Live TV Show on Financial Planning & Tax Planning

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well let's first up talk about

taxes usually um the 31st of march is

the

last date to make any tax saving

investments

for the fiscal year gone by so 31st

march 2021 will be

will be the last date to make your

investments that will help you or

cutting down your tax bill

for 21. remember last year of course the

fm had given an extension till the 31st

of july but it's not going to happen

this year

last year was a one-off on account of

the pandemic but this year

um it's out of the question in fact it

never happened

only last year was an exception it's not

like your return filing date

where there are extensions granted so

31st march is

uh the heart stop which means that you

have what 25

odd days left to plan your tax um plan

your tax saving

investments so how should you go about

it and now of course

there's also another question who should

go about it because now we have two

different kinds of tax regimes

one that does not necessitate the need

to

you know make these tax saving

investments so let's discuss all of this

with karan batra

he's the founder and ceo with

charteredclub.com

uh current many thanks for joining us

today on the money show

so just start with karan you know we've

discussed this topic very often in the

past

uh what you know how exactly what are

the instruments available the sections

available

out there with which an individual

earning more than

five lakh rupees of income or seven lakh

rupees of income

uh can save on taxes

hi mobina good evening and thanks for

the invite

so the deductions which are available

are the usual ones

that is under section 80c a person can

invest up to

1.5 lakh rupees and these mainly cover

your ppf tlss

and apart from that there's health

insurance which is covered under section

80d

so a non-senior citizen can claim

claimed reduction of 25 000 rupees and a

senior citizen can claim reduction of 50

000 rupees and apart from that there is

nps

in which a person can claim additional

50 000 rupees of reduction

and apart from that there is interest on

home loan

for which a person can claim 2 lakh

rupees of reduction every year

all right okay so if you had to you know

pick the easiest

um you know instrument out there uh

you know the easiest to understand as

well for our viewers

easiest to manage easiest to liquidate

which one would you pick

so health insurance is one i would pick

apart from that under atc i would pick

three that is

one is life insurance premium second is

ppf

and if a person is comfortable with elss

you should opt

all right um which you know many of

these in

uh tax saving investments have lock-ins

which means that once an individual puts

their money in

they will not be able to take it out you

know in the next few months or maybe

even the next year

so which are these instruments uh you

know that our viewers as well should be

aware of

and let's say if you know they they

can't afford to have their money locked

in for too long

then what would you recommend see

all of these investments all of them

have a lock-in so the least uh lock-in

is in elss which is three years

ppf has a higher thing the home that

you're purchasing even you cannot sell

it

so the minimum is three years a lock-in

and average lock-in is around five years

with most of the instruments

if a person cannot have the money

to ensure lock-in or he does not have

sufficient liquidity

then maybe he should opt for the new

regime wherein he is not required to

make any investments

so the new regime is basically for

people who don't have liquidity to make

investments

or who don't want their money locked up

so in such cases the new regime is

better

for people who can have lock-ins

who have liquidity they should opt for

the pre-use regime

so a previous regime is good for people

who can ensure

a lock-in or can have sufficient

liquidity

so i have some clients so the daughter

is getting married next year

so they say they cannot do investments

so such people they're opting for the

new regime where you're not required to

make any investments then there's no

logic

okay understood um now let's talk about

um this new gift given to us by fm

sitharaman in last year's budget which

would obviously be

applicable for from the financial aid

april 2020 to march 2021

and that is a new tax regime um that

essentially

involves paying a lower tax rate so

in such a situation then how would you

do they need to really be bothered with

this entire exercise that we are talking

about

no so people opting for the newer tax

regime

they don't have to make all these

investments however there are certain

things

which people in the new taxi team can

also play so interest on home loan is

one thing

and uh your leave encashment is another

thing

so most of the people they don't have to

worry about it it's only those small

deductions

which would be available for people in

the new register as well

all right okay uh so it may not

necessarily

i mean you know you're saving yourself

from all of that uh

tax saving hassle as well investment

hassle as well however current

i think um what would what should these

individuals look at when deciding

whether they should opt for the new

regime or old regime prima facie it

looks very easy right to opt for the new

regime

because the rates are automatically

lower but what would they be missing out

on what would be the key disadvantage of

that which you know may not be

uh so easily visible just by looking at

the numbers

see the tax rates are certainly lower

but then we lose out on the

tax deductions so uh something that

person should look at is does he have

the sufficient liquidity

to make these investments number one

number two is he comfortable with the

lock-in

so if they are okay with these products

go for the previous regime

else go in the new regime in fact in the

new regime as well

a salary taxpayer can keep on changing

his regime every year

so he may offer the new regime this year

or for the previous regime in the

previous year or in the next year

so they can switch in uh each year

however a self-employed person

once he shifts to the new regime then he

cannot go back to the previous regime

so a self-employed person will have to

take this into account as well that once

you offer the new regime we cannot

go back to the previous regime

okay so business people professional

self-employed people basically

once they opt for a particular regime

they cannot keep switching

but if you are salaried then you have

the option to choose between two

financial years

so let's say in fy 21 you decide that

okay maybe i'll pay a lower

rate of interest perhaps because you

know you may be a little short on cash

um you know and you don't really have

the cash right now to put into any tax

saving instrument

then yes maybe you could go for the old

tax regime uh sorry the new tax regime

which will

then let you uh pay a lower tax rate

however

if you are um uh you know

and then next year of course you can

switch back to uh you know the old tax

regime if you want to continue

you know using ppfs and lic and health

insurance

as a tax exemption or a tax deduction

uh all right you know i want to talk

about one particular head and that's

capital gains current in this last one

year the market has rallied

significantly

and now as we know a long-term capital

gain which is

when you invest and hold a listed

security for a year or more than a year

it is considered as long term

is taxable at 10 now in this market

rally many may have you know

booked some profit as well and now it's

going to be

taxed so um let's understand in both

cases let's say if

a person has not yet booked their

profits and b

but they do want to and b um somebody

who's already booked their profits

for somebody who has not yet booked it

they still have some flexibility on how

you know they can go about trimming

their tax bill to the bare minimum

what do you recommend they do

see these long-term capital gains on

shares and mutual funds

they are taxable at 10 however every

year

there is a exemption limit of one lakh

rupees so up to one lakh rupees it is

exempt

so if somebody has not booked it but is

planning to book it then maybe he can

book it

up to say one lakh rupees because that

is tax exempt if he wants to book higher

amount he can put higher amount as well

but up to one lakh rupees everyone can

book

and uh maybe if they want they can

reinvest later as well

number one number two uh there is an

exemption also available

uh wherein if a person sells shares or

mutual funds

and he buys the residential house

property then the entire gains are tax

exempt

so there's no maximum limit so whether

that's one crore or five crore

or ten crore rupees so if you sell

shares and mutual funds

which are held for more than one year

and you invest in the residential house

property

then your entire capital gains are tax

exempt and here i am referring to

section 54f

okay i understand uh so that's

about capital gains and how you can go

about you know managing the tax bill

that will come around

current i'm going to ask you a bit more

of a holistic question now something to

do with financial planning as well

um many times when people look at tax

planning they also look at it as a part

of financial planning

they want a product that will give them

a good return as well

so what's your view on this entire

exercise if you could just give us a

more holistic approach

when an individual is picking a tax

saving instrument what are the key

things

he or she should look at see tax

planning and financial planning should

always go hand in hand

we should never buy something just for

the purpose of tax saving which does not

fit in our financial goals

so yes tax planning and financial

planning should go hand in hand

and one thing which i recommend to

everyone is ppf

that's a fixed income earning instrument

earns a

better return than ft you can claim uh

deduction under section 80c

and even the interest earned is tax fee

so bpf is something that should be a

part of everyone's

portfolio apart from that elss is also a

good option

wherein you're writing the india growth

story so if you're investing for the

long term

the returns are also good and is also

wow

you can claim reduction under section

80c for elss

so these are the two ones

okay well great there you have it

everything you need to know about uh

planning

your taxes for uh you know this uh this

fiscal year uh

2020 2021 some options given ppf

lic health insurance of course which

current listed as

i think the best way and given the fact

that we've just come out of a pandemic

or actually for most of us we're still

in the midst of a pandemic let's not

forget

that covet cases are still very much

there in india and we have to adopt

precautions a health insurance of course

is the first thing that we can do

sitting at home

to protect our family and guess what you

also get that section atd benefit

for you for your family for your senior

citizen parents as well who may be

dependent on you so

that's definitely the the best way to be

able to get a

financial security as well as of course

uh a tax saving

uh you know boosted and or an incentive

as well elss ppf

elss with only a three-year lock-in a

ppf with a five-year lock-in by the way

current i want to get in your take on

this

net outflows that we've been seeing in

elss usually from december onwards

uh we start seeing inflows into elss

games but now we've started seeing

net outflows even in december in general

mutual funds are seeing net outflows

but um you know what what i mean what do

you think is the reason

that still people are not putting in

their money and elss jan maybe yes it's

increased a little

but till december is it losing

popularity no it is not losing

popularity it is another asset that is

gaining popularity

and that is residential real estate so

yesterday only i was sitting with

somebody

and he was saying that residential real

estate is picking up very fast and that

is what the numbers was also saying

so whenever a person buys real estate he

liquidates his fixed deposits and

redeems some money from the mutual funds

because real estate in india

requires a huge chunk of money so one

reason why there is some outflow from

mutual funds and elss

is people are investing in real estate

number one number two

there are some people who are not

comfortable with the current valuations

so maybe they are looking some profits

so these are the

primary two reasons but uh elss as a

product

is still very good is people are gung-ho

about it

and i would recommend it

all right excellent so uh you know

that's just a quick take on elss as well

well i think let's uh time to take on

board

some questions and queries as well that

we've received from our viewers remember

folks if you would like to connect with

us

you'd like to ask any questions to

current you can write in our email

address is

it'll appear on the top of your screens

as well the money show at et now

dot tv so um you know do write in

whatever questions that you may have and

karan will get them answered we'll be

monitoring our email address as well

okay let's take on board our first

question ayan chatter raj writes in

saying

between ppf and nps which option should

i choose for retirement corpus building

and tax saving you know you just said

karan about how financial planning and

tax planning should go hand in hand

you should not you know pick a product

for tax saving

just because it looks attractive or you

know it should fit into your financial

portfolio and i think that's what ayan

as well is trying to do

he's looking at it as tax saving and

retirement corpus so yeah what would you

recommend between the two

see both of them have their pros and

cons and

so ppf is basically an instrument which

is to encourage

savings whereas nps is primarily for

retirement planning

so that's a core retirement planning

product number one number two when we

talk about retirement planning so

retirement planning is a long term goal

say 15 years away 20 years away 25 years

away

so for such long terms nps may deliver a

better return

because ppf the returns are fixed

in nps these are market linked and

market linked returns

over a long period of time usually give

better returns

because the benefit of compounding also

kicks in so

nbs may be a better product in this case

okay so um you know ppf actually as a

product inherently its characteristic is

to promote uh the habit of savings among

individuals that's the reason why in

fact there's a lock and also 15 years

you can't withdraw your money for 15

years over there so

in a way it's it's a good way to you

know encourage the habit of savings

um and you know with nps of course you

have the whole

uh power of compounding bit that kicks

in uh which will benefit

uh you know viewers so hence um you know

especially from the point of view of

retirement which is by the way this

the stated goal of a national pension

scheme nps is a better option

all right moving on pranjel barola

writes in saying i've been filing my itr

for my business under section 44 a.d

for six for the last six years if i opt

out of presumptive taxation this

financial year am i liable to get my

books audited even if my turnover is

less than rupees one crore

um you know current for the benefit of

all of our viewers especially

businessmen

business women small business owners if

you could just explain what are the

provisions of section 4480

how do they benefit um you know uh these

uh small business owners and of course

if you could specifically

uh help out parental as well with the

query

see basically what happens is all

business people they pay taxes they pay

income taxes only on the profits part

not on the entire sales part now how do

we arrive at the profit

sales minus expenses is equal to profit

so this is the normal mechanism and in

this mechanism what happens is a person

is required to keep a track of

all the expenses like his mobile bills

patrol bills

the depreciation and assets and salaries

paid

so a lot of invoicing is there you have

to do a lot of paperwork you have to

maintain profit and loss security

implemented for

pnl balance sheet so there's a lot of

headache that goes into

preparing all this so for small business

owners the government has tried to

simplify the taxation regime wherein

they said you don't have to get into all

these hassles

every business owner knows his

approximate profit

so government says don't prepare all

these

just pay tax on your approximate profit

which is called

presumptive income and they say disclose

minimum eight percent in case of uh

payments received by uh cash and

disclose minimum

uh six percent in case of payments

received by

uh the online mechanism and banking

channels

so this is the scheme of presumptive

taxation which is to simplify the manner

of computation of income

and in the past five years this has

gained a lot of popularity

so year after year we see the number of

returns that are filed to last three if

i tell you

more than 1.5 crore people file their

returns using the presumptive tax

mechanism

so presumptive tax mechanism is good it

simplifies taxation

there's no there's lesser hassle no

books of accounts required

that is the concept of presumptive

taxation now uh

in this case the user is asking

what if he leaves the scheme of

presumptive taxation

then is he required to get the audit

done so

yes a new clause was recently inserted

which was inserted a couple of years

back wherein they said that

if a person leaves the scheme of

presumptive taxation

he cannot again enter the presumptive

taxation scheme

for the next five years number one

number two for the next five years he

would be required to get his audit done

irrespective of the turnover so

this is the scheme of presumptive

taxation and if you opt out for it then

you will be required to get your

done

okay so regardless of whatever the

turnover is

you will then have to get your books of

accounts

audited uh that's um you know something

that

you know you could look at it as a

drawback of opting for the first time

for the presumptive scheme

and of course once you opt out of it

then there's no going back at least for

the next

five years so that's uh you know advice

for pranjal

or rather information coming in for

pranjal

okay uh one more question then santo

mondal writes person in a lower tax

bracket

should not buy debt funds except ppf

bank and post office schemes

person in the 30 tax bracket should

invest in overnight funds and liquid

funds

with the exception of 5 extra return

with the expectation

rather of extra return compared to a

bank fd i think that's what he's trying

to say

is his assessment correct you know his

point is right that when you look at

fixed income investments you should

consider your tax bracket because then

you know net of taxes

the return falls significantly however

um

you know karan what do you think of what

santo has to say is he right in what he

is saying that

you know how different tax bracket

people should invest in different debt

you know fixed income schemes yes it is

right so tax planning or whenever we

invest tax planning should be considered

so maybe what he's trying to say is on

the interest on the nft a person is

paying 30

tax whereas on debt funds if a person

who's more than three years

the rate of tax is 20 so sometimes

people go buy this logic

and opt for debt funds instead of uh fds

however i would like to apprise him and

all the viewers

that the returns on debt funds are also

a function of the interest rates

so if the interest rate goes down the

debt funds value go up and if the

interest rates go up that fund's value

go down so

the question asked by the user is not

so simple to be generalized and it

depends on the case to case basis

and they should consult their financial

advisor or do all their calculations

before opting for it this is not only a

taxation impact but

the prices of debt funds change with the

change in interest rates

okay it's a very larger issue as such

but karen has

you know sort of explained it for the

benefit of our viewers

well i think on that note we will have

to

end our q a segment if you've sent in

your question and we've not been able to

uh answer it well uh we will be back

with

more um you know such sessions with

karan so

keep writing into us on the manish now

dot tv

and we'll get them answered and thanks

karan as well uh for joining us today

and you know helping our viewers as well

out with their questions

thank you okay well moving on uh uh you

know all

employees can breathe a sigh of relief

because retirement fund body epfo the

employees provident

fund organization has decided to keep

interest rates

unchanged at eight and a half percent on

provident fund deposits for the current

financial year

remember the epfo has about five crore

active subscribers

uh these are all usually uh employees

with the private sector

now this interest rate is going to be

notified in the government gazette

following which the epfo would credit

the rate of interest into the

subscriber's account so

it's the second year that the interest

rate will be eight and a half percent

it's still much better

than you know what you get from your

other small savings schemes and fds like

ppf

and um you know nsc etc eight and a half

percent is definitely good

given you know the kind of uh interest

rate environment in general we are in

let's not forget that contribution to

the provident fund by your employer and

employee

also is eligible for a tax deduction

so some good news coming in for

individuals employees about their

private sector employees actually

and on that note we will finally take a

very short break on the show don't go

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