If your investments grow in value, and you sell or move them around, the government steps in to collect a share of the pie. This tax, on the increase in value your investments have seen, is called capital gains tax.
- Longer term investments over short term ones
- Equity investments over real estate or debt ones
It taxes them appropriately. At Fisdom, our recommendations take into account minimisation of your tax outflow.
Voluntary deductible is the minimum amount you need to pay at the time of claiming your insurance.
For example, if your claim amount is Rs. 100000 and the voluntary deductible is Rs. 3000 then you have to bear the first Rs 3000 and the claim will be worth Rs 170000 which will be paid to you. This voluntary deductable amount will not be refunded or paid by the insurance company.The higher the voluntary deductable the lower would be the premium paid by you.
The government currently frowns upon shorter tenure investments, and taxes them more. For each type of investment, it has fixed a time horizon to determine whether the investment is short or long term. Any gains coming from investments sold off before this cut-off is called short term capital gains. Of course, no gains are computed until and unless the investment is sold off or moved around.
Short term capital gains, in general
- Are taxed more
- Cannot be set off against other long term capital losses
- Do not benefit from indexation
It is the yearly returns your assets make. Its computation in a big portfolio can get complex; but if you arrive at this number yourself or using our tools, it is easy to make sense of whether your assets are earning you good returns or not. After this, your intuition is usually correct – anything less than <7% is usually poor, 7-10% is decent, and anything above that is great!
Remember that what matters to you is returns after taxes. So the numbers above need to be adjusted accordingly. In general, you make poor CAGR after taxes if your money lies idle in savings bank, or if you put it away in bank fixed deposits.Your CAGR is often better if you invest your money wisely instead.
This is what gets knocked off your investment, when you exit a fund. A fraction of your redemption amount is removed, and the balance gets credited to you. Today, exit loads typically do not exist if you hold an investment long enough. At Fisdom, we optimize your investments and withdrawals to minimize or eliminate your exit load.
A debt mutual fund invests money into different forms of debt securities – bank fixed deposits, company deposits, etc. However, unlike these deposits themselves, these funds do not provide a fixed or guaranteed return. They carry no exposure to the stock market, and yet are very tax efficient and can at times give you handsome returns too!
Equity funds, monthly income plans (MIPs), balanced funds, gold funds, etc are other types of mutual funds available in the Indian market today.
This is a scheme where the government borrows from you at a fixed interest rate (currently 8% tax-free). In an earlier era when investment options were limited, this was the one source of extremely safe returns. While the benefits of PPF remain its tax-free status and its safety, the problems are numerous.
You cannot invest less than Rs 500/- in a financial year in PPF, or over Rs 70,000/-. Amounts are locked in for as many as 15 years, though some partial withdrawals are possible in the interim. PPFs are administered only through public sector banks, many of whom offer poor quality of service on this account. The returns themselves barely beat inflation.
On the whole, when general interest rates are low, the 8% here may be attractive. Otherwise, several other options have become more attractive for the customer from a returns and convenience perspective.