3 out of the 5 years. Sponsor should contribute atleast 40% of the capital of the AMC. Trustees are appointed by the sponsor with SEBI approval. Atleast 50% of trustees should be independent. Atleast 50% of the AMCs Board should be of independent members. An AMC cannot engage in any business other than portfolio advisory and management. An AMC of one fund cannot be Trustee of another fund.AMC should have a net worth of at least Rs. 10 crore at all times. AMC should be registered with SEBI AMC signs an investment management agreement with the trustees. Trustee Company and AMC are usually private limited companies. Trustees oversee the AMC and seek regular reports and information from them. Trustees are required to meet atleast 4 times a year to review the AMC the investors funds and the investments are held by the custodian. Sponsor and the custodian cannot be the same entity. R&T agents manage the sale
and repurchase of units and keep the unit holder accounts. If the schemes of one fund are taken over by another fund, it is called as scheme take over. This requires SEBI and trustee approval. If two AMCs merge, the stakes of sponsors changes and the schemes of both funds come together. High court, SEBI and Trustee approval needed. If one AMC or sponsor buys out the entire stake of another sponsor in an AMC, there is a takeover of AMC. The sponsor, who has sold out, exits the AMC. This needs high court approval as well as SEBI and Trustee approval. Investors can choose to exit at NAV if they do not approve of the transfer. They have a right to be informed. No approval is required, in the case of open-ended funds. For close-ended funds the investor approval is required for all cases of merger and takes over.
EQUITY SHARES
ABOUT SHARES:At the most basic level, stock (often referred to as shares) is ownership, or equity, in a company. Investors buy stock in the form of shares, which represent a portion of a company's assets (capital) and earnings (dividends). As a shareholder, the extent of your ownership (your stake) in a company depends on the number of shares you own in relation to the total number of shares available For example, if you buy 1000 shares of stock in a company that has issued a total of 100,000 shares, you own one per cent of the company. While one per cent seems like a small holding, very few private investors are able to accumulate a shareholding of that size in publicly quoted companies, many of which have a market value running into billions of pounds. Your stake may authorize you to vote at the company's annual general meeting, where shareholders usually receive one vote per share. In theory, every stockholder, no matter how small their stake, can exercise some influence over company management at the annual general meeting. In reality, however, most private investors' stakes are insignificant. Management policy is far more likely to be influenced by the votes of large institutional investors such as pension funds. a) STOCKS SYMBOLS:A stock symbol, or 'Epic' symbol, is the standard abbreviation of a stock's name. You can find stock symbols wherever stock performance information is published - for example, newspaper stock listings and investment websites. Company names also have abbreviations called ticker symbols. However, it's worth remembering that these may vary at the different exchanges where the company is quoted.
b)
PERFORMANCE INDICATORS:Here is a list of the standard performance indicators Definition The last price at which the stock was bought or sold The highest and lowest price of the stock from the previous trading day
Performance Indicator Closing price High and low
52 week range Volume
The highest and lowest price over the previous 52 weeks The amount of shares traded during the previous trading day High and low
Net change
The difference between the closing price on the last trading day and the closing price on the trading day prior to the last
THE STOCK EXCHANGES:A marketplace in which to buy or sell something makes life a lot easier. The same applies to stocks. A stock exchange is an organization that provides a marketplace in which investors and borrowers trade stocks. Firstly, the stock exchange is a market for issuers who want to raise equity capital by selling shares to investors in an Initial Public Offering (IPO). The stock exchange is also a market for investors who can buy and sell shares at any time. a) Trading shares on the stock exchange: As an investor in the INDIA, you can't buy or sell shares on a stock exchange yourself. You need to place your order with a stock exchange member firm (a stockbroker) who will then execute the order on your behalf. The NSE AND BSE are the leading stock exchange in the INDIA. Trading is done through computerized systems. b) The trading process:If you decide to buy or sell your shares, you need to contact a stockbroker who will buy or sell the shares on your behalf. After receiving your order, the
stockbroker will input the order on the SETS or SEAQ system to match your order with that of another buyer or seller. Details of the trade are transmitted electronically to the stockbroker who is responsible for settling the trade. You will then receive confirmation of the deal. c) Types of shares available on the stock exchange:You cannot trade all stocks on the stock exchange. To be listed on a stock exchange, a stock must meet the listing requirements laid down by that exchange in its approval process. Each exchange has its own listing requirements, and some exchanges are more particular than others. It is possible for a stock to be listed on more than one exchange. This is known as a dual listing.
Insurance
People need insurance in the first place.An insurance policy is primarily meant to protect the income of the familys breadearners. The idea is if any one or both die their dependents continue to live comfortably.The circle of life begins at birth follower by education , marraige and eventually after a lifetime of work we look forward to life of retirement . Our finances too tend to change as we go through the various phases of life. In the first twenty of our life, we are financially and emotionally dependents on our parents and their are no financial committments to be met.In the next twenty years we gain financial independence and provide financial independence to our families. This is also the stage when our income may be unable to meet the growing expenses of a young household. In the next twenty as we see our investments grow after our children grow and become financially independent. Insurance is a provision for the distribution of risks that is to say it is a financial provision against loss from unavoidable disasters. The protection which it affords takes form of a gurantee to indemnify the insured if certain specified losses occur. The principle of insurance so far as the undertaking of the obligation is concerned is that for the payment of a certain sum the gurantee will be given to reimburse the insured. The insurer in accepting the risks so distributes them that the total of all the amounts is paid for this insurance protection will be sufficient to meet the losses that occur. Insurance then provide divided responsibilty. This principle is introduced in most stores where a division is made between the sales clerk and the cashiers department the arrangement dividing the risks of loss. The insurance principle is similarly applied in any other cases of divided responsibilty. As a business however insurance is usually recognized as some form of securing a promise of indemnity by the payment of premium and the fulfillment of certain other stipulations
Types of insurance
Term insurance plans Term insurance is the cheapest form of life insurance available. Since a term insurance contract only pays in the event of eventuality the life cover comes at low premium rates . Term insurance is a usefu tool to purchase against risk of early death and protection of an asset.
Endowment plans Endowment plans are savins and protection plans that provide a dual benifit of protection as well as savings. Endowment plans pay a death benifit in the event of an eventuality should the customer survive the benifit period a maturity benifit is paid to the life insured. Whole of life plans A whole of life plan provides life insurance cover to an individua upto a specified age . A whole of life plan is suitable for an individual who is looking for an extended life insurance cover and /or wants to pay premium over as long as tenure as possible to reduce the amount of upfront premium payment. Pension plans Pension plans allow an individual to save in a tax deffered manner. An individual can either contribute through regular premiums or make a single premium investments. Savings accumulate over the deferment period. Once the contract reaches the vesting age , the individual has the option of choosing an annuity plan from a life insurance company. An annuity is paid till the life the lifetime of the insured or a pre-determined period depending upon the annuity option chosen by the life insured. Unit Linked Insurance Plans Unit linked insurance plan (ULIP) is life insurance solution that provides for the benefits of risk protection and flexibility in investment. The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV). The policy value at any time varies according to the value of the underlying assets at the time. In a ULIP, the invested amount of the premiums after deducting for all the charges and premium for risk cover under all policies in a particular fund as chosen by the policy holders are pooled together to form a Unit fund. A Unit is the component of the Fund in a Unit Linked Insurance Policy.
The returns in a ULIP depend upon the performance of the fund in the capital market.
ULIP investors have the option of investing across various schemes, i.e, diversified equity funds, balanced funds, debt funds etc. It is important to remember that in a ULIP, the investment risk is generally borne by the investor. In a ULIP, investors have the choice of investing in a lump sum (single premium) or making premium payments on an annual, half-yearly, quarterly or monthly basis. Investors also have the flexibility to alter the premium amounts during the policy's tenure. For example, if an individual has surplus funds, he can enhance the contribution in ULIP. Conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). ULIP investors can shift their investments across various plans/asset classes (diversified equity funds, balanced funds, debt funds) either at a nominal or no cost. Expenses Charged in a ULIP Premium Allocation Charge: A percentage of the premium is appropriated towards charges initial and renewal expenses apart from commission expenses before allocating the units under the policy.
Mortality Charges: These are charges for the cost of insurance coverage and depend on number of factors such as age, amount of coverage, state of health etc. Fund Management Fees: Fees levied for management of the fund and is deducted before arriving at the NAV. Administration Charges: This is the charge for administration of the plan and is levied by cancellation of units. Surrender Charges: Deducted for premature partial or full encashment of units. Fund Switching Charge:
Usually a limited number of fund switches are allowed each year without charge, with subsequent switches, subject to a charge. Service Tax Deductions: Service tax is deducted from the risk portion of the premium.
There are a total of 13 life insurance companies operating in India, of which one is a Public Sector Undertaking and the balance 12 are Private Sector Enterprises.
GOVERNMENT SECURITIES
Government securities(G-secs) are sovereign securities which are issued by the Reserve Bank of India on behalf of Government of India,in lieu of the Central Government's market borrowing programme. The term Government Securities includes: Central Government Securities. State Government Securities Treasury bills
The Central Government borrows funds to finance its 'fiscal deficit'.The market borrowing of the Central Government is raised through the issue of dated securities and 364 days treasury bills either by auction or by floatation of loans. In addition to the above, treasury bills of 91 days are issued for managing the temporary cash mismatches of the Government. These do not form part of the borrowing programme of the Central Government Types of Government Securities Government Securities are of the following types:Dated Securities : are generally fixed maturity and fixed coupon securities usually carrying semi-annual coupon. These are called dated securities because these are identified by their date of maturity and the coupon, e.g., 11.03% GOI 2012 is a Central Government security maturing in 2012, which carries a coupon of 11.03% payable half yearly. The key features of these securities are: They are issued at face value. Coupon or interest rate is fixed at the time of issuance, and remains constant till redemption of the security. The tenor of the security is also fixed. Interest /Coupon payment is made on a half yearly basis on its face value. The security is redeemed at par (face value) on its maturity date.
Zero Coupon bonds are bonds issued at discount to face value and redeemed at par. These were issued first on January 19, 1994 and were followed by two subsequent issues in 1994-95 and 1995-96 respectively. The key features of these securities are: They are issued at a discount to the face value.
The tenor of the security is fixed.
The securities do not carry any coupon or interest rate. The difference between the issue price (discounted price) and face value is the return on this security. The security is redeemed at par (face value) on its maturity date.
Partly Paid Stock is stock where payment of principal amount is made in installments over a given time frame. It meets the needs of investors with regular flow of funds and the need of Government when it does not need funds immediately. The first issue of such stock of eight year maturity was made on November 15, 1994 for Rs. 2000 crore. Such stocks have been issued a few more times thereafter. The key features of these securities are: They are issued at face value, but this amount is paid in installments over a specified period. Coupon or interest rate is fixed at the time of issuance, and remains constant till redemption of the security. The tenor of the security is also fixed. Interest /Coupon payment is made on a half yearly basis on its face value. The security is redeemed at par (face value) on its maturity date.
Floating Rate Bonds are bonds with variable interest rate with a fixed percentage over a benchmark rate. There may be a cap and a floor rate attached thereby fixing a maximum and minimum interest rate payable on it. Floating rate bonds of four year maturity were first issued on September 29, 1995, followed by another issue on
December 5, 1995. Recently RBI issued a floating rate bond, the coupon of which is benchmarked against average yield on 364 Days Treasury Bills for last six months. The coupon is reset every six months. The key features of these securities are: They are issued at face value. Coupon or interest rate is fixed as a percentage over a predefined benchmark rate at the time of issuance. The benchmark rate may be Treasury bill rate, bank rate etc. Though the benchmark does not change, the rate of interest may vary according to the change in the benchmark rate till redemption of the security. The tenor of the security is also fixed. Interest /Coupon payment is made on a half yearly basis on its face value. The security is redeemed at par (face value) on its maturity date.
Bonds with Call/Put Option: First time in the history of Government Securities market RBI issued a bond with call and put option this year. This bond is due for redemption in 2012 and carries a coupon of 6.72%. However the bond has call and put option after five years i.e. in year 2007. In other words it means that holder of bond can sell back (put option) bond to Government in 2007 or Government can buy back (call option) bond from holder in 2007. This bond has been priced in line with 5 year bonds. Capital indexed Bonds are bonds where interest rate is a fixed percentage over the wholesale price index. These provide investors with an effective hedge against inflation. These bonds were floated on December 29, 1997 on tap basis. They were of five year maturity with a coupon rate of 6 per cent over the wholesale price index. The principal redemption is linked to the Wholesale Price Index. The key features of these securities are: They are issued at face value.
Coupon or interest rate is fixed as a percentage over the wholesale price index at the time of issuance. Therefore the actual amount of interest paid varies according to the change in the Wholesale Price Index.
The tenor of the security is fixed. Interest /Coupon payment is made on a half yearly basis on its face value. The principal redemption is linked to the Wholesale Price Index.
Features of Government Securities Nomenclature The coupon rate and year of maturity identifies the government security. Example: 12.25% GOI 2008 indicates the following: 12.25% is the coupon rate, GOI denotes Government of India, which is the borrower, 2008 is the year of maturity. Eligibility All entities registered in India like banks, financial institutions, Primary Dealers, firms, companies, corporate bodies, partnership firms, institutions, mutual funds, Foreign Institutional Investors, State Governments, Provident Funds, trusts, research organisations, Nepal Rashtra bank and even individuals are eligible to purchase Government Securities. Availability Government securities are highly liquid instruments available both in the primary and secondary market. They can be purchased from Primary Dealers. PNB Gilts Ltd., is a leading Primary Dealer in the government securities market, and is actively involved in the trading of government securities. Forms of Issuance of Government Securities Banks, Primary Dealers and Financial Institutions have been allowed to hold these securities with the Public Debt Office of Reserve Bank of India in dematerialized form in accounts known as Subsidiary General Ledger (SGL) Accounts. Entities having a Gilt Account with Banks or Primary Dealers can hold these securities with them in dematerialized form.
In addition government securities can also be held in dematerialized form in demat accounts maintained with the Depository Participants of NSDL.
Minimum Amount In terms of RBI regulations, government dated securities can be purchased for a minimum amount of Rs. 10,000/-only.Treasury bills can be purchased for a minimum amount of Rs 25000/- only and in multiples thereof. State Government Securities can be purchased for a minimum amount of Rs 1,000/- only. Repayment Government securities are repaid at par on the expiry of their tenor. The different repayment methods are as follows : For SGL account holders, the maturity proceeds would be credited to their current accounts with the Reserve Bank of India. For Gilt Account Holders, the Bank/Primary Dealers, would receive the maturity proceeds and they would pay the Gilt Account Holders. For entities having a demat acount with NSDL,the maturity proceeds would be collected by their DP's and they in turn would pay the demat Account Holders.
Day Count For government dated securities and state government securities the day count is taken as 360 days for a year and 30 days for every completed month. However for Treasury bills it is 365 days for a year. Example : A client purchases 7.40% GOI 2012 for face value of Rs. 10 lacs.@ Rs.101.80, i.e. the client pays Rs.101.80 for every unit of government security having a face value of Rs. 100/- The settlement is due on October 3, 2002. What is the amount to be paid by the client? The security is 7.40% GOI 2012 for which the interest payment dates are 3rd May, and 3rd November every year. The last interest payment date for the current year is 3 rd May 2002. The calculation would be made as follows: Face value of Rs. 10 lacs.@ Rs.101.80%.
Therefore the principal amount payable is Rs.10 lacs X 101.80% =10,18,000 Last interest payment date was May 3, 2002 and settlement date is October 3, 2002. Therefore the interest has to be paid for 150 days (including 3 rd May, and excluding October 3, 2002) (28 days of May, including 3rd May, up to 30th May + 30 days of June, July, August and September + 2 days of October). Since the settlement is on October 3, 2002, that date is excluded. Interest payable = 10 lacs X 7.40% X 150 = Rs. 30833.33. 360 X 100 Total amount payable by client =10,18,000+30833.33=Rs. 10,48,833.33 Benefits of Investing in Government Securities No tax deducted at source Additional Income Tax benefit u/s 80L of the Income Tax Act for Individuals Qualifies for SLR purpose Zero default risk being sovereign paper Highly liquid. Transparency in transactions and simplified settlement procedures through CSGL/NSDL Methods of Issuance of Government Securities Government securities are issued by various methods, which are as follows:
Auctions: Auctions for government securities are either yield based or price based. In an yield based auction, the Reserve Bank of India announces the issue size(or notified amount) and the tenor of the paper to be auctioned. The bidders submit bids in terms of the yield at which they are ready to buy the security. In a price based auction, the Reserve Bank of India announces the issue size(or notified amount), the tenor of the paper to be auctioned, as well as the coupon rate. The bidders submit bids in terms of the price. This method
of auction is normally used in case of reissue of existing government securities. The basic features of the auctions are given below:

Method of auction: There are two methods of auction which are followedUniform price Based or Dutch Auction procedure is used in auctions of dated government securities. The bids are accepted at the same prices as decided in the cut off.
Multiple/variable Price Based or French Auction procedure is used in auctions of Government dated securities and treasury bills. Bids are accepted at different prices / yields quoted in the individual bids.
Bids: Bids are to be submitted in terms of yields to maturity/prices as announced at the time of auction.
Cut off yield: is the rate at which bids are accepted. Bids at yields higher than the cut-off yield is rejected and those lower than the cut-off are accepted. The cut-off yield is set as the coupon rate for the security. Bidders who have bid at lower than the cut-off yield pay a premium on the security, since the auction is a multiple price auction.
Cut off price: It is the minimum price accepted for the security. Bids at prices lower than the cut-off are rejected and at higher than the cut-off are accepted. Coupon rate for the security remains unchanged. Bidders who have bid at higher than the cut-off price pay a premium on the security, thereby getting a lower yield. Price based auctions lead to finer price discovery than yield based auctions.
Notified amount: The amount of security to be issued is notified prior to the auction date, for information of the public. The Reserve Bank of India (RBI) may participate as a non-competitor in the auctions. The unsubscribed portion devolves on RBI or on the Primary Dealers if the auction has been underwritten by PDs. The devolvement is at the cut-off price/yield.
Underwriting in Auctions
For the purpose of auctions, bids are invited from the Primary Dealers one day before the auction wherein they indicate the amount to be underwritten by them and the underwriting fee expected by them.
The auction committee of Reserve Bank of India examines the bids and based on the market conditions, takes a decision in respect of the amount to be underwritten and the fee to be paid to the underwriters.
Underwriting fee is paid at the rates bid by PDs , for the underwriting which has been accepted.
In case of the auction being fully subscribed, the underwriters do not have to subscribe to the issue necessarily unless they have bid for it.
If there is a devolvement, the successful bids put in by the Primary Dealers are set-off against the amount underwritten by them while deciding the amount of devolvement. On-tap issue This is a reissue of existing Government securities having pre-determined yields/prices by Reserve Bank of India. After the initial primary auction of a security, the issue remains open to further subscription by the investors as and when considered appropriate by RBI. The period for which the issue is kept open may be time specific or volume specific. The coupon rate, the interest dates and the date of maturity remain the same as determined in the initial primary auction. Reserve Bank of India may sell government securities through on tap issue at lower or higher prices than the prevailing market prices. Such an action on the part of the Reserve Bank of India leads to a realignment of the market prices of government securities. Tap stock provides an opportunity to unsuccessful bidders in auctions to acquire the security at the market determined rate. Fixed coupon issue Government Securities may also be issued for a notified amount at a fixed coupon. Most State Development Loans or State Government Securities are issued on this basis. Private Placement
The Central Government may also privately place government securities with Reserve Bank of India. This is usually done when the Ways and Means Advance (WMA) is near the sanctioned limit and the market conditions are not conducive to an issue. The issue is priced at market related yields. Reserve Bank of India may later offload these securities to the market through Open Market Operations (OMO). After having auctioned a loan whereby the coupon rate has been arrived at and if still the government feels the need for funds for similar tenure, it may privately place an amount with the Reserve Bank of India. RBI in turn may decide upon further selling of the security so purchased under the Open Market Operations window albeit at a different yield.
Open Market Operations (OMO) Government securities that are privately placed with the Reserve Bank of India are sold in the market through open market operations of the Reserve Bank of India. The yield at which these securities are sold may differ from the yield at which they were privately placed with Reserve Bank of India. Open market operations are used by the Reserve Bank of India to infuse or suck liquidity from the system. Whenever the Reserve Bank of India wishes to infuse the liquidity in the system, it purchases government securities from the market, and whenever it wishes to suck out the liquidity from the system, it sells government securities in the market. National Savings Certificate National Savings Certificate, popularly known as NSC, is a time-tested tax saving instrument that combines adequate returns with high safety. NSCs are an instrument for facilitating long-term savings. A large chunk of middle class families use NSCs for saving on their tax, getting double benefits. They not only save tax on their hard-earned income but also make an investment which are sure to give good and safe returns. How to Invest National Savings Certificates are available at all post-offices. The application can be made either in person or through an agent. Post office agents are active in nooks and corners of the country. Following types of NSC are issued: Single Holder Type Certificate: This can be issued to: (a) An adult for himself or on behalf of a minor (b) A Trust. Joint 'A' Type Certificate: Issued jointly to two adults payable to both holders jointly or to the survivor. Joint 'B' Type Certificate: Issued jointly to two adults payable to either of the holders or to the survivor. Who can Invest An adult in his own name or on behalf of a minor A trust Two adults jointly
Denomiations and Limit National Savings Certificates are available in the denominations of Rs. 100 Rs 500, Rs. 1000, Rs. 5000, & Rs. 10,000. There is no maximum limit on the purchase of the certificates. So it is for you to decide how much you want to put in the NSCs. This is of course a huge benefit for you can decide as much as your budget allows.
Maturity Period of maturity of a certificate is six years. Presently interest paid is 8 % per annum half yearly compounded. Maturity value of a certificate of any other denomination is at proportionate rate. Premature encashment of the certificate is not permissible except at a discount in the case of death of the holder(s), forfeiture by a pledgee and when ordered by a court of law. Tax Benefits Interest accrued on the certificates every year is liable to income tax but deemed to have been reinvested. Income Tax rebate is available on the amount invested and interest accruing under Section 88 of Income Tax Act, as amended from time to time. Income tax relief is also available on the interest earned as per limits fixed vide section 80L of Income Tax, as amended from time to time. Public Provident Fund Public Provident Fund, popularly known as PPF, is a savings cum tax saving instrument. It also serves as a retirement planning tool for many of those who do not have any structured pension plan covering them. The balances in PPF account cannot be attached by any authority normally. How to Open Account Public Provident Fund account can be opened at designated post offices throughout the country and at designated branches of Public Sector Banks throughout the country.
Who can Open Account The account can be opened by an individual in his own name, on behalf of a minor of whom he is a guardian. Tabs on Investment Minimum deposit required in a PPF account is Rs. 500 in a financial year. Maximum deposit limit is Rs. 70,000 in a financial year. Maximum number of deposits is twelve in a financial year. Maturity The maturity period of the account is 15 years. Rate of interest is 8% compounded annually. One deposit with a minimum amount of Rs.500/- is mandatory in each financial year. The amount of deposit can be varied to suit the convenience of the account holders. The account holder can retain the account after maturity for any period without making any further deposits. In this case the account will continue to earn interest at normal rate as admissible till the account is closed. The account holder also has an option to extend the PPF account for any period in a block of 5 years at each time, after the maturity period of 15 years. Lapse in Deposits If deposits are not made in a PPF account in any financial year, the account will be treated as discontinued. The discontinued account can be activated by payment of the minimum deposit of Rs.500/- with default fee of Rs.50/- for each defaulted year. Premature Closure or Withdrawl Premature closure of a PPF Account is not permissible except in case of death. Nominee/legal heir of PPF Account holder cannot continue the account after the death. Premature withdrawal is permissible in the 7th year of the account subject, to a limit of 50% of the amount at credit preceding three year balance. Thereafter one withdrawal in every year is permissible.
Account Transfer The Account is transferable from one post Office / bank to another and from post Office to bank or from a bank to a post office. Tax Benefits Deposits in PPF are eligible for rebate under section 80-C of Income Tax Act. The interest on deposits is totally tax free. Deposits are exempt from wealth tax.
BONDS
A bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to repay the principal at a later date, termed maturity. It is a formal contract to repay borrowed money with interest at fixed intervals.[1] Thus a bond is like a loan: the issuer is the borrower, the bond holder is the lender, and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Certificates of deposit (CDs) or commercial paper are considered to be money market instruments and not bonds. Bonds must be repaid at fixed intervals over a period of time Bonds are issued by public authorities, credit institutions, companies and supranational institutions in the primary markets. The most common process of issuing bonds is through underwriting. In underwriting, one or more securities firms or banks, forming a syndicate, buy an entire issue of bonds from an issuer and re-sell them to investors. The security firm takes the risk of being unable to sell on the issue to end investors. However government bonds are instead typically auction. The most important features of a bond are: Nominal, principal or face amount the amount on which the issuer pays interest, and which has to be repaid at the end. Issue price The price at which investors buy the bonds when they are first issued, which will typically be approximately equal to the nominal amount. The net proceeds that the issuer receives are thus the issue price, less issuance fees. date The date on which the issuer has to repay the nominal amount. As long
Maturity
as all payments have been made, the issuer has no more obligations to the bond holders after the maturity date. The length of time until the maturity date is often referred to as the term or tenor or maturity of a bond. The maturity can be any length of time, although debt securities with a term of less than one year are generally designated money market instruments rather than bonds. Most bonds have a term of
up to thirty years. Some bonds have been issued with maturities of up to one hundred years, and some even do not mature at all. In early 2005, a market developed in are three groups of bond maturities: short term (bills): maturities up to one year; medium term (notes): maturities between one and ten years; long term (bonds): maturities greater than ten years. The interest rate that the issuer pays to the bond holders. Usually this rate is or it can be even more exotic. The name coupon originates from the fact that
euros
for bonds with a maturity of fifty years. In the market for U.S. Treasury securities, there
Coupon
fixed throughout the life of the bond. It can also vary with a money market index, such as
LIBOR,
in the past, physical bonds were issued which had coupons attached to them. On coupon dates the bond holder would give the coupon to a bank in exchange for the interest payment. The quality of the issue, which influences the probability that the bondholders will receive the amounts promised, at the due dates. This will depend on a whole range of factors. Indentures and Covenants An is a formal debt agreement that establishes
indenture
the terms of a bond issue, while covenants are the clauses of such an agreement. Covenants specify the rights of bondholders and the duties of issuers, such as actions that the issuer is obligated to perform or is prohibited from performing. In the U.S., federal and state securities and commercial laws apply to the enforcement of these agreements, which are construed by courts as contracts between issuers and bondholders. The terms may be changed only with great difficulty while the bonds are outstanding, with amendments to the governing document generally requiring approval by a majority (or super-majority) vote of the bondholders. are bonds that are rated below investment grade by the
credit rating agencies.
High yield bonds
As
these bonds are more risky than investment grade bonds, investors expect to earn a higher yield. These bonds are also called junk bonds.
coupon dates the dates on which the issuer pays the coupon to the bond holders. In the U.S. and also in the U.K. and Europe, most bonds are semi-annual, which means that they pay a coupon every six months. Optionality: Occasionally a bond may contain an embedded option; that is, it grants
option-like
features to the holder or the issuer:
Callability Some bonds give the issuer the right to repay the bond before the maturity date on the
call dates;
see
call option.
These bonds are referred to as

par. call premium.
callable bonds.
Most
callable bonds allow the issuer to repay the bond at has to pay a premium, the so called
With some bonds, the issuer
This is mainly the case for high-yield
bonds. These have very strict covenants, restricting the issuer in its operations. To be free from these covenants, the issuer can repay the bonds early, but only at a high cost. Putability Some bonds give the holder the right to force the issuer to repay the bond before the maturity date on the put dates; see call dates and put datesthe
put option.
(Note: "Putable" denotes an
embedded put option; "Puttable" denotes that it may be putted.)

dates
on which callable and putable bonds can be
redeemed early. There are four main categories. A Bermudan callable has several call dates, usually coinciding with coupon dates. A European callable has only one call date. This is a special case of a Bermudan callable. An American callable can be called at any time until the maturity date. A death put is an optional redemption feature on a debt instrument allowing the beneficiary of the estate of the deceased to put (sell) the bond (back to the issuer) in the event of the beneficiary's death or legal incapacitation. Also known as a "survivor's option". sinking fund provision of the corporate bond indenture requires a certain portion of the issue to be retired periodically. The entire bond issue can be liquidated by the maturity date. If that is not the case, then the remainder is called balloon maturity. Issuers may either pay to trustees, which in turn call randomly selected bonds in the issue, or, alternatively, purchase bonds in open market, then return them to trustees.
convertible bond
lets a bondholder exchange a bond to a number of shares of the issuer's
common stock. allows for exchange to shares of a corporation other than the issuer.
exchangeable bond
Fixed rate bonds
have a coupon that remains constant throughout the life of the bond. (FRNs) have a coupon that is linked to an index. Common indices such as
LIBOR
Floating rate notes
include:
money market indices,
or
Euribor,
and CPI (the Consumer Price Index).
Coupon examples: three month USD LIBOR + 0.20%, or twelve month CPI + 1.50%. FRN coupons reset periodically, typically every one or three months. In theory, any Index could be used as the basis for the coupon of an FRN, so long as the issuer and the buyer can agree to terms. don't pay any interest. They are issued at a substantial discount to
Zero-coupon bonds value.
par
The bond holder receives the full principal amount on the redemption date. An may be created from fixed rate bonds by a financial
example of zero coupon bonds are Series E savings bonds issued by the U.S. government.
Zero-coupon bonds
institutions separating "stripping off" the coupons from the principal. In other words, the separated coupons and the final principal payment of the bond are allowed to trade independently. See IO (Interest Only) and PO (Principal Only).
Inflation linked bonds,
in which the principal amount and the interest payments are indexed to
inflation. The interest rate is normally lower than for fixed rate bonds with a comparable maturity (this position briefly reversed itself for short-term UK bonds in December 2008). However, as the principal amount grows, the payments increase with inflation. The
government of the United Kingdom
was the first to issue inflation linked

I-bonds
Gilts
in the 1980s.
Treasury Inflation-Protected Securities
(TIPS) and
are examples of inflation linked bonds and bonds indexed on a business
issued by the U.S. government. Other indexed bonds, for example

equity-linked notes
indicator (income, added value) or on a country's GDP. are bonds whose interest and principal payments are backed by
Asset-backed securities
underlying cash flows from other assets. Examples of asset-backed securities are
mortgage-backed securities obligations
(MBS's),
collateralized mortgage obligations
(CMOs) and
collateralized debt
(CDOs). are those that have a lower priority than other bonds of the issuer in In case of bankruptcy, there is a hierarchy of creditors. First the
liquidator
Subordinated bonds
case of
liquidation.
is paid, then government taxes, etc. The first bond holders in line to be paid are those holding what is called senior bonds. After they have been paid, the subordinated bond holders are paid. As a result, the risk is higher. Therefore, subordinated bonds usually have a lower credit rating than senior bonds. The main examples of subordinated bonds can be found in bonds issued by banks, and asset-backed securities. The latter are often issued in tranches later. are also often called
perpetuities. tranches.
The senior tranches get paid back first, the subordinated
Perpetual bonds
They have no maturity date. The most
famous of these are the UK Consols, which are also known as Treasury Annuities or Undated Treasuries. Some of these were issued back in 1888 and still trade today, although the amounts are now insignificant. Some ultra long-term bonds (sometimes a bond can last centuries: West Shore Railroad issued a bond which matures in 2361 (i.e. 24th century)) are virtually perpetuities from a financial point of view, with the current value of principal near zero. is an official certificate issued without a named holder. In other words, the
Bearer bond
person who has the paper certificate can claim the value of the bond. Often they are registered by a number to prevent counterfeiting, but may be traded like cash. Bearer bonds are very risky because they can be lost or stolen. Especially after federal income tax began in the United States, bearer bonds were seen as an opportunity to conceal income or assets.[2] U.S. corporations stopped issuing bearer bonds in the 1960s, the U.S. Treasury stopped in 1982, and state and local tax-exempt bearer bonds were prohibited in 1983.[3] Registered bond is a bond whose ownership (and any subsequent purchaser) is recorded by the issuer, or by a transfer agent. It is the alternative to a
Bearer bond.
Interest
payments, and the principal upon maturity, are sent to the registered owner.
Municipal bond
is a bond issued by a state, U.S. Territory, city, local government, or their

exempt
agencies. Interest income received by holders of municipal bonds is often the federal
income tax
from
and from the income tax of the state in which they are issued,
although municipal bonds issued for certain purposes may not be tax exempt. Book-entry bond is a bond that does not have a paper certificate. As physically processing paper bonds and interest coupons became more expensive, issuers (and banks that used to collect coupon interest for depositors) have tried to discourage their use. Some book-entry bond issues do not offer the option of a paper certificate, even to investors who prefer them.[4] is a bond issued by a state, usually a European state. Interest is paid like a
Lottery bond
traditional fixed rate bond, but the issuer will redeem randomly selected individual bonds within the issue according to a schedule. Some of these redemptions will be for a higher value than the face value of the bond. is a bond issued by a country to fund a war. is a bond that matures in installments over a period of time. In effect, a
War bond
Serial bond
$100,000, 5-year serial bond would mature in a $20,000 annuity over a 5-year interval. is a special type of municipal bond distinguished by its guarantee of
Revenue bond
repayment solely from revenues generated by a specified revenue-generating entity associated with the purpose of the bonds. Revenue bonds are typically "non-recourse," meaning that in the event of default, the bond holder has no recourse to other governmental assets or revenues. [edit] Investing in bonds Bonds are bought and traded mostly by institutions like
banks. pension funds, insurance companies bond funds.
and
Most individuals who want to own bonds do so through
Still, in the U.S.,
nearly 10% of all bonds outstanding are held directly by households. Sometimes, bond markets rise (while yields fall) when stock markets fall. More relevantly, the volatility of bonds (especially short and medium dated bonds) is lower than that of shares. Thus bonds are generally viewed as safer investments than
stocks,
but this perception is only partially correct. Bonds do suffer from less day-to-day volatility than stocks, and bonds' interest payments are often higher than the general level of
dividend
payments. Bonds are liquid it is fairly easy to sell one's bond
investments, though not nearly as easy as it is to sell stocks and the comparative certainty of a fixed interest payment twice per year is attractive. Bondholders also enjoy a measure of legal protection: under the law of most countries, if a company goes
bankrupt,
its bondholders will often receive some money back (the recovery amount),
whereas the company's stock often ends up valueless. However, bonds can also be risky: Fixed rate bonds are subject to interest rate risk, meaning that their market prices will decrease in value when the generally prevailing interest rates rise. Since the payments are fixed, a decrease in the market price of the bond means an increase in its yield. When the market interest rate rises, the market price of bonds will fall, reflecting investors' ability to get a higher interest rate on their money elsewhere perhaps by purchasing a newly issued bond that already features the newly higher interest rate. Note that this drop in the bond's market price does not affect the interest payments to the bondholder at all, so long-term investors who want a specific amount at the maturity date need not worry about price swings in their bonds and do not suffer from interest rate risk. Price changes in a bond will also immediately affect mutual funds that hold these bonds. If the value of the bonds held in a trading
portfolio
has fallen over the day, the
value of the portfolio will also have fallen. This can be damaging for professional investors such as banks, insurance companies, pension funds and asset managers (irrespective of whether the value is immediately "marked to market" or not). If there is any chance a holder of individual bonds may need to sell his bonds and "cash out", interest rate risk could become a real problem. (Conversely, bonds' market prices would increase if the prevailing interest rate were to drop, as it did from 2001 through 2003.) One way to quantify the interest rate risk on a bond is in terms of its control this risk are called immunization or hedging. Bond prices can become volatile depending on the credit rating of the issuer - for instance if the credit rating agencies like Standard & Poor's and Moody's upgrade or downgrade the credit rating of the issuer. A downgrade will cause the market price of
duration.
Efforts to
the bond to fall. As with interest rate risk, this risk does not affect the bond's interest payments (provided the issuer does not actually default), but puts at risk the market price, which affects mutual funds holding these bonds, and holders of individual bonds who may have to sell them. A company's bond holders may lose much or all their money if the company goes
bankrupt.
Under the laws of many countries (including the United States and Canada),
bondholders are in line to receive the proceeds of the sale of the assets of a liquidated company ahead of some other creditors. Bank lenders, deposit holders (in the case of a deposit taking institution such as a bank) and trade creditors may take precedence. There is no guarantee of how much money will remain to repay bondholders. As an example, after an accounting scandal and a telecommunications company
World com, Chapter 11
bankruptcy at the giant
in 2004 its bondholders ended up being paid
35.7 cents on the dollar. In a bankruptcy involving reorganization or recapitalization, as opposed to liquidation, bondholders may end up having the value of their bonds reduced, often through an exchange for a smaller number of newly issued bonds. Some bonds are callable, meaning that even though the company has agreed to make payments plus interest towards the debt for a certain period of time, the company can choose to pay off the bond early. This creates
reinvestment risk,
meaning the investor is
forced to find a new place for his money, and the investor might not be able to find as good a deal, especially because this usually happens when interest rates are falling.
COMMODITIES
A commodity is a normal physical product used by everyday people during the course of their lives, or metals that are used in production or as a traditional store of wealth and a hedge against inflation. For example, these commodities include grains such as wheat, corn and rice or metals such as copper, gold and silver. The full list of commodity markets is numerous and too detailed. The best way to trade the commodity
markets is by buying and selling futures contracts on local and international exchanges. Trading futures is easy, and can be accessed by using the services of any full or on-line futures brokerage service. Traditionally, there is an expectation when trading commodity futures of achieving higher returns compared to shares or real estate, so successful investors can expect much higher returns compared to more conventional investment products. The process of trading commodities, as mentioned above, must be facilitated by the use of trading liquid, exchangeable, and standardized futures contracts, as it is not practical to trade the physical commodities. Futures contracts give the investor ease of use and the ability to buy or sell without delay. A futures contract is used to buy or sell a fixed quantity and quality of an underlying commodity, at a fixed date and price in the future. Futures contracts can be broken by simply offsetting the transaction. For example, if you buy one futures contract to open then you sell one futures contract to close that market position. The execution method of trading futures contracts is similar to trading physical shares, but futures contracts have an expiry date and are deliverable.Futures contracts have an expiry date and need to be occasionally rolled over from the current contract month to the following contract month. The reason is because the biggest advantage to trading commodity futures, for the private investor is the opportunity to legally short-sell these markets. Short-selling is the ability to sell commodity futures creating an open position in the expectation to buyback at a later time to profit from a fall in the market. If you wish to trade the up-side of commodity futures, then it will simply be a buy-to-open and sell-to-close set of transactions similar to share trading. The commodity markets will always produce rising of falling trends, and with the abundance of information and trading opportunities available there is no reason for any investor to exclusively trade the share market when there is potential profits from trading commodity futures. The increased use of commodity trading vehicles in investment management has led practitioners to create investable commodity indices and products that offer unique
performance opportunities for investors in physical commodities. As is true for stock and bond performance, as well as investment in managed futures and hedge fund products, commodity-based products have a variety of uses. Besides being a source of information on cash commodity and futures commodity market trends, they are used as performance benchmarks for evaluation of commodity trading advisors and provide a historical track record useful in developing asset allocation strategies. However, the investor benefits of commodity or commodity-based products lie primarily in their ability to offer risk and return trade-offs that cannot be easily replicated through other investment alternatives. Previous research that direct stock and bond investment offers little evidence of providing returns consistent with direct commodity investment. commodity-based firms may not be exposed to the risk of commodity price movement. Thus for investors, direct commodity investment may be the principal means by which one can obtain exposure to commodity price movements. The commodities that are traded in the market Gold Copper Silver Sugar Wheat Zeera Guar
Introduction of Banking
The banking section will navigate through all the aspects of the Banking System in India. It will discuss upon the matters with the birth of the banking concept in the country to new players adding their names in the industry in coming few years. The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well defined under three separate heads with one page dedicated to each bank. However, in the introduction part of the entire banking cosmos, the past has been well explained under three different heads namely:

History of Banking in India Nationalisation of Banks in India Scheduled Commercial Banks in India
The first deals with the history part since the dawn of banking system in India. Government took major step in the 1969 to put the banking sector into systems and it nationalised 14 private banks in the mentioned year. This has been elaborated in Nationalisationof Banks in India. The last but not the least explains about the scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled commercial banks. Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.
INTRODUCTION OF CURRENCY DERIVATIVES

The introduction of currency derivatives in India is a landmark decision which is likely to be a boon for importers, exporters and companies with foreign exchange exposure. These derivative products have a wide range with their special features suiting to the needs and requirements of the individuals. As currency derivative is new to India, it is time to have a broad understanding of them which are mostly couched in jargons and technical terms. Thus the very subject raises a kind of aversion for the common people. The currency derivatives are contracts just like any other derivatives viz., Stock, Index etc. Unlike the stock, the underlying in this case is currencies. The value of the currencies determine the values of the currency derivatives. A s it is universally accepted that market risks are ones which can not eliminated in absolute terms. But their management is perfectly possible. The currency derivatives are efficient tools for management of risks in money and forex markets. The need to protect the exposure against unforeseen and unpredictable movement in currency and interest rates have led to the emergence of these kinds of derivatives. Thus external borrowings or receivables or payments in foreign currencies come within the purview of management under it .As we all know the exporters and importers incur huge obligations in terms of foreign currencies and they can guard their interest by buying appropriate products. Derivatives which are based on currency exchange rates are known as forward contracts, forward contracts contain stipulation as to the rate at which exchange takes place between two currencies at a future date. This form derivatives are extensively resorted by the exporters and importers to secure their positions by making contracts with their respective banks. It is important to note that on the appointed date the contracts have to be honoured and the difference between the market rate prevailing on the appointed date and the contracted rate has to be coughed up and if the parties agree to a postponement to a future date the differentical has to be squared up. There is a basic difference between a forward contract and an option. A forward contract is characterized by an obligation as well as a right. But in the case of an option no obligation to perform exists. Thus the buyer of a forward contract can make an
upfront gain or loss all depending on the situation of the currency viz., whether it is in premium or discount. But a buyer of a currency option can decide to ignore as he is not placed under any obligation.
Each country has its own currency through which both national and international transactions are performed. All the international business transactions involve an exchange of one currency for another. For example, If any Indian firm borrows funds from international financial market in US dollars for short or long term then at maturity the same would be refunded in particular agreed currency along with accrued interest on borrowed money. It means that the borrowed foreign currency brought in the country will be converted into Indian currency, and when borrowed fund are paid to the lender then the home currency will be converted into foreign lenders currency. Thus, the currency units of a country involve an exchange of one currency for another. The price of one currency in terms of other currency is known as exchange rate. The foreign exchange markets of a country provide the mechanism of exchanging different currencies with one and another, and thus, facilitating transfer of purchasing power from one country to another. With the multiple growths of international trade and finance all over the world, trading in foreign currencies has grown tremendously over the past several decades. Since the exchange rates are continuously changing, so the firms are exposed to the risk of exchange rate movements. As a result the assets or liability or cash flows of a firm which are denominated in foreign currencies undergo a change in value over a period of time due to variation in exchange rates. This variability in the value of assets or liabilities or cash flows is referred to exchange rate risk. Since the fixed exchange rate system has been fallen in the early 1970s, specifically in developed countries, the currency risk has become substantial for many business firms. As a result, these firms are increasingly turning to various risk hedging products.
How to maximise employee wellbeing

1 Focus on wellness Motivating employees to exercise and eat healthily often has a bigger impact than investing in private medical care, Ben Wells, of Buck Consultants, an HR consultancy, believes. The number of companies with a wellness strategy almost doubled to 40 per cent in 2007-08, the consultancy has found. Unilever, the consumer products manufacturer, recently launched a drive to improve the health of employees, posting calorie counts next to meals, giving nutrition advice and offering free gym access. Healthier employees are more engaged, committed and put in discretionary effort following our investment in them, Alan Walters, HR director at Unilever, said.
2 Respond to workers' needs Employers should be thinking about how employees and their families are affected by the recession, Annette Cox, associate director at the Institute of Employment Studies, said. About 20 per cent of people in our survey said that they don't sleep because they are so worried about financial problems. What kind of person is going to be presenting themselves for work the next day? Managers should know where to refer employees for help, such as occupational health or consumer credit counselling services, she said.
3 Communicate clearly Surprising numbers of people don't take up health insurance benefits or pensions because they find them complicated and difficult to understand, Ms Cox said. Ninety per cent of employees at one company did not select a pension plan because there were too many to choose from, Mr Wells said. The company is reducing the options from ten to three. Tapping into workplace networks is highly effective. If the employee sitting next to them says join the pension scheme, it's a good deal', that is a key influencer, he said. Companies should not be afraid to convey bad news, such as losses in a share scheme, Mr Wells added. Use the negative figure to grab people's attention and say: Invest now because assets are cheap.'
4 Offer lifestyle benefits In difficult times a degree of choice, such as the option to work flexibly, makes people feel in control, Claire Kelliher, a senior lecturer in strategic human resource management at Cranfield School of Management, said. Being able to choose when and where they work helps people to manage their workload and has a positive effect on stress levels, she said. Offering additional holiday as unpaid leave as a way of avoiding redundancies is also very popular, Ali Gill, chief executive of Crelos, an HR consultancy, suggested.
5 Combat inertia People are generally apathetic about doing the right thing, particularly saving for the future, Mr Wells said. His research found that only 1 per cent of people attending a workshop on saving followed up the advice. Save more tomorrow' schemes, where employees pledge future pay increases towards their pension plan, work well, he said. You take advantage of inertia as people make the decision then forget about it. Unilever now offers blood pressure checks on its factory production lines. Before, people used to have to go off-site and that was a barrier, Mr Walters said.
6 Mental as well as physical health Line managers have the biggest impact on mental health, Ben Willmott, employee relations adviser at the Chartered Institute of Personnel and Development (CIPD), said. In many cases it is management style that mitigates, adds to or even creates stress. Managers should be trained to spot signs of depression, such as a drop in performance, moodiness or lack of focus. Uncertainty is a huge source of stress, Ms Kelliher said. If not in a position to reduce it, managers should spell out that things are uncertain for them, too.
7 Get high level commitment If, as an organisation, you really care about employee wellbeing, now is the time to make it a pillar of your strategy, Mr Walters said. You need sustained buy-in from a high level if you want to be successful.
8 Be involved Ten years ago companies ditched responsibility for employees' finances, but now they are moving back to a more paternalistic approach, Mr Wells said. The rationale is that secure employees equal focused and productive employees.
9 Tailor your offering With an ageing population, parental ill-health is a problem for many mid-career professionals, but is largely neglected by employers, Ms Kelliher said. Age also plays a part in the kinds of benefits people want. Generation X and Y are not that interested in planning their retirement, but baby boomers are likely to want to research their options in detail, Mr Wells said.
10 Make benefits make business sense Absence costs an average of 666 per worker per year, according to the CIPD, so health benefits offer a tangible return on investment. Run pilots first, so that you can assess the impact a programme has on reducing absence and increasing productivity, Mr Willmott said
EMPLOYEE INVESTMENT PROGRAM The employee investment program encourages employees to invest in the company they work for and receive a substantial tax credit in return. Under this program, employees can set up and invest in an LSVCC fund, which in turn is invested into their employers company. Employees who invest receive a 20% provincial tax credit and a 15% federal tax credit on the first $5,000 they contribute each year. For employers, the program helps create a more engaged and productive workforce by allowing employees to have a feeling of ownership. The program can be effectively used for recruitment and retention and even succession planning. The fund can provide equity capital for business expansion. In addition to the tax credits, the employees have the opportunity to share in the success of the company they work for and to own a piece of it. Tax credits are available only to the first purchaser of shares. If shares of the LSVCC are purchased in the first 60 days of the calendar year, the tax credit may be claimed for that calendar year or the previous calendar year, or a combination of those two years. Unused tax credits cannot be refunded. Investments may be RRSP-eligible. Investments must be held for eight years or tax credits must be repaid (unless the employee leaves the company before eight years). In order to create an LSVCC fund under this program, there must be a group of employees willing to invest. As well, the employer must agree to the establishment of the fund. Eligible companies must be corporations or co-operatives, with between five and 500 employees who reside in Saskatchewan and at least 25% of salaries paid out in Saskatchewan. An employee-controlled investment fund, incorporated by an employee association, must be established to manage the investments. The fund may not issue equity shares for a total value in excess of $5 million. The fund must provide for equal opportunity for all employees to purchase shares which are participating and voting and share in the proceeds upon dissolution. The fund is required to invest in the employer company within six months.
The Impact on Low to Middle Earners

Having laid out detailed plans for public spending and taxes last year, the Chancellor unveiled relatively little that was new from the household perspective in his latest Budget. However, many of the pre-announced measures are only now coming into effect, with significant consequences for millions of low-to-middle earners. Of equal importance is the acknowledgement in the Budget that the economy remains very weak, with higher inflation and lower growth than previously expected, meaning that prices will continue to rise more quickly than earnings in 2011 and 2012. This note does four things: First, it considers the pre-announced tax and benefit changes taking force from April 2011 that are of relevance to low-to-middle earners.1 Secondly, it provides a brief assessment of the new measures announced in Budget 2011 that are likely to have a direct impact on households in the group. Thirdly, it looks at prospects for real wage growth under the macroeconomic forecasts set out in the Budget. Finally, it uses a series of case studies to consider what the combination of these economic trends with planned tax and benefit changes will mean for typical lowto-middle earner households in the next two years. While some households typically those without children and those with the lowest incomes are likely to experience modest gains as a result of the fiscal changes coming into effect in 2011-12 and 2012-13, many low-to-middle earner families with children are set to lose out as a result of cuts to tax credits and other benefits. All lowto-middle earner families risk being hit by negative real-wage effects, outweighing fiscal gains in some instances and compounding fiscal losses in others. Some of the expected impacts are set out below: Despite benefiting by around 47 in 2011-12 as a result of cuts to fuel duty, average earnings in low-to-middle earner households are set to fall in real-terms from 19,900 in 2009 to 18,500 in 2012. Around 6.9 million low-to-middle earner adults will gain up to 200 as a result of the 1,000 increase in the income tax personal allowance in 2011-12.
A second above-inflation increase in the personal allowance in 2012-13 will benefit the remaining 6.5 million low-to-middle earner taxpayers by a further 48 next year.
Changes in employee National Insurance thresholds and rates in 2011-12 will benefit around 5.3 million low-to-middle earner employees and reduce the incomes of around 1 million.
A shift to uprating the employee National Insurance primary threshold in line with the Consumer Prices Index rather than the Retail Prices Index from 2012-13 will reduce the incomes of 5.9 million low-to-middle earner employees by around 6. The level of loss will subsequently grow year-on-year.
Above-inflation increases in the child element of Child Tax Credit in 2011-12 and 2012-13 will boost the incomes of families with the lowest incomes, but an increase in the rate at which all tax credit awards are withdrawn as income rises and cuts in the generosity of various elements, including childcare, will reduce incomes for those higher up the income distribution.
Losses are likely to extend further down the income distribution from 2012-13. A three-year real-terms cut in Child Benefit payments will reduce income in 3 million low-to-middle earner households with children by an average of 50 in 2011-12, rising to 116 in 2012-13 and 151 in 2013-14.
Around 36,000 low-to-middle earner households will be affected by the decision to remove Child Benefit from all households with a higher rate taxpayer from January 2013. These households contain 92,000 children and will lose 540 on average in 2012-13, rising to 2,160 in 2013-14.
Taking all of these effects together, low-to-middle earner households are set to face varying levels of falling income in 2011-12 and 2012-13. Compared to a baseline of 2010-11, typical families can expect to be up to 7.5 per cent worseoff in real terms.
1)
Pre-announced changes taking effect from April 2011

Since 2008, government financial statements have tended to include sizeable fiscal transfers first from the state to the public in order to support the economy
during recession, and then from citizens to the state in order to help cut the budget deficit. Many of the measures announced in recent years are only now coming into effect, producing a mix of outcomes for households. Some measures will boost the incomes of low-to-middle earner households, while others will have a negative impact. Below we consider some of the major changes taking effect from this financial year. Chart 1 describes changes to income tax allowances and thresholds announced in the June 2010 Budget. It shows how the personal allowance (the tax free allowance available to adults aged under-65) increased from 6,475 to 7,475 on 6 April 2011, reducing most basic rate taxpayers bills by 200 a year (20 per cent of 1,000). The Government estimates that 880,000 will be removed from income tax altogether.2 A 2,400 reduction in the basic rate limit (the maximum amount of income above the personal allowance on which basic rate tax is levied) from 37,400 to 35,000 means that the earnings level at which the higher rate of income tax becomes payable (the higher rate threshold) has fallen by 1,400 from 43,875 to 42,475. This shift means that the 400 gain that higher rate taxpayers would otherwise experience as a result of the personal allowance increase (40 per cent of 1,000) will be more than offset by an additional 560 charge (40 per cent of 1,400). In addition, it is expected to move 380,000 basic rate taxpayers into the higher rate bracket.
Chart 2:
Earnings distribution of low-to-middle earner adults: 2011-12 average earnings. Figures cover employees and self-employed, but exclude those low-to-middle earners not in work.
Note: Earnings inflated from 2008-09 using ONS data and OBR projections for
Chart 2 shows the earnings distribution of adults living in low-to-middle earner households. It shows that, among the 8.4 million low-to-middle earner adults in employment, around 1.5 million were already earning too little to pay income tax in 2010-11, and will therefore not be affected by the personal allowance increase, but around 0.3 million will be removed from income tax altogether. The majority of the remainder will benefit from the move, although a small number around 10,000 will be moved from the basic rate to the higher rate income tax band as a result of the reduction in the higher rate threshold.
National Insurance
While the income tax changes discussed above will boost the incomes of the vast majority of working low-to-middle earners, the impact of a range of changes to National Insurance Contributions (NICs) will vary by earnings level. In Pre-Budget Report 2008, the previous government set out plans to align the NICs primary threshold the level of earnings at which employees become liable for NICs in 2011-12 with the weekly equivalent of the income tax personal allowance. Based on forward plans for the personal allowance at the time,4 this would have resulted in a primary threshold today of 6,656 (128 a week). Pre-Budget Report 2008 also included notice of 0.5 per cent increases in the employee and self-employed rates of NICs to take effect from April 2011. In Pre-Budget Report 2009, the government extended these rate increases by a further 0.5 per cent and increased the primary threshold by an additional 570 a year. The Upper Earnings Limit the level of earnings at which employees move from the main NICs rate to the, lower, additional rate will continue to be aligned with the weekly equivalent of the higher rate threshold, and has therefore fallen by a similar
annual amount (1,404) in April 2011. Chart 3 summarises the effects of these changes on employee NICs.
Taken together, these changes have the effect of removing some workers from employee NICs altogether and reducing bills for those just above the primary threshold. The maximum gain achieved by someone with a salary of 7,228 is 166 (11 per cent of 1,508 the increase in the primary threshold). This gain is then reduced by 1p in each pound (because of the 1 per cent increase in the main NICs rate), so that it is entirely removed at a salary of around 23,816. Because the additional rate is lower than the main rate, the reduction in the upper earnings limit benefits those moving from below to above the threshold although the gain is not enough to offset the loss associated with increase in the main rate to 12 per cent. At a salary of 42,483 (just below the new upper earnings limit), an individual is 187 worse-off a year as a result of the NICs changes; This figure declines to a low of 43 at 43,887 (just below the previous upper earnings limit), before climbing once again at salaries above this. Among the 7.2 million low-to-middle earner employees, 0.9 million were already earning too little to be liable for employee NICs and will therefore not be affected by the various changes, but around 0.4 million will be removed from NICs as a result of the primary threshold increase. Around 4.9 million additional low-to-middle earners will gain to some extent, because they have earnings below 23,816. However, the remaining 1.0 million low-to-middle earner employees will lose out.
A range of changes coming into effect in April 2011, introduced primarily in the June 2010 Budget and Spending Review 2010, are set to boost awards for some and reduce them for others. The changes include: An above-inflation increase in the child element of CTC, raising the maximum annual award from 2,300 per child in 2010-11 to 2,555 in 2011-12; An increase in rate of withdrawal that applies above the both the first and second income thresholds to 41 per cent; A reduction in the second income threshold from 50,000 to 40,000; A reduction in the maximum costs payable under the childcare element of the WTC from 80 per cent to 70 per cent; Removal of the baby element of CTC awarded in addition to the child element for families with children aged under-1; A reduction in the income disregard from 25,000 to 10,000; An extension of WTC eligibility to people aged over-60; A three-year freeze in the levels of the basic and 30-hour elements of the WTC; and In line with most other benefits, a shift in the uprating of those elements that are index-linked from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI).
In addition, from April 2012: The family element of CTC will be withdrawn immediately after the child element, effectively withdrawing the second income threshold; The 50+ elements will be removed from WTC; A disregard of 2,500 will be introduced for in-year falls in income meaning that tax credit awards will not be increased during the course of the year unless household income falls by more than 2,500; The WTC working hours requirement for couples with children will be increased from 16 hours to 24 hours; and The period for which a tax credit claim and certain change of circumstances can be backdated will be reduced from three months to one month.
From April 2013, the income disregard will fall again, from 10,000 to 5,000. Taken together, these measures are expected to save 300 million in 2011-12, rising to 1,590 million in 2012-13 and 2,350 million in 2013-14. Because awards are contingent not just on income but also on family size, calculating average losses across all low-to-middle earner households hides much of the detail. Instead, we consider specific family circumstances in Section 4 of this note. In general, however, low-to-middle earners are the biggest consumers of tax credits: 30 per cent of low-to-middle earner families are in receipt of tax credits, with an average annual award of around 4,000. These families account for 52 per cent of all tax credit awards and 59 per cent of the total value, meaning that significant cost cutting in this area will inevitably hit members of the group hardest.
Child Benefit
The June 2010 Budget announced that the rates of Child Benefit for first and subsequent children would be frozen at 20.30 and 13.40 a week respectively for three years from April 2011, producing real-term declines in payments. The Government has estimated that the measure will save 385 million in 2011-12, rising to 1,920 million by 2013-14.5 The Spending Review 2010 subsequently set out plans to remove Child Benefit from families with a higher rate taxpayer from January 2013, saving 600 million in 2012-13 and 2,435 million in its first full year of operation (2013-14). There are around 5.3 million dependent children living in 3 million low-to-middle earner households. The real-terms freeze in Child Benefit will cost affected households an average 50 a year in 2012-13. Compared to 2010-11, the average annual loss rises to 116 in 2012-13 and 151 in 2013-14. In 2012-13, around 36,000 low-to-middle earner households with 92,000 children will contain a higher rate taxpayer. Compared to 2010-11, these households will lose 540 on average in 2012-13,6 rising to 2,160 in 2013-14. The total savings to Government from the removal of Child Benefit from these low-to-middle earner
households will be 77 million in 2013-14, representing just 3 per cent of the total anticipated savings.
Education Maintenance Allowance

The Government announced in 2010 that the Education Maintenance Allowance (EMA) would be scrapped in England from school year 2011/12. Under EMA, students aged 16-19 who had just left or were leaving compulsory education and were enrolled on an eligible course qualified for weekly awards depending on the level of their household income. In school year 2010/11, students in households with incomes below 20,817 got 30 a week (for a 39 week academic year period), those with household incomes below 25,521 got 20 a week and those with incomes under 30,810 got 10 a week. The changes that came into effect on 1 January 2011 closed the scheme to new applicants but offered some protection for existing claimants. Students who first applied for EMA in 2009/10 will continue to receive the same weekly payment in 2011/12, while those who first applied in 2010/11 and received the maximum 30 a week will this year get 20. All other students will receive nothing, although 165 million will be made available directly to schools and colleges to distribute as they wish. As such, students in their first year in 2010/11 who received either 10 or 30 a week, will lose 390 in 2011/12, while those who received 20 a week will lose twice this amount. Around 58 per cent of EMA recipients in 2008-09 lived in low-to-middle earner households. The scrapping of the scheme is therefore likely to be felt most particularly by members of the group. To the extent that some support remains in place, it is increasingly targeted on students from households with the very lowest incomes, meaning that low-to-middle earner students are unlikely to benefit.
2)
New measures announced in Budget 2011

In contrast to the drama contained in recent financial statements, Budget 2011 was a quiet affair. While it confirmed that the majority of pre-announced tax and benefit changes scheduled to come into effect in April 2011 would take place, very few new measures were detailed. In the absence of large fiscal set-pieces, the theme of the Budget was growth. The Chancellor announced a range of measures designed to encourage business investment from reductions in the main corporate tax rate and cuts in regulation, to relatively small-scale sector-specific initiatives. Depending on their success, such measures will have an impact on economic performance, and therefore on the earnings potential of low-to-middle earners. However, there were just four announcements likely to have a direct impact on the lives of most low-to-middle earners: a further above-inflation increase in the income tax personal allowance in 2012-13; a shift to using the CPI instead of the RPI to uprate other direct tax rates, allowances and thresholds from April 2012; the immediate cancellation of the fuel duty escalator, the deferment of the inflation-linked increase and an additional 1 pence per litre (ppl) reduction; and a one year extension to the temporary conditions applying to the Support for Mortgage Interest scheme from January 2012.
Below we consider each of these measures in turn.
Personal allowance
Following the 1,000 increase in April 2011, Budget 2011 detailed a further rise in the personal allowance in 2012-13. Chart 4 shows that, rather than rising in line with inflation (to a forecast 7,865), the allowance will now be increased to 8,105 (240 higher than 7,865). It had already been announced that the higher rate threshold would be frozen at 42,475. The
personal allowance change therefore leads to a reduction in the basic rate limit from 35,000 to 34,370 (rather than 34,610 as previously expected).
Under these changes, both basic- and higher-rate taxpayers will see their bills fall by 48 a year compared to the changes that would have happened in the absence of the Budget announcement (20 per cent of 240). Compared to the pre-Budget scenario, around 60,000 additional low-to-middle earners are likely to be removed from income tax in 2012-13 as a result of the personal allowance increase, while the remaining 6.5 million taxpayers in the group will all gain 48. Chart 5 shows the average annual increases in household incomes associated with the shift from the before-Budget 2011 to the after- Budget 2011 scenario in Chart 4, by income decile.
It shows that, across all households,7 the biggest winners in cash terms are in deciles 7-9, with average household gains of between 47 and 56. This occurs because such deciles are more likely than those further down the distribution to contain dual-earners who both gain from the move and less likely to contain pensioners who do not benefit. Households in decile 10 gain relatively little because they contain a higher proportion of very high earners (above 100,000) who have either reduced or zero personal allowances. Taking these figures as a proportion of household incomes, Chart 6 shows that the biggest winners appear to be households at the middle and just above although the sums involved are relatively small. These distributions can in part be explained by the concentration of retired households in the lower half of the income distribution. However, even if pensioner households are removed from the calculation, two-thirds of the total expected 1,050 million cost in 2012-138 relates to gains by households in the top-half of the working-age income distribution. Among low-to-middle earner households the measure is worth 28 a year on average.
Direct tax indexation

As part of the Governments commitment to eventually raising the personal allowance to 10,000, the Budget stipulated that the 2012-13 above-inflation increase discussed above will be followed by subsequent uplifts at least equivalent to RPI (until the 10,000 target is reached). However, it also announced that the underlying indexation
basis for all other direct taxes would change from RPI to CPI from April 2012, although additional measures mean that increases in the employer National Insurance threshold and age-related allowances for older people will continue to rise with the RPI for the remainder of the Parliament.
Of the rates, thresholds and limits that will be uprated by CPI in 2012-13,9 the most broad-based is the National Insurance primary threshold. Chart 7 shows that, based on OBR projections for inflation in September 2011, the primary threshold will increase to 7,540 in 2012-13, rather than 7,592. The move will increase employee bills by just 6 in 2012-13 (12 per cent of 52), but the costs will grow over time as the threshold falls further behind where it would have been under RPI-indexation. By 2015-16, employees will be 50 a year worse off.
Chart 8 shows the average annual decreases in household incomes associated with the shift from the RPI-indexation to CPI-indexation, by income decile. Unlike Chart 6, the effects relate to all of the direct tax thresholds and limits set to be affected in 2012. It shows that the cash loss grows across the income distribution from just 1 a year in the poorest 10 per cent of households to 8 a year in the richest 20 per cent. This distribution is again likely to reflect the higher proportion of dual-earner households at the top end of the income spectrum.
Taken as a proportion of income, Chart 9 shows that households in income deciles 4-9 are likely to be worst affected. While the flat-cash loss is likely to be regressive, the effect is partially offset by higher participation rates in wealthier households. As discussed above, while the figures are tiny in 2012-13, they will grow over time, following a similar distributional pattern. Low-to-middle earner households are set to be around 4 a year worse-off on average in 2012-13 as a result of the shift. Of the 105 million savings anticipated by the Government in the first year, around 30 per cent is set to be generated by low-to-middle earner households.
Fuel duty
Budget 2009 introduced a fuel duty escalator, which provided for an annual increase of RPI inflation plus 1 pence per litre (ppl) through to 2014-15. However, Budget 2011 announced that the escalator would be replaced by a fair fuel stabiliser. Under the new system, the duty will be increased by RPI in years when oil prices are high (above $75 a barrel), and by RPI plus 1ppl when oil prices are low (below $75 a barrel). In addition, fuel duty was cut by 1ppl with immediate effect. The subsequent 3.02ppl increase in the main fuel duty rate (based on RPI-only because of high prevailing oil prices) that should have fallen due in April 2011 has been deferred to 1 January 2012, with the 2012-13 increase set to be implemented on 1 August 2012.
As Chart 10 shows, these measures mean that rather than increasing to 63.02ppl in April 2011, the main fuel duty rate was reduced from 58.95ppl to 57.95ppl on 23 March 2011, and will be increased to 60.97ppl from 1 January 2012. The package is expected to cost the government 1.9 billion in 2011-12, rising to 2.1 billion in 2014- 15, though this is dependent on trends in oil prices. Chart 11 shows the average annual boost to household incomes associated with the fuel duty changes, by income decile. It shows that households in higher income deciles are set to experience the largest cash gains: 73 a year among the richest 10 per cent of households, compared with around 30 among households at the bottom end of the income distribution. The difference is likely to reflect the fact that wealthier households are likely to drive more frequently, and in bigger cars.
Chart 12 shows, however, that in proportional terms the move appears to be progressive, although there is little difference across deciles 2-9 and, as with the direct tax measures discussed above, the annual figures involved are relatively small Some of the financial benefits for households associated with this move will be eaten into by the increase in VAT that took place in January 2011. However, the government has estimated that the typical Ford Focus driver will be 26 better off in 2011-12 than they would have been under the previous plans for duty and VAT (i.e. retained at 17.5 per cent). Taking the fuel duty measures detailed in the Budget in isolation, low-to-middle earner households are set to benefit by around 47 in 2011-12, meaning that the group will account for around 37 per cent of the total cost. If the impact of the January 2011
increase in VAT on fuel is included, the gain experienced by low-to-middle earners in 2011-12 falls to around 15.
Support for Mortgage Interest

Support for Mortgage Interest (SMI) allows homeowners who lose their jobs and become eligible for means-tested benefits to apply for help with meeting their mortgage interest costs. Prior to January 2009, homeowners could claim after 39 weeks of joblessness and for interest payments on anything up to the first 100,000 of their mortgage. Changes brought in at that time, in response to the recession, reduced the number of weeks after which someone could claim to 13 and increased the maximum amount covered to 200,000. Budget 2011 announced that these temporary changes would be extended for a further year to January 2013, at a cost of 110 million in 201213. While low-to-middle earners are, by definition, largely independent of means-tested benefits, many members of the group are vulnerable to job loss, and therefore could find themselves in the position of needing to rely on SMI. Homeowners in the group are likely to find it more difficult than higher earners to continue to meet payments under these circumstances because of their lower levels of savings, lower average redundancy payments and higher relative levels of borrowing: for example, 30 per cent of low-to-middle earner households buying a home prior to the credit crunch did so with the aid of 100 per cent mortgages, compared with 18 per cent of higher earners. The extension of the temporary changes is therefore welcome from a low-to-middle earner perspective, although the generosity of the scheme remains lower than it was before October 2010 because of the change introduced at that time to the interest rate paid out. Instead of receiving a fixed 6.08 per cent, recipients now get payments based on the currently much lower Bank of Englands published Average Mortgage Rate.
3)
Real wage growth

As discussed above, while pre-announced tax and benefit changes are having and will continue to have significant effects on household finances, the measures announced in Budget 2011 are likely to have relatively little impact. In contrast, the implications for household budgets of the updated forecasts for earnings and prices are much more substantial. In addition to revising downwards its November 2010 forecast of GDP growth in 2011 from 2.1 per cent to 1.7 per cent the OBRs March 2011 outlook detailed lower expected earnings growth and higher inflation.
In November, average wages had already been falling in real terms for 12 months. The OBRs forecast suggested that they would continue to decline in the period to 2013, but that the rate of decline would fall steadily. Chart 13 shows both that actual performance in the period since November has been much worse than expected, and that the forward path based on the OBRs latest update is more negative than previously assumed.
Chart 14 compares the current expected path of low-to-middle earner household earnings with that projected under the OBRs November 2010 forecasts. It shows that earnings are set to fall by 1,400 between 2009 and 2012, and remain 1,100 below their 2009 level at the end of the forecast period.
4)
The prospects for low-to-middle earner households

Combining the real-wage effects set out in Section 3 with the impacts of various tax and benefit changes detailed in Sections 1 and 2 suggests that many low-tomiddle earner households are likely to face significant real-terms reductions in incomes this year and next. The following case studies are based on four stylised families.11 Outcomes vary across household types, but each of the low-to-middle earner households considered will suffer from a significant real wage squeeze. Where relevant, incomes will be further hit by a complex range of pre-announced changes to tax credits and benefits. The new personal allowance increase announced in Budget 2011 will reduce some of these effects, but the overall picture is still negative for all of the low-to-middle earner families shown. David & Josie David works 35 hours a week, earning 45,000 a year. His wife Josie looks after their three year-old and their two school-age children. Table 1 sets out their position.
Because inflation is set to outstrip pay growth, Davids earnings will fall by 992 in 2011-12 and by a further 43 in 2012-13 in real terms.
On top of this drop, tax and benefit changes taking place in the next two years will reduce their household income in real terms by 653 in 2011-12 and by a further 789 in 2012-13.
This decline comes about for two main reasons. First, the couple are no longer eligible for the family element of the Child Tax Credit (worth 545) because the threshold at which this award begins to be withdrawn has been reduced from 50,000 to 40,000. Secondly, Davids status as a higher rate taxpayer means that they will lose Child Benefit from January 2013 (making them 818 poorer in financial year 2012-13).
Davids tax bill will be relatively unchanged, and Budget 2011 increases the familys income by just 39 a year in 2012-13. Taking the changes in earnings, prices and tax and benefits together, David and Josie will be 1,645 (-4.6 per cent) poorer in 2011-12 than in 2010-11 in real terms, and 2,478 (-6.9 per cent) worse-off in 2012-13.
Jack & Laura Jack and Laura work 42 hours a week between them: Jack earns 28,000 a year and Laura earns 11,000. They have a young baby and a four year-old, both of whom are looked after by a registered childminder while Jack and Laura are at work. Their details are presented in Table 2.
Wage and price trends mean that their combined earnings are set to fall by 860 a year in 2011-12 in real terms, and by a further 37 in 2012-13.
Tax and benefit changes will reduce the household income by an additional 2,323 in 2011-12. There will be a slight improvement in 2012-13, but the household will still have lost 2,129 compared to 2010-11.
Changes to income tax and National Insurance will act to support their finances, boosting household income by 567 in real terms in 2011-12 and by a further 216 in 2013-14 (78 of which is as a result of measures announced in Budget 2011).
The main hit to the household income will instead come from tax credit changes. While the child element of the CTC (worth 2,300 per child in 2010-11) is being increased above-inflation in 2011-12 and 2012-13, the removal of the baby element of CTC (worth 545 in 2010-11), the reduced generosity of childcare support included in WTC (from 80 per cent of costs to 70 per cent) and the faster tapering of all tax credits (from 39 per cent to 41 per cent) result in a reduction of 2,818 in 2011-12 in real terms.
Although their awards will subsequently increase by 110 in real terms in the following year, the family will still be 2,847 worse-off than in 2010-11. The freezing of Child Benefit produces a further loss.
Taking the wages, prices and tax and benefit changes together, Jack and Laura are set to be 3,183 (-7.5 per cent) poorer in 2011-12 than in 2010-11 in real terms. By 201213 the overall loss will have fallen slightly to 3,026 (-7.1 per cent).
Defining Low-To-Middle Earners

From a conceptual perspective, we define low-to-middle earner households as including those which are squeezed by the workings of the mixed economy: too poor to be financially comfortable, but too rich to qualify for substantial state support. From an analytical perspective, we consider the group to include those households with belowaverage incomes that remain largely independent of state support. In capturing the group statistically, we adopt a three-stage process, filtering on the basis of age, income and benefit receipt. First, we remove retired households from the overall population. Significantly reduced incomings and outgoings mean that many of the pressures faced by households at retirement are of a very different nature to those experienced during working lives. Therefore, while we remain interested in the experiences of older households, we define the group in most instances in relation to working-age households. Secondly, we filter on the basis of household income. We first equivalise gross incomes to weight for differing household sizes and compositions. This matters because low-to-middle earners are in part defined by the fact that their living standards are squeezed and, for any given level of income, a household of five adults is likely to achieve a lower standard than a single-person household. The equivalisation process takes account of such differences by inflating the incomes of smaller households and deflating the incomes of larger ones. We next rank the working-age households on the basis of their equivalised incomes and separate them into ten equally sized deciles (where decile 1 has the lowest income). We use median income the boundary between deciles 5 and 6 as the upper threshold of the group. At the lower end we create a threshold at the boundary between deciles 1 and 2. We do this in part because it represents the approximate level of earnings associated with working full-time at the minimum wage, and in part because decile 1 often produces unusual results due to the large number of households within it that have temporarily low incomes or incomes that come neither from employment nor the state.
Therefore, at this stage, the low-to-middle earner group comprises all of those working-age households with equivalised gross incomes in deciles 2-5 of the workingage income distribution (12,000 - 30,000 for a couple with no children). For simplicity, we refer to those households with above median incomes as higher earners, while those households with the lowest incomes are classified as being benefit-reliant. Thirdly, we filter out all those households that receive more than one-fifth of their household income from income-related benefits,12 moving them to the benefit-reliant group. The specification of income-related means those in receipt of universal benefits such as Child Benefit are not excluded from the group. Tax credit receipts do not count towards a households total level of income-related benefit because of their definition not as benefits but as a negative tax for those on low-to-middle incomes.
SAMPLING METHODOLOGY SamplingTechnique: Initially, a rough draft was prepared keeping in mind the objective of the research. A pilot study was done in order to know the accuracy of the Questionnaire. The final Questionnaire was arrived only after certain important changes were done. Convenience sampling technique will be used for collecting the data from the jhalawar. The consumers are selected by the convenience sampling method. The selection of units from the population based on their easy availability and accessibility to the researcher is known as convenience sampling. Convenience sampling is at its best in surveys dealing with an exploratory purpose for generating ideas and hypothesis. Sampling Unit: The respondants who were asked to fill out questionnaires are the sampling units. These comprise of employees of MNCs, Govt. Employees, Self Employeds and existing customers.d Sample size: The sample size was restricted to only 100, which comprised of mainly peoples from different regions of Chandigarh due to time constraints. Sampling Area: The area of the research was Jhalawar The project work can only be complete after: Analyzing the data. Referring books and gathering more relevant information from the internet. Drawing detailed and careful inferences from the analysis. Data Collection Questioning & observing are the two basic methods of collecting primary data. Questionnaire studies are more relevant than observation studies
Importance of Questionnaire When information is to be collected by asking questions to people who may have the desired data, a standardized form called questionnaire is prepared which helps to bring the data as such required for the research work. The questionnaire is a list of questions to be asked to the respondents. Each question is worded exactly as it is to be asked & the questions are listed in an established sequence. Spaces in which to record answers are provided in questionnaire. Presentation of the data The collected data will be analyzed and will be represented through various charts, graphs, pie charts, tabulation and a master sheet of the surveyed data. The data will be presented to determine market shares and percentage of readers out of the total population. The same pattern will be repeated in the case of advertisers.
Analysis
Do you know about the following financial instruments?
120 100 80 60 40 20 0 EQUITY SHARES MUTUAL FUNDS BONDS INSURANCE FIXED DEPOSIT YES NO
100 80 60 40 20 0 GOVT SECU REAL ESTATE IPO GOLD YES NO Column1
The sample size consists of 100 respondents and out of which almost all the people are fully aware about investment avenues like gold and fixed deposits and almost 95 are aware about equity shares and mutual funds
How do you get information about the following investment avenues?
Out of the 100 respondents about 50% of them get the information from advertisements on the television and internet and the rest from the magazines , company sales executives and friends and relatives.
Rate the following according to your preference?
Out of the 100 respondents asked the most preferred financial instrument is fixed deposits and the then the rest like equity shares with 70 % and insurance. What is your age?
Out of the respondents that were surveyed the maximum were of the age group of 31-40
What are the factors that you consider while investing in any financial instrument?
Out of the respondents 50% were of the opinion that return and safety are the main reasons behind their investment decisions .
On what basis you invest in any particular financial instrument?
The respondents were mostly of the opinion that portfolio is the most important factor before investing and then fundamental analysis done by them or by the financial advisor and then the other factors
How will you invest your money in any financial instrument?
Most of the respondents surveyed that they mostly invest their money through a broker and then through sub brokers and agents
What is your annual income?
15% 58%
22%
Out the total respondents around 60 %were in the income group of 1- 3lakhs and 22% in the 35lakhs bracket
How much of your money you invest in financial instruments?
Most of the respondents surveyed were mostly those people who invest 10 to 30 % of their money in these instruments.
How long do you prefer to keep your money invested?
Out of the 100 respondents mostly were of the view that they invested there for a money at least for a period of 1year to 3 years
How much return do you expect from your investments?
CONCLUTION AND RECOMMENDATIONS The over all project is depending up on the findings that has been explained previously. All my survey findings are corelated and being explain in the above graphs. After completing the survey and watching the analysis I come to this conclusiion that the before investment investors do have focus on Tax savings, Income, Capiatal preservation etc. They also have a predetermination of the time period of investment. According to my view the age group of 21-30 can be a great potential investors for the company as the has high risk profile, more disposible income, and the time horizon is perfect 3-5 years.
Recommendation for this category is company must follow up these high potential customers, they can be offered Equity shares because this group of people have a high risk profile and they can afford to takes risks which is usually associated with equity shares. This group of customers can also be offerd Mutual funds because in that also the exposure is in equities. ULIPS can also be offered to this group.The ULIP has a 20%-22% return which good enough for investment. The main focus should be to reach to the customer, these customers are aware of ULIPs and aware of other product. Company should try to reach them and tap the investor.
Mutual Funds can also be offered as they have high risk profile. Company should take initiative to get demat account of these customers.
The age group of 31-40 years, investors are with Moderate risk profile, most of the investors are from the 10,000-15,000 Rs per month disposible income. Company will get a good investor with diluted risk profile. Company can offer them ULIPs,and Fixed Deposits as investment instrument. Mutual funds can be an option but that must be a debt fund to invest.
The age group of 41-50 years, investors are from the 15,000-20,000 Rs disposible income group. Investor in this group are invested in Insurance sector, the primary focus of these investors are retirement and time horizon is likely to be 6-9 years. This is also good potential group for the retirement plan in ULIPs. Fixed deposits can be a good option for them.
For the age group of above 50 years, the rish profile would be low moderate,as the term is not more than 3 years. Investors have invested in insurance sector
but in this age insurance would not be a good option for investor. Company should try to minimise the risk tolerence by offering Fixed deposits. In the survey there were lot of people who were in the age group of above 60. For this group of people the company can target Fixed deposits which gives continues return like monthly interests so that they can keep on getting returns. OCCUPATION If we see the survey data it will seen that respondents are majorly Service peopole and Business Class. Depending upon the data I conclude that the srevice class has a time horizon of 3-5 years and risk tolerence Low- Moderate. They invested in FDs, Equity shares, Mutual Fund and ULIPs.
Recommendation company shoul tap these class by innovative marketing strategies as they already invested, and offer FDs, ULIPs. Mutual fund can be a lucrative offer if the Fund is any moderate fund or debt fund.
For the business class, the risk profile is high-very high. Most investor are with negative return acceptability and time horizon is < 3 years. Company should offer Mutual funds with risk profile High to very high thus investor can get a high return. Apart from this company should offer to open demat account with them.
Disposible Income The disposible income bracket less than Rs.5000 per month are basically safe investors and have not and do not prefer investing in mutual funds and ULIP. Thus positioning of these products should be such that people are attracted towards this scheme. Emphasis on marketing of the products should be given. Respondents under disposible income bracket Rs.5,000-Rs.10,000 have mainly invested in insurance and real estate. But when survey was done and their preferences was asked these respondents strongly preferred investing in these strategies. Disposible Income Bracket of Rs.15,000-Rs.20,000 are the strong contenders for investing their money and these people have invested in real estate, insurance and fixed deposits. Moreover there is mixed preferences for their investments thus proper segmentation of the sample should be done accordingly marketing strategies should be adopted.
Though there is a small percentage of respondents in disposible income bracket above Rs.20,000 who least prefer investing in mutual fund. But this is the segment which can be well targeted and their portfolio should be such that gives them more returns. The case of ULIP is different as people strongly prefer investing in this investment strategy. Thus emphasis for selling ULIP in this income bracket.
LIMITATIONS OF THE STUDY The project is based upon various financial instrument that are available in India and the perception level of the customer about these financial instruments. For which there will be the need of information from the customers about their knowledge of these financial products. The various limitations of the study are: Total number of financial instrument in the market is so large that it needs a lot of resources to analyze them all. There are various companies providing these financial instruments to the public. Handling and analyzing such a varied and diversified data needs a lot of time and resources . As the project is based on secondary data, possibility of unauthorized information cannot be avoided. Reluctance of the people to provide complete information about themselves can affect the validity of responses. Due to time and cost constraint study will be conducted in only selected area of Jhalawar. The lack of knowledge in customers about the financial instruments can be a major limitation. The information can be biased due to use of questionnaires.
Questionnaire Name : Occupation : Contact No : Email id : 1. Do you know about the following Financial Instrument? o Mutual Fun Yes
o o o o o o o o
No No No No No No No No No
Bond Insurance Equity Shares Fixed Deposits Govt. Securities Real Estate IPO Gold
Yes Yes Yes Yes Yes Yes Yes Yes
o If any other please specify. .. 2. How do you get information regarding these Financial Instrument? o Advertisement o Company Sales force o Friends / Relatives o Magazines /Newspaper o If any other please specify. 3. Please rate the Financial Instruments as per your Preference. More preferred Moderate Less preferred Mutual fund Insurance Equity Shares Bonds Fixed Deposits Govt.securities Real estate IPOs Gold investing in any Financial Instrument? o Return (capital appreciation)
4.What is your age? 15-20 21-40 41-50 5160 60 above 5. What are the factors which you consider while
o Tax Saving o Liquidity o Regular income flow o Safety o Risk o If any other please specify. 6. On what basis you will invest in any particular Financial Instrument? o Past Performance o Portfolio o Fund Manager o Fundamental/Technical Analysis o Market Sentiment o If any other please specify 7. How will you invest your money in any Financial Instrument? o Yourself o Through any stock broking company. Please specify name.. o Sub broker/ Agents o Through Banks o If any other please specify.. 8. In what type of Financial Instrument you like to invest? o Equity based o Debt based o Balanced Fund o Hybrid Fund o ELSS (equity linked saving scheme) o If any other please specify 9. What is your annual income?
1lac to 3 lac
3lac to 5lac
5lac to 10lac
more than 10 lacs
10. How much of your money you invest in any Financial Instrument? o 10% to 20% o 20% to 30% o 30% to 50% o More than 50% o If any other please specify.. 11. How long you prefer to keep your money in any Financial Instrument? o Less than 6 months o 6 months to 1 year o 1 year to 3 year o More than 3 years o If any other please specify 12. How much return you expect from any Financial Instrument? o 10% to 20% o 20% to 30% o 30% to 50% o More than 50% o If any other please specify. 13. Will you invest your money for saving the Tax in any Financial Instrument? Yes No 14. Are you satisfied with your investment decision, Please rate? o Highly satisfied o Satisfied o Less satisfied o No satisfaction
15. Any other comments.

My Original Project On Budget 2011

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A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

VALUE ADDITION TO THE COMPANY

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

INTRODUCTION OF BUDGET 2011

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

Types of Mutual Funds

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

Various types of Mutual Funds:

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

Performance Indicator Closing price High and low

52 week range Volume

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

The tenor of the security is fixed.

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals

A Study of Budget 2011 on the Investment Pattern of Salaried Individuals