Increased Service Tax from 1st June 2015

Increased Service Tax from 1^st June 2015

From starting 1st June 2015, the service tax rate has been increased from 12.36% to 14%. Service tax is levied by the central government on certain services. It is paid by the end user. Eating out, travelling and mobile bill will also get costly now onwards. In financial services mutual fund distribution service has been came under the ambit of this tax this time.

At present we are paying the service tax on our insurance premium and distributor also pay the service tax on received commission by selling the insurance product. In banking space, various fees and charges linked to saving account, term deposit and debit or credit card attract service tax. Bank FD interest does not come under this tax. The interest of home loans and personal loans do not charge service tax but the processing fee and late payment fee attract service tax.

The increased tax will also affect your share trading bill. The brokerage levied on your buying and selling shares are also attract the service tax and from today the new rate would be applied. Mutual fund adviser and distributor will pay now service tax on their commissions received by selling mutual funds. The mutual fund AMC also pay the service tax on management fee.

Service tax on the mutual fund distributor will also impact the business of mutual fund badly and the new IFA get affected by imposing this tax.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Simple Saving Boosting Tips

SIMPLE SAVING BOOSTING TIPS

Our country is country of saver not investor. Everyone want save more and more but not able to the same. As cost of living and growing desires of person are big hurdle for saving. For creating wealth one has to save and invest in disciplined manner. By adopting some tips you can increase your saving effectively.

Minimum use of debit and credit card:

These cards are very convenient and easy to use but it also increases your spending dramatically. Due to growing online shopping trend and swipe cards option we often spend more than needed. We purchase those things which we really do not need due to influence of attractive offers and discounts. Adopt cash mode for payment in maximum transaction and try to avoid use your plastic money, it will surely increase your saving. By the end of month, you will be surprised to see your increase in saving.

Keep your money in liquid fund:

It is very good idea to keep your money which you may have need in short notice in liquid mutual fund. There is huge difference between your saving account return and liquid fund return. Your saving bank offers you between 4% to 5 % annual return on your deposit and on other side liquid fund offer almost double return 8% to 9% annual. I always wonder why people do not keep their saving in liquid funds.

Think twice before big purchase:

It would be smart move if you stop and think many times whether you really need it before make a big purchase like, LED TV, Expensive handset, laptop, home etc. Understand the difference between desire and need, it will help you to make smart decision. Try to find out the overall impact of these purchases on your financial plan and you will have more time to find out best product in appropriate rate.

Use ECS or Auto debit facility in investment:

It would be wise to use auto debit from your bank account for investment in mutual fund or paying the insurance premium. In many times we delay our investment plan due to lack of saving but in auto mode there will be forcibly saving happen.

Adopt above mentioned tips for increase your saving. It will sure boost your saving and change your habit of more spending.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Mr Parag Parikh: An Original Value Investor

Mr. Parag Parikh: A Tribute to original value investor

India’s original value investor Mr. Parag Parikh is no more now. He died in a car accident in Omaha, (US) on 4th May. He was there to attend an investor meet of Warren Buffet’s company. After knowing this news I was sad and not in the state to react. His demise is big loss to Indian financial industry. He was only 60. Mr Parag Parikh was known as a true value investor for his approach based on behavioural finance. He had started broking business in 1979. His broking house was one of the first to have releasing research report with detail. He was running the broking house and financial advisory firm Parag Parikh Financial Advisory Services. In 2014, he winded down the broking business and switched to asset management business- PPFAS Asset Management. He was courageous and spoke his mind, even if that meant loss of business. He was ready to always learn.

His AMC manages only single fund – PPFAS Long Term Equity Fund and no plan to second equity and debt fund. Their equity fund ads clearly mentioned that investor should note that this scheme is suitable for investors who have investment horizon of minimum 5 years. He made it compulsory for all his employees to invest in their schemes. In Feb 2015, employees held approximate 9% units in long term equity fund. You will be surprised his fund’s biggest holding is “Google”- almost 10%. . PPFAS AMC is only AMC to conduct unit holders meeting like a company’s AGM.

He was a great fan of Warren Buffet and implemented his investing philosophy in AMC business. He has written many books on investment philosophy and financial market.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Do you know about Gift Tax?

Have you gifted money in relative’s bank account?

Although I am not much expert in tax matters but I can give you fair idea on this issue. In general, many tax payer gift to their relatives like parents, spouse and children to save the tax. It is not so simple as the people understand. Many people just transfer the money into their relative or friend’s account and assume that it will help them to save tax because they have gifted away that money and because their relative come under tax exemption limit income so they don’t have to pay any tax.

So today we will understand the tax implication if you transfer some amount to your relatives account. What is the tax implication on involving each party in this transaction? Let us assume you transfer Rs 2 lakh to your wife’s bank account and your income is Rs 15 lakh per annum. Your wife invests this Rs 2 lakh in a bank fix deposit at the rate of 9% and earn Rs 18,000 interest income in a financial year. There are 3 types of tax liability arise in this case.

Tax liability on husband or donor for the amount gifted:

In this case, husband can never claim any type of tax deduction or exemption on that gifted amount (Rs 2 lakh). You have to pay tax on your entire income Rs 15 lakh after deducting eligible available exemption or deduction section 80C etc. After paying tax, he can gift any amount to any relative.

Tax liability on wife or receiver for the amount received:

In this case the wife has no tax liability because she has received the gifted amount from her husband, who comes under specified list of relatives. She can receive any amount from these types of specified list of relatives and still will not be any tax liability. If she receive gifted amount from any other individuals that amount would be taxable on her hand.

Tax liability on income earned from invested gifted money:

In this case wife has earned interest income Rs 18,000 by investing gifted amount Re 2 lakh in bank FD. Although the interest income comes in wife’s account but in this case she has no tax liability and the same interest income clubbed with husband’s income and her husband pay the tax on her interest income.

The interesting point is that if she further invests this interest income Rs 18,000 in bank FD again and earns income on invested amount then she will be liable to pay tax on the interest income earned by investing Rs 18,000 in bank FD.

If you gift the money your parents name and major child then the income earned on that gifted amount will not be clubbed in your taxable income. There are lots of ways to save income tax by restructuring investments in relative’s names. In general, people do not have much time to plan all this and for years they pay higher income tax and never optimize it. You should consult from a good CA for these types of tax saving strategy.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Are you Mutual Fund Investor?

Are you Mutual fund Investor?

You may be think that this question is as simple or silly but in really it is very important question for your economic freedom and wealth creation. First of all if your answer is YES then I want to congratulate to all of you for participating in mutual fund schemes. Most of you are investing in XYZ amount in a particular scheme suggested by a friend or an agent without any target amount and also knowing without risk which is associated with your schemes.

In general, I have observed many investors consider mutual fund as share market investment only but this is not true. It also invests in debt instrument and fixed term deposit investment also. Unfortunately in India most of investor are not getting benefit from debt mutual fund also. People even do not know in which schemes they should invest either in equity schemes or debt schemes or hybrid schemes. They even do not bother to know about this and in some cases agent have not much knowledge about mutual fund schemes.

Many investors often lament that they had lost a lot of money in mutual fund which is suggested by someone else or randomly picked by themselves. It is due to lack of awareness and lack of understanding about mutual fund as a product.

In my view, mutual fund is the best investment option available in the financial market for any investment time frame. Before start investing in mutual fund you should decide your investment time horizon and target amount at the end of investment period. There are different types of schemes available in the market for different needs and investment horizon. You have to decide your investment time frame first. Your investment period may be from 1 week 20 years or even more years and accordingly you should invest in suitable schemes.

If you are not able to choose the right schemes or you don’t have time please contact an IFA (Independent Financial Adviser). We also help to the investor to choose the right mutual fund schemes. Believe me If you invest in disciplined manner after knowing the product you will definitely create a lot of wealth. There are many equity schemes which have generated multiple times return in 10 year or 15 year time period.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Are you Smart Investor?

Are you smart Investor?

Whenever I ask this question to investors or my friends, unfortunately the answer come in “No”. In our country, majority of people have no clear time frame and understanding the risk associated with a particular investment. They often invest on the advice of relative and sweet talking agent and even do not want to know about investment in details. In this article I am explaining a one fine example of smart and value investing.

In four wheeler segment, Maruti is a reliable and very well known brand in India and has been biggest carmaker year after year. Company has many popular model and Maruti Alto has been remained the top selling car for the tenth year in a row.

In 2003, Maruti had come with IPO at price Rs 125 and listed in the exchange at the price Rs 164. Many people had booked the profit at that time and that was the biggest mistake. After 12 years listing, the share is trading now around Rs 3,500, nearly 28 times higher than the IPO price.

The price of Maruti 800 was Rs 2 lakh in 2003 and If you had invested that amount in shares of Maruti company, your worth is Rs 56 lakh in 2015. It means you can now buy BMW or Mercedes by that investing amount.

It is just one example of value investing. There are many multi bagger companies in market which had outperformed to all investment avenue and will outperform in future also. I will say, the time is still in your hand you can still choose wealth creator companies and by investing them you can ensure your financial freedom.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Sector Update: Insurance

Sector Update: Insurance

After 7 years wait, Indian parliament has approved long pending insurance bill. According to insurance bill, now FDI has been raised to 49% from 26% with Indian ownership control. Penalty for non compliance raised to 25 crore. It is Modi govt’s first major reform sign. Industry expert hopes that this insurance bill help bring in over Rs 50,000 crore in fresh capital which will stimulate the insurance sector.

From 1st April 2015, the premium rates for third party motor insurance cover has been raised after issuing new draft by IRDA. IRDA is also planning new investment norms for general insurance companies. According to new norms, investment limit in securities other than those approved would be now 10% earlier it was 25% of total premium collected in a fiscal. It may reduce the earning of general insurance companies.

The Bombay High Court has asked to IRDA to ensure that insurance companies should not involve TPA in the claim settlement. As per ruling of health insurance, allowing or rejecting claim should decide by insurance companies not by the TPA.

According to British Medical Journal, India’s private healthcare sector treating patients as revenue generators. Doctors get Rs 30,000 to 40,000 to refer patients for angioplasty. Unnecessary tests are being carried out and fabricated reports were generated. Large sums were paid for the same only to fill the pockets of referring doctors and pathologists. There is serious need for stringent, transparent and mandatory regulation.

IRDA said that insurance companies can appoint individual agents on their own from 1st April 2015. As per current practice, IRDA grants license to a person to become an agent of insurance company. After the new norms, whole licensing systems will go.

To bring more transparency, IRDA is planning to treat health insurance as a stand alone segment. As per current rule health insurance come under non life insurance category. Now, separate regulation will be made by IRDA for medical insurance.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com