Max Secure Financial Planners -

We need “Roti, Kapada and Makaan” before thinking about achievement of other financial goals. The key financial goals for families currently are; Children’s education and Retirement corpus. A roof over our head is a basic necessity no doubt, but should we go for owning it or stay in a rented house? If you aspire to own an expensive house, the home loan EMI may make you poor and you may have no money left for other expenses after paying the EMI. It will be difficult to maintain a healthy balance between housing and other critical goals. The factors to consider in buying a house vs renting are;

During February 2016, the Government of India had announced  that it will review small savings interest rates every quarter  based on the yields of government bonds of the previous three months.Recently the government has reduced  interest rates on small savings schemes  to align them with market for the quarter beginning 1 April 2017.

The commercial Banks were reluctant to pass on the policy rate cuts by RBI citing the higher small savings rate. Now this linking of interest rates of small savings schemes to the yields of government securities and reduction in rates will prompt the banks to  pass on the policy rate cuts to the borrowers  through lower lending rates.

The  rates have been reduced  by 10 bps of all small savings schemes including PPF,senior citizens’ saving scheme, postal time deposits, KVP,NSC and Sukanya Samriddhi  excluding the Postal Savings account which has been retained at 4%.The Government has  also retained the spread of 25 basis points of long-term savings schemes such as the five-year term deposit and National Savings Certificates (NSC)  etc over government securities of comparable maturity  to encourage long-term savings.

(1)  From financial year 2017-18, if Return is not filed within due date, late fee of Rs 5,000/- for delay up to 31st December, and Rs 10,000/- thereafter.

(2) Every person who has been allotted PAN as on 1st July 2017 must intimate the AADHAR number to the Tax Authority, failing which, PAN allotted to such person shall be deemed to be invalid.  Kindly note that linking of AADHAR with PAN is not possible, unless name as per AADHAR and PAN match perfectly.  Hence, please take steps to rectify your name as per AADHAR to match as per PAN. 

3) Tax Exemption limit is Rs 2,50,000/- (same as earlier) -

- After that, upto Rs 5 lakh, Tax Rate is 5% (earlier it was 10%).  Tax rebate of maximum Rs.2500 will be allowed, for total income upto Rs 3.50 lakhs.

-Individuals having total income exceeding Rs 50 lakhs but below Rs 1 crore, are to pay surcharge @ 10% of the tax.  Those having total income exceeding Rs 1 crore shall continue to pay surcharge @ 15%.

(4) Payment of Rent – Rs 50,000 per month by any Individual or HUF (not subject to Tax Audit requirements) - deducts TDS @ 5%. 

In the past few weeks, we have seen banks either introducing new charges or hiking the existing ones sharply. While many customers complain of banks robbing them with higher charges, those from the banking industry say customers need to pay for the services they enjoy. Customers’ pain point, however, is not just the fee, but the non-transparent, arbitrary manner in which charges are being levied.

Savings for Income Tax

All tax-saving investments and expenses have to be made before March 31 2017.

• 80(C) : Ensure  savings  of  Rs 1,50,000/- atleast  (EPF, PPF, NPS, Life Insurance premium, Home loan principal repayments etc)
• 80(D): Health Insurance premium of Rs 25,000/- for self and family and Rs 30,000 for parents who are senior citizens. You can claim of Rs 5,000/- for health check up under section 80 (D).
• Get reimbursements  from your employer  by submitting medical bills maximum of Rs 15,000/-
• LTA: Keep the journey tickets as evidence for tax exemption. 
• Calculate your tax liability by taking(a) Interest on housing loan(b) Exemption from HRA  factoring the house rent paid and (c) Conveyance allowance(Rs1,600pm)
• Advise the salary section to stop Income Tax deduction for February and March 2017, if the tax deducted has exceeded your tax liability. Alternatively you have to apply for refund of excess tax paid by you.

There is a debate on segregating sales from investment advice.SEBI has proposed that mutual fund distributors cannot give investment advice to buyers and proposed to make it compulsory for mutual fund distributors  who give advice to register as investment advisers. We reproduce the view of Prof Pattabiraman at  IIT-Madras as published in ET wealth on 16th January 2017.

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Steve Jobs said, "People don't know what they want until you show it to them". This applies to conflict of interest. In a recent consultation paper, Sebi proposed that mutual fund distributors should not provide incidental or basic investment advice in respect of mutual fund products and should not call themselves advisers.

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.

These are times of uncertainties! Who could have predicted the address to the nation by the Prime Minister on the evening of 8^th November 2016. Remonitisation have become painful for many for standing in long queues. More uncertainties are in store in the coming days! GST will overhaul the indirect taxation system in the country. Short term pains but long term gains? Now coming to personal finance; there is a need to question our core beliefs and think differently. Let us take income, assets, liabilities, expenses and retirement!

Income: Where does your income come from? Is it salary from your employer? This is an   external source. It is like water flow in a river. But looking it from a bigger picture, the real source of river water is the spring. Similarly the source of income is not the monthly salary but your skill, time, intelligence and experience. If you focus on up gradation of your skills that generates your income streams, you are more likely to preserve a steady income in the long run. Conversely if do not upgrade your skills in tune with the demand of the times, you are more likely to miss out on generating income. Think for a moment about the prospect of losing your job, look at your skill sets. They may be more valuable if you have kept them honed. Do not ignore skill building and networking even after you have settled in a job.

The Govt of India has announced demonetisation scheme for Rs 500 and Rs 1000 rupee notes from the mid night of 8^th Nov 2016.There are long queues before the bank branches and ATMs. We have addressed apprehensions about the taxation issues in an earlier blog. Recently the Parliament has amended Income Tax Rules pertaining to deposit of cash in the accounts. The tax treatment will be as follows:

Deposited with disclosures in Tax return

1. Tax @30% plus surcharge @33% and penalty of @10% of the deposit amount which makes it almost 50% of the deposit(In the earlier voluntary disclosure which ended on 30^th September 2016,the      total amount was 45%)

2. 25% of the deposit will be kept with the bank for a period of 4 years at nil rate of interest.

3. The balance 25% can be withdrawn by the depositor

Yesterday we went to buy vegetables from Vishnu, our local vendor. With limited cash in hand we were wondering how to pay him? We were surprised to see a board with paytm sign in front of the shop. After completing our shopping, I took out my Smartphone and made the payment through Paytm. The transaction was successful and the vendor got an SMS alert. It was so smooth and a big relief!!

If you want relief from the queues in front of the ATMs and Bank branches, it is not difficult. You can become less dependent on cash by making online payments. As may be observed below, if a family has a monthly expenses of Rs 50,000/-, they need not keep more than Rs 2,500/- of cash with them. A big relief from the long queues!!