Intra-day trading, long-term capital gains, short-term capital gains and losses from a income tax perspective

An active investor or trader need to be mindful, knowledgeable, and smart about income tax implications from such activities. Trading in shares may be treated as business income (speculative) or as capital gains (investment) depending on the situation.

The first place to invest in April: The safest savings instrument in India

The Public Provident Fund (PPF) Scheme is a statutory scheme provided by Government of India. This is probably the safest savings instrument one can get. The Scheme is for 15 years and can be extended in 5 year increments. The minimum deposit is 500/- and maximum is Rs. 70,000/- in a financial year. A year for the purpose of the Scheme means a financial year (1st April to 31st March).

PPF provides 8% interest compounded annually. More interestingly, it's an EEE mode of investment and has triple tax benefits: 80C provision, interest earned is not taxable, and withdrawal is tax exempt. There are other benefits, but don't worry about it. Okay, if you think this government scheme cannot be attractive, Think Again! It's a clean 8% tax free return Mister! That's correct, there are no maintenance fees, no hidden fund management charges, and the returns is all for you to keep. All of it! If it's still not obvious, then consider this: This 8% return is equivalent to a pre-tax rate of return of 11.57% if you are in the 30% tax bracket individual. An assured 11.57% assured pre-tax rate of return!! Where can you find a better investment tool?

So, before you go ahead and invest in another instrument, make sure that you have used PPF completely. It's April and the beginning of a new financial year, and an opportunity to earn tax-free 8%. What are you waiting for? Go ahead and invest the first 70,000 savings in PPF. Then invest the rest elsewhere.

Company Fixed Deposits & Fixed Income

Several companies in India offer fixed deposit schemes (company fds) that offer interest rates higher than banks. However, one needs to know that these companies instruments (and NBFCs also) are unsecured and do not guarantee anything to the investor in case of a default.  Also, liquidity is an issue as each corporate might behave differently and may not return money in time. Hence investors need to carefully analyze the credentials of the company.  However there are several good companies out there who do a professional job at this.  It's better to break up the investment amount and distribute it among 2-3 companies. There is reward for the risk taken. The usual income tax treatment (like bank fixed deposits) apply.
Go to a site like Bajaj Capital or Integrated Enterprises and you will find these (fixed income) instruments. While these companies collect incentives to collect investments from you, they also have lot of knowledge and you can ask them questions, collect data and judge for yourself See some examples below collected from their site (April 13, 2011). Company fd interest rates might be peaking.

		INTEREST ( % )						Updated on - Apr 11, 2011
COMPANY	RATING	6 MON	1 YEAR	2 YEAR	3 YEAR	5 YEAR	ADDITIONAL SR.CT	EFFECTIVE FROM	DOWNLOAD	ORDER
Apollo Hospitals Enterprises Ltd			8.25	8.50	9.00			23/02/2011	DOWNLOAD
CANFIN HOMES LTD	ICRA-MAA+		8.30	8.30	8.30	7.60	0.50(upto 1 cr)	10/01/2011	DOWNLOAD
DHFL Aashray Deposit Scheme	CARE-AA+ and BWR-FAAA		365 Days-Trusts Only-10.50%	400 Days-General-10.25%			0.25% for General only	22/03/2011	DOWNLOAD
DHFL-Aashray Deposit Plus	CARE-AA+ and BWR-FAAA		10.00	10.00	10.00	10.00	0.25%	22/03/2011	DOWNLOAD
DHFL-Swayam Sidha Deposit			500 Days-10.00%				0.25%	22/03/2011	DOWNLOAD
Elder Pharmaceuticals Limited			8.00	9.50	10.50		0.50	15/02/2011	DOWNLOAD
EXIM BANK OF INDIA	CRISIL-FAAA, ICRA-MAAA, FITCH- TAAA		8.50	8.50	8.75	9.00	0.50	20/01/2011	DOWNLOAD
FIRST LEASING COMPANY OF INDIA LIMITED	CARE-AA+, FITCH-tAA+		10	10.25	10.50			07/02/2011	DOWNLOAD
Gabriel India Limited			9.00%	9.50%	10.00%			10/02/2011	DOWNLOAD
HDFC LIMITED	CRISIL-FAAA, ICRA-MAAA		9.00	9.15	9.25	9.00	0.25	03/02/2011	DOWNLOAD
HDFC LTD-PLATINUM DEPOSIT	CRISIL-FAAA, ICRA-MAAA		15 MONTHS: 9.50%	22 MONTHS-9.30%	33 MONTHS-9.50%		0.25	04/02/2011	DOWNLOAD
HUDCO	FITCH-TAAA, CARE-AA+		8.70	8.85	8.95	9.05	0.25	02/04/2011	DOWNLOAD
ICICI HOME FINANCE	ICRA-MAAA, CARE-AAA		8.25	8.75	8.75	8.50	0.25	31/01/2011	NOT AVAILABLE
J.K LAXMI CEMENT LTD			8.00	8.50	8.50			15/12/2009	DOWNLOAD
J.K.TYRE & INDUSTRIES LIMITED			9.00	9.25	9.50			15/01/2011	DOWNLOAD
JAIPRAKASH ASSOCIATES LTD		10.50	10.50	11.00	11.50			22/09/2010	DOWNLOAD
Jaypee Infratech Limited		10.50	10.50	11.00	11.50			01/10/2010	DOWNLOAD
JK PAPER LIMITED			8.00	8.25	8.50			14/09/2010	DOWNLOAD
Kerala Transport Development Finance Corporation Limited	NA		9.25	9.25	9.50	9.50	0.25	04/04/2011	DOWNLOAD
LIC HOUSING FINANCE LTD	CRISIL- FAAA		9.00	9.25	9.50	9.50	0.10 upto Rs. 50,000 and 0.25 for above Rs. 50,000	24/02/2011	DOWNLOAD
MAHINDRA & MAHINDRA FIN SERV LTD	CRISIL-FAAA		8.50	9.50	10.00	10.00	0.25%	24/01/2011	DOWNLOAD
NATIONAL HOUSING BANK (SUNIDHI SCHEME)	CRISIL-FAAA, FITCH-TAAA		8.75	8.75	9.00	9.25	0.60	14/02/2011	DOWNLOAD
NATIONAL HOUSING BANK(SUVRIDHI TAX SAVING SCHEME)	CRISIL-FAAA, FITCH-TAAA					9.25	0.60	14/02/2011	DOWNLOAD
NTPC Limited	CRISIL-FAAA		6.50 (Non cumulative)	6.75 (Non-Cumulative)	7.00 (Cumulative)			26/09/2010	NOT AVAILABLE
OCL Limited			7.50	8.00	8.00			18/09/2010	DOWNLOAD
Plethico Pharmaceuticals Limited			11.00%	11.50%	12.00%		0.50%	25/03/2011	DOWNLOAD
PNB Housing Finance Ltd	FAAA by CRISIL		9.00	9.00	9.50	9.50	0.50	01/04/2011	DOWNLOAD
Shriram Transport Finance UNNATI Scheme	CRISIL-FAA+ & ICRA-MAA+		9.25	9.75	10.75	10.75		07/01/2011	DOWNLOAD
SIDBI	CRISIL-FAAA, CARE-AAA		8.75	8.75	8.75	8.50	0.50	17/02/2011	DOWNLOAD
TN Power Finance & Infrastructure Dev Corp. Ltd			9.00	9.25	9.50	9.50	0.25% upto 2 years and 0.50% for 3 years & above	16/12/2010	NOT AVAILABLE
UNITECH LMITED		11.00	11.00	11.50	12.00		0.50	01/05/2009	DOWNLOAD
United Spirits Limited			11.00	11.50				01/02/2011	NOT AVAILABLE

Source: (Bajaj Capital)

Select Manufacturing Companies Accepting fresh deposits

Company Name Rate of Interest (%) 1 Year 2 Years 3 Years Remarks Min. Amount Multiples of  Apollo Hospitals Enterprises Ltd 8.25 8.50 9 -- 25000 1000  Elder Pharmaceuticals Ltd 7 8.50 9.50 0.50% additional for senior citizens & shareholders 25000 1000  Godrej Industries Ltd -- 8 8.50 -- 10000 1000  India Cements Ltd 7.5 8 8.5 -- 21000 1000  Mahindra & Mahindra Ltd 7 -- 8 -- 25000 1000

Select Non Banking Finance Companies Accepting fresh deposits

Company Name Rate of Interest (%) 12 Months 24 Months 36-60 Months Remarks Min. Amount Multiples of Rating   Shriram Transport Fin.Co. Ltd. (UNNATI) 9.25 9.75 10.75 -- 25000 1000 FAA+/stable(CRISIL) MAA+/stable(ICRA)   Mahindra Finance - Samruddhi [Cumulative Scheme] 8.5 9.5 10.00 0.25% additional for senior citizens 10000 1000 FAAA / stable (CRISIL)   Mahindra Finance - Samruddhi [Non – Cumulative Scheme] 8.25 9.25 9.75 0.25% additional for senior citizens 25000 1000 FAAA / stable (CRISIL)

Company Name Rate of Interest (%) 12 Months 24 Months 36,48 & 60 Months Remarks Min. Amount Multiples of  Tamil Nadu Power Finance & Infrastructure Development Corporation Ltd [Cumulative Scheme] 9.25 9.50 10 0.25% ( for 12 & 24 months) & 0.50% (for 36,48 & 60 months) additional for senior citizens 10000 1   Tamil Nadu Power Finance & Infrastructure Development Corporation Ltd [Non Cumulative Scheme] -- 9.58 10.08 0.25% ( for 24 months) & 0.50% (for 36,48 & 60 months) additional for senior citizens 10000 1000

Select Home Finance Companies Accepting fresh deposits

Company Name Rate of Interest (%) 400 Days 12-84 Months Special Additional Interest Min. Amount Multiples of Rating  DHFL AASHRAY Deposit 400 Days  Non-Cumulative Scheme 10.51 - 0.25% extra for senior citizen & share holders 10000 1000 CARE (AA+) FD BWR FAAA  DHFL AASHRAY Deposit 400 Days  Cumulative Scheme 10.25 - 0.25% extra for senior citizen & share holders 10000 1000 CARE (AA+) FD BWR FAAA  DHFL AASHRAY Deposit Plus Non-Cumulative Scheme (Deposit < Rs.25 lac) - 10.25 0.25% extra for senior citizen & share holders 10000 1000 CARE (AA+) FD BWR FAAA  DHFL AASHRAY Deposit Plus Cumulative Scheme (Deposit < Rs.25 lac) - 10.00 0.25% extra for senior citizen & share holders 2000 1000 CARE (AA+) FD BWR FAAA

Company Name Rate of Interest (%) 15 Months 22 Months 33 Months Remarks Min. Amount Multiples of Rating  HDFC Ltd(Platinum Deposits) 9.50 9.30 9.50 0.25% additional for senior citizens 20000 1000 FAAA (CRISIL) MAAA (ICRA)

Company Name Rate of Interest (%) 12 Months 15 Months 20 Months 30 Months 40 Months 60 Months Remarks Min. Amount Multi- ples of Rating  ICICI Home Finance (<=1Crore)[Annual/Cumulative]Special Scheme 8.50% 8.60% 9% 9% 8.75% 8.50% 0.25% additional for senior citizens 10000 1000 AAA (CARE) MAAA (ICRA)

Company Name Rate of Interest (%) 12 Months 24 Months 36 Months 60 Months Remarks Min. Amount Multiples of Rating  LIC Housing Finance Ltd 9 9.25 9.50 9.50 0.10% additional for senior citizen upto Rs. 50000     & 0.25%  additional  for senior citizen for Rs.51000/- and above 10000 1000 FAAA (CRISIL)  National Housing Bank Sunidhi Term Deposit[Non Cumulative] 7.25 7.25 8 8 0.50% extra  for senior citizen 50000 10000 CRISIL “FAAA” / FITCH “TAAA”  National Housing Bank Sunidhi Term Deposit[Cumulative] 7.45 7.45 8.24 8.24 0.50% extra  for senior citizen 50000 10000 CRISIL “FAAA” / FITCH “TAAA”

Company Name Rate of Interest (%) 12 Months 24 Months 36 Months Remarks Min. Amount Multiples of Rating  Sundaram BNP Paribas  Home Finance 9.25 9.50 9.50 0.50% additional for senior citizens 10000 1000 MAA+/stable (ICRA)

Source: (Integrated Enterprises)