Max Secure Financial Planners -

SEBI Registered Investment Advisers (RIA) provide right financial advice and act in clients’ interest. RIAs are like Financial Doctors and are different from Distributors and Banks. RIAs focus more on advice where as Distributors including Banks focus more on products; just  like selling medicines.

Regular and Direct Mutual Fund Products 

The Mutual Fund AMCs design regular products factoring two components; i.e. the price of the product and the commission. When the investors buy Regular MFs; the  embedded Commission in it  is  passed on  to the Distributors  and Banks. It is like selling branded medicines.

But now SEBI has directed AMCs to design Direct MF schemes without the commission in it. It is like generic medicines. These are  transparent and the investors do not pay for the Commission component. These are not offered by the Distributors and Banks since they do not earn commission from it.

Benefit of Direct Schemes

SEBI has mandated that expenses ratios of MF schemes should not exceed 2.5% in case of equity schemes and 2.25% in case of Debt schemes. These include the commission paid to the Distributors and the Banks. We provide the comparative expenses ratio  of some Regular and Direct Mutual Fund schemes below .The differences are due to the commission embedded in Regular schemes. As may be observed, it is around 1% more in case of  Regular schemes than in Direct schemes .This excess of 1% in Regular schemes  are  paid to the Distributors and Banks.

Infosys share  price crashed yesterday  due to the resignation of their CEO  Mr. Vishal Sikka, the first non-founder CEO.He cited the interference of  Founder Mr. Narayan Murthy in his domain. But Mr Sikka reiterated his belief in the great potential of Infosys. The founders of Infosys  were known for good corporate governance but face a great challenge on succession planning going ahead.

 Business tycoon Mr Vijay pat Singhania,founder of Raymonds  has been entangled with his son Mr Gautam Singhania  on inheritance of his empire.He has already handed over his empire to his son but he has no money to meet his daily expenses.  It has a message for parents across the country; " Do not be  blinded on your retirement planning and be careful  in transferring your created your wealth to your children".

The period between 2002-2011 was a golden period for real estate investments. Now we have some data  to understand the current situation. The National Housing Bank (NHB), the regulator of housing finance companies have launched a revamped RESIDEX, a housing price index. The index claims to offer home prices of 50 cities across the nation.

This should help us get some idea about which way the real estate prices have gone over the last few years. And for the first time we should be able to calculate the actual city wise returns. Let's take a look at Table  below. It shows the annual returns of some selected cities between June 2013 and March 2017. It also shows the one-year return between March 2016 and March 2017.

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.