It is better to be INSURED than sorry!

Nisha is happily married to Amit for five years. They have a beautiful one-year old girl, Kavya. They recently bought a 2 BHK in a good neighbourhood in Mumbai with excellent educational institutes. Amit works in an MNC and has just been promoted to managerial post. He is earning well so the loan taken for the new house is not a problem. Nisha took a break from work due to pregnancy. Life is perfect!

One day, while coming back from the park with Kavya, Nisha gets a call. Amit’s been in an accident and is severely injured. He is put in intensive care. Though grief-stricken, Nisha soon starts worrying about the sudden change in their financial position. Now, the loan, which previously could have easily been repaid, feels like a burden. Nisha wants to give her child a decent education and lifestyle which comes at a financial price. To top it all, she also has to manage the hospital bills and give emotional support to her husband.

Had Amit bought an Insurance Policy, they would have received the financial help that they desperately need and Nisha would have been able to focus fully to the well-being of her family.

That is why it is very important to buy insurance. But it is equally important to buy the right insurance. For example, in the above scenario, the accident could lead to temporary or permanent disability. It may also lead to death. All of this is covered under Personal Accident Insurance Policy. At the same time Amit would need a Mediclaim to help him with the enormous hospital bills. Had the accident resulted in Amit’s death, a Life Insurance would have provided financial stability to his family.

There are numerous insurance policies in the market today. They provide you protection against unpredictable events such as death, accidents, sickness, loss or damage to property. Before buying an insurance policy you need to be sure of your requirements and fully understand what is covered and what is excluded. Over insurance is also bad for your financial health.

Insurance is an essential part of Personal Finance. Financial Planners can work out and suggest you the right amount and right type of insurance suitable for your needs.

When the praying does no good, insurance does help!

– Bertolt Brecht

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Personal Finance – A way to comfortable living!

“Don’t work for the money, let the money work for you…”
– ROBERT KIYOSAKI

Elders of the family are in the habit of gifting their nieces, nephews and grandchildren with money. This money is then usually used to buy gifts and toys for the kids and the rest is spent by the parents. This cycle has been going on for generations and will continue in the future.
Now instead of spending the entire amount, say the expend is marginalized and the remaining amount is invested in desirable securities. Let’s suppose the investment is of ₹ 1000 per year for 15 years i.e. total of ₹ 15000. On a conservative note, with 8% average annual return, the accumulated corpus at the end of 15 years will be about ₹ 29,320. With 12% annual return it will be ₹ 41,753. And with 15% it will go up to ₹ 54,717.
The advantage of undertaking such a project is three-fold:

i. The kid inculcates the habit of saving and investing early on in his/her life. One less thing to worry for the parents assuming they are already aware of the benefits of investing.
ii. The kid learns a thing or two about personal finance and investment which unfortunately is still not taught in schools.
iii. In a more realistic scenario, the individual starts accumulating corpus at a very young age. The power of compounding ensures that the individual has a reserve fund for future needs.

This is just one tiny example of what a regular and timely investment can do. The same can be followed by people of all ages and strata throughout their lifetime. Of course, with the passage of time the needs and wants of the individual change. Various factors get involved such as required savings, expenditure, financial security, goals in life, risk appetite, advancement of age, etc.

Some common questions which need to be addressed.

I. How much to invest?
II. When is the right time to invest?
III. For what duration?
IV. What are the investment options?
V. What are the risks involved?
VI. How much money would I make?

To answer all these questions a financial plan has to be made.

  1. To start with you consider the current financial situation taking into account your current income, monthly living expense, savings and loans if any.
  2. Once you are aware of your financial position you decide your financial goals. This includes both long-term goals like child’s education, child’s marriage, securing future for your dependents, retirement planning, estate planning, charities and short-term goals such as vacations, buying a car, home furniture, etc. These goals should be realistic.
  3. Now that the financial goals have been decided, the next step is to identify the means to achieve these goals. Here you need to consider different alternatives of investment in various securities, asset allocation, insurances, etc.
  4. While finalizing on one alternative you need to evaluate every option by taking into account your risk appetite. Every security has some risks involved. Also, every security is expected to give certain returns. There are various financial ratios such as Sharpe ratio, Treynor ratio, Jensen measure which will help you compare the different portfolio alternatives and come to a decision.
  5. Next you implement the chosen plan.
  6. Once the plan is implemented it needs to be reviewed and revised on regular basis. This review will keep in check your asset allocation in various securities, the accepted risk-return trade off, etc.

Every individual has different financial requirements based on their own situation, wants and needs. Putting your money in some security solely based on hearsay is not a good financial practice. A good investment for one person can be a bad investment for the other.
To make this decision you need a sound knowledge of financial markets or a good financial advisor.

“Know what you own, and know why you own it!”
– PETER LYNCH

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NEW AREAS WHERE YOU CAN SAVE TAX IN THE FY 2018-2019

At the onset of a financial year, with a lot of enthusiasm, we all hear out the Budget, especially the personal finance section, announced by the finance minister. The budget of FY 2018-2019 has incorporated some new areas that can help you to save tax. As tax-saving time is here, so it is right for you to quickly know about the new introduced improvements or sections where you can save tax.

1. Tax-exempted medical premium increased from Rs. 30, 000 to Rs 50, 000 u/s 80 D, Income Tax Act, 1961.

This is applicable for senior citizens, who are of age 60. Till last financial year, the premium paid up to Rs 30, 000 towards health insurance for a senior citizen was tax-exempted. However, for this financial year, this tax-exempted limit has been raised to Rs. 50, 000. So now anyone (son, daughter, spouse or the sr.citizen himself/herself) who is paying the medical premium up to Rs 50,000 for a senior citizen can save tax up to Rs 15,600. Tax benefit calculated for the highest tax slab of 30% and includes 4% health and education cess.

2. NPS withdrawal made 100% tax-free

As per the proposal approved by the Union Cabinet, the government has offered complete tax exemption on 60% of the NPS corpus withdrawn on maturity. This has made NPS more tax friendly. NPS or National Pension System is a Govt. Of India initiated an investment tool for retirement planning. NPS investors can invest up to Rs. 1.5 lakh in NPS under Sec 80 C and additional Rs. 50, 000 under Sec 80 CCD (1B) of Income Tax Act, 1961. Under both the sections, the investor gets a tax deduction, which makes NPS a tax- saving investment tool during the ‘Investment Phase.’

Even during ‘Redemption Phase,’ NPS is a tax-efficient tool. At maturity, it is mandated to utilize the 40% of the corpus to buy an annuity that continues to give a regular income/ pension to the investors, while the remaining 60% of the corpus can be withdrawn by the investor as a lump-sum amount. Earlier only 40% of this withdrawal amount was tax-free while the remaining 20% was taxed. But now after the approval from Union Cabinet, there will be a complete tax exemption on this 60% of the withdrawn corpus amount.

3. Sr. Citizens can claim a tax deduction of up to Rs 50,000 u/s 80TTB

Budget 2018 introduced a new section – 80TTB under the Income Tax Act 1961, giving more tax-benefits to the senior citizens. Under this section, senior citizens can claim a tax deduction of up to Rs 50,000 on interest earned during a financial year from deposits held with a bank, a banking co-operative society or with a post office. Under this benefit, Rs. 50, 000 will get deducted from the gross annual total income before levying of a tax on it. A senior citizen, who is a resident individual aged 60 years or above during the financial year is eligible for claiming this deduction. However, not all interest income can be claimed as a deduction u/s 80TTB. Interest earned through the following are eligible for claiming deductions u/s 80TTB of Income Tax Act:
Fixed deposits or recurring deposits or other savings accounts held withheld with a bank, a banking co-operative society or with a post office
Other types of deposits with post offices such as
Senior Citizen Savings Scheme accounts
Post office time deposits
5-year recurring deposits
Post Office Monthly Income Schemes

4. Senior citizens need not to pay TDS on interest income up to Rs 50,000

As per the notification issued by The Central Board of Direct Taxes (CBDT), dated December 6, 201, it has been clarified that banks must not deduct any TDS from a senior citizen’s interest income in a single financial year up to Rs 50,000. Previously the limit of TDS deduction was Rs 10,000 per financial year irrespective of the age of the individual taxpayer.

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