Managing Personal Finance

Income Tax is a matter of high concern for all of us. It’s one of the major sources of income for the Government of any country. A country’s overall growth depends on how its citizens pay taxes. It’s our moral duty to pay taxes on due time. But in India, many businessmen, investors, professionals find tricks to avoid this. Sometimes few big shots come into picture for an overdue of heavy amount of income taxes. This is the reason why the Government is unable to deliver proper services to its citizen and employ ways to cover up by imposing additional taxes. So, it increases the suffering of the mediocre people.

Many investors, companies invest money in the share market, mutual funds etc. and suck the honey out of it. Govt. remains totally unaware of their activities due to the improper tracking system. The big scams in the share market happen, because the concerned department can’t scan them out in time. Thus the Indian Economy keeps deteriorating day by day due to these black money makers. The value of Indian currency keeps descending on a regular basis.

The scenario has started changing. Recently our Ministry of Finance has confirmed the tightening of screws. Today, PAN card has already become mandatory for investment in the ‘Share market’ and ‘Mutual Funds’. Soon it will be compulsory for opening / maintaining bank accounts, credit cards, loans etc. Government is forcing the employees working in different companies - private/public, small/ big, to submit their ‘IT Returns’. But another group of people like businessmen, consultants, professionals like doctor, lawyers, teachers (who do private tuitions) etc. still find ways to escape. But soon they will find no other way but to show their actual income to the concerned Govt. department!

No doubt, it’s a tough task for the Govt. to implement and maintain all these, but compulsion of the PAN will definitely make the system more effective. The possibility of major and minor scams in the finance sector (like in share market, mutual funds, etc.) will undoubtedly minimize. The finance globe would be under control making it good for mankind.

What is PAN? - Permanent Account Number (PAN) is an identity given to each professional (whoever is earning money) by the Income Tax department, Govt. of India. It’s for them who are earning money somehow. Currently it’s not applied for students, unemployed people. It is such an instrument, through which govt. can track anyone’s financial dealing, income etc.

Finally I would like to convey that PAN is not a matter of horror, it’s for our own benefit. If we, the common people run on the right track and help the govt. in implementing the right things, the black money makers will fail to tarnish the money market any more.

We get frequent calls / mails from various banks offering credit card. Some people hesitate, some ignore and some accept it without having a fair idea about it. We need to know the concept of the credit card .. how it differs from a debit card..?

The basic concept: Bank gives a card through which purchases can be done at authorized shops and outlets. No money deposit is required for using the card; for the time being the bank pays to the merchant on behalf of the consumer. Now the user’s duty is to refund that particular amount within a specific date (max. 50-55 days). The credit limit gets fixed by the bank in accordance with the financial status of each individual.

Difference with debit card: Debit card concept is using your own account while purchasing. You need to have sufficient balance in your account at the time of purchase. The basic difference is, in case of credit card, the bank pays for you at that time; but in case of debit card necessary balance amount is required in your account for purchase.

Why there is an increasing trend of credit card usage: Carrying liquid money is always a risk factor during traveling. So while shopping, credit card gives us the flexibility to purchase things without cash. We don’t need to worry about cash if we have credit cards in the wallet. Reimbursement can be made when we get next month’s salary. Today is the age of internet. Most of us book air & railway tickets etc. through the internet and its only possible if you have a credit card.

The biggest disadvantage with the credit card is that most of the time people use it unnecessarily. In the countries like US, people even purchase grocery items through credit card. Many of us spend huge money in the restaurants, purchasing fashionable goods; If we can’t control ourselves in the shopping malls, restaurants, bear bar etc., the total expenditure will be beyond limit and a resultant debt burden. On the other hand, banks are provoking us with attractive offers throughout the season. So basically we trap ourselves through the misuse of credit card.

Some tips to use your credit card:

• Call bank’s customer care dept. to know your statement preparation date and payment due date after receiving your credit card.
• To avail maximum credit period (interest free), purchase things after the statement date (say your bank prepares credit card statement for you on 10th of every month; so  make the purchase on 11th day to get maximum interest free credit period).
• Try to avoid crossing your credit limit, so be aware of the available credit limit before using the card. Otherwise it will cause extra charges.
• Sign at the back of the credit card immediately after receiving the card. Never give it to your friend, relatives etc. Card information may be leaked at any point of time.
• Pay either the ‘minimum amount due’ or ‘total amount due’ against your card statement. Don’t pay any amount ranging in between minimum payment and total amount due. It shows as if you can’t pay in full and interest charges will be levied on the full amount due. (Say your statement reflects a minimum payment due of Rs. 500 whereas the total amount due is Rs. 15000. So either pay 500 or 15000. Even if you pay 14900, interest will be charged on Rs.15000 in the next statement; not on the remaining amount (15000-14900 = 100).

If you have any questions or experiences on this, please don’t hesitate to put your comment. More posts will be covered on this topic soon.