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The Signal: The right way to set performance expectations

The Signal: The right way to set performance expectations

India, in this millennium, has evolved into an Investment hotspot. India has been attracting attention from foreign and domestic players. Even in the face of the pandemic, domestic investors have continued to support Indian capital markets – the same is reflected in bellwether indices’ performance and record number of demat account opening in H1FY21.

As the world navigates through unprecedented times, India will develop faster and so will its markets and the participants. As participants mature through experience, they understand that investing is not about maximizing or minimizing but is, in fact, about optimizing and achieving expectations.

Setting the right expectations is an important aspect of a fulfilling investment journey.

It is easier to manage markets & money, than it is to manage investor expectations

(Almost Every Indian fund manager)

So now, what is a good way to have the right kind of expectations when it comes to investment returns?

While most are focused on “maximizing returns”, most cannot put a number to their expectation with a completely rational line of thought. 

Most people can be divided into a set of two based on their perception of returns in capital markets – 

1. First set – It is a get-rich-quick scheme where they can expect money to multiply overnight
2. Second set of folks believe that it is a speculative charade run by a manipulative set of people. They can never expect anything more than what they would playing a game of roulette.

Then there is a small segment of investors who understand the way markets function and know there is a rational way to base performance expectations upon – aiming to generate inflation-beating returns in the long term.

Take a moment. 

Money is nothing but a medium of purchasing power. With more money, you want to be able to purchase more and the bigger threats that can reduce the purchasing power of your money is inflation. So, in the longer term, you want to beat inflation to at least stay above water.

Time to take a closer look at the impact of inflation on money

Warren Buffet described Inflation best as, 

gravity on asset values – The higher the rate, the greater the downward pull”. 

In layman terms, Inflation is the economic principle behind increasing product prices, and thus, reduced purchasing power. Remember when Onions went up to Rs. 120+/Kg or Zimbabwe currency was used as confetti? Now you know why.

data details

As can be seen above, for any of your investment goals to materialize in the future your return on investment must outperform the rate of inflation.

Simply put, your money needs to grow at a rate faster than at which its purchasing power is reduced.

It has been empirically proven that, over a longer period, equities beat inflation in perhaps the most effective manner.

Do you disagree that inflation is perhaps the best metric to use as a base while deciding what expected return you should aim for? 

Write to us. We would be happy to hear your perspective on the topic. Also, if you present a solid case, there’s a real chance that we would be glad to feature your take on the topic in our next newsletter.

Motilal Oswal Multi Asset NFO – An All-Weather Investment Product

Motilal NFO

In current market scenario, where investors are facing real dilemma of choosing the investment asset class.
Investors are unwilling to invest 100% in traditional instruments as they currently offer meager returns, averse to invest all in equity as it carries high risk; also, not going all hog on gold as they think that the rally for gold is over & not investing in debt instruments as the risk of credit default has gone up amid current environment.

Is there any product which can allow investor to invest in all the above asset classes with the changing market dynamics, high downside protection and which aims for reasonable returns?

Interestingly, playing to this opportunity, Motilal Oswal mutual fund is launching a New Fund Offer based around the asset diversification- “Motilal Oswal Multi Asset”. Quick look at the features – open-ended, Multi asset.

Asset Allocation of Motilal Oswal Multi Asset Fund is as follows:

Asset Allocation of Motilal Oswal Multi Asset Fund is as follows:

Every asset class has its “season”, and an investor whose portfolio is dynamically aligned to shift into said asset class, is poised to win most. All asset classes have their designated role ranging from generating alpha to acting as hedge, thus helping portfolio to maximize diversification benefits.

The Asset class correlation matrix is as follows:

The Asset class correlation matrix is as follows:

Different levels of correlation among different asset classes provide the portfolio with an effective hedge

The Result of having the right mix of asset classes, in the right proportion, has led to Multi-Asset as a MF category to outperform its peers across various time periods. Table below highlights category average performance of MF categories.

MF categories.

Investor Takeaways:

The fund deserves an allocation in your portfolio for those who desire marginally better & consistent returns without
taking higher risk and looking to make an entry into the prevailing uncertain market.

The fund is suitable for those who are having an average indicative horizon up to five years & more.

In case you wish to understand more about the opportunity or simply discuss the prospects of the funds, feel free to
connect with us and we would be glad to have a chat.

Fund Details

NFO details

RBI joins Global Central Banks to revive the economy

Backdrop

Global markets are in a lurch as the coronavirus scare has sent it into a nose-diving frenzy. The world is witnessing simultaneous developments on the virus outbreak – China, the epicentre, of the virus outbreak is returning to normalcy with restoration of commercial activities while other regions like Europe & Asia continue to report incremental identification of cases.

Amid the ruckus created by the virus outbreak, the Saudi-led oil price war has only added fuel (no pun intended) to the fire. Oil prices have dribbled down to ~$30 a barrel levels – perhaps the steepest decline since the 1991 Gulf War. While this is primarily a positive development for India from a perspective of a reduced oil import bill and headroom to generate tax revenues through the headroom created between prevailing on-ground prices & the reduced market price. However, as a word of caution, this may have deflationary effects on the already slowing economy. Having said that, the softened inflation will afford the central bank enough room for a rate cut.
Central banks, globally, are acting in sync to revive the economy through various policy measures & spending. While this may simply be a band-aid to a gunshot, the degree of helpfulness of policy measures is an exploration reserved for another note.

The U.S. Fed led the easing exercise by cutting policy rates to almost zero along with releasing a $700bn quantitative easing programme. Global counterparts including the central banks is New Zealand, Japan, South Korea, Bank of Japan, and the European Central Bank are taking coordinated measures to infuse liquidity into economies to keep them afloat.

Back Home

RBI Governor addressed the nation around the episode developing around Yes Bank and how does the central bank intend to deal with the economic slowdown.

Key announcements included:

Yes Bank

Yes Bank depositors are reassured that their deposits in the bank are safe and the bank will resume operations on 18th March’20, 6pm. There is no need for a panic withdrawal of funds. The governor stated that depositors have never lost their deposits in a scheduled commercial bank and this time won’t be different. The governor also assured that Yes Bank has enough liquidity and will offer support as and when required.

Policy Measures

The governor acknowledged that the first-order effects of the coronavirus outbreak are seen in travel-related sectors like airlines, tourism and hospitality. The extent & duration of the pandemic is unknown, but RBI has acknowledged and intimated intent to address the situation through a couple of measures. While Governor Das has assured of closely monitoring the situation, he has also reassured that the central bank is well-equipped and will intervene as and when appropriate.

  1. RBI proposes to conduct another six-month USD/INR sell-buy swap on 23rd March’20 to provide liquidity to foreign exchange markets as selling pressure intensifies amid panic.
  2. Long-Term Repo Operations (LTRO) to be conducted up to a total amount of INR 1 Lakh Crore at policy rate, in multiple tranches to further bolster liquidity in the Indian economy.

Though there was no rate cut announcement, evolving dynamics support a higher probability of a 25-35 bps rate cut.

Investor Takeaways

  1. Equities, especially large-caps, seem to have reached a reasonable price point to enter. This does not mean that we have hit the bottom & it is time to go bottom-fishing but given the current levels, now would be a great time to step-up SIPs/STPs in equities. Entering multicap funds should augur well for investors with a horizon of ~5 years.
  2. For debt fund investors, the increased probability of further softening of the yield curve as an effect of global softening & synchronised Indian policy measures (e.g. LTRO, probability of rate cut) opens up a sweet spot for debt funds with an average effective maturity in the 5 to 7 years range. Investors with a slightly higher risk appetite may choose good dynamic bond funds. We continue to maintain our view to steer clear of credit risk – in fact, investors should try having a meaningful exposure to sovereign debt along with the AAA-rated corporate bonds.

 

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Demystifying RBI’s dollar rupee swap sell/buy auction

News: RBI on Thursday,12th March 2020, moved to address the dollar shortage in the market by offering a $2-billion swap for six months.

What is dollar rupee swap auction?

It is the tool used by the RBI to infuse/suck out the liquidity in the economy and manages the currency pressure. It is operated through an exchange between the US dollar and the rupee

How it works?

Under dollar rupee sell/buy swap auction, Banks shall buy US dollars from the Reserve Bank of India. Against this INR rupees, Reserve Bank of India gives US Dollar to the banks.

RBI is trying to increase the US dollar liquidity in the market as there is a mismatch. The sell/buy swap to boost dollar liquidity should be seen in the context of the rupee opening 62 paise weaker on Thursday at 74.25/26 to the dollar (against the previous close of 73.63/64) and closing at 74.2150/2250. Intra-day the rupee tested a high and a low of 74.35 and 74.08, respectively.

Objective of USD/INR Buy/Sell swap auction?

In a statement on its website, the RBI said it was doing the swaps in view of the intense selling pressure witnessed worldwide on “extreme risk aversion due to the spread of COVID-19 infections”. This is “compounded by the slump in international crude prices and a decline in bond yields in advanced economies”. All asset classes are witnessing a spike in volatility, with mismatches in US dollar liquidity accentuating across the world, it noted.

Thursday’s swap is the first of many such possible ones to come, as the Indian central bank gears up to utilise its formidable foreign exchange reserves to soothe the nerves of the market. For this purpose, the level of forex reserves, at $487.24 billion as of March 6, “remains comfortable to meet any emergency.

It will ease the pressure on the rupee which is marching towards its record low.

Bottomline

The Reserve Bank of India is closely and continuously monitoring the rapidly evolving global situation and spill overs. It stands ready to take all necessary measures to ensure that the effects of the COVID-19 pandemic on the Indian economy are mitigated, and financial markets and institutions in India continue to function normally.

Dollar rupee sell/buy swap auction move is one of them.

Happy Investing.

 

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How to add Biller in Karnataka Bank

  • Open your Karnataka bank Mobile App.
  • Click on More

  • Click on “Manage Biller”

  • Select category as Mutual Fund

  • Now Click on Add Biller

  • Select Biller as BSE limited

  • Enter/Paste the URN number and Nickname as Fisdom

Now click on proceed to add your biller.

Being financially free

It’s the month of India’s financial independence and I can only think about what it takes for us to be free, as people.

We’re either dependant on our jobs, relationships, traps of habits, or emotions.

Taking a route on viewing how we can be financially free and how relatable it is to each one of us.

There isn’t a person I know who hasn’t watched queen! Or wanted to watch it again. I run out of words that could describe this movie. It isn’t a movie it is an entire experience.
For those 2.5 hours I got involved with her joys, her sorrows her heartbreak, the condescending nature in which she was treated by her Fiancé and most involved in her evolution within that time period and her courage to break free from the shackles of social standards( Who is this society anyway?).

While watching the movie I couldn’t help but wonder, what could be the financial implication of such a situation in any young girls life…

1. Heartbreak is a big deal! As much as you hear:‘ It is for the better’, ‘ He didn’t deserve you’ etc… it always hurts. Shopping is a solution! So is taking a holiday with your girlfriends and so is pursuing your hobby, taking up a course. None of which comes free, unfortunately. Word of advice, start saving for a worst case always!
A Monthly SIP (Systematic Investment Plan) could go a long way in bailing you out of any situation that suddenly looms on your head.

2. Do not let past bad experiences affect your future decisions- In a state of self-pity, it may have been very easy for her to slip into that life again by accepting a not so positive partner.
However, she chose to step out of that territory and find one of her own. Often, we struggle with investments we have made in the past, regret them, curse the person who sold them to us, stop any future investments and sit cushy with the money in the bank feeling comfortable.

Sometimes a bad experience should be used to leap into the future with more gathered wisdom. Research/ understand the options of investment well before getting into them.

Use the guidance of an expert on this route to financial freedom.

3.Change / Transformation – she transformed from her a meek quiet under confident submissive girl to one with a spark in her eyes, a skip in her step and confidence oozing off her. This she gathered only through going through different experiences and finding herself. The same could be associated with your investments.

Evaluating options and then finding those that make you comfortable. Whatever they may say, savings, investments and going to bed knowing that your money is working hard for you, gives you confidence like no other!

4. Self Discovery – Her journey only helped her realize what her dreams were for herself. Something as simple as cooking which gave her a sense of joy when she realized she could sell what she made!

Often, we don’t pursue our smallest dreams cause we don’t put down and road map our goals or don’t have the money to fund them! Put it down and start working towards it! You never know how these small steps help you realize your biggest dreams! Start building a small investment fund to just help you pursue your goals, whatever they might be.

In a lot of these steps, you might need fisdom, and we are here for you.

On that note, I’m signing off, hoping some of this makes a small difference in your lives!

 

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Income tax return

Deciphering the mysterious ‘capital gains’ while filing the ITR this year

While traveling in the woods, I met a monk who enlightened me with his words of wisdom about happiness. Happiness is of two forms. The first one is the internal happiness which you gain from charity and other social cause. The other one is the external happiness which you gain from spending money. He told me you can’t get both kinds of happiness at the same time. Well, the monk hasn’t met the older monk yet. Politely, I bowed my head and whispered, “I am sure you aren’t aware of the concept of Income Tax”.

Allow me to get to the point, how to file an ITR?

To be honest, ITR filing is quite a cumbersome task. But we have got a specialty in making life simpler for our customers. Just be with me and follow the steps.

To file ITR, you will need the form. To get form, you will need to visit http://incometaxindiaefiling.com. There you will find 7 ITR forms. If you are a salaried person and have not had any capital gains, then ITR Form 1 is the option for you. But if you are a salaried person or a HUF(Hindu Undivided Family) with the capital gain or loss, you will need to choose ITR Form 2.

Wondering what capital gains are? The extra gain which you have received from your mutual funds is capital gains. The tax is supposed to be paid on realized capital gains during the financial year. Rules for taxation on capital gains is different for debt mutual fund and equity mutual fund. The capital gains can be short term or long term depending upon the period after which the mutual fund is redeemed.

Mutual funds scheme also provides the dividend to investors. Dividend received is also subject to taxation based on certain conditions. Dividend received up to Rs.10 lakhs is tax-free and dividend earning of most of the retail investor falls under this category.

There are some things which must be taken into consideration. Tax is calculated for funds in your portfolio, which you have redeemed. For long-term capital gains, the tax is payable capital gains if the amount is above 1 lakhs. If you are looking for tax deductions, only ELSS schemes and pension schemes of funds can be shown under Section 80C up to a maximum of Rs.1.50,000.

This is all a smart investor must be aware of.

Share with your friends!

Happy Investing!

 

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Billionaire investors swear by these three principles for investing in highly volatile markets

Since the past month, equity markets have been significantly choppy. While many savvy investors have taken it in stride and are harping on the correction as an opportunity to buy more at discount prices, there is a large faction of mutual fund investors for whom the sweat on the brow has not dried since over a month.

Investors who have started investing in mutual funds only a year back or so are experiencing the stomach-churns for probably the first time. All this time, novice investors had been exposed to only the bright side of the world of equities with overwhelming returns, many may even have regretted not investing more before the uptick. However now, as the cycle changes, the regret has switched sides because of the “red numbers” in the investment reports.

So, what’s the way ahead for a common Indian investor whose only goal to invest in mutual funds was to build wealth over a longer term?

Tried & tested across periods, successful investors swear by these principles for investing during choppy times.

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“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
-Warren Buffett

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Market cycles are called cycles for a reason – Don’t react as if you did not know that equity markets are volatile

Equity markets are sensitive to multiple factors including macro-economic environment, geopolitical scenarios, sectoral stress and similar. The markets react and reflect people’s expectations in the very distinct near term and quite often than not in an exaggerated manner. “Kneejerk reaction” is among the most used phrases on Dalal Street for a reason. However, those who stood the test of time and believed in investing discipline emerged with bountiful wealth.

Right from the 2009 financial crisis to Brexit, North Korean missile tests, Fed Rate hikes and similar global tantrums, equity markets have survived it all and yet delivered spectacular returns over the period. Ever wondered why? Simple, do you believe that many years down the line, the world (includes national economies, sectors, companies, humans, art, music and everything) will reach a pedestal at least some place higher than now?

Basically, do you believe that mankind will continue to progress?

If your answer is yes, you must realise that equities are nothing but a reflection of economic progress (driven by mankind, obviously) and so has a direct correlation and reason to grow with the rest of the world.

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“We continue to make more money when snoring than when active.”
-Warren Buffett

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Equity markets fluctuate basis the demand and supply by millions of entities.
Can you read a single mind? If not, why try read millions of them and time the market?

Millions of minds and algorithms maintain the demand-supply and consequent pricing in capital markets. What is the likelihood that you would be able to fathom the direction in which the majority decisions would flow?

Even when you think you can make some sense out of the chaos, let me tell you, very often even the entire market gets things wrong – hence the term “correction” instead of “decline” is used to describe such scenarios when sudden enlightenment reverses the effect of overtly optimistic valuations previously placed by the market.

We all know the golden rule for building immense wealth – “buy low, sell high”. However, ironically, we tend to do precisely the opposite. When prices go down, we panic and sell only to return when prices are soaring.

Following is a classic illustration of what would have happened if your parents did what you are doing now – skipping SIP instalments and investments when the market has tanked the worst during the year.

(Assumed INR 1L SIP into NIFTY 50; Dip % on Base Scenario)

Honestly, nobody – literally nobody in the world can time the market while many are paid to try. The best way to go about investing is through a periodic investment (think SIP) just so that you manage to average your purchase cost across cycles and benefit from the rupee-cost averaging.

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“Most People don’t plan to fail. They fail to plan.”
-John L. Beckley

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Plan right & believe in it – That’s the reason you had a plan in the first place

Times like now are testing times where many novice investors get shaken by volatility and choose to step out of the markets instead of riding the tides till they reach their goals. Statistically, not sticking to plans is the reason for ~87% of investment failures.

Asset allocation and financial planning is key to being profitable and building wealth. Let’s say you start exercising to get fit – you have a planned schedule, workout routine and diet plan. While planning, you knew it would take at least 8 months of perseverance before you achieve your target body. Now, what happens if you follow the regime regularly but don’t see much of an impact in one month? Would you stop? If you stop, you know who is to blame when eight months have passed, summer has begun, and you can’t get into your summer outfit on the beach.

Quite often in life, you will not be able to achieve goals (financial as well as non-financial) if you give up way before the time comes when you were expecting to reap the benefits.

It is extremely important that you plan extremely well, keep reviewing and make situational alterations – not a revamp.

While these principles are not a definite guide to becoming Uncle Scrooge wading through an ocean of gold coins, but it sure can help you achieve your financial goals.

 

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Trade Wars: Making America Great Again. Or maybe not?

The tale of old brute protectionism coming back to stab the benevolent globalization

Since his election as POTUS, President Donald Trump has received flak from global economists and equal cheers from unsuspecting protectionist lobbies for his stance on extreme protectionism. True to his electoral campaign “Make America Great Again”, the orange man dressed in a Brioni suit sure is determined to take some serious actions. However, knocking-off anyone who crosses your path may not always be a prudent manoeuvre – especially if you are a debt-ridden super-economy and the others are significant trade partners who have a meaningful stake in creating fortunes for you.

Trump’s unfaltering streak of meddling with existent trade policies can be outlined as follows:

So, what did Donald Trump sign now?

Trump just okayed a proposition to levy a tariff of 25% on steel imports & 10% on aluminium imports. While Canada and Mexico are exempt from this tariff, Trump has asserted that it would consider offering ‘flexibility’ to ‘friends’.

Now, what’s this ‘tariff’ thing all about and why does Trump want this?

For all practical purposes, a tariff is a type of tax that the government levies on import of certain goods & services (technically, even exports can be levied but it is not quite popular because profits, duh!). This tariff is a direct revenue source for the government of the importing nation.

So, is this about increasing revenue for the government?
Well, that is an implicit benefit, but definitely not the real story behind this one. Trump has long been advocating protectionist measures to boost domestic manufacturing by penalizing imports and retaliating against dumping – the process wherein foreign countries produce goods at a very cheap cost and sell in the domestic market at rates so cheap that kills profitability for domestic manufacturers.

Having said that, don’t we all know who the clear target is? – at least when it comes to dumping cheap goods across nations.

Fun fact about 2017, America imported 36 million metric tonnes of steel as against domestic production of 10.1 million metric tonnes and was a net importer for 47,31,000 metric tonnes of aluminium. Unsurprisingly, China leads global production for steel (49.2%) and aluminium (53.5%) where America sits somewhere in the corner of the first row. Interestingly, on an average, China produces as much steel in a month as America does in a year.

Isn’t it uncanny how a nation such as America which, for all practical purposes, thrives and survives on imports take such a bold decision to get off the drip? Can America’s domestic production even suffice its own demand, let alone export?

Is America reflecting the classic Indian phrase – “Aa bail, mujhe maar”?

Basic back of the envelope calculations suggests that though currently underutilised, the demand for steel and aluminium outweighs existing capacity significantly. This means, even if American manufacturers start utilising all available capacity at the highest operating efficiency levels, they will still fall way short of production required to suffice home demand. And creating new capacities would not be an easy task owing to the challenges around the long setup period, availability of skilled labour, expensive power and rising cost of financing.

America is clearly targeting its first trade attack at China. At the same time, as in the year 2017, USA was sitting on its largest trade deficit of ~$375 billion owed to China. Now, China had been reciprocating well by importing from US goods worth $130 billion which is over a third of what America owes to China.

Adding to China’s clear upper hand, it owns ~$1.2 trillion in US treasury bonds and even a mild retaliation by way of partial dumping could be quite the taser to the Fed.

Now, while Trump’s aspiration and ambition is understandable and appreciated, playing twister on a field of landmines is probably not the best option available. Since quite some time, America has been stepping on the toes of meaningful trade partners and the World Trade Organisation. A synchronised retaliation by member countries (which has already begun) could do some serious damage not just to the American economy but also to the global economy as a whole.

It is not very advisable to try fight with a suicide-bomber – nobody’s going to get out alive.

Caught in crossfires: Can this be a win for India?

While such increasing tension between America and China elicit fears of global uncertainty, India may be in a relatively insulated situation – at least out of direct shooting range. With America turning hostile towards China, it is imperative that China will need a big market to substitute the slippage of America as a meaningful importer. Having said that, India is not only the most convenient geography but also the perfect demography for China to engage in trade activities.

Economic progress and retaining domestic political power is key to President Xi Jinping’s personal and political ambitions. Beijing’s situation and trade relationships offers New Delhi meaningful geopolitical leverage. This only means that India can not only exploit the situation to its advantage through concessions and other acts of friendship, but also leverage the relationship to deal with nuisance neighbours.

Nevertheless, India does not stand free of collateral damage if the hostilities between America and China blows out of proportion. If India, intentionally or unintentionally, rubs USA the wrong way; the economic repercussions would not be a beautiful one.  Diplomacy would be key for India to crawl its way out of the crossfires only to return when peace and sense prevails. If dealt with in an exceptionally skilled manner, India can be the monkey who eats the cake while the two cats fight.

Taking a leap of faith in human sanity, the chances of a full-blown trade is slim. However, if one were to happen there will be nothing but economic shambles left on the streets.

Rightly put by Chinese Commerce Minister, “There are no winners in a trade war, and it would bring disaster to our two countries as well as the rest of the world”

 

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Last minute investment ideas for tax saving

For years now, as March commences, many of us rush to make ‘tax-saving investments’ into almost anything that allows for an 80C deduction without even putting much thought to it. This, quite often than not, leads to a mess of a financial decision. Only if you could correct your short-sightedness of tax saving and think of these investments as tools to building long term wealth, you can reap much superior benefits.

To save you from the trouble this year here is a list of last minute tax saving investments tips which will come in handy to lower your tax outgo.

Utilisation of Section 80C in last minute investment planning  

Section 80C of the Income Tax Act is one of the most popular widely explored options for tax saving investments. With a host of financial investments options ranging from PPF, EPF, ELSS, Life Insurance Policy premiums, Bank FDs, Post Office Schemes etc. There is some or the other investment option available for all types of investors. Investments up to Rs 1.5 lakh in one or more of these are exempt from tax. Here is a quick review of some of the best last minute investment options in Section 80C.

PPF:  If you unsure about where to invest and don’t want to take risks for your investments, invest in PPF. PPF investments are backed by government and offer fixed interest rate each year. If you do not have a PPF account, you can open one online and if you have an account then you can just invest the remaining amount to utilize your 80C limit. However, the current rate of interest is low at 7.6% p.a.

ELSS: ELSS is one of the best investment options in the list of financial products as it provides you the opportunity to invest in markets and enjoy tax deductions for the same. If you are a salaried employee, a sizeable amount of your investments go into your EPF account and you can look at investing in ELSS to diversify your portfolio into equities. Even for non-salaried taxpayers, ELSS is the ideal option for equity investment as most of the investments in 80C are debt investments. Another advantage of ELSS is that it has the shortest lock-in period of 3 years. Among all investment options, ELSS mutual funds offer the lowest lock-in with almost the highest returns.

Life insurance policy: Having a life insurance policy is extremely essential and if you do not have insurance policy with adequate coverage then you should look at buying a good term insurance policy. One should have term insurance policy in the portfolio to protect family for uncertainties.

NPS: You should start your retirement planning as soon as you can and NPS can be a great investment avenue for the same. Your investments in NPS enjoy additional deduction of Rs 50,000 under Section 80 CCD(1b) thus taking the total limit of tax deductible u/s 80C income to Rs 2,00,000 for the financial year.

Tax Deduction options beyond 80C

There are several other investment options which do not fall under the Section 80C and have a high probability to be missed while declaring deductions. These include:

Deduction on your Housing Loans: You can claim repayment of principal amount of your home under Section 80C upto Rs 1.5 lakh. Apart from this, you can also claim additional deduction of Rs. 2 lakhs on the interest component of your home loan for fully constructed self-occupied property under Section 24(b).

Claim your medical policy premiums: Given the rising healthcare costs it is (became) extremely important to have medical insurance. If you do not have medical insurance policy for you or your family (including parents), then you should purchase medical insurance policy and claim the premium paid for such policies for tax deduction under Section 80D.

Interest on Education Loan:  If you have taken an education loan for higher studies for yourself, your spouse or children then you can claim the deduction for the interest paid each year on such loans under Section 80E

Donations made to funds and charitable organisations: If you have made donations to charitable trusts and organisations or relief funds, then you can claim deductions for donated amount under Section 80G.

Interest earned on your savings account: You can also claim deductions upto Rs 10,000 for interest earned on your savings account under Section 80TTA (revised to Rs. 50,000 p.a. for senior citizens w.e.f 01.04.2018)

The best way to make the most of your investment options for the current financial year is to ensure that you adopt these basic and simple tax saving strategies to avoid investing in products which you do not understand and may not be suited for you in the long run.

 

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