rh financial and tax planning
TRANSCRIPT
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1Feb 24, 2016
Achieve your Financial Goals
By : Rachna Rego
DirectorRight Horizons
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" The dream is not something you see in sleep....The dream is the thing that doesn't let you sleep..." - Abdul Kalam
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Agenda• Financial Planning
– Concept and Process• Case Study• Simple Techniques For All Markets• Investment Avenues • Right Horizons Profile• Q & A
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Financial Planning – Why?• Rate of cost escalation is huge for each of these goals – average
being 6.5%– Retirement Planning– Higher Education / Marriage of Children– Medical Expenses
• Every individual has different needs, hence, avail customized service – ‘What suits your friend, may not suit you!’
• Appropriate ‘Asset Allocation’ enables you to avail optimal risk-adjusted returns – Design your portfolio with a heady mix of Debt / Equity suitable for your risk profile
• Wealth Creation is possible only if you are able to ‘Make your money work for you!’
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Why Financial Planning• To achieve your dreams and fulfil your future
obligations, you need to carefully plan your finances
Managing the Risk – Return Equation across multiple asset classes
Liquidity Needs
Safety Needs
Potential
upside
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Need Based Approach to Investments
Wealth Creation
Wealth Management
Wealth Preservation
Your needs are our Services
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Financial Planning Process…basic
• Where do you want to be & when• Define your financial goals in terms of how
much you will need and when• Where are you?
• Check your financial resources• Check your financial commitments
• How do you get there• The financial plan / asset allocation
• Are you on course• Periodic review of your investments / your
own condition
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Impact of taxes and inflation on FDs
Bank FDs may not help you help in Wealth Creation in the Long Term
You also run the risk of Interest Rates going down *source:
www.statebankofindia.com
Returns (5 yr Lockin) * SBI 9%Tax @ 30.9% 2.8%Post Tax yield 6.2%Avg Inflation Rate 7%Net Yield -0.8%
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Summary: Financial Planning
• Choose Avenues considering following– Taxation– Post tax returns – Financial Requirements and Goals
• Diversify into avenues with varied risk profiles– Real Estate / Real Estate Funds– Debt – Deposits, Debt Mutual Funds– Gold funds– Equity
• Balance the risk and returns• Reduce Equity Risk thru
– STP and SIP– Profit booking in market volatility
We hope our contrarian approach will help take advantage of the opportunity that we see in the future
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Case Study• Age Band – 25 – 30 Yrs• Needs
– Car – Rs. 5 Lakh– Vacation – Rs. 50,000/-– Marriage – Rs. 3 Lakh
• Age Band – 30 – 40 Yrs• Needs
– Children Education – Rs. 5 Lakh
– Vacation – Rs. 1 Lakh
– House Construction – Rs. 35 Lakh
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Tax Planning
Part A: Tax Laws & Planning
Part B: How to do Tax planning
By
Right Horizons Financials Pvt. Ltd.
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Taxation
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Agenda
• Heads of Assessment
• Save Taxes – Without Investing
• Housing loan benefits
• Deductions
• Tax Computation
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Invest for Tax Saving?…But what about my goal
planning?!
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Investing to save taxes, match goals & reap high returns…Is it possible to achieve all these at once??
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Income from SalarySalary Structure – Basic, Bonus, Medical/conveyance/House Rent/ Leave Travel/other Allowance, Variable Pay, PF
Taxable Components – Basic, Bonus, Variable Pay, etc
Income Exempt from Tax – Allowances – HRA, LTA, Medical, Conveyance (Rs. 800/ Month)
Deductions – PF/EPF, Professional Tax
Perquisites – Taxable – Rent Free Accommodation, Accommodation at concessional rent, Subsidized or Interest Free Loan (perquisite to the extent of interest)
Tax-free* – Food coupons, Medical reimbursement, Medical premia paid by employer on behalf of employee*w.e.f Last year budget declaration FBT is abolished and hence tax – free perks will not be subject to
Fringe benefit taxes
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Other Heads of Income• Income From House Property
• Profits and gains of Business or Profession
• Income from Capital gains
• Income from Other Sources
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Save Taxes without Investing!!
Section Permitted LimitsHouse Rent Allowance1. Actual amount of HRA2. Rent Paid - 10% of Salary (Basic)3. 50% of salary in 4 metros or 40% salary for other cities
10(14) Conveyance allowance Rs. 800/ - p.m. is limitLeave Travel Concession >> 2 trips in a block of 4 Yrs >> Amount not exceeding Air-Economy or Rail-AC 1 >> Fare shall be for journey to the place of destination by the shortest route
10(13A)
10(5)
Tax Saving Tip:
Rent paid to the extent of Rs. 3000 / Mth, will not require rental receipts as proofs, a self-declaration is mandatory
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Housing Loan
Section Permitted LimitsSelf Occupied PropertyInterest on borrowed capital for purchase/ construction deduction currently Rs 150,000. (self occupied property)If House given on RentDeduction of 30% available on Rental Income on NetAnnual Value(Rent-Taxes) for property given outon rent inaddition to deduction of interest
24(2)
24(1)
Interest payments on housing loan would get the following deductions:
Tax Saving Tip:
Structure your home loan effectively to optimize on tax breaks, if both self & spouse want to claim, both home and loan should be held in joint names
**Deduction of 30% available on rental income towards maintenance is
proposed to reduce to 20% as part of direct tax code
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Deductions
Section 80CCG was introduced recently during the budget
Under Investment Instruments featuresSection 80 C Premium for Life Insurance or ULIP,PF, Public
Provident Fund (PPF) - only up to Rs. 70,000 in a year,Equity Linked Savings Schemes (ELSS) of Mutual Fund,Tax Saving Fixed Deposits with Banks,Repayment of home loan principal,National Savings Certificates (NSC), Tution fees for children
Section 80C gives every income tax payer up to a maximum of Rs. 1,00,000 tax free income in a year if they invest in mentioned instruments
Section 80D Medical/ Health Insurance Premium Max Rs 15000 { additional 15k if availed for parents}
Section 80E Interest paid on educational loans You can claim a deduction on the interest paid on loans taken for higher education for yourself, your spouse and children.
Section 80G Donations to Charitable institutions You can claim a deduction for any donation that you might have made to a charitable fund or institution.
Section 24 Interest paid on housing loan maximum of Rs 1,50,000 can be deducted from your taxable income as interest repayment for a self occupied house.
Section 10(13A) House Rent Allowance submit your rent receipts to employerSection 10 (14) Rule 2BB(10)Transport Allowance max upto Rs 800 pm./ 9600 pa.80 CCG Rajiv Gandhi Saving Scheme For Income less than 10 lakhs & upto 50KSection 17(2) Medical Reimbursement upto Rs 15000- submit bills to your company
Tax Saving Avenues
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Tax Saving Overview & Tips
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Tax Savings – Where to Invest?
Returns
HighLow
LowH
ighR
isk
PPF, Infra Bonds, NSC, Traditional Insurance
Non Market Linked Flexible Plan
Capital Guaranteed Plans
Market Linked Plans
Equity Linked Savings Scheme
Investments in these avenues qualify for dedn. u/s 80C
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Conservative Investments
Min / Max Invt. Term Withdrawa
l ReturnsPost-Tax
ReturnRisk
Profile
PPFRs. 500 /- to Rs. 70,000 /-
15 Yrs* 7 Yr onwards (Partial)
8.5% (Tax – Free)
8.5% Low
Fixed Deposit
s
Rs. 1000* / No Limit
Min. 5 Yrs (For tax benefit)
None 8.5% (Taxable)
5.95% Med
*Can be increased to 30 Yrs in blocks of 5 Yrs; **Differs from bank to bank
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Qualifying Investments (Contd.)Insurance: Some options you can consider –
• Non Market Linked Flexible Insurance Plan:
– Benefits: Guaranteed returns, lower risk (invests in Govt. bonds mainly),
simple plan, flexibility in terms of withdrawal, top-ups
– Negative: Customer cannot decide where the funds would be invested.
Investment pattern fixed by IRDA
• Market Linked Insurance Plan
– Benefits: Choice of investment portals, ability to choose higher risk- higher
return avenues, lower charges, flexibility (top ups, payment for a shorter
period, free switches, etc.)
– Negative: Market Linked and hence subject to market risks
• Capital Guaranteed Insurance Plan:
– Benefits: Market Linked returns and assures Capital guarantee, withdrawal
flexibility, top-ups
– Negative: No choice of investment portals (provides a balance of equity and
debt)
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Tax Saving Mutual Funds
Features
• Block lock-in of 3 Yrs• High Risk Profile• Tax – Free returns• SIP mode available• Start with a minimum Rs. 500/Mth
Suitability
When the markets are lying low
Provides for potential upside
Investment Via Systematic route is advised
Judicious choice of funds is required
Equity Linked Savings Scheme
Past Performance (YoY Returns)
Source: Bajaj Capital; Jul 10
CostFund Name Rating 1Y 3Y 5Y Risk Grade Beta Expense RatioELSSDSPBR Tax Saver 4 Star 36.30 7.95 0.94 Avg. 0.85 2.25HDFC LT Advantage 4 Star 25.81 8.48 2.99 Below Avg. 0.85 2.11ICICI Prudential Tax Plan 5 Star 33.40 9.39 4.50 Avg. 0.88 1.98Canara Robeco Equity Tax Saver Regular 5 Star 27.46 10.81 6.74 Low 0.71 2.29Reliance Tax Saver 4 Star 42.43 11.04 3.45 Avg. 0.94 1.9
RETURNS (%) Risk Analysis
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About Right Horizons
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Investment Banking & Consulting
Individual's Financial Planning
Real Estate
Portfolio Advisory Corporate Services
Right Horizons -Services
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How have we managed risk• Financial Planning and Asset Allocation• Contrarian Approach• Profit booking at peak
– Conducted only for long term assets– Not done for short term assets since it adds to cost
• Diversification into avenues that are less risky at a peak– Real Estate Funds– Capital Protection funds– Gold funds
• Diversification of ESOPs and using debt to enhance returns• Systematic Investments
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RH in the NEWS…
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Featured in almost all leading dailies.
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Our USPsIs a one stop shop on all financial needs – from tax planning to investments providing value and a structured oversight
Having to work with multiple Wealth Managers and Advisors
SPO
C
Wealth Advisory by MNC/Indian BankRight Horizons Provides
In-depth Expertise / Advice on ESOPs to deliver best returns, alerts to sell
Biased/Minimal advice on my ESOPs
ESO
P
Multiple avenues; Multiple options under each avenue – providing range and reducing bias. Eg we provide the range of ICICI Bk, HDFC Bank, Templeton PMS all under one roof without bias
Wealth Management advice only suggests their own products and does not have a complete range of avenuesO
wn
Prod
uct
Planning provides the foundation – advice completely customized to each individual
Minimal planning at the individual level, no customization
Plan
nin
g
Managing Risk given primary importance – help provide long term growth; multiple vendors help diversify e.g. spread across multiple PMS
Advice without financial basis: not founded on Risk ManagementRi
sk m
gt.
Advice based on market outlook; a unique de-risked modelSe
ll Advice based on what was easier to sell
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Why Right Horizons…?• Are you getting unbiased advice?? • We deal across all investment avenues with multiple options
within each avenue – hence giving you unbiased advice• Finance driven to provide you right advice
– Suggestion based on your needs– Advice from professionals with strong financial background – provide you
with strategies to manage risk– Focus on Financial Planning– Backed by a research team
• Service at your doorstep – Help desk on campus• Different levels of services to Swiss re employees
– Free Services – Tax & Investment Advisory (Complete process taken care of – includes handing over of proofs)
– Paid Services – Tax Filing, Need Based Analysis & Financial Planning
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Our Special Offer to employees
• FREE Services – Tax Advisory and individual advice on tax saving investments– Investment advice is free (Insurance, MFs, Govt Bonds, etc) – Answer queries on your queries on Taxes & Investments– One point contact for all your tax related investments incl providing forms,
collection, payment and receipts• Paid Services at discounted rates:
– Tax Filing– Financial planning and advisory – Rs 2,500+tax – Detailed financial planning on each need, investment reco, weekly market
reports, stock picks, alerts, online mutual funds info, monthly statements, tracking, opportunities info, ESOPs
Mail : [email protected] / [email protected] or Ph : 080-32718679/41209582 Website : www.righthorizons.com
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Questions and Answers
Contacts: Mail : [email protected]
Phone : 32718679 or 41209582 or 98453 99780 Website : www.righthorizons.com
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Rupee Cost Averaging
Risk Reduction
Market Timing Not required
Advantages of SIP/ Monthly mode for ULIP/MFs
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Key Terms• Debt• Equity• Asset• Asset Allocation• Bonds• Fixed Vs Floating Rates• Risk• Portfolio• Diversification• Mutual Funds• Insurance