The government’s laws are very strict in terms of Income Tax Return (ITR), so the assessee /person may get a notice even for a minor mistake in the filing of Income Tax Return (ITR). But income tax notice does not always mean that you have to face problems.
So, let us know about some common notices under the Income Tax Act, 1961
1.Notice under Section 156
Reason: It is issued by the Assessing Officer (AO) against the outstanding amount, interest, penalty, etc. Steps to be taken: The assessee has to deposit the amount within 30 days after receiving the notice. However, in special cases, the time limit can be reduced to less than 30 days.
2.Notice under Section 145(1)
Reason: Notice under this section is a traditional practice by the IT department, it states that ITR has been successfully processed. This can be sent by the IT department from the end of the financial year to the end of the year in which return has been filed. Steps to be taken: No response required from the assessee unless he has made any mistake in the ITR. If there is any outstanding amount or missing information, that should be corrected immediately to avoid any penalty.
3.Notice under Section 142(1) & 143(2)
Reason: Notice u/s 142(1) issued by the IT department only when AO needs some kind of verification, clarification and reassessment. Notice u/s 143(2) issued when AO is not satisfied with assessee response for notice u/s 142(1). Steps to be taken: For 142(1), assessee has to reply within stipulated time and for 143(2) he may need to be present before AO personally or through a representative.
4.Notice under Section 148 – show cause notice
Reason: When AO feels that assessee has not disclosed all sources of income with the intention to evade taxes. If amount withheld is less than Rs 1 lakh, notice issued within four years from the end of the assessment year. If amount withheld is greater than Rs 1 lakh or related to property situated outside India, notice under Section 148 can be issued within six years. Steps to be taken: The assessee is required to produce the details of information within the time limit specified by the AO.
5.Notice under Section 245
Reason: Primarily an intimation that department is adjusting assessee’s previous year tax payables with the current year’s refund. No time limit for issuance of notice under this section. Steps to be taken: Assessee has to reply according to the notice within 30 days. If he fails to respond within the stipulated time, the adjustments will be made automatically.
So, let us know about some common notices under the Income Tax Act, 1961
1.Notice under Section 156
Reason: It is issued by the Assessing Officer (AO) against the outstanding amount, interest, penalty, etc. Steps to be taken: The assessee has to deposit the amount within 30 days after receiving the notice. However, in special cases, the time limit can be reduced to less than 30 days.
2.Notice under Section 145(1)
Reason: Notice under this section is a traditional practice by the IT department, it states that ITR has been successfully processed. This can be sent by the IT department from the end of the financial year to the end of the year in which return has been filed. Steps to be taken: No response required from the assessee unless he has made any mistake in the ITR. If there is any outstanding amount or missing information, that should be corrected immediately to avoid any penalty.
3.Notice under Section 142(1) & 143(2)
Reason: Notice u/s 142(1) issued by the IT department only when AO needs some kind of verification, clarification and reassessment. Notice u/s 143(2) issued when AO is not satisfied with assessee response for notice u/s 142(1). Steps to be taken: For 142(1), assessee has to reply within stipulated time and for 143(2) he may need to be present before AO personally or through a representative.
4.Notice under Section 148 – show cause notice
Reason: When AO feels that assessee has not disclosed all sources of income with the intention to evade taxes. If amount withheld is less than Rs 1 lakh, notice issued within four years from the end of the assessment year. If amount withheld is greater than Rs 1 lakh or related to property situated outside India, notice under Section 148 can be issued within six years. Steps to be taken: The assessee is required to produce the details of information within the time limit specified by the AO.
5.Notice under Section 245
Reason: Primarily an intimation that department is adjusting assessee’s previous year tax payables with the current year’s refund. No time limit for issuance of notice under this section. Steps to be taken: Assessee has to reply according to the notice within 30 days. If he fails to respond within the stipulated time, the adjustments will be made automatically.
Last few years have not been an easy ride for debt mutual fund investors. There have been a series of downgrades and defaults by the high rated debt papers which wiped out huge money invested by the retail investors. In order to bring back and retain the trust of investors, the market regulator Sebi has made several changes in the rules for debt mutual funds. Sebi is continuously tracking the space to repair any loopholes to protect the interest of investors as well as the mutual fund houses.
Here are the top three rules which have favored debt mutual funds in recent past that you must know:
1.Seggregation of portfolio : In the event of credit downgrade the downgraded instrument generally becomes illiquid making it very difficult for the fund manager to dispose of such instruments. In such an event segregation of such an instrument from the main portfolio will prevent the distressed asset(s) damaging the returns generated from more liquid and better-performing assets of the portfolio. Sebi allowed seggregation of debt instruments in case of a credit event in 2018. In August this year, Sebi further allowed mutual funds to side pocket debt in cases where borrowers approach the mutual fund house for debt restructuring due to stress on account of Covid 19. This will prevent investors to invest into a toxic security.
2.Portfolio and Yield Disclosure Norms: In partial modification of SEBI circular on 'Monthly portfolio disclosures', Sebi mandated mutual funds to disclose the schemes' current portfolio every 15 days instead on a monthly basis. "In addition to the current portfolio disclosure, yield of the instrument shall also be disclosed," said Sebi in its July circular. The disclosure of yields of each instrument in the portfolio will help investors to know the quality of the portfolio and understand the level of risk taken by the scheme to a better extent.
3.Safer Liquid Funds: In order to improve risk management and ensuring sufficient liquidity, Sebi mandated liquid funds to hold at least 20% of its portfolio in liquid assets like cash, government securities, T-bills and repo on government securities at all the time. This was done after a few liquid funds witnessed a deep fall in their single-day NAVs due to credit crisis. Sebi also notified exit load on liquid debt funds for redemptions within 7 days to deter corporates from using liquid funds to park their money for very short periods. Big purchases and redemptions from corporates can amplify the risk in these funds for retail investors.
1.Seggregation of portfolio : In the event of credit downgrade the downgraded instrument generally becomes illiquid making it very difficult for the fund manager to dispose of such instruments. In such an event segregation of such an instrument from the main portfolio will prevent the distressed asset(s) damaging the returns generated from more liquid and better-performing assets of the portfolio. Sebi allowed seggregation of debt instruments in case of a credit event in 2018. In August this year, Sebi further allowed mutual funds to side pocket debt in cases where borrowers approach the mutual fund house for debt restructuring due to stress on account of Covid 19. This will prevent investors to invest into a toxic security.
2.Portfolio and Yield Disclosure Norms: In partial modification of SEBI circular on 'Monthly portfolio disclosures', Sebi mandated mutual funds to disclose the schemes' current portfolio every 15 days instead on a monthly basis. "In addition to the current portfolio disclosure, yield of the instrument shall also be disclosed," said Sebi in its July circular. The disclosure of yields of each instrument in the portfolio will help investors to know the quality of the portfolio and understand the level of risk taken by the scheme to a better extent.
3.Safer Liquid Funds: In order to improve risk management and ensuring sufficient liquidity, Sebi mandated liquid funds to hold at least 20% of its portfolio in liquid assets like cash, government securities, T-bills and repo on government securities at all the time. This was done after a few liquid funds witnessed a deep fall in their single-day NAVs due to credit crisis. Sebi also notified exit load on liquid debt funds for redemptions within 7 days to deter corporates from using liquid funds to park their money for very short periods. Big purchases and redemptions from corporates can amplify the risk in these funds for retail investors.
In times like this, where uncertainty is looming on every facet of life, managing finances always keeps one on one’s toes. The onslaught of Covid-19 has taught us that saving money, even in small amounts, will never run out of fashion. After all, little drops make the mighty ocean.
We may ignore small changes in our life, disregarding the impact they collectively have on us. So are our suggestions. They might seem small, but when they are collectively adopted, they help one save a huge amount of money in the long run. Here are a few measures that you can adopt on a day-to-day basis to save some costs.
1. Budgeting:
The first step for effective money management is budgeting. Budgeting ensures we stick to a plan and don’t overshoot targets. We need to always remember that the way compounding works in investments, the same way it also inflates expenses to stratospheric levels risking our entire financial planning. It is hence important to plan for future goals considering the cost at the time of goal. “Let’s say you plan to send your kids for higher education overseas and estimate the costs at Rs 50 lakh, however this goal is still 10 years away in which time these Rs 50 lakh could have become Rs 75 lakh or Rs 100 lakh, depending on the exact geography / institute etc. Similarly, for any other goals like wedding / retirement, it is imperative to adjust the goals for inflation,” says Udit Garg, Member, Founding Team, Goal Teller.
2. Buying Refurbished Products:
What are refurbished products, you might ask. These are products that have been previously returned to a manufacturer or vendor for various reasons and then they are normally tested and repaired before they are re-sold to the public. Refurbished products, at a lower price, maintain the standard quality that one might expect from the manufacturer and may also come with a warranty by the seller. There are various websites online that deal in refurbished products. A small word of caution though, such purchases should be made with a lot of discern and homework, especially for critical items.
3. Smart Purchasing:
Follow these interesting tips while purchasing for your home/ self:
# Pre-plan your purchases and collaborate with your neighbours/ relatives to purchase goods in bulk quantity and avail better discounts.
# Time your purchases for the next season a year before. Aim for the end of season sales to get better prices.
# To avoid emotional buying, wait for a day to close any premium off the list item that you want to purchase. This will help avoid succumbing to instincts.
# Always stay on lookout for offers provided by different payment portals while making purchases.
# “Various credit cards reward cardholders for their payments in reward points which are redeemable against a host of products / travel vouchers / fuel etc and hence it always helps to choose a card that has rewards that are suitable and useful to you. For example, if you travel a lot, it might be wise to buy a card that has high rewards on travel/travel vouchers,” says Garg.
# Credit cards charge heavy penalties as interest and late payment fee. So, it is absolutely essential that we pay the bills in time. Automatic payment facilities can also be set up to avoid late payment fees.
4. Quality over Price:
While purchasing any high-price tag product for your home, consider quality over price. “It is always wise to pay a higher sum for a better product and save money on hefty repairs and replacements. At the same time, we also need to keep in mind that higher price does not always assure quality, and hence, it is important to consider the reviews and the after sales services of the product,” Garg says.
5. Electricity:
Electricity is often ignored but is a very important aspect that should not be overlooked. A few suggestions below could help in reducing or optimising this spend:
# Keep the temperature setting on the Air Conditioner at an optimal level of around 23-25 degrees.
# Bucket wash over showers.That helps conserve water and also reduce load on the water geyser, enabling significant impact on electricity consumption. This can be topped up with the geyser being on only for a specific time period every day which will further help the cause.
# Other small measures like switching off the water purifier at night, switching off computer systems etc contribute towards this objective.
We may ignore small changes in our life, disregarding the impact they collectively have on us. So are our suggestions. They might seem small, but when they are collectively adopted, they help one save a huge amount of money in the long run. Here are a few measures that you can adopt on a day-to-day basis to save some costs.
1. Budgeting:
The first step for effective money management is budgeting. Budgeting ensures we stick to a plan and don’t overshoot targets. We need to always remember that the way compounding works in investments, the same way it also inflates expenses to stratospheric levels risking our entire financial planning. It is hence important to plan for future goals considering the cost at the time of goal. “Let’s say you plan to send your kids for higher education overseas and estimate the costs at Rs 50 lakh, however this goal is still 10 years away in which time these Rs 50 lakh could have become Rs 75 lakh or Rs 100 lakh, depending on the exact geography / institute etc. Similarly, for any other goals like wedding / retirement, it is imperative to adjust the goals for inflation,” says Udit Garg, Member, Founding Team, Goal Teller.
2. Buying Refurbished Products:
What are refurbished products, you might ask. These are products that have been previously returned to a manufacturer or vendor for various reasons and then they are normally tested and repaired before they are re-sold to the public. Refurbished products, at a lower price, maintain the standard quality that one might expect from the manufacturer and may also come with a warranty by the seller. There are various websites online that deal in refurbished products. A small word of caution though, such purchases should be made with a lot of discern and homework, especially for critical items.
3. Smart Purchasing:
Follow these interesting tips while purchasing for your home/ self:
# Pre-plan your purchases and collaborate with your neighbours/ relatives to purchase goods in bulk quantity and avail better discounts.
# Time your purchases for the next season a year before. Aim for the end of season sales to get better prices.
# To avoid emotional buying, wait for a day to close any premium off the list item that you want to purchase. This will help avoid succumbing to instincts.
# Always stay on lookout for offers provided by different payment portals while making purchases.
# “Various credit cards reward cardholders for their payments in reward points which are redeemable against a host of products / travel vouchers / fuel etc and hence it always helps to choose a card that has rewards that are suitable and useful to you. For example, if you travel a lot, it might be wise to buy a card that has high rewards on travel/travel vouchers,” says Garg.
# Credit cards charge heavy penalties as interest and late payment fee. So, it is absolutely essential that we pay the bills in time. Automatic payment facilities can also be set up to avoid late payment fees.
4. Quality over Price:
While purchasing any high-price tag product for your home, consider quality over price. “It is always wise to pay a higher sum for a better product and save money on hefty repairs and replacements. At the same time, we also need to keep in mind that higher price does not always assure quality, and hence, it is important to consider the reviews and the after sales services of the product,” Garg says.
5. Electricity:
Electricity is often ignored but is a very important aspect that should not be overlooked. A few suggestions below could help in reducing or optimising this spend:
# Keep the temperature setting on the Air Conditioner at an optimal level of around 23-25 degrees.
# Bucket wash over showers.That helps conserve water and also reduce load on the water geyser, enabling significant impact on electricity consumption. This can be topped up with the geyser being on only for a specific time period every day which will further help the cause.
# Other small measures like switching off the water purifier at night, switching off computer systems etc contribute towards this objective.
Increasing debt allocation when the markets are volatile and prices driven by a flush of liquidity can help cushion the market correction.
As the stock market benchmarks—Sensex and Nifty—have bounced back from the March lows, retail participation, especially from young investors, is growing in the equity markets. While the strong flush of global liquidity has pushed up the stock markets, investors must look at companies that have earnings visibility and are fundamentally strong.
There is a widening divergence between stock markets and the real economy. While the 30-share BSE Sensex rose 18.5% in the three months to June, the country’s gross domestic product contracted by a historic 23.9% in the June quarter from a year ago because of the Covid-19 pandemic and the lockdown that followed . Private final consumption expenditure, the mainstay of the economy, contracted by a sharp 26.7% during the period as consumers resorted to precautionary savings because of the economic uncertainty, income and job losses. As many retail investors are investing in stocks directly instead of investing through mutual funds, they should stick to their asset allocation strategy and rebalance their portfolio regularly in volatile stock market conditions like the one now. Investors must keep in mind that the weak macros suggest that recovery in corporate earnings will be really tough and valuations remain overheated. While volatility is a feature in equity investing, investors must stay invested for a longer time.
Rebalance portfolio
During volatility, an investor must move funds from asset classes which are overweight to other asset classes which are under-weight in the portfolio. As the stock prices have moved up now, investors can go for some profit booking. In fact, during volatility, one must sell those stocks that have not performed well and add quality stocks with medium-to long-term view. During market volatility, stocks are often available at a discount, which is a good time to accumulate quality stocks at a discount. When the markets are volatile, investors must rebalance their portfolio regularly to manage risks in a better way. Booking profit from some of the top performing stocks and investing the money in certain stocks which are laggard now, but has the potential to rise in the future can be a good option. Experts say, going forward, investors must lower their return expectations and keep it at realistic levels. However, before rebalancing factor in costs such as brokerage in direct stocks and penalty for foreclosing a bond. Rebalancing will also involve short-term or long-term capital gains tax. In equities an investor will have to pay short-term capital gains tax (less than a year) of 15% and long-term capital gains tax (over one year) at 10% over profits of Rs 1 lakh. In debt, the investor will pay at his marginal rate if the holding period is less than three years and at 20% with indexation if held for more than three years.
Asset allocation
Investors must ensure proper asset allocation at all times depending on their financial goals, risk appetite and time horizon. Brijesh Damodaran, managing partner, BellWether Advisors, says an asset allocation process would help an investor to take both tactical and strategic calls in the investment portfolio. “Allocation among the assets can be predefined at the beginning of the portfolio construction and be reviewed at regular intervals of six months, or as required,” he says. In volatile times, the right mix of equity and debt can build a strong portfolio and earn higher returns in the long-run. Increasing debt allocation when the markets are volatile and prices driven by liquidity flush can help cushion the market correction. Financial goals play an important part in asset allocation. If an investor is nearing his goal like higher education for children or retirement, then he must shift to the safety of debt instruments, preferably investing in government bonds, or paper of state-owned companies. Damodaran suggests that the time period for equity investments should be three to five years and for anything less than this period, investments should be in fixed instruments with liquidity.
Source: LiveMint, Financial Express
As the stock market benchmarks—Sensex and Nifty—have bounced back from the March lows, retail participation, especially from young investors, is growing in the equity markets. While the strong flush of global liquidity has pushed up the stock markets, investors must look at companies that have earnings visibility and are fundamentally strong.
There is a widening divergence between stock markets and the real economy. While the 30-share BSE Sensex rose 18.5% in the three months to June, the country’s gross domestic product contracted by a historic 23.9% in the June quarter from a year ago because of the Covid-19 pandemic and the lockdown that followed . Private final consumption expenditure, the mainstay of the economy, contracted by a sharp 26.7% during the period as consumers resorted to precautionary savings because of the economic uncertainty, income and job losses. As many retail investors are investing in stocks directly instead of investing through mutual funds, they should stick to their asset allocation strategy and rebalance their portfolio regularly in volatile stock market conditions like the one now. Investors must keep in mind that the weak macros suggest that recovery in corporate earnings will be really tough and valuations remain overheated. While volatility is a feature in equity investing, investors must stay invested for a longer time.
Rebalance portfolio
During volatility, an investor must move funds from asset classes which are overweight to other asset classes which are under-weight in the portfolio. As the stock prices have moved up now, investors can go for some profit booking. In fact, during volatility, one must sell those stocks that have not performed well and add quality stocks with medium-to long-term view. During market volatility, stocks are often available at a discount, which is a good time to accumulate quality stocks at a discount. When the markets are volatile, investors must rebalance their portfolio regularly to manage risks in a better way. Booking profit from some of the top performing stocks and investing the money in certain stocks which are laggard now, but has the potential to rise in the future can be a good option. Experts say, going forward, investors must lower their return expectations and keep it at realistic levels. However, before rebalancing factor in costs such as brokerage in direct stocks and penalty for foreclosing a bond. Rebalancing will also involve short-term or long-term capital gains tax. In equities an investor will have to pay short-term capital gains tax (less than a year) of 15% and long-term capital gains tax (over one year) at 10% over profits of Rs 1 lakh. In debt, the investor will pay at his marginal rate if the holding period is less than three years and at 20% with indexation if held for more than three years.
Asset allocation
Investors must ensure proper asset allocation at all times depending on their financial goals, risk appetite and time horizon. Brijesh Damodaran, managing partner, BellWether Advisors, says an asset allocation process would help an investor to take both tactical and strategic calls in the investment portfolio. “Allocation among the assets can be predefined at the beginning of the portfolio construction and be reviewed at regular intervals of six months, or as required,” he says. In volatile times, the right mix of equity and debt can build a strong portfolio and earn higher returns in the long-run. Increasing debt allocation when the markets are volatile and prices driven by liquidity flush can help cushion the market correction. Financial goals play an important part in asset allocation. If an investor is nearing his goal like higher education for children or retirement, then he must shift to the safety of debt instruments, preferably investing in government bonds, or paper of state-owned companies. Damodaran suggests that the time period for equity investments should be three to five years and for anything less than this period, investments should be in fixed instruments with liquidity.
Source: LiveMint, Financial Express