ICICI December 18 Issue.Cdr
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Our tax saving provisions are defined not just to save taxes but make long term investments that can help meet our life goals. However it is easy to overlook the financial planning aspect in tax planning while investing in tax saving instruments. It is crucial that we invest according to our life stage and are aware of the options available which best suit that life stage. For example taxable income is relatively lower at the start of one career and tends to increase as our career progresses. This stage is also the beginning of Shilpa Kumar establishing an asset base, there is MD & CEO little income from capital gains or ICICI Securities Ltd. interest and fewer deductions. Investors here have the advantage of having time on their side. Equity oriented investments make perfect sense at this stage, more importantly products like equity linked savings scheme (ELSS). The three year lock in also ensures discipline and investing for the long term. Additional it also has benefit of tax exemption under section 80C. As you grow, your income and responsibilities also tend to increase. At this stage usually these is a family and some serious goal planning begins. Tax, at this stage, can be managed while achieving financial goals like buying a house, investing in insurance to safeguard the future of your dependents and also starting to invest to build a kitty for retirement. Tax breaks on home loan repayment combined with tax concessions on life insurance premiums and contribution to pension schemes like Provident Fund (PF) and National Pension System (NPS) and help increase income and achieve life goals. Additionally, buying health insurance not only helps in times of a medical emergency but also helps save tax under Section 80D. Taxes on tuition fees of children and education loan are also subject to deduction up to certain limit. This stage, also usually signals the peak in expenses and liabilities. Therefore, making optimum use of tax-saving instruments under all permissible sections is a must for assessing tax saving investments. It is equally important to factor in your risk appetite and time horizon to achieve the goal before investing in tax efficient plans. Tax-saving portfolio of those moving towards retirement should be focused on the goal of capital protection. Also, in this phase, with debt obligations reduced and the tax bracket being at the highest slab, it is prudent to focus more on tax saving options. While Senior citizen saving schemes (SCSS) is a great tax-saving investment for senior citizens, other opportunities can be discovered depending upon risk profile and life expectancy of the assesse. Individuals can also consider tax saving through noninvestment related instruments like charity and donations. Tax commitments, financial circumstances, life-stage goals, risk appetite and liquidity requirement of every individual are distinct, no standard tax-planning strategy can be applied to all. Taking professional help to manage taxes is thus highly recommended. The bottom line is to consider taxation before making or revising financial plan at every life stage. I also take this opportunity to wish you and your family a Happy New Year 2019. Our message remains the same - 'Keep investing and stay invested for your life goals'. Through this magazine and our website www.icicidirect.com we want to make an earnest attempt to help investors know more on investing, make them aware of the options they have and to partner with them in setting and achieving their financial goals. We welcome you to write to us or visit our branches to assist you. ICICIdirect Money Manager 1 December 2018 Tax planning is an integral part of our overall financial planning. All our investments, including tax-saving ones, need to reflect our long-term investment plans. This means to have a financial goal first and then decide an asset allocation strategy. Once you know how much to invest in an asset class, start with investing into the most tax-efficient product. By developing and implementing appropriate investment strategies, we can improve our prospects of saving taxes as well as meeting our financial goals. Our cover story of this edition handholds you through the aspects of efficient tax planning. Tax planning should fit into your overall financial goals. For instance, including equity linked tax-saving products like ELSS (equity-linked savings scheme) and NPS (national pension system) in your portfolio can accomplish two goals: tax deduction up to Rs. 2 lakh and accumulate retirement corpus. Similarly, investment in tax-saving FDs can be utilized to achieve short-term goals. Insurance, the most popular tax-saving player amongst Indians, should be primarily purchased for the risk coverage. Tax benefit should be an incidental benefit. The nature of your tax-efficient portfolio primarily depends on your risk profile, income, tax-bracket and age. But the most suitable tax-saving plan is the one that is aligned with your life-stage goals and helps you achieve it on time. This, edition also comprises of an interview held with the team of H&R Block that will be an add-on guide while you plan your tax saving instruments. Further, if you wish to get clarity on different aspects of personal finance or any other money matter through Ask our Planner, you may write to us at [email protected]. So read on, stay updated and involved. Do write in with your feedback and share your thoughts. Team ICICIdirect Money Manager wishes you a happy and prosperous New Year. Your magazine is now also available on www.magzter.com, a digital newsstand. Editor & Publisher : Abhishake Mathur, CFA Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey Editorial Team : Nithyakumar VP CFPCM, Sachin Jain, Research Team ICICIdirect Money Manager 2 December 2018 MD Desk ............................................................................................ 1 Editorial .............................................................................................. 2 Contents ............................................................................................. 3 News ................................................................................................. 4 Stock ideas: Petronet LNG and The Phoenix Mills Flavour of the Month: Be prepared for this Tax Season Very often we take tax planning for granted, though the tax filing happens once a year we do tax planning last min. Most of us have tax planning but an effective tax plan could help in reducing your taxes much more. This edition will ensure you are known to every tax saving instruments that can help youdesign your income tax. Learn more……...............................................................14 Tête-à-tête An interview held with the team of H&R Block India (Pvt) Ltd, giving their insights on tax planning which will help you have an effective plan this tax season..............................................................23 Ask Our Planner Our financial expert answers your personal finance queries …........27 Mutual Fund Analysis Which are the top performing mutual funds in current market scenario? Check these top pharma funds recommended by our research team.......................................................................................34 This month on iCommunity Take a look at the latest activities on our unique information platform- iCommunity (for December 2018) ...................................... 4 7 Equity Model Portfolio ..............................................................................48 Quiz Time ................................................................................................52 Prime Numbers ........................................................................................53 ICICIdirect Money Manager 3 December 2018 Half of India's ATMs may shut down by March; here's why Nearly 50 per cent of the Automated Teller Machines (ATMs) in India may be shut down by March 2019 due to unviability of operations, hitting hard both urban and rural population, the Confederation of ATM Industry (CATMi) warned on 21st November. "This would severely impact millions of beneficiaries under the Pradhan Mantri Jan Dhan Yojana who withdraw subsidies in the form of cash through ATMs, besides urban centres, resulting in snaky queues and chaos akin to post-demonetisation," said the spokesperson. He said the CATMi step is forced on account of recent regulatory guidelines for ATMs hardware and software upgrades, recent mandates on cash management standards and the Cassette Swap method of loading cash. Courtesy: Financial Express Shaktikanta Das appointed as the new RBI Governor Former economic affairs secretary Shaktikanta Das was named the 25th governor of the Reserve Bank of India (RBI) to succeed Urjit Patel, who quit abruptly on 10th December amid a bitter dispute over the regulator's autonomy. The appointment will be for three years. It has been seeking a special liquidity window for nonbanking finance companies (NBFCs) that lend to small and medium enterprises (SMEs) and create jobs in smaller towns. Finance Minister Arun Jaitley told ET in an interview 10th December that while overall liquidity may have improved, some sectors still face issues. Courtesy: Economic Times Provident Fund alert! EPF withdrawal before retirement capped at 75% A jobless Employees' Provident Fund (EPF) subscriber who hasn't crossed the retirement age (60 years) will now be able to withdraw only up to 75% of the accumulated EPF deposits, as against 100% earlier. A month without a