Friday First Cut

New Income Tax Portal For e-Filing 2.0 | Portal Features & Benefits

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.

1. User-friendly

a) Simplified

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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All you need to know about NPS

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.

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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? | 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

1. 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. 

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.

Allotment

There are different investor categories when it comes to IPOs. This includes:

1. Qualified Insititutional Buyers (QIBs)
2. Non Institutional Investors (NIIs)
3. 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

Underwriter

• 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.

What Is Reverse Mortgage? How You Can Benefit From It

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.

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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.

Most popular video – How to do Retirement Planning?

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.

How to do Retirement Planning?

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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Financial Planning for Beginners

Investing helps one in the future. All of us have goals in life, most of them require money. As your earning increases, your purchasing capacity also increases, which in turn increases your goals as well. It is always better to start saving early, so that it becomes easier to fund your future goals. Checkout our video to note few pointers on Financial Planning for beginners.

Risk Profiling: https://youtu.be/Ts_z3HBLsbk​

Types of health insurance covers and which one should you have?: https://youtu.be/OydkJ7a22wA​

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Types of health insurance covers

You cannot predict what is there waiting for you in the future. There are always lots of uncertainties coming up for you in the future and you are always unaware of it. These uncertainties cause a drastic financial crisis to your family and close ones. Getting health protection as early as possible is becoming extremely important. But do you know the various types of health insurance coverage and which one should you have?

Related Article: Complete Guide for buying Health Insurance Plans

Policy has become a fundamental requirement of every individual, thanks to the inactive life lifestyle most people tend to live today. This too is a reason why people are really worried about their health as a matter of fact. Therefore, they consider a lot of options when thinking of buying any insurance policy.

Insurance plans protect you during an unanticipated medical crisis and help in balancing your family’s finances during such a difficult time. Medical insurance has indeed become an obligatory thing to have today considering the rise in medical expenses and an increase in the number of diseases. A medical emergency can arise at any time and affects an individual and his family both financially and emotionally. Thus, financial advisors advise that it is prudent to buy health care policy and insurance plan in advance.

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With the evolution in human being’s mindset, they have started contemplating the radical aspects of their life and the health care necessities. And the best thing is that they have started acknowledging the fact that they indeed need health insurance whether its rationale or not.

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What is Risk Profiling? – Friday First Cut Episode 18

What is Risk Profiling? How to find your Own Risk Profile

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Knowing your risk profile is one of the very important step before making an investment. Risk will always be on your plate when you’re investing, but do you know How to find your own risk profile? Refer our video to learn detailed information about your Risk Profiling

Stay tuned for our upcoming video on…….

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