Saturday, 31 January 2015

Calculating "Human Life Value" and need of pure Term Life Insurance Plan in life is important.


A method of calculating the amount of life insurance a family will need based on the financial loss the family would incur if the bread earner person were to pass away today. It is usually calculated by taking into account a number of factors including but not limited to the insured individual's age, gender, planned retirement age, occupation, annual salary, inflation, employment benefits, as well as the personal and financial information of the spouse and/or dependent children. 

Since the value of a human life has economic value only in its relation to other lives such as a spouse or dependent children, this method is typically only used for families with working family members. The human-life approach contrasts the needs approach.

Remember, when using the human-life value approach, you'll want to replace all of the income that's lost when an bread earner of family dies. To be more precise, you'll want to include only the after-tax pay, and make adjustments for expenses (like a second car) incurred while earning that income. Also, don't forget to add the value of health insurance or other employee benefits to the income number.

Illustration of Mr. Sharma's Human Life calculation and deriving difference in pure life cover needed for Mr. Sharma's risk cover for his family as a bread winner income loss if any untoward happening happen to Mr. Sharma's life in future. 
Mr. Sharma's age (Years) - 30
Age of spouse (Years) - 27
Life expectancy of spouse (Years) - 70
Age of child (Years) - 3
Child's share of monthly household expenditure (%) - 10
Child will remain dependent till (Years) - 22
Monthly household expenditure (Rs) - 40,000
Of the above, how much is spent on Mr. Sharma (Rs) - 10,000
Expected inflation in household expenditure (%) - 5
Money to be set aside for child's education (in present value terms) (Rs) - 1,000,000
Money to be set aside for child's marriage/other needs (in present value terms) (Rs) - 750,000
Outstanding loans (Rs) - 1,500,000
Other liabilities (Rs) - 500,000
Medical expenditure/emergency fund (Rs) - 500,000
Rate of return on low risk securities/deposits (%) - 8
Human Life Value (Rs) - 16,645,475
If the rate of return on low risk securities/deposits is (%) - 7
Revised Human Life Value (Rs) - 18,183,996
Current Life Cover of Mr. Sharma from Employer (Rs) - 10,00,000
Current Life Cover bought by Mr. Sharma from Life Insurance companies (Rs) - 20,00,000
Total Life cover Mr. Sharma have as on today (Rs) - Rs 30,00,000
Term Insurance needed to be bought to cover up all life risk = (Revised Human Life Cover - Total Life Cover Mr. Sharma have as on today)
Term Insurance needed to be bought to cover up all life risk (Rs) = (18,183,996 - 30,00,000)
Term Insurance needed to be bought by Mr. Sharma to cover up all his life risk (Rs) = 15,183,996

Manish K Pandey
CEO & Founder Director
Fern Wealth Advisors Private Limited
Navi Mumbai
Email -
# +91-9830040603

Friday, 30 January 2015

5 Reasons to file Income Tax Return (I.T.R)

5 Reasons to file Income Tax Return

No.1 creating financial history
When you file your return every year with the income tax department, it is kept as a record with them. This shows that you have a source of income and you are financially stable. Mind you it’s not just a record. You can also take it as a supporting document when you wish to avail a loan.
Now you’ll have doubt how will it be of any use to avail a loan?
Let us take an example:
I file my return each year since I was 18, declaring my income from my internship while you have not filed any.
So when today at the age of 22 while I have just started working I want a loan for any reason. How do I prove that I have source of income?
It’s very simple. I’ll take my past income tax return filed any attach it with my current income proof. It will show bankers that I already have created a financial pool to support me. It will be an advantage for me compared to those non-filers of return.

No.2 claiming refund
Now it is not necessary that we all have taxable income after availing of all the benefits like insurance deduction, loan deduction etc. but my employer/banker had deducted tax (TDS) on my salary/interest income. How do I get back tax deducted by them even though I was not liable to pay any tax?
Answer to it is, file your return. Declare all your income and TDS details. If tax deducted is more than the tax you are liable to pay, you will get refund from the department.

No.3 Avoiding Penalty
Now let us talk how income tax department will deal if you don’t file your return.
Any person who does not file his return of income within the assessment year is liable to pay penalty of INR 5000. The amount may seem small but you know this record will always be maintained with the department. So it is not just for one year but even for the coming years you will be put in the bad books (defaulters list) of the department. Also there is interest payable.

No.4 Notice from department for non – filing
Now, you must be having doubt about how will the department come to know that I have not filed my return or levy penalty for non-filing?
Well the simple answer is PAN card. When your employer deducts your TDS they have to deduct, deposit and file the details of TDS with the department along with the PAN Number of person of whom TDS is being deducted. So even if you don’t file the return but your employer is giving details of your taxable income.
You declare it or not but the department already has your details.

No.5: Notice from department for Concealment of Income
We all have seen Hindi movies where there is income tax notice which is not delivered in time and the exaggerated consequences. Why does that happen?
They have not filed their return or filed but not paid the tax thereon. Income tax department can serve a notice if there is reason to believe that the assesses has concealed income or he was to file return but not filed. This is initiated by the department by serving a notice.

Thanks & Regards,
Chirag Chordia
(AIR CA, CS, B.Com)
Founding Partner
Chartered Accountants
Tel. Office +91-8419961504
Mob. +91-8080492124 / 8384805324

Saturday, 24 January 2015

Capital Gain tax in direct Shares / Equities or in Equity Mutual Funds Decoded for Resident Individual / HUF

Taxation of Capital Gains on Shares

ü  Generally, profits arising on sale of any capital assets are treated as long-term if the same have been held for 36 months or more on the date of sale.
ü  However, in case of shares in any Company, the holding period requirement is only 12 months or more in order to make such profits as long-term.  It is important to note that the requirement of lower holding period is applicable for shares in any Company and not necessarily an Indian Company.
ü  Moreover even shares held in a private limited company will become long- term if held for 12 months or more on the date of sale of such shares.
ü  As per the present provisions of income-tax laws, any long-term capital gains arising on sale of equity shares listed on Indian stock exchange and sold through a stock-broker (On which STT have been paid) are fully exempt from income tax under section 10(38) of Income tax Act, 1961. 
ü  This exemption is not available in case the listed shares are sold outside the stock exchange platform or cases where the shares have been tendered under buyback scheme or under any open offer.
ü  It is also pertinent to note that this exemption is available only in respect of equity shares listed on Indian Stock Exchange whether it is an Indian Company or a foreign company.  This way say shares of Standard Chartered Bank, a foreign company,  which are listed in India enjoy this exemption.
ü  In case of profit on equity shares sold on stock exchanges in India held for less than 12 months are s taxed at a flat rate of 15 percent (Section 111A). It is also interesting to note that even in cases where the applicable slab tax rate is 10 percent, you will still have to pay tax of 15 percent on such short- term capital gains. 
ü  This rate still will be 15 percent even in case the slab rate applicable to you is 30 percent. In case your other income excluding this short- term capital gains is less than basic exemption limit, you will be entitled to take the benefit of such shortfall in the basic exemption limit while calculating your tax liability.
ü  Tax in respect of capital gains arising on sale of shares other than equity shares transacted on Indian Exchange: - All transactions of shares do not take place on the plat form of stock exchange. This would cover transaction of unlisted shares as well as transactions of listed shares in the form of open offer or buy back by of these shares by the company directly.
ü  Any capital gains arising on sale of such transactions will still be treated as long-term if the shares have been held for 12 months or more on the date of sale. In case the shares are sold within 12 months, the short-term capital gains arising on such transaction shall be included in your regular income and shall be taxed at the slab rate applicable to you.
ü  Generally the tax-rate applicable in case of long-term capital gains is 20% if you consider indexation. However in case the LTCG calculated with indexation is higher than 10% of unindexed capital gains, your liability on such long-term capital gains shall be restricted to 10 percent only in certain cases.
ü  This option of choosing between 20 percent on indexed long-term capital gains or 10 percent of unindexed capital gains is available only in case of listed shares which are transacted outside stock exchange. So in case you had tendered shares of listed company under buyback scheme, your liability would be restricted to 10 percent of profit made by you in case the shares were held for 12 months or more.
ü  In case the shares sold are not listed in India, this option of choosing between 10 percent unindexed and 20 percent indexed capital gains is not available.
ü  However in case of short-term gains, though the shares are listed in India, your liability on such short-term gains will depend on the slab rate applicable to you.

Taxation of Dividends received on shares:
ü  Any dividend received on shares held in Indian company is fully exempt from payment of tax (Sec. 10(34)). However the company is required to pay a tax called Dividend Distribution Tax on such dividend
ü  Long term Gain from Shares (Through STT) – Exempt from Income Tax
ü  Long Term Gain from Shares (Without STT) – 20% after considering Indexation OR  10% without Considering Indexation, WHICHEVER IS BETTER FOR ASSESSEE
ü  Short Term Gain from Shares (Through STT) – 15% Flat
ü  Short Term Gain from Shares (Without STT) – Applicable Slab Rate
ü  Dividend on Shares and Mutual Fund is Exempt from Income Tax
ü  Long Term gain from sale of Equity Oriented (65% should be in Equity) Mutual fund is Exempt
ü  Short Term Gain from sale of Equity Oriented Mutual fund – 15%
ü  Long Term gain from sale of MF Other than Equity Oriented (65% should be in Equity)  - 20% OR 10% whichever is lower
ü  Short Term Gain from sale of MF other than Equity Oriented – Applicable Slab Rate

Chirag Chordia
Member of The Institute of Chartered Accountants of India
Can be reached at +91-8080492124/

Friday, 23 January 2015

Decoding IT Section 80C and other IT Sections for tax saving for Resident Indians/ HUFs

Articles deals with deduction under Section 80C & 80D of the Income Tax Act and explains who is eligible for deduction, Eligible Investments, Limit for deduction, who can invest for whom and time period for investment. 
The total limit under this section is Rs 1.50 lakh from Financial year 2014-15 / Assessment Year 2015-16.
Qualifying Investments
ü  Contribution to Recognized Provident Fund & Current rate of interest is 8.5% per annum (p.a.) and is also tax-free.
ü  Contribution to Public Provident Fund - Current rate of interest is 8.70% tax-free (Compounded Yearly) and the normal maturity period is 15 years. Minimum amount of contribution is Rs 500 and maximum is Rs 1,50,000.
ü  Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. Please note that life insurance premium paid by you for your parents (father / mother / both) or your in-laws is not eligible for deduction under section 80C. If you are paying premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here.
ü  Investment in Equity Linked Savings Scheme (ELSS):
ü  Home Loan Principal Repayment: The Equated Monthly Installment (EMI) that you pay every month to repay your home loan consists of two components – Principal and Interest. The principal component of the EMI qualifies for deduction under Sec 80C. Even the interest component can save you significant income tax – but that would be under Section 24 of the Income Tax Act.
ü  Stamp Duty and Registration Charges for a home: The amount you pay as stamp duty & registration when you buy a house, can be claimed as deduction under section 80C in the year of purchase of the house.
ü  National Savings Certificate (NSC): NSC is a 5-Yr small savings instrument eligible for section 80C tax benefit. Rate of interest is 8.50%t compounded half-yearly.  The interest accrued every year is liable to tax (i.e., to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.
ü  Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in Sec 80C deductions.
ü  Pension Funds – Section 80CCC: Sec 80CCC – stipulates that an investment in pension funds is eligible for deduction from your income. Section 80CCC investment limit is clubbed with the limit of Section 80C – it means that the total deduction available for 80CCC and 80C is Rs. 1.50 Lakh.
ü  5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction.
ü  Senior Citizen Savings Scheme 2004 (SCSS): Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Current rate of interest is 9.20% per annum payable quarterly.
ü  5-Yr post office time deposit (POTD) scheme: Only 5-Yr post-office time deposit (POTD) – which currently offers 8.40 per cent rate of interest –qualifies for tax saving under section 80C. Interest is compounded quarterly but paid annually. The Interest is entirely taxable.
ü  NABARD rural bonds:
ü  Unit linked Insurance Plan :
ü  Others: Apart form the major avenues listed above, there are some other things, like children’s education expense (for which you need receipts), that can be claimed as deductions under Section 80C.
When to Invest? 
Many of us start looking for investment avenues only in February or March, just before the Financial Year is getting over. This is a big mistake! One, you would end up investing your money without putting proper thought to it.
And secondly, you would end up losing the interest / appreciation for the whole year. Instead, decide where you want to make the investments, and start investing right from the beginning of the financial year – from April. This way, you would not only make informed decisions, but would also earn the interest for the full year from April to March.
Section 80D
Medical Insurance
If Assessee is senior citizen – INR 20,000/- otherwise INR 15,000/- for medical insurance of self, spouse and dependent children.
Additionally, a further sum of INR 15,000/- (INR 20,000/- in case of senior citizen) for medical insurance of parents (father or mother or both)
Therefore, the maximum deduction available under this section is to the extent of Rs. 40,000/ From AY 2013-14, within the existing limit a deduction of upto Rs. 5,000 for preventive health check-up is available.

Chirag Chordia
Member of The Institute of Chartered Accountants of India
Can be reached at +91-8080492124/

Monday, 19 January 2015

Retirement Planning need for Indian Youth very essential in 2015

Indian youth which is estimated to be <35 years of age and accounts for almost 65% of India's today population is a big asset to India's growth story in future but they need to have a good paying job today and need good and proper retirement planning for their retirement which will happen for this entire population 25-35 years from now.

India don't offer any social security or health care security to its citizens today and have limited Government jobs too. Their also in Government job now pension rules are changed in term of contributions for joinees after October 2010. Most of the aspiring skillful Indian youth today is either in Private jobs or self employees and need the good and proper retirement planning to be done immediately.

I'm listing few points which each Indian should do immediately for a retirement planning to create a proper and fitting retirement plan for wealthy financially free retirement with lavish and luxurious life style you maintain today or even better you aspire than what you have today.

1- Hire and engage a Financial planner / advisor

2- Discuss your Human Life Value, Health Insurance needed amount and retirement plan and aspirations with your Financial planner / advisor

4- Estimate the age at which you want to retire easily and comfortably with your spouse

3- Estimate the value / amount / income if you start getting today you can take a call to retire immediately with your spouse and with no other responsibility to fulfill any further

4- Estimate the average inflation economy will see in years left with you to retire, estimate your's and your's spouse life expectancy after you retire and estimate risk free Return On Investments on your retirement corpus at point of your retirement till your life expectancy

5- Start early in your age to contribute towards retirement in right products and right asset allocation to achieve your worked out retirement corpus by your Financial planner / advisor

6- Invest in regular intervals for longer period of times for higher compounding returns in right products and in right asset allocations as decided between you and your Financial planner / advisor

7- Some good products available in India for retirement planning plans asset allocation are PFRDA-NPS, Employee Provident Fund contributions, PPF savings, Bank R.Ds, Lumpsum or SIP investments in Mutual Fund Equity or Debt or Balance Funds, Lumpsum or SIP investments in Mutual Funds retirement plans, Life Insurance ULIPs and Retirement plans etc.

8- Change your savings formula from Monthly Income-Monthly Expenses= Monthly Savings
    Monthly Income - Monthly Savings = Monthly Expenses

9- Review and your re-balance your asset allocation & retirement portfolio every six months or every year once with your Financial planner / advisor

10- Try to invest with minimising risk and maximising return strategies with help of your Financial planner / advisor so that you achieve your retirement corpus a little before your decided time and you get accurately the value you want as retirement corpus for your better comfortable retirement.

Start today without a any delay to plan your retirement corpus and start investing as soon as possible.

Manish K Pandey
Fern Wealth Advisors Private Limited
Navi Mumbai'
Email - fernwealthadvisors@gmail,com
# +91-9830040603

Saturday, 17 January 2015

10 Reasons Why you need a Finanical Advisor / Planner for Investments success in 2015

After a great year of 2014 for equities with exceptional returns in Indian stock markets, falling crude prices, easing inflation and full majority government of NDA at helm of governance under leadership of PM Narendra Modi to transform India and get its due apex position in world, Year 2015 is all set to bring a new leap for Indian economy as India heads for better governance, better prospects, positivity, on ground actions and better sentiments and above all the 3D's Democracy, Demand and Demographics pitch and reality by PM Narendra Modi for building brand India with his missions and his visions with youth power and their skills is sure shot going to bring prosperity and wealth to many Indians. 

The challenge lies, how the youth and middle class of India is going to understands the ways to create this wealth beyond their earnings / income which is making wise and smart investments decisions and moving towards discipline of investing in right asset class as early in their life with power of compounding over a long period of time (>10 years +). Investor awareness prograns by SEBI, NSE, BSE, AMFI, Media & others is very important for future of Indian investors who aspire to be wealth and prosper but one more thing every Indian investor family needs is engagement and hiring of a professional qualified Financial Planner / Advisor.

In 2015 investors need to engage Financial planner or Financial advisor to step forward in right direction for their Financial Freedom. So I am jotting down 10 reasons why you need a Financial Advisor / Planner for your wealth creation and have Financial Freedom in 2015 and beyond with rising India.

1- A Financial planner / Advisor gives professional advice based on your needs

2- A Financial planner / Advisor help you set measurable goals

3- A Financial planner / Advisor helps you understand various financial instrument

4- A Financial planner / Advisor highlights the effect each financial decisions has on your overall financial goals

5- A Financial planner / Advisor reminds you to re-evaluate your financial situation periodically

6- A Financial planner / Advisor encourages you to start planning as soon as you can in your life

7- A Financial planner / Advisors will draw up a financial plan which is practically achievable.

8- A Financial planner / Advisor recommends a plan, yet empowers you to take charge of your complete personal finances and financial health

9- A Financial planner / Advisor keeps your interest in mind all the time

10- A Financial planner / Advisor free up your time and ensure a financial freedom for you so that you can concentrate on the other important things in life

Manish K Pandey
CEO & Founder Director
Fern Wealth Advisors Private Limited
Navi Mumbai
# +91-9830040603