My opinion published in 28/03/2018 Mint News Paper

What we need to do as the Financial Year is coming to an end

FY 2018 is almost complete and being the financial year we need to do certain things on or before the financial year as well as also start planning for the next financial year in a much better way so as to avoid the mistakes which might have incurred this year. So what are important things which should be taken care of before this year’s ends and what we need to start at the earliest in the coming year? Let’s understand them more.

1 File tax returns for previous years

Government has withdrawn the facility of filing income tax returns for two financial years. From this year onwards we need to file the tax return in the assessment year itself. Which means 31 March is the deadline for filing returns for 2015-16 and 2016-17. Although we can file tax return till 31 March, but it is always better to file the return by due date i.e.  31 July. Further is there is any losses to be set off we have to file the tax return on time. Otherwise, we can’t carry forward the loss to the next financial year.

2. Review the Investments

We need to review our portfolio on basis  so as to have the idea what is going on, and if required to book losses or capital gains so as to get the benefits on that particular year. The reintroduction of LTCG tax on equities is also another reason the review the portfolio on every year. Review should not only just check the returns but also consider the portfolio allocation on various asset classes and whether it matches with our current financial goals. In equity funds one year performance may not be sufficient to remove any investments but we should find out the reason for its underperformance. As certain value funds may underperform in a bull market however they may do well over a period of time hence it’s not a good idea to sell them just because they did poorly in one year.

3. Keep all the documents in order

As we need to file a return in next four months so we should now keep all the papers ready like documents related to tax exemptions i.e. home loan account statement, Investment made under 80C, Mediclaim, Capital Gain/loss details. We also need to check the TDS deducted by Banks/Companies so as to account them in our tax returns. We should also get our all accounts/passbook updated so as to have clarity what is there or if something is missing.

4. Invest in PPF account before 31^st March

If we have a running PPF account then every year a minimum of Rs. 500 to be invested to keep it running. So if we have forgotten to invest we still have few days to invest so as to avoid the penalty.

5. Start for the Next Year right Now

Most of us do our tax-saving investments only when our HR asks the proofs for the investment in the month of March. However it is always wise to start the investment at the starting of the year itself so as to plan in a more systematic way. Rather than investing Rs. 1.50 lakhs in ELSS in the March it is always better to do SIP of Rs. 12500/- Per month. This helps us to average out the cost of investments and also saves us from market volatility. Before starting any tax saving investments we should first consider all expenses & investments which qualifies for Section 80C tax deductions i.e.—tuition fee of kids, principal component from housing loan EMI, EPF deductions, annual premium on existing insurance policy, etc. After that we should decide the amount still left which can be invested under Section 80C. Then further we can distribute this investments (depending upon an individual’s risk appetite) in equity and debt instruments. For equity investments, starting an SIP in an ELSS fund is the best strategy and for debt PPF could be a good option.

6. Submit documents to avoid TDS

We need to submit 15G and 15H (for Senior Citizens) forms to Banks and Companies where we have invested in Fixed Deposits and interest component is more then Rs.10,000 (Rs.5000 in case of Company FDs), The tax free interest limit for senior citizens has now been raised to Rs. 50,000.  We should submit these forms at the start of the year i.e. April itself so as to avoid any inconvenience later. However please remember this exemption is only for those who do not come under income tax payable limits. If you pay tax then you should not file or else the IT Department can take action against you.

6. Plan for the year in advance

We should also plan for our budget and investment at the start of the year based on previous years’ experience. Like we may plan to buy certain items, planning for the holiday next year or have some other goals in mind. Keeping those things in mind we may be required to invest more or if our investment is concentrated into one type of assets then it needs to be diversified properly. All those things should be reviewed at the start of the year so that we can avoid the mistakes and last minute anxiety.

Planning for everything is very important and when it is about money we need to be extra careful so that it should make our life easy not to increase the tension. By planning at the start of the year and final review before completion of the year will help us more peace of mind and also not to make last moment mistakes.

Women are special so do their Financial Requirements

Generally money, finance and investments are called as man’s domain and in most of the houses the man of the house take care of these matters. However in today’s world when women are leading in every aspect of life, the involvement of women in financial decision and also to cater their specific needs is very important. Working women often juggle responsibilities in their careers and at home, together. The investment and financial needs of women are, to a degree, different from those of a man. In this article at the time of Women’s day let’s discuss what are the important aspects a women should keep in mind to plan her personal finances.

1. Plan for healthcare: It’s very important

Health care expenses can rise with longer life, which is a big concern when planning for retirement. There are many complicated disease which can eat a substantial part of our savings if we have not covered our self against them. If we have not taken a health insurance at the early stage of life then purchasing a mediclaim later on is not only costly but may not cover all the ills, So it is always better to take mediclaim at the young age.

There is also another reason to buy a health insurance as we get the income tax benefit upto Rs. 25000/- (Rs. 30,000 for Senior citizens which has been raised to Rs. 50,000/- in last budget). You can also take health insurance for the parents as they grow older they may need it more, further the tax benefits are also available for mediclaim taken for parents. While buying a health insurance, we should check the exclusions in the policies carefully. Sometimes we may get a policy at a lower premium compared to others but it may exclude certain illness so be careful.

2. Plan for Retirement: It’s crucial

As our life standard are improving, we are living longer. It means that we need to plan for a long life, and a long retirement and also have to deal with all the challenges of aging. Life expectancy for women is higher than men in any cases and changing social fabric also indicates to be self-dependent at older age.

Inflation, is a tax on capital and it slowly eats away our portfolio. Inflation causes a gradual decrease in your purchasing power because a fixed amount of assets buys less. If we take 7% inflation per year It compounds to 7.6 times in 30 years.” Which means if our monthly expenses are 25000/- today at the age of 30 then by the time we retire it will ballooned to 1.90 lakhs per month.

As the economy is growing with demand for various items rising, fixed investments such as Cash, Fixed Deposits and Bonds may not keep up in an inflationary environment.

For any financial planning and especially which are for long term; Inflation must be taken into account. If you are a single women it’s better to take the advice of an expert and if you are married it’s better to discuss the retirement plan together and chart out the priorities and investments to meet the future cost of living.

3. Plan for Kid’s future: They matter a lot

Every mother wants to give their kids the best, and yes it needs proper planning so that money should not come in a way for their bright future. In today’s world the education cost is rising very fast and for extracurricular activities also we need lot of money. If your kid wants to become a sportsman or an artist there also we need to send him/her at good training canter’s which requires lot of money. So planning for their future career needs to be done at the early days.

Now days, teenagers and young adults tend to focus on lifestyle spending and they don’t mind taking loans for fulfilment of their needs, rather than saving. As a mothers we should not just save for the kids’ future but also guide them to develop better financial habits. We should stick to predefined budgets and pocket money so as to make them realise the value of money and importance of savings.

4. Plan for unplanned: Yes that can happen too

There are many things which comes in life without any intimation, it can be some emergency requirements, a break from the work or a separation form spouse or something else. So it’s always better to have some funds in kitty for any kind of emergencies and unplanned things in the life. If you are planning for a break in your work, its better to plan for a break by first calculating the money required during that time and start investing at least 2-3 years (depending upon the duration of break) in advance for that so as to save sufficient amount to meet the expenses during that time. You should also work on a Plan B to generate some side income so as to keep yourself mentally and physically engaged.

5. Need a Loan: Ladies are preferred borrowers

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. There are some banks that offer special rates for women customers for gold loan, education loan, personal loan, etc. For women entrepreneurs, banks offer loans on easy terms and lower interest rates.  The interest rate is offered at .05% to .2% lower than normal rates. Further to this interest rate benefit, there are several states in India which offer discounts on stamp duty charges to women buying homes.

Take this benefits if you are planning to buy a home or car or want to start a business. Although the difference may not be much but it still matter especially if the tenor of the loan is very long.

Finally:

There is a famous quote by Benjamin Franklin    “If you fail to plan, you are planning to fail!”  

Money is a very critical factor for living a comfortable life so the financial planning is always a very crucial factor. Avoiding any serious missteps can help to provide a better chance for a long-term financial future and eventual retirement that meets your desire. It’s always better to take a professional’s help to keep your finances in a shape based on your specific requirements.