The Income Tax Department launched its new e-filing portal www.incometax.gov.in
New e-filing Portal Features And Benefits are covered in our video.
b) Easy to use
c) Multiple login Options
d) Single Dashboard
2. Income tax payment on same portal
a) Multiple Payment Options
b) No challan needed
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3. Easy to fill details
a) Interactive Q&A format
b) Pre -filled data
4. Quick Processing of Income Tax
5. Quick Refund
6. Help Support
7. Mobile App available
Date of filing ITR – Extended from 31st July to 30th Sep
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Franklin Templeton AMC slapped with a fine of 5 crore; Banned from launching new debt mutual funds
The SEBI has banned Franklin Templeton AMC from launching debt schemes for the next two years. Rs 5 crore penalty has been levied for “several irregularities” in the running of its six debt schemes that were wound up in April 2020. The irregularities extend to failures to exercise adequate due diligence, carry out valuation of securities as per the principles of fair valuations and ensure a robust risk management framework.
A refund of Rs 451 crore management and advisory fees with 12% interest has also been ordered along with separate adjudication proceedings against the CEO & Directors.
SEBI asks mutual funds to classify debt schemes on credit, interest rate risk basis
AMCs will have to classify all debt schemes in terms of a potential risk class matrix, based on interest and credit risk, SEBI announced. AMCs will have full flexibility to place single or multiple schemes in any cell of the Potential Risk Class matrix.
Interest rate risk will be now categorized into three buckets. The lowest risk bucket Class I with a Macaulay Duration of up to a maximum of 1 year, Class II-moderate risk bucket to have MD up to 3 years and the class III can have MD above 3 years. Class I schemes will have debt paper with a maximum residual maturity of 3 years and Class II schemes with a maximum residual maturity of seven years, while maximum residual maturity has not been fixed for Class III. Credit risk will also be divided into three categories- greater than 12, greater than 10 and less than 10.
It is another progressive step to ensure the potential risks in a debt scheme are appropriately revealed to the investors and support informed decision-making.
Piramal Group Likely To Complete DHFL Takeover By August
The NCLT has approved a resolution plan submitted by Piramal Group. Piramal Group’s resolution plan, which offered Rs 37,250 crore for DHFL, was approved by the committee of creditors in January with a majority. Once this happens, the equity of existing shareholders is said to be written down to zero and DHFL shares to be delisted.
DHFL’s fixed depositors are part of the committee of creditors and those with dues up to Rs 2 lakh will receive full payment on their principal amount. Depositors with dues between Rs 2-10 lakh will get 40-43% of their principal outstanding. Those with dues higher than Rs 10 lakh are likely to be repaid through a mix of cash and securities on a pro-rata basis.
RBI implements operational flexibility for reporting FPI deals in G-Secs
The RBI is to provide operational flexibility for reporting Over the counter transactions in Government securities transactions undertaken by the Foreign Portfolio Investors . The new rules will come into effect from June 14.
Due to this announcement, the information about trades undertaken by domestic counterparties with FPIs must be disseminated by the Clearcorp Dealing Systems India Ltd (CDSL) after one part of the trade is reported on the NDS-OM platform by the domestic counterparty with a suitable qualifier to indicate that the trade is awaiting counterparty confirmation.
Rising fuel prices in India- reasoned by Union Petroleum and Natural Gas Minister Dharmendra Pradhan
The recent surge in global crude oil prices is the major cause of the fuel price hikes in India. Its price has gone over USD 70 (per barrel) in the international market. This negatively impacts consumers here, as India imports 80 percent of its oil requirement.
He added, it is up to the GST Council to decide whether fuel should be brought under the Goods and Services Tax, which, many believe, would substantially bring down prices.
FIIs Invest 3K Crore in First 4 Days of June After Withdrawing 18K Crore in April
FIIs have net invested Rs 3,049.81 worth of Indian equities in the first four trading days of June. It is too early to make a call with certainty but this data shows that FIIs might be changing their outlook to India to a more positive one as COVID 19 infections drop and the vaccination drives in various states gather pace.
Economies across the world have also opened up and exports from India are going up with Indian merchandise exports up 67.39% to $32.21 billion in May compared to May 2020 and goods exports are up 195.7% in April 2021 compared to 2020.
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As the name suggests National Pension System (NPS) is dedicated solely to retirement planning. It is a pension cum investment scheme launched by the Government of India for the age from 18 to 65 years.
It has the dual benefit of investing for retirement and also the best tax saving instrument as it qualifies for EEE status.
NPS is also a good option for wealth creation as your money gets invested across asset classes like equity, Government/corporate bonds, etc. Hence the National Pension System can be a good option for those who are not comfortable making investment decisions on their own then such a tailor-made solution can be the best choice and will also build a corpus for their retirement.
Related Article: Rules that will knock your pocket from 1st April 2021
How to save taxes?
Section 80C It is the most commonly used section where an individual can save tax by investing or spending a maximum of Rs 1.5 lakh in a financial year in/on specified avenues. Some of the commonly used investment/expenditure avenues under Section 80C are Employees Provident Fund (EPF), Public Provident Fund (PPF), Equity-linked savings scheme (ELSS) mutual funds, National Pension System (NPS), repayment of the principal amount of home loan, children school fees etc.
- Section 80CCD (1b)
You can further save tax by investing additional Rs 50,000 in NPS. Do keep in mind that this deduction is available over and above the tax benefit available under section 80C. Thus, you can save tax by investing up to Rs 2 lakh in a financial year -Rs 1.5 lakh under section 80C and Rs 50,000 under Section 80CCD(1b).
- Section 80CCD (2)
This deduction is available on the employer’s contribution to an employee’s Tier-I NPS account. A maximum contribution of 10% of the basic salary plus dearness allowance (if applicable) is allowed under this section.
Most Popular: What is an IPO? | How to choose in which IPO to Invest?
- What is an IPO?
Initial Public Offering (IPO) can be defined as the process in which a private company or corporation can become public by selling a portion of its stake to the investors. Through the IPO, the company gets its name listed on the stock exchange.
Before the IPO, a company has very few shareholders. This includes the founders, angel investors and venture capitalists. But during an IPO, the company opens its shares for sale to the public. As an investor, you can buy shares directly from the company and become a shareholder.
- Why does a Company offer an IPO?
To raise capital for growth and expansion
Every company needs money to increase its operations, create new products or pay off existing debts. Going public is a great way to gain this much-needed capital for a company.
Allowing owners and early investors to sell their stake to make money
It is also seen as an exit strategy for initial investors and venture capitalists. A company becomes liquid through the sale of stocks in an IPO. Venture capitalists sell their stock in the company at this time to reap returns and exit from the company.
A company going public means that the brand has gained enough success to get its name flashed in the stock exchanges. It is a matter of credibility and pride to any company. This is a great way for a company to publicise its products and services to a new set of customers in the market.
- Types of IPOs
- Fixed Price Offering
Fixed price offering is pretty straightforward. The company announces the price of the initial public offering in advance. So, when you partake in a fixed price initial public offering, you agree to pay in full.
- Book Building Offering
In book building offering, the stock price is offered in a 20 percent band, and interested investors place their bid. The lower level of the price band is called the floor price, and the upper limit, cap price. Investors bid for the number of shares and the price they want to pay. It allows the company to test interest for the initial public offering among investors before the final price is declared.
- Benefits of Investing in an IPO
· First-mover advantage
This is especially true when reputed companies announce an IPO. You get a chance to buy the company’s shares at a much lower price. This is because once the company’s shares reach the secondary market, the share price may go up sharply.
· Listing gains
When a company gets listed on the stock market, it may be traded at a price that is either higher or lower than the allotment price. When the opening price is higher than the allotment price, it is known as listing gains.
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- Process of Applying for an IPO
Nowadays, it has become easier to apply for an initial public offering because of the online application process. However, if you are a new investor, you need to learn a few things before applying.
The first important thing is funding. Whether it is a fixed price or a book building IPO, you will have to make a payment in advance, and for that, you must have funding ready. Investors can use their savings or take a loan from a bank or NBFC for the purpose.
However, without a DEMAT account, you can’t invest in stocks. So, the next thing you need is to open a DEMAT account. Select a reputed broker with atrack record to have a DEMAT.
You can use the DEMAT account not only for IPOs, but to receive all sorts of investment instruments like gold bonds, corporate bonds, shares, and more.
The online process is an easy way to apply. You can do it from the investor portal on the broker’s website or by downloading the ASBA form from your bank’s net-banking platform.
ASBA stands for Application Supported by Blocked Account (ASBA). It allows banks to block funds in the applicant’s account against your bidding for the IPO.
If you apply through the broker, you need to use UPI enabled payment gateways to make payment. In either case, cheques and demand draft payments are not accepted for bidding.
An investor needs to bid while applying for the shares in an IPO. It is done according to the lot size quoted in the company’s prospectus. Lot size can be referred to as the minimum number of shares that an investor has to apply for in an IPO.
A price range is decided and the investors require to bid within the price range. Though an investor can make a revision in his biddings during an IPO, it should be noted that he needs to block the required funds while bidding. In the meantime, the arrested amount in the banks earns interest until the process of allotment is initiated.
There are different investor categories when it comes to IPOs. This includes:
- Qualified Insititutional Buyers (QIBs)
- Non Institutional Investors (NIIs)
- Retail Individual Investors (RIIs)
The allocation of shares differs for all the above groups in an IPO. As an individual investor, you come under the last category.
As an individual investor, you are allowed to invest in small lots worth Rs 10,000-15,000. You can apply for a maximum of Rs 2 lakh in an IPO. The total demand for shares in the retail category is judged by the number of applications received. If the demand is less than or equal to the number of shares in the retail category, you are offered a full allotment of shares.
When the demand is greater than the allocation, it is known as oversubscription. Many times an IPO can be over-subscribed five times over. This means that the demand for shares exceeds the supply by five times!
In such cases, the shares in retail category are offered to investors on the basis of a lottery. This is a computerised process that ensures impartial allocation of shares to investors.
- Terminology Associated with IPO’s
Draft Red Herring Prospectus
The DRHP is the document that makes the public know about the company’s IPO listings after the approval made by SEBI. A DRHP contains the following information about the company:
- Purpose of raising funds through listings
- Balance sheet
- Promoter’s expenses
- Earning statement of the last three years (if applicable)
- Net proceeds of the company
- Commission and discounts of the underwriter
- Details such as the name and address of all the underwriters, officers, directors and stockholder who possess 10% or more than the currently outstanding stock.
- Legal opinion on the listings
- Copy of the underwriting document
- An underwriter can be a banker, financial institution, merchant banker or a broker. It assists the company to underwrite their stocks. The underwriters also commit that they will subscribe to the balance shares in case the stocks offered at IPO are not picked by the investors.
What is IPO grey market?
An IPO grey market is one where a company’s shares are bid and offered by traders unofficially. This takes place before the shares are even issued by the company in an Initial Public Offering (IPO).
Since this is an unofficial market, there are no rules and regulations. Market regulators like Securities and Exchange Board of India (SEBI) are not involved in these transactions. The regulator doesn’t endorse this either.
Grey markets are generally run by a small set of individuals. All deals are based on mutual trust.
Grey Market Premium
Grey market premium is nothing but the price at which the shares are being traded in the grey market.
For instance, let’s assume the issue price for stock X is Rs 200.
If the grey market premium is Rs 400, it means that people are ready to buy the shares of company X for Rs 600; (i.e. 200+400).
This is how a typical deal works out in the grey market.
RBI Annual Report
The RBI’s balance sheet grew 6.99% YOY to Rs. 57.07 trillion, while the rise in assets was due to an increase in foreign and domestic investment by 11.48 and 13.75%. The bank’s income declined 0.96% YOY as it transferred a surplus of Rs. 99122 crores to government, it fell to Rs. 1.33 trillion. Total expenditure decreased by 63.1%. The stock market bubble has been a worry for RBI, reiterated since August 22, 2020, where the RBI Governor had mentioned that there was a clear disconnect between the equity market and the real economy, where a surplus global liquidity is driving the asset prices worldwide. This asset price inflation in the context of an 8% contraction in GDP in 2020-21 poses the risk of a bubble. The drop in the market proved short-lived even though economic scars were long-lasting. The stock price index is mainly driven by money supply and FPI investments. Though the economic prospects also contributed to the movement, the impact has been relatively lesser. This assessment showed that liquidity injected to support economic recovery can lead to unintended consequences in the form of inflationary asset prices and providing a reason that liquidity support cannot be expected to be unrestrained and indefinite and may require calibrated unwinding once the pandemic waves are flattened and the real economy is firmly on a recovery path. The current report also has concerns about equity markets not reflecting real state of the economy. The impact of the second wave will be done in a month or two and if it is not contained will have long-lasting impacts on employment and output.
Also rea: RBI Monetary Policy – Fintoo Blog
Nifty Hits New High Today at 15455.55
View on Nifty remains bullish as long as 15100-15000 act as strong support for the index. Lot of positive trigger for markets like decreasing cases of Covid, GST meet, stimulus package and ample amount of liquidity to support the ongoing rally.
FMCG companies witnesses 50% Increase in e-commerce sales
The Covid-19 second wave and lockdowns in many states is making people click to buy than going out. While the growth in online sales in April and May was nearly as much as in last fiscal, the online sales in top cities has jumped 4-5% in last 2 months. Biscuit making companies reported online sales from e-commerce segment to around 15% in top 15 cities in April and May. Companies like Grofers have seen sales grew by 46% in April-May as compared to Feb-March period. Tata Consumers has setup separate vertical to cater to online category. Ecommerce as percentage of overall sales has doubled in FY21 compares to FY 20. With this structural change in consumption FMCG companies will see increase in sales with online market share taking away the lunch of offline retailers, going forward online consumption demand will keep increasing and sustain. Early movers will benefit exponentially in terms of gross sales.
Improvement in Q4 results for Kalyan Jewellers
Ramesh Kalyanaraman Executive Director attributed change to massive shift of consumers from unorganised sector to organised gold sector (better hygiene, more space). The shift has helped improve gross margin by 3% to 17% now. Net profit grew 54.1% YOY. Revenue declined 15.1% YOY. Has 30 showrooms in west Asia. Companies outlet increased to 116 in India, opening 9 in April of which 8 where in south India. Has plans to open 21 Showroom in India in current year. The stock should kept on watch list and see how the plans unfold in current year with timely execution of goals set, the company has fair amount of chance to increase market share and sales.
Biden Plans to Propose $6 Trillion Budget
The era of high spending looks likely to continue, President Biden is likely to propose $6 trillion spending for FY 2022 while total spending may rise to $8.2 trillion by 2031. Whereas Inflation fears are hovering over Biden’s spending plan, the White House has warned that anti-competitive practices have led to increase in construction cost, semi-conductor and shipping cost. Prices of lumber, steel, containers have spiralled upward causing inflation. Government is planning to tackle monopoly and supply shortage as price keeps on rising and hampering growth. The situation is still evolving, which need to be seen if the commodities prices would make a U-turn.
Crypto Exchange Survival at Stake in India
Crypto exchanges plan to approach the Supreme Court again to seek clarification that can RBI direct banks to stop dealing with them. Last month banks had stopped dealing with crypto exchanges on informal direction by RBI, while somehow they managed through payment processing companies. But recently, even the payment companies are shying away from dealing with the crypto-exchanges. High speculation and over leverage in crypto markets have led to wild swings in cryptocurrency, which is ultimately leading to client’s position being squared off, if additional premium is not provided. Situation is still evolving and some regulations do need to come to protect retail investors from highly speculative markets.
Government Stimulus Package for economy for the worst-hit sectors
The government is planning a stimulus package and direct relief for hospitality and MSME as they are the biggest employers and have been hit the worst amid second wave. ECLGS may be relaunched for MSME sector to avail loans without collateral. The discussion are at early stage and may be announced as state starts unwinding restrictions. The stimulus will give the economy necessary fire power to get back to growth after second wave, it will be a much needed boost for companies to kick start their business.
GST Council Meet Today
GST Council can consider zero rating or complete tax exemption on products crucially needed to fight against covid 19. Not only the products will be exempted but also inputs required to manufacture would also be exempted. This will lower the prices of life saving drugs and ventilators and oxygen cylinders, which will help overall population, decrease the death rate. The companies involved in the particular business will also benefit on increasing margin and sales.
Paytm Plans to file $3 Billion IPO
One97 communication may be planning to list Paytm this year around Diwali and targeting a valuation of $25-30 billion. Board meeting is scheduled today to approve then plan for IPO, the company has a high profile investor base like Softbank, Ant group, Berkshire Hathaway among others. Company is yet to make profit and last year’s cash burning was around 2500 crore. More details are awaited.
Trade war to start again?
The US Senate moved towards passage of a bill to confront china’s rise. This Bill would plow more than $100 billion into US R&D to foster semi-conductor manufacturing. Bill may include a wide array of measures directly targeting China on human rights and its influence in USA, which may not go well with china who has been importing millions of tons of agri products from USA under a trade agreement. Any retaliation is yet to be seen. If this thing affects the trade agreement and two world power again fighting on the economic front, then it could impact the world economy. This could be a key international trigger and needs to be followed closely.
When you have a regular mortgage, you pay the lender every month to buy your home over time. In a reverse mortgage, you get a loan in which the lender pays you. In Reverse mortgage, Bank takes part of the equity in your home and convert it into payments for you – a kind of advance payment on your home equity. The money you get usually is tax-free.
Generally, you don’t have to pay back the money for as long as you live in your home. When you die, your estate will be used to repay the loan.
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Reverse Mortgage loans are not right for everyone. It may surprise you to hear a lender say this, but it is true. If you are looking for a short-term loan you may be better suited for a different type of financing. A reverse mortgage loan can sometimes require closing costs and upfront mortgage insurance premiums which would make it impractical as a short-term solution in some cases.
However, for those who wish to remain in their homes and need extra cash flow to do so, the Home Equity Conversion Mortgage may be exactly what you are looking for.
Financial distress on account of the Covid-19 pandemic is the biggest challenge to bringing lives, communities and the weakening economy back on track. Millions of people have lost jobs. Millions more have had to take deep pay cuts. Many families have lost their sole breadwinner.
Retirement Planning – We may have reached our goals of owning a car or enjoying foreign vacations. But when we have retired and don’t have any stable income, how are we supposed to maintain this lifestyle? Retirement Planning helps us to invest well in advance considering the amount we wish to receive in future.
Inflation is the biggest wealth killer if we don’t plan our retirement considering the Inflation impact on the same.
Related Article: Start Early To Retire Early – Retirement Planning
Also, the markets are always subject to risk. Now we do see a visible impact on the economy due to pandemic, which has resulted in job loss, lesser production and lesser disposable income.
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Everyone should ensure resourceful financial planning which will consist of goals, irrespective of their age, income profile, risk, and should have an asset provision. The financial plan should explain what assets to invest in and get significant exposure to those assets. Every investor should take a look at a financial plan on an annual basis which will help them to assess the validity and optimality of the same.
An individual should also plan for life measures and changes in the upcoming year that may affect the financial situation in the coming years, such as school/ college admission for children, functions, purchase of a house, etc.
The first thing every individual must do is create a balance sheet of all their assets and liabilities. The balance sheet must have every transaction of all the assets that the individual has invested in. This will also help an individual to keep track of all transactions and plan your finances in a more resourceful manner and decide your goals and assets.
Following are the points that can ensure your financial planning is on track:
1. Positively save every month no matter what
This is a very important part that helps you assess how much you save from your monthly income. An individual must save from the income according to the financial goals. From an individual’s salary, he should save 20-30% of surplus then only he can plan a better financial plan for wealth building purposes. A coin saved on a routine day would definitely help us on a rainy day.
2. Your net worth is going up on a yearly basis
An individual should understand whether his or her net worth is increasing on a yearly basis. If the net worth is increasing then it is great but if the net worth is decreasing then an individual has to work on it and savings should be done. In every month an individual has to invest to increase the surplus in an initial level of life. At every step of life, net worth needs a check so that investments and asset allocation can be done or reorganized based on the scenario.
3. Not heavily dependent on loans
Many individuals are depending on credit cards and they use them very frequently like personal loans, etc. This is an ongoing process and the debt keeps building up. It is harmful for financial plans and it will be difficult for the credit score for future taking long-term loans.
4. Are you protected by external risk?
It is very important to safeguard from other external risks. Accidents, medical emergencies will destroy your savings and will disturb your financial goals. So, an individual must have insurance policies like health insurance.
5. Bear expenses without external help
Sudden expenses like medical emergencies etc. can not be planned well in advance, there should be a certain amount allocated towards such unplanned contingencies. You should not lock all savings and should mark up some of it towards contingencies. This would save you an additional burden of interest etc. on the loan amount.
6. Consistent savings from your income
An individual should invest a fixed amount from the salary of every month. If your salary is 60K per month then you have to invest 6K every month. As the savings are done by an individual then only there is an increase in wealth. Starting with the small investments we can move to the large investments like mutual funds, share markets etc.
7. You should not over-leverage
You should not be overleveraged. If your salary is 60000 and your EMI is 45000 then it will be difficult to handle all the other expenses. It feels very convenient in the short term but on a long term basis, it is difficult to handle it. So, one has to manage the leverages and the left-over amount after paying leverage for the expenses and it should not be a burden.
8. Return are real earnings
The returns on investments must be fair and this should not happen that invested amount will bear less amount of interest or return. The analysis should be done beforehand and then the investments are to be done. So, the amount must be limited in a savings account and the investment in assets should be more to get more returns from mutual funds, shares, stocks etc.
9. High-level clarity from financial plan
An individual has to be clear while investing and managing the financial goals. The future goals must be focused on and keep in mind while planning the finance. The unclear goals must not be good for balanced financial affairs.
The article tries to sum up the pointers for checking whether your financial plan is on track. However, financial planning changes as per financial goals of the individual, risk appetite, and wealth-building requirement. Hence, it is recommended that the financial planning should be carried out by the professionals and should be revisited periodically to see if needed to maintain the validity and viability of the same.
Global economy to grow by 6% in 2021, up from its 5.5% forecast in January. Looking further ahead, global GDP for 2022 will be seen increasing by 4.4%, higher than an earlier estimate of 4.2%.
Some Key Points:
- Those who have managed to have a job during the pandemic will have excess saving hence investments will grow.
- Many countries like USA, UK will show market recovery
- Work from home will be adapted post-pandemic too hence software and technology sector will increase
- The number of startups (without the physical office) will increase leading to global employment
- Emotional spending can increase in sectors like clothing, hotel industry, and luxury products
- Despite fossil fuels being the dominant source of electricity generation, we continue to expect that solar PV (Solar Photovoltaics) capacity will grow at rapid rates on the back of growing capacity in the EU, India, and China. If current trends continue, solar PV capacity is on course to surpass natural gas in 2023 and coal in 2024 in the global electricity sector.
- Disruption in the global supply chain also likely to recover with normalcy
- If large numbers of people continue to work remotely, that will reduce long-term demand for office space as well as demand for energy. That, in turn, will mean less investment in office buildings and oil wells. If people continue to shop remotely, then there will be less construction of shopping centers.
- Vaccinations continue to reduce the threat of the virus, thereby enabling more consumers to engage in the kinds of social interaction that boost spending.
China’s growth set to drive global economy in post-pandemic years:
The U.S. and India will be the second and third-biggest contributors to global growth in the period, according to the IMF, with Japan and Germany rounding out the top five.
Global GDP is expected to rise by more than $28 trillion to $122 trillion over that period, after falling $2.8 trillion last year because of the Great Depression.
One reason for the divergence is the faster-than-expected recovery in the U.S. It’s the only large economy where the IMF’s GDP forecast for 2022 is actually higher now than it was before the pandemic.
Joe Biden announced a USD 1.9 Trillion COVID-19 stimulus plan to revive the US economy.
- The relief package was announced with a view to fight against the COVID-19 pandemic.
- This package provided support to small businesses and also provided direct support to american people.
- Due to this, there has been a significant reduction in small businesses failure in the US.
- It includes USD 1,400 in additional stimulus cheques to Americans, an extension for key unemployment programmes.
Disruption in Supply Chain globally:
- There are a number of factors contributing to disruption, including increasing global demand for consumer goods, a shortage of container ships, and air freight capacity.
- Due to the disruption in the supply chain, the recovery of the manufacturing sector is hurting, although Germany is doing exceptionally well.
- The global chip shortage is worsening due to the rising global demand for consumer electronic goods, home appliances, and automobiles. Also, Chinese companies are concerned about the potential impact of future sanctions from the United States.
- The overall supply chain problem is likely to have a negative impact on the global supply of mobile telephones, automobiles, and home appliances, which can lead to an increase in prices. Already, some prices have started rising. Taiwan’s largest supplier of semiconductors says that the global shortage is not likely to be resolved until 2022. Meanwhile, several Taiwanese producers are massively investing to boost capacity.
Push for Green Infrastructure:
- Green Bonds – These bonds are used to finance environmental projects. Currently, their share is less than 5% of the global fixed income market.
- The estimates about green bond issuance are that they are going to increase by over 40% to top half a trillion US Dollars for the first time.
- Environmental, Social, and Governance (ESG) funds will have inflows and they will continue to increase and account for up to 57% of total European mutual funds by 2025.
- The analysis about electricity production from renewables continues to gather momentum, with solar photovoltaic (PV) capacity likely to grow at rapid rates on the back of growing capacity in the EU, India, and China. If current trends continue, solar PV capacity is going to surpass natural gas in 2023 and coal in 2024 in the global electricity sector.
The global economic output seems uncertain. The global economy as a whole should revert to its pre-pandemic level of output by the end of 2021 and expand by around 5% in market exchange rates.
Invest in International Equity : Start Investing
Any person earning Income has to pay tax. So why are we waiting for the last-minute rush, tax planning and investing to save taxes should not be left for the last minute. Better to start now, this way one can get ample time to carefully plan your tax which will enable us to achieve our target of Tax saving and also helps to accumulate wealth for our future.
There are various tax savings options available under section 80 C of the Income Tax Act, 1961. Now the next step is to figure out the option which offers the highest possible returns.
Here we are going to discuss few such investments which are good tax-saving instruments and simultaneously helps to create wealth in a long term:
- Equity Linked Saving Scheme (ELSS)
Equity is the best investment option that offers a kind of wealth creation opportunity. It holds the potential to beat inflation and generate long-term wealth. However direct investment in stocks does not offer a tax-saving advantage and it is subject to a highly volatile market that needs lots of expertise to create wealth out of it. That is where Mutual Funds come because one can leverage the power of investing in equity but leave the expertise required for equity investing to the domain experts for small fees.
Equity Linked Saving Scheme (ELSS) is one of the best options in the given scenario. ELSS funds are diversified Equity Mutual Funds. One of the important advantages is it has a mere 3 years Lock-in period which is the lowest among other tax-saving instruments at the same time it gives the highest returns.
ELSS funds primarily invest in Equities and Equity Linked Instruments, across the market in terms of sectors and market cap.
Liquidity is also one of the factors of evaluation, the 3 years lock-in with ELSS funds may be a better option for most investors because your money is far more liquid than in other investments.
Due to 3 years, lock-in period Fund Managers can generate better returns because they can take long term strategic decisions as opposed to short term moves in response to investor behaviour when the market is volatile.
SIP in ELSS:
Another good option is to invest in ELSS via SIP. Here one can invest regularly as per our financial goals and it also benefits from averaging during times of volatility.
One can also gain from the power of compounding, which is one of the next best options in building wealth creation. As per the growth option in ELSS funds you stand to benefit from the power of compounding.
E.g. If we invest Rs.5000/- per month (SIP) for 15 years in ELSS then the total investment was only Rs. 9 lakhs and the returns after 15 years would have been Rs.44.5 lakhs.
- Public Provident Fund (PPF)
When people think of building a corpus for their retirement, the first thing that comes to their mind is by contributing to the Public Provident Fund. Public Provident Fund is one of the safe options of investment as it is backed by the government. It gives a fixed rate of Interest annually (7.1% per annum – at present). However, with the current changes proposed in Union Budget 2021, the interest earned will be taxable if the annual contribution is Rs.2.5 lakhs and above.
It is available in all post offices and all public or private sector banks.
The Frequency to deposit in the PPF account is also as per the tax payer’s requirement ie. One can deposit either a lump-sum amount or in instalments during the Financial Year.
E.g. With an investment of only Rs. 5000 per month at 7.1% per annum one can receive approx. Rs. 16.7 Lakhs after 15 years.
It is suitable for investors who want to avoid risk, save for long term goals like child education, marriage, etc without worrying about any capital loss.
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- Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana (SSY) is a small deposit scheme for the girl child launched as a part of the “Beti Bachao Beti Padhao” campaign. One of the reasons why this scheme has become popular is due to its tax benefit. It is again backed by the Government so it is preferred by those taxpayers who want to save tax and get good returns without capital loss.
Though this option is available only to those who have a girl child, it is a good tax-saving instrument that fetches the highest rate of interest (7.6% per annum) and also creates corpus in the long run which enables the taxpayer to achieve their financial goals like girl child marriage or for her study purpose.
A Sukanya Samriddhi Account can be opened any time after the birth of a girl child till she turns 10, where you will have to deposit a minimum of Rs.250/- and a maximum of Rs. 1.5 lakhs can be deposited during the financial year. The account remains operational for 21 years from the time it is opened or until the girl in whose name it is opened gets married, after she turns 18 years.
It comes with exempt-exempt-exempt (EEE) status as its annual deposit qualifies for Sec 80 C benefit and maturity proceeds are also non- taxable. The Interest received is also exempt from Tax.
- National Pension Scheme
As the name suggests National Pension Scheme is dedicated solely to retirement planning. It is a pension cum investment scheme launched by the Government of India for the age from 18 to 65 years. NPS is also a good option for wealth creation as your money gets invested across asset classes like equity, Government/corporate bonds, etc.
Here one can have the choice to select our asset allocation which follows an age-based asset allocation model depending on our risk appetite.
It has the dual benefit of investing for retirement and also the best tax saving instrument as it qualifies for EEE status.
Hence the National Pension Scheme can be a good option for those who are not comfortable making investment decisions on their own then such a tailor-made solution can be the best choice and will also build a corpus for their retirement.
- Fixed Deposit Scheme
Fixed Deposits are one of the safest investment options, especially when one compares them with stocks or other market-linked instruments. As the volatility is low the corpus that one set aside in Fixed Deposits serves as a great way to ensure that your capital is safe.
For the investor who is just starting with different investment options, then investing the same amount as your capital is an easy way to arbitrage your risks and receive an assured amount at maturity.
One can also start saving at an early age and multiply wealth with the power of compounding.
- United Linked Insurance Plan
United Linked Insurance Plan is a combination of savings and protection. Along with providing Life Insurance it also helps to channelize one’s savings into various market-linked assets for meeting long term goals.
A Minimum lock-in of 5 years is long term, which ensures investors generating good market-linked returns.
It is good to stay invested in these schemes for a long-term period of say about 10 years or more. Over the long term, ULIP is expected to generate returns ranging from 10% to 12%. The returns from the best ULIP are better than other market instruments like FD’s, NSC’s, PPF, etc. Best ULIP can also beat inflation in the long term.
One can also get a brisk return by exercising the option of fund switching in ULIP’s due to long term investment.
The amount received on maturity is exempt from taxation u/s 10 D of Income Tax Act, 1961. Along with this tax relief, one can also avail of tax benefits on premiums paid up to a maximum of Rs.1.5 lakhs u/s 80 C of Income Tax Act, 1961.
Thus, the objective of wealth creation over an investment horizon of 10 years can be fulfilled by investing in the best ULIP.
It is wise to think of investing beyond the traditional ways of saving tax like, investing in Fixed income tax saving instruments like FD, PPF, or endowment life insurance plans etc. Plan for other options like ELSS, ULIP, etc based on the risk appetite and other relevant factors as discussed above of an individual.
With many options available when investing for wealth creation and saving tax at the same time can be easily achieved by making the right choice at the right time and getting started with it at the earliest.