Source : Aditya Birla sun life
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Source : Aditya Birla sun life
Reach us at 9845399780 or email@example.com
National Pension Scheme (NPS) is a retirement scheme. You can contribute to it voluntarily and build a corpus. This will be invested in the markets and the returns will get added to the corpus. It is a scheme to ensure pension post retirement.
Source: http://www.npstrust.org.in. NAV as on 31st Jan, 2019
How have NPS schemes fared?
NPS schemes (Scheme E) that invest more than 50% in stocks have not fared well in the short-term as the market has been volatile. On the other hand they have performed well for the longer term.
NPS schemes that invest in government securities
(Scheme G) have performed well both in short-term and long-term.
As per recent changes, the investment in equity can go up to 75% in active subscription for non-government subscribers. This means potential to earn even higher returns and beat inflation is possible.
As per the new proposal, 60% of the total amount that is allowed to be withdrawn after the age of 60 will be fully tax exempt from April 1, 2019. The other 40% has to be invested in an annuity plan for getting regular pension payouts.
The new proposal makes it similar to products such as PPF which also does not have any tax on withdrawal as per schedule.
Investment up to an additional amount of Rs. 50,000 can be claimed as deduction if invested in NPS apart from 10% that qualifies for deduction under Section 80CCD. But this benefit comes with a clause of a 3-year lock-in period unlike other products such as EPF or PPF.
You cannot exit from the product anytime you wish. Premature withdrawal is allowed under certain conditions –
The annuity product that you have to invest in may not be the product you want to buy. Usually annuity products have low returns. So NPS is a partially liquid investment.
NPS has become a more attractive product as –
NPS is at a disadvantage as –
You can allocate a part of your investment portfolio to NPS but ensure that you have a combination of equity mutual funds, debt mutual funds and PPF to have a well-diversified retirement corpus.
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Shekar was extremely upset with the hospital bill. He did not know what to do. A small mistake had cost him a lot.
His 5 year old son was admitted in the hospital. Doctors had to conduct multiple tests to determine the cause of the illness. After 5 days, his son was discharged from the hospital with a big bill.
X rays, MRIs, medicines, consultation with multiple doctors, GST, recovery cost – the total bill came up to Rs.1,35,000/-
Shekar comes from a lower middle class family and had just paid the fees for both his sons. He had very little money in his bank.
He did not have enough to pay the hospital bill and had to borrow from relatives, take advance loan and pay off the bill.
One small mistake of not buying health insurance cost him a lot.
His brother, Ganesh instructed him to “STOP PAYING MONEY TO HOSPITALS”.
Ganesh told him that health insurance can ensure a cashless, secure future and a better experience with hospitals. Individual and family coverage can secure their future.
Ganesh recommended Right Horizons Financial Services PVT. Ltd to buy insurance and secure his family’s future.
So instead of Paying Hospital bills, take a wise step and choose the right insurance to focus on future Plans
Right Horizons’ core expertise includes Financial Planning, Mutual Funds, SIP, Insurance, Portfolio Management Services, Estate Planning, Retirement Plans, Child Education, Family Office, etc.,
Kindly visit our website for more details
Call: + 91 9845399780
Some Facts and Stats
Indian women have come a long way in terms of education, independence and self-identity. But the tendency to leave financial decisions in the hands of the men in their lives – son, husband, father is still quite prevalent. Though this has been changing, it is important that more women take charge of their financial life as there are many indicators that women are good investors – Why?
But on the other hand, there are certain weaknesses that are inherent in women investors –
Women have to play to their strengths and overcome their weaknesses and gain financial independence. Here are some steps that you can take to get involved in matters of personal finance –
Make your financial resolutions this Women’s Day to be truly independent
This women’s day, Right Horizons offers a FREE financial planning session for women at Dialogues cafe, JP Nagar on March 9th, 3-5pm. To register, write to us at firstname.lastname@example.org or 9845399780.
Vinay’s portfolio has taken quite a beating. He had purchased YES Bank at a price of around Rs. 450 per share about 8-9 months back. Today the share is hovering around Rs. 168. Sintex Plastics, which he had purchased in December 2017, has lost about 60% of its value. His portfolios largely comprised of midcap stocks, have lost 40-60% value from their peak. His stock portfolio was doing very well at one point, based on which he significantly increased his investments into stocks. Now, he is unsure as to what to do. Should he buy more of the stocks that he has so that his costs can be averaged?
The stock market has seen quite a few crashes this year. It is highly volatile these days and in a bear phase. The mid and small cap indices lost between 25-35% in a short period. In a bear market, confidence is low and stock prices are not rangebound. They can swing wildly.
In case you are in such a dilemma, here are some action points to bear in mind before making a random or emotional decision –
Review and Adjust Your Portfolio
Its ideal to book profits on your portfolio and hold some cash for deployment on market falls. You may still want to review the stocks and equity mutual funds in your portfolio so as to remove the duds. You might want to let go of the duds in your portfolio by taking advantage of bear market rallies.
If you have stocks that were bought because of tips, recommendations or just to make quick profits, review them and sell off those that do not seem to have the potential for giving good returns in the long run. Look to buy good stocks that can gain strongly on a market recovery.
Avoid Panic Selling
Some of us panic and sell off stocks the moment we see that they are losing value. That may not be the best course of action for all stocks. It is not a good idea to exit quality stocks with a good long-term record and good cash flow, , especially at points when they have fallen sharply and their valuations become attractive again.
Don’t Miss Out On Buying Low
Averaging is a smart investment strategy, especially for diversified mutual funds and exchange-traded funds. Systematic Transfer Plans are good to supplement your SIPs when markets have fallen; and you are unable to predict the bottom of markets, but you know it is somewhere around the corner.
Most investors become too fearful on large market falls and miss out the opportunity of buying stocks at their best prices. Keep in mind that the news flow is likely to very negative at such points. At the same time, don’t fall into the trap of getting in too early. You can add more of blue chip stocks, high quality funds and ETFs when the prices are down.
If you don’t have the time or find it difficult to track individual stock and the market environment, stick to mutual funds. Seek professional advice if required. Understand your portfolio, risk tolerance and risk capacity, so that you do not make any hasty decisions that you might regret later on. Work on a disciplined investment style that suits you.
It is difficult to time the market. So investors have to be patient and keep the right investment perspective before making decisions.
In the current market scenario, the prices have fallen quite a bit. It may be time to take some positions slowly. For example, one can invest in blue chip equity funds such as Mirae India Equity and Aditya Birla Sunlife Frontline funds in a phased manner, especially on corrections. One can use a combination of lump sum investment and SIPs to average the costs. When the markets move upward, they can sell off some positions and use that money to invest in debt instruments.
Ever since Interim Budget 2019, there is some confusion on whether there is income tax relief given to all citizens or not. Some people are convinced there is an income tax relief for all. Others say they have read or heard news reports about tax rebate relief.
For a common man with limited financial knowledge, all this can be very confusing. So, let us clear that confusion once and for all. The Budget has allowed individuals with taxable income up to Rs 5 lakh to get full tax rebate and so they pay zero tax. Read on to know more.
Tax slabs unchanged
There is no change in the income tax slabs. You must understand what is the difference between taxable income and total/gross income. Gross income includes all of the income a person has received during a financial year. This amount is not explicitly exempt from taxation. On the other hand, taxable income is the amount of income that is actually subject to taxation, after all deductions or exemptions. So, typically taxable income will be lower than gross/total income.
For a person aged below 60 years, up to Rs 2.5 lakh of their taxable income is not taxed.
Income between Rs 2.5 lakh to Rs 5 lakh is taxed at 5% of total income exceeding Rs 2.5 lakh. This tax comes to a maximum of Rs 12,500.
Income between Rs 5 lakh to Rs 10 lakh is taxed as at 20% of total income exceeding Rs 5 lakh.
Income above Rs 10 lakh is taxed at 30% of total income over Rs 10 lakh.
In the Interim Budget, these tax slabs remain the same. However, the Budget has allowed individuals with taxable income up to Rs 5 lakh to get full tax rebate under section 87A of the Income Tax Act.
Do remember for senior citizens aged 60 years and above but below 80 years, income up to Rs 3 lakh is exempt from tax. Income up to Rs 5 lakh is exempt from tax for super senior citizens (ie. aged 80 years and above).
Tax rebate is not tax cut for all
What does full tax rebate for those with taxable income of Rs 5 lakh mean? Read the example below.
Let us assume you, a person below 60 years, has a taxable income of Rs 5 lakh. As per income tax slabs, you fall in two slabs.
First, your income up to Rs 2.5 lakh is not taxed.
Second, the excess amount above Rs 2.5 lakh is taxed at 5% of the exceeding amount. Since your taxable income is Rs 5 lakh, this means you have Rs 2.5 lakh extra over the zero tax-slab.
At 5% income tax rate, the tax liability comes to Rs 12,500. However, the full tax rebate of up to Rs 12,500 given in the latest budget means you will also pay no tax!
But what if your taxable income is Rs 5.5 lakh or Rs 6 lakh or more? The moment your taxable income crosses Rs 5 lakh, then the rebate is not applicable for you.
If your taxable income is Rs 5.5 lakh, for example, your gross tax liability shoots up to Rs 23,400. For somebody with taxable income of Rs 6 lakh, the tax rises further to Rs 33,800.
In essence, all this means your tax liability rises sharply once you cross Rs 5 lakh taxable income zone. For earning just Rs 50,000 more than Rs 5 lakh (taxable income of Rs 5.5 lakh), your tax liability is nearly 47% on the extra Rs 50,000 income.
Importance of tax-planning
Under the new income tax rules, it becomes highly important to plan taxes properly and carefully. A small mistake can cost a lot as you can understand.
Not just the pay structure, full focus and attention needs to be given to tax planning.
Those in the marginal area (just above Rs 5 lakh taxable income) should use all the tax deductions available. This is so that such individuals are not taxed more just because they forgot to claim exemptions, or were not aware of how to lower tax dues.
So, try to consult a good financial planner and prepare your tax blue-print for this year and beyond.
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The Interim Budget 2019 may not have directly touched the income tax slab rates, but a small tweak in income tax rebate is virtually doing the job for many. Salaried employees earning up to Rs 10 lakh in a year can escape paying tax if they use some of the investment and expense related deductions available. In the same breath, non-salaried individuals earning Rs 9.5 lakh do not have to pay a single paisa in income tax. All this is possible because full tax rebate has been given for taxpayers having taxable income of Rs 5 lakh. This means if your total income is more than Rs 5 lakh, all you have to do is to claim deductions so as to bring the taxable income to Rs 5 lakh or below. Read on to know more.
No more taxes
Apart from hiking standard deduction to Rs 50,000 a year, The government has not made any extra income tax deduction related announcements in Interim Budget 2019. By smartly using the norms, all of your income can be made tax-free. Of course, some might argue that claiming Rs 5 lakh as deductions out of Rs 10 lakh income is difficult. Dear friends, life is an art of possibilities. If you know there is a way, you can always succeed.
Before the Budget, taxable income up to Rs 2.5 lakh attracted no tax while taxable income falling between RS 2.5 lakh to Rs 5 lakh attracted 5% tax. In simple terms this means that if your taxable income was Rs 5 lakh, you paid tax on the Rs 2.5 lakh beyond the zero-tax income.
This 5% of Rs 2.5 lakh translated into Rs 12500 and was your income tax liability. The Interim Budget 2019 has given 100% rebate on up to Rs 12500 amount. So, there will be no tax liability for you.
How do individuals earning more than Rs 5 lakh take advantage of the situation? It is easy. If you have a salary income of Rs 10 lakh, you need to claim deductions worth Rs 5 lakh and bring your taxable income part to Rs 5 lakh.
Assume your salary income is Rs 10 lakh. You can make a deduction of up to Rs 2 lakh for interest paid on housing loan for self-occupied property under Section 24. This will reduce your taxable income from Rs 10 lakh to Rs 8 lakh.
Then, there is maximum Rs 1.5 lakh deduction for investments made under Section 80C (like principal paid on housing loan, insurance premium, ELSS, PPF etc.). This brings your taxable income from Rs 8 lakh to Rs 6.5 lakh.
The Interim Budget 2019 has increased the standard deduction for salaried persons to Rs 50,000 (increased from Rs 40,000 earlier). Using this standard deduction, your taxable income falls from Rs 6.5 lakh to Rs 6 lakh.
To encourage National Pension System (NPS), the income tax norms allow us to claim a maximum and separate deduction under Section 80CCD(1B) for additional investment in NPS of Rs 50,000. This when claimed will bring your taxable income from Rs 6 lakh to Rs 5.5 lakh.
Each and every nook
Lastly, you can claim Rs 25,000 medical insurance premium for self & spouse and Rs 25,000 mediclaim premium for your dependent parents. The combined Rs 50,000 premium (under Section 80D)when deduced from your taxable income of Rs 5.5 lakh brings it to the magic figure of Rs 5 lakh.
The process will be similar for non-salaried persons but they will not able to claim the Rs 50,000 standard deduction (available for salaried only). Thus, non-salaried with Rs 9.5 lakh in the above example will pay zero tax.
Below is a a table that shows your example of a salaried person (below 60 years of age).
A) Gross Income – Rs 10,00,000
i) Deduction for Interest on Housing loan for self-occupied property – sec 24 – Rs 200,000
ii) Deduction – Section 80C (Insurance premium /Principal on housing loan / ELSS / NPS /) – Rs 150,000
iii) Standard Deduction for salaried – Rs 50,000
iv) Deduction under Section 80CCD(1B) – Additional investment in NPS – Rs 50,000
v) Deduction under Section 80D – Mediclaim – Rs 25,000
vi) Deduction for parents (senior citizens Mediclaim) – Rs 25,000
C) Taxable income (A minus B) – Rs 500,000
D) Income tax payable (5% of amount between Rs 2.5 lakh to Rs 5 lakh) – Rs 12500
E) Rebate under section 87A – Rs 12500
F) Net tax payable- Rs 0 (zero)
Do remember that many salaried and non salaried persons can also other deductions available under the Income Tax Act. For instance, interest paid during a financial year on an education loan is allowed as deduction for individuals from the total income under Section 80E. The deduction is provided only for the interest part of the EMI. There is no limit on the maximum amount that is allowed as deduction. If you are paying education loan interest, you can claim the maximum amount per financial year. If the amount is Rs 5 lakh per year, you will not have to do any other investments to come to zero-tax club.
Likewise, taxpayers can use the Section 80G of the Indian Income Tax Act that allows you tax deduction on donations made to any charitable organization. The various donations specified in section 80G are eligible for a deduction of up to either 100% or 50% with or without restriction, as provided in Section 80G.
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2018 was one of the most difficult year for investors as benchmark Nifty gave only 3.2% whereas broader markets like Mid cap and Small caps where down by 15.3% and 23.6% each respectively. Only Bankex, FMCG and IT are closed on a positive note, while rest all indices closed lower. The markets also witnessed major events like NPA clean-up, NBFC re-financing issues, RBI Governor exit, that could fundamentally change the structure of the economy. It is however important to highlight that the government proactively acted on the above issues.
Where do we stand today:
Data throws up a mixed bag when we look at valuations and compare it with December 2007, closer to the previous market peak. On Price/Earnings for Nifty 50, we are valued similar to the last peak at 26.6 in Dec 07 Vs 26.4 in Dec 18, but when we look at other valuation parameters like Market Cap/GDP, we are much lower.
As pointed by Warren Buffett, the percentage of total market cap (TMC) relative to the US GNP is “probably the best single measure of where valuations stand at any given moment.”
//(GDP & GNP Definition and the difference
GDP is the total market value of goods and services produced within the borders of a country.
GNP is the total market value of goods and services produced by the residents of a country, even if they’re living abroad. So, if a U.S. resident earns money from an investment overseas, that value would be included in GNP (but not GDP).
Further, markets have steep falls when they run up significantly and the economy is overheated. Despite the fact that markets have moved up over the last couple of years, this is much muted compared to what you normally see in a bull market. Economic parameters are also muted.
Various Indicators- Current Vs Dec 07
US Markets take a tumble
US markets have seen a large correction since October 2018 with the DowJones was down by 18.8% before recovering some of the losses. Though the US markets have been one of the best performers, we are relatively bearish on US stocks vis-à-vis Indian stocks. In the case of the US, both market and economic performances have been strong over the past few years and we believe US stocks/ESOPs could be impacted over the next year.
Every general elections year is always a volatile year as you get huge moves in Index on both the sides and 2019 is not going to be different, as we step into general elections. The election result may impact the economy’s road map ahead. In Jan 2018, many experts were cautious because of high valuations in mid and small caps without having earning growth. The whole matrix has changed in 2019 as stocks have given significant corrections and earnings growth also picked up in 2018. We expect 2019 to be a year of net positive investment for both FII’s and DII’s, unlike 2018 where only DII’s were supporting Indian markets.
This is not the year for light-hearted investors who get worried when they see 10%- 15% down move in the Index. Past data shows that those who stayed invested in these volatile period were the biggest beneficiaries including in years of coalition governments.
If we analyze last 5 general election data, Nifty has never given negative return in an election year. In 1999, 2004, 2009 and 2014 Nifty has given 51%, 18%, 80% and 39% each respectively. Equity markets always ride on fear and hope and this year would be no different. Everywhere we are hearing that central elections are there and markets will be volatile, but holding on to your investments at these times might reward you significantly. The recently concluded State elections resulted in BJP losing in all 3 major states. Now markets have given big thumbs up to the result and up by more than 5%. This signifies value buying is emerging and we should be invested at these time irrespective of any party takes control of government with majority mandate.
Historical Calendar Year returns in an election Year
Past data shows that we may have a pre-election rally.
Keeping in mind the above data points, we believe that while markets are likely to be volatile, it would end the year on a positive note. Subsequently, I expect both economic parameters and markets to gather momentum.
Life is all about competition. Who is the best? Are you good or is your friend better? There is competition even among personal finance products. While most personal finance products are good, which one would help meet financial goals. This is the call you have to make.
This is a story of a fight between two friends, Satish and Suman. Not a physical fight, but an intense competition. Both of them were in their early thirties and worked in reputed IT Firms. They liked to compete with each other and today the fight was which financial product was better. Was it ELSS or equity diversified mutual funds? Satish says ELSS and Suman says equity diversified funds. Who is right?
For those who don’t know, an equity diversified mutual fund invests in stocks across sectors. If you are an aggressive investor, try equity diversified mutual funds. Money is in stocks and there’s a measure of protection as the investment is spread across sectors like pharma, IT, Oil and Gas, Automobiles and so on, called diversification.
Lets take a look at the opponent, Equity Linked Saving Schemes or ELSS. ELSS is a type of equity diversified mutual fund where most of the investment is in stocks. It has a compulsory 3 year lock-in which means you cannot touch this investment for 3 years. What’s special about ELSS is it’s the only tax saving mutual fund. ELSS enjoys a tax deduction under Section 80C of the income tax act, up to Rs 1.5 Lakhs a year. Does this make ELSS better than equity diversified mutual funds? Let’s find out.
ELSS vs Equity Diversified Mutual Funds
ELSS is a long term investment
ELSS has a 3 year lock-in and forces you to stay invested for this time period. Equity is an excellent investment only if you stay invested for the long term. A bare minimum of 3 years is a must. This is where ELSS scores over equity diversified mutual funds.
Equity diversified mutual funds have no lock-in and allows an exit, whenever you wish. This is bad for you as most investors exit when stock markets crash. The key to make money in stocks is to stay invested in the market for the long term. Invest in ELSS with a time horizon of 7 years.
ELSS Saves Tax
Lets say you invest the same amount in an equity diversified scheme and an ELSS. Both of them give the same returns, but ELSS wins over the diversified fund as it enjoys the Section 80C benefit. ELSS is an excellent investment if you fall in the higher tax brackets.
If you fall in the 30% tax bracket, invest up to Rs 1.5 Lakhs a year in ELSS and save Rs 46,800 a year. ELSS enjoys Section 80C tax deduction and beats equity diversified mutual funds.
ELSS is like killing two birds with one stone. You get good returns and you save tax. Top ELSS schemes have given an average of 16-20% over 5 years. This is higher than equity diversified schemes. Then there’s the tax benefit.
Satish earns Rs 11 Lakhs a year and falls in the 30% tax bracket. He invests Rs 1.5 Lakhs a year in ELSS via SIPs. This helps him save 30% on Rs 1,50,000 which is Rs 45,000 + a cess of 4% which is Rs 1,800. Satish saves Rs 46,800 a year by investing in ELSS.
ELSS is a stepping stone to equity diversified mutual funds
In recent times many first-timers are investing in equity. Novice investors are rushing to equity diversified mutual funds without understanding them, in the hope of quick profits.
Why not first invest in ELSS and then try equity diversified mutual funds? ELSS with a compulsory lock-in, forces you to stay invested for the long term. ELSS handholds you and helps get familiar with equity. You can now invest in equity diversified funds with confidence and make a profit.
Today, stock markets are falling and many first-time investors are heading for the exit in panic. Many of these investors have bought high and sold low, taking home immense losses. If these panic-stricken investors had invested in ELSS, they would not have been able to exit the stock market and in a few years, they would have seen profits.
What do you take home from this article?