Tag Archives: Best Investment Options in Delhi NCR

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Common Myths About Fixed Deposits

Fixed Deposits, also called as Term Deposits, are one of the most traditional investing options.

While we may be hearing a lot of noise around other investments like Mutual Fund SIPs, Liquid, Balanced and Debt Funds, Tax Free Bonds, PPF, EPF and what not! To some nothing beats the assurance and simplicity of a Fixed Deposit.
It’s a popular choice when it comes to showing investments on paper at the end of a financial year. But all that simplicity and assurance comes at a price! This article will help you remove some of the most common myths surrounding the Fixed Deposits and the interest accrued out of them. Read on, so that you are well aware next time you are investing in one.

 

Myth 1 – Fixed Deposits are only offered by banks

Fact – Fixed Deposits are also offered by other companies

It’s quite a general believe that Fixed Deposits are only offered by Government or Private sector banks. In fact, you can approach multiple leading companies and NBFCs (Non-Banking Financial Companies) who offer Fixed Deposits for retail investors.  And the catch is you are likely to enjoy better interest rates with these institutes as compared to bank deposits. Although these institutes may not give you attractive features like flexible tenure options, online account access and insurance cover on your fixed deposits.

 

Myth 2 – TDS (Tax Deducted at Source) on Fixed Deposits is mandatory

Fact – Knowing the mandates well could help avoid Tax Deduction

This is no myth that fixed deposits are taxable, however, not everyone needs to pay taxes. Yes you read that right! Returns from Fixed Deposits are included as a part of one’s total income under ‘income from other sources’. So, if your interest income exceeds Rs. 10,000 in one financial year, TDS will be 10%. For company deposits, TDS is deducted once interest exceeds Rs. 5,000 in one financial year. Minors, housewives, senior citizens, and people living on zero taxable income or no income, can most definitely avoid TDS. In that case, one needs to submit form 15G or form 15H to avoid TDS. If you’re over 60 years with no income, you won’t be losing any of your money on taxes, and can even enjoy a better interest on FD returns.

 

Myth 3 – All FDs Offer Tax Benefits

Fact – Select 5 year deposits offer tax benefits

Now if you are looking for tax saving, you will have to know that not all FDs offer that benefit. Tax benefits under section 80C of the Income Tax Act are offered only on specific deposits – for instance you’ll need to lock in your money for at least 5 years for this purpose. And during this time, the deposits cannot be pledged nor withdrawn.

 

Myth 4 – Regular interest payments on Fixed Deposits fetch more returns

Fact – A cumulative Fixed Deposit with returns only on maturity would fetch you more

Fixed Deposits come with two options, one where you receive interest payouts at regular intervals, and two a cumulative deposit where the whole amount (principal amount + bank’s interest) is received on maturity. The latter fetch you more returns. How? Well, that’s the magic of compounding. What happens in a cumulative deposit is the interest paid by the bank is compounded or multiplied at regular frequencies. So, higher the frequency of compounding, higher the yield on investment.

 

Myth 5 – Investing on an FD in the name of a family member helps saving taxes

Fact – Investing on an FD in the name of a family member doesn’t help saving taxes

Money gifted to spouse or children doesn’t attract tax. But when it comes to investment the income it generates is clubbed with the income of the giver and taxed accordingly. So, if you are thinking to invest in fixed deposits in the name of any family member, remember the interest will be taxed as your income. So, it’s best to avoid.

 

Myth 6 – In case of cash crunch, premature withdrawal is the only way

Fact – Fixed Deposits have other options in times of emergencies

If at any time you require money from your Fixed Deposits, most banks offer part withdrawal of funds, so that you could withdraw the amount you require taking care of the emergency, and the balance would continue to earn interest.

Henceforth, investing helps your savings grow – only if you truly understand how the concept works. At SBS Fin, we want our investors to indulge and understand wealth management as well as the money market instruments. Try and inculcate the habit of being up-to-date with the trends of the stock market and analyzing its ups & downs for better investing strategies. The same can be followed and assessed on our mobile app SBS FinFit, the same is available on Google Play and App Store.

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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

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Health Insurance-If you are in the pink of health

If you are in the pink of health, it is difficult to imagine an illness, could make you pauper. The escalating cost of medical treatment is becoming beyond the reach of common man. The oft quoted rate of inflation in health care is between 15-20% per annum, as compared to overall inflation of 6-7%, making medical treatment very expenses for common man.

The idea of making/earning money can make a man move mountains. If you tell a man to stop smoking because it will damage his lungs, he will not stop. But offer him a rupee for every cigarette, he will give up and get cured for life. So, it’s no wonder that when well-wishers ask you to take medical insurance you ‘ll smile and ignore them as if there were insane.

My father too was living in such a dream world. He thought he or my Mom will never get sick. Newly retired from a PSU where medical reimbursement was actuals my father was spoilt and as a result he did not buy health insurance during his younger days… till my Uncle threatened and cajoled him to buy one for my Mom and himself.

Within 6 months of buying health insurance at the age of 59 my mom had emergency hernia surgery late in the night. Blissfully unaware of pre-existing disease clause in the policy my father cried fouled when Mom’s claim was rejected as hernia is not covered in the first year of policy. He had never bothered to read policy document. Substantial sum of money was spent on Mom’s 8-day hospitalization and after care. It dented my father’s savings at a time when he was still grappling with his post retirement issues of regular income etc.

All this taught me few lessons on importance of health insurance and care to be taken while buying health cover. Using my own personal experiences, I will try to decode and simplify health insurance in this blog by answering some common questions and myths which more than often deters us from buying health cover.

Why do I need?

Health care is a serious concern for majority of us. Escalating costs accompanied by increase in life style diseases, dreaded disease like cancer becoming common make us want to run for cover. This is where Mediclaim steps in. It is an insurance that takes care of your medical expenses or treatment expenses.

Remember: Healthcare costs are ‘inelastic’ because demand doesn’t go down as prices go up.

The icing on the cake is tax benefit u/s 80 D of Income Tax Act,1961

I am too young and healthy

At times, certain ailments remain unknown to us until their symptoms are visible. As per regulations, such pre-existing ailments are covered after at least 48 months of holding a health policy. Therefore, buying early, before one develops any diseases, would help ensure that one’s health is insured without any such exclusions.

By and large, a health insurance policy bought at an early age and renewed regularly for several years without any claim should lead to a better claim experience.

Remember: The best time to get enough health insurance is when you need it the least

In my experience with people over 45 I have seen insurance companies refusing cover or loading premium because client is taking medicine for BP/Thyroid or is overweight or has anxiety problem which is so common for us, in this cut throat competitive world.

Remember: The more you delay and the older you get, the heftier will be your premium.

I have a group cover by my employers,so I don’t need a separate policy

If your employer provides an option for group health coverage, grab it even if you have to pay a portion of the premium. The coverage amount may be restrictive so check if it is sufficient. Also, remember, especially if you are in the private sector that this group cover will continue only as long as you are in the job. The period between switching jobs may leave you unprotected. Moreover, few insurers are calling off their contract with employers and thus leaving several employees stranded with.

How much Mediclaim do I need?

This depends on several factors such as age, health condition, lifestyle, family history, etc. Ideally,you should cover the cost of big surgeries and operations. Give due consideration to your medical history, family health history before deciding on the amount of cover. We get use to certain standard of living, this also plays a very imp factor while deciding on the amount of cover.

Bottom line: Affordability of the premium. One must consider the amount of premium which is to be paid by him. The amount of premium is directly proportional to the sum assured.

Should I go for individual or family floater?

If you have a family and are looking to buy health insurance, the common dilemma is between buying an individual health insurance policy and a family floater policy. Individual policies, as the name suggests, cover a single person. Whereas, the floater policy covers the entire family under a single policy.

Keep the following points into consideration in order to choose between the two:

PRICE

If your family is young or the age gap between the spouses is not much, then a floater plan will be cheaper.

Floater: good

Individual: bad

HIGHER COVER

Being cheaper than the individual health plan, the floater health insurance plan makes a higher value cover more affordable.

Floater: good

Individual: bad

BAD YEAR

However, the flip side is that while in an individual plan each individual has a dedicated sum insured, in a floater plan the insurance cover is shared. So if one family member makes a claim, the cover reduces on the rest by that much. In the event of a bad year, when all members need to use the policy, the floater may not be sufficient.

Floater: bad

Individual: good

(But please note that there are products available in the market, where your health cover is automatically restored in the event of one family members using the entire cover in 1 year)

AGE GAP

Individual plans are expensive compared to a floater policy. But the cost advantage of a family floater insurance plan diminishes if the age gap between the spouses, or the eldest member, is huge. It could also become financially unviable if one individual is not in good health and poses the risk of using up the entire sum insured.

Floater: bad

Individual: good

Affordability

Bottom line is if you can afford have separate covers.

What are the benefits of Mediclaim?

Medical insurance covers almost everything right from the time you step into the hospital till the time you are discharged including Ambulance charges. The normal costs that are covered are room and boarding expenses, nursing expenses, fees for the surgeon, anesthetist, medical practitioner, consultant, fees for specialists, blood, oxygen and the operation theatre, charges for surgical appliances, medicines, diagnostics materials and charges for X-rays, dialysis, chemotherapy and so on. Even medicines are covered.

(Please read the product brochure and policy wordings carefully)

What are the limitations of Mediclaim?

*Most important limitation is pre-existing health conditions. If a person has had a heart attack previously or has been operated upon for some other condition, then cover will not be available for those conditions.

*Some day care medical procedures are not covered (refer to product brochure or policy wordings)

*Dental surgeries, cosmetic surgeries for aesthetic purpose, HIV related conditions etc. are not covered.

*There is a waiting/cooling period of 30 days to 90 days from the date of inception of the policy, when you take the policy for the first time

*Disease wise capping in many cases. For example, cataract surgeries there is a sub-limit of Rs. 40,000

*High premium with age. Premium tends to jump when there is a change in age band.The cost can sometimes so expensive that the person may not able to pay the premiums

Health insurance is very useful and everyone should have adequate cover.Hospital bills for very small to considerably large ailments can be a pain. It’s difficult to meet such costs on our own without burning a hole in our savings. Also, with medical costs escalating, we may have to compromise on quality healthcare, because of affordability. It is then that the importance of health insurance comes into the picture. Health Insurance provides us with the ability to afford better healthcare facilities for ourselves and our loved ones. What’s more, Govt give us tax benefits. That’s enough incentive to gift ourselves and our loved ones a peaceful sleep this Christmas.

For please feel free to call/write for more details on Health Insurance. You can write to, contact@sbsfin.com

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Investment Tips for Startups

Most of the entrepreneurs are serial optimists and are hardly prepared for potential downside of the business scenarios.

May be that’s the reason 9 out of 10 startups don’t see 5th year of their operations and are shut down prematurely. Recently I came across a startup of two young gentlemen who started their QSR (Quick Service Restaurant or Eat Out) @ Sec. 18, Noida, with as cofounders. It was going well in the beginning and then after a couple of months the revenue started falling and they reached to a point where they were not even able to meet their day to day expenses and they were not ready to invest further. They were left with only one option to sell their venture but couldn’t find someone who was ready to buy at the price they were seeking. Finally they ended up selling their belongings to individual buyers and suffered huge losses. Now they don’t want to ever venture into business and are happy with their jobs.

I am not writing this post, to dishearten early starters but for the significance of investing smart when you plan to startup or start with a parallel path. Budget allocation at the time of portfolio management is a most required element of any investment plan. And Startups need to work on both with an abundant buffer or plan B to keep up their risk appetite. We are working with some of the most inspiring and successful startups of this decade and we are happy that our advice and asset allocation has helped them time & again in their businesses.

Have you ever thought ofwhy do so many startups fail – it is not the idea always, at times it is the execution, the planning, lack of funds and even personal reasons? Taking the monetary element of startup as the prime objective, let us try and understand the basics of investments when you are starting up.

What should an entrepreneur keep in minds while investing in a startup? What are the basic investment tips for a startup?

In this blog I’ll answer these questions.

  1. Invest with RoI in mind: Investing without RoI is like playing football without the goalposts. So you need to be objective with your idea, its execution and link everything to the ‘profit’ motive, if you are venturing into a startup.
  2. Keep lock in period in your mind before making investment decision: Investing takes patience. Understand even if your start up is successful it may take 3-5 years to break even. Keep a lock in period of 3-5 years for the investments you make. Or start small, test, review and go easy but ultimately sustain.
  3. Don’t put all your eggs in one basket: It’s good to be optimistic but one should not put all his eggs in one basket. The key is to diversify your investments. To keep their business operational a no. of people takes every rupee out of their savings account or spend from their credit card. Sometimes it works and sometimes it doesn’t. If things don’t go well as you had planned what will be your contingency plan?
  4. Maintain a good contingency cash cushion: Calculate your monthly business as well as your personal expenses and keep aside cash equivalent to at least six months of the monthly expenses.There are Liquid Funds to invest in and create buffer related to various business expenses.
  5. Invest in human capital: The most important capital of any business is human capital. A no. of entrepreneurs ignore this very fact and usually the business is their brain child hence they think they know everything and can develop their employees. You can invest in small SIPs for your employees and keep their investment plans going while they join us as risk partners.
  6. Don’t mix your personal and business assets: We always recommend our startup clients and SME businesses to keep their business and personal portfolio’s separate. The financial goals differ for an individual and a business and that is why it is very important to manage both as different entities for investments and returns.
  7. Save Money: Remember Money Saved is Money Earned. No matter how small it may seem you should always save money. It could be switching off extra lights, Air conditioner, printer, laptop/mobile charger when not in use etc.
  8. Buy Insurance cover: Buying an insurance cover for startups and small businesses is always advised. It helps you keep the spirits up by a default reassurance. Also it saves startups and allow them to sail in unexpected and untimely business situations.

Contact us for any queries regarding best investment options in Delhi NCR  or feel free to write us, contact@sbsfin.com

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Stick to your Financial Goals and Investment Plan, Make a Festival Budget

Now that the festival season is just around the corner and everyone in the family, let it be a child or a grown up or an old, has a long shopping list for the festive season. And there’s a very important question we need to ask ourselves, “Are we financially prepared for this festive season?”

The business houses come up with very attractive discounts to ensure the customers do not only buy which they have planned for but also the customers buy more than what they have planned. With the ease of plastic money and credit cards, people tend to spend more as they don’t have to pay upfront for their shopping and they get a credit period of 30-45 days. These special discount offers and credit card many a times lead to impulsive buying and once you start swapping your credit card, it becomes very difficult to resist the temptation of buying more and people end up buying even those things which are of little use to them.

The idea of writing this post comes with some experience, where our clients end up jumping beyond their Financial Goals and ultimately put themselves and their Investment Plans in jeopardy.  But it is completely human – we are all having our default systems in such way that the month of October makes our pockets easy and moods are all about Shopping. And then the beautiful marketing gimmicks add to our spending powers. Keeping the annual trend in mind, we thought to bring an Alert in the form of following Do’s &Don’t’s for this festival season.

So how can we plan our funds for the festive season? Here are some tips which will help you not only to plan your shopping this festive season but also help to utilize your funds in an efficient manner:

HONESTY

Be honest to yourself while creating a festive budget and stick to it. Dramatic changes in your spending patterns during festive season can have severe consequences on your financial health. Festive spending should not be more than 25-30% of your normal spending pattern.

AVOID IMPULSE SHOPPING

Plan your shopping list keeping your budget in mind. Avoid impulsive buying those gifts you din’t plan for.  Distinguishing needs and wants is the key.

PLAN and ACT

Start shopping early. The sooner you start the more information you will have on the products you are planning to buy. Shopping online is also a good idea as you can compare the prices of different online retailers and strike a good deal.

ADOPT THE NO CREDIT POLICY

Pay in cash for, if not all then bulk of, your purchases. People who use credit cards for their purchases spend an average of 30% more than people who buy in cash. Don’t borrow to spend. Remember it costs money to borrow money as it’s not always free to borrow.

CUSTOMIZE and CREATE

Instead of buying, make your gifts. It puts more heart to the gifts and such gifts are valued more than the expensive off the shelf gifts by the receivers. It also brings Personal touch and create better relationship bonds.

DO NOT BOMB your SPEND on MARKETING DHAMAKAs

Sales are irresistible butsaving is irreplaceable. These days the sales are not only offered during the festival season but throughout the year ex., End of Season Sales, Year End Sale, Stock Clearance Sale, Independence/ Republic Day Sale etc. Visualize what you want to save and start saving more and invest what you save.

FESTIVALS are about SAVING- Remember that!

Don’t forget to buy an investment plan. Our ancestors had realized the importance of savings and investments long back and that’s the reason we celebrate ‘Dhanteras’ as a festival wherein people buy Diamond/Gold/Silver. These days we have so many other investment avenues. Buying an investment plan is a must.

I am sure these tips will help you take good financial decision this festive. Spend wisely, save more and invest prudently. Enjoy the Festive Season ahead.

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How Much of Income you should invest?

Very often, I am being asked about – what part of income shall be invested. Some clients believe in expenses and savings, others believe in savings, expenses and buffer and their are also few- you say I never thought about investments. I earn, spend and rest is in my bank account. And let me confess – I love them all for their own kind of reasoning. Because as a financial advisor – I now know that we live in a country where Investments are not taught to kids and in most of the houses – it is not even advised.

And it is that reason that we decided to talk about it and set a limit to our income which must be invested on monthly basis.

There are two most fundamental questions when it comes to personal finance:

  • “How much of income you should invest?” and
  • “When is the best time to invest?”

 

In this article I’ll answer both the questions. The standard answer to the 1st question is, “As much as you can save”. Now different people interpret it differently. Someone in his 20s may be happy saving 10% and someone in his 30 may think that he can secure his future by saving 15-20% of his income and someone in his 40s and 50s may find 15-20% very less to secure his future and will try to save more. There’s no thumb/fixed rule when it comes to your personal finance and %age of income you should save and invest as a lot depends upon your personal financial plan, the age of your retirement and there could be a no. of other factors. Usually the general benchmark is 50/20/30 or 50/30/20 rule. Now the obvious question is what’s this 50/20/30 or 50/30/20 rule?

50/20/30 or 50/30/20 Rule:

50% of your Income- Fixed Costs

These are the fixed expenses you incur regardless of where you live and work. These include your house rent, insurance premium installment, loan installments, electricity bills, mobile phone expenses, transportation and other utility bills. These expenses are generally same and you can easily calculate the percentage of your monthly take home income and you need to ensure your fixed cost does not cross 50% of your monthly take home income.

20% of your income- Savings

You must save 20% of your monthly take home income for your financial security. Please note your savings towards your PF should not be figured in this as you need to save 20% of your monthly take home income and not your gross monthly income. You must build an emergency corpus equal to at least your six months gross income and should use it as an emergency fund only.

30% of your income- Variable Expenses

Don’t commit more than 30% of your monthly income for variable expenses. Variable expenses include your personal choices like eating out, petrol/diesel bills, mobile data bills, entertainment, shopping, groceries etc. You should keep a track of these bills as you will be able to figure out which are the expenses can be minimized or avoided eg if you are eating out on a regular basis it will surely hit your monthly budget and you can decide to prefer homemade food which is not only more nutritious than the outside food but also saves a lot of money.

I am sure now when you have understood the answer to the first question you must be waiting for the answer to 2nd question: A number of people think they have missed the train and they didn’t invest when the markets were low or when interest rates were high. But the right answer of this question is every time is the right time to invest and depending upon the time horizon and your risk appetite you may chose from the wide variety of the investment instruments and invest. Don’t miss the train now. This is the right time to invest. Don’t delay it further.

You can simply write to us or speak to our financial fitness expert or even schedule a call to understand your investment plan.

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5 must have Investments in 2016-17

You sure are done with the taxation & returns for last year and most of you must have started executing your financial goals as planned for the year ahead. For all those, who are done with the annual financial plans and also those who are still wondering on where to invest and how to go about breaking your investment amount for the year ahead, here is a detailed explanation on the must have investments for the ongoing financial year.

Whether you are a working class corporate goer, a business person or managing a startup – these investments will surely help you plan better for the financial goals.

Public Provident Fund: The PPF scheme was launched to encourage savings across various income classes by Ministry of Finance in the year 1968. PPF is a long term debt instrument scheme which offers safety with attractive rate of interest. PPF falls under Exempt, Exempt, Exempt (EEE) and is one of the best tax saving instruments. The first E implies an exemption on the amount invested in the PPF, the second E implies an exemption on the interest on PPF and the third ‘E’ implies exemption on the total income earned from PPF. Following are key features of PPF scheme:

  • Individuals in their own names as well as on behalf of the minors can open a PPF account in any of the banks. The HUF is not allowed to open a PPF account.
  • Interest rates on PPF scheme are announced by Govt. of India annually. Interest earned is compounded annually. For current financial year of 2016-17 the interest rate is 8.1%
  • Tenure of PPF scheme is 15 years and one can chose to continue in multiples of 5 years, with or without making additional investments to the PPF account.
  • One can invest minimum Rs. 500/- to maximum Rs. 1,50,000/- in one financial year. The amount can be deposited in lump sum or in a maximum of 12 installments in a financial year.
  • Loans and withdrawals are permitted depending upon the tenure of the account. The loans can be availed from 3 rd financial year and the interest on the loan amount is charged at 2% per annum above the PPF interest rate. Partial withdrawal can be made every year after 7 th financial year but the complete withdrawal is possible at the maturity.

Equity Linked Saving Scheme: The ELSS is a diversified equity mutual fund which invests 65% in equity related instrument with a lock in period of 3 years hence it qualifies for tax exemption under section 80C of the income tax act. ELSS funds are one of the best avenues to save tax as along with tax deduction, though not assured, the investor gets potentially higher returns. Following are key features of ELSS schemes:

  • ELSS has the shortest lock in period of 3 years in comparison to other tax saving schemes.
  • One can invest a minimum of Rs. 500/- in ELSS and there’s no upper limit on investment though maximum Rs. 1,50,000/- per annum are eligible for deduction under section 80C. One can invest in lump sum or in installments using systematic installment plan.
  • Since these funds invest 65% in equity, there’s some element of risk with potentially high returns. Moderate to high risk investors can consider this option . The past performance is not a guarantee of the future.

Health Insurance: The medical costs are rising year on year and it’s not a secret that the inflation in medical care is much higher than the inflation in food and other articles. The inflation in medical care is in double digits and no decline in sight for years to come. Hence insurance companies has launched special insurance plans known as Health Insurance which covers the cost of an insured individual’s medical and surgical expenses. Depending upon the type of insurance coverage, either the insured pays costs out of his pocket at the time of medical care which is reimbursed later or the insurer makes payment to the hospital/medical care provider. One can claim tax benefits under section 80D for the health insurance premium paid for self and can claim tax benefits under Section 80DD for the health insurance premium paid for the health insurance of dependent/ disabled person. Following are advantages of Health Insurance Policy:

  • Peace of mind
  • Flexibility of choosing health insurance cover
  • Cashless treatments available in the hospital. No need to carry cash.
  • Tax benefits up to Rs. 30,000/- under Section 80D and Section 80DD
  • Health Insurance available up to old age

Term Insurance: Term insurance policies are increasingly used as a financial planning and risk management tools these days as these are pure protection plans and most basic form of life insurance plans. These plans ensure your family’s financial independence in your absence. These plans offer high insurance cover with relatively low premium as there is no maturity benefit available (Don’t be disappointed at the end of the policy term, you are alive after all). The purpose of this insurance policy is to hold you until you can become self –insured by your assets. One can buy term insurance for a period of 5, 10, 15, 20, 25 years or till the age of 70 years. Also if you take a home loan from a bank then you must buy term insurance of the corresponding value. In case of your demise your family will not lose the home as the insurance company will repay the outstanding loan amount.

National Pension System: Pension Plans provide financial security and financial freedom in your old age without compromising on your standards of living. NPS was launched on 1 st January 2004 by Govt. of India with the objective of providing retirement income to all the citizens. Initially it was introduced for new Govt. employees but from 1 st May’09, the NPS has been extended to all the citizens (age from 18 to 60) of India including NRI’s. It’s a voluntary, defined contribution retirement saving scheme and the saving of the individuals are pooled in a pension fund and these funds are invested by Pension Fund Regulatory and Development Authority (PFRDA) regulated professional fund managers. To avail good pension you should start investing in NPS at an early age so that the power of compounding can make your corpus big and help you with decent pension.

We are sure, the concrete description above helped you in understanding about the financial instruments. To understand the utility or to subscribe to one of these, feel free to write to us on contact@sbsfin.com or you can also speak to our financial fitness expert.