Category Archives: Others

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!

Should you invest in NPS (National Pension Scheme)?

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Does National Pension Scheme (NPS) offers better retirement solutions!

In the recently announced budget Mr. FM had allowed an additional deduction on account of investing in NPS; it was made available to public around six years ago but it did not garner any attention because of the complex procedures in opening NPS account and its tax treatment at the time of maturity too played a role in dissuading investors.

The recent announcement in the Budget did not alter any of features of NPS but the additional deduction of Rs 50,000/- under Section 80CCD is surely going to be a great incentive. The said limit is over and above your existing limit of Rs 1.5 lakh u/s 80C.

 

Should you invest in NPS?

Though the additional benefit under tax is a great boost and makes it an attractive investment option for retirement but one should not just go with the tax benefits only but you should only invest in NPS based on your assessment of overall risk and after your comprehensive financial planning.

Why I am telling you this is because of the limit NPS puts on the maximum exposure to equity allocation and has been capped at 50% of the entire corpus. If you are young then it seems to be more conservative for you based on a logic that if you are investing in NPS when you are say around 30 years of age or less and have more than 25 years of retirement time. If that is the case then also you can invest in NPS as one of the retirement planning product but do invest separately in other equity related instruments like ELSS or direct equity.

The other reason is also based on the fact that if you see a longer horizon then ELSS tax saving mutual funds schemes will be able to generate much better returns in comparison to NPS due to no restriction on equity investment. Please check the table to see the comparison between the returns of NPS and MF ELSS.

 

Equity Funds

Annualized Return (%)

NPS Funds

1 YEAR

3 YRS

5 YRS

PRU ICICI PENSION FUND

45.84

21.10

14.06

KOTAK PENSION FUND

44.69

20.30

13.78

RELIANCE PENSION FUND

46.27

19.94

13.47

SBI PENSION FUND

44.80

20.63

13.46

UTI RETIREMENT SOLUTIONS

44.04

20.00

13.08

Mutual Funds : ELSS category average

66.61

25.44

15.83

 

How much to invest?

You can invest the amount of Rs 50,000/- at one go also or even can divide the amount in a monthly mode the way you invest via SIPs of a mutual fund. There are three types of funds, which you can choose from, and these are “E” (equity market), “G” (Government Securities) and “C” (Fixed instruments & other than government securities.

 

Tax treatment on Maturity!

At the time of retirement; minimum 40% of pension wealth is required to be invested for purchasing an annuity and maximum 60% of the pension wealth can be withdrawn in lump sum. And the 60% of the corpus you are allowed to withdraw will be taxable. Now if you compare the same with any other retirement products say PPF or a Provident Fund both are tax-free on maturity.

 

 

When is the right time to invest in the Market?

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Financial Planning for investing in Gold, Property & Equities!

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. Let us understand the changing dynamics in today’s world and how should you plan your investments in the next few years.

There are three best asset class (apart from fixed investment options) to invest in, Gold, property market and equity i.e. share market/mutual funds. If you see the gold and property market, both had given tremendous returns in the last few years; gold had a dream run from the year 2006 till 2013 and similarly property market across India had shown massive returns from the year 2000 till date.

But if you closely observe it, now the juice is already extracted from both of it and gold had started giving negative returns and property prices are also slowing down and in fact if you see the trend there are many unsold inventory means unsold flats & buildings lying across India. One can really make a good deal with a builder if they are looking forward to buy a property, my advise is don’t rush to buy property more specially if you are looking to buy it for investment purpose. You should wait for few more months to years and make a great deal.
Whereas if you have seen the equity market in the last one-year it had given more than 50% returns and before that form the year 2008 till early 2014 the returns were only range bound and almost negligible. With the last year’s outstanding performance and looking at the growing Indian economy which is now one of the best placed economy in the world, I suggest that investing more in share market directly or via mutual funds makes sense and you will be able to make good money in the next 4 to 5 years.

Friends, gone are the days when financial planners used to advice about having a balanced plan; we are living in a world, which is changing every minute rather every second, all the equations have changed and we really need to plan keeping these fluctuations in our life. When the entire balance in life had become imbalance, we cannot have a plan, which is based on the next 20-25 years, which are totally unpredictable.
However I do not meant to say that you don’t plan for long term and in fact child education/marriage and retirement planning are long term goals only but your planning to achieve your goals should be split up in to a short span of 5-5 years and the same should be aligned to the current time period you are in to. All you need to do is to be aware and alert for any dynamic changes, which will happen and adapt your financial plan accordingly.

In fact in one of my earlier column published on 15th September 2013 in various newspapers and online media (Topic- Shuddh Desi Investments) I have advised readers for buying stocks of pharma/export and IT companies which have given astonishing returns during last one and half year. All due to their earnings in dollar, the share market index which has went up by more than 50% since last year is comprising of 45% of these sectors and the rise in it had nothing to do with any political changes which people believe it to be. All these because of strong US economy and increasing dollar prices and we can see the same trend for few more years now. I advice you to invest more in equities for the next 3 to 5 years and then make good money via stocks or mutual funds and then take it out and invest in gold or property to make virtual money to a real money, go chase this acche din before they fade away, happy investing.

Jaitley ki Potli: Decoding the Union Budget 2014

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  • Hike in Income Tax Slabs by Rs. 50000/-:  Good news for the taxpayers as FM has increased the basic exemption limit of income tax though marginally by Rs. 50000/- as against  the existing limit of Rs. 2,00,000/-. For senior citizens the existing limit of Rs. 250000 has been hiked to Rs. 300000 /-.
  • Increase in the Investment limit u/s 80C by Rs. 50,000: The limit under this section is also hiked by another Rs. 50000/- to make it to Rs.150000/-. Now you can invest more in Insurance, mutual funds ELSS, PPF, NSCs, and PF or can claim higher benefits on your expenses on Principal on your home loan or tuition fees for your children.
  • Increase in the limit of Interest on your home loan by Rs. 50,000/-: Now get higher benefit on your existing home loan EMI payments as interest benefit u/s 24(b) has been increased by Rs. 50,000/- to take the total limit of interest benefit on a self occupied house from an existing Rs. 1,50,000/- to Rs. 2,00,000/-.
  • Increase in the deposit limit of PPF: Good news for all the PPF lovers as now you can invest Rs. 1.5 lakh in PPF as against the existing deposit limit of Rs. 1,00,000/-
  • A quick Snapshot of Tax benefits and your take home

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      Note: The above example is calculated based on the latest tax proposal and for a first tax slab of 10.3% but       If your income is under 20.6% tax slab say Rs. 10 Lakhs then your net tax saving would be Rs. 25,750/- & If    your income is under 30.9% tax slab say Rs 15 Lakhs then you can increase your take home by Rs. 36,050/-.

What is going down?: Branded Clothing/solar power units/, smart cards, sport equipments, Computers, TVs, Oil, Soaps, Foot-wears, LED’s below 19”, water purifiers, diamonds and LED lights. 

    What is going up? Cigarettes, aerated drinks, pan masala, chewing tobacco, radio taxi and imported electronic items.

    Smart Tips to leverage this budget for a better financial use:

  • Savings on account of hike in Interest on home loan and basic exemption limit should be utilized to invest for increased 80C limit of Rs. 50000/-.
  • Invest monthly say Rs. 4000/- per month in PPF to optimize the benefit of higher deposit limit of PPF i.e. 150000 overall and get assured return.
  • Take a joint home loan to optimize the benefits of higher interest on home loan and get benefits of as good as Rs. 4 lakhs deduction, in all.
  • Make sure to utilize the amount of Tuition Fees paid for your kids as it comes under 80C with an increased benefit of additional Rs. 50000/-.
  • If you are young or in thirties, invest the additional amount of Rs. 50000 under 80C in Mutual Funds ELSS to leverage equity market and savings both.
  • If you are in fifties and looking forward for tax savings and safety of investments then go for PPF to get dual benefits, tax advantage & safety both.
  • Work on your 80C Tax Planning investment looking at your overall Financial Planning.
  • Invest the savings arising due to the reduced outflow on branded cloths and home appliances henceforth for better use as penny saved is penny earned.

      My Views on the overall Budget:

      Overall the budget has given good respite to Taxpayers in terms of more take home salary or income but still there are lot of             things which needs to done with respect to the tax benefits on Medical reimbursement amount of Rs. 15000/- which was                   expected to be increased to at least Rs. 50000 or hike in children’s Tuition fees tax benefits. Even FM’s move of allocating               Rs. 200 crore for building a statue of Sardar Patel came as a big surprise because  that is as good as congress giving money to           Rajiv Gandhi Institute or Mayawati building her own statutes, what’s the difference. Let’s hope to have more “Acche Din”                   ahead.

       Thanks & Regards

       CA Rishabh Parakh