All about investing in shares

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Shares share an important space in the different media of investment such as bonds, cash and property.
Let’s start by defining shares.
Shares are basically miniature snippets of a company. By owning a share, you own a tiny segment of the company, and also a proportion of the company’s value
Research shows that shares have proven to be amazing long-term investments in the financial arena. They usually surpass government bonds, corporate bonds etc.
There are risks associated, but in the longer term, you get rewarded with benefits.
You can choose to purchase shares, or you can invest in mutual funds. Funds essentially buy a set of shares that are monitored and administered by a fund manager.
And when you own a share, then you are a shareholder for that company. This can mean that you have certain rights over the decision making in the company.
So essentially if you have a share with a company, then over the years, the investment value of it increases with the company’s progress and profit making.
Also, there are certain shares that allow you to reap the benefits together with the company. Meaning the profit gets shared with you as dividends.

Owning a share in big and small establishments
In case of fully established and renowned organisations, you get profits as dividends, however the progress is a not a very fast process.
These dividends can be a regular source of income for you, and you can even invest it for further monetary gains. The income that you procure from dividends is taxed at a certain rate.
For smaller organisations, there are usually no dividends. However the growth is better there.
Also if you wish to sell the shares for that company, it doesn’t come easy. It is hard to find buyers, because of the lesser credibility of the company.
Analysing the growth of the company and predicting it accurately is also critical to us.
Big organisations like Infosys have a lot of happy employees owing to their shares in the company. Here the drivers, plumbers, attendants are all millionaires.
In today’s date, around 100 individuals in Infosys are billionaires, and around 2000 of them are millionaires. The management has a habit of rewarding it’s employees over the years for their dedication and hard work. With the progressing organisation the value of shares, and the benefits for shareholders (including the drivers, attendants etc) increased manifolds.

Risks associated with shares
The economic conditions of the company and it’s surroundings determine the boom or downfall of shares. If the share value decreases then the importance of your investment also fades away.
Holding shares in just one organisation is also very risky. You should spread the risk by owning shares in multiple organisations. Diversity is significant here. What if you own shares in only one company, and it drastically witnesses a degradation in it’s value, then you are at the risk of losing all your money.
Also diversifying helps in better returns with more stability.

Buying and selling of shares
If you intend on purchasing or selling of shares, then it is advisable to consult a traditional stockbroker. You can also consult an online broker or a financial adviser. A financial advisor can guide you well on what to buy and what to sell.
We hope you analyse well before investing in a share. Happy Investing!
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Tax Free Allowances

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Tax rules vary from individuals with a salary to the ones having other/additional sources of income. They need to declare their salary income either offline or online to file their income tax returns.

Let’s first discuss allowance before proceeding ahead to Tax free allowances. Allowance is a moentary benefit provided by the employer to the employee that is over and above the base/regular salary. These benefits were introduced to cover the expenses that the individuals bore while at service. Some of the allowances are taxable, some partly taxable, and some of them are free from taxation.

There are various allowances on which benefits can be availed by salaried individuals on tax. These allowances are exempted under section 10(14) We will list them below:-
Special allowances under section 10(14)1 are

  • (i) Allowance granted to meet cost of travel on tour or on transfer.
  • (ii) Allowance granted on tour or journey in connection with transfer to meet the daily charges incurred by the employee.
  • (iii) Allowance granted to meet conveyance expenses incurred in performance of duty, provided no free conveyance is provided.
  • (iv) Allowance granted to meet expenses incurred on a helper engaged for performance of official duty.
  • (v) Academic, research or training allowance granted in educational or research institutions.
  • (vi) Allowance granted to meet expenditure on purchase/ maintenance of uniform for performance of official duty.

Under Section 10(14)(ii), the following allowances have been prescribed as exempt

Type of Allowance Amount exempt
(i) Special Compensatory Allowance for hilly areas or high altitude allowance or climate allowance. Rs.800 common for various areas of North East, Hilly areas of UP, HP. & J&K and Rs. 7000 per month for Siachen area of J&K and Rs.300 common for all places at a height of 1000 mts or more other than the above places.
(ii) Border area allowance or remote area allowance or a difficult area allowance or disturbed area allowance. Various amounts ranging from Rs.200 per month to Rs.1300 per month are exempt for various areas specified in Rule 2BB.
(iii) Tribal area/Schedule area/Agency area allowance available in MP, Assam, UP., Karnataka, West Bengal, Bihar,Orissa, Tamilnadu, Tripura. Rs.200 per month.
(iv) Any allowance granted to an employee working in any transport system to meet his personal expenditure during duty performed in the course of running of such transport from one place to another place. 70% of such allowance upto a maximum of Rs.6000 per month.
(v) Children education allowance. Rs.100 per month per child upto a maximum 2 children.
(vi) Allowance granted to meet hostel expenditure on employee’s child. Rs.300 per month per child upto a maximum two children.
(vii) Compensatory field area allowance available in various areas of Arunachal Pradesh, Manipur Sikkim,Nagaland, H.P., U.P. & J&K. Rs.2600 per month.
(viii) Compensatory modified field area allowance available in specified areas of Punjab, Rajsthan, Haryana, U.P., J&K,HP., West Bengal & North East. Rs.1000 per month.
(ix) Counter insurgency allowance to members of Armed Forces. Rs.3900 Per month.
(x) Transport Allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of residence & duty. Rs.800 per month.
(xi) Transport allowance granted to physically disabled employee for the purpose of commuting between place of duty and residence. Rs.1600 per month.
(xii) Underground allowancegranted to an employeeworking in under groundmines. Rs.800 per month.
(xiii) Special allowance in thenature of high altitudeallowance granted to members of the armed forces. Rs. 1060 p.m. (for altitude of 9000-15000 ft.)
Rs.1600 p.m. (for altitude above 15000 ft.)
(xiv) Any special allowancegranted to the members of the armed forces in the nature of special compensatory highly active field area allowance. Rs. 4,200/- p.m.
(xv) Special allowance granted to members of armed forces in the nature of island duty allowance.(in Andaman & Nicobar & Lakshadweep Group of Islands) Rs. 3,250/- p.m.

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Fixed Deposits Versus Mutual Funds

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In our financial space, we come to a state, where we have sufficient funds, and we wish to invest a chunk of it for future plans and goals.
Two very popularly used media for investment are Fixed deposits and Mutual Funds. We will distinguish between the two after we define them properly.

Fixed Deposits
Here we deposit money in a bank for a specific period of time that ranges from 7 days to 10 years. The amount invested earns an interest based on the tenure of deposition. It can be as high as 9% per annum(varies according to the banks and it’s schemes). After the tenure ends, the money is returned to us topped with the interest earned.

Mutual Funds
Mutual funds can be best described as a place where funds are consolidated by numerous investors. The fund accumulated is invested in one or many asset classes like equity, debt, liquid assets etc.
It carries the tag mutual because all the perils, awards, gains and losses in the invested sum are shared by all the investors in accordance to their contributions.

Difference between Fixed Deposits and Mutual Funds

Rates of Interests:
In case of Fixed deposits, the rate of interests are pre-determined and remain intact during the entire tenure of investment. The rates of interest vary for mutual funds as per the market conditions. In case of an uphill in the market scenario, the benefits of mutual funds surpass those of fixed deposits, as the returns are higher. While a downhill situation in the market renders fixed deposits as the winners in terms of the returns that are offered.

Liquidity:
In case of Fixed deposits, the tenure is fixed, and they offer medium and low liquidity options until you complete the entire tenure of deposit. Mutual Funds offer liquidity to the investors but with certain sets of terms and conditions.
There would be some penalty associated with pre-mature withdrawal of our fixed deposits, hence we would lose a chunk of our expected return. For mutual funds, after the minimum holding period is over the liquidity rate is high. However if we immediately withdraw after we invest that is within a year, then we are liable to pay an exit load cost of 1 percent.

Risk Factor
Fixed deposits are for investors with low risk appetite. However mutual funds are for people with high-risk appetite.

Investment Cost
There are certain costs associated with the mutual funds that we invest in, however fixed deposits do not levy any expense on the investor. The expense incurred depends on the kind of mutual fund that we choose. Liquid funds may have a low expense of up to 1% p.a., debt mutual funds may have anywhere between 0.5% p.a. to 2.25% p.a., and the expense of equity mutual funds may be up to 3% p.a. This expense is adjusted in your returns

Tax Scenario
We would all love to receive more amount of money post the tax returns from our investment
In case of mutual funds, you need not pay any long term capital gain tax on your investment in equity mutual funds However for a short term gain, we need to pay taxes at 15 percent. The gains in long term investment in debt mutual funds are taxed at 20 percent with indexation and 10 percent without indexation. For liquid mutual funds, the tax is as per the tax slab.
Regardless of the tenure in fixed deposits, the interest that is earned in totality is taxable according to the tax slabs.

We have drawn a line of differentiation between Fixed deposits and Mutual funds. Hope this helps you out better with investment plans. Happy investing.

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Social Media Score can affect your credit score

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We are aware of how vast and effective Social Media has become. In fact we owe our ability to be aware about what is going on to social media.
Social media has ceased to be just a platform for interacting and socialising. It is much more now.
Traditional verification to evaluate our monetary potential fails at times. Smart organisations have therefore found out these smarter ways to assess our abilities to pay back.
Credit agencies now assess your financial caliber on the basis of your social media existence and life.
For Lending platforms,having a good character value is critically important to them, because that is what allows them to have faith on our repaying ability.

There are many things that the credit agencies/bureaus look at before lowering or upping our credit score. Let’s jot down some primary elements that are considered by the credit agencies to grant or not grant loans.

  • 1. Our lifestyles and daily routines can be well investigated through social media platforms like Facebook, Linkedin and Twitter.
  • 2. They might look at whether we are into alcohol or drugs or at slightest of possibilities that can affect our ability to continue your job.
    These results can potentially reduce our credit score
  • 3. A pattern is cemented around our social behaviour on the basis of our activities and behaviour on social media. This is used to trace the ability in us to repay.
  • 4. Our creditworthiness is judged through our two c’s on social media, they are: – contacts that we have and the contents that we post.
  • 5. There are certain keywords encircled by the credit agencies. The profiles with words like wasted, trashed, smashed etc are scrutinised or put under the black list.
    They might be potential defaulters in the eyes of the credit givers.
    Posts that talk about Casinos, or the posts with ALL CAPS or that contain bad English are again looked at.
  • 6. Our circle of friends is also encircled and pin pointed at in case of any doubts. So if there is anything off the road there, we might land up in their caution radar.
    Most of the credit agencies utilise the social media for people who do not have a credit score, or have a very newly built credit history. This is also for people who have just migrated.
    Also it is fair on the part of credit agencies to get acquainted with the borrower properly so that lending is a risk-free process for them.
    We need to safeguard our creditworthiness by being cautious about what we post on our social media accounts. Also we need to discuss within our family and educate others about the potential decrease in the creditworthiness in case of a bad social media score
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Ways to Repay Loan Early

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We encounter many situations wherein we have to rely on loans. And where there is a loan there is a debt that follows.
We often become perplexed and overwhelmed after seeing the debt pile. This is often due to mismanagement. All that is required is a sense of systematic financial arrangement that will allow you to be on time with repayments or even be an early payer.

We will list down some ways through which you can pay off your debts in a much faster way.
1. Go for Bi-weekly Payments. You can choose to pay the lender every two weeks instead of the regular monthly repayment
Paying your loan early will save your money that amounts due to the interest. This will also decrease the overall term of the loan.
With the surplus money, you can do so much with your life. You can invest it, or you can save it for retirement or you can pay off other debts.
However you need to consider this with your lender first. There should be no penalties associated with an early payment.

2. You can speed up the repayment procedure with each salary hike you get.
You can do that by incrementing the EMI account with every hike in your income. Even a moderate increase in the income saves a great deal of interest. For example If you get an increase of 7 to 8 percent then you can easily increase the EMI amount by a 4-5 percent. This little increase in the EMI can lead to the completion of loan repayment at a much faster rate thus saving a lot of interest and time.

3. Choose the path of Refinance when you have many loans in your basket. Taking a loan against your existing asset again helps in waving off other debts in place, and also helps in reducing the overall interest rates that are spread over multiple debts. We will explain how.
Refinancing basically is paying off your existing loan, and going forward with a new one, while using the same property as collateral or security. You can utilise refinancing for reducing the term of a longer mortgage, or for a switch from a fixed-rate to an adjustable-rate mortgage.

4. You can convert the credit card dues to EMI’s. Credit cards are otherwise convenient, but they also give you a hard time, if you spend without thinking.
If the credit card bills become insanely high, then it is time for you to ask your credit card issuing company to convert your due payments into EMI’s. Many of the credit card companies allow the customers to pay off in 6-12 EMI’s. However if the amount is large, then it might even get extended to 24 months.

5. You can resort to rounding up of the payments. Here you will have to spend a little extra money. But this leads to saving your money in the long term on the interest rate, and also shortening your loan period.

6. Most importantly, bring in a wave of change in your lifestyle too. It is important for you to strike a balance between what you spend and what you save. Do not run into recurring debts. Also keep in mind that paying off debts after the due date affects your creditworthiness. So it is advisable to pay on time, and not fall prey to debt traps.

So do not run away from repayments. Investing in the healthy habit of paying on time will help you out to steer clear of debts and will also help you to live in financial stability.

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Planning for Retirement

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“Retirement” .Do we need to think about it at all? If no, then perhaps now is the time to stop giving a cold shoulder to it.

Being ignorant does not help carve a secure future.

Though we are young and quite able at this stage in our lives. But do we think of times when “un” gets added to our ability.

Reality covering us from all four sides has changed now. We cannot wait till the RIGHT age.

Money control and Money management is imperative and so is wise investment.

We would want to jot down some essential tips that would assist you better with financial planning.

Compounding it is!
One of the strongest instruments in the financial world is compounding.
So how do we go about the process?

Start investing early, even if it is Rs10,000 a month, go for it. Putting in a small amount is okay, what is critical here is the interest that compounds with the passing time.

Also,Save your bucks! Saving is always a great idea to keep. Saving not only for retirement but for other purposes aids at various stages of our lives. The sooner you start saving , the more time your money has to bloom. Pooling in some money for retirement should be your utmost priority. Financial Goal setting is important, however sticking to those goals, and not wavering is even more critical.

It is time to go digital!

Start using an e-wallet!
This has advantages of cash back and it is safer
The flexibility, security and the usability of the wallets have cemented faith in the people using them. You can put an amount as tiny as Rs 10 to Rs10,000.
Convenience blended with rewards incites people to use it again and again.

Sail the boat of Direct mutual funds!
Investing in direct plans of mutual funds renders higher returns. The difference in returns is more pronounced in case of equity funds. In debt funds the the returns are moderate in amount. And the returns are the lowest in liquid funds out of the three.

Swap Fixed Deposits with Debt Funds!!
Safety and Fixed deposits go hand in hand. However when it comes to tax benefits, they are not very efficient. A better path to tread on is Short-term debts, that has the combined credit risk almost equal to FD’s. Though there is not a vast difference on the interest rates generated on short-term debt funds, however the actual return on these is much if they are held for a span of more than three years

Brick a building of buferable cash!
The economic conditions waver like the wind. For example, a hike in prices in the US can subsequently leads to a market fall in India!
Having some cash as buffer, will be handy in such situations. This money can be used to buy at cheap rates and sell at higher rates.

Be wary of Debts/Mortgages!
Being freed of mortgages or any lingering mortgages is a fantastic step towards retirement planning. You do not want to get nightmares of debts when you are greying.

Also lets chart out a plan for someone who is close to us and has just entered his/her retirement phase We will go step by step.
1. Firstly we need to calculate their monthly expenses and needs
2. We then come to her various sources of income
3. Changing their status in the bank is a wise option. Transfer their corpus to a senior citizen savings account. That gets better interest.
4. Get their 15H form signed and deposited at the Bank so TDS in not deduced at source on her FDs. This also reduces agony of chasing for Tax refund.
5. Go for opening a Mutual Fund Folio. Do you know once you have done a KYC with one Mutual fund, it is valid for all investment across all Mutual funds.
6. Divide their portfolio into Four segments
6. 1 Monthly income (if pension is not there or less) – In Fixed Income Mutual funds go for a standing instruction to transfer a fixed sum to their saving account monthly.
6.2 Diversify Equity Mutual funds for long-term steady income
6.3 Invest 10% of the corpus in Blue chip companies
6.4 Build an Emergency fund
7. Activate confirmation emails and SMS on your and their phones
8. Make sure their health insurance plan is secured.
9. Ensure all assets have nominees as per their wish.
10. Make their will

Retirement is the a faraway destination, but we need to cement a path from now to reach there in a financially healthier state.
We hope that our recommendations will help you in deciding clearly and taking informed steps.

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Tips to Consider before Lending Money to Friends

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Lending money to friends becomes a difficult choice at times. Money has the tendency to create rifts between closely bonded people. Yet money is a topic that becomes unavoidable.

Lending and borrowing between friends can lead to sequences of debts, debt traps, uninvited apprehension and animosity. Situations where the money is borrowed, and half-returned, partially returned or in the worst case scenario not returned creates an unpleasant situation

However we can create a space of clarity in the money matters between friends if we follow some ground rules. They are listed below.

  • 1. Lending should always be a situational process. You should assess the urgency of the situation. . If a friend asks us to open a credit card in our name for their use or asks us to guarantee their loan, then you should consider its consequences. We should not put ourselves in a situation where some one else’s actions can affect our credit. Their wrong usage can disrupt our credit score, thus lowering our chances of getting loans.
  • 2. Lending should be within limits. Even if it is a friend that we are talking about, we need to still evaluate the amount that we lend. Do not nod in agreement for an amount that can push you in a debt trap.
  • 3. It is also imperative to gain access to the details of where the money would be utilised. Here we are not talking about the trust, of course we trust the people here who borrow. But knowing where the money would be spent will give us a better knowledge of whether it is being put in the right use or now. It will also help us in acknowledging whether the situation deserves a loan or not.
  • 4. Discussing it clearly might seem like an awkward idea to begin with. However having the terms and conditions set in the beginning leads to a smoothly painted financial end. Repayment period, interest rates and the loan amount itself should be discussed in detail to avoid any misconception or a possible rift.
  • 5. Draft an agreement. In case you are lending a large sum of money, having a financial agreement worded in paper is always a good idea. Both the parties know the exact details of when, how and why. This just clears the air and avoids conflicts.
  • 6. Also a great option for them is to borrow through the new-age and financially sound institutions.
    EarlySalary is one such platform that provides instant cash at ease without the hassle and obstacles. So refer EarlySalary to your friend and be a friend in need.
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Setting Personal Budgets

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In our lives today, it seems that we are constantly in our running shoes, because all we do is race to fulfilling our duties, necessities and obligations.
Expenses are never-ending. How we wished that we could count the expenses on our fingers, but unfortunately we cannot.

It has become extremely necessary to have a budget made. Having a budget in place allows more breathing space when it comes to financial decisioning. We can actually take a pause, and direct our expenses better, without being hasty about money matters

We will talk about how we can focus on administering our expenses and savings.

  • 1. Track your spends and earns for every month. Figure out what you spend and where you spend. It goes for your earnings too.
  • 2. Also prioritize your bills. The necessities have to be thought about first. Rent, Groceries, Electricity tops the list.
  • 3. Now is the time to plan for your future goals and dreams. Start saving and investing to make the dreams turn into reality. Sit and discuss your goals with your family, and ask them to give in inputs too about what they want to achieve, lets say in the next five years. Such brainstorming is always productive.
  • 4. Create categories for your goals. Tag them as short-term, mid-term and long-term. Your short-term goals could be buying a refrigerator next month, or purchasing a car next year.

    Mid-term goals could be about you wanting to go on a vacation with your family to Malaysia

    Long-term goals would be you thinking about retirement plans and policies.
  • 5. While we have created goals, we need to also assess the value associated with them. Inflation is a factor that can cause an upheaval in our financial dreams. Short-term goals would not be affected by inflation. However mid-term and long-term goals can be affected by inflation. So you need to be wise enough to invest also side by side.
    This will help your money boom too over the course of time.
    Also having a correct estimate on the value of assets is imperative.
  • 6. After estimations, and goal settings comes the most difficult part. Now you have to save for your goals. That means you need to keep aside some money for your different goals. Shelling out money at appropriate intervals will help you in achieving all the goals that you want.
  • 7. A great way to track, monitor and create a more systematic budget is through the innumerable money management apps available in the technical horizon. These apps act as your financial advisors and guides and they accurately advise and calculate spends and earns.
    Some of the most popularly used money management apps are Wally, Mint, Homebudget etc.
    You can get a detailed description of the same at money-management-apps

    Managing money seems like a task impossible. But we assure you that with budgeting and prioritizing your monetary needs, it is a task really easy.

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How To File Income Tax?

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If handling finances wasn’t enough, we have taxes in place too to give us gripping nightmares.
However tax payment and filing income tax returns are both crucial for achieving a financial stability in life.
ITR filing is mandatory is a person’s gross total pay exceeds 2.5 lakhs.
The basic motive for filling income tax return is to showcase accountability and to display that appropriate tax has been paid.

There are both online and offline ways of filing income tax returns. However the income tax department made it mandatory for individuals with an income of more than 5 lakhs to file their income tax returns through the online route only.
We will write down about ways in which you can go ahead with this.

The offline Route:
If you have an income of less than 5 lakh per annum, and you decide to go ahead with the offline process then you can easily download the forms from the income tax website, or you can collect it from an income tax office. You will have to fill in some necessary documents including the ITR form and acknowledgement form(This contains the summary of ITR). The stamped copy of the acknowledgement form is handed back to you.
While Offline is the conventional route, Online is the more convenient one.

The Online Route:
It saves time. With technology popping up from everywhere, it becomes easy for you to file the returns of income tax. You do not have to fill in bank related details (such as the PAN number) over and over, all of that is auto-filled for you by the software. Thanks to the digital era!
The software is considerate and helps you calculate the tax amount payable or the refund amount due based on your income and deductions mentioned in the income tax report. This again saves time, is more efficient and reduces fallacies.
While you have chosen the online route, you will be happy to know that there are many options to opt for while filing income tax returns.

Apart from the income tax department’s websites. There are other deputed websites to carry out the same work. Some of the popular websites are Cleartax.in TaxSpanner.com, Makemyreturns.com etc.

There would be variations in these websites in terms of the packages offered, the costs associated, the procedures involved . Also many portals provide the process of filling taxes for free. These are for people with the income below a certain level.
So while opting for a package, you usually choose a cheap package if your income is through your salary. The package choice may turn to a costlier one, if the income is from various sources(Business, Capital gains, House properties etc)
You need to also ascertain the service provider. These are your finances that we are talking about and hence we need to be careful. You will be filling in information like investments, savings, bank account details etc, and hence you need to evaluate the confidentiality and privacy policy of the portal that you choose.

You do not have to do much while filling it through the government website. You can fill the details online itself on the ITR form and upload the form directly.
After the upload and submit, an acknowledgement is generated. This would be emailed to you as well.

For most of service providers, there is already a system built in for filling forms with ease, that suits the need of the users. Some service providers even have a question and answer format for form filling.
Once the acknowledgement is signed, it is received by the tax department to assess the calculative errors, wrong claims or deductions filled in by the tax payer for that year.
After rigorous evaluation, when the data filled in by the taxpayer is matched with the in-house data, an email is sent to the individual which is termed as intimation under section 143(1). This is to notify the individual that the acknowledgement has been received and is ready to be processed.

Tax consultants
Apart from these routes, you have many tax consultancies too in place. These consultancies have expertise on tax .These consultancies help individuals like you by providing the know-how around taxes. The organization provides complete and intact information on how to file the income tax returns. Examples are H&R Block, TaxConsultantsIndia etc.

Now we believe that filing income tax should not be a formidable task for you. With so many options the ease around them, you do not have to ever worry about getting stuck anywhere.

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