Individual tax payers may be able to avail of higher standard deduction on taxable income from the next financial year with the finance minister considering raising the standard deduction limit to Rs 1,20,000, from the present Rs 100,000, under Section 80C of the Income Tax Act, 1961.
This 20 per cent increase will allow a taxpayer to save up to Rs 2,000 in taxes every year, a senior government official said.
An announcement may be made in the Budget on February 29, which is likely to be the last before the next general election.
Under Section 80C, 80CCC and 80CCD of the Income Tax Act, individuals can claim total deduction up to Rs 1,00,000 a year towards life insurance premia, five-year bank deposits, provident fund, superannuation fund, national saving certificates, tuition fees and many other investments like in mutual funds.
The list of savings and investments that qualifies for deduction under Section 80C was expanded in December, 2007 to include five-year post office time deposits and the senior citizens savings scheme.
The deduction of Rs 1,00,000 for such a large number of savings and investment items is grossly inadequate, tax experts said.
"To accelerate capital formation in the economy, the government should think of increasing the deductions under Section 80C to Rs 1,50,000. This will definitely fuel savings growth," said Gaurav Taneja, partner, Ernst & Young.
However, it is anticipated that the increased investment limit under Section 80C may be allowed only for specified savings instruments like a pension scheme aimed at promoting old-age security.
The insurance industry has been demanding a separate exemption limit of up to Rs 1,00,000 for very long-term investments like pensions and annuity schemes
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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