Invest in Equity Funds even after Retirement

The other day, I received a WhatsApp message from a senior citizen whose returns from a fixed deposit have gone down by 25%. This difference has come about between a five-year deposit that he made in 2012, and when he renewed it upon maturity in August 2017. 

To those who are just reading the headline numbers on interest rates, this may not make sense. Depending on when you are measuring, interest rates have gone down by 2 or 3%. However, here's the exact message: "I was being paid Rs 35,352 every month (subject to income tax) enabling me to lead a worry-free life. Now on maturity I have reinvested the amount in the same bank and I will be paid Rs 26,489 

The interest rate on his FD may have gone done by just about 2.5%, but his income is down by 25%. In fact, this is an obfuscation in the way reduction of interest rates is announced and carried in the media. A reduction in the interest rate on a particular kind of deposit from, say, 10 to 8% is a reduction of 20%. If you were earning Rs 20,000 a month, you will now earn Rs 16,000 a month. The 2% reduction is an illusion. 

Retired from the economy 
The move towards a lower interest rate economy, while great news for the economy, is of little relevance to older, retired people. Lower inflation and interest rates, better fiscal management and higher economic growth carry no benefit for them because they are no longer in the earning and accumulative phase of their lives. An older person is not going to get a better job or a higher salary because the economy is growing. That phase of his or That phase of his or her life is over. 

However, wishing for higher interest rates is no solution. This yearning is there because we have been conditioned to ignore high inflation, the evil twin of high interest rates. I'm sorry to say this, but the person in the above example is financially doomed. For the last five years, when he was getting Rs 35,352 as interest income and spending it, he was actually eating away his capital. Out of that income, no more than Rs 7,000 to 10,000 was real income. The rest was just the inflated value of the currency. 

Here's the fact that he and crores others ignore: his real income has probably not gone down. If he was spending only his real, inflation-adjusted income, he would probably find that it has actually increased. And how would he have spent only his real income? The answer is, by spending only about 1.5 % of the deposit per year, and letting the rest compound. This is based on the assumption that FD rates are about 1.5% higher than the inflation rate. 

Obviously, he would need far more money to do that. Instead of Rs 40 lakh as deposit, he would need more than Rs 2 crore as deposit, which he does not have. There is no complete solution to this particular case. However, even a partial solution can only come from the returns that equity can generate. Real (inflation adjusted) equity returns are actually double or triple that of fixed income. Where a FD may generate 1.5% above inflation, equity will do 3 to 5%. 

There is no way out except to take some exposure to equity in a measured, de-risked and tax-efficient way. First, keep roughly three years' expenses aside and gradually invest the remaining amount into a set of two or three conservative hybrid funds (balanced funds). After three years, you can start withdrawing every year from these balanced funds an amount that is roughly 3 to 4%of the remaining sum. 

"If one is to avoid old-age poverty, then this phobia of equity investment in retirement must be gotten rid of. There is no other way." 

This will give you an amount that is equal to, or more, than what you are earning from a fixed income deposit today. The best part is that the value of the remaining investment will also grow at roughly the inflation rate. If you can implement this, then there is a virtual certainty that you will not be faced with old age poverty. The icing on the cake is that unlike your deposit interest, this income will be tax free. 

 

 

 

 

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How to check Income Tax Return (ITR) Status

The status of an income tax return or ITR can be checked once the return has been filed and verified. Taxpayers should regularly check the status of their income tax return to ensure that the ITR has been accepted and processed. If your return is filed properly and processed by the department, the status reflected in your account will be 'ITR processed'. However, if some discrepancies are found or some changes are proposed by Centralized Processing Centre (CPC), Bengaluru, there can be different return status such as defective return or case transferred to assessing officer.

The taxpayer can provide a suitable reply to the income tax department with respect to the status pending in the account so as to avoid any complications in the future

There are two ways to check the status of ITR:-

Using the login credentials
1. Log into income tax department's e-filing website (https://www.incometaxindiaefiling.gov.in/home)

2) Click on dashboard

3. Select View Return/Forms option

4. Then select the Income Tax Returns from the first drop down menu and the relevant assessment year from the drop-down menu

5. Status of your return will be shown on screen

Using acknowledgement number of ITR filed:
In this option, you don't need your login credentials. The following are the steps to know your status:-

1. Open the income tax department's e-filing website (https://www.incometaxindiaefiling.gov.in/home)

2. Select ITR status from the list on the left side of the page

3. Now, you are required to fill your PAN, acknowledgement number of ITR

4. The ITR return status will be displayed

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

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How to choose the right Insurer for Life Insurance Policy

Life insurance is the most secure way to provide safety to your loved ones, get returns and achieve financial goals. There are various types of life insurance plans that serve different needs of customers. Still, a huge number of Indians are grossly underinsured now. This despite the fact that there are multiple benefits that an effective life insurance plan offers. Such a plan can help you beat several unwanted emergencies effectively and keep you and your family secured. A life insurance plan will not only provide the needful safety cover, but will also allow you to get good returns (in some cases) that will assist in achieving your financial goals in the long run.

Nowadays, however, there are many life insurance companies in India and to pick the best one out of all is pretty much difficult. The first thing that people should look for is the timely claim settlement. As per the IRDAI, insurance companies have to settle the non-early claims within 15 days and early claims within 90 days. Non-early claims settlement is based on the receipt of the death certificate and a simple claim form. Claims which arise just because of the insured's death within three years of taking the policies are known as early claims.

Let's explore the same further:

Early claims

It is obvious that a few investigations are required before the settlement of early claims. It requires more time. What is the proportion of early claims in the life insurance industry of India? Although there is no such statistics available, it will be quite ok to say that it hardly exceeds 20 per cent, otherwise, it will difficult for insurance companies to maintain the solvency. Therefore, more than 80% claims must be settled within 15 days. Sometimes, insurance companies take a long time in investigating claims.

While comparing life insurance policies of different companies, you must keep the average sum assured payout in your mind. Most of the insurance companies' payouts are pretty much less. For a few insurance companies, it would be around one third or even one-fifth of the average sum assured under a policy. There can be two reasons behind this. The first one is that a few policies result in general death claims which do not carry high sum assured. Second is that most of the high sum assured claims related to the early claims are partly/fully repudiated. While there are no statistics to be sure about the actual reason, it is suggested to examine the claim settlement records of insurers from friends and associates before taking high insurance cover.

Lapse ratio

Another way to measure the popularity of the insurance companies is to check their lapse ratio. Lapses including forfeitures during a year/ Arithmetic Mean of the business in force at the beginning and at the end of a year are expressed in percentage terms. So, Lapse Ratio not only helps you in understanding the new trend of insurance companies like which life insurance is high in demand, but also assist you in choosing the right insurance company on which you can trust. The lower the ratio, the higher is the acceptance level of the insurance company. A high lapse ratio refers to the misspelling of insurance policies or poor servicing and claims settlement records.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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How to File a Revised Tax Return?

How to file a revised Income Tax Return?

The mode of filing and method of verification for a revised return is similar to that for an original return. The only difference being the revised return will carry the changes proposed to be made and also details of the earlier return filed i.e. date of filing of earlier return and the acknowledgement number

There is no restriction on the number of times a return can be revised, provided it fulfils the stipulated criterion. However, one has to file the revised return in the same mode in which the original return was filed. That means if the original return was filed electronically, the revised return too has to be filed electronically. Similarly, if the original return was filed physically, the revised return should also be filed physically.

There is no separate form to file a revised return, but make sure you tick the space that specifies that this is a revised return. Also, mention the acknowledgement number of the original return. Once a revised ITR is filed, the original or the previous return is deemed to be withdrawn.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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ICICI Prudential Large & Midcap Fund

ICICI Prudential Large & Midcap Fund was earlier called ICICI Prudential Top 100

Naren has 25+ years of experience in research and fund management and has been associated with ICICI Mutual Fund for the last 13 years. Naren is known for being a contrarian and has a good understanding of "value" stocks.

Naren follows a disciplined investment process and an active portfolio management approach. The fund has a large cap bias with a focus on stocks which have significant long term growth potential. He aims to generate alpha by active sector rotation through a top-down approach. Within the chosen sectors, Naren makes use of relative valuation parameters to invest in large-cap stocks he believes are attractively priced relative to their growth prospects.

While picking stocks, he focuses on the financial strength of the company and knocks out stocks with high leverage. He favours companies with attractive fundamentals, shifting away from ones where he thinks valuations are stretched. He does not take cash calls and remains fully invested; cash levels are unlikely to exceed 5 per cent of assets. The strategy is complex, but we believe in Naren's execution skill which makes the process robust.

The fund runs a concentrated portfolio based on the number of stocks in its portfolio than its peers. With Naren's excellent stock picking skills we are comfortable of the concentrated portfolio, which could have the potential to fetch higher returns. The fund's long term performance track record is good, but it can underperform its peers in the short run due to its valuation conscious approach.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Aditya Birla SunLife Short Term

Aditya Birla SunLife Short Term Investment Strategy

Maneesh Dangi heads the fixed income team at Aditya Birla Sun Life AMC and is also the co-CIO at the AMC. He has 15+ years of experience in research and fund management and has been with Aditya BSL AMC since 2006. Dangi is an experienced portfolio manager and we view his in-depth understanding of the macro-economy as being an advantage. The fund house runs one of the largest teams on the Fixed Income side, consisting of a 12-member analyst team. This includes four portfolio managers who also double up as analysts. Analysts too take on dual/multiple roles based on their expertise. The fund typically invests in high quality debt papers and has not taken active credit bets in the past. The issuer-selection process on the corporate bond side is extremely detailed and based on a well defined set of processes. The team relies on their internal ratings and processes as opposed to external credit rating agencies. Given their focus on quality and liquidity, analysts tend to undertake an in-depth evaluation of the management, corporate governance practices, financial standing of the issuers, liquidity, and risk.

Overall, the investment process seems robust, given the manager's focus on conducting competitor analysis, scenario analysis, and client profiling that form important aspects of the process. The core of the strategy lies in a combination of taking a duration view based on the interest rate directional movements and taking some credit bets in high quality corporate bonds at the shorter end of the yield curve. In line with its philosophy, the strategy allocates a portion of its assets to G-Secs and State Development Loans (SDL) in addition to investing in high quality debt papers. Dangi can vary his allocation towards these based on their valuations and relative spreads. The execution of the strategy is reflected in the fund's noteworthy performance. The fund has remained a consistent performer over the years.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Motilal Oswal Dynamic Fund

Assets under management: Rs 1,745 crore

Fund Manager: Gautam Sinha Roy
Top 3 equity holding: HDFC, Bajaj Finance, Maruti
1-year return: 8.12 per cent

Motilal Oswal Dynamic Fund decides equity allocation using an amalgamation of price/earnings, price/book and dividend yield of Nifty 50 Index. Depending on market levels net equity exposure can vary between 30-100 per cent.

Given that valuations are steep now, the fund manager has curtailed equity exposure to 40-45 per cent. Stock selection is done using a multicap strategy and debt is conservatively managed.

SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

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How is Income Tax Calculated?

Tax time is here again. Several taxpayers will be e-filing tax returns on their own. While filing your returns, a question is likely to cross your mind about how your tax dues are calculated? It's important to understand this calculation, so you can review your return and check whether tax is due from you or a refund shall be paid to you.

Income tax is payable when your income exceeds Rs 2.5 Lakhs. Income is aggregated from all sources. And deductions under section 80 of the income tax act are allowed from such aggregate income. Your income tax return cannot be successfully submitted unless tax has been duly paid.

If you are salaried most of your tax dues are taken care of via TDS or tax deducted at source by your employer. However, if you have earned interest income or any other income such as rent or capital gains, you'll have to calculate tax yourself. The most important thing to remember while calculating your taxes is to always calculate it on your aggregate income. Say for example you want to calculate and pay tax on rental income earned by you. To compute tax on such income, you must recalculate your total income and then calculate tax payable on it. Even though TDS has been deducted on your salary, total income including salary has to be recomputed. Once total tax is calculated any TDS which has already been deducted is adjusted from it and remaining dues have to paid.

Let us understand tax computation in detail.

Income is categorised under five heads, income from salary, income from house property, income from capital gains, income from business and profession and income from other sources. If any exemptions or deductions are available specific to these heads those are allowed before calculating aggregate income. For example, HRA exemption, LTA exemption are allowed on salary income first and then salary income is included in total income. Similarly, on rental income, deduction is allowed for municipal taxes and 30% as standard deduction. After these deductions, rental income is included in aggregate income. If you are a freelancer, expenses directly related to your freelancing work can be reduced from your freelancing income before such income is included in your total income under the head business & profession. Once you have arrived at your total income from all heads, you can reduce deductions available under Section 80. Deduction for ELSS Funds, EPF, PPF investments, LIC premium are allowed under section 80C. Deduction from medical insurance can be claimed under section 80D. Total income less deductions gives your total taxable income. Now calculate tax on this income. Rs 2.5lakhs of this total taxable income is exempt. On the remaining income up to Rs 5lakhs tax is calculated @ 10% and tax of 20% is applicable on income from Rs 5lakhs to Rs 10lakhs. Any income above Rs 10lakhs is charged @ 30%. On such total tax, cess is calculated @ 3% and must be paid along with tax. Any TDS which is already deducted on salary or interest is reduced from total tax. Remember to include the income related to TDS which you will be adjusting from your total tax.

Let's understand income tax calculation by way of an example. Neha receives a Basic Salary of Rs 50,000 per month. HRA of Rs 25,000. Transport Allowance of Rs 8,000 per month. Special Allowance of Rs 5,000 per month. LTA of Rs 20,000 annually. Neha pays a rent of Rs 20,000 and lives in Delhi. Neha has income from interest from savings account of Rs 8,400 and a fixed deposit interest income of Rs 5,500 during the year. Neha has made some investments to save income tax. PPF investment of Rs 50,000. ELSS purchase of Rs 20,000 during the year. LIC premium of Rs 8,000. Medical insurance paid of Rs 12,000. Neha's employer deduction Rs 50,000 as TDS.

Neha's total income from salary works out to Rs 8,64,800.

Basic Salary Rs 6,00,000

HRA Rs 1,20,000 (Rs 3,00,000 less exemption Rs 1,80,000)

Transport Allowance Rs 76,800 (Rs 96,000 less exemption Rs 19,200)

Special Allowance Rs 60,000

LTA Rs 8,000 (Rs 20,000 less bills submitted 12,000)

 

Deductions claimed

Section 80C Rs 1,50,000 (PPF deposit Rs 50,000, ELSS investment Rs 20,000, LIC premium Rs 8,000. EPF deducted by employer (Neha's contribution) = Rs 50,000 *12% *12 = 72,000)

Section 80D Rs 12,000 (Medical insurance Rs 12,000)

Section 80TTA Rs 8,400

 

Income from salary Rs 8,64,800

Income from interest Rs 18,400

Gross total income Rs 8,83,200

Less deductions Rs 1,70,400

Gross taxable income Rs 7,12,800

 

Tax calculation

Up to Rs 2,50,000, exempt from tax

Rs 2,50,000 to Rs 5,00,000              10% (10% of Rs 5,00,000 less Rs 2,50,000)              = Rs 25,000

Rs 5,00,000 to Rs 10,00,000           20% ( 20% of Rs 7,12,800 less Rs 5,00,000)              = Rs 42,560

More than Rs Rs 10,00,000         30% (nil)

 

Cess      3% of total tax (3% of Rs 25,000 + Rs 42,560)      Rs 2,026

 

Total Income Tax            Rs 25,000 + Rs 42,560 + 2,026    = Rs 69,586.80

 

Total tax payable by Neha is Rs 69,586.80 of which Rs 50,000 has already been deducted as TDS and remaining Rs 19,586.80 must be paid by Neha before filing her tax return.

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Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds

Top 4 Tax Saver Mutual Funds for 2018

Best 4 ELSS Mutual Funds to invest in India for 2018

1. DSP BlackRock Tax Saver Fund

2. Invesco India Tax Plan

3. Tata India Tax Savings Fund

4. BNP Paribas Long Term Equity Fund

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Reliance Equity Opportunities Fund

Reliance Equity Opportunities Fund Is now called Reliance Multicap Fund

How has Reliance Equity Opportunities Fund performed? 
With a 10-year return of 13.4%, the fund has outperformed both the category average (10.1%) and the benchmark index (6.8%). The fund has comfortably beaten both its category average and index over the past decade. 

Should you buy Reliance Equity Opportunities Fund?
This fund has no market-cap bias, but retains higher exposure to mid- and small-caps relative to peers. While it was a fairly consistent outperformer until a few years ago, it has been erratic in recent years. The fund manager has a penchant for placing large bets on niche themes or sunshine sectors, which paid rich dividends earlier but may have backfired during the market rally of the last few years. 

Reliance Equity Opportunities Fund has hiked its presence in large-caps, diluting its heavy mid-cap bias. It has spread exposure to sectors evenly, without the distinct tilt towards financials exhibited by many of its peers. With an improved performance last year, the fund is showing signs of a reversal in fortunes. It remains an aggressive, differentiated offering in the multi-cap space. 

 

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com