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Tax saving FDs: Why you should give these bank fixed deposits a miss this year

by economictimes.indiatimes.com Leave a Comment

Synopsis

Many individuals prefer investing in tax saving fixed deposits as they are less riskier as compared to ELSS mutual funds. Further, the tax saving FDs offer fixed returns. However, there are three reasons why individuals may be better off by giving tax saving FDs a miss this year. Read on to know all about it.

With few days to go to complete tax-saving processes under the old tax regime for the current financial year, many taxpayers might invest in banks’ tax-saving fixed deposits (FDs) as a last-minute option. This is because investing in these FDs is easy. The investment can be done either by visiting a bank branch or through net banking.

Many taxpayers invest in a tax-saving FD as it is considered safer than equity investments via equity-linked saving scheme (ELSS) mutual funds. Further, FD returns are fixed and not linked to market fluctuations. However, taxpayers may be better off exploring options such as National Saving Certificates ( NSC ), post office time deposits and Public Provident Fund ( PPF ) to save income tax this financial year, instead of using tax-saving FDs.

Here are some reasons to back this assertion.

Interest rate for 5-year FD yet to peak
The Reserve Bank of India ( RBI ) has been raising key policy rates since May 2022. Till the end of financial year 2022-23 (March 31, 2023), the central bank has hiked the repo rate by 250 basis points or 2.50%. At the start of the financial year, the repo rate was 4%; currently, it is 6.50%.

With the increase in repo rate, banks also started raising interest rates on fixed deposits. They have launched several special deposit schemes as well to attract FD investors. However, the interest rate of tax-saving FDs is still not the highest.

The RBI’s bulletin for March 2023 said that between May 2022 and February 2023, the medium term deposit rates hiked by 82 basis points (0.82%) for retail deposits for new investments. Only 33% of the rate hike of 2.50% has been passed on to the FD investors.

Most of the interest rate hikes have been passed on only to FDs with short-term maturities. Many banks are offering the highest interest rate on tenure between one and three years. For a bank FD to be a tax-saver, its tenure must be of 5 years. Currently, the interest rate on tax-saving FDs is lower than the highest interest rate offered by banks on other tenures of FD.

For instance, State Bank of India ( SBI ) is offering the highest interest of 7% on an FD with tenure of 2 years to less than 3 years. However, the interest rate on its 5-year FD is 6.50%, which is 0.50% lower than its highest interest rate.

Similarly, HDFC Bank is offering the highest interest rate of 7.10% on tenure of 15 months but less than 18 months. However, the interest rate for its 5-year tax-saving FD is 7%.

ICICI Bank is offering the highest interest rate of 7.10% for two tenures – 15 months but less than 18 months and 18 months to two years. However, the bank is offering 7% for its tax-saving FD.

Bank of Baroda is offering 6.25% on its tax-saving FD. However, the bank’s highest FD interest rate is 6.75% for tenure between 1 year and up to 3 years.

Generally, the interest rate on fixed deposits with longer tenures such as 5 years and above tends to be highest when compared with short-term and medium-term tenure. One can say that long-term FD rates are yet to peak. Hence, this may not be an opportune moment to book long-term tax-saving FDs in banks. Some bank FDs offer above 7% and are worth considering.

Though some major banks are offering an interest rate of 7% on tax-saving FDs, it is important to check the interest rate being offered by all major banks. This is to ensure that you do not lose out on higher interest rates while making an investment.

Do note that for senior citizens, banks are already offering a higher interest rate. For instance, SBI is offering an interest rate of 7% on 5-year tax-saving FDs. Similarly, ICICI Bank is offering 7.50% on tax-saving FDs. Hence, senior citizens may invest in tax-saving FDs to save on income tax.

Less risky alternatives are offering similar or higher return
A tax-saving FD with a bank has a tenure of five years. To save income tax, individuals have an option to invest in a 5-year post office term deposit and NSC. Both have a tenure of five years. Currently, both of them offer an interest rate of 7%.

Do note that a post office time deposit (POTD) and NSC are safer than bank tax-saving FD. This is because these two have a sovereign backing. Hence, any amount invested by an individual and the interest are considered completely safe – without any monetary limit. However, in case of a bank FD, an individual’s deposits and interest are insured up to Rs 5 lakh. Deposits include money held in savings accounts, fixed deposits, recurring deposits or any other deposit held with the bank.

Also Read: How to get cover of Rs 65 lakh on bank deposits

So, if an individual wants to save income tax, they can consider invest in either a 5-year POTD or NSC instead of a bank tax-saving FDs that offers a return of 7% or less. The interest rate offered by these small saving schemes is similar to what some prominent banks are offering on their tax-saving FDs; and there is a higher degree of safety.

Rinju Abraham, Vice-President, Scripbox, says, ” Bank fixed deposits currently offer slightly lower interest rates than post office term deposits. The 5-year term deposit at the post office is eligible for tax benefits under Section 80C and the implied safety on such deposits is usually high.”

An individual can also consider PPF to save tax if tenure is not an issue. The interest earned on a PPF investment and the maturity amount are exempted from tax.

Interest rate risk appears higher with bank FD
Lastly, if an investment is done at the current interest rate level, the interest rate will not change for five years. So, if you lock-in your investment in a bank tax-saving FD at a much lower rate of around 6.5%, and later the bank hikes the interest rate to 7% or above for long-term FD tenure, your tax-saving FD will continue to earn a lower interest rate. However, if you opt for a small saving scheme with interest at 7% or above, the chances are that you might not miss out on a lot of interest in case of a rate hike at a later stage.

Interest rates of bank tax saving FDs were taken from bank websites on March 16, 2023.

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Govt Unlikely To Roll Back Budget Proposal Of Taxing High-Value Insurance: Report

by news.abplive.com Leave a Comment

Amid the demand of the industry to roll back the Union Budget proposal of taxing high-value insurance policies, officials have said that the government is unlikely to make changes in its plan, reported news agency Reuters. In Budget 2023, Finance Minister Nirmala Sitharaman proposed “to limit income tax exemption from proceeds of insurance policies with very high value.”

The move was proposed to tax the returns upon maturity of life insurance policies if their aggregate premium was above Rs 5 lakh in a year. The plan comes into effect on April 1.

According to the report, insurance industry executives have met Finance Minister Nirmala Sitharaman and finance ministry officials to demand they reconsider the proposal. However, an official told the news agency, “The government is not keen to revise the Rs 500,000 threshold limit as it impacts only high net-worth individuals, and not the common man.”

Also Read: ITR Filing: CBDT Picks Up 68,000 Cases For E-Verification. Know About The Scheme

Although he added that the government will consider allowing these investments to be adjusted for inflation, also known as ‘indexation’. Indexation means adjusting purchasing price to the rate of cost inflation index (CII) that is published periodically by the income tax department.

Another official told Reuters that the Department of Financial Services has suggested to Prime Minister’s Office (PMO) to allow these indexation benefits, and the final call will be taken by the PMO.

Also Read: Govt Not To Pay 18-Month Frozen DA Arrears For Central Govt Employees: Report

An independent tax consultant Kuldip Kumar, according to the report said that if allowed, indexation will lower the policyholder’s tax liability. Kumar said that this benefit will mean insurance proceeds will be taxable as capital gains rather than “income from other sources”, as proposed in the budget, which will reduce the tax rate to 20 per cent from 30 per cent.

These Florida brothers ran one of the largest opioid ‘pill mills’ in US history. The FBI says it was linked to thousands of deaths

by edition.cnn.com Leave a Comment

By Faith Karimi , CNN

Updated 2335 GMT (0735 HKT) February 3, 2023

(CNN) Throngs of people hang outside the American Pain clinic in Boca Raton, Florida, waiting their turn. Inside, a doctor greets them one by one and prescribes them pain medication, a handgun peeking out from under his white coat.

American Pain is a one-stop shop, supplying both prescriptions and painkillers. At the door, a hulking bouncer warns people not to snort their pills in the parking lot. That would attract the kind of attention that the clinic’s owners, twin brothers Chris and Jeff George, are trying to avoid.
But it’s too late. Local and federal investigators are nearby, watching every move.
These are scenes from a new CNN Films’ documentary, “American Pain,” which details the George brothers’ rise and fall as opioid kingpins. The film by Emmy Award-winning director Darren Foster uses FBI wiretap recordings and undercover videos — along with the brothers’ exclusive jailhouse interviews — to paint a picture of a ruthless pain-pill empire that turned the Georges into millionaires and enabled addicts from all over the country.
“The George brothers did not start the opioid crisis. But they sure as hell poured gasoline on the fire,” said retired FBI agent Kurt McKenzie, who was part of the investigation — nicknamed Operation Oxy Alley — that began after oxycodone from the twin brothers’ clinics showed up at scenes involving drug overdoses. Investigators bugged the clinic’s phones, recorded surreptitious video and sent undercover agents masquerading as a patients to buy drugs.
Read More

“They became the largest street-level distribution group operating in the entire United States,” McKenzie added. “Nobody put more pills on the streets than they did. Nobody … and they were operating in broad daylight.”
Twin brothers Jeff and Chris George of South Florida claim to have made tens of millions of dollars selling painkillers.

Twin brothers Jeff and Chris George of South Florida claim to have made tens of millions of dollars selling painkillers.

One brother described their operation as ‘the Disneyland of pain clinics’

Between them, Chris and Jeff George ran four pain clinics and other related businesses in South Florida.
Their operation coincided with surge in the opioid epidemic between 2008 and 2010, when the prescription painkiller business was booming, federal officials said. People across the country also were beginning to realize the toxic toll the legal drugs were taking on communities.
“Before this case, the public only knew that people were dying from drug overdoses, they had no idea how the ‘system’ worked,” McKenzie said. “The George brothers created the blueprint.”
Chris George with his silver monster truck. The twins lived flamboyant lifestyles and owned boats, flashy watches and multiple homes.

Chris George with his silver monster truck. The twins lived flamboyant lifestyles and owned boats, flashy watches and multiple homes.

They advertised the clinic in local newspapers and recruited doctors to prescribe the medications, offering them incentives for large and frequent prescriptions. To avoid setting off red flags, the brothers’ clinics only accepted cash and credit cards — not insurance plans, according to court documents. They hired women through Craigslist to dole out the pills prescribed by the doctors.
The George brothers made it easy to get drugs at their clinics, where no appointments were necessary. Patients flocked to Florida from Tennessee, Kentucky, Ohio, West Virginia and other Appalachian states ravaged by opioid abuse.
“I believe we’ve created a new form of tourism,” Jeff George says in the documentary, in a phone interview from prison. “We were basically like the Disneyland of pain clinics.”
Some drug dealers drove to the clinics from Kentucky in rented buses marked “Tree of Life Baptist Church” to mask their criminal intentions, the film shows.
“It’s like a candy store down there,” one man told FBI agent Jennifer Turner, who led the federal investigation, when asked why he frequented the George brothers’ pill mills.
Meanwhile, the brothers were making millions and trying to outdo each other’s flamboyant lifestyles. They bought pricey watches, flashy cars, boats and multiple homes. Jeff George drove a Lamborghini while his brother Chris had an enormous customized monster truck.
The South Florida Pain Clinic was one of four that Chris and Jeff George owned between them.

The South Florida Pain Clinic was one of four that Chris and Jeff George owned between them.

The clinics operated like frat houses, said Derik Nolan, a longtime friend of the twins who describes himself in the documentary as their right-hand man. As customers waited for their next fix, clinic employees played with remote-controlled cars and shot each other with slingshots. The clinics’ fridges held beer and Patrón shots, Nolan said.
The clinics’ cash registers were too small to contain the incoming flood of bills, so employees stuffed the money in massive trash bags.

They bragged about making millions of dollars in profits

One clinic referred people without MRIs to a trailer behind a strip club, where they could get lap dances while waiting for new scans from sham radiologists, according to an FBI agent quoted in the film. The George brothers believed the imaging helped make their prescription process look more genuine.
The clinics’ doctors were paid per person, which provided an incentive to see as many patients as possible, federal officials said.
The doctors “did not obtain prior medical records or prescribe any alternative treatment. They did not make referrals to specialists. Virtually everyone examined by the co-conspirator physicians received a prescription for controlled substances,” court documents said. “There was no individualization of treatment as required under applicable federal and Florida law.”
These bottles of 30 mg oxycodone tablets -- straight from the manufacturer -- were seized from a George brothers clinic by law enforcement. The brothers' main clinic, American Pain, ranked among the top nine purchasers of oxycodone in the nation, according to court documents.

These bottles of 30 mg oxycodone tablets — straight from the manufacturer — were seized from a George brothers clinic by law enforcement. The brothers’ main clinic, American Pain, ranked among the top nine purchasers of oxycodone in the nation, according to court documents.

Chris George brags in the film that the American Pain clinic alone generated $40 million in profits. American Pain prescribed 18 million units of oxycodone, ranking among the top nine purchasers of oxycodone in the nation, according to court documents.
“Of the 20 highest-prescribing physicians in the entire country, five of them worked at just one of Chris’ facilities,” said McKenzie, the former FBI agent. “These are real doctors. They have real licenses … and what looked to be a real clinic.”
Chris George says he took pride in his clinics’ volume.
“I wanted my doctors to be the top prescribing doctors in the country,” he tells the filmmakers in an interview from prison. “To me, that was an accomplishment.”

A grieving father helped bring down a pill mill

John Friskey owns a computer service business in Jacksonville, Florida. At the time a pill mill moved in to the same strip mall, Friskey was a grieving father who’d lost his son, Andy, to opioid addiction. Andy loved music and played the guitar.
“He was in a car accident in Tennessee. He had a ruptured spleen and was in pain,” Friskey told CNN. “He got medicine from the pill mills. I didn’t know they were pill mills. I didn’t even know he was getting medicine. He overdosed on it.”
The neighboring pain clinic was owned by a man named Zachary Rose, who was rivaling the George brothers for supremacy among Florida pill mills. Rose’s clinic brought crowds of drug users from out of state to the area, and Friskey wanted him out of the strip mall.
When the clinic asked Friskey to help them maintain their computer networks and security cameras, Friskey saw an opportunity. He approached the DEA and offered to help shut it down.
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DEA agents wired him and recorded his conversations when he worked on Rose’s computers, as doctors there bragged about how much money they earned per day.
Friskey said he would take out their hard drives, replace them with new ones and turn the old ones over to federal agents.
“They never questioned me, never tried to stop me,” Friskey said. “I was happy to shut him down.”
Rose pleaded guilty to a drug conspiracy charge in 2012 and was sentenced to 15 years in prison .

An estimated 3,000 people died from overdoses linked to the brothers’ clinics, the FBI says

Everything came crashing down in August 2011, when federal investigators raided the brothers’ homes and discovered illegal weapons, drugs and other items.
They also raided the home of the twins’ mother, Denice Haggerty, who worked at one of the pain clinics. There, they discovered safes in the attic stashed with $4 million.
The brothers were among 31 people indicted — including their mother — under the federal RICO Act, which targets organized crime. Thirteen doctors also were charged, and all but two pleaded guilty to lesser charges of money laundering or wire fraud.
Haggerty, the twins’ mother, pleaded guilty that year to one count of conspiracy to commit wire fraud and was sentenced to 30 months in prison.
Chris George pleaded guilty to one count of racketeering conspiracy and was sentenced to 17 years in prison. He served 11 years and was released in September 2021.
Jeff George: "We were basically like the Disneyland of pain clinics."

Jeff George: “We were basically like the Disneyland of pain clinics.”

Jeff George also pleaded guilty to a racketeering conspiracy charge and was sentenced to 15 and a half years. He also was convicted of second-degree felony murder in the fatal overdose of a patient, according to court filings. He received an additional 20-year sentence for the murder charge and remains in prison.
An estimated 3,000 people died from overdoses linked to the brothers’ clinics, McKenzie said. He said the FBI came up with that number after reviewing a random sampling of 300 patient files from the brothers’ clinics and noting how many of the patients had later overdosed.
As many of the clinics’ customers sold their pills to others, that estimate doesn’t include the secondary or even tertiary drug market, McKenzie added.

Chris George denied responsibility for clients’ fatal overdoses

The brothers, now 42, leave a legal legacy in Florida.
In 2011, the state passed a “pill mill law” that banned pain clinics from dispensing opioids and established requirements for medical examinations.
But Nolan, the Georges’ associate who also pleaded guilty to a racketeering charge and served 10 years in person, feels like law enforcement targeted the wrong people.
“They didn’t want to go after big pharmacy. They didn’t want to go after big distributors. They just wanted us — we’re nobody. The money we made is peanuts compared to what big pharma made over the years,” he said in the film.
In recent years large pharmaceutical companies such as Purdue Pharma, whose OxyContin painkiller has been widely blamed for kickstarting the opioid crisis, have agreed to pay billions of dollars in legal settlements. Drugstore chains such as CVS and Walgreens also have agreed to settle lawsuits brought by states and local governments alleging the retailers mishandled prescriptions of painkillers.
The George brothers in an undated photo. "They act like I'm the bad guy here 'cause I owned a business," Chris George said after being released from prison.

The George brothers in an undated photo. “They act like I’m the bad guy here ’cause I owned a business,” Chris George said after being released from prison.

Meanwhile, more than a decade after the FBI shut down their operation, Chris George believes he and his brother play no role in the fatal overdoses.
“In the end, it’s their responsibility. They’re responsible for themselves, I’m not,” he says in the film after his release from prison. “I don’t think we created more addicts. They were already here. They just had an easier way .. to get their drugs. And a safer way. Now they don’t even know what they’re getting.”
Chris George, who is out on parole, continues to deflect blame for his drugs’ deadly toll onto his former patients.
“They said they were in pain to my doctors. They got an MRI showing they were in pain. My doctors gave them medication. What they did with that is out of my hands.
“They act like I’m the bad guy here ’cause I owned a business,” he added. “You know, in this country, anybody can open a business.”
Chris George said he plans to start a real estate business with his friend Nolan.
And if the housing market crashes, like it did during their opioid empire’s heyday, Nolan told the makers of “American Pain” that he has another idea.
“We may have to venture back into the medical field,” he said.

9 tax saving investment options for FY 2022-2023

by economictimes.indiatimes.com Leave a Comment

Synopsis

The last date to complete tax savings for current financial year is March 31, 2023. If an individual opts for old tax regime in FY 2022-23, then ensure that you have made specified investments under section 80C to save tax. Here are 9 tax saving investment options for FY 2022-23.

An individual taxpayer planning to opt for the old tax regime for current FY 2022-23 must complete their tax-saving exercise on or before March 31, 2023. If an individual has not made any investments allowed under section 80C of the Income-tax Act, 1961 then he/she must not wait until last minute.

Section 80C allows an individual to claim maximum deduction of Rs 1.5 lakh from their taxable income. By claiming this deduction, an individual’s taxable income reduces which leads to reduction in income tax liability. An individual whose total income is taxed at 30% tax rate and 4% cess, will pay Rs 46,200 as additional tax if maximum deduction is not claimed. Had the maximum deduction being claimed, then tax outgo will reduce by Rs 46,200 (including cess).

Here are some of the common options available under Section 80C, 80CCC and 80CCD (1) for saving income tax. Do note the total investments made under Section 80C, 80CCC and 80CCD (1) together must not exceed Rs 1.5 lakh in a financial year.

Equity-linked Savings Scheme ( ELSS ): ELSS mutual funds are one of the common investment options used under Section 80C to save income tax. The maximum deduction that can be claimed is of Rs 1.5 lakh. ELSS mutual funds invest in equity and the returns earned are market-linked, making them one of the most risky investment options in the 80C basket.

ELSS mutual fund schemes have a lock-in period of three years. Thus, once invested, an individual investor cannot withdraw the money before the completion of three years from the date of investment. ELSS has the shortest lock-in period among all the other options available under Section 80C. There is no limit to the maximum amount that can be invested under ELSS mutual funds. The minimum amount varies between mutual fund houses.

The return earned in ELSS mutual fund will be taxable if the redemption is done. The capital gains will be taxable if the total equity capital gains in a financial year exceeds Rs 1 lakh.

Public Provident Fund ( PPF ): PPF is one of the most popular small savings schemes. This is because PPF has EEE tax status. This means that investment made in PPF is exempted from tax, the interest earned from PPF is exempted from tax and maturity amount is also exempted from tax.

PPF is a debt investment, hence, they are not as risky as ELSS mutual funds. PPF is a government scheme, hence, it comes with sovereign guarantee. The interest on PPF is announced by the government in every quarter. For January – March 2023 quarter, the PPF is offering 7.1% annually. The government will review the PPF interest rate on March 31, 2023 for the April- June 2023 quarter.

PPF comes with a lock-in period of 15 years, where the lock-in period starts after the completion financial year in which initial investment is made. For instance, if an individual makes the first investment in PPF in August 2022, then lock-in period of 15 years will be calculated from April 1, 2023. Though PPF has a lock-in period of 15 years, it offers loan and partial withdrawal facilities.

The minimum and maximum investment amount in PPF is Rs 500 and Rs 1.5 lakh. An individual can open the PPF account either with a bank or a post office.

Do note that once PPF account is opened, then minimum investment must be made in the PPF account every financial year. If minimum investment in PPF account is not made in a single financial year, then PPF account will become a discontinued account.

National Pension System ( NPS ): Investment made in NPS is eligible for deduction under Section 80CCD (1) of the Income-tax Act. The scheme offers pension to the investor from his/her retirement age. The returns under the NPS are market-linked.

The amount of deduction that can be claimed for NPS investment under Section 80CCD(1) is 10% of salary (basic salary plus dearness allowance). The maximum deduction that can be claimed is of Rs 1.5 lakh. Hence, an individual having basic salary of Rs 10 lakh is eligible to claim deduction of Rs 1 lakh under Section 80CCD (1). To fully-utilise the benefit of Rs 1.5 lakh, he/she will have to explore other tax-saving investment options.

NPS has a lock-in period of till the age of 60 years. For example, if an individual started investing in NPS at the age of 25 years, then he/she will have a lock-in period of 35 years. NPS offers partial withdrawal facility, however, such withdrawal is allowed under specified circumstances. On maturity, an individual can withdraw maximum 60% of the corpus as lump-sum. This lump-sum will be exempted from tax. The balance 40% must be mandatorily used to buy annuity plan. The annuity/pension received will be taxable in the hands of individual.

The minimum per NPS contribution is Rs 500 but there is no maximum amount that can be invested in NPS. An individual opening NPS account must ensure that they have made minimum contribution of Rs 1,000 in a financial year to avoid making the NPS account discontinued.

Employees Provident Fund ( EPF ): EPF is one of the most popular tax-saving instruments for salaried individuals. If the organisation is covered under the EPF law, then a salaried individual will be making contribution to the EPF account. An individual is required to contribute 12% of basic salary to the EPF account and employer will make a matching contribution as well.

The interest rate on EPF account is announced by the government. The EPF account also has a lock-in period till retirement. However, partial withdrawal from EPF account is permitted for specific situations. Further, if an individual after quitting their job, does not find another job in two months, then he/she can completely withdraw the money from their EPF account and close the account.

The amount that can be invested in the EPF account depends on the salary of an individual. However, if an individual wishes to make additional contribution to the EPF account, then same can be done via Voluntary Provident Fund (VPF). The rules of EPF and VPF accounts are same.

Do note that if the total contribution to the EPF and VPF account exceeds Rs 2.5 lakh in a financial year, then the interest earned on excess contributions will be taxable in the hands of an individual. The maturity amount received from EPF account is exempted from tax.

Tax-saving fixed deposits: A 5-year tax saving fixed deposit is another option available to individuals to save income tax in the current financial year. An individual can invest in tax-saving fixed deposit at a bank or a post office.

The interest rate on tax-saving fixed deposit varies between banks. For post office tax saving fixed deposit, interest rate is announced by the government. The interest received from tax-saving fixed deposit is taxable in the hands of the individual.

Tax-saving fixed deposit has a lock-in period of 5 years. Hence, once invested, the money cannot be withdrawn before the completion of 5 years from the date of investment.

The minimum investment amount for tax-saving fixed deposit varies between banks. The minimum investment amount for post office 5 year term deposit is Rs 500. There is no limit to the maximum amount that can be invested. However, the maximum tax benefit of Rs 1.5 lakh can be claimed.

National Savings Certificate (NSC): An individual can invest in NSC as well to save income tax. The investment in NSC can be made by visiting the nearest post office. The interest rate on the NSC is announced by the government every quarter. However, once the investment is done, the interest rate remains fixed till maturity. Currently, NSC is offering interest rate of 7% per annum.

NSC has a lock-in of 5 years. Thus, once an individual makes an investment, the money cannot be withdrawn before the completion of 5 years. The minimum amount in NSC is Rs 1000 with no limit on the maximum amount. The tax benefit is, however, restricted to Rs 1.5 lakh under Section 80C. The interest earned on NSC is re-invested and is paid at maturity. The interest earned from NSC is taxable in the hands of an individual. However, as the interest is re-invested, this makes it eligible for deduction under Section 80C.

Sukanya Samriddhi Yojana (SSY): This a savings scheme for the girl child. A parent of a girl child can invest in Sukanya Samriddhi Yojana and save tax on it. Every quarter, the government announces the interest rate for Sukanya Samriddhi Yojana. Currently, the scheme is offering interest rate of 7.6%.

An individual can open the Sukanya Samriddhi account either via bank or post office. The Sukanya Samriddhi account will mature after 21 years of opening of the account. However, the deposits are required to be made for 15 years from the date of opening of account.

The Sukanya Samriddhi account can be opened by a guardian for a girl child below the age of 10 years. Only one account can be opened in the name of a girl child either in bank or post office. This account can be opened for maximum of two girls in a family.

The minimum and maximum deposit that can be made in Sukanya Samriddhi account is Rs 250 and Rs 1.5 lakh, respectively, in a financial year. If the minimum deposit is not made in a financial year, then the account will become a defaulted account.

Sukanya Samriddhi Yojana also comes with the EEE tax status like PPF.

Senior Citizens Savings Scheme (SCSS): Only senior citizens can invest in this scheme to save income tax. The interest rate on Senior Citizens Savings Scheme is announced by the government in every quarter. Currently, the scheme is offering an interest rate 8%. Once the investment is done, the interest rate remains fixed for the tenure of the scheme. The interest is paid every quarter to the senior citizen.

The scheme has a lock-in period of 5 years. However, the scheme allows premature closure of the account. The premature closure of account invites penalty as well.

The scheme allows minimum deposit of Rs 1000 and maximum deposit of Rs 15 lakh. The Budget 2023 has proposed to hike the maximum deposit limit to Rs 30 lakh from Rs 15 lakh currently.

The interest received from scheme is taxable. However, a senior citizen can claim deduction under section 80TTB for the interest earned.

Unit-linked insurance plans (ULIP): An individual can make investment in ULIP to save tax. It is an insurance product that offers both life insurance coverage and benefit of investing equity. The returns earned from ULIP products are market-linked.

The ULIP has a lock-in period of 5 years. Once the lock-in period expires, the individual can withdraw the money.
The amount that can be invested in ULIP depends on various factors such as age of individual, sum insured, policy term. The maturity proceeds from ULIP will be taxable if premium paid for all ULIPs in a financial year exceed Rs 2.5 lakh.

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( Originally published on Feb 16, 2023 )
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Credit Suisse is an anomaly: Why New Zealand and Australia are safe from ‘bank run’ contagion

by www.stuff.co.nz Leave a Comment

John Hawkins is a senior lecturer at the Canberra School of Politics, Economics and Society, University of Canberra.

ANALYSIS: There has been a lot of talk about the risk of financial contagion following the collapse of California’s Silicon Valley Bank . Perhaps too much talk.

While the frequency of bank runs in the past shows the power of emotions to move markets, there’s little reason to panic.

We’re not looking at anything like the circumstances that precipitated the global financial crisis of 2008. If you’ve got your savings in any bank or credit union in Australia or New Zealand, the greatest fear is fear itself.

READ MORE: US Federal Reserve raises key interest rate by quarter-point despite banking turmoil Silicon Valley Bank’s loans to insiders tripled to $355m before it failed Swiss banking giant UBS buys rival Credit Suisse in bid to stop global financial crisis

Just two other US banks, the New York-based Signature Bank and First Republic in San Francisco, have been caught up in the trouble. Internationally, the only casualty is Credit Suisse in Switzerland, whose customers have been saved by loans offered from Switzerland’s central bank and takeover by Switzerland’s largest bank, UBS .

It is likely that until a few weeks ago you’d never heard of Silicon Valley Bank (or Signature or First Republic). But Credit Suisse, founded in 1856, is known around the world. It was regarded as one of 30 systemically important global banks .

What does its troubles have to do with Silicon Valley Bank? Not much, except that fear is contagious, and the bank already had problems that made it extra susceptible to panic.

Interest rates and bond debts

Apart from fear, the one common factor in these bank failures is the impact of higher interest rates on government bonds.

Bonds are a form of debt. Governments issue them to raise money in excess of their tax revenue. Bond buyers are paid regular fixed interest (known as a “coupon”) until the bond matures, when the issuer repays what the original buyer paid for the bond.

Banks like bonds, particularly in uncertain times. Even though they pay less interest than on other forms of debt, there’s an extremely low risk of default. Governments rarely go broke. They can always raise funds through taxation, or issuing more bonds, to meet their obligations.

In the early months of Covid, as central banks slashed interest rates as much as possible to sustain economic activity, the already low rate of interest that governments paid on bonds dropped further. In some cases this meant bond yields were even negative . But they were still attractive to banks because of the low default risk compared to, say, lending money to companies facing tough times.

But then came 2022 and unexpected inflation, as economies recovered and Russia’s war on Ukraine pushed up global energy prices. In response, central banks began quickly pushing up interest rates. Bond interest rates rose too. The interest rate on a ten-year US treasury bond, for example, was about 1.5% in November 2021 . A year later it was more than 4%.

These higher yields on new bonds have lowered the value of existing bonds that pay less interest. Any bank wanting to sell those bonds (on a secondary market) must do so for less than what it paid.

What happened with Silicon Valley Bank

This is what happened with Silicon Valley Bank. The early stages of the pandemic were great for it. Deposits by customers, concentrated in northern California’s high-tech industry, tripled . The bank then invested heavily in US government bonds, intending to hold them until they matured.

Then came inflation and the tech industry downturn, with many companies announcing layoffs. Customers started drawing down their deposits to pay their bills.

To cover those withdrawals, the bank had to sell bonds at a loss. This reduced market confidence in the bank, leading to further withdrawals by depositors worried it might collapse. Fear of a collapse became a self-fulfilling prophecy.

But the outcome of a classic “bank run” – with fear spreading through an interconnected financial system – was prevented by the US Federal Reserve stepping in to guarantee deposits.

What happened with Credit Suisse

So what has this to do with Credit Suisse? Like Silicon Valley Bank, which had poor risk controls , it too had specific problems indicative of poor management.

It has been implicated in providing banking services to corrupt and criminal clients . In June 2022 it was convicted in Switzerland’s Federal Criminal Court for failing to prevent money-laundering by cocaine trafficker .

In short, Credit Suisse was a disaster waiting for a catalyst. The collapse of Silicon Valley Bank, and the talk of a global banking crisis, was enough to send already jittery customers to the exit. Credit Suisse’s largest shareholder, Saudi National Bank , then bluntly and publicly refused to contribute more capital.

Stronger in Australia and New Zealand

In my view, the chances of any bank in Australia and New Zealand following this trajectory is effectively zero.

There’s a lot of crossover between the two countries’ financial sectors and the principal banking regulators, the Australian Prudential Regulation Authority and the Reserve Bank of New Zealand. To prevent bank runs developing, the RBNZ and APRA set minimum levels of liquid assets that can be quickly converted to cash to cover withdrawals.

It is almost a century since any depositor in an Australian bank lost even a portion of their money.

This not to say there haven’t been crises. For example, in 1979 the Bank of Adelaide faced collapse . The RBA organised massive loans from other banks. It was then taken over by ANZ Bank. Depositors kept their savings.

In 1990 the troubled State Bank of Victoria was taken over by the Commonwealth Bank of Australia (then still owned by the Commonwealth government). Again, depositors didn’t lose.

In the very unlikely event a bank did fail, Australian depositors are also protected by a federal government deposit insurance scheme called the Financial Claims Scheme . This was set up during the global financial crisis to protect customers of banks, credit unions, building societies and general insurers. It guarantees that every depositor with up to $250,000 will get their money.

The NZ government has a similar scheme in the works, with legislation expected to become law later in 2023.

This article was originally published on The Conversation . Read the original article .