Fund houses, namely ICICI Prudential AMC, Reliance Mutual Fund and Birla Sun Life Mutual Fund, have launched an add-on feature, which is providing life insurance cover to the investors. The life insurance cover provided is available to investors of select schemes of these fund houses and is directly proportional to the monthly SIP investments being made by the investor. This feature provides coverage against the uncertainties of life besides enabling investors to accumulate wealth.

How does it work?

In order to be eligible for the insurance cover, the SIP registered should be for a period of three years and above. The cover is 10 times the monthly SIP installment in the first year, which increases to 50 times in the second year and then 100 times third year onwards. There are caps to maximum cover by these AMCs. The following table gives an idea of how this life cover feature works:

What if an investor exits mid-way / stops SIPs / withdraws partially?

If the investor discontinues the monthly investment before three years, the insurance cover stops immediately.

However, in case the SIP with insurance is discontinued after three years, the insurance cover is available equivalent to the value of SIP units so allotted as per the valuation on the first business day of the month in which renewal confirmation is given.

Merits

One of the key advantages of SIP with insurance cover is that the scheme provides a free group insurance cover to the investor without any extra cost. This insurance coverage shall continue to pay the SIP amount in case of premature death of the investor to achieve his investment goals.

Demerits

This add-on insurance feature is not available under all schemes and therefore it provides limited choice to the investor in terms of selecting the funds. The insurance coverage is provided to only the first unit holder and is not extended to joint/ second unit holder.

Mutual fund investments are subject to market risk. Insurance coverage has to be settled with AMC or though group insurance provider. Please read the offer documents before making any investment decision.

Arabinda Kundu

10.08.19

Courtesy : Economics times, money control.

The introduction or rather reintroduction of long term capital gains taxes on equity mutual funds including ELSS(equity linked savings schemes) has made some novice investors a bit jittery. A lot has already been written and said about long term equity gains taxes on equity schemes. In short, considering the potentially high returns, Rs. 1 lakh annual gains taxation threshold and the grandfathering of returns till 31 st  January 2018, equity schemes still hold the edge over competing investments. This also holds true for ELSS funds that investors choose for making tax saving investments. In case you are still on the fence regarding if there are any benefits of opting for tax saving mutual funds over traditional tax saving investments, the following are seven top reasons to choose ELSS.

1. Short Lock-in:

All tax-saving investments feature a lock-in period which currently varies from 3 years to 15 years. During this lock-in period you are not allowed to redeem your investment or make withdrawals except for some specific emergencies. As per existing rules, among the available tax saver investments in India, ELSS i.e. tax saver mutual funds have the shortest lock-in period of 3 years. This allows you the ability to shift to a different investment option within a relatively shorter period of time in case your chosen investment is not performing as per your expectations. Obviously in case of tax saver schemes with longer lock-in period, you do not receive the same flexibility.

2. Flexibility to Choose Investment tenure:

The flexibility of mutual fund schemes is unmatched even in case of tax saver investments as you have the option to choose your investment tenure beyond the 3 year lock-in. In case of most other tax saving investments you have to invest in blocks of 5 years or more beyond the initial lock-in period. This is not the case with ELSS schemes – you can stay invested for a day or even for decades after completion of the initial three year lock-in period. Typically staying invested in a top rated ELSS mutual fund for a longer period offers you greater compounding benefits.

3. Potentially Higher Market Linked Returns:

ELSS are market-linked diversified equity schemes, this gives them an edge over fixed return investments that offer tax benefits. The main problem that fixed rate tax saving schemes such as PPF have is that inflation reduces the actual returns generated by these investments over time. Fortunately being market-linked, tax saver mutual funds can provide potentially higher returns that can beat the adverse impact of inflation in the long term. This is the key reason why many individuals who make investments with the intention of planning for retirement or other future expenses have moved away from old school options such as fixed deposits and PPF to mutual
funds and ELSS instead.

4. Compounding Benefit:

Compounding is what makes today’s investments more valuable in the long term and equity linked savings schemes can potentially deliver superior compounding benefit when compared to traditional tax saving investments. This is because the returns offered by traditional instruments such as tax saver fixed deposits and PPF tend to offer a lower rate of return than the average ELSS. This causes the compounding of the initial investments to grow slowly and reduces the overall benefit of compounding for you in the long term. In case of mutual funds such as ELSS, the potential returns being higher, these compounding benefits tend to add up faster for investors. It must however be pointed out that ELSS returns do not have a fixed ROI, hence during some periods, returns will be considerably higher than during other periods with historic long term average returns of equity schemes recorded at 12% per annum.

5. Option of SIP Investment:

SIP or systematic investment plans are akin to recurring deposits for ELSS investments and currently this route has emerged as the key driver of equity mutual fund investments in India. For starters, a SIP allows you to invest over the long term in small installments so you do not need to worry regarding upsetting your monthly or annual budget. SIP is also suitable for individuals
who tend to have trouble saving as the amount gets debited automatically from your bank account. This way you will end up saving money for the future instead of spending it all. Last but not the least, SIP also provides the benefit of rupee cost averaging to investors. The NAV of an ELSS fund changes daily and investing via SIP eliminates the need for investors to time their entry into the market by providing an average value of units (rupee cost averaging) over the chosen investment tenure.

6. High Levels of Transparency:

Mutual fund houses i.e. asset management companies (AMCs) who manage ELSS and other mutual fund schemes are regulated by SEBI (Securities and Exchange Board of India). As per SEBI guidelines, AMCs have to make periodic disclosures regarding key information of all schemes managed by them. Information provided through these mandatory disclosures include net asset value (NAV), assets under management (AUM), scheme returns over different periods, total expense ratio (TER), current asset allocation, etc. While some of these have to be
reported daily, others need to be reported as per a monthly or quarterly schedule. As of now, no tax saver investment in India features a higher degree of transparency than ELSS. Hence tax saver mutual funds ensure that you always have the latest information regarding the status of your investments.

7. Ease of Investment:

The advent of Internet and related technology has significantly eased the pains related to making tax saving investments. However many traditional tax saving schemes such as PPF still require you to physically queue up at a designated bank or post office so that you can subscribe to the chosen instruments. Not in case of tax saver mutual funds. After having adopted Aadhaar-based eKYC, the industry as a whole allows investors to start investing online without having to leave the comfort of their home or office. You can of course still complete an in-person biometric KYC at designated RTA locations, but the advantage of a completely-online cKYC for tax saving investments is currently only available to mutual fund investors.

Courtesy: Paisabazaar
July 10, 2018

Children’s day is round the corner and it is the right time to start thinking about our children’s future. November 14, the birthday of our first Prime Minister Jawaharlal Nehru is celebrated as children’s day as he always loved children and took measures for their growth and development.

Children play completely different and the most important role in our lives. For some, they act as an emotional support system; they are the most precious gifts anyone can have. All of us want our kids to do something different, better and beautiful. But what is our responsibility as a parent?

It’s we who play a major role in shaping our kid’s life. So how we support them at each and every phase of life both emotionally and financially is very important supporting your kid financially even before they are born is something that is in your hands. There are a lot of children’s gift plans available in the industry.

What is children’s gift plan?

Children’s gift plan is a mutual fund type. It is a hybrid mutual fund (solution oriented).The objective of these funds is to generate wealth for kid’s future goals like education, higher studies, marriage, etc. These funds are best suited for long term investors.

Features of children’s gift fund:

1. These funds are long term investment plans.
2. They can have a lock- in period of 5 years or till the kid turns 18 years
3. No tax benefit is given.
4. As the intention is to achieve long term goals like education or marriage and discourage early withdrawals, these funds have higher exit load as compared to other mutual funds.
5. The exit load may range from 3 to 4%
6. Grandparents can also investin the name of their grandchildren.
7. At the time of redemption, money is sent to the beneficiary’s account only. (kid’s account)

How is children’s gift fund different from normal mutual funds?

These funds are designed specifically for the above theme, however, the choice of securities or portfolio composition is like any other hybrid or equity fund. The performance of these funds varies as per the market too. The functioning is like any other normal equity fund.

There are certain limitations as well.

If you invest your money in such theme based funds, and the performances over medium to long term are not favorable, there are lesser chances of redemption because of lock in period in some mutual funds.

Also even after the lock in, there is no tax benefit. There is nothing in these funds which is not available in plain vanilla equity or hybrid fund. In the latter, you always have a choice to change your investment pattern and align your investment strategy as per the changes in the market. The only thing you have to focus more is being disciplined in terms of investment and not redeeming before you achieve your goal.

Have a look at the performance of children’s gift funds available in the market.

We are all familiar with investing in mutual funds. But, did you know that you can also invest in mutual funds in the name of a minor (child under 18 years of age). While we will get into the merits and demerits of investing in the name of a minor later, it is first essential to understand how the entire process works.

How to go about investing in MFs in the name of a minor?
The parent / guardian will have to open a mutual fund folio in the name of the minor child. Remember, the minor ‘s investment in the mutual fund cannot be held in joint names. It has to be necessarily held in the name of the minor only. Since the minor is not permitted to take financial decisions in her own name, there will have to be a designated parent or guardian who will be the custodian of the account. While the minor will be the first and sole holder, the guardian can be either of the parents or any legally appointed guardian.

Interestingly, if you are planning for the long term, you can also do a systematic investment plan (SIP) in the name of the minor. The debits for the SIP can either come from the parent ‘s designated bank account or it can come from the child’s minor account, which is under the designated guardianship. One thing is important here. All minor SIPs will automatically cease to exist on the minor attaining majority (age of 18). From that point, she becomes the investor and will have to go through KYC in the proper format.

What are the documents required for investing in the name of a minor..
For opening a minor’s mutual fund folio, there are 2 key documents required.

Firstly, the proof of age and date of birth of the minor is required. This can be either provided in the form of the birth certificate issued by the municipal authorities or a passport.

The second document is required to establish the relationship between the minor and the guardian. In case of parents, the birth certificate or the passport mentioning the name of the parent is sufficient. In case of a legal guardian, a copy of the court order will be required.

In addition, the parent or the guardian to whom the minor is attached will have to be KYC-compliant as per the extant SEBI regulations. As stated earlier, the SIP will be valid only till the minor attains the age of 18 and automatically cease after that. Post that date, the minor turned adult will have to go through the entire KYC process in her own name. There are also cases when the guardian may have to change. In that case, a no-objection-certificate (NOC) will be required from the current guardian. Also the court order appointing the new guardian will be required. Needless to say, the new guardian will also have to be KYC compliant before becoming guardian to a minor.

What about dividends and capital gains on funds held by minor
As per the existing provisions of the Income Tax Act, all income of the minor will be clubbed with that of the parent or the designated guardian. Any such income will be taxable in the hands of the parent or guardian with whom the minor’s income is being clubbed. Of course, dividends are tax-free in the hands of the investor and so are long term capital gains, when held beyond a period of 1 year. But in case the minor’s fund is sold before the completion of one year, it will be treated as short term capital gains and included in the total income of the parent or guardian and taxed at their peak applicable tax rate.

Is it a good idea to buy MFs in the name of a minor?
There are actually two ways to look at it. Firstly, when you are planning for your child’s future, it always makes investment sense to demarcate the investments for your child’s future separately. Otherwise, investments are fungible and such funds tend to get used for other allied purposes. To that extent it instills discipline in the financial planning process. There are also child plans of mutual funds that you can select from, but that comes with a lock-in period and hence may not suit your requirements.

The argument against investing in the name of minors is that it takes away your flexibility. The day the minor turns 18 and attains majority, you will have no control over how she wants to use her funds. That is something you need to keep in mind. Another way will be to invest in your own and designate the child as the specific nominee for that particular investment. That will ensure discipline in investment; at the same time giving you adequate flexibility. The choice is entirely yours!

A golden rule to follow in tax planning is “The key to smart tax planning is to keep it simple”. One doesn’t have to seek advice from multiple sources and get confused in the process. Plan everything well ahead in the year, instead of the last-minute tricks. You can take advantage of the various exemptions and deductions with simple methods to minimize your tax liability during a financial year.

Use these three steps to make sure that your tax planning is smart. These three steps will ensure that you are on the right track of smart tax planning:

STEPS FOR TAX PLANNING

1. Take advantages from the components of your salary

Some components in your salary structure have provisions of exemptions and deductions under the Income Tax Act. The perks, perquisites or tangible benefits that you are entitled to can be claimed up to some amount as deduction or is exempt in some cases. Few of them have been discussed below:

• House rent allowance: If you are staying in rented accommodation and paying rent then you can claim exemption with respect to the house rent allowance (HRA) u/s 10(13A).
• Education allowance: Any allowance received for education up to Rs. 100 per month up to maximum of two children and hostel stay of employees’ children up to Rs. 300 per month up to maximum of two children from the employer can be claimed u/s 10(14).
• Leave Travel Allowance: Under this, two trips in a block of 4 years, i. Exemption limit where journey is performed by Air – Air fare of economy class by the shortest route or the amount spent, whichever is less ii. Exemption limit where journey is performed by Rail – Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is less

2. Investment in Deductible Options

• Section 80C states the most useful options to maximize take-home salary and lower down the tax pay-out. It offers as much as Rs. 150,000 in terms of tax benefit that can reduce tax outgo by Rs. 45,000 for assessee in 30% tax bracket, when calculated without surcharge and cess.
• Use ‘must-have’ options- Life Insurance and Employee Provident Fund. Expenses like life insurance premium paid and contribution to EPF, school fees can be claimed under 80C.
• You can claim principal repayment towards the home loan, by furnishing a proof of the same u/s 80C. You can also claim tax benefits u/s 24 towards the interest payment on your home loan up to Rs 2, 00,000 in a financial year.
• You can claim a deduction of up to Rs. 25,000 in a financial year for medical insurance premium, provided the installments is for you, your spouse, and your dependent children, as per section 80D.(Rs 30,000 if age of insured is 60 years or more)

Tip: Deductions under this section can be directly claimed in the tax return, and not necessarily claimed through your employer. Most importantly, you have to make these investments by 31st March 2019 for tax benefits for FY 2018-19.

3. Tax Filing

Filing your ITR leads to the right outcome in your tax planning. In order to avoid last-minute hassles, file your returns well in advance. You can do so by e-filing your returns on the income tax department website or other ITR portals.

Points to remember in tax planning:

• Make sure your immediate and mid-term financial needs are covered as most of these investments have a minimum lock-in period of 5 years.
• It’s important to consider several investment opportunities before making a final decision. Ensure that your need of tax saving is not getting fulfilled at the cost of poor returns from that investment.
• Be fully aware of the objective of an investment, its gestation period and maturity terms and conditions.
• It’s not a year-end activity so avoid hasty decisions of investing in tax saving schemes that don’t give you benefits in future. Simple management and strategic decisions at the right time is all you need for smart tax planning!

• Save or InvestBefore we embark on a journey towards financial independence, let us first understand the basics of savings and investments. A disciplined investor creates a balance between the two.Saving is the process of parking hard cash in extremely safe and liquid securities. The primary aim should be capital preservation and the secondary goal getting some returns, if possible. This can include savings accounts and certificate of deposits among others.

  Investing is the process of using money/capital to generate a safe and acceptable return over a time-period. An investment can include real estate, gold coins, stocks, mutual funds and small business to name a few.

  Differentiate between saving and investment

  Saving

  • Savings are ideally smaller, for short-term goals in the near future like a vacation, emergency etc.
  • Liquidity is high, giving ready access to cash when needed.
  • There is typically no risk involved.
  • You can earn interest on your savings.

  Investment

  • Investments involve putting money to work to create wealth for achieving long-term goals like child’s education, house etc..
  • Liquidity is usually not easy when you invest money.
  • Risk involved is usually high.
  • Investments have a potential to yield higher returns, where investments appreciate over time.

  How much should one save and invest?

  Savings is the foundation to build your financial goals. Savings will provide you the capital to design your investments. The two basics that ideally need to be followed are:

  • As a thumb rule, your savings should be enough to cover personal expenses like loan payments, insurance, utility bills etc. and any unforeseen expenses.
  • Any specific purpose that will require a large corpus of fund in five – ten years should be investment driven. For eg. purchasing a home after say five years will require a steady investment objective today.

  Define your goals

  • While saving, your primary goal is to secure your money without losing any of its value. Though saving money preserves its nominal value, it’s opportunities to grow are limited.
  • While investing, you give your assets the potential to grow over a time-period. Typically, you re-invest your interest, dividends and other capital gains. More often than not you are willing to take risks while investing your money. But with the appreciation in money, also comes the risk of losing money. Hence, keeping a long timeframe is usually recommended to recover from any decrease in value.

  Explore options

  Here are the potential choices to be considered for savings:

  • Savings accounts
  • Money market accounts
  • Certificate of deposits (CDs)
  • bonds
  • There are a host of investment options as well:
  • Individual Securities such as stocks and bonds
  • Pooled investments such as mutual funds
  • Real Estate
  • Gold

  How to make financial planning work for you

  Goal	Situation	Save(Or)Invest
  Buy a car	You intend to buy a new car within a year.	Save
  Down payment for a house	You would like to move into your new home in another 3-5 years	Save
  Child’s higher education	Your toddler just started pre-school. Probably at least 15 years later you will need a lump sum amount	Invest
  Have a comfortable retirement	You have just turned 30, you plan to retire at 60. 30 years of prudent saving will take you through	Invest

• Cams data shows that 1.7 million of its 3.6 million new investors were millennials
• Hand-holding first-time investors and encouraging them to continue investing is important

NEW DELHI: More and more millennials are taking to mutual fund investing and are letting their corpuses grow by holding them over long terms. According to data from Computer Age Management Services (Cams), a transfer agency which services 68% of MFs in India, of the 3.6 million new MF investors it onboarded in FY18-19, 47% (1.7 million) were millennials (between 20 and 35 years). Cams shared the data exclusively with Mint along with its observations.

“Good performance of the stock market in 2017 where they were up about 28% amid declining interest rates on fixed deposits and savings accounts made MFs attractive for millennials,” said Ankur Choudhary, co-founder and chief investment officer, Goalwise, an online mutual funds platform. Choudhary said equity-linked savings schemes (ELSS) has become popular for saving tax because these products have the shortest lock-in period (three years) compared to other products covered under Section 80C of the Income-tax Act.

Experts believe that industry body Association of Mutual Funds of India’s (Amfi) Mutual Funds Sahi Hai campaign and personal finance blogs, specifically targeted at millennials, have helped increase awareness about MFs.

Trend in numbers

Women investors: Cams data shows that women make for 24% of the 1.7 lakh millennial investors, indicating increased financial independence and participation of women in money-related decisions. “More and more women are investing in assets other than gold and real estate. This goes to show women are turning into investors. About time,” said Shweta Jain, certified financial planner, chief executive officer and founder, Investography Pvt. Ltd. Sanjiv Singhal, founder, Scripbox, an online MF aggregator, said this reflects a convergence of two trends—more women with independent incomes and simplification of retail investing. “This is converting women from savers to investors,” he said.

Advisory: Despite increased digitisation and simplified know your customer (KYC) process, 86% of the millennials prefer being advised by intermediaries such as banks and distributors. “Sometimes intermediaries ignore the larger picture and focus on short-term interests and recommend products that may not be good for you,” said Jain.

A startling revelation from the data was that even millennials prefer paper-based account-opening. Investors who were helped by intermediaries took to paper-based and electronic modes of transaction, according to Cams. Greater preference for digital was given by DIY millennial investors who make for 14% of the total new investors.

Preference for equity: Another trend that the data highlighted was millennials’ preference for equity. As much as 1.5 million millennials started their MF investments with equity, but 3% subsequently invested in non-equity schemes. The remaining 150,000 investors started off with non-equity mutual funds but 33% of them subsequently moved to investing in equity.

Choudhary said equity funds are more attractive because they have the potential to give higher returns compared to debt funds or fixed instruments like FDs. “They also have the potential to lose money in the short or medium term. It is, thus, important to balance equity funds with non-equity debt funds according to your risk profile. The lower your risk appetite, the lower should be your exposure to equity,” said Choudhary.

SIP route: With an average ticket size of ₹2,118, over 1 million millennial investors preferred the systematic investment plan (SIP) route to enter equity mutual funds. Of the 620,000 outstanding investors, 490,000 invested lump sum in equity funds with an average investment size of ₹58,000 and the remaining 130,000 invested lump sum in non-equity schemes with an average investment value of ₹1.6 lakh. Choudhary said millennials prefer SIPs because the route aligns well with how one earns and saves money. “The benefit of SIP is that it is more affordable, it helps average out your purchase price, and it builds investing discipline,” he said.

“Millennials need to allocate a part of their income towards goal achievement before they allocate it to other areas which are non-urgent and unimportant,” said Pravin Jadhav, director, Paytm Money, an online MF aggregator, 80% of whose investors have chosen the SIP route. When investing in lump sum, Choudhary said it’s advisable to spread it across a few months in order to avoid getting unlucky with the purchase price.

Key takeaway

Hand-holding first-time investors and encouraging them to continue investing is an important take away from the data, which shows 260,000 SIPs got cancelled and redeemed within the same financial year, while 7,000 redeemed their lump sum investments.

Vishal Dhawan, certified financial planner and founder, Plan Ahead Wealth Advisors, said the main reason for this is investors looking at short-term returns instead of long-term performance. Cash flow challenges, overspending and job changes could be the other reasons. “Be clear about why you are saving and your investment time horizon. It’s important to stay disciplined with your investment strategy and understand that past performance may not be indicative of future returns and never compare your investment strategy with your peers,” said Dhawan.

Jain likens MF investments with the growth of a bamboo tree. “Do your bit! A bamboo tree doesn’t grow much for the first few (five) years, it then shoots up dramatically; don’t kill your investments at least in the first three years. Give your money time, it’ll give you the returns,” said Jain.

Income Tax Update: Budget 2019-20

• No Income tax for individuals with Annual Taxable Income of up to Rs. 5 lakh. No change in Income Tax Slabs
• Surcharge increased by 3% for individuals with Income of Rs. 2-5 crores and by 7% for income more than Rs. 5 crores.
• Aadhaar card can now be used interchangeably for PAN card. Thus, you no longer need PAN to file income tax returns.
• Additional deduction of Rs. 1.5 lakhs for interest on home loan availed for purchase of Affordable houses of up to Rs. 40 lakh till March 2020.
• Income tax deduction of Rs. 1.5 lakhs for interest on loan taken to buy an electric vehicle.
• The annual turnover limit for corporate tax of 25% increased to Rs. 400 crores.
• TDS of 2% on cash withdrawal of more than Rs. 1 crore in a year from a bank account to discourage business payments in cash.
• Excise Duty on fuel hiked by Re. 1.

Major Changes made in Income Tax Slabs FY 2018-2019

This financial year witnessed changes which have undergone quite a few alterations in FY 2018-2019. Let’s have a look at the changes upcoming this financial year 2018-2019:

• Tax Rebate for Middle Class:  Individuals having a net taxable income up to Rs.5 lakh has been provided with a full tax rebate under section 87A of the Income Tax Act, 1961. This has been the centre point of interim budget 2019 in terms of changes in taxation.
• Standard Deduction: The interim budget 2019 announced to increase the standard deduction limit from Rs 40,000 to Rs.50,000 for salaried employees.
• TDS Threshold on Rental Income: In the interim budget 2019, the TDS threshold on the rental income has been increased from Rs.1.8 lakh to Rs. 2.4 lakh. Also, the income tax exemption from notional rent for unsold properties has been increased from 1 year to 2 years
• TDS Limit on Interest Income: The budget also provided for no TDS deduction on interest income earned from banks or post office deposits up to Rs. 40,000 annually. Earlier this limit was up to Rs.10,000.

Updated: 29-07-2019 06:04:24 AM

Income tax is referred to as a progressive tax i.e. the rate at which tax on income is payable increases with the income of the assessee. Income tax slab rates specify the threshold annual income limits at which a higher or lower rate of tax is applicable. In the following sections we will discuss the income tax rates for FY 2018-19 (AY 2019-20) and some other key features of income tax in India.

Income Tax Slabs for Assessment Year 2019-2020

As per the Union Budget of 2018, below are the various slabs according to which income tax is assessed in various categories of income tax assessee.

Resident Individuals & Non-Resident Indians

Under existing rules of the Income Tax Act, 1961, resident Indian and non-resident Indians (NRIs) are taxed according to the same income tax slabs and rates. The following are the IT slabs and slab rates for AY 2019-20 in case of resident and non-resident Indians aged less than 60 years:

Additional Components

1. 1. Surcharge: In case income is more than ₹ 50 lakhs and less than ₹ 1 crore, the surcharge is applicable at a rate of 10% of the income tax. For income, more than ₹ 1 crore, a surcharge of 15% is applicable on income tax on the amount exceeding ₹ 1 crore.
   2. Health and Education Cess: “Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.
   3. The interim budget 2019 has provisioned to provide a full tax rebate to individuals having a net taxable income (income adjusted after eligible tax deductions) up to Rs 5lakhs. It means that the maximum tax rebate provided under section 87A has been increased from Rs. 2,500 to Rs. 12,500. Individuals having net taxable income up to Rs. 5lakhs can claim the tax rebate under 87A and thus effectively pay zero tax.

Hindu Undivided Families (HUFs)

Hindu Undivided Family (HUF) is headed by a Karta (designated head of the family). HUF has a legal identity similar to that of an artificial judicial person for taxation purposes. The following are the Income Tax slab rates applicable to HUF for AY 2019-20 (FY 2018-19):

Additional Components

Surcharge: In case income is more than ₹ 50 lakhs and less than ₹ 1 crore, the surcharge is applicable at a rate of 10% of the income tax. For income, more than ₹ 1 crore, a surcharge of 15% is applicable on income tax on the amount exceeding ₹ 1 crore.

Health and Education Cess: “Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.

Associations of Persons, Bodies of Individuals and Other Artificial Judicial Persons

As per the definition provided by the Income Tax Act, 1961, an Association of Persons (AoP) and Body of Individuals (BoI) refer to an association/integration of two or more people with the intention of making profits. These are among the commonest examples of artificial judicial persons and are liable to pay tax as per the following income tax slabs:

Additional Components

1. 1. Surcharge: In case income is more than ₹ 50 lakhs and less than ₹ 1 crore, the surcharge is applicable at a rate of 10% of the income tax. For income more than ₹ 1 crore, a surcharge of 15% is applicable on income tax on the amount exceeding ₹ 1 crore
   2. Education Cess: Extra 2% is applicable on the income tax amount plus applicable surcharge.
   3. Higher Secondary & Higher Education Cess: Extra 1% is applicable to the income tax plus surcharge applicable for all tax payers.

Senior Citizens

Senior citizens in India are defined as individuals aged over 60 years and less than 80 years as per current tax rules. The following are the AY 2019-20 income tax slab rates for senior citizens applicable to earnings for the financial year (FY) 2018-19:

Additional Components

1. 1. Surcharge: In case income is more than ₹ 50 lakhs and less than ₹ 1 crore, the surcharge is applicable at a rate of 10% of the income tax. For income, more than ₹ 1 crore, a surcharge of 15% is applicable on income tax on the amount exceeding ₹ 1 crore.
   2. Health and Education Cess: “Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.

Super Senior Citizens

Under taxation rules in India applicable to income earned in FY 2018-19 for ITR filing in AY 2019-20, super senior citizens are defined as individuals who are aged 80 years and more during the applicable fiscal. The individuals feature IT slab and income tax rates that are different from that of other tax assessees as follows:

Additional Components

1. Surcharge: In case income is more than ₹ 50 lakhs and less than ₹ 1 crore, the surcharge is applicable at a rate of 10% of the income tax. For income more than ₹ 1 crore, a surcharge of 15% is applicable on income tax on the amount exceeding ₹ 1 crore
2. Health and Education Cess: “Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.

Partnership Firms

The applicable tax rate for any Partnership Firms & Limited Liability Partnerships (LLP) is at a flat rate of 30%.

Additional Components

1. Surcharge: In case income is more than ₹ 1 crore, the surcharge is applicable @ 12% over income tax amount.
2. Health and Education Cess: “Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.

Local Entity / Authorities

The tax rate applicable for Local Authorities is on a flat rate of 30%.

Additional Components

1. Surcharge: In case income is more than ₹ 1 crore, the surcharge is applicable @ 12% over income tax amount.
2. Health and Education Cess: “Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.

Domestic Entity Companies

The tax rate applicable for any Domestic Companies is at a flat rate of 30%. However, if the gross receipt of the company does not go beyond ₹ 250 crores in the previous year, the company has to pay taxes at a rate of 25%.

Additional components applicable to Domestic Entity Companies are:

1. Surcharge:In case income is between ₹ 1 crore and ₹ 10 crores, the surcharge is applicable @ 7% of the income tax amount. However, if the amount exceeds ₹ 10 crores, the surcharge payable is at a rate of 12%. The income tax department provides marginal relief to companies in special cases:

(i)  Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

(ii)  Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.

2. Health and Education Cess:“Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.

Foreign Entity / Companies

Additional Components

1. Surcharge: In case the income is between ₹ 1 crore and ₹ 10 crores, the surcharge is applicable @ 2% of the income tax amount. If income is greater than ₹ 10 crores – 5% of the income tax amount is charged as surcharge
2. Health and Education Cess: “Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.

Co-operative Societies

Urban / Semi urban/ Rural excluding Self Help Group (SHG) and Agricultural Societies.

Plus:

1. 1. Surcharge:In case income is more than ₹ 1 crore, the surcharge is applicable @ 12% of the income tax amount.
   2. Health and Education Cess:“Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.

Income Tax Slabs Comparison FY 2019-20 Vs FY 2018-19

Income Tax Slab for individuals less than 60 years of age and HUF

Key Comparisons:

• Income Tax Slabs remain unchanged for FY 2019-20 and AY 2020-21 for all citizens (including Senior Citizens).
• Standard Deduction for salaried taxpayers has been increased from Rs. 40,000 to Rs. 50,000.
• Education Cess on Income Tax has remained same at 4%.
• No further changes in the corporate tax. Corporate tax rate has been maintained at 25% for domestic companies with a turnover of up to Rs. 250 crore.

The income tax slab is a table that shows the threshold limit beyond which a specific tax rate is applicable and various deductions are made as per the applicable rate. To better understand the working methodology of the income tax slab, one has to first understand the vital elements based on which tax slabs are fixed.

Income Tax Act, 1961

The provisions of income tax are contained in the Income Tax Act, 1961 which extends uniformly to the whole of India and has been effective since 1962. The act contains provisions for determining taxable income, tax liability, procedure for assessment of penalties, etc.

1. Annual Amendments –Since the Income Tax Act is a revenue law, it requires amendments whenever the government wants to make changes in it. Under the annual amendment of existing revenue generation requirements, the Government proposes its finance bill, which directly decides the threshold limits for various tax rates which are commonly referred to as Income Tax
2. Income –Income in broad terminology is defined as any receipt in the form of money or money’s worth which occurs with a certain regularity or expected regularity from a definite source.

Key factors based on which, income tax slabs are applicable include:

• Income of assessee
• Residential status of the assessee
• Assessment year
• Rate of tax
• Charge of income tax
• Maximum amount / threshold limit till income is not chargeable/taxable
• Gross income

The income tax slab is applicable to:

• Any resident individual with regular source of income
• A Hindu Undivided Family (HUF)
• A company
• A firm
• An Association of person (AOP) or a Body of Individuals (BOI) whether incorporated or not
• Any local authority

Income Tax Slabs on Dividend

Dividend income received by individuals is taxed based on the source of dividend income i.e. the type of entity declaring the dividend income.

Income Tax Slab for NRI

For the Financial Year of 2018-19, the tax slabs and rates are as follows:

Health and Education Cess – 4%

Income Tax Slab for Expats

For the Financial Year of 2019-2020, the tax slabs and rates are as follows :

Income Tax Slab for Freelancers

The income tax slab rates as same for all individuals. For Freelancers, the tax slab and rates are as follows :

Additional Components

1. Surcharge: In case income is more than ₹ 50 lakhs and less than ₹ 1 crore, the surcharge is applicable at a rate of 10% of the income tax. For income more than ₹ 1 crore, a surcharge of 15% is applicable on income tax on the amount exceeding ₹ 1 crore
2. Health and Education Cess: “Education Cess” and “Secondary and Higher Education Cess” will be replaced by “Health and Education Cess” at the rate of 4%, on the amount of tax computed, inclusive of surcharge.

Income Tax Slab for Doctors

The income tax slab rate is same for all the salaried persons residing in India. Income tax slab rate for doctors are as follows:

Plus Surcharge:

• 10% of tax where total income exceeds Rs. 50 lakh
• 15% of tax where total income exceeds Rs. 1 crore
• Health & Education cess: 4% of tax plus surcharge

Income Tax slab for Pensioners

Below mentioned is the income tax slab rate for the pensioners:

Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

*Income tax exemption limit for FY 2019-20 is up to Rs. 3,00,000

Frequently Asked Questions

Q- Are income tax slabs same for all individuals?

Yes. Income tax slab rates are the same for all individuals within a specific segment such as those aged less than 60 years, senior citizens (60 years to less than 80 years) and super senior citizens (80 years and above) all feature the same income tax slab rates. This holds true irrespective of whether these individuals are salaried, self-employed, unemployed or freelancers.

Q- Who decides the IT slab rates and can they change?

The income tax slab rates for the applicable financial year are notified by the Finance Act and passed by the parliament every year. As they are notified every year through the Finance Act, slab rates are subject to periodic change. The last time slab rates underwent a change was in FY 2014-15 when the minimum exemption limit was increased to Rs. 2.5 lakh from the earlier Rs. 2 lakh limit.

Q – What is the benefit of having slab rates in income tax as opposed to a single rate of tax as in case of GST?

Income tax is charged on the earnings of an individual whereas GST is charged on the consumption of goods and services. Income tax slab rates are designed to provide relief to those with lower income and maximize tax collection from higher income individuals. This system of taxation which features an increase in rates as the taxation criteria increases is known as progressive taxation. GST on the other hand is consumption-based so those who consume pay more tax and it stands to reason that higher income individuals will consume more and pay more tax through indirect taxes such as GST. Thus in effect both the income tax slab rate system and the GST method lead to the same result just by different routes.

Q- Are there separate slab rates for men and women?

Not anymore. But earlier there indeed were separate slabs for men and women in India. For example for FY 2010-11, the basic exemption limit for men aged up to 65 years was Rs. 1.6 lakh annually while women aged up to 65 years of age had a higher basic exemption limit of Rs. 1.9 lakh. This is no longer the case as for FY 2018-19.

Q – To whom do the current income tax slab rates apply?

Every individual whether a resident or non-resident no matter what his/her age whether salaried, self-employed or unemployed is covered by the applicable income tax slab rate and minimum exemption limit. Additionally, applicable slab rates also cover various non-individuals such as HUF (Hindu Undivided Family), AOPs (Association of Persons), BOIs (Body of Individuals), firms, LLPs (Limited Liability Partnerships), companies, local authority and other artificial judicial persons are also covered by the income tax slab rates.

Q – How do I calculate my tax liability using the slab rate for taxable income of Rs. 5.2 lakh in AY 2019-20 if my age is less than 60 years?

Income tax calculation in AY 2019-20 applies to annual earnings in FY 2018-19. For the applicable AY, basic

exemption limit is Rs. 2.5 lakh, and the slab rate is 5% for income of Rs. 250,001 to Rs. 5 lakh. Income above Rs. 5 lakh will have a 20% tax rate as per IT slabs for AY 2019-20. So you have a tax liability of 20% on Rs. 20,000 = Rs. 4,000. Additionally, 5% tax on 2.5 lakh (Rs. 5 lakh – Rs. 2.5 lakh) = Rs. 12,500. Thus your total tax liability for AY 2019-20 is Rs. 16,500. You can of course get the same result using a free online income tax calculator.

Our goals can only be reached through a vehicle called Plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.” —Pablo Picasso

If you are investing without a goal in mind, then you are not saving enough for your future needs. Having a goal-based investment plan is both very important as well as useful.

What is a goal?

A lot of us think that dreaming about a house or a car is a goal. But the actual goal is where your name few things very clear in mind.

• What is my goal? – give a name to your goal
• When do I want to achieve this? – decide a time horizon
• How much money do I need to achieve this goal?-Decide the monetary value of your goal

Once you have the above 3 things in your clear conscious, you are all set to take the next steps.

Mistakes to avoid while doing goal-based investment:

Not having target amount in mind: All of us want to more and more returns, but having a target amount in mind will help you to make decisions like how much do you need to invest, till when to hold and when to sell your investment. It will act as a balance between savings and expense.

Not considering inflation: The prominent reason we save and invest is to beat inflation so we can still buy the same things and live the same lifestyle even after 10 years. Always consider inflation while deciding your target amount. Calculate the future value of your goals. There are lots of calculators available in the market which can help you to do so.

Not saving enough: The most common mistake done at the time of doing goal-based investment is we overestimate our savings. Once you have determined the future value of your goal or inflation-adjusted value now it’s time to do a backward calculation and figure out how much money has to be invested regularly.

Steps to follow for a goal based investment.

Step 1 – Asses your financial situation

Whether you are looking to action a specific need or simply want the peace of mind that your finances are in good shape the financial health check will do the job. The free financial health check service is a review with one of our highly trained Wealth Coaches, over the phone or face to face.

Step 2 – Decide Goal

• Decide the priority of the goals
• Determine how much can you save and how much saving is needed for your goal
• Start investment
• Review and rebalance your past investments
• Once you follow the above steps to decide your goal and defined how much amount you will need for it and in how many years.

Step 3– Decide the priority of the goals: There are few things we have to focus on while prioritizing.

It can be done based on time left for the goal. Like 6 months, 1 year, 10 years

Another way can be based on criticality- This means how important the goal is, can you compromise on the monetary terms etc.

For example – Goal like kids education can neither be postponed nor be compromised in terms of money requirement. So this goal should have higher priority. Whereas going for a world tour can be delayed by a few months and there is a possibility to compromise in budget requirements too, so this can be a nonfatal priority.

Based on the criticality and time left for the goal, the portions of savings should be allocated to it accordingly.

Step 4: Determine how much can you save and how much saving is needed for your goal

It’s always advisable to save at least 25% of your total monthly income; this can be dependent on your goals too. Another factor which you have to look at is your debit or credit card outstanding.

While designing a savings and investment plan, focus primarily on your debts and design a plan to clear them too. Debts take away a big portion of our savings in terms of interest. Understand and use your credit cards wisely.

Step 5: Start investment:

This is another very critical step which will need a lot of attention and precision. Always take professional help if you don’t understand financial products. Choosing a right product is very important.

• Choose a product which suits your risk profile.
• Don’t overestimate returns from any product especially if you are investing in equity related instrument.
• Always diversify your investments, keep your portfolio a mixture of debt and equity products
• Always keep some portion aside for emergencies too so any contingency won’t disturb your investment.
• Design an effective tax plan too.

Step 6: Review and rebalance your past investments:

Once you start investing always keep a track of your investment and add or remove investment only if it is very important, don’t freak out if the short term fluctuation is not favoring your investment. Stay invested in the longer term.

Unlike other saving schemes like Fixed Deposit (FD), Public Provident Fund (PPF) and National Savings Certificate (NSC), Equity-Linked Savings Scheme (ELSS) offer the shortest lock-in period with a higher return on investment. For the majority of earning citizens of India, retirement saving is one of the most ignored goals as it is distant and one does not feel a dire need to address it.

However, the desire to save tax could be help us to meet two goals – tax saving and retirement planning – with one single investment. Usually, investments leading to tax saving are done annually to save tax for that fiscal year. Under the Income Tax Act of India, section 80C allows maximum deduction of INR 150,000 from your total annual income. ELSS is one such instrument that let you claim these benefits. ELSS is riskier than those fixed income alternatives under section 80C, but it generates the higher rate of returns which are partially taxable as compared to the fully taxable returns from FDs and NSCs. ELSS is the best way to save tax and invest for retirement, especially for the young earners.

How to invest in ELSS

ELSS is an equity-linked savings scheme, which means the amount will be invested in equities and they need time to perform. As compared to investment schemes like FD, PPF, NSC, and NPS (National Pension Scheme) which usually have the lock-in period of 5 years, 15 years, 5 years, and till retirement respectively, ELSS has the shortest lock-in period of just 3 years.

After the lock-in period gets over, the scheme becomes an open-ended scheme and the funds invested become eligible to be withdrawn. However, it is advisable that instead of withdrawing the funds let them remain invested until about five years before you retire.

To start saving for retirement CLICK HERE 

Since equities are more volatile, any fresh investments and the ongoing open-ended investments in ELSS within 5-7 years of retirement must be considered only after assessing your risk profile. So here is how it will work. Say, you invest INR 8,000 monthly in ELSS for 25 years towards retirement. Expecting a long term rate of return as 15% per annum, the maturity amount will be somewhere close to INR 2.6 Crores, which could be a hefty amount in one’s retirement portfolio in addition to other investments made as part of retirement planning.

Now before you decide which scheme to invest in, you need to reach a conclusion as to how much you would want to save as your retirement benefit.

How much to save

You need to calculate an exact amount of post-retirement monthly needs and then start saving accordingly to avoid over/under-investing.

Here is how you can do that in 5 simple steps:

1. Get hold of your present monthly expenses at current costs
2. Get the number of years left for your retirement
3. Inflate the present monthly expenses at around 5%. The amount you will get is the monthly expenses that you would likely to incur once you have retired after adjusting for inflation.
4. Now estimate how much amount you need to meet your inflated monthly expenses.
5. At the last step, you will have to find out how much monthly savings would you need to accumulate till retirement. There may be other savings too that you have planned, so consider them too.

How to choose ELSS

Selecting a single best ELSS is not an easy task. There is some ELSS that has more exposure to large-caps, while some perform better with mid-cap or multi-cap stocks. It’s found better to invest in not more than 2-3 diversified ELSS and ensure that they belong to different industries and market capitalizations.

How to save through ELSS

You can invest in ELSS through two of the way. One is depositing a lump sum amount into the chosen ELSS at regular intervals. The other way is to invest a fixed amount at regular intervals also called as SIP (Systematic Investment plan). By the latter way, you are not trying to capture the ups and downs of the market, but the cost of your investment will be scattered over a period of time. This is most preferable for the young earners.

Invest in ELSS instantly >>                              OPEN AN ACCOUNT NOW 

What’s your action after investing in ELSS?

You don’t have to worry about the ELSS during the lock-in period. However, once the lock-in period ends, you need to review the performance of the schemes you have invested in. If your ELSS is performing, there is no need to redeem it. One thing that you need to restrain yourself is being tempted from the fund’s return in isolation. Compare the scheme’s return with its benchmark return. Not a scheme which is consistently unable to cross its benchmark return should be in your investment portfolio. Also, observing the category average returns against its peers will give you an idea about how good/bad your investment is. There can be several reasons for that, and you need to explore all of them before deciding to switch on to others.

Investment is the backbone of financial planning. So if financial planning is battle training, investment is the Kargil. This is an ultimate practical experience and while doing this question or query is bound to surface. Hence this is the page where I have collected the common investment questions that arise in every once mind. You are likely to get solution to your query here or else ask me through the comments section.

Investment Questions:

• Should I take loan & invest in Stocks?
• Are Company Fixed Deposits Safe?
• What are ETF & which Indian ETF I should Invest in?
• How much I save for my goals?
• How to get good returns through futures & options?
• What about investments made in IPO.
• What will happen if we are caught in spiral like Japan?
• What should I expect from my Bank Fixed Deposits?

Leveraged Investment

Question: My Friend who’s a stock broker, advising me to purchase some stocks as stock markets is at very attractive levels? As I don’t have enough money so he’s told me to get a personal Loan. I can pay EMIs easily, but is it advisable?

This is not a friendly advice. Either your friend wants to earn brokerage out of your risk or he’s also not that equipped with knowledge to advise you on financial matters. Stock market is one of the most risky asset classes at least for short term where you can earn or lose the fortune. But even if you want to stay invested for long term and you are comfortable in paying the EMIs then also I would not advise you to enter this investment by taking Loan. No one can guarantee you returns in stock market. Personal Loan is among the costliest Loan available as bank doesn’t ask for any security or collateral along with it. It’s Interest rate varies from 16%-20%p.a. As there’s no guarantee in Stock market so it’s very risky to take loan and invest. Moreover there’s a condition attached with personal Loan that this money should not be used for Stock market Transactions. I advise you to start a SIP in Equity Diversified Mutual Funds with the amount you are comfortable paying as Loan EMIs. This will help you in building up the corpus and also satisfies your desire to enter into stock market.

Company Fixed Deposits

Question: I want to invest in company fixed deposits which are safe and good to invest with fairly good return. May I request your good self to suggest the name of safe company for investment? Period of investment is 3 year.

There’s no company which I can call as safe. Fixed deposits are unsecured loans that companies procure from general Public. If a company defaults and goes bankrupt, fixed deposit investors will be paid second last i.e before Equity Investors. But still you can check those companies which have good rating by credit rating agencies. Rating does not make company deposits safe but at least it helps in gaining confidence on the soundness of repayment capacity. There are some Government companies also which issues FDs. You can consider those also.

ETF or Exchange Traded Fund

Question: Can you please provide me an update on ETF…. What is ETF? How much return do we get? For someone at my age of 25 it is right time for me to invest in ETF? Which ETF should I invest for long term?

ETF or Exchange traded funds are passive funds which follows some particular index be it Sensex or CNX 500. These funds are similar to index funds with only difference that these are listed on exchange – so you can also do transaction any time in the day rather than waiting for end of the day. Returns in ETF are directly linked with index performance so if Sensex will give 12% return in year – you can also get the same amount. My suggestion as India is still a growing economy – there is a scope for fund managers to beat index. So you should make your portfolio through 3-4 diversified equity funds.

How much one should save?

Question: How much percentage of my total Income should one invest and in which financial instrument considering children education and retirement planning?

Actually percentage of income going in goals depends on once age & type of asset class you are choosing. If someone is around 30 years & invest in equities – approx 15% income will be sufficient to achieve these basic goals but he is investing through debt may be 25% of income is needed. But if someone is close to 40 the he needs 25% through equity & 35%-40% in case if debt. But as I said other factors like Job security, other goals also determine the quantum of investment.

Future & Options

Question: Please tell me about how to invest in Futures & Options. How I can earn good returns from it.

Future and options are most common “Derivatives”. Derivatives are financial instruments that derive their value from an ‘underlying’. The underlying can be a stock issued by a company, a currency, or a commodity like gold etc. The derivative instrument can be traded independently of the underlying asset. As per most famous investor “Derivatives are instruments of financial mass destruction”. Why he said this – because derivatives are leveraged instrument & very risky for any investor. Institutional players use these Instruments for hedging their positions but retail investors use them for speculation. Assume that you have capital of Rs 50000 – that you used to buy a future of x company by paying 25% margin. Now if particular stock(underlying security) will rise by 10% in a month you will gain Rs 20000 on your portfolio or 40%. Now think if it goes down by 10% – as retail investor don’t have understanding or control over their investment; they soon lose their capital.

IPO or Initial Public Offer

Question: I have 300 shares of Jsw energy, which is received at the time of IPO offer. I want to know about the future of this share from the point of view of as an investor, I am not a trader. Please give the expert opinion.

Investor often thinks IPO is a good way to make QUICK money and gets attracted towards it. It is true that few of the companies who came up with an IPO have done well but it is not easy to pick the right ones. Do you remember Reliance Power IPO in Jan 2008 & same happened with other power & infrastructure IPOs. Investor thinks that IPOs are good Investment Vehicle but in reality they are against investor’s interest as they arrive in market when promoters are sure that they will fetch good premium. Do you know BSE IPO index which was launched in August 2009 is down by 9% & in the same period Sensex has given more than 25% return? One should stay away from IPOs or be very choosy.

India Vs Japan

Question: What will happen if we are caught in spiral like Japan i.e. correction of 80% & still bleeding though Japan’s companies are not bleeding then why the Nikkei is not giving the returns? I hope u must be getting what i wanted to ask. Please do clarify why we will go on making new highs on index although with ups n downs

There are 2 reasons for what happened in Japan- first when their market topped it’s valuation was almost 5 times of average. Their PE was approximately 100 at that time. Second Japan is now a developed country & in last 2 decades their GDP growth is 2-3% max. Hope it answers your concern. India is still growing economy and the best is still to come. Next 10-15 year will be Golden years for India – you will like to sit out & watch the game or would you like to participate.

Bank Fixed Deposits

Question: What are the historical real returns on Bank Fixed Deposits in India? When will they turn positive?

Real rate of return is when we remove adjust normal/nominal rate of return (like 7.5% on FD or 8% on some post office scheme) is adjusted for inflation. Normally bank interest rates gives close to 1% of real rate of return but if consider taxation actually we are making losses. Last 2-3 years were pathetic for a debt investor as real rates are negative – even RBI is concerned regarding this. India is a growing economy & inflation will always be higher due to demand coming from public – one must hold equities & real estate to take benefit out of it.

In Case you have questions related to investments ask in comment section.