80C – didn’t see? - Tax saving for the Late Lateefs

The new year is here and along with the cheer comes in the customary HR E-email –

“Please submit your investment declarations for the year to save on tax deductions”

Much as you’d like to ignore that ominous outlook item, you cant ‘cos you know they’re gonna rip you off completely next month if you don’t submit your investment proofs.

But hang on – Investment kiya kisne hai??

Every year I see my close and not-so-close people, including some in my own profession, struggle with this basic hygiene item. They know it’s gonna save them butt-loads of money to be conscious about this but it’s forgotten as soon as the Financial year is through.

The “next year I will plan this better” NEVER comes for this poor checklist item.

Anyways, long story short. Now you are rushed and you wanna just hear what you can do to get out of this mess, this year.

So here goes. Bullet points to keep it simple.

 

 

(i)The 80C investments  - In order of preference and convenience

Limit is 1.5 lacs

EPF -- EMPLOYEE PROVIDENT FUND – Company deducts this every month

HOME LOAN PRINCIPAL – Just call for the Provisional certificate from your Loan company/bank. The breakup of Principal and interest is shown. Claim the Principal

ELSS (Equity linked savings scheme) – It is a 3 year lock-in equity mutual fund. Any bank or broker or CA will do it. Ask for Reliance, Franklin, Birla, DSP or ICICI as the fund-house

TAX SAVING 5 YEAR FD – Any bank does it

PPF (PUBLIC PROVIDENT FUND) – Any bank does it

ULIP or any other insurance plan – Any insurance premium that you are paying for yourself, biwi, bachha. If no policy already, avoid this!

KID’s school fees – Even if your child is hopeless, the taxman will give this benefit to you

NSS (NATIONAL SAVING SCHEME) – Go to the post office

KVP (KISAN VIKAS PATRA) – Post office again

(ii)The additional deduction – Mediclaim premium

Whatever you are paying for mediclaim upto Rs.25000 can be claimed – self, parents, spouse, children allowed

(iii)The additional deduction – Medical bills

Most companies allow medical reimbursement – give chemist bills upto Rs. 15,000

iv)The additional deduction – nursing a handicapped dependant or someone with a critical illness

Get a form 10I signed by the doctor and claim a Rs. 40,000- Rs. 125,000 deduction

(v)The additional deduction – Charity or donation receipts – there is no limit to charity

50% of the amount is tax deductible

Daaru bill for heartbroken friend not allowed

(vi) NPS – New Pension scheme – additional 50,000 can be claimed as deduction, over and above 80C-     Any bank will do it

VERY VERY IMPORTANT – HOUSE RENT ALLOWANCE

Thumb rule –  Submit rent receipts if rent is below Rs. 10000 per month. Submit the rent agreement for anything above that.

WHAT IS ALLOWED formula --->

50% of Basic Salary +Dearness Allowance OR 40% (if you’re not in a metro) OR

Actual rent minus 10% of Basic Salary OR

Actual HRA

Whatever is the least of the above, is what you shall claim!

Hope the above helps. Feel free to write to me for any queries.

What is Wealth Management? Why does one need it?

 

The textbook definition of wealth management as you Google, would be for HNIs and Businessmen who take the help of paid professionals to manage their funds. This, generally, if you ask around at a party or a social gathering would be the perception nonetheless. That ‘Wealth Management’ is employed when there is substantial ‘Wealth’ to be managed and one employs a professional to do so.

 

 

However, let’s just stop for a minute and question the basics here.

For instance, I am a salaried professional earning INR 50,000 per month. I spend a lot of what I earn but do save about 30% (although most of us wouldn’t have this number). That means I save about INR 15,000 per month. That translates to about INR 1.8 lacs a year.

Which means in 10 years, I save about 20 lacs.

That ain't much now, is it ?!?

So, if I just were to assume that my savings grew at 15% per annum, what would my 20 lacs become at the end of 10 years?

INR 44 freaking lacs !!! Ding...ding...dingg

And, I haven’t assumed any increase in my salary or my savings over the next 10 years.

Even if I take a 10% hike in my savings every year (which will be a combination of my increasing salary and increasing prudence in spending as I grow older), the number at the end of 10 years becomes INR 65 lacs!

Now, I don’t mean to be throwing large numbers and intimidating you. But my premise is simple.

You, me and even the average Joe NEEDS Wealth Management.

We don’t wanna do it, because –

 1)  We feel there is a cost involved. That idiot is gonna charge me a hefty fee for his advice

  2)  We feel we are normal fry. I barely save. The guy is gonna laugh at me when I blurt out the “amount” I need  him to advise on.

  3)  I don’t think there is a need for a wealth manager. I have TV, newspapers, internet, media, hot anchors on CNBC telling me where to put my money

  4) I don’t trust anyone with my money. I’m going to do it myself. I don’t wanna end up with another insurance policy my banker sticks on to my head

  5) I  have heard people being conned all the time. All investment avenues are con-jobs and i’m just gonna trust my good old FD.

And So on...

But... if I were to tell you, that none of the above reasons should deter you from looking at this very important aspect of your life because it is as important as having a family doctor or a dentist or a chartered accountant or even a lawyer.

 ‘Cos this is about your hard-earned money.

If you don’t let it fight its own battle and work as hard as you, you will ALWAYS...& I mean ALWAYS be in short supply.

Let us assume the following scenario:

If you spend about 70% of your income today, you are spending about INR 4.2 lacs in a year on an income of 6 lacs. In 10 years, you will need INR 8 lacs i.e. 133% of your current income just to sustain these expenses. And I have only considered Government inflation here – at 6% p.a.

You can either hope and pray that salaries will increase enough to catch up with the expenses or you start “managing your wealth” today.

Fact of the matter is; Wealth management is not restricted to HNIs. It shouldn’t be.

Whatever you have today is YOUR WEALTH.It deserves the same amount of attention as do the crores for some high flying businessman.

So stop beating around the bush and start seeking some answers! You would be surprised as to what you would find.

 

That's it for now. Stay tuned.....there's more where this came from.