S&P BSE Sensex*	Re/US $	Gold Rs/10g	Crude ($/barrel)	FD Rates (1-Yr)
33,250.30 |417.36 1.27%	64.55 |-0.09 -0.14%	28,760 | -490.00 -1.68%	61.90 |-0.58 -0.93%	5.00% - 6.75%

As you might be aware, agriculture income is exempt in India. And needless to say, unscrupulous people use this provision to evade taxes. Many individuals, who own agricultural land in India, claim to be drawing crores of Rupees worth of income from farm output. This is confusing, especially given the common perception is that farmers in this country commit suicide due to financial distress. 

You would be shocked to know this…

According to the Income-Tax (I-T) Department, 6.57 lakh assessees collectively declared the agricultural income of Rs 2,000 lakh crore in 2011— this was nearly 20 times India’s GDP that year. Those masquerading taxable income or perhaps the income earned through illegal activities as agricultural income had a free-run so far. Even if you assumed all of them sow saffron, this number looks uncannily unrealistic.

In reality, all of them probably owned acres, but many of them may have not grown even a single crop in years.

It seems their days are numbered. Until now, the I-T Department was handicapped because of data unavailability and a lack of individual financial records. However, with the revenue department going in for a facelift, the situation is going to change soon.

In the near future, the I-T Department may simply access ISRO-powered satellite imagery and cross-check if any crop was grown in the mentioned areas indeed. Doing backward arithmetic and estimating the true income potential of such rich farmers would be a child’s play for the I-T Department now.

Sounds like a movie script? Be assured, this is soon to become a reality.

Similarly, the instances of tax-evasion in the case of individuals having professional and business income are also common. To plug all the loopholes, the I-T Department is likely to integrate data obtained from the GST returns with that of the I-T returns. If it observes any discrepancies or inconsistencies in the financial information provided in GST returns and I-T returns, the assessee will have to face serious consequences.

Moreover, expect the I-T Department to spy on you based on information footprints you leave on social media. So, if are uploading the images of your new SUV and not declaring adequate income to justify such purchases; it is likely that the I-T Department knocks on your door.

The situation has changed dramatically post demonetisation—an event that revealed heaps of financial data of individuals to the I-T Department. It is using advanced analytics systems that can throw up crucial observations about assessees and potentially draw meaningful conclusions. Integration of Aadhaar with a whole host of services has offer more teeth to the I-T Department. 'Project Insight'—an offensive against black money is likely to gain more ground in the foreseeable future.

On the regulatory front, other equally potent laws such as Benami Properties Act and Real Estate Regulation and Development Act (RERA) have immensely empowered the concerned Government authorities to take strong actions against tax dodgers.

Going by the recent developments, it seems the Government is going all out against black money holders by synchronising and coordinating the operations of all its departments.

The I-T Department may soon interrogate assessees carrying out suspicious transactions and holding disproportionate investments for framing proportionately serious charges against them.

Reacting to these developments Mr Amit Maheshwari, Partner at Ashok Maheshwary & Associates said, “Until now many taxpayers at the time of assessment would offer to pay tax on unexplained credits and investments if these were raised by the revenue department and (if) the taxpayers were not able to substantiate them. However, one has to be very careful now as such unexplained credits and investments may be examined under the Benami Act and may invite penal and criminal consequence.” 

Mr Dilip Lakhani, a senior tax expert said, “If a cash credit is unexplained and the tax department can trace back the money to some other person, then only Benami Act can apply.”

He further added that, “In cases where there are only unexplained cash deposits in the bank account then higher tax is applicable and Benami Act can’t be applied.” 

Bear this in mind if you are a taxpayer…

So far, escaping unnoticed from the taxman’s microscope was comparatively easy, but going forward this exercise is going to become tougher. If you report big jumps in the cash holdings or in the turnover which aren’t substantiated by the corresponding change in the debtors’ and inventory position, chances of getting nabbed by the tax department will go up significantly.

As the businesses go increasingly digital and customers actively start using digital payment platforms, tracking your business activities and intersecting your personal financial activities will become easy for tax authorities.

Punishment for the concealment of the income and penalties imposed thereon are severe and may seriously damage your reputation.

While the government watchdogs are trying to encroach in the territories of tax evaders, the Government has to ensure that the genuine and loyal taxpayer is incentivized.

On this backdrop, the Budget 2018-19 holds the key. This being the last full-year Budget before the next Lok Sabha elections, expectations of tax payers are running high. From the grapevine, the Government is considering to reshuffle tax slabs remarkably thereby lowering the tax liability of the middle-class.It’s still a wait and watch though.

It’s still a wait and watch though.

Efficient tax planning can result in you legitimately saving tax, not tax evasion. Hence, engage in prudent tax planning right since the beginning of the year. Also, keep a check on your spending and be careful while you show-off your possessions on social media platforms. Download PersonalFN’s latest Comprehensive Guide to Tax Planning. This Guide will reveal how you can save your hard-earned money from the taxman, and reduce your tax burden quickly and smartly.

 Happy Tax Planning !

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Best Midcap Funds For 2018. Look Before You Leap!

Best Midcap Funds For 2018. Look Before You Leap!

Mr Equity Market has been on the top of the world in 2017. Equity mutual funds made sure they did not miss out on the market rally over the past one year.

Smallcap Funds are up by a massive 40%!

Midcap Funds trail closely behind with a return of around 30%-35%.

Multicap Funds generated returns in excess of 25%.

Stable Largecap Funds too, did not miss out on the party and delivered returns in excess of 20%.

Exactly a year ago, on December 8, 2016 PersonalFN published this article: This Can Be A Good Time To Invest In Midcap Funds. Due to demonetisation that took the world by surprise a month earlier, investors were highly pessimistic on the impact on businesses and turned bearish. Share prices fell and valuations turned to look attractive.

Given the correction, PersonalFN wrote, “such dips in the market may be a good time to invest a small portion of idle cash for the long term (i.e. five years +).” Those who had invested in midcap funds a year ago, would now be sitting on returns in excess of 30%.

To read and Personal FN’s views over it, please click here.

When Mutual Funds Say ‘No’ To New Investments, Here’s What You Can Do

At a time when mutual funds spend crores of rupees to garner new assets, it is a rarity to hear some mutual fund schemes restricting inflows. Given the high market valuation in the mid-cap space and liquidity concerns, many mid-cap oriented funds are restricting fresh inflows.

Portfolio construction in this environment becomes increasingly difficult. So, to prevent undue exposure to high-risk mid-cap stocks, and/or to avoid a sizable allocation to large-caps, these funds have no other option but to restrict inflows.

Investors tend to chase high performance mutual funds. Hence, such high-risk and high-return mid-cap schemes have reported a surge in investments over the past few years. The burgeoning Assets under Management (AUMs) are a growing concern for investors as well as the fund houses.

Unfortunately, investors tend to ignore the high-risk and continue to invest unhindered. On the other hand, fund managers cannot ignore the portfolio risk. Therefore, they are inclined to say ‘No’ to the increasing investments.

Why does the high AUM work against an outperforming mutual fund scheme?

• Small and microcap funds invest in small companies, but ones that have tremendous growth potential
   
• Smaller the size of the company, more illiquid the stock would be. This means, buying and selling large quantity of shares at a single price becomes challenging
   
• To address liquidity concerns and curb the downside risk to the portfolio, schemes with higher AUM start diversifying into larger mid-caps, and sometimes large-caps
   
• As the average market cap of the portfolio goes up, it tends to become more stable, and so generates less lucrative returns in the subsequent times

To read more and Personal FN’s views over it, please click here.

Are SIPs Better Than Lumpsum Investments? Know Here…

Systematic Investment Plans (SIPs) of mutual funds are so aggressively promoted and popularised that many tend to believe that mutual fund SIP is an investment product by itself.

However, a SIP is only a facility offered by Asset Management Companies (AMCs) to investors. Through a SIP, an investor can invest in a mutual fund on a monthly or quarterly basis. Daily SIPs or Weekly SIPs are also available in some schemes. The monthly SIP option is the most popular of the three.

All you need to do is select a scheme, define a regular investment amount, pick a date for the monthly deductions, and set the tenure. This can range from 6 months to perpetuity. Once setup, the AMC will automatically deduct the monthly payment from your bank account and invest it in the scheme.

This is a hassle-free way to invest in mutual funds and develop a regular savings habit. But more importantly, the SIP of mutual funds handles market volatility. Equity markets, despite the volatility, have the potential to create long-term wealth. So as an asset, you cannot ignore equity mutual funds. To deal with the short-term volatility, you need to invest wisely.

To read more and Personal FN’s views over it, please click here.

SEBI’s New Circular On Mutual Funds -- What Does It Means For Your Investments

The Securities and Exchange Board of India (SEBI)  issued new norms in October 2017 to rationalise the process of classification of mutual fund schemes. Initially, mutual fund houses agreed with this decision, but changed their stance when they realised the difficulties in implementing the changes suggested by the capital market regulator. In response, the industry body—Association of Mutual Funds in India (AMFI) made representation to SEBI requesting amendments to the newly issued rules.

Taking a note of issues raised by the mutual fund industry and realising the practical difficulties in the implementation, SEBI amended the classification norms recently.

 As per the original circular issued by the capital market regulator, equity-oriented schemes were to follow the rules below:

• Large-cap oriented schemes should invest at least 80% of their assets in large cap stocks
• Large-cap and mid-cap schemes shall have minimum allocation of 35% in each
• Similarly, mid-cap schemes and small-cap schemes shall invest at least 65% in mid-cap and small-cap stocks respectively

To read more and Personal FN’s views over it, please click here.

This Bold Move By The Government Can Make Housing Affordable

Historically, Indian real estate sector has been infamous for bullying home buyers and flouting the law. Builder-political nexus made real estate sector the most fertile land for black money creation and the storehouse of unaccounted wealth as well.

With the implementation of Real Estate Regulation and Development Act (RERA), the present Government conferred upon more bargaining power to the home buyers. As you might be aware RERA has made real estate developers more accountable. The days of builders diverting funds collected for one project to another, deliberately delaying the construction work and harassing buyers over the payment of unjust charges under various heads are over. RERA has made stringent provisions against all such misdeeds.

But you would be surprised to know, despite a rigorous law being in place, builders have been stubbornly holding up property prices very high in many real estate markets across the country by hoarding a pile of real estate inventory with an aim to sell it at a higher rate in future.

To read more about this story and Personal FN’s views over it, please click here.

Securities and Exchange Board of India (SEBI) may allow mutual funds and other portfolio managers to invest in commodity derivatives. This move is aimed at opening up an alternative investment avenue to investors. PersonalFN believes, investors should be cautious about making any investment in commodities through a dedicated product. One must analyse the risk profile of the investment proposition before committing one’s hard-earned money.

Here’s How To Invest In Mutual Funds In The Name Of A Minor

Getting Married? Here’s How To Get Your Personal Finances In Shape
 

Tax Evasion: Tax evasion is an illegal practice where a person, organization or corporation intentionally avoids paying his true tax liability. Those caught evading taxes are generally subject to criminal charges and substantial penalties. To willfully fail to pay taxes is a federal offense under the Internal Revenue Service (IRS) tax code.

Quote: “...but in this world nothing can be said to be certain, except death and taxes."-Benjamin Franklin.