Engineer's Finance

I read an article today regarding Top Tax payers in India @ indiatimes.com. Please visit the following link for the same : http://timesofindia.indiatimes.com/articleshow/3319521.cms

I am pretty sure that all of you will be knowing about the Ambani brothers. Ambani brothers are the world’ 5th – Mukesh and 6th – Anil richest person ( Forbes List ). Still they don’t figure in the top-200 list of Tax payers. Isn’t that strange? I noted this in the article:

“Talking of industrialists, conspicuous by their absence in the top-200 list are the Ambani brothers, Mukesh and Anil. Their mother, Kokilaben, barely makes it to the list at 195, having paid Rs 4.46 crore as tax.”

I was dumbstruck. I thought Mukesh will be first and Anil will be the second top tax payer in the country. But the truth is not so. Mukesh’s asset is 43 billion dollars and that of Anil’s is 42 billion dollars. Do you think this year they would not have made enough money to become the highest tax payers of the country? I think they would have minted more money than any other Indian. But how come they pay so less tax? I am sure they would have paid taxes legally. I don’t question about their integrity.

All that I want to emphasize in this article is that, only business man can decide how much he wants to pay as tax to the government and not the government which decides how much they need to pay. When the world’s 5th richest person pays not more than 5 crores of tax. You can think how other small business man will plan up their tax and pay to the government. All that you need is good chartered accountant (CA) who writes the accounts just the way you want with the help of loop holes in the law. I don’t mean that they do something wrong and manipulate the income to ensure they pay less tax but what I want to convey is that they are smart enough to find the ways to pay less.

That is what business gives you, the opportunity to mint money and still not pay tax to the government legally. How wonderful is it!! Why is this because, the laws are made by the rich people, for the rich people and to the rich people.

I have realized that if I work for next 50 years in software industry, I can never become rich. Since government and my dear creditors take up the money even before I enjoy my hard earned money. I should be a businessman not a big one even a small one is fine. If you dream of making money, my suggestion, start a business. 🙂

Credit Policy -Q1 2008-09

To know more about it visit RBI website : http://www.rbi.org.in/scripts/Annualpolicy.aspx

Highlights:

The Bank Rate has been kept unchanged at 6.0 per cent.

LAF unchanged at 6.0 per cent.

Repo Rate 9.0 per cent.

The CRR of scheduled banks is currently at 9.0 per cent.

The Mid-Term Review of the Annual Policy Statement for the year 2008-09 will be announced on October 24, 2008.

An announcement made by the RBI after a review of the Indian economy is termed as credit policy. It announces changes in key credit management tools like the bank rate, repo rate, reverse repo rate, SLR and CRR.

In its credit policy, the RBI makes a statement on the country’s economy, expected GDP growth rate in a quarter or a year, the level of inflation that it will be comfortable with, and a host of other things.

As of now the RBI is concerned about inflation, which has breached the 5.5 per cent level, (As of today – 11.8 while writing this article) it was comfortable with. It is in this backdrop that the bankers, stock market punters and economists believe the RBI will hike key indicative rates like the CRR, reverse repo and the bank rate.

The RBI’s decisions will impact banks, the stock markets, economists, various other economic agents and even you and me. It will affect our decision, or how much we have to pay for home loans, two-wheeler loans or personal loans.

It is the money value of all goods and services produced by a country in one accounting year. April 1 — March 31 is considered as one accounting year, or a financial year, in India.

A laborer working in an iron mill, a weaver spinning yarn, a farmer harvesting crop or a software engineer writing code all get paid at the end of the month; in some way, they convert their effort into money.

If you read something like the RBI expects India’s GDP to grow at 9% for fiscal (accounting) year 2008, it means that if India’s GDP in 2007 was Rs 100, this financial year it would be Rs 109.

Many people prefer to write national income instead of GDP.

As per section 42 (1) of the RBI Act, 1934, every commercial bank has to maintain with the RBI (every fortnight) a minimum of 3% of its NDTLs compared to the previous Friday.

For example, if CRR is to be calculated today (assuming that today is that reporting fortnight), then it will be only 3% of the NDTLs on the previous Friday.

Found that confusing? Here’s an example that should make it easier.

Assume July 25 is the Friday on which the bank has to make its report.

Bank A, which has a NDTL of Rs 100 on July 18 (the previous Friday), will have to maintain a CRR of Rs 3 with the RBI on July 25 (assuming it has been asked to keep a CRR of 3 per cent).

CRR, as of today, stands at 8.75 per cent. This is over and above the SLR requirement.