A lot of people resolve to start investing at the start of the New Year. But how many actually follow through with their resolution? Well, don’t worry if you haven’t kept up your resolution. This Gudi Padwa, you have another chance.

Gudi Padwa is a spring time festival that is considered as the traditional New Year by the people of Maharashtra. With the festival coming up, how about investing in mutual funds in order to create wealth for the future!

Gudi: The symbol of victory

It is believed that Lord Ram defeated Ravana and returned to Ayodhya on this day. The ‘Gudi’ or flag symbolizes victory and inspires people to achieve spiritual and material success.

This can be achieved by investing in mutual funds. Generally, most people put their money in savings accounts and fixed deposits. While these avenues offer capital protection, the returns are not very high. Mutual funds can be a better alternative. They have the potential to provide returns that are higher than the prevalent inflation rates, which generally hover around the 4~5% mark in India.

By steadily investing in mutual funds, you can successfully meet your financial goals such as buying a car or a house or creating a corpus for your retirement.

The Gudi Padwa offering : an assorted mix

The traditional Gudi Padwa offering comprises of various items such as dal, neem leaves, neem flowers, honey, jaggery and cumin seeds. All these ingredients differ in aroma and taste. And to make the dish correctly, all the different ingredients should be in the right quantity. You don’t want it to be too sweet or too bitter.

Similarly, there are different mutual funds choices available for investing. Equity funds, debt funds, index funds, sectoral funds and so on. Each fund is tailored to meet specific needs of the investor.

For example, equity funds have the potential to offer high returns. But on the flip side, they are prone to higher market risks. The returns on debt funds may be comparatively lower but they offer capital preservation.

A good portfolio shouldn’t be exposed to too much risk. At the same time, it should try and maximize the returns of the investor. In other words, there should be a perfect balance; just like the holy offering.

Unity in diversity

Unlike other investment avenues, mutual funds offer the benefit of diversification in a very easy manner. Instead of investing in 20 to 30 stocks, it is possible to invest in a single index fund and achieve the same level of diversification.

And the best part is you don’t even need to spend a lot of money to achieve this. In fact, through Systematic Investment Plans [SIPs], you can start your investment journey with as little as Rs 500 each month. Slowly, you can increase the monthly investment amount as your income level grows.

Conclusion

As the festivities for the New Year begin, how about starting your investment journey too? This Gudi Padwa, make a resolution to increase your wealth by investing in mutual funds.

Indra Nooyi. Chanda Kocchar. Kalpana Chawla, Sudha Murthy. Saina Nehwal. PV Sindhu. Priyanka Chopra. Manushi Chillar. Additionally, there are numerous women entrepreneurs as well operating at various scales. These aren’t just names of famous women. They are the face of the changing reality of women. Today’s women are strong and smart enough to efficiently manage home and work together. However, when it comes to planning their finances, they still prefer to take a backseat.

Financial planning for modern women

Ladies, you take numerous short-term financial decisions day-in and day-out. Then why not plan to secure your financial future? It is high time that you come out of the closet and take the driver’s seat. Financial decisions are made for every family member’s future. It is only fair that everyone gets a say in fixing the goals and deciding where to invest.

On the other hand, say you know nothing about where the money is invested and how many insurance policies are there. Your entire family could suffer because of negligence and ignorance. You should not just be updated about whereabouts of the money but also be prepared for any sort of financial emergency that may arise.

Need for financial planning

Firstly, many women now have an actual source of income, so the household income is increasing as well. Now, your savings are not limited to just the pennies saved from household budget, but also the salary drawn every month. Thus, it becomes vital for you to do your own financial planning. Secondly, due to the proven worth, women also find a place in parents’ wills. Keeping the surplus income as a fixed deposit is not sufficient. Over time, the money will lose its value. Instead, you should work towards increasing its value.

Goal-setting is a part of process

Whether it is business or personal life, setting goals is important. Having need-based goals, charting a road map and converting it into actions are the basic steps for financial planning too. While there can be many needs, prima facie they can be categorized into two: protection needs like insurance and investment needs like retirement.

Plan your retirement

Women live longer. So, shouldn’t you be financially ready for your golden years? Having to compromise on your health and lifestyle in the old age is the last thing you would want to do. Look out for special schemes for women in your retirement plan where you can get some additional benefit.

Save for rainy day

Women are known to plan for emergencies and have a plan B. Not just planning, but you should also be emergency-ready for a sudden incident. This includes having health and life insurance, and also building a contingency fund.

Start with SIP

To begin with, invest in mutual funds through SIP. You can invest as less as Rs. 1000 per month. With mutual funds, you have the opportunity to invest small portions in widespread securities, thus, dividing the risk. You can also have multiple SIPs for different life goals like Pooja Shukla.

Pooja Shukla, 40, is an entrepreneur. At the age of 25, she invested in a mutual fund through SIP for her wedding. She also invested in another mutual fund for buying house. At the right time, Pooja redeemed her mutual fund units to finance her wedding and contribute to their first home.

At 31, when her daughter was born, she started 2 new SIPs for her school education and wedding. Pooja still continues the SIPs and plans to redeem them at the right time. Since last 15 years, Pooja also invests in ELSS every year, a mutual fund with a lock-in of 3 years, which gives tax benefit under section 80C. Instead of redeeming, she reinvests the matured amount in ELSS. The compounding effect has multiplied her investments manifold.

Your first step to become financially independent can be to invest in a mutual fund. Mutual funds are known to yield attractive returns in long run.

In a nutshell

It is important that you take the gender equality jargon seriously and take control of your own finances. While it is acceptable to emotionally depend on your husband, handle your finances independently.

The tax filing process can seem intimidating especially if you are doing it for the first time. Nevertheless, you don’t to need to worry.

Here are some simple yet useful tips that will help you complete the IT filing process in one go:

Keep Your PAN Card Handy

When you are ready to file your tax returns, ensure that you have your PAN card with you. Make sure to quote your PAN number accurately on your income tax return. Furthermore, your date of birth and fathers name mentioned on the income tax return should match with your PAN card details.

Make Sure Your Aadhaar Card Is Ready

Since July 2017, mentioning the Aadhaar card number on the income tax return forms have become mandatory. If you don’t have an Aadhaar card, you will not be able to file your tax returns. So if you don’t have an Aadhaar card, make sure to apply for one as soon as possible.

Get Form 16 from Your Employer

Form 16 is an important document that lists all the information required while filing income tax returns. Generally, the employer provides Form 16 to the all its employees by 31st May of every year. In case you were employed at more than one company within a single financial year, you will have to collect Form 16 from all the companies.

Know the Prevailing Income Tax Rates

Are you aware of the latest income tax slab for AY 2018-19? If not, you must acquaint yourself with it. Understanding the prevailing Income Tax Rates will help you plan your taxes and get a better understanding of the tax filing process.

Utilize Form 26AS

Form 26AS features the TDS details linked to your PAN. The TDS details will include the income deducted from sources such as fixed deposit, rent, commission income, and salary. You can adjust the TDS from your total tax liability, as TDS is already deducted from your income. However, make sure to include details of the corresponding income from which the TDS is deducted.

Furnish the Details of Your Assets If Your Income Is Above 50 Lakhs

If your total income after deductions exceeds Rs 50 Lakhs, you will have to provide additional details regarding your income. Furnish details such as Value of an immovable asset, movable asset, jewellery and liabilities and cash in hand.

Download Your Bank Statements

Including Bank Statements in your IT returns serves two purposes. Firstly, it is mandatory to mention them on your income tax returns. Secondly, it will tell you the amount of savings bank interest credited to your account. Savings bank interest is exempt from tax up to INR 10,000. If you have any dormant bank accounts, you need not mention it in your returns.

When it comes to borrowing money, many people prefer taking personal loans as opposed to using their credit cards as they can get more from it, the process is easier, and the rates are better.

Once you do get approved for a personal loan, the money is sent directly to your bank account. However, you have to decide whether you want to get a fixed term loan or a fixed interest rate loan.

A fixed term loan is usually less than 5 years and you can pay off the debts quickly. With a fixed interest, your monthly payment and the interest rate stay the same, however, if you are over 60 days late the interest rate on your current balance can be increased.

However, when you are getting a personal loan, you should be very careful about what you’re getting into. A lot of contracts come with certain tricks and traps that don’t even have to be buried away because the lenders will convince you that it’s in your best interest.

If you are well versed in these common traps, you can avoid them.

Insurance

Getting a life insurance can be a great means of protecting your family in case any calamity should occur. When you are considering getting a life insurance, you should look through all your options in the market and come up with the best one.

However, a lot of loan lenders, while closing the loan, might ask you to also add an insurance cover to the loan. This increases the premium of the loan. Furthermore, these insurances usually charge a premium far higher than the ones available elsewhere in the market.

To avoid this trap, you need to ask pointed questions about how the claims will be made, what would be the premium on the load, and other such questions. Only if you are satisfied with the answers, and if you’ve surveyed the market, should you purchase the loan.

Pre-Compute Interest

While Pres-Compute Interest may be hard to explain, it’s the worst deal you can get stuck with. It calculates interests in a complex manner and you end up paying a far higher interest in the initial years of the loan than you would otherwise. As such, you might pay off your loans earlier than anticipated, but you’ll do so at a higher interest rate.

In the advertisements, they may mention ‘no prepayment penalty’, however the interest will be calculated based off the ‘precompute’ method and you will end up paying more.

Origination Fee

Most personal loans charge an origination fee, which is why most people get stuck with a bad deal. You should calculate the APR of a loan, not the interest rate. And in order to avoid getting stuck with the fee, you should realize that the fee is already deducted from the loan amount.

Penalties for Prepayment

Even if penalties aren’t charged directly for prepayment, they may be charged via pre-compute interest and the origination fees. Be sure to ask if there’s a prepayment penalty, and if so, then avoid it entirely.

The share markets are volatile and risky. The huge fluctuations may be scary for you especially if you are new to stock market investing. It is natural that you would not like to lose money when prices fall. However, you must not make investment decisions based on the short-term fluctuations but instead invest for the longer term.

Staying invested for a longer time is better than trying to time the market. Successful investors do not have any investment secrets to make profits. Stock investing is about comprehending the fundamentals and hard work.

Here are three reasons why you must invest in equity market.

Multiple investment options

You may invest in shares of certain companies or invest in index stocks to make profits. Alternatively, you may invest through equity mutual funds, which is an indirect way to invest in the share markets. You may also invest in the derivatives market, which includes futures and options.

Inflation-beating returns

Compared to most financial products such as government bonds, savings bank account, fixed deposits, insurance, and others, investing in the equity market offers the highest returns, especially in the long-term. If you remain invested for three to five years, there is an excellent opportunity of making inflation-beating returns. This helps you build wealth over the years.

Risk mitigation

Diversification is an important aspect of financial planning. Stock investing is risky and you may never completely mitigate the risks. However, you may invest in companies with different market capitalization or operate in different sectors to mitigate the inherent risk of stock investing.

Using market news correctly

Institutional investors may have an advantage because they receive equity market news through their huge network of professional experts. However, you also have access to this information. Furthermore, you may use several tools and techniques that are easily available online to use this information to your advantage.

An important aspect of investing in stock markets is to have a plan. You must determine the available capital that you have for such investments. Additionally, know your risk appetite and set a financial goal and investment horizon before you commence investing in shares.

It is recommended you start early so your capital has a longer time to grow. If your financial goal is in the distant future such as building a retirement corpus, stock investing may be beneficial. This is because, with a longer investment horizon, you are able to ride out the short-term volatilities to build a huge retirement corpus.

You must never assume too much risk while investing in stocks. You should have realistic goals and use the share market news wisely for maximizing your returns. To ensure you do not lose money, you must book profits once your price target is achieved. Gaining proper understanding before investing is important.

Effective tax planning includes choosing the right investment option in order to maximize wealth and to generate higher returns in the long run. Individuals can, directly and indirectly, invest in the share market.

A direct investment means investing in stocks and equity savings scheme. Indirect investment means investing in the mutual fund, insurance, and National Pension Scheme [NPS]. There are various tax benefits available on an investment in equity. Some of the primary ones are discussed below:

Tax-free dividends

A large number of companies distribute their income amongst shareholders in the form of a dividend. The dividend is an income for the investor and the same is completely tax-free under the Income Tax Act. Any amount received in the form of the dividend is not taxable.

Long-term capital gains

When the shares are sold in the share market, investors either make a gain on the sale or suffer a loss. If the shares are sold at a price higher than the purchase price, it will be a gain and in case they are sold at a lower price, there will be a loss. Shares that are held for more than one year are known as long-term and the gain on the sale of such shares is exempt from taxation. In case of a short-term gain, it will remain taxable at 15%, regardless of the income tax slab the investor falls in. This implies that long-term investors can significantly benefit from taxation in case of capital gains.

Set off and carry forward of capital gains

The purchase and sale of shares are carried out through a demat account. The biggest tax benefit with regard to investing in equities is the option to set off capital gains. Short-Term Capital Gains [STCG] and Short-Term Capital Loss [STCL] can be adjusted against each other. Similarly, Long-Term Capital Loss [LTCL] and Long-Term Capital Gains [LTCG] can also be adjusted against each other. The capital loss can even be carried forward for up to eight financial years.

Equity-Linked Savings Scheme [ELSS]

Investment through ELSS has a number of benefits. It is liable for a deduction to the tune of INR 1.5 Lakh under Section 80C of the Income Tax Act. It has a lock-in period of three years and the dividend, as well as long-term capital gains, remain tax-free. If individuals are investing for the sole purpose of tax saving, this is an ideal choice.

Rajiv Gandhi Equity Savings Scheme

The scheme can earn tax benefits amounting to INR 50,000 and has a lock-in period of three years. Further, it is available to only those investors who have an income of less than INR 12 Lakh a year. It is considered as a preferred option of investment for the purpose of a deduction under the Income Tax Act.

Every investor should choose an investment strategy based on their long-term goals. In addition to making the most out of tax benefits, wealth maximization should be the goal. With a number of investment avenues available in the share market, it is possible to reduce the tax liability and maximize wealth at the same time.

The budget is significant not just for the country but you as well. That’s because it directly impacts you. The changes it makes in its taxation structure can influence your disposable income, investment portfolio and so. This is why tracking the budget can be a useful exercise. You get an idea about what to do with your income. You can plan where to invest, how to save tax and so on.

But, don’t worry if you haven’t. This article will briefly tell you how this year’s budget can affect your investment:

Equity

The Indian government imposed a Long-Term Capital Gains Tax [LTCG] of 10% on equity assets in this year’s budget. This means that if you sell the equity investment after 12 months, you will be taxed 10%. However, you are exempted from paying tax if your proceeds are not over Rs 1 Lakh.  You also need to remember that the LTCG tax is applicable from April 1, 2018.

To understand the LTCG tax calculation, you need to understand the meaning of Fair Market Value [FMV] and acquisition cost.

The FMV is the highest price of a listed equity share on an exchange on January 31, 2018. If there was no share trading on January 31, the highest price quoted on the most recent trading day before January 31 will be used. The FMV for an unlisted asset like the share of an unlisted company will be its Net Asset Value [NAV] on January 31, 2018.

The acquisition cost will be the higher of the FMV or the purchase price. If the sale price is less than FMV, the acquisition cost will be the higher of the purchase price or sale price. The difference between the sale price and the acquisition cost will be the capital gain or loss.

Mutual funds

The budget has not changed the tax deduction limit of Rs 1.5 Lakh under Section 80C of the Income Tax Act. This means Equity Linked Saving Scheme [ELSS] is one of those funds that can help you reduce your taxable income.

However, the introduction of LTCG tax has complicated matters. But, you can still save tax if you are smart. As mentioned earlier, gains up to Rs 1 Lakh are exempt from tax. Once the three-year lock-in period is over, sell units partly in a way that your gains do not exceed Rs 1 Lakh in a financial year. This method can help you earn an income every year without paying taxes! You can also choose to reinvest the proceeds in a new ELSS scheme.

Retirement planning

A person turning 60 years can withdraw 60% of the corpus held in a National Pension Scheme [NPS] account at maturity. About 40% of the corpus is exempt from tax. The tax exemption benefit is meant for salaried employees only. The benefit is extended to all subscribers of the NPS scheme from April 1, 2018.

Fixed deposit

Until now, the tax exemption limit for interest earned from post office and bank fixed deposit was Rs 10,000. But this limit will be raised to Rs 50,000 from the next financial year. The tax benefit is applicable to recurring deposit schemes as well.

To sum up

Now that you are aware of the tax impact on each asset class, you can start with investment planning for next financial year. 

References – 1, 2, 3, 4 and 5

Indians need not be reminded of the demonetization days which changed everything. The note ban brought about significant changes in the life of every individual across the country.

Apart from meandering queues outside banks and an increasing use of ATMs across the country, the note ban has had a positive as well as a negative impact on the economy. It has been more than a year the note ban came into the picture and here is how India has been impacted.

Improvement in personal finance

People are now choosing to deposit, whatever cash they have, into their savings account instead of stashing across different cupboards in the house. A large number of individuals have realized the importance of saving and deposit the same in their bank accounts regularly.

Increased use of digital payment systems

Indians have finally accepted the digital payment system. Demonetization proved that Indians can easily adapt to any changes and are open to learn about the use of latest technology. With a number of technology enthusiasts guiding others, even the most conservative individuals began using plastic cash and digital wallets.

Reduction of black money

The demonetization move was for a sole purpose – removal of black money from the economy. Almost 99% of the cash was deposited back into the banks since people had no other choice. They could not hold the cash anymore and had to bring it into the financial system of the economy.

A boost in tax payments

The direct impact of demonetization could be seen in an increase in the payment of taxes. There was a record increase in the number of income tax payers as well as first-time tax payers. Additionally, individuals also chose to pay advance tax and income tax returns on time.

Fall in GDP

Demonetization is considered as the main cause for the fall in the Gross Domestic Product [GDP] of the country. There was a significant slowdown in the economy. Also, there were a large number of layoffs across different industries in the country.

Diminished terror funding

Demonetization is considered as a strong reason to evaporate the cash reserves of a number of terror groups. Several terror organizations used fake currencies in order to fund their activities and the government took a very strong step to contain this.

Zero balance savings account

There was an immediate rise in the Jan Dhan or zero balance savings account after the announcement of the note ban. Many people deposited their cash into these accounts.