Max Secure Financial Planners -

(Open between 1^st Sept to 9^th Sept 2016)

It is a government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India. The bonds are held in the books of the RBI  or in demat form eliminating risk of loss of scrip. The application form will be provided by the issuing banks/designated Post Offices. It can also be downloaded from the RBI’s website. Banks may also provide online application facility.

Process

KYC will be completed by the issuing banks/Post Offices. Any Individual, HUF, Trust and Company can subscribe to these bonds. The maximum holding period is 8 years with lock in period of 5 years. It carries interest rate of  2.75% pa. On maturity one can get the equivalent amount of market price of gold. Loan Facility is available against gold Bonds. One can possess gold on paper and need not  take risks of physical safekeeping.

Important points to note while Buying SGB:

1. Issue Period: Issue open date : 1^st Sept 2016 Issue Close date – 9^th Sept 2016
2. Price : Rs 3150 Per gram of Gold
3. Interest : 2.75% p.a. payable semi-annually on the initial value of investment
4. Investment : Min - 1Grm Max – 500 Grms gold per person in a Fiscal year (April – March)
5. Tenor : 8years with Exit option from 5^th year to be exercised on interest payment dates
6. Tradability :  Tradable on exchanges from date to be notified by RBI

Traditionally women are better at managing family’s budget and are more concerned about children’s education and marriage. We find women groups take to streets when prices of vegetables and other essential items increase beyond tolerable levels. Nowadays increasing number of women are opting for career in regular jobs. It provides them opportunity for financial independence. It is high time for women to take control of their finance for the following reasons; 

 (1)   Increasing divorce rates – India is witnessing a surge in divorce rates and therefore entrusting the spouse with financial matters can create money crunch. It is prudent to keep a tab on your monthly investments and determine holdings in your name, so as to avoid financial complications later.

(2)   Time off for raising children – Many expectant mothers wish to take a time off over and above their maternity leave in order to raise their children, but can’t do so due to financial commitments. Hence, a proper planning on creating a ‘time-off’ corpus can help them to do this.

(3)   Daughter as a son – Today, more of the daughters are evolving as sons to their families and thus contribute to the family finances. Women, by participating in financial decisions, can become trendsetters by continuing to be an asset to their own family even after marriage

(4) More life to live- In old age; women largely depend financially on their spouses. But, with life expectancy of women being higher than men, it is advisable to put in place a separate retirement planning for themselves. 

Today, women have more power and earning potential than ever before. They have the ability to sharpen their skills in building wealth and undertake financial planning to achieve their financial goals in life.

Asset Classes

There are four major asset classes; Real Estate & Gold under physical assets and Equity & Debt under financial assets. The trend of physical assets providing higher return is now reversing. 

Real Estate: Real estate investment is indivisible and illiquid. It carries liquidity risk. It may take longer time to find a buyer for selling the property and hence one must invest in real estate only if one wants to remain invested for longer period. Further real estate prices are correcting and may not provide the higher return it has generated in the past.

Gold: Investing in physical gold and ornaments depresses return due to making charges. It is advisable to invest in Gold ETF of the Mutual Funds. But over last two/three years, gold has not provided return to beat inflation. Sovereign gold Bonds are the flavor of the season. It provides interest of 2.75% besides benefit of capital gain tax. Gold should not be more than 5-10% of your portfolio.

 Equity (Shares and Mutual Funds): It carries volatility risk due to fluctuations of prices in share market. But the volatility gets normalized over a longer period. Hence it is advisable to invest in equity for longer period and not to invest for short term goals. 

Tax Deduction at Source (TDS) on interest on Fixed Deposits and Recurring Deposits of banks have caught many savers with surprises. While buying Life Insurance, we are advised that premium payment upto Rs1.50 lakhs are tax deductible under section 80C and maturity proceeds are tax free under 10(10D). But it is not so always! Many insurance products do not qualify for full tax deduction and maturity not fully tax-free. The current low return on Insurance is further impacted by incidence of tax.

 TDS on Life Insurance Proceeds

Insurance products tend to give you a deduction of up to Rs1.5 lakhs from your taxable income under Section 80C. Effective April 2012, the sum assured should be at least 10 times the annualized premiums for life insurance policies to enjoy this tax benefits under Section 80C and on maturity proceeds under Section 10 (10D). Numerous life insurance products are available in the market that do not qualify for full tax savings on entry and will have no tax exemption on maturity. The new section 194DA of the Income Tax Act, 1961, that took effect on 1 October 2014, envisages TDS on life insurance policy payouts which are not exempt under Section 10(10D) and total amount paid to a policyholder towards non-exempt policies that exceeds Rs1 lakh in a financial year, would attract a 2% TDS (tax deduction at source) on the maturity, surrender or partial withdrawal amount of life insurance policy. If you are buying a life insurance product, which does not qualify tax-free returns, this may be an absolute disaster for your investment.

When we fall sick, we go to a Doctor who does the diagnosis and prescribes medicines. Thereafter we go to the medicine shop to buy the medicine. We bait on the professional competence of the Doctor for cure of the disease. In case of financial products, be it insurance or mutual funds, most of us   buy the child plan or pension plan or do a SIP in Mutual Fund through an agent or a bank relationship manager. By the time we realize that products bought by us are not suitable for achieving our goals, it is too late.

We should visit a financial doctor to get the right advice, who can analyze our cash flow, investments, insurance policies, loans etc and recommend suitable products to achieve our financial goals. The products should be suitable to our needs. SEBI has now come out with regulation to register SEBI Registered Advisers(RIA) who are like financial doctors and have a fiduciary duty to act in client’s interest. There are more than 200 such individual advisers in India today.

After the EPF taxation Fiasco by the Finance Ministry, another big blow has been passed on to the middle income savers by reduction of interest rates on small savings schemes effective 1st April 2016 for the April-June 2016 quarter. 

NPS has emerged as a popular tax saving tool at par with EPF. but the issue on taxation of 60% of the proceeds on maturity or buying annuity is a moot point and hoped to be resolved soon. Opening of NPS account was a herculean task till now but have been made easier through online NPS account.

Types of NPS accounts: There are Two types of account i.e TIER I and TIER II

• Tier I is the mandatory account for long-term savings. Additional Tax benefit upto Rs.50,000 is available u/s 80CCD (1B) over and above the 80C limit of Rs1,50,000/-
• Tier II is an add-on account which provides you the flexibility to invest and withdraw from various schemes available in NPS without any exit load.
• To open Tier II account you need to have Tier I account first.

A subscriber is required to open a Tier 1 account with the Central Recordkeeping Agency (CRA). Each account is identified by a unique Permanent Retirement Account Number (PRAN). It is now possible to open this account online using the e-NPS system by accessing the following link: https://enps.nsdl.com

1. Think before opting for an EPF

If you got a new job, then think twice when you are opting an employee provident fund or EPF. From April 1, 2016, when you withdraw the EPF, you have to pay tax on 60% portion of amount. Rest 40% will be tax free. Anyway, you have no way out because EPF is compulsory. Similarly, new pension scheme or NPS will also taxed just like EPF. Given a choice, NPS will be better which has an equity component and may generate higher return.

2. Your builder has delayed…don't worry for tax exemption

Currently, most of the home buyers make payment to the builder but do not get possession within stipulated three years' period. Since the buyer does not get possession within three years, he is entitled to get only Rs 30,000 tax deduction. Now, finance minister has raised this time limit up to five years.

1)  Rs 5,000 Rebate for Income upto Rs 5 Lakhs: Rebate increased from Rs.2,000 to Rs. 5,000 for an individual having annual income of up to Rs.5 lakh per annum. Now, such individuals can avail total rebate of Rs.5, 000 in an assessment year.

2) Rs 60,000/- Deduction for House Rent: Deduction amount claimed against rent paid to be increased from 24,000 pa to 60,000 pa under Sec 87A. Not many know about this. Basically this is useful to people staying on rent but do not have HRA as an income component. 

3) Rs 50,000/- add. Tax deduction for home buyers : First time home buyers to get an additional deduction of Rs.50,000 on interest component of EMI. Value of such houses should not exceed Rs50 lakhs and loan Rs35 lakhs. 

UAN (Universal Account Number) is a must

One must get an UAN for availing the online EPF services.UAN is a 12 digit single account number which will be linked to your provident fund account. You don’t need to worry for your different EPF accounts and how to transfer them, when you join a new job. Now each employer will give you a member id, and the member id will be linked with the UAN. Even the employee’s having EPF under private trusts will be assigned the UAN. This is the new system and will be applicable for your current and future employment.

UAN Status in online mode

You have to go to the Employee Provident Fund website (http://uanmembers.epfoservices.in), activate your UAN based registration and complete the details with your login credentials, nearest EPF Office area etc.

EPF Balance:

Once you activate your UAN, you can avail different services such as PF balance, PF passbook, monthly contribution etc through online and SMS.