There Is No Free Lunch, Is It?

This article has been contributed by Riddhi Kharkia, with inputs from the entire team.

Okay, so there is an ad that has been playing for long and if you are a big cricket buff (read: IPL devotee), you surely couldn’t have missed it (okay, have you made your guesses). Let me give it away to you because this post wouldn’t begin without the name of the brand behind these advertisements. The ad that I am talking about is “Freecharge”. To be honest, the series of ads conceptualized by Freecharge have brilliantly summarized the significance of this service/brand.

Now, you must be definitely wondering—how on Earth is the Freecharge ad related to money management or this blog. Since it is no quiz and unfortunately you would not be getting points for figuring out the connect, let me give this away as well. Basically, seeing this ad, I thought of citing the incomes that are “free” of “charge” by the Government of India. So, you know what we mean by Freecharge 😉

Coming straight to it, tax is payable on all incomes earned in India by an Indian resident. However, there are some exceptions to this rule and certain categories of income have been specifically exempted from tax. Such incomes are known as Tax-free incomes.

Here, we are presenting the most common tax-free incomes that every tax payer should be aware of. The joy of tax-free income is beyond measure.

  Income Details
1. Interest on Savings Bank Account –   Tax free up to Rs. 10,000
2. Long-term Capital Gain on Sale of Shares/Mutual Funds – Wholly exempted from tax- Shares/Mutual Funds should be held for minimum 12 months

– Security transaction Tax (STT) must be paid while purchasing

3. Interest  or any payment received on PPF/PF –   Wholly exempted from tax
4. Dividends from Shares /Income from Mutual Funds –   Wholly exempted from tax-   Dividend must be received from Domestic company only
5. Educational Scholarships –   Wholly exempt from tax, in the hands of the person who receives it-   Not necessarily a government-financed scholarship
6. Amount received through Will or Inheritance –   Wholly exempted  from tax-   But when the amount is invested, only the income earned on that amount is taxable
7. Amounts received by way of Gift on Marriage –   Wholly exempted  from tax-   Gift can be anything and from any person
8. Money received from your EPF account –   Wholly exempted from tax, provided money is taken out after 5 years of continuous service
9. Money got under Voluntary retirement Scheme (VRS) –   Tax free up to Rs, 5,00,000-   Employees of Public sector companies or an authority established under a Central or State govt are also eligible
10. Leave Travel Allowance (LTA) received from the employer – Tax free up to the amount of bills of travelling provided
11.  Maturity or Claim or Surrender amount received by Life Insurance Company – 100% tax-free provided the premium paid did not exceed 20% of the sum assured.

Well this is it!

If you are aware of some income that we might have missed out in the list, then please mail us/comment on this article and we promise to make the change.

Thank you for your patience.

Cheers.

Sukanya Samriddhi Yojana – “Beti Bachao, Beti Padhao”

An Educated Girl will stay healthy, save money, build a business, empower her community, lift her country.

Quick facts about Sukanya Samriddhi Yojana – a special savings scheme for girl child introduced by Government of India in January 2015.

New Infographic

For more details, stay tuned to Fintuned.

Cheers!

 

Knowledge: A Non-Performing Asset That Banks Love

This article has been contributed by Harshita, with inputs from the entire team.

Just yesterday, one of my friends was talking to me of her break-up (no, not over drinks) and her incessant talk hovered around the assertion that it would have worked if she knew the guy better. To be honest, she failed to secure my undivided attention (not because her story was unappealing, but primarily because I was continuously thinking of a topic for my next article). During that long phone conversation, I stumbled upon a topic for this post.

Owing to the well-paced growth of retail banking operations in India, the Reserve Bank of India introduced the “Know-Your-Customer” norms for all banks, in late 2002. Though I cannot help my dear friend in resolving her “Know-Your-Mate” issue in relationships, I can definitely shed some light on the KYC norms adopted by the Indian Banking system as well as other regulatory bodies.

KYC

Those who are thinking, that this article is of no use to them, since they are not related to the banking sector should amend their opinion because if not employees, they are bank customers for sure.

Often, we come across the term “KYC norms” while reading newspapers (Did you read this one?), filling out forms etc., but do you really understand its significance? Continue reading “Knowledge: A Non-Performing Asset That Banks Love”

In a State of Tax SOS, Try ELSS!

The deadline is fast approaching. If you still haven’t done your tax planning, it’s time to gear up. There is no need to sweat because we are here just for your help (sounds awful lot like some marketing line, is it). Therefore, in the next three months, we will be focusing on a mix of tax related articles that will help you in efficient tax planning and save you some hard-earned money.

FU Tax!

So let us begin this series with an article contributed by Miss Riddhi Kharkia [ACA], a good friend, on Equity Linked Savings Scheme (ELSS).

First off, what is ELSS?

ELSS or Equity linked savings scheme is a type of mutual fund with a particular mode of making investments. It is a scheme that invests 65% of its corpus in equity and equity-linked products. As you can see, it is almost similar to any other mutual fund scheme with a slight variation in investing style. They are the favorite picks for tax planning because they offer dual benefits. Since the money is invested by the fund in equity i.e stock markets, investors get the benefit of capital appreciation plus dividend (if the scheme is dividend-oriented). In addition to that, investment in ELSS would is eligible for deduction to investors u/s 80C, which is capped to a maximum of Rs 1.5 Lakh. [Happy, huh ;)]

A detailed section on benefits.

When it comes to putting your money in any financial instrument, you want to do it with eyes wide open. So why not with ELSS?

To help you invest in this product with full-awareness, here is an elaborate section on benefits of investing in an ELSS.

  1. Since ELSS invests money in equity, it will help you to grow money when the stock market grows over a period of time. Currently, the SENSEX is on a decline owing to some heavy profit-booking activity and falling crude prices. As such, it is actually a good time to invest in the markets. In the later part of the article, I have provided my top three ELSS picks that could be your beginning point for taking the plunge!
  1. Investing in ELSS can help you in utilising tax exemption of Rs 1.5 Lakh in 80C, in case you have not been able to utilize it fully with traditional weapons like LIC premium and PPF/EPF investments. Take a stab at ELSS funds; you will like it 😉

ELSS comes with a lock-in period of 3 years only, the shortest among all tax saving options under Section 80C. In the case of SIPs, each installment is considered as a separate investment and will have a 3 year lock-in period from the date of such installment. The redemption on maturity is on first in first out basis.

After 3 years, you can remain invested for a longer period if you are pretty impressed with the returns and don’t feel like pulling out your money. A 3 year horizon is pretty decent time to help you grow money after considering market fluctuations as well. Additionally, a SIP gives you the benefit of rupee cost averaging. No, it is not some complex jargon but RCA simply implies that a SIP evens out the volatility in the markets and on an average, each installment gives you a hefty return.

  1. ELSS is the only tax saving investment that provides tax free returns for short period. Any returns received from equity funds after 1 year is tax free. Hence any dividends/returns/capital gains obtained from such funds are tax free.

When should you invest in ELSS?

Unlike a fixed deposit scheme or a regular insurance policy where investors can shell out money in lump-sum, this product requires a more mindful approach. Since it is an equity investment, It is prone to market risks and fluctuations and as such, the timing of the entry and exit is very important.

As I mentioned above, the best way to invest in a mutual fund (in this case, an ELSS fund) is creating a SIP because of its ability to generate steady returns over a specific horizon.

How to pick a winner?

Yes, this is a significant question because no one here wishes to lose money. While there are some definite parameters to look for, let me also point out that since an ELSS fund invests in equity, it has some inherent risk associated with itself. So the parameters you should ideally look out for are

  1. Long term performance of the fund.
  2. A glance at the holdings. (You can just take a look at the sectors it is invested in)
  3. Fund manager and performance of other funds managed by him/her.

Honestly, these parameters will give you a fair idea about the fund but as they say, research is never enough. Considering that, one may definitely divulge into further research on aspects like peer performance, expense ratio, leverage in the fund etc.

Conclusion

In comparison with other products under 80C, ELSS stands out both in terms of liquidity and stability. When compared with PPF, I believe PPF is a good investment option when you have surplus funds and you don’t need money in near future (a 15-year lock-in is huge). ELSS is viable when you want to maximize your returns along with tax savings in a shorter tenure.

As promised, here are my top three picks among ELSS funds that should help you get started in the least!

Note: Mutual funds generally offer two schemes – dividend (profits are given to investors from time to time) and growth (profits are ploughed back into the scheme leading to higher NAV). Here’s a look at the performance of the two types of funds.

*In no particular order*

  1. Reliance Tax Saver (ELSS) fund – Growth
  2. Axis Long Term Equity Fund – Growth
  3. L&T Tax Saver Fun – Cumulative

Disclaimer: It is your money. So, please read and invest!!

For Home Loan Virgins, This Tax Saving Article is a Must Read!

I just got back home after attending a housewarming party and am slated to attend one in the evening (Really hectic isn’t it). However, attending these housewarming parties got me thinking on the money that is required to finance them and ultimately, these thoughts waded into the land of housing loans (Well, you can call it a disadvantage of reading personal finance stuff the entire day 😛 ). Keeping the jokes aside , it is important to understand that most of us are going to buy a home sooner or later and hence, it is of extreme importance to know “how the housing loans can save us some money”.

Yes, you heard it right. We all know that housing loans can be used as effective tax-saving instruments but the problem is that we do not know all of it. If you go on the internet then you will obviously find any information on tax-saving using housing loans. However, there are two pain points in this regard:

1. The information is dispersed and unorganized. After looking for long myself, I found that there is no comprehensive picture that presents home loan tax benefits in one page.

2. Well, as other finance stuff, a lot of information in this regard makes it boring.

Now, with this article, I have attempted to solve both these problems by focusing only on required information and presenting it in a pictorial form. It is one comprehensive post that should answer almost all your queries related to managing tax using home loans. So, without wasting anymore of your time, here is the picture you should save:

Home loan taxation tips

This picture above refers the way tax can be reduced under the Income Tax Act, 1961 if you have taken a home loan and are paying interest on it.

Here is the link to conditions prescribed under section 80EE.  Do Have a LOOK.

* So if you took the loan in year 2013-2014 then the construction/renewal/repair etc. should be completed within 3 years from 31.3.2014. Thus, the significant date is 31.3.2017.

** Pre-construction interest is allowed on construction/acquisition etc. on a pro-rata basis. So, if Mr F (just didn’t want to use X) took a loan of Rs 10 lacs in 2010 to build a house and pays interest @10% per annum. Now say the construction got over on in 2012 then the amount of pre-construction interest works out to be Rs 2 lacs for two years. As per law, this interest will be allowed for 5 years i.e 2013 to 2018. Logically, the amount of deduction in each year would be Rs 40000 (Rs 200000/5 years). Remember this example for pre-construction period and that’s it!!

Author’s note: Well, I just used the term author’s note because it sounds kinda professional and exciting. But that doesn’t mean, I have nothing to say. So, in my opinion, sections 80C and 80EE are relatively easier and less complicated sections and can be implemented while filing your taxes without any outsider help. However, for section 24, I would suggest that you should always seek some knowledgeable guy’s help before proceeding to claim deduction.

Well, that is it from me! Hope that you would be able to use this knowledge and save some money 🙂 If there’s anything you don’t understand or any suggestions that will make my writing better, please feel free to use the comments section or mail at fintuned.in@gmail.com

Cheers.

Money Management is all about DIFY and DIY.

It is true that we are not that comfortable with abbreviations. Among other reasons, one thing is that it sparks a big surge in our inherent curious being. To tell you about myself, the moment I see any abbreviation in an article I immediately open up a new tab on chrome and look for the word without considering the article I am reading at that point in time. (However, I am changing this habit for the better)

I would NOT want you to do something like this and I promise that you will know all about the short-forms here in a while. (Also, I will keep any irrelevant gyaan to minimum). The inspiration to write this article came to me after a friend of mine pinged me this: “You know, I have heard many advocates of personal finance, money management etc. but never in any of their talks I have understood how to start the money managing exercise and as such, never bothered about it.”

Come to think, it is a legitimate question because may it be a gym workout, study for a big course or practically anything in life, the big question is “How do I start?” Well, in this blog post I have tried to devise a simple methodology that should help you start the lasting exercise of money management.

Kanna Keep calm

DO-IT-FOR-YOURSELF (DIFY)

See, I gave away the first abbreviation (Hope you might be a little happy now).  Well, it is not a new rocket science approach but just a redefined way of  looking at things. Personal finance is all about you (including you near ones) and hence, it is significant to realize that you have to do-it-for-yourself before embarking on this journey. To do this, you just need a plain paper and a pen and give this heading. Then, divide your future lifetime into a series of time periods depending on your outlook and potential to achieve time-bound targets and start mentioning the dreams/things you have to do for yourself.

Let me give you an example:  If I were to make my DIFY sheet, it could go like this:

Time cycle                            DIFY        

By 25 years                               Get a car (hatchback preferably)

25-30 years                              Own a flat of say xyz sq ft.

And so on…………..

So you see the funda right? And it is not at all difficult because you know what you want to do for yourself.  Just one more thing to make it more valuable would be to add a monetary value to your DIFY. For instance, besides my “Get a car” DIFY, I should add Rs. 8 lacs. Though, it is a small tweak but its effect is profound 🙂

DO-IT-YOURSELF (DIY)

Can you say with any certainty in which direction a football player would hit the ball if the goal post were to be removed. Obviously NOT! And not only you, he himself would not have an idea about where to hit the ball.

Sadly, I have seen a good number of people do this with their personal finance exercise as a result of which, they make the move in erroneous directions and do not even know if a goal is scored. Therefore, it is of utmost importance that we at least have some idea of where to go and I am happy to tell you that you have already done it. Now, if you can then grab the same DIFY sheet and make another column called DIY.

What I want you to do under this column is to just scribble anything about investments, savings, instruments (FD, bonds) etc. that you know about can help you reach your DIFY target.  So, you can write things like “Invest in fixed income”, “Invest in stocks”. “Save 10% every year” etc.

Well, congratulations on successfully starting your money management/dream achievement exercise. Now, research on your DIY elements and seek help from family, professional or for that matter, any resource you can grab.

So please go now, take a sheet and do it. All you would have to sacrifice is making 15 Maggi packets i.e 30 minutes. [Sorry, if it wasn’t funny 😉 ]

Any questions or feedback! You have the power of attorney to the comments section.

Cheers.

Creating a Budget is Damn Easy!

Hoping that you are convinced with the significance of a budget as the first and foremost tip for pursuing a healthy financial lifestyle, this piece will guide you in creating your first budget! It is no use if we just read the articles/tips and erase it from out brains once the day is over.

The only solution to implementing a change for the better is to start doing the activities/tasks required to effect that change. Thus, let us help you out in creating a personal budget for yourself so that it becomes a habit.

Before jumping into the exercise of creating a budget, you can decide on a few things:

1. The time duration of the budget i.e weekly, monthly or yearly.
2. The purpose of the budget i.e to control expenses, to plan investments, or something else entirely.
3. The third is not a decision but a promise that you will be obedient to your budget (Pinkie swear promise!)

One of the most traditional ways to create a budget is using a notepad and a pen (though you can also used different colored pens to make it look fancy) on the last day of the previous month.

Thus, if Sheldon is making a budget for March, he should ideally do it on the 28th of February but if you are not as punctual as Sheldon, you can still create your budget a bit late!

A simplest budget should compulsorlily cover the following areas:

  • Estimated expenses for the upcoming month/week.
  • Estimated income
The expenses can again be broken down into recurring (those that occur every cycle) and one-time (for nce only)
And you are done with you first budget!! Congratulations.

Now, if you are feeling particularly adventurous and also feel that the paper and pen is an old timers thing, then we would suggest this:

The Google docs gallery has certain pre-loaded templates for your budgeting needs and while they are more comprehensive, it is also easy to store them. The following two are our recommendations and you can search them on the gallery.

Best-Personal-Budget-Planner A well done and comprehensive budget spreadsheet that includes frequency of expenditure, charts and many more things, by Lars Shirey.

Simple Budget Planner A compact budgeting spreadsheet that lets you budget expenses by percentage of annual and monthly income, by Google.

That is it. So march now to your desk or your laptop and make sure to create your first budget!

If you have any doubts/questions, the comments section is hungry 😉

Cheers!