Author Archives: Amit Shah & Co.

Investment Advisory

Information About SWP

Systematic Withdrawal Plan (SWP) is the withdrawal of fixed amount of money from an investment on a periodic basis. Well, as per the fundamentals, mutual fund investments should be withdrawn over period of time; and never on a lump sum basis.

This helps to take advantage of the sales price averaging. It works on the same principle as Cost Averaging. Average sales price will work out to be higher if withdrawn in a periodic manner than in one-time withdrawal.

Systematic Withdrawal Plan Options

There are 2 types of Options available in Systematic Withdrawal Plan –

1) Fixed Withdrawal

In this case, a fixed amount of money is withdrawn every month by redeeming the required number of units, which is based on the NAV of the mutual Fund at the time of withdrawal.

Example: 1000 units are present in the mutual fund and the NAV in the current month is 10. The withdrawal amount requested is Rs. 900. Hence, 90 mutual fund units will be redeemed to fund the withdrawal.

2) Capital Appreciation

Here, a certain percentage of the capital appreciation is withdrawn on periodic basis. If the fund appreciation does not match the requested withdrawal amount, then payment in that period will be withheld and pay-out will be made in the subsequent period. Generally, growth funds are preferred for this option.

Example: For a quarterly Systematic Withdrawal Plan, the withdrawal requested is Rs. 500. If the capital appreciation has been Rs. 600 and 90% of capital appreciation is permitted, then Rs. 540 will be deposited in the investor’s bank account at the end of Q1.However, due to the downturn in markets, if the capital appreciation in Q1 is only Rs. 450. Thus, the payment will be withheld and paid in Q2 along with payout for Q2 i.e. Rs. 450 + Rs. 540= Rs. 990.

Key Benefits of Systematic Withdrawal Plan

  1. Money when you need it

Systematic Withdrawal Plan allows account holder to access their money exactly when they need it. This helps individuals to achieve their financial goals.

  1. Regular Income

It allows investor to withdraw money on a periodic basis. Thus, investors do not need to withdraw everything at once. This way, Systematic Withdrawal Plan helps achieve a higher average sales price. Also, timing the market is not necessary to ensure that best sale price is available.

  1. Tax Advantage

Systematic Withdrawal Plan offers tax advantage as long term capital gains have a lower tax rate. Tax Deducted At Source or TDS is not applicable.

Systematic Withdrawal Plan can be set up to withdraw only the capital appreciation amount. In this way, one can enjoy the gains while the capital still stays invested.

How does Systematic Withdrawal Plan work?

Nothing can be more blissful than receiving regular income to fund the day to day expenses during retirement or funding your child’s tuition fees or any other requirement. What better way to have this than start a SWP.

Let’s take a look at the following example to see on how to apply Systematic Withdrawal Plan –

Janak has 10000 units of a mutual fund X. He has availed of Systematic Withdrawal Plan option and has instructed the fund house to withdraw Rs. 5000 on the 4th of every month. In this case, fixed withdrawals are made from the capital. Following table explains how this will work-

Month and Date No of Units Available NAV on 4th Units Redeemed SWP Amount (Rs) Units Remaining
4 Jan 10000 15 133.33 2000 9866.67
4 Feb 9866.67 14.5 137.93 2000 9728.74
4 Mar 9728.74 12 166.67 2000 9562.07
4 Apr 9562.07 13 153.85 2000 9408.22
4 May 9408.22 15 133.33 2000 9274.89
4 Jun 9274.89 16 125.00 2000 9149.89
4 Jul 9149.89 16.5 121.21 2000 9028.68
4 Aug 9028.68 15.5 129.03 2000 8899.65
4 Sept 8899.65 14.7 136.05 2000 8763.59
4 Oct 8763.59 14.3 139.86 2000 8623.73
4 Nov 8623.73 14 142.86 2000 8480.87
4 Dec 8480.87 13.8 144.93 2000 8335.95

 

In the above table, we can see that the initial number of MF units is 10000. On Jan 4th, the NAV is 15. Thus, units redeemed to withdraw Rs. 2000 is 2000/15= 133.33. This leaves us with 9866.67 units in month of Jan. Similarly, we can see how the units are redeemed in the following months.

Initial years of an individual’s life are spent saving and investing those savings in various financial instruments like Mutual Funds, PPF, etc. It is important that these savings are available to us in times when we need really need them.

If these are available to us in a periodic manner, then that can help in planning us in meeting more regular expenses like tuition fees for children, daily expenses in retirement, payment of premium for insurance policies or any other financial purpose you can think of. SWP can help achieve all this.

It’s a matter of opening your mind and seeing where Systematic Withdrawal Plan can be really helpful to us.

 

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Investment Advisory

Information About STP

Systematic Transfer Plan or STP refers to an investment plan wherein fixed amount of money can be transferred from one mutual fund to another on a specified date.

This transfer can be made on a weekly, monthly or quarterly basis. Systematic Transfer Plan is generally used to reduce exposure to equities or increase exposure to equities depending on the market conditions; but over a period of time.

This works just like the (Systematic Investment Plan) SIP except that; here money is being transferred from one mutual fund to another, rather than from a bank account. The mutual fund will reduce the number of units equal to the amount you have specified for transfer.

For e.g. If `1000 needs to be transferred from fund A to B, then units of fund A worth `1000 will be sold and transferred to fund B.

Benefits of Systematic Transfer Plan

Let’s look at the benefits of Systematic Transfer Plan –

1) Like a SIP

You can invest a lump sum amount in one mutual fund and have a fixed amount of money transferred to another mutual fund on a periodic basis, just like an SIP would.

2) Like Systematic Withdrawal Plan

When you feel that markets are risky and might go down, you can have money transferred from an Equity fund to a Debt Fund. This will help reduce your exposure on equities.

3) Provides Good liquidity

This is the benefit you get by investing in any mutual fund. Since your money is invested in a debt fund, you can sell the units anytime in case of an emergency or otherwise, and you can have liquid cash in your account in no time.

4) Capital Appreciation

You will benefit from the rise in NAV of the Debt fund or Equity fund that you are invested in.

5) Flexibility

In most funds, fund units are sold so that specified amount can be transferred to another fund. Some STPs provide options wherein only the capital appreciation can be transferred.

So, does Systematic Transfer Plan sound like a new generation financial instrument? Well, here’s how you can make most of it. Let’s look at some scenarios below to see how Systematic Transfer Plan can be beneficial for us.

Scenarios

Scenario 1- Debt to Equity

Now what do I mean by saying Debt to Equity. Money is invested in a debt fund and then transferred to an equity mutual fund on a periodic basis. This is useful when a large sum of money needs to invested in stock markets and timing the market might not be a good option due to volatility in the market.

Let’s take a look at the following example. Nisha has recently inherited `10 lakhs from her father. She has a keen interest in putting this money in stock markets but is apprehensive that she might lose all of it, as the market has been very volatile. Here’s how Systematic Transfer Plan helps her-

1) She invests `10 lakhs in XYZ Debt fund.

2) She can invest the entire amount in a liquid fund or a short term bond fund as this will give her stable returns. Also, the NAV of Debt funds or Liquid fund do not fluctuate much, assuring that the value of her investment will not drastically decrease in response to market movement.

3) She then opts for the STP wherein, every month or whatever interval she prefers, a pre-determined amount of money can be transferred to an Equity Diversified fund.

4) In volatile Stock markets, this helps reduce her risk of timing the markets to ensure that she gets a good purchase price.

Systematic Transfer Plan

Scenario 2- Equity to Debt

This strategy is useful when you want to cash out when you retire.

Look at Shirish’s example, who is now retired and wants to cash out the money he has invested in an Equity fund and reduce his risk. He has accumulated `15 lakhs in an Equity fund but does not want to pull out all the money at once. Here is what he can do-

1) He starts an STP to transfer money from the Equity fund to Debt fund or Liquid fund. This will help him reduce his exposure to equity.

2) He can sell the units of the Debt fund whenever he needs this money.

3) He can also start a Systematic Withdrawal Plan so that money can be transferred to his account on a periodic basis.

Scenario 3- Equity Fund to ELSS

Money can be transferred from Diversified Equity fund to an ELSS scheme of the same fund house.

Take example of Niraj who has accumulated 5 lakh in Equity diversified fund. He does not want to sell it and then invest the money in a fund to avoid transactions costs. This is how he can save his tax-

1) He makes a STP from Equity fund to ELSS fund of the same fund house.

2) Periodic transfers of the money are effected as per instructions.

3) ELSS will provide tax benefits as well.

Thus, in the wake of volatile markets, rising transaction costs and taxes, Systematic Transfer Plan can prove to be useful in many ways. So, when are you becoming ‘STP Friendly’!!!

 

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Investment Advisory

Information of sip

You are here: Home » MF Simplified

What is a Systematic Investment Plan? How does it work?

Feb 5, 2015, 12.28 PM IST

What is a Systematic Investment Plan?

A Systematic Investment Plan or SIP is a smart and hassle free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.). A SIP is a planned approach towards investments and helps you inculcate the habit of saving and building wealth for the future.

How does it work?

A SIP is a flexible and easy investment plan. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme.You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day.
Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding.

Rupee-Cost Averaging

With volatile markets, most investors remain skeptical about the best time to invest and try to ‘time’ their entry into the market. Rupee-cost averaging allows you to opt out of the guessing game. Since you are a regular investor,your money fetches more units when the price is low and lesser when the price is high. During volatile period, it may allow you to achieve a lower average cost per unit.

Power of Compounding

Albert Einstein once said, "Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it." The rule for compounding is simple – the sooner you start investing, the more time your money has to grow.

Example
If you started investing Rs. 10000 a month on your 40 th birthday, in 20 years time you would have put aside Rs. 24 lakhs. If that investment grew by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60.

However, if you started investing 10 years earlier, your Rs. 10000 each month would add up to Rs. 36 lakh over 30 years. Assuming the same average annual growth of 7%, you would have Rs. 1.22 Cr on your 60 th birthday – more than double the amount you would have received if you had started ten years later!

Other Benefits of Systematic Investment Plans

· Disciplined Saving – Discipline is the key to successful investments. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.

· Flexibility – While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.

· Long-Term Gains – Due to rupee-cost averaging and the power of compounding SIPs have the potential to deliver attractive returns over a long investment horizon.

· Convenience – SIP is a hassle-free mode of investment. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.

SIPs have proved to be an ideal mode of investment for retail investors who do not have the resources to pursue active investments.

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Uncategorized

TDS Information

Budget 2016: Under the scheme of deduction of tax at source as provided in the Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limit.

In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at source are proposed to be revised as mentioned in table 3 and table 4 respectively.

– See more at: http://taxguru.in/income-tax/rationalization-tax-deduction-source-tds-provisions.html#sthash.uh9CS5U9.dpuf

Reminder from tax department to pay tax on interest income, revise returns if required

by Cleartax-Team on March 25, 2016 in Form 26AS, Income from Other Sources, Income Tax, Income Tax Penalty, Section 80 Deductions, TDS

In last year’s tax returns arnsdisclosurewas added for bankinaccountstax retuheld by a tax payer.

It seems the income tax department has done its work related to this information. It has recently asked tax payers to include entire interest income in their tax return and pay tax on

it. The release also said that you must revise your revise your tax return if you did not include interest income.

Important points regarding tax on interest income

Include all interest incomes in your tax return: All types of interest income should be included in your tax return.

All of these interest incomes are taxable –

Interest income from a savings account with banks, co-operative banks, post offices

Interest income from a fixed deposit

Interest income a recurring deposit

Interest income from corporate bonds

Interest income from government bonds (unless specifically notified by the government)

Interest income from capital gains bonds

Interest income from post office savings deposit schemes

Interest income from post office monthly schemes

Interest income on NSCs

Interest income from Kisan Vikas Patras.

Form 26AS includes only that interest income on which TDS is deducted: A lot of tax payers include interest income which appears in their Form 26AS. This is the interest income on which TDS has been deducted. Since no TDS is deducted from a savings bank account, such interest income is not included. However, interest from a savings account is taxable and must be included in your tax return.

Deduction under section 80TTA: Are you unsure about how to claim this deduction – readhere in detail. A lot of taxpayers make the mistake of assuming this deduction is available on all types of interest. And sometimes they completely miss out on including interest in their tax returns. (More helpful reading here).

Government has information of interest paid by payer without TDS deduction: The circular from the income tax department mentions that the government has details from payers of interest paid by them without deducting TDS. So make no mistakes and remember to include these in your income tax returns.

Where a Form 15G and Form 15H is filed but total income of tax payer exceeds Rs 2,50,000: Sometimes you may have filed a Form 15G and Form 15H but at the end of the year realised that your total income is more than the minimum exempt income of Rs 2,50,000. In such a case, you must include interest for which you gave Form 15G/Form15H. Even though no TDS is deducted, such income is fully taxable.

(Find out if you are eligible to fill Form 15G/Form 15H here. Instructions to fill Form 15G arehere).

What should you do to comply with the circular

File your income tax return of income for Assessment Year 2014-15 (if not filed already) by 31stMarch 2016. Assessment year 2014-15 relates to financial year 2013-14. Minimum income exempt from tax for this year is Rs 2,00,000.

Revise your income tax return of income for assessment year 2014-15/2015-16 if the return already filed does not include taxable interest income. Minimum income exempt from tax for these years is Rs 2,50,000.

File income tax return of income for assessment year 2015-16, if not filed so far and include taxable interest income if any. This return must be filed by 31st March 2016 to avoid penalty of Rs 5,000 under section 271F.

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Indirect Tax

New Information about TDS

Budget 2016: Under the scheme of deduction of tax at source ahttp://www.charteredclub.com/wp-content/uploads/2012/02/tds-rent.pngs provided in the Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limit.
In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at source are proposed to be revised as mentioned in table 3 and table 4 respectively.
– See more at: http://taxguru.in/income-tax/rationalization-tax-deduction-source-tds-provisions.html#sthash.uh9CS5U9.dpuf Reminder from tax department to pay tax on interest income, revise returns if required
by Cleartax-Team on March 25, 2016 in Form 26AS, Income from Other Sources, Income Tax, Income Tax Penalty, Section 80 Deductions, TDS
In last year’s tax returns a disclosure in tax returns was added for bank accounts held by a tax payer.
It seems the income tax department has done its work related to this information. It has recently asked tax payers to include entire interest income in their tax return and pay tax on it. The release also said that you must revise your revise your tax return if you did not include interest income.
Important points regarding tax on interest income –
• Include all interest incomes in your tax return: All types of interest income should be included in your tax return.
All of these interest incomes are taxable –
• Interest income from a savings account with banks, co-operative banks, post offices
• Interest income from a fixed deposit
• Interest income a recurring deposit
• Interest income from corporate bonds
• Interest income from government bonds (unless specifically notified by the government)
• Interest income from capital gains bonds
• Interest income from post office savings deposit schemes
• Interest income from post office monthly schemes
• Interest income on NSCs
• Interest income from Kisan Vikas Patras.

• Form 26AS includes only that interest income on which TDS is deducted: A lot of tax payers include interest income which appears in their Form 26AS. This is the interest income on which TDS has been deducted. Since no TDS is deducted from a savings bank account, such interest income is not included. However, interest from a savings account is taxable and must be included in your tax return.

• Deduction under section 80TTA: Are you unsure about how to claim this deduction – readhere in detail. A lot of taxpayers make the mistake of assuming this deduction is available on all types of interest. And sometimes they completely miss out on including interest in their tax returns. (More helpful reading here).

• Government has information of interest paid by payer without TDS deduction: The circular from the income tax department mentions that the government has details from payers of interest paid by them without deducting TDS. So make no mistakes and remember to include these in your income tax returns.

• Where a Form 15G and Form 15H is filed but total income of tax payer exceeds Rs 2,50,000: Sometimes you may have filed a Form 15G and Form 15H but at the end of the year realised that your total income is more than the minimum exempt income of Rs 2,50,000. In such a case, you must include interest for which you gave Form 15G/Form15H. Even though no TDS is deducted, such income is fully taxable.

(Find out if you are eligible to fill Form 15G/Form 15H here. Instructions to fill Form 15G arehere).

What should you do to comply with the circular
• File your income tax return of income for Assessment Year 2014-15 (if not filed already) by 31st March 2016. Assessment year 2014-15 relates to financial year 2013-14. Minimum income exempt from tax for this year is Rs 2,00,000.
• Revise your income tax return of income for assessment year 2014-15/2015-16 if the return already filed does not include taxable interest income. Minimum income exempt from tax for these years is Rs 2,50,000.
• File income tax return of income for assessment year 2015-16, if not filed so far and include taxable interest income if any. This return must be filed by 31st March 2016 to avoid penalty of Rs 5,000 under section 271F.

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Investment Advisory

Investment Advisory

Vision Consultancy for specified investment goals for the benefit of the investors & proper guidance about investment financial plan is a comprehensive evaluation of an individual’s current pay and future financial state by using current known variables to predict future income, asset values and withdrawal plans.[1] This often includes a budget which organizes an individual’s finances and sometimes includes a series of steps or specific goals for spending and saving in the future. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan is sometimes referred to as an investment plan, but in personal finance a financial plan can focus on other specific areas such as risk management, estates, college, or retirement.

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Uncategorized

SBI Housing Loan Consultation

Vision Consultancy Also Provide SBI Housing loan consultation

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Others

Shop Act License Registration

Vision Consultancy is one of the reliable consultancy firm engaged in the business of providing a wide range of services such as Shop Act License Registration to various clients.

Shop and Establishment Act is one of the most important State Government regulations which governs the functioning of businesses engaged within its Jurisdiction. The Shop and Establishment license is a primary proof of existence of business in a specified jurisdiction.

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Others

Wrong Assessee code does not invalidate payment: HC

In the case of Devang Paper Mills Pvt Ltd Vs UOI, it was held that merely mentioning wrong code in the process cannot result into such harsh consequence of the entire payment not being recognized as valid, incurring further liability of repayment of the basic duty with interest and penalties.

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Indirect Tax

MVAT

With reference to Notification No VAT 1515/CR-169/Taxation -1 Section 9 of MVAT, the Government of Maharashtra hereby, with effect from 2nd January 2016, amends schedule ‘A’, after entry 12A the following entry inserted with NIL %. Drugs and medical equipments used in dialysis for the treatment of patients suffering from kidney disease as may be notified from time to time by State Government, in the official Gazette.

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