Karvy Weekly Recomendations 21 May 2016

Karvy ValueMax Recommendations May 2016 :

Ongoing & Upcoming NFOs & FMPs :

How To Make Money From Money Back Policies :

Money-back plans are endowment plans that periodically return a predefined percentage of the sum assured instead of waiting till the end of term. This feature of getting periodic returns before maturity makes it very popular with investors. But is Money Back Plans really profitable? Given below are some key points which one should consider to make a money back plan profitable.

Ø      Look for the premium paid vs sum insured amount. If your intention is to get a higher sum assured then going for a term plan or traditional endowment plan is a better option

Ø      If you want higher sum assured for the same premium in a money back plan then make your children the insured person, i.e. go for a children's money back plan

Ø      Look at it only as a forced saving tool like recurring deposits

Ø      It works in creating wealth only if you reinvest the money returned at regular intervals or use it for planned big amount expenditures.

Ø      For e.g. if you take a money back plan where say you pay for 5 years and then get the return for next five years then you can invest in the same product at the end 5 years and pay the premiums of the new policy with returns from the old policy. This way you are reinvesting the returns and increasing the same without worrying for tax.

Ø Have your future periodic financial needs defined ( i.e. at what time inn future you will
      need how much money ) and chose a money back plan accordingly which suits your
      needs.

The ABC Of Income Tax For Salaried Individual :

Income Tax Rules and Calculation in India is still a very complex matter and that is why most of us try to evade it and leave it up to the income tax return preparers

In this blog I have tried to put this complex matter in a simple way so that it is easy to understand for all

Step 1 : KNOW YOUR AGGREGATE INCOME

AGGREGATE INCOME COMPRISES OF THE FOLLOWING

A.   Income from Salary / Pension 

B.   Income (Profits) from Business / Profession  

C.   Income / Loss from House Property

            Your Rental Income from house property falls under this section

            Your deduction ( - ve income ) of interest paid on housing loan falls under this    section ( Max Limit `2 Lakhs)

             

D.   Income from Capital Gains

            Any income where you have realized a capital gain like profit from Equity/             Mutual             Fund Sale, Sale of property etc

E.   Income from Other Sources 

            Bank Interests, Dividends, Tax Free Bond Interests etc

F.   Agricultural Income ( If Applicable )

Step 2 : KNOW YOUR ELLIGIBLE DEDUCTIONS

There are several eligible deductions under different sections. The salient and most common one are give below

A.        Sec 80C – Contribution to PF, PPF, Sukanya Samriddhi Account, NSC, LIC         Premium, Life Insurance Premium of any other insurer, Principal repayment of      home loan, children's tuition fees etc.  Max Limit under this section along with section 80CCC and 80CCD1 is `1.5 Lakhs.

B.        Sec  80CCD – Additional contribution to National Pension Scheme ( NPS ) Max             Limit    ` 50,000

C.        Sec 80D - Health Insurance - Self & family ( Max Limit `30,000 for senior   citizen and    ` 25,000 for others ) Health Insurance – Parents (Max Limit       `30,000 if parents are         senior citizen and ` 25,000 for others )

Step 3 : KNOW YOUR TOTAL TAXABLE INCOME (TTI)

            TOTAL TAXABLE INCOME = AGGREGATE INCOME - ELLIGIBLE DEDUCTIONS

Step 4 : KNOW INCOME INCLUDED IN AGGREGATE INCOME ABOVE AND TAXABLE       AT SPECIAL RATE ( ISP)

            Common income taxed at special rate are

            A. Short Term Capital Gain (u/s 111A) - Taxable at 15%

            B. Long Term Capital Gain - Taxable at 20%  

            C. Long Term Capital Gain - Taxable at 10%  

            D. Winnings from Lottery, Puzzle, Crossword etc- Taxable at 30%

Step 5 : KNOW YOUR INCOME TAXABLE AT NORMAL RATES

            INCOME TAXABLE AT NORMAL RATES = TTI – ISP

Step 6 : CALCULATE YOUR INCOME TAX

            Based on the INCOME TAXABLE AT NORMAL RATES the tax is calculated based on   prevailing Tax Exemption Limits and Tax Slabs. The exemption varies based on age (           senior citizen i.e. > 60 Years and super senior citizen > 80 Years )

            Given below is the current slab for person less than 60 years

INCOME SLABS	TAX RATES
Where the taxable income does not exceed `2,50,000	NIL
Where the taxable income exceeds `2,50,000 but does not exceed `5,00,000	10% of amount by which the taxable income exceeds `2,50,000 Less : Tax Credit u/s 87A - 10% of taxable income up to a maximum of `2000
Where the taxable income exceeds `5,00,000 but does not exceed `10,00,000	`25,000 + 20% of the amount by which the taxable income exceeds `5,00,000
Where the taxable income exceeds `10,00,000	` 125,000 + 30% of the amount by which the taxable income exceeds `10,00,000

            Surcharge : 12% of the Income Tax, where taxable income is more than `1 crore.           (Marginal Relief in Surcharge, if applicable)

            Education Cess : 3% of the total of Income Tax and Surcharge.

Step 7 : ADD TAX CALCULATED AT SPECIAL RATE IF ANY

            Refer Step 4

Link To Income Tax Calculator : http://finotax.com/income-tax/calc-next