THINK BEFORE YOU INVEST

Investment is always a key decision factor in the mind of every investor. Every one wants to earn healthy return out of the amount invested by him, but its very difficult to decided in which area the money should be invested whether to invest in shares or mutual funds or fixed income securities or government bonds etc. But after reading this article we enable you to take decisions. The following points may be considered before you invest in any instrument:-

1.      TYPE OF INVESTOR: Firstly you should aware of yourself what type of investor you are. Are you aggressive, moderate or conservative approach investor. What is your risk taking ability?

2.    MAKE PORTFOLIO: After you decide your risk taking ability, you should make your portfolio accordingly, if you are capable of taking risk, then you should invest in equity market which offers you maximum return but it also offer maximum risk to your capital but if you want security of your capital then you may invest in the government bonds, this is save investment, it assures capital but doesn’t offers you higher returns.

3.    DURATION OF YOUR INVESTMENT: There after you should also take into consideration the time period of your investment. If you want to invest money for long period then you may opt for equity market as these are generally provide healthy returns if you are a long term investor.

4.    REGULAR UPDATES: Keep your self updated about investment market that you may plan your portfolio further or may revise your portfolio accordingly

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TAX PLANNING MAKE YOU RICHER!!!!!

Tax planning plays a vital role in your portfolio

A small Portfolio plan has been described herein, which may make you feel the importance of tax planning in your portfolio

Suppose your monthly income is Rs 30,000 and your monthly expenses is Rs 20,000

It means you save Rs 10,000 monthly.

Suppose you just keep this money in your saving account which offers you only 3.5% to 4% interest annually.

By this you will earn interest of Rs 1943 at the end of the year and at the end of year you will have to pay tax on your salary which is Rs 3,60,000 is Rs 18740 (including tax on interest from saving account)

But if you plan your portfolio you will not only earn higher interest moreover you will save your Tax liability too.

Interest earned at the end of year(in Rs)                 

Monthly income                  Rs 30000      

Monthly expenses                Rs 20000

Monthly savings                        Rs 10000

Now,     

Insurance premium (monthly)         Rs 1000        nil

Saving a/c (monthly)                  Rs 2000        388

Tax saving bonds (through sip)       Rs 5000        2249

Public provident fund (monthly)      Rs 2000        899                   

Total                                          Rs 10000       3536

Moreover you have deposited of Rs 1,08,000 in the form of public provident fund, insurance premium and tax saving bonds which is eligible for deduction under section 80c of income tax act, 1961

Therefore, your tax liability will be in this case is of Rs 7688 (including tax on interest on saving account and return on tax saving bonds)

The key highlight of this portfolio is that you have earned an additional interest of Rs 1588 and moreover you have save tax of Rs 8812 and additionally you will get an insurance coverage too and you have some amount in your saving account which is meant for meeting urgent needs.

In this portfolio we have assumed that the monthly interest on saving is 3.5% and interest on tax saving bonds and on PPF account is 8%

The interest rate may vary depending on the investment company’s or different banks or as per government policy.

The tax slab is used for the purpose of assessment year 2012-2013 and the individual portfolio used here is assessee other senior citizen and female assessee.

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EARNED ANY CAPITAL GAIN???????

Have you earned any capital gain and you are planning to acquire any house property you may save tax implications arising due to capital gain

If you want to save tax implications, you may invest your money by acquiring house property in rural areas, this will not only save your tax on capital gain, more over when you will sell out that property you will not get attracted by any tax liability as consideration arising due to sale of any house property in rural areas is exempt from tax.

People invest in house property in rural areas like in the form of farm houses, the purpose is for investment you may use it for holidays purposes, you may visit these places just to relax your mind, as these places are free from fast life as in cities which is full of pollution whether in the form of air pollution or noise pollution, you will find immense pleasure and relax your nerves,

If you are planning to buy nay house property you may buy it in rural areas.

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SUFFERED ANY LOSS IN BUSINESS????

If you earn losses from business, you can carry forward your loss to the subsequent years where such loss cannot be set-off due to the absence or inadequacy of sufficient profits in the relevant previous year.

Following are the conditions that must be considered for carry forward, carry forward and set-off of losses:-

1.  The loss should have been incurred in business, profession or vocation.

2.  The loss should not be in nature of a loss in the business of speculation.

3.  The loss may be carried forward and set-off against the income from business though not necessarily against the profits and gains of the same business or profession in which loss was incurred, but a loss carried forward cannot under any circumstances, be set-off against the income from any other head other than profits and gains of business or profession.

4.  The loss can be carried forward and set-off against the profits of assessee who incurred that loss, it can now be carried forward and set-off by his successor only if he carried on the same business.

5.  The loss can maximum carry forward for the period of 8 yrs immediately succeeding the assessment year in  which loss was incurred.

6.  As per section 80 of income tax act, 1961, the assessee in order to carry forward the loss to subsequent year, he must required to file income tax return.

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INVESTMENT - A CORE DECISION MAKING PROCESS

Investment is an core decision making process. Decision of making investment in any instrument is very important from the point of view of both return and risk. Investment in an three way process, it means investor should follow the following steps before making any investment

STEP 1. THINK BEFORE YOU INVEST

Firstly, the investor must think in which instrument he wants to invest his hard earn money. If he is of conservative nature then he should opt for instruments which provide least risk. Generally instrument with least risk element provide less return, for example, investment in government bonds, bank fixed deposit etc, these instruments provide least risk which is generally known as safe investment option but these instrument provide interest ranging between 7% to 11 % p.a depend upon tenure of investment.

If he is of moderate nature then he should involve risk element in his portfolio, which provide more interest than of conservative nature investor, for this purpose, he may invest in SIP in diversified mutual funds which offer higher return

But if investor is of aggressive nature and ready to take risk, then he should invest in equity market which gives highest return as compared to the other two, but in this case the risk is highest, an investor may suffer heavy losses.

STEP 2. UNDERSTAND YOUR INVESTMENT INSTRUMENT

Secondly, investor must read all the investment documents carefully, he must aware of the return and risk attached to the investment

STEP 3. INVEST IN THE INSTRUMENT

At last, he should invest in the instrument after reading all the documents, and his portfolio needs.

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