Permanent Account Number or PAN, as it is commonly called, is a means of identifying various taxpayers in the country. PAN is a unique identification number assigned to Indians, mostly to those who pay tax. The PAN system of identification is a computer-based system that assigns unique identification number to every Indian tax paying entity. Through this method, all tax related information for a person is recorded against a single PAN number which acts as the primary key for storage of information. This is shared across the country and hence no two people on tax paying entities can have the same PAN.
The idea behind PAN is similar to the Social Security Number or SSN used in the United States. SSN in the US is a unique nine-digit number issued to all citizens of the US, permanent and temporary both. Although, the primary aim for SSN creation was to track individuals for social security purposes, it has now become a primary identification number for taxation processes.
Any PAN issued is valid for the entire lifetime of the PAN holder. This is so majorly because PAN is unaffected by any change of address of the PAN cardholder.
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Mutual funds: Mutual funds allow investors to pool in their money for a diversified selection of securities, managed by a professional fund manager. Whether the objective is financial gains or convenience, mutual funds offer many benefits to its investors.
Broad Classification of schemes offered by Mutual Fund:
Equity Funds An equity fund is a mutual fund that invests principally in stocks. There are several types of equity funds like Diversified, Sector and thematic, Large-cap, Mid-cap, Small-cap, Multi-cap, Index funds etc. Equity Linked Savings Scheme (ELSS) qualifies for tax exemptions up to Rs. 1.50 Lakhs under section (u/s) 80C of the Indian Income Tax Act.
Debt Funds €“ Debt funds are a type of mutual fund that generates returns from their investors' money by investing in bonds or deposits of various kinds and are a good option for investors averse to idea of taking risk associated with equities. Debt Mutual Funds mainly invest in a mix of debt or fixed income securities such as Government Securities, Corporate Bonds, other debt securities of different time horizons.
A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account. It is known as a term deposit or time deposit in Canada, Australia, New Zealand, and the US, and as a bond in the United Kingdom and India. They are considered to be very safe investments. Term deposits in India, Nepal, and Pakistan are used to denote a larger class of investments with varying levels of liquidity. The defining criteria for a fixed deposit is that the money cannot be withdrawn from the FD as compared to a recurring deposit or a demand deposit before maturity. Some banks may offer additional services to FD holders such as loans against FD certificates at competitive interest rates. It's important to note that banks may offer lesser interest rates under uncertain economic conditions. The interest rate varies between 7 and 8.75 percent.
Corporate fixed deposit is a deposit in company for a fixed rate of return over a fixed period of time. The rate of interest is determined by the tenure of the deposit as well as other factors. NBFC, Housing Finance & Manufacturing companies accept such deposits. The corporate fixed deposit is governed by section 58A of the Companies Act. Company fixed deposit is a good option for investment as they provide higher rate of interest compared to bank deposits. They are a good source of regular income by means of monthly, quarterly, half-yearly, or yearly interest incomes. Performance of the company should be reviewed from time to time and at the maturity of deposit, by analyzing Balance Sheet & Share Prices movement. This will be helpful in deciding whether the deposit should be renewed or not.
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Capital Gain Bonds Under section 54EC of income tax act, an investor need not pay tax on any Long-Term Capital Gains arising from sale of any capital assets. If the entire Capital Gain realized is invested within 6 Months of the date of sale, in eligible bonds. Currently, following are permitted to issue Capital Gain Bonds Under Section 54EC:-