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Friday, 16 March 2007

Bank Interest Rates: Domestic, NRE & Taxes

Bank Domestic Interest rates are rising faster than NRE rates

About 20 years ago, banks were offering up to 17% (i.e. up to 2% more than Domestic ).
I remember those days one could double up his money in just 5 years.
The rates were down but steady for about 14 years at around 11% and before July 17 2003, banks were still offering around 7.5%. But from August (2003), rates were down to 3.8% and again, by the end of the same years i.e.eff. from 1st November 2003, no known bank would offer more than 1.75% for a 12 months term NRE deposits.

Over the past 4 and a half years, we have seen lot of ups & down in the NRE interest rates ranging from 1.75 to 6.35% which is now (March 2007) is 5.7%. (see tables along side as on 15.03.2007)

Again, Domestic rates those days were always lower than NRE rates. 1 or 2% offered extra to NRE deposits and this was solely to attract foreign investment or foreign exchange. Domestic rates too seen fluctuation over the last few years say from 5 to 9.75%.

Current trend looks like this..
(March 15, 2007) (abv table as on March 15.2007)
Domestic 8.25% to 9.75%
NRE 5.4% to 5.75%

NRE interest pegged to 100 basis points above LIBOR
So, when UK Bank rates go up, Indian Bank rates will go up too.

Senior citizen (60+) 8.5% to 10.05%

As can be seen from above that Domestic rates are up to 4% higher than NRE, I guess it is wise to convert the NRE deposit into Domestic to fetch higher rate of income/interest.

See various tables.

Q. What about the taxes ?
Banks are required to deduct taxes at source (TDS) on all Domestic Deposits.
I think, if your income or interest earned from all deposits with the same bank exceeds Rs.5000 then you are liable to pay tax on the excess amount and then there is E.C. 2% tax on tax which is very negligible.

Q. What about NRE tax ?
Good question. I think (but not very clear) that all NRE deposits subject to pay tax from the current financial year i.e. 2006-2007.

Q. Last April 2006, we have invested in a bank (Domestic) fixed deposit a/c for 3 years fetching interest @ 7%, are we liable to pay tax? How much?
Salu Rs. 70,0000 (70K)
Lino Rs. 1,50,000 (150K)
Eddie Rs. 2,25,000 (225k)

A. Tax for the financial year 2006-2007
SALU: No. Assuming this is the only fixed deposit you have in the bank.
As you will receive interest less than Rs.5000 for the whole year, you are not liable to pay tax. Formula: Taxable Income (TI)=Total interest received (TIR) minus Rs.5000 . Tax is 10% of TI (2% Educational Cess on tax may also be levied) .
LINO: Yes, you will pay around Rs.561 every year on the interest you rcvd Rs.10,500
EDDIE: Yes, you will pay around Rs.1097 on the interest you received Rs.15,750

Simple Interest (SI)= Principal amount (PA) x7/100

Tax (T) = (SI-5000)x10/100
Educational Cess = T x2/100

e.g. SALU (abv)
SI = 1,50,000 x 7/100 = Rs.10,5000

Tax = (10,500-5000) x 10/100 = Rs.550

E.Cess = 550 x 2/100 = Rs. 11

i.e Total Tax or TDS = Rs.561

Note: Interest Rcvd likely to be more (compounded Interest) so also the tax payable to that extent.

Advice to SALU/EDDIE/LINO break and re-invest your deposits to fetch 2% more interest. Do this in this April.

Q, Miguel has 50K each (March 2007) in fixed deposits at 4 different banks viz. SBI, BOI, BOG & Saraswat each fetching 9% p.a, is he liable to pay tax ?
A. In the eyes of Income Tax Law, Yes, for the year 2007-2008. Income from all sources including bank or banks is taxable. But in this case, our Minguel is likely to get away as his individual bank will not deduct TDS as his income is less than Rs.5000.
But, had he maintained all his 4 deposits in any one bank only, then the bank would have deducted (TDS) Rs.1,326 every year.

Q. In order to buy her a new flat in Vasco, Jen deposited (April 2004) Rs. 6 lakhs (600K) @ 5.5% pa for 5 years. What about her ?
Jen, an advice, break your deposit and re-invest at current rates and get at least Rs. 21,000 extra pa.
TAX Rs. 2,856 (on interest rcvd 33,000 @5.5%
TAX Rs. 5,000 (on interest rcvd 54,000 @ 9%)

Q. Falcon has NRE deposits Rs.3,50K May 15, 2006 fetching interest @4.5%, Now that the currents rates are 5.75%, is it OK for him to break and re-invest ?
Yes. But break/re-invest soon after May 15, 2007. If done before that, he will lose all the interest earned for that period. There is a penalty for closing/encashment/re-investment during the first one year.

Note: Others who are in similar situation and who may have kept their deposit receipts with the bank (safe Custody), may instruct their bank to break and re-invest. A simple email should also do (if you wrote/email to them at least once before)

Q. Domnic has about 3 lakhs to invest but he does not wish to pay a tax on his hard earned money, what advise for him ?
Copy Minguel above (Keep this between you and me only).
Or keep/split it under different names like his wife, children etc

Q. Everytime, I keep money at home or send through friends, my dad finishes it quickly mainly on drinking and gambling Matka etc and then ask for more. Any advise/solution to provide him a regular monthly income ?
When you go to Goa next, keep a large/lump some amount in a bank say Rs.1 lakh preferably in the name of your father (this is to fetch up to 1% more interest Sr. citizens see table abv) and instruct the bank to pay interest monthly crediting his SB a/c. This way, he can take up to Rs.833p.m.

IMP. Because the money is yours, make sure you mention your name as nominee or else all your other brothers including your married sisters will have share in it.
Alternately, all of you (bros & Sis) can jointly contribute towards the fund in which case your parents can even get larger monthly amount. Just forward this email to them and they will understand the reason why you forwarded to them.

Q. If the NRE interest is taxed from this year, roughly how much I would pay on my Rs.3 lakhs deposit fethching 5.5% ineterest ?

Well, go through these tables and you will get some ideas.

- Please do not take this as professional services.
- This is just to give you some ideas as to what it might look like..
- It is assumed that Domestic Tax rate is 10% whereas NRE tax rate is 20% with 2% Educational Cess.
- There might be differet rates of taxes for different income bands.
-You may forward this to your banks for further clarifications.- You may also write back to me with any further queries or with some answers which you may have received from your banks etc. It will help me to update this info in the interest of all.

Thursday, 15 March 2007

Any one can be a SAINT, any one can go to HEAVEN

No matter what religion you belong to - ALL ROADS LEAD TO SAME DESTINATION (See bigger pic below)
Its never too late to be a SAINT or to go to HEAVEN.
Any one can be a Saint, any one can go to Heaven. It's very simple, all you have to do is 'be good to others' or follow your God's preachings. Yes, and that is as simple as that. You dont have to be a priest nor you have to be a nun or 'Bhat' etc to become a saint, just be good to others and that will guarantee you a ticket to Heaven or Sainthood. Dont try to show others you are religeous (if you really are, please keep that within you). Don't try to look for your God every where. Always bear in mind your God might be very next to you.

Sant Tukaram/Kabhir said..
"Moko kahan dhundo re vande
Mai to tere pasame....

"Muje kaham dundo,
Meim to tere passi hum"
"Why looking for me every where
when I am very next to you?"
" Hanv tuje lagxinch astana,
Maka inga-tinga kiteaksodtai?"

Who has seen the GOD? Neither YOU nor I.
Yes, the only way we can see God is thru 'YOU' Let every 'YOU' be my God. And if you think you are too old or/and a sinner throughout your life, don't worry, you too can go to heaven or become a saint - all you need is a CHANGE.
Change yourself TODAY and dont wait until tomorrow. Simply be good to others and you will be there. Remember, it's the people who will send you to Heaven, it's the people who will proclaim you as Saint and not necessarily the Rome etc.

Hope to see you all there..

All the best.
See the above pic larger here..

Wednesday, 14 March 2007

Money grabbing Asians - Are we ?

Money grabbing Asians- are we?
We Asians (abroad) often called 'money grabbers'. (mainly applies to UK and perhaps EU, US etc)Yes, we work very hard- long hours, over time and even doing additional small jobs.This has become very habitual to most of us, i.e. once started there is no end to it. Whether we are young, middle aged or retiring age we simply cannot give up 'money grabbing' habits. We don't even care about our health, we think our children will look after us once we are old and sick (they are the reason we work hard anyway). In reality, do our children really look after us?
I asked a lady (in her late 50s) who worked under me, why are you working so hard (long hours) even now when your only son and daughter (both married) earning £40,000 each, and that you have two properties/houses on rent, she said 'I have to save for my grandchildren too' (in UK, on av., two houses are worth £400k Approx.Rs.320,00,000 or Rs.32 millions).
Another lady, who is also old, always appears sick and weak, also having two additional houses, with a son 30 and daughter 26 both working. How can their children allow their sick parents to work? Poor lady, always talk high about her son and that he is the reason she work very hard. One day I happen to meet her son at some body's birthday party. He didn't know that his mother work under me. I said to him, 'you got a nice car' to that he said 'oh! this is nothing, you wait till my mother die, I will buy one Mercedes or one BMW' (This is offcourse, by selling one house). What a lovely son!!
I remember, my colleagues telling me about a very wealthy Indian old lady who worked for British Airways Catering for 35 years and when her turn comes up to retire, she pleaded with the management for extension which she got for her good records & hard work. 18months later she collapsed and died at work place. Above are the facts (this is happening mainly amongst the Asians including Goans. I work as a supervisor for 10 years many men & women worked under me. I have seen, heard and been there). Some of us don't even know how much wealth we have accumulated over a period of time (but our children know very well), we continue working very hard. Sometimes, we do long hours simply because others do (competition). All we do work, work work or money, money, money. When asked, when was the last time they visited their home land, they say 10/15years ago (reason:they cant afford it) despite getting 90% concession in air fare to India and GOA.
In an another case, two Goans both Husband and wife working. Husband earning £30,000 & wife £18,000. They too have one extra house which is given on rent fetching about£1200 per month. They have one child the only son (14). Last year they were asking me for any cheaper Goa Flight during Xmas Season (SFX Expo) as their son never been to Goa. First I said £599 for 2weeks they say 'too expensive'. Two weeks later I managed to offer for £399 at a bargain price to this their answer was 'still can't afford it' In the end they never visited Goa nearly 15 years now.

Yet, there was another case, where another elder Goan working for London Underground (Baker's Street), who was so thrifty (conjus Marwaddi) giving me tips, when I first come into this country, as to how to save money. One of tips was saving money on Gas or electricity bills during the winter. He says, during winter, they switch off all central heating at night and keep a flat rubber bottle* (see pic below) filled with hot water underneath them (in bed) which keep them warm whole night. Would you believe this ?? Sadly, he died few years ago. I knew them as they come from a bhatkars' family from my place Goa(they came UK from Africa).
I am writing this hoping, some of the aged workers would at least make some efforts to look again into their ways of life and bring in some changes at least for their health sake and off course for their family sake. Remember, money is not every thing. We, as their grown up children, should do something about our parents, they worked hard all their life long. Don't they deserve a break now? or 'slow down' atleast ? I know some of our parents are simply stubborn and very difficult to deal with but that should not be an excuse stopping us changing their lives, lets keep trying and they will listen to us one day (we are the reason they live or work any way). They have earned so much for us (we don't even have to pay for the house we are living in). Let us not be selfish as in BMW case above.
Thanks for your time,

*We too had this Rubber water bottle at home Goa my dad brought from Tarvar. But we used to give 'xek' on peoples back like 'gorom udka humdesao-vam or shek'

Please cast your votes here..

note: These articles were previously posted on yahoo groups ovr the period of 4 years.

10 to qualify (to be my friend)

Over 5 years ago, I got this original text/sms on myGOA mobile (in two parts)from a person I knew. During my recent visit, surprisingly, a young chap forwarded the same to me in its original form (as any addition to it even a single letter will split two parts into 3).The person/author only son died very young of AIDs just few months ago (2 years ago). He was rich & wealthy and had so many friends. He send the text to all of his friends. Earlier, he lost both his parents too. It was obvious from his message that he was speaking from his experience and hence mainly targeting the young. As a tribute, I am forwarding the same to you guys. I am sure it has something for every one, and if forwarded to others, it may change people's lives, as in most cases 'prenvention is better than cure'

10 to qualify.
UR my friend if U..
1 Respect yr parents.
2.Return home by 8.
3.B loyal 2 all.
4.Treat every1 equal. others when in need..
6.Never talk behind back.
7.Say NO 2 Drugs.
8.Alcohol? Stay within limits.
9.Smoking? try 2 stop or reduce.
10.No SEX with strangers.
R U my friend ???

Note: this is a test message as I am new to this 'Blog' thing