Feeds:
Posts
Comments

Posts Tagged ‘#transfer’

Your money matters – Simple steps to take charge of your money matters

1In today’s world, women are equal to men in most ways. Women have achieved high accolades and are doing very well in modern Indian, sometimes even better than their male counterparts!

However, when it comes to financial planning for their family, most times they take the back seat, leaving the details for the husband to handle. Financial planners are unanimous in saying that when it comes to making investment decisions, women rarely take an initiative. A study commissioned by DSP BlackRock Investment Managers Pvt. Ltd and conducted by global research agency Nielsen across 14 cities in India in July 2013, found that only 23% of working women make their own investment decisions.The reason often is that the complexity of products and the mathematics involved in financial planning makes it seem puzzling.

However, women should take control of their finances. Here’s what the empowered women should do when it comes to financial planning for herself and her family.

Create Self Awareness and Get Involved:The first step would be to involve oneself and start discussing these aspects actively with family. Women face different changes in life which affects their finances – be it marriage, child birth, divorce or death of spouse. If you are a single mother, the financial responsibility of raising a child needs to be planned. If you are just married, understanding the outlook of the spouse and jointly planning the future finances should be a top priority. Therefore, it is important to increase the financial awareness when all is well and to be prepared for adversities. Things to do:

  • Read articles / blogs / personal finance books
  • Discussing and take active interest along with spouse
  • Take the help of a financial planner or advisor
  • Attending personal finance sessions

Take advantage of various incentives provided for women:Both the private and public sector institutions provide financial incentives for women, most of which go under the radar. (1) Banks offer customized savings accounts with cash backs and rewards for women who spend using bank’s debit card on shopping, food, etc. Some banks also offer discounts on medical tests required by women like thyroid tests, etc. To save for their kid’s education, mothers can open a ‘Junior/Kid Account’ with the waiver of monthly account balance requirement if it is linked to a Recurring Deposit (RD) Account or a Systematic Investment Plan (SIP). (2) While buying an insurance policy, women receive a benefit on the premium paid as compared to their male counterparts. Traditionally, women pay less premium than men for the same sum insured when it comes to buying a life insurance policy. (3) Many banks offer lower interest rates on home loans if a woman is applying for it or if she is the first applicant for a joint loan. The same goes for car loans too. (4) Some state governments provide certain exemptions with respect to stamp duty and transfer duty in case of sale deeds, conveyance deeds and gift deeds if the property is in the name of a woman.

  • Learn and know the available benefits available for women when buying products / availing loans

Cover Risk and Contingency:All the planning you do could be ruined in case of any emergency. Therefore, contingency planning comes before any investment planning. Such contingencies could be risk to life, health, hospitalisation or any unforseen emergency which may require her to step in financially. If you are a working couple or a single earning member family with a loan, having adequate life insurance ensures that dependants will not have to compromise on their finances in the income earner’s In regards to health, various medical research reports say that women live longer and may have more health issues compared to men. Therefore the need for health cover for women.

  • Have a contingency fund for your family
  • Understand and create enough life cover and health coverfor spouse and you

 Plan for Retirement/ Sabbaticals: For you, retirement can either mean retiring at the end of your working age, usually 60; or when you have children and decide to not work anymore. Various studies show that as women usually live much longer than men, therefore they may outlive their spouses. So, in order to have a secure retirement, it is essential to plan for it well in advance. Factors such as inflation, lifestyle, providing for dependants need to be synced together efficiently.

  • Understand the funds that you may need in retirement (with spouse and without spouse) and invest towards it
  • In case of sabbatical / pause in work, understand the income loss you may face from such a decision and work towards providing a buffer for it

 Investing: While women are known to be great savers, saving in itself becomes futile if savings are not deployed to grow. Women need to get involved in such aspects and contribute actively. Working women should also understand these nuances rather than letting the husband or father decide about her money and investments.

  • Involve yourself in investment decisions, slowly and steadily, to grow confidence and understanding of the subject

 Legacy Planning:– In case of wills, the voice for women to register their own wills is growing louder. Now, more than ever, women have assets in their names which if left without proper will/nominations, can inadvertently end up in the hands of a person for whom the asset was not envisaged. Women may also inherit their parents’ assets. Even in the case of the husband’s will, the wife needs to be informed of the existence and details of such a w Dealing with the loss of a loved one is challenging but can become easy if there is awareness and the lady of the family is prepared and informed.

  • Understand and be part of the will making process

 

From the above, you would have gathered how important it is for women to get started on money awareness. Getting women to manage money requires a mindset shift and the above steps, we hope, will give you some pointers on how to start managing your money matters. After all it is your money and it matters.

Advertisements

Read Full Post »

Long Term tax gain tax

One of the biggest items that came out from the recent Budget has been the reintroduction of Long Term Capital Gain (LTCG) tax. This tax is applicable on gains arising from sale of  :

  • Equity Shares in a listed company on a recognized stock exchange
  • Units of Equity Oriented Mutual Funds; and
  • Units of a Business Trust

The proposed tax is applicable to above assets if:

  • They are held for a minimum of 12 months from date of acquisition
  • The Securities Transaction Tax (STT) is paid at the time of transfer. However, in the case of equity shares acquired after 1.10.2004, STT is required to be paid even at the time of acquisition

(As per Notice by Ministry of Finance, dated 4th February, 2018)

There are two major points in regards to the proposed regime:

  1. The LTCG tax will be at a flat 10% for any long term gains in excess of Rs 1 lakhs, starting from Financial Year 2018-19 i.e. 1stApril, 2018. In other words, all long term capital gains realized up until 31st March, 2018 will be exempt from the proposed tax.
  2. There is a “Grand Fathering” clause, which in essence ensures that all notional/realized long term capital gains up to 31stJan 2018 will remain exempted from the proposed tax. This means that effectively the closing price of 31st Jan 2018 would be the cost price for LTCG calculations.

How would the Long Term Capital Gains Tax be calculated?

If you sell after 31.3.2018 the LTCG will be taxed as follows:

The cost of acquisition of the share or unit bought before Feb 1, 2018, will be the higher of :
a) the actual cost of acquisition of the asset
b) The lower of : (i) The fair market value of this asset(highest price of share on stock exchange on 31.1.2018 or when share was last traded. NAV of unit in case of a mutual fund unit) and (ii) The sale value received

Scenarios for computation of Long Term Capital Gain

  • Scenario 1:An equity share has been purchased on 1st Jan, 2017 at Rs. 100. Its Fair Market Value (FMV) as on 31st Jan 2018 was Rs 200 and it was sold on 1st April 2018 at Rs. 250.

As actual cost of acquisition is less than FMV, the FMV will be considered as cost of acquisition and therefore the LTCG will be Rs. 50 (Rs. 250 – Rs. 200)

scenario 1

  • Scenario 2:An equity share has been purchased on 1st Jan, 2017 at Rs. 100. Its Fair Market Value (FMV) as on 31st Jan 2018 was Rs 200 and it was sold on 1st April 2018 at Rs. 150.

Actual cost of acquisition is less than FMV. However the sale value is also less than FMV. Therefore the sale value will be considered as cost of acquisition and therefore the LTCG will be NIL (Rs. 150 – Rs. 150)

scenario 2

  • Scenario 3:An equity share has been purchased on 1st Jan, 2017 at Rs. 100. Its Fair Market Value (FMV) as on 31st Jan 2018 was Rs 50 and it was sold on 1st April 2018 at Rs. 150.

As actual cost of acquisition is more than FMV, the actual cost of acquisition will be considered as cost of acquisition and therefore the LTCG will be Rs. 50 (Rs. 150 – Rs. 100)

scenario 3

  • Scenario 4:An equity share has been purchased on 1st Jan, 2017 at Rs. 100. Its Fair Market Value (FMV) as on 31st Jan 2018 was Rs 200 and it was sold on 1st April 2018 at Rs.50.

Actual cost of acquisition is less than FMV. As sale value is less than both the FMV and actual cost of acquisition, the actual cost of acquisition will be considered as cost of acquisition and therefore there will be Long Term Capital Loss of Rs. 50 (Rs.50 – Rs. 100). Long-term capital loss arising from transfer made on or after 1st April, 2018 will be allowed to be set-off and carried forward in accordance with existing provisions of the IT Act.

scenario 4

Note, there is no clause of indexation on cost of acquisition. Setting off cost of transfer or improvement of the share/unit will also not be allowed.

 

LTCG on these instruments realized after 31.3.2018 by an individual will remain tax exempt up to Rs 1 lakh per annum i.e. the new LTCG tax of 10% would be levied only on LTCG of an individual exceeding Rs 1 lakh in one fiscal. For example, if your LTCG is Rs 1,30,000 in FY2018-19, then only Rs 30,000 will face the new LTCG tax.

What should you do now with your Equity Portfolio?

Even with the reinstatement of this tax, we believe that equities are still an efficient post tax investment avenue. We would therefore continue to recommend to remain invested in equities provided the investment horizon is long. Alternatively, if you require monies in the short term, this may be a sound window to book profits and shift to less aggressive avenues.

 

Read Full Post »

%d bloggers like this: