PAN can be misused.!! Use PAN prudently.!!

PAN – Permanent Account Number, an important financial document in today’s time. It is mandatory to quote your PAN for various financial transactions to curb black money.  It is also a valid ID proof for everything from sim card application to hotel reservations, etc.

But did you know, if you use PAN card as an Identity proof where not mandated by the government, there are chances that it can be misused to commit financial frauds, crimes and forgery. It can be used to carry out benami transactions.

What is PAN?

It is a code that acts as identification of Indians, especially those who pay Income Tax. It is a unique, 10-character alpha-numeric identifier, issued to all judicial entities identifiable under the Indian Income Tax Act 1961.

Where is it mandatory?

As per Income Tax India below are the transaction where it is mandatory:

·     Sale or purchase of any immovable property valued at five lakh rupees or more

·    Sale or purchase of a motor vehicle or vehicle, [the sale or purchase of a motor vehicle or vehicle does not include two wheeled vehicles, inclusive of any detachable side-car having an extra wheel, attached to the motor vehicle

·    A time deposit, exceeding fifty thousand rupees, with a banking company

·    A deposit, exceeding fifty thousand rupees, in any account with Post Office Savings Bank

·    A contract of a value exceeding one lakh rupees for sale or purchase of securities

·    Opening a bank account

·    Making an application for installation of a telephone connection (including a cellular telephone connection)

·    Payment to hotels and restaurants against their bills for an amount exceeding twenty-five thousand rupees at any one time

·    Payment in cash for purchase of bank drafts or pay orders or banker's cheques for an amount aggregating fifty thousand rupees or more during any one day

·    Deposit in cash aggregating fifty thousand rupees or more with a bank during any one day

·    Payment in cash in connection with travel to any foreign country of an amount exceeding twenty-five thousand rupees at any one time

·    Making an application for issue of credit card or debit card

·    Payment of an amount of fifty thousand rupees or more to a Mutual Fund for purchase of its units

·    Payment of an amount of fifty thousand rupees or more to a company for acquiring shares issued by it

·    Payment of an amount of fifty thousand rupees or more to a company or an institution for acquiring debentures or bonds issued by it

·    Payment of an amount of fifty thousand rupees or more to the Reserve Bank of India

·    Payment of an amount aggregating fifty thousand rupees or more in a year as life insurance premium to an insurer

·    Payment to a dealer for purchase of bullion or jewellery–

o    of an amount of five lakh rupees or more at any one time; or

o    against, a bill for an amount of five lakh rupees or more,

What are the alternatives?

You can use any of the other ID proofs you hold at places where PAN is not mandatory. Any of the valid ID proofs like Voter’s ID, Driving Licence, Aadhaar Card, etc.

TIP:

If you are not holding any other ID proofs and you have to submit you PAN copy. Make it a habit of mentioning the person you are handing it over to, purpose, the date and then sign below it.

Eg. Submitting PAN copy for XYZ Credit Card;

Mention- submitting to XYZ co. for credit card application on 01/01/2015 and then your signature.

NRIs can invest in India!! Here’s How...

India’s Growth story making the headlines every day and more and more NRIs (Non Residential Indians) are wanting to be the part of it. And why not? While Foreign Institutional Investors (FII) are pumping money into this economy and Foreign Direct Investment are coming in, there are ample opportunities for NRIs to invest in the homeland.

NRIs are allowed to invest in the Indian Stock Markets, and many are already investing regularly. The paperwork and the formalities are a little burdensome, but once all the setup is done, the fruits are sweet.

There are three major ways to invest in Indian stock market: India based ETFs, Direct Equity & Mutual Funds.

1.   India Based ETFs: 

ETFs (Exchange Traded Funds) are traded in respective countries’ stock exchange in respective currencies. through and bank or broker, avoiding a lot of documentations. These can be traded just like any other stocks. You can invest in these stocks without the hassles of going

However a major point to note is that, these ETFs will be affected by fluctuation in the exchange rate. So not only there will be an impact of market but also the value of Rupee as against the host currency.

2.    Directly in Indian Stocks:

After going through the initial setup of opening few accounts, NRIs can invest directly in Indian Stocks.

Primarily, you need either a NRO (Non ResidentOrdinary) or NRE (Non Resident External) bank account. Then you need an approval under PIS (Portfolio Investment Scheme) which allows you to invest in Indian stock market. Finally you will need a Demat and Trading account. Any major bank can help you with setting up of all the above accounts and getting a PIS approvals.

When you have all this done, you can invest in Indian stocks but not all stocks are eligible for NRI investment. RBI publishes a list that shows you which stocksare or aren’t eligible for NRI investing.

3.    Mutual Funds:

NRIs can invest in Indian Mutual Funds through their NRE or NRO account. Demat account is not mandatory and PIS account is not required. However, there are certain restriction on the funds available depending upon the country of residence.

Investing through a mutual fund advisor would place you better as they are aware of all the regulations and restrictions governing NRIs investments in mutual funds.

Be Mindful of taxation:

Overall the provisions pertaining to tax liability of capital gains provisions remain the same for residents and non-residents.

However, many countries have a double tax avoidance agreement with India and this will come into play while determining the overall tax liability of income earned through investments made in India.

For any queries regarding NRI investment and financial planning please write to the author Akshay Suvarna at akshay.suvarna@ymail.com and also visit the website www.mymoneymanager.net to know more about mymoneymanager.

6 Financial Secrets You Should Know Before You Turn 30

1. Secret of Compounding: 

This is the basics for making money work for you.
What is compounding? Let’s take an example of two brothers Jay and Veeru -

Jay starts investing ₹ 10,000 every year at the age of 25 till he is 35.  He stops investing but does not withdraw the funds.

Veeru starts investing ₹ 10,000 every year at the age of 35 till he is 60.

Considering both retire at 60 and earned interest at 12%, who do you think has accumulated more wealth by then?

Astonishingly, Jay managed to accumulate 2.2 times more money than Veeru, despite the fact that Veeru contributed for 25 years and Jay contributed only for 10 years.

This is the Power of Compounding. Jay’s funds started compounding early, this interest earned further interest and so on. So, start investing early no matter how small an amount, the true power of compounding will make you rich.

2. Secret of Term Insurance: Term Insurance is the purest form of insurance, no one will tell you this. There are agents everywhere trying to sell you investments linked with insurance. Such insurance schemes not only give lower returns but also give you very little life cover. It is recommended to keep investments separate from insurance.

We believe nothing can happen to us, we wish the same. Nothing should. But why take chances? Our loving family should not suffer financially, hence under term insurance, in the event of the policy holder’s death the nominee gets sum assured. No market link, no investment schemes, no settlement hassles and is also inexpensive.

We usually undermine this fact and are inadequately insured or are misinformed by agents. The younger you are, the cheaper is the premium for Term Insurance. You could also avail Tax deduction under Section 80C.

3. Secret of Health Insurance: Medical costs are rising faster than the cost of living. That’s the price we have to pay for better life. Hence, health insurance is a must.

Most of us are covered by our employers, but that is limited. There are multiple clauses under employer provided health insurance covers. Taking a Health insurance which covers your family members and gives a higher cover for yourself is your best bet.

Like term insurance the Health Insurance is cheaper when you are young. If unused, there are unclaimed bonuses added to the sum assured under health insurance. The premium paid makes you eligible for a Tax deduction under section 80D.

4. Secret of Bad Debts: Bad debts are bad for a reason. They secretly eat up on your credit score. Credit score is important as this is what decides if you will get that new credit card with airport lounge access or that much needed loan to buy your dream house.

Bad debts keep on piling interest on interest till you don’t pay them off completely, affecting your credit score. Make sure you have paid in full your outstanding credit card bills or that education loan that you have.

Do not carry the spending mistakes of your 20s into your 30s. 30 is the beginning of the new era of married life, kids, new jobs, big house and your big dreams. Ditch the bad debts for the good dreams and live stress-free.

5. Secret Emergency Fund: As the name suggests, in case of emergency this is what will be rescuing you. A fund to suffice your lifestyle requirement in case of unforeseen emergencies where your income is reduced or stopped.

If you have sufficient health cover and life cover, the recommended emergency fund could be 6 months of your monthly salary. Imagine you want to quit your job to find your passion or you could be just between jobs or God forbid you are bedridden for a while due to an accident or illness, this fund will be your saviour.

This emergency fund should be kept secret and not to be used to gift yourself from time to time. The fund itself is a gift to you.

6. Secret of Defining Your Financial Goals: This is an open secret we all know, unless we define our goals it is very hard to achieve. Still very few of us actually adhere to it.

Segregate your financial goals as per priorities this will help you to decide if it is a short-term goal, a medium-term goal or a long-term goal. Since you have understood the power of compounding and are keen to start investing early you can provide for each of your financial goals.

You can then systematically invest for your big spends like buying a house, kid’s education and marriage, as well as your short-term goals like going on your dream vacation, buying that new car, etc. Also knowing how much you need at the time of retiring and saving for it will make you feel secured of your future.

These 6 secrets will safeguard your financial goals as well as of those of your family members. The purpose of this article was to create awareness and inculcate healthy financial habits at the peak of your youth. There are definitely other financially savvy things you can do in addition to the ones mentioned above.

If you have any queries on how, what and where to invest, as it is never too late to start, kindly write to the author Akshay Suvarna at akshay.suvarna@ymail.com. Visit www.mymoneymanager.net to know more about financial planning and get a customized financial plan for yourself.

Do I Have To Pay Tax If I Sell My House?

Most likely! However, you can reduce the tax for sure.

This article will focus on Capital Gains on sale of property and how you can save some tax thereon.

Which Tax And Why?

Income Tax Act mentions that any gains arising from the sale of any assets attracts tax.  Either it is Short Term Capital Gain or Long term Capital Gain.

Image source: Chartered Club

 Income Tax Act definition is as below:

1.   Short Term Capital Gain (STCG) : Asset is held for less than 36 months

2.   Long Term Capital Gain  (LTCG) : Asset is held for more than 36 months

Any such gain attracts STCG Tax or LTCG Tax.  STCG Tax rate is as per the individual’s tax slab rate and LTCG Tax rate is 20% on LTCG with Indexation.

Image source:bwcaa.org

How Is It Calculated?

1.    Short Term Capital Gain (STCG) is simple to calculate, i.e. if the property is sold within 36 months all you have to do is use this format to arrive at your Net STCG.

    As mentioned earlier the STCG shall be taxed as per the individual’s tax slab rate.

2.     Long Term Capital Gain (LTCG) is little more elaborate than STCG, i.e. if the property is sold after 36 months of acquiring the same.

  TAX @ 20% shall be payable on the long term capital gain computed above and advance tax shall also be liable to be paid on such capital.

Indexed cost of acquisition is calculated as below:

Check here to get the Index for the year you purchased the house and the year you sold or are planning to sell house.

How To Reduce The Tax Liability?

Can I save tax? Yes. Most important part for all of us. After all, the gruesome Income Tax Department does have some consideration towards us.

Exemptions are only in case of LTCG and no such exemptions are provided for STCG.

These exemptions fall under section 54 and section 54EC of Income Tax Act, 1961.

1. Under section 54 the entire LTCG will be exempt from tax if the seller uses the entire LTCG amount to build a new house within 3years of sale of the house property or purchase a new house within 2 years of the sale of property. However, if you cannot decide right away, the LTCG amount can be parked in a Special Account called the Long Term Capital Gain Account. The funds should be used for either of the purposes mentioned above, within the span of 3 years or LTCG will be taxable.

2. Under section 54EC the seller can alternatively invest in the bonds u/s 54EC up to a maximum amount of Rs. 50 lacs and avail exemption under LTCG. The LTCG arising from sale of property can be invested in following two bonds :

·         National Highway Authority of India (NHAI) Bonds

·         Rural Electrification Corporation (REC) Bonds

Both the bonds have a lock-in period of 3 years and pay out interest around 6% annually.

Note: Interest earned in NHAI bonds and REC bonds as well as LCTG account are taxable.

Illustration With An Example:

If Mr. A had purchased flat in 2004-05 at Rs. 60 lacs and has sold the same house in year 2014-15 at Rs. 1.30 crores. The computation of Capital Gain is as below:

1. Since the asset was held for more than 36 months it is LTCG.
2. Cost Inflation index(CII) for year 2004-05 is 480 and CII for year 2014-15 is 1024
3. Therefore Indexed cost of acquisition will be Rs. 60,00,000 x ( 1024/480) = Rs. 1,28,00,000/-.
4. Resulting LTCG will be 2,00,000/- (1.30 cr - 1.28 cr)
5. LTCG tax is 20%, hence LTCG Tax on Rs. 2,00,000 @ 20% = Rs. 40,000/-.
6. To save a tax of Rs. 40,000/- Mr. A can either use LTCG of Rs. 2,00,000/- to build a new house within 3 years or purchase a house within 2 years or alternatively invest the LTCG of Rs. 2,00,000/- in either of the bonds mentioned u/s 54EC; making his tax liability NIL under LTCG.

image source: www.iocomprocasa.com

Conclusion:

1. In case of STCG the applicable tax rate is according to the individual’s slab rate.
2. LTCG Tax is @ 20% with indexation on LTCG only and not on the whole amount.
3. Tax can be saved u/s 54 and u/s 54EC.
4. Short Term Capital Loss can be adjusted against STCG or LTCG in the same financial year.
5. Long Term Capital Loss can be adjusted ONLY against LTCG in same financial year or LTCG in subsequent 8 financial years.

To know more about Capital Gains and Bonds u/s 54EC or any queries regarding your assets or ways to save and grow your money, kindly reach me at mymoneymanager.

How To Have A Pocket Friendly Vacation.

The vacation season has started. Kids have their summer breaks. The weather is unbearable and 

you just want to give this heat a miss. A few tips on how to beat the heat but not burn a hole in your pocket.

Plan Ahead: Planning in advance is the key to having a pocket friendly yet magnificent vacation you always wanted. Booking your stay and your travel, if done in advance, will fetch you early bird discounts. Air tickets booked in advance are sometime dirt cheap. Also you can plan your own itinerary as you have time, instead of relying on the age old travel agent's sightseeing packages. Sites like tripadvisor, makemytrip, etc. are very helpful.

Tip: Check the conditions of ticket cancellation before you book it.

Have A Budget: Always have a budget allotted to vacations, so that this expense does not eat up your retirement fund or your regular investment. Budget gives you guide lines for your vacation spending, right from selecting of destination, accommodation and transport to buying souvenirs for your loved ones. Don't go overboard.

Tip: Have a little extra fund just in case of unforeseen expenses like medical requirements, natural calamities, etc.

Start Saving: If you have planned ahead and have a budget allotted, start working towards saving funds for it. It is easier than you think. It might be from the funds your investment adviser has set aside or the yearly bonus you received at year end or your regular saving set aside per month.

Tip: My friend saves 10k per month and his wife saves 7k per month, by year end they accumulate 2.04 lacs + Interest. This is solely used for their vacations. You wont feel the pinch saving monthly.

Indian Destinations: Well take a look at the Indian alternatives to your favorite international destinations. Lambasingi, Andra Pradesh, only place in south India where it snows. Valley of flowers in Uttarakhand can be compared to the Antelope valley in the US. Click here for more options and be enamored by the scenic beauty and wonders closer home

Tip: Visit Mawlynnong Village, Meghalaya.  Did you know it is Asia's Cleanest Village.

International Destinations: For those of you who still wish an international vacation and have budgeted for the same, there are plenty options. However, certain months are peak business season and cost you more. There are various networking sites for international travelers and hitchhikers. You can rent an apartment or just a bed in a hostel (forget the horror movies) which are cheaper than hotels.

Tip: There are international destinations which will cost you less than an iPhone, Click here.

Maintain A Diary: Maintain a diary or a log of not only your journey and experiences but also your expenses. This will help you in asserting how well had you planned and where you need to focus while planning your next vacation. It also helps maintain your budget while on vacation.

Tip: This diary can give lot of insights about the stay, travel and expenses involved when you are planning vacations for your family and friends. 

Why Investing In Mutual Funds Is Beneficial - My Money Manager Recommends

Why Investing In Mutual Funds Is Beneficial - My Money Manager Recommends 

1.    Diversification :

As the wise saying goes ‘do not put all eggs in one basket’, with the assorted range of assets available to allocate under mutual funds, the risks are reduced to a great extent. You can invest across industries and geographies.

2.    Proficient Management:

Experienced and qualified professionals along with equally proficient team manage these funds. The fund managers expertly analyse the market and take decisions aligned with the mutual funds scheme’s objectives.

3.    Economies Of Scale:

Mutual Fund managers usually buy shares of big corporations which require huge volumes and huge capital. The typical investors can avail benefits of the shares of these big corporations through mutual funds, as they can start investing with as little as Rs. 500 in Systematic Investment Plans.

4.    Convenience and Choice:

Right to choose from the diverse range of mutual funds schemes managed by proficient fund managers available at low cost which suits your financial needs and goals is of course a great convenience for today’s generation.

5.    Better Returns:

Based on the historical data, mutual funds have the potential to deliver better returns in medium term or long term investments as compared to the traditional investments in bank deposits.

6.    Liquidity:

In case of open ended mutual fund schemes investors can redeem part of full investments on any business day at the NAV (Net Asset Value). In case it is a closed ended mutual fund schemes, it mentions if it can be traded in stock exchange.

7.    Transparent:

Various publications and rating agencies regularly monitor and review the performance of a mutual fund. Daily NAV, fund manager’s forecasts and strategies, etc, give a clear reflection of the credibility of the mutual fund schemes.

8.    Safe:

All mutual funds are required to follow the strict regulations and guide lines drafted to protect the interests of the investors. All mutual funds are registered with SEBI (Securities Exchange Board of India) and all mutual fund advisors are required to be registered with AMFI (Association of Mutual Funds of India); Objectives of which are investor protection and investor awareness.

Every Investment attracts some risks. Skilled Financial Advisors with tactful selection of investment opportunity and allocation of funds based on the financial goals of the investor can mitigate the risks and at the same time cater to the potential of higher returns.

Contact us to learn more about Mutual funds and Financial Planning at www.mymoneymanager.net

"Mutual Funds are subject to market risk. Please read the offer document carefully before investing"

6 QUESTIONS TO CONSIDER BEFORE YOU QUIT YOUR JOB TO BE AN ENTREPRENEUR.

6 Questions to consider before you quit your job to be an entrepreneur.

It is natural to want to do something new after a while, whether you are an industry veteran or a fresher or just started to have that itch to be an entrepreneur in this vibrant economy. Answer these 6 important questions before you bid farewell to your job. This will help you determine if you are ready to take the leap.

1.   Why do you want to be an entrepreneur? Boss is a jerk, long working hours, lack of recognition, etc. We all have faced it at some point of time in life. One of the solutions is - get a “NEW JOB”. The first and foremost reason to be an entrepreneur is because you can and will do anything to succeed. You like challenges, risks, control, freedom and many more attributes that becomes a part and parcel of entrepreneurship. Contemplate the reason, find the fire within you to rise and emerge as an entrepreneur.

2.       Do you have plan B, C, D, E and 20 remaining alphabets?  Most of us do, but inspecting it as critically as your plan A is more important than you can imagine. It should be in place just in case, to build a bridge between your cash flows and needs. Start-ups need not be hard but it cannot be that easy too.  If everything goes well your plan B could be your next start-up idea.

3.       Does your family support you? Not only will they be your core support but also the ones who’ll be directly affected with this decision. Especially if you are the sole bread winner, they would have to make life style changes for the period your business is still taking off. If you’re single don’t blindly bank on your parents; ask them and discuss with them your plans.

4.       Do you have unused employee benefits? Medical check-up, dentist appointment, the employee discounts on retail items, etc. If you still have these – USE IT! Once you have quit, the same things would seem a bit more expensive.  Why give it away when you have toiled in that company for so long?

5.       Do you know your cash burn rate? It is the average rate at which your monthly income got exhausted over the last 6 months. This will help you calculate the funds needed for the next 6 months when you would probably have no or low income. 6 months is when you are single, add 2 months for each dependent (8 months if you are married, 12 months if married with 2 kids).  This acts as a safety net, ease off the pressure from your mind so that you can concentrate on your start up.

6.       Do you have your health and life covered? You are covered by your employer only when you are an employee. With the rising cost of medicals a reliable health insurance is a must; look for the one with cashless facilities with major hospitals. A good term insurance covering your life will give you a sense of financial security. Your family will be provided for in your absence.  Health and life insurance is essential for everyone even if you are not quitting.

Additional Tip:  Some of you must have planned your dream exit sequence. A dramatic going out in blaze; if I am going down I’m taking everybody with me - kind of glorious ending. Whatever it is, how much ever you hate your boss or job or colleagues, don’t ever do this.  Keep your poise go out with grace, you never know where these people might cross your paths.  A greater satisfaction comes from showing how better your life is after taking up your new venture.