Red Pill or Blue Pill – The Dawn of Financial Matrix in India

This post has been contributed by Vidit Dugar from Fintuned Team.

We live in times where Automation & Artificial intelligence have become buzz words and to be honest, these concepts come out to be super exciting. Taking the risk of making it a little too melodramatic, whenever I hear these words, moves like Robocop, IRobot, Matrix series etc., quickly flash through my head and then I end up using my time [you can call it wasting if you wish ;)] in watching some adrenaline pumping snippets from these movies on Youtube. However, this article is not about my day-dreaming trips and therefore, let’s leave it at bay 🙂

Recently the International Advisory Board (IAB) suggested SEBI to study fee based model for robo-advisories in the investment sector bringing the recent automation of the financial advisory sector into limelight. The marriage of automation and finance is an interesting move in the Indian financial ecosystem and while countries like US and UK have moved at light speed in this domain, the recent move suggests India is ready.

If the words robo-advisory model make you imagine Skynet taking over the world or think of a robot like Baymax (From Big Hero 6) framing your investment plans, then you are mistaken because Jetsons age is not here yet.

Continue reading “Red Pill or Blue Pill – The Dawn of Financial Matrix in India”

Crowdsourcing Content

When we started Fintuned, we always had a vision to make Fintuned a portal that not only distributes financial wisdom but also becomes a venue where everyone can share their financial stories/wisdom/ideas/tools and any other thing I missed out on 🙂

Do you know why? Because:

we believe that best learning stems from healthy experiences

we believe that best learning stems from diverse ideas

we believe that best learning stems from sharing stories

Basically, we believe that the best way to know is to seek answers in stories that are all around you! Think about your life and your learning and you will realize that we aren’t wrong.

So, to get this into effect, we are doing something that will add immense value to Fintuned’s patrons.

We are inviting everyone of you to share your stories/wisdom/ideas/tools with every single one of Fintuned’s patrons and if you wish, we will keep it anonymous. You can rendezvous with us in more ways than one:

Email: fintuned.net@gmail.com ; Facebook; Twitter

Albert Einstein

Cheers,

Mihir

Learning, Like Investing, Is Ongoing

An informative piece on establishing the significance of MOOCs and how to leverage them optimally.

Hey Folks,

Hope you are doing great as always and spending some quality time with your friends and family.

Before I jump into narrating my thoughts and drawing up my ideas, let me mention an extremely significant message carried in the title of the post itself. A few years back, when I started with my first investment, a courteous gentleman told me “Learning, like investing, is ongoing” and that thought has stayed me ever since because of the loud and clear message it conveys.

In these last few years, a particular trend in the education space has come out to be a wonderful surprise. Growing up in India (no culture appropriation trash here please), I have always been insistent on the importance of securing a degree/certificate, whatever you call it. However, the emergence of MOOCs i.e. Massive Open Online Courses has brought about a tectonic shift in the way we used to learn and believe me, this change is definitely for the better.

moocs

Websites like Coursera (pioneer in this space), Khan Academy, Code academy, Udemy, Udacity, edX, Skillshare and desi website Apnacourse are doing some great work in making education affordable, accessible and diverse. To give you my own example, I am currently pursuing a wonderful, interactive course on HTML and CSS from Udemy and that too for $10 only. It may sound absolutely unbelievable but the potential unlocked by these online courses websites is immense and the sad part is that a lot of people are simply unaware about the same.

If you are thinking that I will enlist the catalog of courses on these websites, show samples etc. then you are completely wrong. In this post, my idea is to give you some amazing facts (even though they are more of experiences but because of the associated veracity, let me just call them facts) which will compel you to look through the above-mentioned names. So, here we go:

Fact #1: Courses on these websites are unimaginably inexpensive. While Khan academy is a free portal, integrated courses can cost as low as $10 on other web properties.

Fact #2: Most of these courses have lifetime access. So, don’t worry if you are way too busy for days, weeks or even months.

Fact #3: They are mostly courses with certification. Too hell-bent on getting some document? That’s solved.

Fact #4: Take the names of world’s best educational institutions and you will find it present on the MOOC model.

Fact #5: Because most of these guys have mobile applications, accessibility becomes a non-issue.

To be honest, I can go on and on but you get the point! The intent behind this post is to make you aware of the myriad possibilities with the concept of MOOC. It is worth a shot.

“Learn. Unlearn. Relearn”, said Nikesh Arora, at a sales conference when I used to be a Googler. Undoubtedly, he knows what he says.

Let me leave you with this thought and as a bonus here is a link that you should surely visit – www.moocs.com

Cheers,

Mihir

3 Important Money Lessons To Learn From Vasan’s Story

Vicarious learning is a notable method to avoid making similar mistakes others have made. This post gives you three important lessons from a story that surprised everyone.

Hey folks,

Hope every one of you is doing simply phenomenal and making money money money 😉

I have not been able to communicate with you since last few days (believe me, that’s a lot) because of all the running around I have been doing for work and marriages (well, it is the season). That being said, I wish to share some very interesting insights I gathered after reading the wonderful coverage of Vasan Healthcare’s story on Livemint. Leaving the political controversies aside for this post, allow me to focus strongly on significant takeaways from this entire episode. Agreeably, the story carries a lot of meat for early-stage ventures to learn from but if we think about it harder, there are some absolutely forthright money management lessons that standout in the saga. For your convenience and without further ado, here are 3 most important money lessons to learn from Vasan Healthcare’s story:

Vasan Healthcare Image

*Let thy step be slow and steady, thou shall stumble not: Almost on a daily basis, I come across buzzwords like instant gratification, super-normal growth, wide presence etc., implying the urgency of growing and reaping benefits instantaneously. In case of Vasan as well, the entrepreneur’s insatiable hunger to grow and grow fast brought about a dangerous climax. Even though the brand grew to around 200 centers in a short time frame, the entire model started becoming unsustainable and finally gave away under tremendous pressure from stakeholders.

In case of money management as well, we have often seen cases where people plan and try to reach the zenith as quickly as possible. In our opinion, it is equivalent to digging a grave for yourself. If you initiate the wealth creation exercise with the mindset of making a quick buck (time the markets, eh?), you are going to end up in a dismal state sooner than later.

*Lack of documentation becomes a problem for acceptance: True enough, the moment we stop keeping a track/record of significant activities, the results of those activities go out of control. If you read the Vasan story carefully, it doesn’t take long to realize that a grave error committed by the entrepreneur was to overlook the need of keeping a proper Balance Sheet for the company. As a result, both him and his stakeholders could never understand the intricacies of Vasan’s operations.

It goes without saying that a similar principle needs to be implemented in the money management exercise. You may be earning 18 percent plus returns from equity, invested money on a project with 20 percent IRR etc., but without reasonable record, it only becomes a mess at the end of the day.

*Have a mentor/coach and pay heed to him/her: Oh, this is the most critical learning I had after reading how the Vasan story played out. While the entrepreneur had scored the support of eminent personalities as mentors on board, the entire arrangement failed to produce result because of entrepreneur’s inattentiveness to their advice.

In order to manage money astutely, the presence of a great, experienced mentor is indispensable. However, the buck doesn’t stop at just having a mentor. The important thing is to understand, appreciate and evaluate his/her advice in the most legitimate possible. Mentors not only ease your path to success but also make sure that you go farther than you imagined!

While there may be more takeaways from the Vasan saga, I believe that these three are the most important lessons for me. I strongly recommend that you read all the literature available on the episode before making any conclusions. If you have any additions/suggestions to make, feel free to put it in the comments section.

Cheers,

Mihir

Everything There Is To Know About HRA

An exhaustive FAQ with respect to HRA that everyone needs to keep handy.

  1. What is HRA?

HRA or House Rent Allowance is a grant provided by employer to employee to meet the cost of living in a rented house at the employer’s work location. Such HRA forms parts of the salary that employee receives from employer every month.

  1. What is the tax exemption available in relation to HRA?

Least of the following is exempted:

  •  Actual HRA received from the employer
  •  Rent paid – 10% of the salary
  •  50% of Salary, in case the employee resides in metro cities, otherwise 40% of salary
  1. I stay with my parents/relatives. Can I take HRA benefit?

Of course, you can! However, this is only possible if you have entered into an agreement with them and actually make the payment every month, preferably by cheque.

*Quick tip*: Avoid claiming tax benefits on rent payments made to the spouse as the arrangement can be characterized as a sham transaction, say experts.

  1. Can I pay rent by cash?

Yes, you can. However, it is advisable to make bank transfers or cheque payments for future references.

  1. How does HRA flow back to the owner/parents?

Owner/Parent will taxed for the rental income after a 30% deduction.  If they are retired and do not derive any significant taxable income, the rent would be tax free in their hands.

*Quick tip*: It gets better if the property is jointly owned by both parents. Then you can divide the rent two-ways so that the tax liability gets split between the two individuals.

*Quick tip*: If their income exceeds the basic exemption limit, you can help them save tax by investing in their name under Section 80C options

  1. Can I claim HRA and Home loan deduction at the same time?

Yes, only where you are staying and paying rent as well. One of the cases this is frequently seen is where home is bought are in 2 different cities.

  1. I am a self-employed person, Can I claim HRA?

No, as you are not receiving a formal salary. However, you can claim a deduction under section 80GG of the Income Tax Act for the rent incurred on the residence.

  1. What is considered as an evidence that I am paying rent?

Rent agreement or rent receipts is the proof. Please note that you will have to submit copies of rent receipts or rent agreement, depending on what your organisation stipulates.

  1. Is there any role of PAN card number here?

Yes, if rent paid by you is more than Rs. 1 lac per year, you need to submit pan card details of the owner. In case the owner do not have Pan Card, a declaration will do.

  1. Is there any particular format for rent receipt?

No particular format for rent receipt has been specified, but please ensure it mentions the following relevant information:

  • Amount of rent paid
  • Period/month
  • Mode of payment (Cheque/Cash)
  • Your name
  • Landlord’s name
  • Landlord’s signature
  • Residential address
  • Date & Place
  • A revenue stamp of Rs 1 for payment (both cash/cheque) exceeding Rs 5,000

If there are any further doubts that you may have, please reach out to us.

Cheers,

Mihir

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.

Income Tax Returns: An Assurance Of Your Financial Health!

Just the other day, I got a rather usual message from a teenage cousin. It was a troll message on the famous Alia Bhatt ( now you know why its rather usual :P). This is how the message goes (pardon me if you have already heard this one, because it is undoubtedly naïve)

Alia Bhatt: Dad, what is your plan for the weekend?

Mahesh Bhatt: Income tax returns!!

Alia: When did the first one release? 😛

To be honest, I know it is a poor joke. However, the only reason I put it here is to highlight the significance of filing Income Tax Returns [(Even Mahesh Bhatt files it ;)]. Also, the aim of this post is to assert the importance of filing returns when your taxable income is below the prescribed threshold.

Individuals, whose total income without allowing any deductions exceed the basic exemption limits are mandatorily required to file Income Tax Return (ITR).

So, what does total income, without allowing deductions mean?

For this, you first need to know the existing exemption limits, beyond which you are liable to pay tax.

For Assessment year 2015-2016, the basic exemption limits are the following:

  • Individuals below the age of 60, the exemption limit is INR 2,50,000
  • For senior citizens, whose age is between 60 to 80 years, the exemption limit is INR 3,00,000
  • For super senior citizens, whose age is more than 80 years, the exemption limit is INR 5,00,000

Let’s say, Mr. X has an income of INR 2,80,000 and his deductions under section 80C come to INR 50,000 for A.Y. 2015-2016. Hence, taxable income is INR 2,30,000 (INR 2,80,000 – INR 50,000). Now, since this amount is below the thresholds mentioned above, the tax payable is nil.

However, here the striking point is – Mr. X is required to file his returns because his Gross Total Income (total income before allowing deductions) is above the exemption limit of INR 2,50,000 (assuming he is not a senior citizen).

Now, the question is “Why should one file the return when his/her income is below taxable limit?”

Filing income tax return does not necessarily means paying taxes. There are a number of benefits that will ease your life and future plans if you file tax return. ITR acts as a credential of your financial well-being and serves as an evidence of your income. Additionally, it makes you a good law abiding citizen (like how Mr. Modi says).

Continue reading “Income Tax Returns: An Assurance Of Your Financial Health!”

The Loan Wolf: An Introduction

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

So, we were thinking really hard to find a topic that would be fun to write and at the same time, be appealing to our readers. To be precise, we were breaking our heads over this thought with a small glass of hot “cutting chai” and delectable “maska pav”. As if it was, my attention swayed to a young guy, who was requesting the eatery manager to spare the payment for time being, and promising to clear all the dues by month end.

EUREKA! There it was.

I got a simple and interesting topic for my next series of articles: “Credit/loans”. To think of it, the arrangement between the manager and that young guy (No, it was not someone from the Fintuned team :P) is nothing but a credit scheme, which in popular parlance is known as “Loans”. Here is a noteworthy article that discusses the history of loans, in case you are at all interested!

Loan bomb

Investing in future is expensive. Be it a home or a car, you have to go an extra mile to get that big-ticket item. And this is where loans come into the picture. If you have never borrowed, you might not know how to get a loan. Though it may seem easy, but certain factors should definitely be kept in mind before opting for loan.

So, let’s get started about the loan process from start to end. (But, we have kept it short and sweet) Continue reading “The Loan Wolf: An Introduction”

Frequently Forgotten, No More!

Contributed by Harshita, with inputs from the entire team.

We all like to get gifts, don’t we? And more so because the Valentine day just passed us by, we deserve gifts. So to keep up the tradition that many a teenage hearts have begun, I will shower you with some precious gifts that will do you well in this tax season. So, unlike the gifts that you get on the 14th Feb these gifts are meaningful and precious (Haww, Did I just say that 😛). As the previous articles on this blog, we demonstrate our love for salaried people this time as well. So, here is a list of tax-saving investment options, which you need to keep in mind.

Following is an illustrative list of tax-friendly investment options:

  • Provident Fund (PPF)
  • National saving certificate s (NSC)
  • Equity linked saving schemes (ELSS)
  • Unit linked Insurance plans (ULIP)
  • Post office saving scheme

Duhh, haven’t we covered these already? Yes, most of them in great detail.

In order to break this monotony, we conducted a small research to understand the general composition of deductions. As expected, most of the participants had their 80C sorted. Seeing that, we came up with a thought of shedding some light on the frequently forgotten/unclaimed deductions (Well, you are all champions in 80C). Continue reading “Frequently Forgotten, No More!”

Gratitude, At The Rate of 100 Percent Compounded Perennially!

This article has been contributed by our number cruncher Mr. Rohit Agarwal, with inputs from the entire team.

Do a small exercise. Just type “The importance of saying thank you” on Google. Surely, you will be amazed to see the multitude of articles that modestly unravel the significance of expressing gratitude. Wait, when did we become the philosophers of our generation?

To be honest though, these two words carry umpteen significance in our daily lives because they recognize the effort (Well, now you decide if you want to say thank you to Mr Rahul………..:P). However, I am not here to load my readers with all the mystical knowledge behind gratitude. In keeping with that notion, I will head straight to the discussion on the topic “Gratuity”.

gratuities_always_accepted_keepsake_box

Most of us have an idea (not like Abhishek Bachchan of course) that Gratuity is a retirement benefit, but are we absolutely aware of the tax implications of this benefit? If you answered that with a NO, then this post will change your answer in a few minutes.

To begin with, Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company (Saying thank you). Gratuity is a defined benefit plan and is one of the many retirement benefits offered by the employer to the employee upon leaving his job. An employee may leave his job for various reasons, such as – retirement/superannuation, for a better job elsewhere, on being retrenched or by way of voluntary retirement.

Establishments Covered Under Gratuity Act?

Well, it is extremely important to know if you are covered under the Gratuity Act or not. So, here is an overview of the establishments that are covered under the said act. [Don’t be worried about memorizing it. Just glance through ;)]

  • Every factory, mine, oil field, plantation
  • port, railways, shop & Establishments OR
  • educational institution

Employing 10 or more persons on any day of the preceding 12 months.

Eligibility

As per Sec 10 (10) of Income Tax Act, gratuity is paid when an employee completes 5 or more years of full time service with the employer (minimum 240 days a year). Please note, an employee means those who are on the company’s payroll. Trainees and interns are not eligible for this compensation.

Tax treatment of gratuity

And, here comes the real challenge.

Warning: If you are easily bored by tax laws or they perplex you every single time, then DO NOT just give it to “your CA”. Rather, prepare a good coffee and peruse through the diverse collection of Fintuned’s articles.

The gratuity so received by the employee is taxable under the head ‘Income from salary’. In case gratuity is received by the nominee/legal heirs of the employee, the same is taxable in their hands under the head ‘Income from other sources’.

The tax treatment for an employee varies as per their employers. Here’s a brief idea of the tax treatment of gratuity for each category of employees in detail.

For the purpose of calculation of exempt gratuity, employees may be divided into 3 categories –

(a) Government employees

(b) Non-government employees covered under the Payment of Gratuity Act, 1972

(c) Non-government employees not covered under the Payment of Gratuity Act, 1972

In case of government employees – they are fully exempt from tax on gratuity. So, they have the maximum tax benefit when it comes to gratuity and a good amount is credited in their bank accounts (I have no comments on their work style 😛) and not even a single piece of this pie needs to be shared with the government. (Are you thinking of a career change)

In case of non-government employees covered under the Payment of Gratuity Act, 1972 

Maximum exemption from tax is the least of the list given below:

(i) Actual gratuity received;

(ii) Rs 10,00,000;

(iii) 15 days’ salary for each completed year of service or part thereof

Note:

  • Here, salary = basic + DA + commission (if it’s a fixed % of sales turnover).
  • ‘Completed year of service or part thereof’ means: full time service of > 6 months is considered as 1 completed year of service; < 6 months is ignored.
  • Here, number of days in a month is considered as 26. Therefore, 15 days’ salary is arrived as = Salary * 15/26 (This is very very important)

In case of non-government employees not covered under the Payment of Gratuity Act, 1972 –

Maximum exemption from tax is least of the 3 below:

(i) Actual gratuity received;

(ii) Rs 10,00,000;

(iii) Half-month’s average salary for each completed year of service (no part thereof)

Note:

  • Well, the definition of salary is similar to the abovementioned one.
  • Completed year of service (no part thereof) means: full time service of > 1 year is considered as 1 completed year of service. < 1 year is ignored.
  • Average salary =10 months’ salary (immediately preceding the month of leaving the job)/10

Note: This Rs 10-lakh ceiling is a lifetime exemption limit, it will be reduced by the tax-free exemption claimed from any previous employment.

As you may have noticed, the calculation of maximum exemption seems a bit complex. However, since we are at your side, you need not be stressed. In order to resolve any doubts, we will come up with a calculated example ASAP (within a day) to give you a broader understanding on tax treatment of gratuity.

Is your coffee over?

While I am not sure of the coffee, this post is certainly over and I sincerely hope that you gained a better perspective on Gratuity. If there are any questions/doubts/comments, please reach out to fintuned.in@gmail.com. Or, litter the comments section 🙂

Cheers.