The Union Budget 2018 is being touted as a balanced one that puts primacy on affordable housing. The government seems all set to meet the Housing for All target by the year 2022.

As such, the government has established an affordable housing fund with an increased allocation for Urban areas [PMAY] by 7.6%. According to the Finance Minister Arun Jaitley, 37 lakh houses have been sanctioned for construction in Urban areas. However, the prime focus is being placed on Rural areas where over one crore houses will be constructed between the years 2017 and 2019.

As such, the Affordable Housing Fund is set to provide better access to capital for both urban and rural areas.

Some Claim there will be no real impact on Real Estate Sector

While the Affordable Housing Fund is all set to create houses, several real estate specialists claim that nothing has been done to actually impact demand and supply.

As such, an alternative view claims that the Affordable Housing Fund will have no real impact on the real estate sector. Ramesh Nair, the CEO and Country Head of JLL India stated that the Income Tax slabs have not shifted and no other direct measures have been taken to influence buying habits.

He further commented that the real estate sector had been reeling for the past three years, and as such, they needed some serious intervention to help them out. This is especially true because the real estate sector contributes to three of the major aspects of the economy. It factors into 7.7% of the GVA, has created 15 million jobs in just 5 years, and influences the exchequer.

A Push Towards Affordable Housing

While the Budget 2018 certainly has its detractors, most people are optimistic about the push towards affordable housing in both urban and semi-urban areas.

To quote Rishi Jain, the director of Jain Developers, ‘Affordable housing looks like a good bet now. And in fact, the continued focus on smart city projects is expected to boost real estate activities further.’

Furthermore, Ashish Jindal, the Co-head of Sanctum Wealth Management, believes that the Budget 2018 will encourage even the major real estate companies to delve into affordable housing, thus stimulating both the real estate sector and also providing access to affordable housing.

In terms of demand for housing, Ashish Jindal, said

The Budget has given a big relief by allowing up to a 5 percent gap between the two and this has the potential to remove the irritant and revive secondary market transactions.

The Rural Factor

One of the major advantages of the Union Budget 2018 is that it clearly aims to push up the farmers’ income. This will further help increase consumption in the economy. This, in turn, will further stimulate the real estate sector.

Harshavardhan Neotia, the Chairman of Ambuja Neotia Group, clearly stated that an increase in farm spending will directly impact the real estate sector.

That’s the basic gist of the Union Budget 2018 and all the different perspectives in regards to the effect it would have on the real estate sector. As such, it seems like an optimistic time to become a homeowner.

However, when you do, you should also get yourself a legit home insurance to financially protect yourself in case of unforeseen circumstances.

The Income Tax [IT] Act, 1961 lays down stipulations for the payment of income tax. Income from salary is one of the numerous categories that an individual may receive income from. To know your tax brackets, go through the income tax slabs of 2017-18.

Salary is received by the employee from the employer, and includes various components such as Gross salary, Leave pay, Gratuity, Provident Fund [PF], and Employee State Insurance [ESI], among others.

Deductions allowed on Income from Salary

According to Section 16 of the IT Act, an employee may claim for the following two deductions.

1. Deduction for professional tax

Under Section 16(iii), professional tax is allowed for deduction while calculating taxable income from salary. It is important to note that professional tax rates vary based on the monthly gross salary of salaried professionals.

2. Deduction allowed for entertainment allowance

Under Section 16(ii), a deduction under entertainment allowance may be availed of by government employees.

Computation of income tax on salary

Though many are intrigued by the entire process of income tax calculation and the incomes tax rates that they must follow, it is quite simple. Your income chargeable for tax under Salaries will have the following major components:

• Basic pay
• Dearness allowance (DA)
• Salary arrears
• Gratuity (Subtract the amount of gratuity exempted)
• Interest on PF in excess of the notified amount
• House rent allowance (HRA) (Subtract the amount of HRA exempted)
• Amount received through Voluntary Retirement Scheme (VRS) or retrenchment compensation (Subtract the amount exempted)
• Leave encashment (Subtract the amount of leave encashment exempted)
• Pension (Subtract the amount exempted)
• Employer’s contribution towards PF (in excess of 12%)
• Leave travel allowance (LTA) (Subtract the amount of LTA exempted)

The sum of the aforementioned headers amounts to the total gross salary. You may subtract the deductions under Section 16to arrive at the income chargeable for tax under salaries.

Income tax rates

If you are a salaried individual paying tax, it is imperative to have a thorough knowledge of the income tax slabs of 2017-18. Individuals who earn an annual income of less than INR 2.5 lakh need not pay income tax. Those in the slab of INR 2.5 lakh up to INR 5 lakh, are required to pay tax at the rate of 5%. Income tax rates for those earning above INR 5 lakh up to INR 10 lakh is 20%, whereas individuals earning INR 10 lakhs and above will pay taxes at the rate of 30%.

Assume your net taxable income from salary is INR 7,11,000. On the first INR 2.5 lakhs, no income tax will be levied. For the next INR 2.5 lakhs, 5% will be charged as per the income tax slab for A.Y 2018-19. On the remaining INR 2,11,000, an income tax rate of 20% will be levied.

Use the aforementioned information to understand the process of computation of income tax on your salary in depth and file your taxes on time.

The main goal of any financial plan is to attain financial independence. There are numerous investment schemes available in the market such as shares, commodities, and mutual funds, among others. One of the most attractive financial vehicles is a Unit Linked Insurance Plan [ULIP].

Understanding ULIPs

As the name suggests, ULIPs are market-linked products that offer dual benefit of insurance as well as investment. Such plans offer a high degree of flexibility as you may choose to invest in equity or debt funds as per your risk appetite. Due to this dual benefit and a high degree of flexibility, ULIPs have become a popular investment option among the masses.

ULIPs: a good choice for financial planning, investing, and future savings

The first step in planning your finances is identifying the various modes of investments and choosing the one best-suited to your needs. You may consider investing in a ULIP due to the numerous benefits it has to offer. Following are six ways a ULIP helps in attaining financial independence.

1. Facilitates long-term investment

ULIP is a very common investment option for long-term savings. It helps you build a sizeable corpus over a period of time, thus helping you achieve your financial goals in the long run. As most ULIPs come with a five-year lock-in period, you get the benefit of an accumulated amount. You may use this corpus to fulfill your goals and dreams such as buying a new house, purchasing a new vehicle, or starting your own business venture, among others. You may also use the amount to protect your child’s future, secure capital for critical milestones such as marriage, or plan for your golden years.

2. Provides life cover

ULIPs are offered by life insurance companies. Such plans provide life cover in case of an unfortunate event. Though ULIPs do not offer a very high level of coverage as compare to term life insurance plans, it serves the purpose of securing the future of your loved ones in your absence.

3. Fulfills risk appetite

ULIPs offer investors an opportunity to invest in any asset class as per their choice. You may choose to invest in equity, debt, or money market instruments. In case you have a low appetite for risk, consider investing in debt funds. You may invest proportionately in debt funds as equity funds if you are a moderate-risk player. Invest in equity funds if your risk appetite is high.

4. Offers flexibility to switch

In case you wish to change from one asset class to another, or wish to modify the proportion of funds, you may do so easily. This helps you control your losses in case the market fails to perform. Besides, you may also enjoy wealth appreciation if the market exhibits a good performance.

5. Offers comprehensive cover

Most insurance providers offer riders with ULIPs. Such riders, also known as add-ons, enhance the coverage. You may opt for riders such as accidental death benefit rider or permanent disability benefit rider, based on your individual needs.

6. Provides tax benefits

The good news is that you may avail of tax benefits on the premiums paid towards your ULIPs. Such deduction is allowed under Section 80C of the Income Tax Act, 1961, up to a limit of INR 1.5 lakh. You may, therefore, enjoy such benefits and lower your taxable income limit to a great extent. It is important to note that in order to avail of tax benefits, the premium amount must not exceed 10 percent of the sum assured.

ULIPs offer a plethora of benefits. You may, therefore, consider diversifying your portfolio by investing in such a financial instrument. It is imperative to understand what is a ULIP plan, what are its features, and what are its advantages before making an investment. By doing so, you may plan, invest, and save for your future successfully.

Many investors in the stock market are not aware of the implications of the tax on their investment. Buying and selling of shares as well as dealing in derivatives have an impact on the income of the investor and the same should be reflected on their Income Tax Return [ITR].

It is mandatory for investors to file an annual return of income and their income statement should include all the gains and losses from investment in derivatives. One of the most popular forms of derivative is Futures & Options [F&Os]. It is basically a contract to buy at a future date.

Investors tend to get confused when they have more than one type of stock market investments. It is important to maintain records of transactions in order to ensure that they are appropriately reported. To gain tax benefits by carrying forward the losses or setting off the losses, it is essential to file an annual return of the income. F&O income is considered as a non-speculative income and hence income from it will be considered as a normal business income and any loss incurred will be considered as a normal business loss.

How to report the income

Investment in the stock market can be made through a demat account. Income generated from dealing with F&Os is always considered as a business income. The advantage of doing so is that it will allow taxpayers to claim the expenses incurred in the business as a deduction. These expenses may include telephone bills, the commission of a broker, Internet charges, salary of employees, and any other expenses that are directly related to the business. Business owners are required to file ITR-4 in order to report their income or loss from the business.

When reporting the income under capital gains, the short-term gain will be taxed as per the regular income tax slabs. The expenditure will not be deemed to be deductible and the short-term capital loss will be adjusted against the capital gain acquired through other sources. The losses can be set off against rental income, interest income, and any capital gains generated in the financial year. The losses cannot be adjusted against salary income. Besides, the loss can also be carried forward for eight consecutive years.

In case of intraday trade, the transaction will be considered as speculative. This loss can be carried forward for four years only. Any loss in intraday trade can only be adjusted against the gain in speculative business. Additionally, intraday and F&O will have separate expenses and they can be bifurcated accordingly. It is advisable to report the losses since it will bring down the total taxable income.

Investors need to understand how to file income tax and the implication of each transaction on the business and file the return correctly.

Bookkeeping and audit

In case the turnover of the business exceeds INR 1 crore, it is mandatory to get the accounts audited by an auditor. A penalty of minimum 0.5% of turnover is imposed, in case the accounts are not audited. It may be extended up to a maximum of INR 1.5 lakh. The business owner will be required to maintain necessary records of all transactions. In order to avail of the benefit of expenses as a deduction, it is essential to maintain complete records for individuals whose income exceeds INR 2.5 lakh per annum or annual turnover of the business exceeds INR 10 lakh.

Thorough understanding and knowledge of tax implications will help investors prepare their financial statement and report the same. It is important to comprehend the regulations before beginning your investments.

Risks are an unavoidable part of life. One can reduce risk, pass it on to someone else, or accept it. Nonetheless, one can never fully eliminate the risk attached to any event in life.

This could not be less true for investments. Every investment has a risk-return trade off—higher the risk, greater is the potential for returns. Mutual funds are considered to be less risky than direct equity investing but with the potential to deliver better returns when compared to fixed-income securities.

Equity-Linked Savings Scheme [ELSS] is a popular type of mutual fund because it is amongst the most dynamic tax-saving investments available in the market today. It is one of the few investment products that offer tax benefits and has the potential to deliver high returns. These funds are equity-oriented schemes that invest primarily in equity and related securities. Equity markets, as we all know, are subject to price fluctuations. Since ELSS funds mainly invest in equity, their performance is also influenced by the volatility of equity markets.

Why should investors not panic ?

Some investors buy ELSS funds and expect the fund to start earning returns immediately. What they fail to grasp, however, is that when there is a market, there will be ups and downs. Panic is often the first reaction of investors when there are fluctuations in the Net Asset Value [NAV] of their chosen fund. The NAV of a fund changes daily due to market movements. Investors need to remember that short-term fluctuations are not necessarily indicators of a long-term trend.

Professional fund managers who have vast experience in investment management manage ELSS plans. Fund managers constantly adjust the portfolio composition by reviewing the performance of the equity stocks within the portfolio. While investors can keep a watchful eye on the performance of the fund, they should not jump at the first sign of trouble, and let professionals deal with it.

ELSS funds are long-term investments

Many investors buy ELSS funds simply because they are excellent to reduce their tax liability, which is undoubtedly one of their greatest features. However, such funds are also very powerful when treated as long-term investments. Remaining invested in ELSS plans for a 10- to 12-year period is likely to bring phenomenal returns. One simply needs to take a step back and look at the bigger picture. Long-term investors are able to cut through the noise of short-term volatility and keep a strong focus on the long-term benefits. Therefore, there is much more to ELSS than being the best tax-saving investment.

The power of compounding

When the returns earn further returns, the power of compounding is unleashed. In relation to ELSS funds, the compounding effect may yield astounding returns on one’s investment. The returns generated by ELSS investments are reinvested into the scheme. As a result, the investor has the opportunity of earning higher profits. The compounding effect, especially in the case of equity-related investments is a highly profitable technique to maximise returns.

Equity is the best performing asset in today’s market

Equity as an asset class outperformed all other types of investment products in 2017. Fixed Deposit [FD] rates and real estate prices were impacted by demonetization. Real estate further suffered because of the establishment of the Real Estate Regulation Authority [RERA], the Benami Property Act, and the introduction of Goods and Services Tax [GST]. Gold also gave a disappointing performance during the last year.

Equity investors, on the other hand, have been able to earn healthy returns on their investment. This goes to show the fundamental strength of ELSS as an investment. ELSS funds allow investors to invest in equity indirectly and at the same time, cushions the investment from the poor performance of a single stock or sector by investing in multiple securities. Professional management eliminates the hassle of tracking the performance of different stocks.

Every rise has a fall and the same goes for investments. ELSS investors may get on the path to earning stellar returns if they can patiently ride out the short-term headwinds of volatility. Making investment decisions on their own may be a nerve-wracking experience for most investors. However, it does not have to be that way.

Angel Wealth is with you at every step of your investment.  The ARQ tool in the Angel Wealth mobile application is an all-in-one investment engine that gives the best mutual fund recommendations as per your portfolio. Powered by machine learning and cognitive technology, the proprietary ARQ investment engine processes over a billion data points to provide recommendations personalized to your risk profiles.

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The year 2018 is nigh! And like every year, it is time to draw up your new year resolutions. Whether or not you say it out loud, the one wish you have is to be in a better financial shape. How about you make a resolution towards a better financial health then ?

Here are a few steps to ensure your financial health is in order.

Take stock of your financial health

The first step is to review your financial health. One barometer of your financial health is your CIBIL score. This is a three-digit score [between 300 and 900] assigned to you on the basis of your credit repayment track record. This is applicable to all lines of credit such as loans and credit cards. If you repay your debt on time, you are likely to have a good CIBIL score. If your CIBIL score is 750 and above, you can rest easy, else scan your CIBIL report to see where you can improve.

The next thing you need to do is put a financial plan in place. It can help meet your life targets. So, this new year, outline a financial plan that can help you fulfil your long-term goals.

Are you adequately insured ?

The first step of financial planning is to ensure your loved ones are financially secure in your absence. This is why opting for a life insurance is ideal.

The most ignored aspect of insurance is health insurance, especially when one is healthy and young. Considering the fast lives that we lead today and the skyrocketing costs of hospitalisation, health insurance should not merely be an option. In fact, the younger you are, the cheaper your health insurance policy will be. This is the best time to get a health cover.

Build an emergency fund

The  next step should be to build an emergency fund. Life is such that it can throw a curveball at you at any time. You may fall prey to a health condition or lose your job. At such times, repaying your debt or even meeting regular expenses may become an uphill task. To avoid falling prey to such situations, it is prudent to build an emergency fund that can take care of all such expenses and debt repayments for at least nine months.

Do not worry about building it all at once. You can start by putting away at least 10% of your monthly income. Instead of saving, you can invest it in a liquid or a debt mutual fund through a Systematic Investment Plan [SIP]. Liquid or debt funds are ideal because they can provide inflation-adjusted returns at low risk.

Consider long-term goals

The most crucial step is investment planning. It is important to build a kitty large enough to finance your child’s education, wedding and even your retirement. The good news is that you do not need to go from pillar to post looking for appropriate instruments to fulfil each financial goal.  Mutual funds, especially equity oriented ones, can step in to meet your long-term goals. These funds have the potential to yield high returns in the long run.

It is not only about their performance. There are several other advantages of investing in equity mutual funds. You can reap the benefits of professional fund management for one. You do not need to worry about your own level of expertise in stock picking. You can trust fund managers to meet your investment objective. Secondly, equity mutual funds are liquid. This means you can redeem units of the scheme at any time, unless you have invested in an ELSS scheme where your funds are locked in for a minimum of 3 years. Thirdly, you get the benefit of diversification when you invest in equity-based funds. You can own a diversified portfolio rather than buying a single stock and risking losses.

Investing in equity-based mutual funds is advisable through the Systematic Investment Plan [SIP] route. SIPs allow you to invest in mutual funds for as less as Rs 500 every month. They also you also reap the benefits of compounding.

Compounding means that the returns generated from your investments are reinvested in your principal. The longer you remain invested through SIPs, the more you stand to gain. Therefore, investing in equity mutual funds through SIPs can be best to meet your long-term financial goals.

To sum up, improving your financial health is not difficult. All you need is a little discipline. So, here’s to your better financial health in the new year!

Innovative products sell the most and the best essentially because they provide better value for money. The same applies to financial instruments as well. Financial instruments are expected to multiply the money better and thus must be innovative.

With the declining interest rates on savings account deposits, banks came up with a more productive and flexible product known as the money multiplier or the sweep-in fixed deposit. It combines the features of a Fixed Deposit [FD] and Bank Account.

Profitability in flexibility

With a sweep-in FD account, you do not have to worry about maintaining the minimum balance in your account and at the same time, you do not have to be concerned that your funds are not earning enough.

Although the functioning of this money multiplier account varies from one bank to another, the underlying principle is the same. The minimum balance amount is retained in your account and the surplus is converted to an FD.

As and when required, the FD automatically is discontinued and transferred to the regular account to maintain the stipulated balance and meet the debited amount on the account.

This allows you to earn higher interest on the surplus amount in your bank account, through the flexible FD without having to spend time on making and breaking the FD.

Here are five things to pay attention to while selecting this facility.

1. Tenure of the FD

Different banks have different tenure options available for the auto swipe-in facility and they could charge premature withdrawal penalty. Ideally, the tenure is a year and not all banks charge the premature withdrawal penalty. Different banks have different tenures so do check the same before opening the account.

2. Threshold limit

Some institutions may levy certain threshold limit while others may allow you to choose the same. A lower limit is beneficial as it enables you to earn higher returns on your savings.

3. Interest rates

Most banks offer the same interest rate on such facilities as available on regular deposits. However, regular FDs offer marginally higher interest rates to senior citizens but the swipe in FDs may not provide this benefit. Thus, keep this in mind, when opening such an account for your senior citizen parents/relatives or in case if you are one.

4. FD size

Generally, the surplus amount is divided into smaller ticket sizes and then converted into FDs so that you do no lose in case of premature withdrawal. The lower the multiple the higher are your earnings.

5. Withdrawals mechanism

Evidently, the interest earned by the FD is going to be proportionate to the tenure it was with the bank and thus, you must opt for Last in First out (LIFO) method of withdrawal. This will allow you to earn better returns. However, if you make frequent withdrawals choosing the First in First Out [FIFO] mechanism is advisable.

The interest earned on the sweep-in FD is taxable as per your tax slab. This facility is beneficial to earn slightly better returns than a regular saving account. However, to meet long-term goals, it is advisable to choose other investment options that provide inflation-beating returns.