Category Archives: Blog

Documents required whilst purchase of a House

Buying a house is one of the ultimate dream in each & every Indian household. And as to many people, we felt there is a need to understand the basic documents required to purchase a house in India. Many a times, the buying of a house is seem to get stuck or delayed due to mistakes in the documentation. That is the reason team SBS Fin decided to share the details on documents required for purchase of a House in India.

A proper checklist is the most paramount step in property (house) purchase procedure. It involves a statutory and regulatory framework. Yet, it is so common that almost 80% of the clientele fail to submit and get complete documents at the time of purchase. Two things should be kept in mind prior purchasing a property:-

  1. Inquiring and analyzing various competitive costs and modes of funds.
  2. Protecting yourself from being a victim to sheer fraudulence.

Following is a list of documents to be checked before buying a house:-

  • Mother Deed/ Sale Deed/ Conveyance Deed

These are the former legal document that helps tracing the antecedent ownership of a property under the deal. Alternatively, in the absence of a mother deed, you must make sure that you obtain certified copies. A sale deed acts as the cardinal legal document for creating evidence for a sale and transferring ownership of property in favor of the buyer. You must also check whether the property under the deal bears a clear title, well-in-time before the sale deed is formulated.

Main Purpose of the document (strictly original): To establish esteemed ownership of the seller.

  • Khata Documents

Khata refers to an account, which, in this context means an account of an individual who owns property in the city. Khata documents are broadly divided into two categories: Khata Certificates and Khata Extracts.

The purpose of a Khata Certificate is for the initial registration of a new property and for transferring of a property. Khata Extract, on the other hand, is used for ferreting out details from the assessment register. This document is required to obtain trade license or to buy a property.

Main Purpose of the document (strictly original): For the transfer of property.

  • RTC Documents

This document is issued by the Village Accountants, containing extensive details about the extent of land in a survey number. It also contains details like the names of present and previous owners of the land, their tenants, mortgages, details of the soil, etc.

Main Purpose of the document (can be a copy): To establish title of the land.

  • JDA (Joint Development Agreement)

This property document forms an agreement between the builder and the individual landowner that ensures the landowner contributes the land and the builder undertakes advancing activities on it.

 Main Purpose of the document (can be a copy): To ensure distinctive authority and establish whether original title rests with the Builder or the Landowner

  • Power of Attorney

The general power of attorney is a prospect and legal document in which a person is given authority by another person to act on his/her behalf as the legal representative. This person is bound to make lawful financial and legal decisions.

Main Purpose of the document (strictly original): To ensure whether the prior Purchase/Sale was carried out by an authorized seller/buyer.

  • Authoritative Documents

The documents that come under this ensure that all government-related facilities are implemented and provided legally and procedure-wise. Even before starting construction at a site, the builder requires a NOC from all key Government Departments in full and revised authority. This can also lead to increase of expenses.

Main Purpose of the document (can be a copy): To legally ensure that all Govt. approvals are in place.

  • Construction Agreement

It is a vital property document which ensures legal permission for execution of work related to construction and involves transfer/sales of goods. This document should be submitted in original forum.

  • Demand drafts & Drawings of the property
  • Property Assessment Extract
  • Up-To-Date Tax Receipts’

This ensures that taxes have been paid regularly and on time until the date of sales, with bills like that of water or electricity should also be analyzed.

  • Foundation Certificate
  • Letter from the Builder

This warrants possession of the property and it being delivered to the buyer on the date specified in the letter as a note of verification. This document is required in an original form.

  • Sale Agreement with the Seller
  • Demand Letter from the Vendor
  • Contribution Receipt of the owner with Bank Statement
  • Release Deed
  • Completion and Occupancy Certificate
  • Deed of Declaration (To transfer ownership legally to the original buyer by the builder)
  • Auction Sale Confirmation Letter

This letter is issued by from the Local Development Authority and is required in case of any site purchased by independent house owners by methods of Auction by Local development authority. A copy of this document is permitted to be submitted (instead of the original).

There are a few more of documents which might be required for this purpose; however, the above is an overview of all the basic documents you need to efficiently prepare in order to formulate a legal and beneficial purchase of property. You should also seek professional guidance in order to gain immunity against ambidextrousness and artifice. For more details on Home Purchase or Home loans, feel free to write to us on rashi.bhargava@sbsfin.com

Personal Finance for Millennials

Your economic security does not lie in your job; it lies in your own power to produce – to think, to learn, to create, to adapt. That’s true financial independence. It’s not having wealth; it’s having the power to produce wealth. – Stephen Covey

 Over the years of changing generations, the millennials have advanced the basic meaning of work through various economic and corporate trends. Each individual – in today’s time – faces hardship in stabilizing and balancing their wealth with personal life, which is why it is essential to gain ascendancy over your personal finances and wealth.

The exercise of the principles of finance to follow-up monetary decisions of an individual or a whole unit is called personal finance. This focuses on righteous spending, saving, budgeting and other financial activities with variant monetary resources.

Why is Personal Finance Important for Millennials?

  • To create wealth and value your net worth.
  • To avoid, annihilate and eliminate debt.
  • To track financial budgets.
  • Helps you expand your horizons to discover various financial opportunities.
  • Better understanding of accounting, tax and legal formalities.
  • Helps you attain your best interest.

 

Following are certain guideline one is advised to adopt in order to set personal finances right:-

 1. Draw A Line

It is very important that you understand of where to draw a line with your personal finances. This means realizing the aberration between investments in personal assets and business investments at individual basis. A prospect and young entrepreneur should never adhere their future and potential to the success of companies they work in. You should not hesitate in investing a part of your finance to follow your passion if you maintain financial security. Self-employed Millennials should aim at constituting miscellaneous and long-term invested portfolios that help them grow beyond a comfort zone because financial planning is not just limited to numbers – it should help you build yourself with ardor.

2. Maintenance of your Books

Business is all about risks, but do you know the biggest risk of all? Not taking any. In the process of building your organization, you tend to follow-up higher and heftier projects, charter more workforce and so, you have to be efficient enough to maintain competence and expertise. It is vital to address minute details along with achieving goals. For instance, the financial management of your company, i.e. a well-structured and methodized budget, should meet the required needs and smoothly help the organization pass the tax season. Top-quality accountants and financial advisors are the pillars of this financial management; they utilize avant-garde technology to keep a record of assets whilst providing personalized guidance like deploying more capital in certain areas or cutting back costs.

3. Formulate a Disciplined Savings System

Financial security and independence is an esteemed ritual in every Millennial’s livelihood. For instance, every time your business generates revenue – pay yourself a portion of proceeds. The capital of your company is utilized in payment of bills, debts and salaries. While on the other hand, when done with the management of these accounts, a portion of fixed amount to yourself can allow you to frame your personal budget and uniform long-term savings plan.

4. Hire Professional Advisors

To help meet primary and basic planning requirements like integrating a saving schedule for personal budget, Millennials are required to contend with more and forthcoming financial needs of their businesses. You need proper and expert guidance to undergo and take financial and economic decisions.

Henceforth, Personal finance helps accede high-financial literacy for Millennials and thus, should be followed for a productive future.

At SBS Fin, our financial fitness expert Rashi is on a mission to spread Financial Literacy and Physical Fitness for the millennial generations. She is a financial coach to many startups of the millennial generation and is also spreading awareness about Physical Fitness as one of the mantra for Financial fitness. SBS Fin is regularly engaging its clientele in educative events about health & lifestyle to pursue their goal of maximizing avenues for financial fitness among the millennials. You can reach Rashi through the contact form or email her on, rashi.bhargava@sbsfin.com

What’s your plan to enable a smooth retired life for your Parents?

In India, the kids have always been considered as the ultimate investment for your retired life. We can call it societal norm, peer pressure or the way families have been run & managed since ancient times when there was nothing like social security, pensions or facilities for that matter.

What still exists however it the fact that to secure the future of the kids, parents constantly try to give their offspring the best and therefore they end up risking their own future. Be it the education of children, weddings, settling them off with a house or a business – the Indian parents are mostly found without a proper and well managed plan of retirement.

The reason why having a retirement plan has become so significant is our expenditures are on arise, the lifestyles have evolved and therefore the expenses related to lifestyles. Our generations spend a lot on gadgets, some of these were not even in the market until then. When you are young, you ought to spend a major chunk on the extracurricular activities of your children, you also invest hugely in aesthetics – be it for your car, room, office or home. Some of these expenses were almost non-existent 2-3 decades ago when our parents should have planned for their retirement.

All of the above reasons make it all the more significant to Invest or to Help your Parents Save for Retirement. Here’s how we can do it:

Start now!

Do not wait or contemplate about the timing. Start the conversation now and ask your parents if they have any plan on how to handle any expensive emergencies or explain how this conversation can really help.

Tip: Try and do it for both sets of parents to avoid any sort of resentment between you & your partner.

Prepare & Have an Agenda for Conversation

Like our parents, we also sometimes overextend our planning and lose out on other financial goals. Set aside a clear agenda and see if theirs and your emergency fund is enough. The basics of this conversation should be to know the following:

Long term care insurance – What policies do they have for health, pension etc.

Retirement Funds – Know if they have invested in any long term ELSS, maintaining any liquid funds etc.

Mortgages – Check on their mortgages. It is very important that they have all mortgage free assets as it provides your parents with peace of mind.

Debt – Suggest them to keep a check on debts be it their credit cards, self-help groups or to any members in the family or friends.

Will and Estate Planning–The idea is not to grill your parents on what they plan to leave for you but it is to make sure that they have properly planned for their estate. The simplest and very basic check for the parents in India would be, Is your Mom a nominee on your Dad’s bank account and vice versa?

Check all the Documents – See and make sure that all their documents are in good state, well organized and arranged.

It is understood that the above mentioned things make it very uncomfortable topics to be discussed with parents especially in our country but you can make them understand that it imperative for them to better enjoy their retired life.

Why it is so significant?

Remember, your parents might have been saving for retirement ever since your birth and may be a little after that but the chances are that they must have exhausted a part of all of it in your educational spend, an extra course that you were keen on taking or may be the destination wedding that had become your dream of life. They did so to give you the best and most of the parents want to manage their own expenses always.

Through this you can help them set their Retirement Goals upright and guide them to plan their retired life better. And in case, you find it all the more difficult – speak to your Financial Advisor and seek help as to How you can help your parents through their retired life?

Contact us for any queries or feel free to write us, contact@sbsfin.com

Retirement Planning for the Millennials

Many a times, financial advisors and experts have been found discussing about the rules of retirement. We at SBS Fin, are of firm belief that any person who touches the age of 33 must start planning for retirement and that too above & beyond the regular investments of annual financial goals like Travel, Health, Education, Real Estate etc.

How important is Financial Independence past Retirement?

Financial independence affirms a sense of freedom and individuality where each and every person, regardless of their age, is capable of generating ample income for paying forthcoming expenses. This passive income can be retrieved through savings or investment, real estate assets or general royalties from performed work in the past.

It is important that you start varying your options and integrating your savings and investments by the right time for a better future with financial independence and security.

Also, one should always participate in retirement plans which are employee-sponsored. There are many employers who contribute to the company-sponsored retirement matching plans by matching the employees’ contribution. It is important that you follow a retirement strategy and function organized and formulated.

The ideal age of looking forward to a retirement would be around 65 years of age, which is why it is important that you, as an individual, boost-start the establishment of your financial independence by your mid 30s-40s. Financially independent would sum up an individual to be completely mortgage-free, debt-free, liability-free, with sufficiently accumulated capital that would enable the person to live passively off interest and dividends and secure by all means.

 

Five Reasons to pursue Financial Independence:

 1. Freedom of Choice

Each individual works for a living. By pursuing this method, a person will attain the freedom to live and work on their own terms in the time-phase of retirement. You reach a point in life where you will choose to work than it being a must, financially. This sense of certainty arises with financial independence, which makes it the primary reason to pursue financial independence.

2. Unemployment Insurance

This is one of the key adjuncts of financial independence. If you choose to neglect the benefits of financial independence, then you choose to be dependent on monthly paychecks, causing you to be caught in the vicious circle of insecurity that can make you prone to losing your job, being at mercy of those who trifle out instead of minimal, sufficient amounts of employment insurance, helping you jump all the hoops and grab loopholes.

3. Expenditure & Investments

Whilst adopting the procedures of financial independence, you will not have to curb your expenditure with accordance to your priorities. Extra cash flow can always be invested and spent on increasing productivity. You can invest this cash as capital at risk or give aplenty of time to foster a business idea that helps you propagate financial returns in the forthcoming future.

4. Peace of Mind

Security about the future results in incarnate peace of mind. One can spend hearty time with family, introspect and pursue their passion freely. Be in a semi-retirement phase or a retirement phase, this would help you to work with all your heart and mind. You can run small errands at your own time with no stress on your shoulders.

5. Taxes don’t appear as vexatious

As a worthy and active citizen of the country, you should be aware that tax matters a lot, irrespective of varying incomes. The thin line between being depravedly rich to financially stable differs with the concept of how and where you’re holding your assets. For example, individuals with little wealth generate a good amount of taxable income while those who pursue financial independence generate abeyant gains in the form of real-estate appreciation, hidden capital gains and profits made through tax-free accounts.

 

How to Approach for a Retirement Planning?

Maintain an Emergency Reserve – It is significant to maintain an emergency reserve in the ever vulnerable life situations. One must always have three to six months’ worth of living expenses in the bank account.

Get rid of Debts – One must borrow for Education as you get a tax benefit but at the same time, the debts which our generation and millennials are getting used to of in the form of credit cards must be paid off at the earliest.

Keep aside 10% of your income for Retirement, yes on monthly basis. You can also start and SIP in a mutual fund.

Allow you investments to grow in direct proportion to your income growth. Also keep the income boosters such as tax refund, bonus income, long due payouts as the annual bonus of your investment income.

The thumb rule of investments in retirement planning should be, 100- age = Your allocation to stocks. We can say, at the age of 30 – one should keep 70% of your portfolio in equities. Once retired, you can limit your exposure to stocks to not more than 25-30% of your portfolio.

You must save 25 times your annual expense. Instantly buy a health insurance plan as the difficulty of making such a purchase increases once you are older.

Allocate, Diversify and Rebalance – If you are a risk-taking regular investor, you can also enjoy go with the strategy of allocation with diversification. You need to be vigilant on quarterly basis.

Retirement Planning Habits in a Nutshell:

  • One NEVER stops investing for retirement.
  • In retired life, you are likely to spend the same amount as today.
  • The best time to start saving and investing for retirement is with your first job or first post-high-school or post-college job. But if you haven’t started yet, then right now is the right time.
  • The Retirement Corpus shall not be used for things other than your retirement.
  • For the retirement accounts – Set it and forget it.

 Henceforth, it is important that you realize that there is simply nobody who would guarantee you the security, financial independence and lifestyle you want at your millennial stage of life, except yourself.

Contact us for  any queries regarding  Financial Planning for Millennials feel free to write us, contact@sbsfin.com

The How and Why of Physical Fitness for Financial Fitness

Physical Fitness for Financial Fitness! Does this rings any bells or led to a pondering frown?

People often ask me as to why I am so keen about Physical Fitness as one of the most significant part of Financial Fitness. Well, as a financial coach I take a huge role in your life as I am sharing the onus of money management for you in such a way that you are never under the financial pressures and always future ready.

Last 5 years, I have been touching lives closely as I plan not only your personal finances but also helping businesses in organizing their wealth to keep it churning and surplus too for the business challenges.

My definition of Physical Fitness is simple, the ability of your body to sustain your lifestyle, work culture and routine life challenges without any medication or if I put it like a financial fitness expert, without any spend on your body to keep it going for meeting your work-life expectations. And that is why I thought it is very important to understand the why Physical Fitness is for Financial Fitness.

Having said that, it makes it all the more important for me to embark physical fitness as the prime goal for my clients who are entrepreneurs, corporate goers, business owners and dreamers in one or the other way.

Significance of Physical Fitness  for Financial Fitness?

When I am working on a Financial Fitness Plan or managing wealth or organizing a portfolio, I am primarily touching the following aspects:

  • Retirement Planning
  • Wish list/Bucket list
  • Parallel Path
  • Business Goals
  • Family Plans
  • Child Education
  • Destination / Weddings
  • Educational Loans
  • Risk Management / Wealth Protection

The reason I listed the above set of areas I touch upon is to underline the fact that, all of the above set of life phases is Finance dependent and also health dependent. The proper allocation and functioning of all of the above is only possible if your fitness is taken care of properly.

There will be no fun in travel bucket lists, retirement plans, that passion driven parallel path past your corporate career, your child’s education or that dream destination wedding – you will not be able to enjoy any of it – if you are not physically fit and neither will you be able to attain financial fitness as you will end up shelling out a huge chunk of your savings and investments on your health.

Physical Fitness for financial fitness
Rashi speaking about Financial Fitness at a recent event conducted by SBS Fin. on the significance of Financial Fitness

How Physical Fitness is Financial Fitness?

To explain how physical fitness is directly proportional to your financial fitness, let me share the closest example, yes, it is about me and how controlling my physical fitness led to better control on my finances.

I am Rashi Bhargava, your Financial Fitness Coach, 39 years of age waging war with lower back pain for 6 years and 4 months. I have been part of this Corporate rat race for 15 years, running in life non-stop as if there was no tomorrow after completing my PGDBM.

If cancer is called the ‘emperor of all maladies’, back pain might as well be the empress. Back pain might not kill, but it doesn’t let one live either. It’s like being madly in love with someone but not being able to be with that person. It leads to a miserable life.

Fact I learnt hard way through: That Pain in the back and neck is by far the number one reason for Indians (and others too, worldwide) for the ‘years of life lived with disability’.  Lower back pain affects up to 80 per cent of people at some point in their life, and neck pain affects up to 50 per cent of the population.

21st Dec 2010, 8:45am is etched in my memory not because I won a million-dollar lottery but my battle with pain started. And I was naive enough to ignore this pain and importance. Visit to the doctor gave me temporary relief. Doctor prescribed me pain killers, handed me a sheet of paper with few images of stretching exercises to do and told me that these exercises I must do lifelong. Pain persisted and after 3 months I was recommended Physiotherapy. 15 sessions of physiotherapy gave me relief for few months and then the same story. This continued for next 3 years. Pain, Volini gel and hot water bottle became my friends at home and travel. I always use to smell of Volini.

3 years into back pain yet I had not learnt my lessons. I did not value money nor understood loss of productivity because of this. I use go to doctors or take physiotherapy sessions, simply put my life was working on a jugaad…a temporary one. Money was being spent like anything on these temporary reliefs. No doctor gave me guidance as to why exercises are must and back pains means muscles getting weak. Finally, one night 13th July 2014 I started having muscle spasms while sleeping. Initial few days I ignored them as one off small health issue. But when I started losing sleep and finding it difficult to lie on bed anytime of the day I got scared and rushed to my Orthopedic doctor. Since it was hot and humid and my morning walks were at peak initial diagnosis was loss of salts, vitamins. Supplements worked a bit but spasms persisted so much that I couldn’t sleep a wink and lying down in bed became a nightmare.

After a month of torture, I was recommended 12 sessions of physiotherapy. Unlike my previous experiences where I traveled far distances for my therapy, I was this time recommended to a physiotherapist who was at 5-minute walking distance from my home. I was in so much pain and discomfort that I would just not let my physiotherapist touch my back. It was testing times and 12 sessions also did not ease my pain. I once shared with a friend that I would give away all my money, wealth and trade for a pain free life.

With faith, encouragement of my therapist and little bit of reading on pain management, I started getting relief and during these painful 2 months I self-reflected a lot. Finally started understanding my body and it dawned on me that it is impossible to achieve financial fitness without physical fitness.My therapist Dr.Khan (Korperkraft) who is a certified TheraBand trainer and a fitness freak started encouraging me in my sales language…a language I understood 😊

In 6 years and 4 months I have spent close to 5 lacs on Doctor fees, physiotherapy sessions, medicines, X-ray and MRI…. Changed doctors, physiotherapists, taken treatment at the most expensive centers like Vardan (Times of India run center) and Back 2 Fitness. Had to dip into my investments for these treatments. Had I invested in health like SIP in Mutual Funds my story would have been different. The economic loss in terms of productivity cannot even be measured.

Somewhere at the back of my mind I have a lingering thought that my back pain also contributed to some extent to my lay-off from Taurus Mutual Fund in Oct 2012. In tough times organizations want nimble footed agile employees who can give more than 200 % to work. I was in a different zone during that period, consumed in pain, always asking my reporting manager for leave or reporting in late in the morning because I had to go for my physiotherapy session.

Most of us want to be physically fit, but very few of us are. The same holds true with financial security. Most of us want to be rich, but don’t want to sacrifice as needed or develop good financial habits. The relationship between health and wealth should be worth noting for all of us. If we want to have a luxurious home, nice car, annual vacations, we must first take care of our body.

“If you’re healthy, you’re not depleting your wealth to pay doctor bills or prescriptive drugs or treatments. You’re also going to be more productive because you aren’t going to have as many sick days, and if you’re a productive person you are going to get raises and a higher income.”

The partnership between health and wealth doesn’t end here; it’s a vicious cycle that can spin the other way as well. If you let yourself get in financial trouble you’re likely to endure headaches, stomachaches, stress, a lack of sleep and fluctuations in weight. Young people are usually in good physical condition, but that doesn’t mean they come out unscathed if they don’t take care of themselves.

“What you do at a younger age will influence how you fare later in life. Like in my case neglecting physical fitness in my 20’s. “If you have a bad diet in your twenties, you may not keel over in your twenties or thirties, but if you never develop good health habits; it will catch up with you.”

Breaking an unhealthy routine can be difficult but some simple changes will help you move in the right direction, whether your problems are health or wealth-related. Ever since I encountered my physiotherapist cum fitness trainer I have challenged myself to incorporate at least 60 minutes of exercises daily to strengthen my muscles, improve my stamina and endurance, however busy my schedule is. I have failed at times, but I have been persistent. It’s been one big struggle…in fact it’s been a war. But now I am confident of my win. This is reflected in my business growth and how people take me on.

The bottom line: In order to become an affluent financially fit individual, you must make smart investments and the smartest is an investment in your health. I hope I could strike a chord here on how of Physical Fitness for Financial Fitness.

This is the basic idea of keeping #collaboration as a theme for client engagement at #SBSFin for the year 2017, where in we will be touching different aspects of #FinancialFitness beginning the year with Physical Fitness. If you have any queries regarding your investments or financial fitness feel free to write to me, rashi.bhargava@sbsfin.com

 

Significance of Physical Fitness for Financial Fitness

Get Back 2 Fitness

 

The Economic impact of Non-Communicable Disease (NCD) on household in India’, the first nationally representative study in India on health spending associated with NCDs was published in 2012 in Globalization and Health. This study by Engelgau et al. came out with some startling data that is in alignment with my thought process. By 2004, the out of pocket health expenses for treating NCDs already accounted for 47.3 percent. About 40-50% of these expenditures are financed by household borrowing and sales of assets. The odds of incurring catastrophic hospitalization expenditures were nearly 160% higher with cancer, 30% greater for CVD or injuries than when hospitalization is due to a communicable disease.

A substantial proportion of expenditures are for medications, diagnostics and medical appliances. As much as these expenses are in private health sector because of public sector not being prepared to handle this workload and health insurance programs that need to cover them, we need to look at the grass-root solution. Being physically active, eating well and sleeping well help to reduce mortality by NCDs by more than half. It doesn’t simply improve quality of life but reduce the financial fitness burden on everyone around.

Its for nothing that sitting is called the new smoking. It is because physical inactivity is the fourth largest killer. We humans simply weren’t made to be stationary. We were made to move. As a matter of fact, as sperms we moved, rather ran to be born.

It was only 500 years ago that the masses started using chairs, up until then benches and stools were used in everyday living. With the Industrial Revolution a mere 260 years ago, human beings took the sedentary lifestyle to a whole new level. Computers have only been around for the last fifty years, as a middle class household gadget for less than half that time (25 years), but they have changed things way too quickly. In addition to that, the way we travel (cars) and eat (fast food) today has changed our lives for the worse. Half the patients I see today are in their sad painful conditions because of what has happened at the turn of this millennium, so called smartphones and tablets. This jet-set modern lifestyle is the primary cause for far higher rates of NCDs.

And then you have back pain.

If cancer is called the ‘emperor of all maladies’, back pain might as well be the empress. Back pain might not kill, but it doesn’t let one live either. It’s like being madly in love with someone but not being able to be with that person. It leads to a miserable life.

The societal cost of back pain is three times higher than the total cost of all types of cancers. That holds true for India too. Back pain takes its toll not only on the individual suffering from it, but also on the family, workplace and society.

To add to that, it’s not an individual who suffers with back pain, it’s the whole society. All of us are responsible for causing it and we all need to get pro-actively involved if we want to reduce it’s impact on the society. There is no one big magical trick to fix but multiple small triggers and weaknesses that we need to address.

Pain in the back and neck is by far the number one reason for Indians (and others too, worldwide) for the ‘years of life lived with disability’.  Lower back pain affects up to 80 per cent of people at some point in their life, and neck pain affects up to 50 per cent of the population.  As mentioned earlier, these numbers have risen tremendously in the last two decades courtesy drastic changes in our lifestyles.

Dr. Rajat Chauhan is MBBS, MSc Sports – Exercise Medicine (Nottingham), MLCOM: Osteopathic Medicine (London). He is running a Sports-Medicine & Muscuklo-Skeletal Medicine clinic for last 8 years in Sheikh Sarai, New Delhi. He is associated with Adidas India as Running Advisor. His book on Pain is published by Penguin Publications, The Handbook of Pain can be glimpsed on http://thepainhandbook.com/

Conflicting Legally: Tax Evasion, Tax Avoidance and Tax Planning

Tax Evasion, Tax Avoidance and Tax Planning are three legally conflicting tax terms which keep on creating confusions time and again in the minds of tax payers.

The last quarter of the year is always about tax planning and this is also the time when we are filled up practically with all kinds of tax terms and tax related confusions. The above mentioned terms hold great importance for understanding tax planning and tax management and that is why it is significant that we learn the difference in Tax Evasion, Tax Avoidance and Tax Planning.

We need experts to talk about and explain the basics so that we can take prudent decisions and it is also very important to understand tax related legal parlance for making the right investment decisions.
Let us understand the meaning and comparison between the terms which forms the basis of Legal provisions in Indian Tax laws. i.e. Tax Evasion, Tax Avoidance and Tax Planning.

TAX EVASION

It refers to a situation where a person tries to reduce his tax liability by deliberately suppressing the income or by inflating the expenditure showing the income lower than the actual income and resorting to various types of deliberate manipulations. An assessee guilty of tax evasion is punishable under the relevant laws. Tax evasion may involve stating an untrue statement knowingly, submitting misleading documents, suppression of facts in assessments. An assessee who dishonestly claims the benefit under the statute by making false statements, would be guilty of tax evasion.

For example, submitting of false financial statements, claiming false exemptions on the basis of fake documents, not reporting correct income and investing in various tax heaven countries in order to reduce there tax liabilities in India.

TAX AVOIDANCE

The line of demarcation between tax planning and tax avoidance is very thin and blurred. There could be elements of malafide motive involved in tax avoidance also. Any planning which, though done strictly according to legal requirements defeats the basic intent of Legislature behind the statute could be termed as instance of tax avoidance. It is usually done by adjusting the affairs in such a manner that there is no infringement of taxation laws and by taking full advantage of the loopholes therein so as to attract the least incidence of tax. Earlier tax avoidance was considered completely legitimate, but at present it may be illegitimate in certain situations.

For example, entering into transactions for the purpose of avoidance of taxes in order to defeat the intent of the legislation, such as forming of shell companies outside India to avoid tax here.

TAX PLANNING

It means arranging the financial activities in such a way that maximum tax benefits are enjoyed by making use of all beneficial provisions in the tax laws which entitle the assesse to get certain rebates and reliefs. This is permitted and not frowned upon by law. Thus, tax planning would imply compliance with the taxation provisions in such a manner that full advantage is taken of all tax exemptions, deductions, concessions, rebates and reliefs permissible under the Income-tax Act so that the tax incidence is the least. Tax planning can neither be equated to tax evasion nor to tax avoidance with reference to a company, it is the scientific planning of the company’s operations in such a way so as to attract minimum liability to tax or postponement or for the matter of deferment of the tax liability for the subsequent period by availing various incentives, concessions, allowances, rebates and relief’s provided for in the tax laws. They are meant to be availed of and they have certain clear objectives to achieve. Tax planning may, therefore, be regarded as a method of intelligent application of expert knowledge of planning corporate affairs with a view to securing consciously provided tax benefits on the basis of the national priorities in consonance with the interests of the state and the public at large.

For Example, taking benefits of deductions provided specifically under section 80C of the Income tax Act, claiming exemptions, investing in Special Economic Zones (SEZs), etc.

At a Glance Comparison:

Tax Evasion Tax Avoidance Tax Planning
It is done by adopting dishonest means like falsification of accounts, concealment of income, etc. It is done in such a manner by which the tax liability is avoided by the use of artifice or device, defeating the basic intent of the legislature. It is done by availing maximum benefit of deductions, exemptions, rebates, etc. which are expressly provided by the government.
It is unlawful, unethical and illegal. It takes advantages of loopholes of law. It is acceptable to the judiciaries.
If attracts heavy penalties. It can only be curbed by amendments and circulars as is quite difficult to prove in court of law. It is justifiable and a rewarding concept for professionals.

We chose to share this post now, to help you with the upcoming tax season. For more clarity and to seek investment advice in pursuit of tax planning and tax saving, feel free to write to us, contact@sbsfin.com