Decoding the Budget 2016

Budget 2016 was prepared keeping in mind the existing global scenario and can be termed as an incremental move towards the backdrop of global uncertainty. Though there is nothing much in the budget to provide respite to the common taxpayers & investors community except few announcements which may help in building the confidence of the tax payers with respect to reducing the litigations or ease in handling the income tax scrutiny cases. Let us understand the impact of Budget 2016 in detail-

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Income Tax:

  1. No Change in Tax Slabs: There is no change in the income tax slabs, existing slabs to continue.
  2. Limit u/s 87A: The deduction limit u/s 87A of the Income Tax Act has been increased by Rs. 3,000/- from the existing Rs. 2,000, the enhanced limit is Rs. 5,000 per annum from the next financial year. But this section applies to those who have total income of less than Rs. 5 lakh.
  3. NPS Withdrawal: Now, the withdrawals from your NPS on the maturity will be tax free up to 40% of the total corpus accumulated. This is a move to take NPS become closer to the other competing products like PPF & EPF, where the withdrawal is tax -free. Similar provision will also apply on EPF and super annuation withdrawal. It means, if you have Rs. 10 lakhs accumulated at the time when you turn 60 years of age, then up tp 60% of it can only be withdrawn which means total Rs. 6 lakhs can be withdrawn and out of this Rs. 6 lakhs, 40% of corpus i.e. Rs. 4 lakhs will be exempt from tax.
  4. Increase in Surcharge: Super rich have to pay more income tax due to increase in the surcharge rate from the existing 10% to 15% , this applies to the individuals whose earnings are more than Rs 1 crore , those are called super rich as per the income tax department.
  5. Undisclosed income: Now a taxpayer can declare his undisclosed income by paying the total tax of 45% which comprises of 30% Income Tax, 7.5% surcharge and penalty of 7.5 of the undisclosed income. They will get immunity from the prosecution. It means those who had not declared their income to the department and no tax is being paid by them then these people can voluntary declare that income and pay 45% tax on it. It means the black money what they have will become white if they pay 45% tax on it and they will not be harassed or prosecuted in future because of their wilful disclosure & payment thereon.
  6. E-Assessment: Government will launch e-assessment in the seven cities wherein no physical presence will be required to deal with scrutiny cases, this is indeed a great move to help taxpayers get freed from running around income tax offices and worrying about income tax notices or paying huge fees to their chartered accountants.
  7. Turnover Limit u/s 44AD: The total turnover limit under Presumptive taxation scheme u/s 44AD of the Income Tax Act is being raised to Rs. 2 crores providing a huge relief to a large number of taxpayers in the MSME category. This section will also cover the professionals like those who are in to legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration , who will opt for the presumptive taxation scheme also to benefit with the revised limit, now the profit from their profession will be deemed to be 50% with gross receipts up to 50 lakh.

House Rent

The people who do not have any house of their own and also do not get any house rent allowance from any employer today get a deduction of Rs 24,000 per annum from their income to compensate them for the rent they pay. The same limit has now been raised to Rs. 60,000 annually as per section 80GG of the IT Act.

According to the budget proposed changes, the existing provisions under Section 80GG allows a deduction of any expense as incurred by any individual exceeding ten per cent of his total income for the payment of Rent for any furnished or unfurnished accommodation which he had occupied for the purposes of his own residence. Also, to avail the benefit, he must not have granted any house rent allowance by his employer and the benefit was capped at Rs 2,000 per month or 25 per cent of his total income for the year, whichever is less and the same limit is enhanced to Rs. 60000 with effect from the next financial year.

Start-ups

    1. It is proposed to provide a deduction of 100% of the profits generated by an eligible startup which is involved in the business of innovation, development, deployment of new products or processes or services driven by technology or intellectual property.
    2. Start-ups will get 100% deduction for their profits for the first 3 out of 5 years means no tax on income, if any and provided that it is being set up during April, 2016 to March, 2019.
    3. Registration for Start-ups: Government to incorporate changes in the companies act to felicitate registration of new start-ups in one day.

 

Women Entrepreneurs

Stand-Up India scheme will allocate Rs.500 crore for the SC/ST & women   entrepreneurs; let us see how this fund will get allocated to boost entrepreneurship amongst women.

Home

First Time home buyers will get an additional deduction of Rs 50,000 towards interest on their home loan which should be up to Rs 35 lakh and with a condition that the cost of the house should not exceed Rs. 50 lakh.

What will cost you more: Food, Luxury Items, Jewelery etc.

Be ready to shell out more for your cigarettes, branded garments and services like bill payments, air travel or eating out as these are set to become more expensive. Apart from these, Gold Bars or Hiring a Packers & movers, Gold & silver, Jewelery articles excluding silver, E-reading devices, Ropeway, Cable car rides, Lottery tickets, Water including mineral water, Aluminium foil, Air travel, Plastic bags & sacks. The budget had also proposed a Krishi Kalyan cess of 0.5 per cent on all taxable services.

Where you will save more!

You can save money on the footwear, Solar lamp, Broadband, modems, set top boxes, CCTV cameras, low cost houses with less than 60 sqaure meter carpet area, microwave ovens, sanitary pads and Braille paper.

Cars

Car prices are set to rise due to a proposed cess of 1 per cent on small petrol, LPG and CNG cars and 2.5 per cent on diesel cars apart from 4 % on other high-powered vehicles and SUVs.

Use Stock Market Crash as an oppourtunity for Wealth Creation!

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Global stock markets have been sliding to new lows as the fear of recession is gripping the investor’s community. Since, China and US are big markets and any corrections in these markets create an impact on the Indian markets as well. The start of 2016 had already been negative and fearful for the Indian stock markets, as well so, how will you plan your strategy during the time of this global turmoil; let us understand:

Is this the time to review your investment portfolio?

Ideally, investors should not look at stock prices and markets on a daily basis and should stay away from the vagaries of markets movements. As long as you’ve paid a good bargain price and the company you’ve invested in hasn’t changed dramatically, there is no need to worry.

Should you invest now?

Though, it may take some time for the markets to stabilize but if you are sitting on cash or have invested surplus money in FDs or other fixed instruments then you should surely take this opportunity & start investing at regular intervals. The key is to deploy your money gradually in the market via mutual funds or direct equities.

Don’t miss the rally, which will come after market correction!

It has been seen earlier that whenever the markets have corrected beyond a reasonable valuations and more because of external factors, it had always provided a great opportunity for long term wealth creation, I would call it a blessing in disguise for investors to make money and one should not miss the rally, which normally comes after every big correction.

What about existing investors, whose valuation is in red?

As mentioned above, as long as the stocks or mutual funds you’ve invested in have not changed dramatically and it is a part of your long term financial planning then there is no need to worry at all. In fact you should sit tight and invest more to average out and use the next few months market volatility for investment by accumulating more units of stocks or mutual funds (SIPs) planned carefully.

Analogy: Baby & SIP!

I have recently come across a good analogy, which compares mutual funds SIPs/stock, market investments to a baby, let us understand.

Q.1 Can we expect a baby to crawl immediately after a birth?

The answer is; NO, isn’t it? Similarly we should also not expect our newly started SIPs, Mutual funds & equity investments to start giving returns from day one. Your investments will crawl in due course of time and then start running gradually to create long term wealth for you, the key is to be alert and vigil and let it grow on its own.

Q.2 What do you do when baby cries?

When they cries, mom usually feeds them and similarly when Sensex or Nifty cries and chips are down; we should also feed money in to it. Let us give time to our investments and it will eventually grow.

Concluding Note: 

Expect some tough times ahead for the stock market across the globe but I strongly feel that this is possibly the huge wealth creation opportunity lying in front of us and we all should take advantage of the current situation. So, let us not miss the bus.

Stay alert; stay smart. Happy Investing!

Time to review your portfolio & rebalance it!

 

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Due to Global Factors like fall in Chinese stock market and domestic issues like delayed GST bill and no immediate positive trigger coupled with insane valuation of many small cap companies has led to a very negative and å fearful start for the Indian Share Market; it has already sent shivers down the spine of investors and traders community.

Should Investor Review Their Portfolio?

Yes; an Investor should always review their portfolio from time to time, but first we really need to understand the meaning of review. An investor can look at the daily price chart; Highs & Lows and then try to predict the stock’s price one month away, one week away or sometimes even one Hour. Many times investors end up buying stocks on the basis of its current market price rather than focusing on its core strength and Business fundamentals.

An Ideal investor is one who do not watch the market daily and stay away from the wagaries of market’s up and down movements in a day to day life. As long as you have paid a good bargain price and the business you had invested hasn’t changed dramatically, then there is no need to worry about the future. So a proper review of portfolio is required and one have to exit from overvalued stocks of his portfolio.

Should you stay invested in Medium to Longterm?

Yes; looking at the Indian economy and a fact that it is on growth track along with a political stabality, falling crude prices, increasing GDP and along with other positive factors; one should not remain invested based on their long term financial planning. We may become the largest economy among emerging markets and outshine China in growth terms.

This particular phase is unlike 2008 where negative sentiments were way too higher so keep investing money at every good correction you see and take a review of your current holding to incorporate some bluechip stocks as most of them are undervalued and avaialable at a great price; you may expect some correction in mid and small cap stocks.

GLOBAL factors affecting us?

US and China are Big markets. So any correction in these economies always have a big impact on Indian market. Like the recent fall in Chinese market has affected Indian market as well but we need to keep this in mind that this impact is short term in nature and focus on internal growth of our country which is improving. In fact if Indian markets correct at a reasonable valuation because of these global factors then it will provide a wonderdful opportunity to enter in the market.

Advice to Retail Investors & Which other instruments can they look at? 

Most of Indian retail investors speculate than buying fundamentally solid Stocks and depends more on tips but considering the fact that equities are one of the best asset class which tends to outperform other investment avenues an investor should always remain cautious while picking stocks.

Falling Rupee, volatile stock market and even the erstwhile safe haven options like gold & property market has also shown a bumpy ride. The question, which most people have, is about whether they should invest in Gold/Property market or Share market right now. Gold and property market had its run already and does not command strong positive sentiments in the near present and whereas stock market also is in a correction mode yet with a strong positive outlook in the near term.

So you should invest more in equities for the next 3 to 5 years and then make aim to make good money via stocks or mutual funds and then book profit and redeem capital and invest in gold or property to convert virtual money to a real money; so right now; go invest in mutual funds and stocks at every market fall and build a good portfolio.

All you wanted to know about Investment declaration to your Employer

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As you all are aware the financial year, which starts from 1st April and ends on 31st March of every year is round the corner. And those who are in employment must have received communication from their employers to submit their investment proofs for the year 2015-16. Let us understand this process and how you can save taxes with the help of investment declaration to your employer: –

What is Investment Declaration?

As you must be aware that that your employer is required to deduct income tax on your salary income on a monthly basis and the same needs to be deposited with the government. For calculating your taxable salary, your employer need to know tax savings investments made by you u/s 80C like Life insurance premium/tuition fees/Home Loan Principal, NSCs, PF, PPF, Mutual Funds ELSS, Tax Savings FDs etc. and also other sections like 80D/8DD/80DDB/80E. Apart from that you are also entitled to claim benefit for LTA, HRA, interest on your home loans and Reimbursements of Medical expenses etc.

How it works?

At the start of every financial year, your employer asks you to submit a “declaration” of your proposed (existing) investments/options as mentioned above, so that your net taxable salary can be calculated and there by tax will be deducted and you get the net in hand every month.

Do you need to submit any proofs at the time of Declaration?

Please note that this declaration does not require you to submit any actual proofs, which will be generated only at a later stage once you make a particular investment. All you need to do is to plan your tax savings in advance in terms of how much is your obligatory/ongoing existing investments like PF, insurance premiums, tuition fees etc. so that you can plan to invest the shortfall if any and declare the same. Let’s take an example of section 80C, wherein you can invest or claim benefits up to Rs. 1,50,000/- towards various options as mentioned above. And by default the said limit gets partly covered by your existing ongoing PF which is say Rs. 25,000/- and life insurance premium say Rs. 15,000/- and PPF contribution say Rs. 10,000/- apart from the tuition fees for your children which is say Rs. 50,000/-. So your actual investment/contribution for a particular financial year will be Rs. 1,00,000/- (25,000+15,000+10,000+50,000) as against the limit of Rs. 1,50,000/-.

Now at the time of declaration, you know that you still need to invest additional Rs. 50,000/- to optimize your total tax savings and which can be invested say in tax saving mutual funds schemes. You can go ahead and submit a declaration that you “WILL” be investing in all the above mentioned items, this activity does not require you to submit actual proofs because it is just the start of the financial year, you only need to “Declare” that you will be investing in various 80C options, paying off rent to claim HRAs or claiming interest on your home loans.

What is Final Submission of Actual Proofs?

During the months starting from December to January your employer will ask you to provide actual proofs against your earlier declaration so that they can verify and finalise your tax computation. So you need to submit them all the copies/receipts/statements/proofs as against your declaration.

Do you need to invest in the same options as per your declaration?

Please note that your investments need not be exactly same as per your declaration. For example in your declaration, you might have mentioned that you will be investing in PPF or life insurance but rather at the end you might have invested in a mutual funds ELSS or your home loan principal amount itself is more than Rs. 1,50,000/- then in that case if you provide actual proofs of these investments which are different than your declaration, then also you will be eligible to claim the tax benefits. Your employer will take those in to account and calculate & finalise your tax liability.

What If you could not submit investment proofs?

If you could not submit investments proofs in time either because you have actually not invested the money as required or due to certain reasons even though you had invested but you could not upload or submit the proofs to your employer. In this case, your employer will recalculate tax liability and will adjust the additional tax in the remaining months of January or February to March.

Do you lose the benefit in case you didn’t submit the proofs to employer?

This is one of a biggest myth that if you don’t submit proofs to your employer then you lose all the tax benefits; No, you don’t. You can still claim the benefits of your investments by filing your tax returns and claiming a refund. But you should always make sure that you submit this in time to avoid going through claiming it via refund, which unnecessarily delays the entire process.

Let us understand it with the help of an example: –

Smita draws a yearly salary of say Rs. 10,00,000/- and have already declared to her employer about her proposed investment of Rs 1,50,000/- under 80C.

Her employer based on her declaration calculates her tax liability on the net taxable income which is Rs. 8,50,000/- (10L-1.5L) and assuming that she does not have any other exemptions or deductions to claim, this will become her net taxable income on which the total income tax as due for the entire year will be say Rs. 95,000/- (approx.). Now this 95,000/- will be divided in to twelve months, which comes to approx Rs. 8,000/- which her employer will deposit every month to the government

Now at the time of actual submission of proofs say in December, Smita could not submit the proofs because she could not invest the entire amount as declared. Now her employer will recalculate her tax liability and she needs to pay the additional tax which will get adjusted from her salary in the ensuing months.

But Smita did invest the entire amount before the end of march but by then her employer had already deducted tax without considering the benefit of this particular investment. But she can still get the benefit of this investment by claiming for refund at the time of filing her return.

But make sure that you plan your taxes in advance and do invest in time so that you can save more and avoid the hassle of claiming refund at a later stage.

Financial Resolutions to make in the New Year – 2016!

By now you must have been over with your year end celebrations planning and it’s indeed a great opportunity to welcome 2016 by including some financial resolutions too. A first step towards happiness is being stress free & well managed finances always lessens half of your stress but just framing words for resolution is insufficient.

The need for setting up clear financial objectives along with flawless execution is just as vital; here are some tips and tricks to set your financial figures right as follows:-

Start with a review of your financial performance in 2015:

It’s time for doing some self-appraisal by asking yourself the following questions:-

  1. Did I accomplish my financial objectives last year?
  2. What was my income & Total Expenses both expected & unexpected?
  3. Did I pay my EMIs/Dues in time or any Late payments; if any?
  4. How much returns I made on my investments; did I exceed my target?
  5. Did I have any surplus money which was lying dead in account only?
  6. Did I touch my emergency fund or didn’t even create the one?
  7. Did I borrow any money and if yes then for what purpose?
  8. How did I perform monetarily in 2015?

Doing this self-examination will open up the ways to set your new year targets for accomplishing your Financial objectives.

How to set your financial goals & make resolutions for 2016?

You should make new financial resolutions based on the review of your last year’s financial performance as follows;

  1. “I will strictly follow my budget”
  2. “I will pay my EMIs/liabilities/credit card payments on time”
  3. “Optimize my tax saving investments”
  4. “I will save 20% of my total income”
  5. “I will start SIPs and also invest in new ways of investment than traditional ways”; and so on.

Here are some resolutions you can set for 2016 & achieve Financial Peace!

Know your financial health: Yes first important resolution is to analyse your financial fitness and check where do you stand in your financial life followed by a detailed plan with proposed income, savings & expenses in 2016.

Prioritize your expenses: There are expenses which are unavoidable & unnecessary and you need to priorities between your essential & luxuries by finding out the gaps & deciding thpse expenses which you can cut down.

Review & Reduce Debt: You can reduce your debts which has higher rate of interest & gives you a flexibility for prepayment or closure. Howevery you should always optimize your debt wherever it is possible like in case of a home loan which also offers tax benefit and thus overall cost of serving this debt can be lowered down.

Make your Monthly & Annual budget: Prepare a monthly budget & an annual budget with the details of expenses & income and review your budget on a monthly basis and following strict execution is the only key to success.

Emergency Corpus: If you don’t have an emergency fund, take a first step & start with the same in 2016. If you already have an emergency fund, make it stronger this year.

Pay your Dues in time: Do not pay any penalty for late tax payments or EMIs or credit card payments; you should make a due date diary and wherever possible set up auto debits.

Save more; save big: Let us make it big this year, increase your saving percentage & create a handsome corpus for future.

Systematic investment planning: Dead investments or savings with minuscule returns are a deterrent in creating wealth. Make a proper investment plan; diversify your portfolio. Calculate your needs, risk appetite & categorize you investment as follows:-

  • Tax saving investments
  • Life, mediclaim, general insurance policies
  • Mutual funds, stock market investments
  • Traditional investments
  • Retirement planning
  • Child education related investments

Joy of giving: Each one of us owe to our society & we should also make a pledge in the new year to contribute for the wellbeing of our society by contributing some part of our earning as well as time towards social upliftment.

Additional income source: Why not we think of adding an additional source of income; It may be your hobby or a skill which can help you generate that additional income.

Conclusion: Savings and smart Investents are simple steps to create long term wealth & assets for securing your future so make your yearly finance plan today and be stress free & welcome 2016 with a financial bang.

Happy Financial Year.

How to claim for your Life Insurance in case of Natural Calamities!

A natural calamity is an uncertain incident, which comes with a disaster of materialistic loss and life loss. Chennai floods, has again shown us, the worst side of natural calamities which are oftern referred as an “Act of God” specially when it comes to applying for your insurance claims. The greatest way to help yourself, in case you face such incidents is to lodge your insurance claims (Life & General insurance policies) at the earliest. Let’s understand what you need to take care before applying for any claim:-

These natural calamities are so sudden that not only it causes loss of human lives but also loss of assets in terms of immovable properties, valuables, vehicles, equipments, movable assets like machines and stock for businessman etc. There are three main types of insurance claims one need to make, these are Life Insurance (death claim), House & Motor insurance & Medical (health) insurance. Let’s understand death claim in this article:-

  1. Life Insurance:-

If a person lost his/her life, then after his death, his successors and legal heirs can claim the amount covered under the life insurance policy. A different policy plans and companies may have their own specific documentation; however the basic process and requirements are more or less same for lodign death claims. We advise you to take the following steps, to lodge your claims for life insurance policies.

  • Ensure the possession of the original policy document with you.
  • Coordinate with the nearest branch of the insurance company with the policy. Please note the time frame within which claim to be lodged from the date of death, try to lodge the claim immediately.
  • Some of the important details/documents which are generally required are:-
    • Original Policy document,
    • Name & other personal details of the policy holder,
    • Death certificate (including date and cause of death), and
    • Claimant’s relationship with the deceased.

Important Note:- In cases like Chennai floods & calamities like this, apart from the loss of human life, policy papers and documents may also get swept away and Insurance companies may launch a special help desk or drive and become liberal for relaxing the requirements of documents to be submitted. For e.g. getting a death certificate immediately may be a problem or if any person goes missing then, rules in particual this kind of situations, may get relaxed, particularly.

We have seen during Uttarakhand devastation that government had asked public sector insurer to pass claims on the basis of indeminity bonds submitted by the claimants for those who were missing because when in case of no physical proof of death, claims process may take several years. Because in case of applying for a death claim for a missing person you cannot apply for a “death certificate” and insurance claim cannot be made on the basis of “Presumption of Death”.

As per the provisions of section 108 of Indian Evidence Act, you can claim presumption of death only after the end of seven years starting from the date when the person was reported missing; the nominee/ legal heir also need to submit FIR, Police department reports and a court order along with any other necessary documents as required for lodging the and its settlement. These conditions and requirements may get relaxed during any natural calamities/disaster and claims are passed on priority.

For those affected by Chennai floods, most prominent insurance companies have already announced measures like setting up a dedicated toll free numbers and email ids to help claimants lodge their claims seamlessely.

 

Top 7 Government schemes to invest in!

There are many schemes which Indian government has initiated to reinforce India’s economic development and financial stability of an individual. These schemes were introduced in order to provide financial support like bank accounts, financial security during emergency like death, education or loans if need be. Let us understand some of the available government schemes one can invest in:-

  1. Pradhan Mantri Jeevan Jyoti Bima & Surakhsha Bima Yojana

It’s a life insurance scheme provided and supported by the government of India. This scheme can be applied by any individual who is between 18 to 50 years of age with a minimum annual premium cost of INR 330/- with a death benefit of INR 2,00,000/- to the nominee. Whereas the Pradhan Mantri Suraksha Bima Yojana will offer a renewable one-year accidental death cum disability cover of Rs 2 lakh at INR 12/- as an annual premium. The insured will get Rs 1 lakh in case of partial permanent disability.

  1. Sukanya Samriddhi Account

Sukanya Samriddhi Account is a part of government’s Beti Bachao aur Beti Padhao movement, it was launched on 22nd January 2015. One gets an annualized 9.1% returns on investing in to this scheme, the same rate has been increased to 9.2% for the financial year 2015-16. The interest rate offered under the scheme is subject to revision and will be compounded every year.

  1. Atal Pension Yojana

This scheme is intended to provide pension benefits like social security with a minimum contribution per month. Those who work in a private sector industry or employment can opt for a fixed pension of INR 1,000 to 5,000 when they turn 60 years old. On the death of the contributor, the spouse or the nominee can claim the pension money & the accumulated corpus. But this scheme is only for those who are not eligible for tax or who are in the low income group; so you can help people in the low strata of society like your security guards/drivers or maids invest in these schemes.

  1. Mutual Funds ELSS

Are you aware of the fact that you can get tax benefits by investing in Mutual Funds? Yes, tax benefit u/s 80C is allowed for an investment in specically designed Mutual Funds schemes which is called ELSS (Equity-linked savings scheme). You can save up to Rs 1.5 Lakhs u/s 80C and also get a chance to earn potentially higher amout of returns on your investments with the lowest lock in period of only 3 years as compared to any other tax saving investment schemes.

  1. Pradhan Mantri Jan Dhan Yojana

Under this scheme financial services like Bank’s Savings & Deposit Accounts, Remittance, Credit, Insurance, Pension etc. is provided to those who are from rural area and do not have access or does not have any bank account.

The scheme also offers an overdraft facility of INR 5000 along with a RuPay Debit card with inbuilt accident insurance cover of INR 1 lakh and RuPay Kisan Card.

  1. National Pension Scheme

It is a voluntary pension scheme that is regulated by Pension Fund Regulatory & Development Authority (PFRDA) and introduced with an aim to provide for retirement needs. The best part of this scheme is that it also offers tax benefits u/s 80CCD of Income-tax Act, 1961 within an overall limit of INR 1,50,000/- as prescribed u/s 80C. in the last budget an additional deduction up to INR 50,000/- is also allowed for contribution made towards NPS. This made the total deduction under section 80CCD to INR 2,00,000/-.

  1. Public Provident Fund (PPF)

PPF  is one of the best government backed long term small savings scheme which was introduced to help people save for retirement specially for those who are self employed.  One can invest up to INR 1,50,000/- p.a. in their PPF account and also avail tax benefits u/s 80C of Income Tax Act. One can also open  PPF accounts in the name of their spouse and children and the best part is the tax free returns on the maturity, which makes it a great investment tool.

As seen above, different schemes offer different returns and caters to various strata of our society so invest wisely before investing in any of these schemes to optmise your returns as well as tax benefits.

 

Happy Diwali & Happy Investing!

7 ways to protect yourself from any Financial Crash!

A good management of money always delivers a security in life. Though you must have been planning your investments after a through financial planning to protect yourself from any financial hazards which may happen in your personal life, isn’t it? But what will happen when things happen beyond your control, for e.g. a global slow down? Lets understand how you can protect yourself from any emergency beyond your control: –

  1. Emergency Fund: An Emergency Fund is that part of your savings; which is kept untouched. It should ideally cover up your basic needs for 6 months and can be created with SIP or with any bullet payment you received (yearly bonus or maturity of existing investments)
  1. Continue with Routine Investment: As per your budgeting and after eliminating the debts, continue with your regular SIPs, monthly investments and savings to create a corpus.
  1. Diversify the portfolio: Don’t put all your eggs in one basket, you need to create a well diversified portfolio consisting of all the assets class.

    4. Get out of Debt: The financial crash leads to recession and impact your earnings, job security or business prospects. You           need to raise debts only for the essential priorities and should also budget a space for 4 months for servicing your debts without compromising on your basic needs in case of any emergency.

  1. Medical Expenses: A good health can create a wealth and if you are in your late 30s, you are still in good position to go for a Mediclaim policy for your family. Medical emergencies are unexpected, unavoidable & nobody even wants to think about it; but this is right time to think on the same. You need to make sure that at any point of time in your life, you have sufficient financial protection for any medical emergency.
  1. Monitor Expenses: Some expenses are essential while some are driven by your temptations and there is a very thin line between a necessity and luxury. It is always prudent to reduce your unnecessary expenses or delay the same. Use your credit card wisely and always remember the fact that credit card just gives you an extended time for making payment but what you pay is purely your out of pocket expense.
  1. Additional Income: Always try for an additional income specially in this era of Global-local market , there are many opportunities which are available for doing a side business, freelancing. Your hobbies or other passion may also earn extra money, think out of box and take the benefit of an era of Internet which has made it very easy for marketing your talent and ideas very easily.

What is the reason behind Indian Rupee Depreciation?

Market volatility is nothing new under the sun and with too much of variation & fall of rupee in the market have already fagged many Indians due to its effect on price rise, money inflation, increased interest rates etc.

So let’s find out the reason behind this and understand what is making Indian rupee vulnerable every time:

Fed actions:

Increase in interest rates means Indian currency is depreciating and $ is gaining more value. The foreign exchange rate for conversion of currencies completely depends on the current market scenario and the exchange rate that many countries are following. In contrast, whenever the export rises and currency inflows goes on a higher side rupee start strengthening.

Earlier most of the countries used to have fixed exchange rates but this system was discontinued by most of the countries to stay far from the risk of devaluation of currencies. Many a times countries opt for ways so to keep their currencies undervalued to promote exports.

Money Inflation:

It’s the difference between increase in money flow outside India and economic growth and this mismatch can cause a surge in inflation. Increase in money supply will pull down the economy growth.

Deflation will not be of much help, if the price of commodity and other goods doesn’t fall. Also, if you’ve fixed interest rate then you’ll have to bear higher valuation of debts and loans.

High gold import demands:

When the gold price is reining cheaper, internationally, most of the Indians hover on buying as much as they can which ultimately cause more demand from gold importers. Hence, they are importing more gold than ever and this is causing gold price fluctuate.

Increase in demand of imported products:

The value of currency largely depends upon import and export of goods. Imported items like clothes, cosmetics, food & beverage, gadgets, automobile, etc. on which we rely. This boosts the foreign currency and rupee also falls for the same reason.

How Rupee fall will have an effect?

Indian rupee depreciation would make you pay more at petrol pumps. As India gets 80% of crude oil imported due to heavy requirements, so weaker rupee would also affect our import bill and that which global oil prices would warrant.

This also prompts oil companies to lift, petrol and diesel prices and that makes transportation costlier which will inflate the prices of most stokes and goods.

Also, it’s expected to reflect on all imported items like gadgets, gold, any electronic items. It also automatically implies on your foreign education, you’ll end up paying more for your foreign education due to the fall of Indian currency. Or Likewise, if you had planned a vacation abroad, then your air tickets, travel insurance, hotel tariffs, shopping and other additional cost would go up.

How we can get control over this?

Decrease in usage of imported items like many foreign brands for clothing, electronics we depend on every day. To an extent, if we can neutralize the buying of gold and other non-essential items then it can relax the burden on forex department and wouldn’t worsen the CAD (current account deficit), which is getting more and more murky.

Given an estimate that we siphon around approximately 30 thousand Crores abroad in exchange of products like cosmetics, food & beverages, tea, etc. Consumtion of indigenous goods and use of public transport and innovative products should be implanted to minimize the consumption of fuel and natural gases.

How to get alarmed about the Indian currency fall?

It can be guessed from a current account deficit (CAD) and foreign exchange inflow rate, inflation rate domestically, interest rates of funds and other government policies. And also depends up on other countries economy state of affairs.

By analyzing these factors one can try to get a decent idea and foresee the possible rupee fall or rise.

All you wanted to know about PPF (Public Provident Fund)

What is PPF (Public Provident Fund)?
PPF is one of the most popular modes of investment in India, which is backed by government and work as a long term saving instrument. This is very useful for those investors who are either self-employed or working in company/ small organization, which does not have GPF or EPF (provident fund); in that case it serves as the best tax free long term investment option.

What are the returns on PPF?
Interest rates on PPF are notified every year by the government and currently it is 8.70% p.a. for the financial year 2015-16. The interest calculation is done on a monthly basis but actual credit happens only at the year-end. The best part of PPF returns is that it is tax-free on maturity and you also get tax benefit under section 80C for the investments you make in PPF every year.

How it is different from GPF or EPF?
Many of us who are working with professionally managed companies, must be aware of General Provident fund (GPF) or Employee Provident Fund (EPF). Employer and employee equally contribute to these funds, the return of investment is interest earnings and the total amount invested by an individual gets tax exemption under 80C.

The option to increase the employee contribution is also available; you can withdraw your PF based on a pre-defined upper limits and it is allowed for some specific purpose only. If you switch your job or you quit, then you can withdraw the PF or transfer with your new employer. It is also taxable if a criterion of continuous service for five years is not fulfilled apart from certain other conditions. Returns on PF are also similar to PPF and you can always opt for the PPF scheme to deliver similar purpose of investment and saving; let’s understand more on PPF as follows:

Salient Features of PPF:
• It is very easy to open &maintain PPF account; Several banks are authorized to facilitate PPF account facility, it is also available with Indian post. Some banks, even offer online opening of the PPF account through net banking or you can walk down to any nearest branch of the authorized banks.
• Long term saving and a Maturity period of 15 years makes PPF investment a wonderful tool for your retirement planning.
• This is totally a secured government backed investment, no risk involved.
• PPF returns are tax-free.
• You get Tax exemption for your investment amount under 80C.
• Funds in PPF account can’t be attached by any court orders
• Initial contribution for opening PPF account is as low as Rs. 100/-.
• Annual deposit limit for investment is min Rs 500/- and max Rs 150,000/-
• PPF account is transferable.
• Change in name is also allowed (for e.g. if a women’s name post marriage gets changed and if she wish to change the same for her PPF account; then it is allowed)

Eligibility criteria to open PPF account:
• Any individual can open a PPF account except NRI and HUF.
• “One individual-One PPF account”, you can open only one such account in your own name.
• PPF account can be open for minors by their parents or guardian (tax exemption benefit is still available subject to a maximum limit allowed).
• Nomination facility is allowed, except for minor account.
• Even if you have GPF or EPF account, you are allowed to open a PPF account in your name.

What is the maturity period & withdrawal options available in PPF account?
The maturity period for the account is about 15 years and on maturity you can have the following three options:

1. Withdraw your accumulated money in PPF account and close it; Or
2. You may even extend your PPF account for another 5 years without paying any further contribution: Or
3. You may extend it for another 5 years with regular contribution.

Can I have a Partial withdrawal facility in between the lock in period of 15 years?
Though the maturity period for PPF account is 15 years as seen above, but partial withdrawal is allowed form 7th year onwards subject to the prescribed specified limit.

Loan against PPF: Yes, loan against your PPF account is also allowed and the same can be availed during a specific period.

Should you invest in PPF?
Yes, Undoubtedly because PPF comes across as one of the best & simplest investment tool to serve your long term financial needs and to top it all; its returns are completely tax free and offers you tax savings u/s 80C as well. One should invest in it though small or big but consistently. Ideally every fresher or a new joinee should open a PPF account right when they start working and as a parent also you should open PPF accounts in your children’s name so that once they attain majority they continue it and enjoy the free from lock in PPF account.