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- Planning Investments for Child Education Plan - Save Tax
- All about HRA Tax Exemption
- Types of Income Tax
| Planning Investments for Child Education Plan - Save Tax Posted: 12 Feb 2014 03:54 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300 Planning Investments for Child Education Plan
It is important that before you start investing you have a roadmap and a goal so that you know what you need to do and at what intervals. Having a goal will also help you ensure that you can evaluate your performance and review it periodically. Two aspects of planning for a child’s future are:
A) Planning for unforeseen eventualities (death of a parent): In the case of such an event there should be a shock absorber in place that will ensure that the child’s education is not disrupted. This can be done by buying a good insurance policy and this must be done at the earliest. The trend has shifted to parents buying a policy in the child’s name to parents taking a risk cover which protects the child’s future. There are a variety of plans to choose from and almost all companies offer these plans so picking a good plan will not be difficult.
B) Building a fund that will be relevant considering the inflation and your child’s need: By this I mean that the amount that you aim to save should take in account the rising cost of education and your child’s aspiration. Imagine if you plan for a course in your neighborhood university and your child wants to go for a super specialized course abroad. Of course each parent will have their financial limitations but while planning keep this is mind. If after a few years of saving you feel that your child aspires for bigger goals than you had initially anticipated; pause review and modify accordingly.
The cost of pursuing a professional course on an average is around 12 lakhs (we are not considering the capitation fees that some course may require) today but obviously a few years down the line it will not be the case so how much do you need then. In the chart below assuming the inflation at an 8% you can see how much the course will cost at various intervals.
To meet the goals of funding the child’s education Vivek decides to evaluate two plans; a) invest an initial amount of Rs. 500000 in a FD at 9%or b) invest Rs. 350000 but choose to invest in a diversified equity mutual fund (assuming a return of 16%). Let us how these two plans fare against the rising cost of education
a) Only one product is chosen which is very risky especially if it is a market related product.
b) Ideally a couple of years before the fund is to be used (around the age of 12-14) one should start transferring the money to safer options so that you are not caught on the downward curve of the market when you need the money.
c) It assumes a big investment initially which might not be possible for everyone. Small continues investments are a more realistic choice
Choosing the Right Investment OptionObviously there will not be one right way to save for your child’s future; you can plan according to your needs and convenience. A few pointers can help you in planning and picking an investment plan that is in line with your objectives. Below we have tried to evaluate a few options keeping in mind a few basic principles. The size and timing of investment will depend on an individual’s choice. Keep in mind the following:
Plan A: Building Child Education FundVarun starts investing Rs. 5500/ month as soon as he is blessed with a child. Let us see how his planning works out. A Rs. 1200000 lakhs course in current times would be Rs. 4800000 after 18 years @ 8% inflation annually
Plan B: Building an Education FundVarsha delays her investment plan by 3 years so she must invest 8000 per month but that alone will not suffice so she decides to continue to invest in equity till the child turns 15 and then shift her investment to fixed income products Assumptions and conditions are same as in plan A
Though she will manage to meet the requirement but it will involve an additional burden monthly and some added risk towards the end as she completely does with the one phase; invests aggressively for a longer period and the shifts to the fixed income option. This is where an early bird has an edge!
Plan C: Building an Education FundVishal plans to invest Rs. 65000 annually out of his bonus/savings for his child’s education fund. He modifies the plan a little he plans to invest in market related products till the age of 14 (his child) and then 2 years of both B and C. He also starts from the time his child is born Assumptions and conditions are same as in plan A
Vishal also manages to save more than enough for the child and he has some cushion too. He shortened his safe investment window but 4 years is a good enough time span. Hopefully the above discussion would have given you some insight into planning for a child’s future. Careful analysis, some research and sticking to the basics can help you in making a best child education plan
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
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B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
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F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
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| Posted: 12 Feb 2014 02:22 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
HRA is an important component of salary income. It is a fixed, Pre determined allowance (generally a percentage of basic salary) that is given to employee in addition to the basic salary. As the name suggests “House Rent Allowance” is meant to support the house rent which an employee pays, and thus this is exempted to some extent by Income tax authorities. HRA exemption is not available to those who live in their own house, as they are not paying rent to anyone. This article is about HRA exemption, in what scenarios one can claim exemption and How to claim the same. - See more at:
How to calculate HRA Exemption amount?
As explained above, HRA exemption can only be claimed by employee if he’s living in the rented accommodation and is paying regular rent. Tax treatment of HRA is as below:
This calculation requires 4 information – the city you live in, the basic salary that you receive, what rent you pay and what is the actual HRA benefit that you get. HRA exemption amount will be least of the below 3 options:
Here Basic salary means Basic+ Dearness allowance.
Let’s Understand the HRA exemption clause with an example:
Ramesh lives in a rented accommodation in Delhi and Pays monthly rent of Rs 20000/-. His Annual salary package details are as under. What would be the HRA exemption limit in this case?
Basic – Rs 480000
HRA – Rs 240000
Medical Allowance – Rs 15000
Special Allowance – Rs 200000
Solution:
As Ramesh lives in a metro city, so the HRA exemption limit would be the least of following:
The Least of the above is Rs 1.92 lakh. Out of total HRA received Rs 1.92 lakh will be deducted and remaining will be added in the gross taxable income and will be taxed as per income tax slab one falls in.
Other Important points to note to claim HRA exemption:
How to claim HRA exemption?
You need to submit the Actual Rent receipts to your employer as a proof of rent payment. Many companies ask for Rent agreement also. On the rent receipts basis employer calculates the HRA exemption benefit and deducts TDS accordingly. Here’s one loop hole which employees generally takes advantage of. Till now, if the rent payment was below Rs 15000/- there’s no requirement of submitting landlord’s PAN number along with Rent receipts and thus up to that prescribed amount employees sometimes furnish Fake rent receipts to claim for HRA exemption. Let me explain this with an example:
Below are the details of Ramesh’s Monthly salary slip.
Basic: Rs 30000 ; HRA: Rs 12000
His place of Residence is Chandigarh and he pays monthly Rent of Rs 10000/-
So technically his HRA exemption calculation would be as follows .
Least of above 3 is Rs 84000/-, so for Ramesh HRA Exemption amount should be Rs 84000/-. But he furnished Rent receipts of Rs 14500/- per month to employer. This has increased his HRA exemption amount to Rs 138000/- (as per calculation in step 2). So where Rs 60000/- would have to be added in his Gross total income, due to the fake rent receipts only Rs 6000/- was actually added.
Latest amendment announced in October’2013
But now CBDT is trying to plug this loop hole and thus from FY 2013-14 all salaried tax payers who claim HRA exemption will now have to report their landlord’s PAN number if the total Rent in a year exceeds 1 lakh. This means the limit which was earlier Rs 15000/- has been reduced to Rs 8333/- per month. In case landlord does not have PAN number, then employee has to submit a declaration by landlord stating the same along with his name and address. This will serve dual purpose for IT authorities, as they can keep a check on landlord if he’s paying taxes on this income or not and also this will act as a deterrent to the employees in tax evasion. So now onwards whenever you furnish rent receipts to your employer which is more than 1 lakh a year, don’t forget to mention the PAN Number of your landlord.
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
--------------------------------------------- Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
2. Franklin India Smaller Companies E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF |
| Posted: 12 Feb 2014 01:32 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
There are two types of income tax:
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
--------------------------------------------- Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
2. Franklin India Smaller Companies E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF |
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