The single-page ‘Saral’ form is no longer simple. The introduction of the new form 2F has created confusion among the tax payers. Here onwards, while filing your Income Tax returns, you will have to fill in an additional form i.e. 2F.

The new 2F four page form will include the income and expenditure of the tax payers. Wondering why this new introduction? Simple, the government is trying to track down the ones who are evading from tax payment. Patience in needed to know how much worth would all the trouble be.

The 2F form will include 9 schedules, which is supposed to be simple. One of the schedules, specifically schedule 5 demands the taxpayers to show a detailed cash flow statement. It includes your income and expenditure from all sources for the tax-assessment year. In short the income tax payers will have to mention their cash balance not only in the beginning of the year but also at the end of the year and yes, this would include your bank account as well. Apart from this, the tax assessees will have to make their investments, expenses, loans secured and gifts received a transparent transaction.

Deduction of outgoings of tax assessees, including their expenses and investments, form receipts, including opening cash balance, bank balance, income, gifts and other receipts have to be mentioned at the close of year.
If the information provided matches with the annual information returns provided by the third parties (annual information returns, banking cash transaction tax and field officers), etc. you invite less trouble. If the information does not match correctly then you ask for unnecessary scrutiny and investigations.

Under the new form no annexures like details of total income, form 16 giving details of tax deducted at source, will have to be filed along with the income tax returns.

However, this will come into effect after July 31, 2006. The tax assessees can fill the forms either electronically or in the physical form.

Exclusions:
Individuals and HUF (Hindu Undivided Family) enjoying long term capital gains in securities (on which STT has been paid) can use this form. However, the ones with short-term capital gains cannot file returns with this new form.
 
In early May, when the prices of the stocks fell, the investors were hoping to see the market rise but the hope just got dampened when the market speedily moved southwards. The prices fell furthermore and the stock market was in mayhem.

Would it be wiser to stay invested or sell off the stocks? Probably, the only common question on every investor’s mind. To know what you should be doing in this heated market, read below.
Consider equity: Advisors suggest to stay invested in the market though it is very volatile at the moment. If long term is not what you are looking for, at least stay invested for a minimum of three years. The longer you stay invested the better returns you will reap.


The market is too complex, and too volatile, for a retail investor to enter on his own. So decide on mutual funds. Where the fund managers make the entire burden of mind-boggling decisions. Well, not everyone might agree to it because of the meltdown of market. But there is always sunshine after a dark night.

The best way is to slow down and take minimised risks. And this can be achieved through ‘Systematic Investment Planning’. As of now, it is the best bet available. When picking a fund, don't just go by what is being recommended, do your homework and take the plunge accordingly.

One needs to know volatility is a part of the stock market and presuming, it is here to stay for a while. So, the best that can be done is to prepare oneself with advanced knowledge about the companies and sectors. Try to understand and analyse the growth potential of the company in which you have invested. In volatile times it is best to stick to the basics and have faith in the fundamental approach to investment.

Jotted below are the five biggest diversified equity funds available:
 
Sr. No. Company
Name		 Amount Return Year Avg.
Return
1. Reliance Equity Fund Rs 5,988 crore / Rs 59.88 billion 1.97% 30, 2006 – April 30, 2006 5.46%
2, Fidelity Equity Fund Rs 3,160 crore / Rs 31.60 billion 80.30% May 18, 2005 – April 30, 2006 79.50%
3. HDFC Equity Rs 3,117 crore / Rs 31.17 billion 99.84% One year ended April 30, 2006 88.06%
4. SBI Bluechip Rs 3,062 crore / Rs 30.62 billion 10.19% 17, 2006 - April 30, 2006 17.79%
5. Franklin India Flexi Cap Rs 3,045 crore / Rs 30.45 billion 104.71% One year ended April 30, 2006 88.06%
 
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It is a know fact that investments in market requires an individual to have a good risk appetite. The recent yo-yo performance of the market has led many investors to think over again on their investment portfolios. Interestingly, the downfall of the market has not had a negative impact on the Unit Linked Insurance Plans (ULIP) owners.


ULIPs, also known as investment plans is a perfect package that comes with insurance coverage and investment options. So, that leaves you with the opportunity of investing in equities. But you do need to keep in mind that the investments in stocks are subject to the vagaries of the market. The volatility in equity markets can keep you uneasy and disturbed since you wouldn't like to see your reserve being affected. You need to know your risk appetite and then make a choice accordingly by choosing an appropriate fund.


Given below are points that explain how ULIPs function:
 
1. Investment mandate:

Unit Linked Insurance Plans function differently. The combination of insurance plus investment in funds is what ULIPs offer. ULIPs have an investment mandate, which permits them to ‘move’ assets without restraint between equities and debt. This feature is not available in other plans like endowment, money back, term policies. The monies invested in funds are used by the insurer to invest in specified instruments like bonds and government securities (G-secs). The amount of money invested in equity has the potential to make a momentous difference to the returns that the plan can create over the long run.
Since ULIPs invest heavily in equity market, the returns can come crashing down during downfall of the stock market.
 
3. ULIP expenses:

ULIPs include expenses of fund management charges, annual expenses, etc. The expenses are taken care of by the premium amount that is paid by the policyholders. The higher the fund management charge, the higher is the cost spent from the premium amount.
2. Miscellaneous features:

An innovative aspect of ULIPs is the 'top-up' facility. A top-up is a one-time additional investment that is paid apart from the annual premium of the policy. This feature works well when you have a surplus that you are looking to invest in a market-linked avenue. ULIPs also have the facility that allows you to skip premiums if you have paid your premiums regularly for the first three years. For instance, if you have paid your premiums dutifully for the first three years and you have missed out the payment of fourth year's premium then the insurance company will make the necessary adjustments from your investment surplus. The insurer will make sure that the policy remains active. But it is always advisable to pay the premiums regularly to avoid troubles. Such facilities are not available with any other policy. This makes it a differentiating factor when compared to other policies.


Another important feature of ULIPs is that the portfolios are disclosed regularly. This gives you an idea of how the money is being managed. Another important aspect is its 'liquidity' factor. Since ULIP investments are NAV-based it is possible to withdraw a portion of your investments before maturity. However, it is possible only after the completion of the initial lock-in period. Such facility is not available with any other traditional policies. What more, it qualifies for tax benefits which is offered under Section 80C of the Income Tax Act. This is subject to a maximum limit of Rs 1,00,000.


 
 
 
 

Before zeroing-in on a life insurance policy, you need to consider the following points.

1. Key out your needs:
Before buying an insurance policy, it is important to key out/identify your needs. Insurance requirements differ at every stage of life. If you are newly married, then you have dependents, your policy should center on the financial aid that would help your wife/children in your absence. Children’s education, marriage, your retirement, etc. all of these needs are taken care of by the policy. Evaluate you needs and then make a choice of the insurance policy.
 
2. How much insurance do I need?
After having identified the need to buy insurance, the next step is to ascertain the amount of cover needed. If you are young and dynamic, you fall in the high-earning age group. Hence you can afford to take risks. However, as you grow with age, you fall more close to the retiring age. At this stage you can take minimum risks. So make your decisions carefully.
To quantify your insurance needs, you can approach your insurance agent. He/she will help you arrive at a plan that will fit aptly to your needs.

Misconceptions:
Many individuals look at life insurance policies as a tax saving instrument. This is one of the grave mistakes that many people make. Insurance is the armour to save you from future financial troubles. So it cannot be misunderstood as a ‘tax saving instrument’. It gives you the much-needed financial protection.
Coming back to making a choice of the policy- if you were to buy term plan, it would just provide you a pure risk cover unlike saving plans (endowment, term, money back plans) that provide maturity amount at the end of the term of the plan. The premium amount becomes higher with the saving-plans because along with the insurance protection, it offers you the maturity/survival amount.

If you are still confused, your insurance agent will help you in making the right decisions for you.
After having identified the need to buy insurance, the next step is to ascertain the amount of cover needed. If you are young and dynamic, you fall in the high-earning age group. Hence you can afford to take risks. However, as you grow with age, you fall more close to the retiring age. At this stage you can take minimum risks. So make your decisions carefully.
To quantify your insurance needs, you can approach your insurance agent. He/she will help you arrive at a plan that fit aptly to your needs.
 
 
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