Prajna Capital - An Investment Guide

The vacation season is drawing closer and you’ve made a perfect plan for that much needed break. All nitty gritties have been taken care of and you are sure nothing is amiss. Just one fear remains: What if things don’t go according to plans? One goes on a holiday to unwind, but this fear can play spoilsport. So what’s the solution? You can either keep your fingers crossed and pray that you have a smooth trip or opt for travel insurance. An increasing number of travelers today are realizing the significance of travel insurance. It is your ticket to a tension-free holiday. Why travel insurance? Consider this: You are faced with a medical emergency in a foreign land with no one for help and limited cash — an ideal recipe for a disastrous holiday. Add to this, the fact that the cost of medical treatment in the US and European countries is very steep and you know why travel insurance needs to be a critical part of your travel plans. If you have such a policy, you effectively transfer the h...

A money back policy has dual benefits of insurance cover and periodic returns MONEY back life insurance policies rank high on the popularity chart. And for good reason: they offer dual benefits of insurance and redemption of money at regular intervals. But little do people realize that they pay more towards premium amount in comparison to a term policy. Here’s a lowdown on what it takes to buy a money back policy and the issues involved. FIRST THINGS FIRST According to life insurers, money back policies fit perfectly in the scheme of things of traditional investors who seek financial instruments that provide insurance and investment, with a low risk element and guaranteed returns. In other words, the plan is meant for individuals who require money at certain intervals in their lifetime to meet fixed long and short-term financial needs (buying a house or car, vacations abroad). “Unlike ordinary endowment insurance plans where the survival benefits are payable only at the end of the end...

Tax Benefits on Insurance and Pension Life insurance and retirement plans are effective ways of saving taxes. The tax breaks that are available under our various insurance and pension policies are described below: 1 Our life insurance plans are eligible for deduction under Sec. 80C. 2 Our Pension plans are eligible for a deduction under Sec. 80CCC. 3 Our health insurance plans/riders are eligible for deduction under Sec. 80D. 4 The proceeds or withdrawals of our life insurance policies are exempt under Sec 10(10D), subject to norms prescribed in that section. INCOME TAX GROSS ANNUAL HOW MUCH TAX CAN YOU SAVE? SECTION SALARY Sec. 80C Across All income Slabs. Upto Rs. 33,990 saved on investment of Rs. 1,00,000. Sec. 80 CCC Across all income slabs. Upto Rs. 33,990 saved on Investment of Rs.1,00,000. Sec. 80 D* Across all income slabs. Upto Rs. 3,399 saved on Investment of Rs. 10,000. TOTAL SAVINGS POSSIBLE ** Under Sec. 80C + 80 CCC - Rs. 37,389 Under Sec. 80 D - Rs.3,399 , calculated fo...

If you had invested Rs 1 lakh in a mutual fund five years back at an NAV of Rs 20. Now the NAV is Rs 70. How should youcalculate my returns on an annual basis ? Compound annualised growth rate ( CAGR ) will be used here to calculate the growth over a period of time . The gain of Rs 50 over five years on the initial NAV of Rs 20 is a simple return of 250 per cent (50/20 * 100). However, it should not be construed as 50 per cent average return over five years. Formula: CAGR = {[(M/I)^(1/N)] ? 1} * 100 Type in: =(((70/20)^(1/5))-1)*100 and hit enter. M: maturity value; I: initial value; N: time in years. CAGR here is 28.47%. Also used for: Calculating the annualised returns on a lumpsum investment in shares.

ACCEPT THE LEARNING CURVE Living within a budget is an educational curve for any new entrepreneur. Trimming your expenses, knowing how long a pay cheque will last, or how much of a cash reserve to keep around are issues which require skilful management. Knowing these techniques takes time. But a start-up can learn to adjust its budget mostly through practical experience, and what was once a shot in the dark would gradually become a more predictable and useful practice. BE PREPARED TO MISS YOUR ESTIMATES Knowing that you are going to miss your estimates doesn’t make an entrepreneur unintelligent or a bad businessperson. Instead, a good businessman must in such cases try to miss them intelligently and start thinking of ways this can be corrected at the earliest. To keep things in line as much as possible, try to adjust from some other area within your overall budget to account for the adjustment. WORK FLEXIBLY As with setting up a budget, sticking also often boils down to a willingnes...

1) Voluntary pension fund Pension funds and retirement planning go hand in hand. A typical pension scheme involves making a voluntary contribution during one’s working life. The pension fund in turn invests it to create a corpus and pays a pension income to the individual on his/her retirement. A 39-year-old salaried individual contributes Rs 10,000 monthly to an eligible pension fund and is planning to retire at 45 years. On his retirement, he/She will receive a monthly pension of Rs 12,000 from this pension company. His taxation would be as follows: Pre-retirement, the contribution to the pension fund of Rs 1,20,000 is allowed as a deduction from his taxable income up to an aggregate amount of Rs 100,000 under Section 80C of the Income-Tax Act. He/She being in the highest bracket would get a tax break of Rs 33,900 on this account. On his retirement, his monthly pension will be taxed as salary at the applicable slab rates. Where He/She opts for a commuted amount of pension at the tim...

A wise investment plan may help you secure a bright future for your children. YOU may want to give the best to your children, but lining up the facilities — properly and prudently — is no kid’s stuff. And when it comes to financial planning for them, it’s even more difficult, particularly in the light of rising inflation rate and increasing cost of education and health services . However, if you can account these factors into your calculation before you invest on behalf of your child, you can make the exercise less burdensome and productive. Here’s a guide on the best possible avenues where you can put your hard-earned money and secure a bright future for your children. START EARLY FOR LONG TERM GAINS Financial Planners hold the view that with ever increasing cost of healthcare and education, the significance of planning for your child’s future has acquired new dimensions. Today, it’s not only about buying an insurance policy but also investing in financial products which give g...

Outlines some funds that offer tax deductions on donations The Income Tax Act permits deductions against donations made for specific purposes. All donations don't qualify fir deductions under the Income Tax Act. Only donations to specific funds and charitable institutions are exempt. An assessee can claim deductions up to specified amounts. The relevant provisions are contained under Section 80G of the Income Tax. The deduction is available to any taxpayer - individual, firm, company, or HUF. Further, the assessee may be a resident or non-resident. The donations should be made in cash or through a cheque. Donations made in kind are not eligible for a deduction. The amount should be paid during the relevant previous year. You can claim a deduction if you donate to: National Defence Fund set up by the Central Government Jawaharlal Nehru Memorial Fund Prime Minister's Drought Relief Fund Prime Minister's National Relief Fund Prime Minister's Armenia Earthquake Relief Fund ...

Retail investors applying for initial public offerings ( IPOs ) of companies are expected to get a huge relief relating to refunds from such offerings. On Thursday, Securities and Exchange Board of India ( SEBI ) said an alternate payment system, aimed at mitigating time taken for refunds, would come into effect from Monday. The new system, will ensure that the money of such investors is not withdrawn from their bank accounts but are just blocked till shares are actually allotted to them. The new system, called Applications Supported by Blocked Amount ( ASBA ), will be helped by a host of SEBI-certified lenders called Self Certified Syndicate Banks (SCSBs). In the first tranche, three banks — Corporation Bank, HDFC Bank and Union Bank of India — have been allowed to act as SCSBs. “These banks will act as SCSBs in public issues which open on or after September 1 onwards,’’ SEBI noted in a release. The IPO application forms for this payment mode will be submitted to banks which have ...

With India being one of the most promising emerging markets, non-resident Indians ( NRIs ) have a keen interest in being part of the Indian growth story. Here are five questions that NRIs tend to grapple with. Can NRIs invest in mutual funds? Yes. NRIs can invest in mutual funds in India. But they must do so in Indian currency. The money should be channelised from an account specially designed for NRIs. But all investors, including NRIs, need to have a permanent account number ( PAN ). How must one invest so that the money can be taken out of the country? Payments can be made by inward remittance through funds held in the Non-Resident (External) Rupee Account (NRE) and the Foreign Currency Non-Resident Account (FCNR). Indian rupee drafts can also be purchased from these two accounts and submitted with an account debit certificate from the bank . NRE accounts must be maintained in Indian rupees but must be opened with funds remitted from abroad. The account can be in the form of a savi...

DON’T give out your credit card number(s) online unless the site is a secure and reputable site. Sometimes a tiny icon of a padlock appears to symbolise a higher level of security to transmit data. This icon is not a guarantee of a secure site, but might provide you some assurance. Don’t trust a site just because it claims to be secure. Make sure you are purchasing merchandise from a reputable source. Make sure the transaction is secure when you electronically send your credit card number. Do your homework on the individual or company to ensure that they are genuine. If you are making online purchase from a previously unknown seller, try to obtain the physical address rather than a post office box and a phone number. Call the seller to see if the number is correct and working. Do not buy from sellers who won’t provide you with this type of information. Don’t judge a person/company by their website. Be cautious when responding to special offers (especially through unsolicited e-mail). B...

I want to take a loan of Rs 1 lakh to buy a used car. How much will the car cost me at an annual interest rate of 8 per cent for four years? The compound interest formula can be used here to calculate the final cost, which would include the loan amount and the interest paid. The amount that is actually paid for Rs 1 lakh is Rs 1,36,048.90. The total amount of interest charged for borrowing Rs 1 lakh is Rs 36,048.90. Formula: Future value = P(1 + R)^N Type in: =100000(1+8%)^4 and hit enter. P: amount borrowed; R: rate of interest; N: time in years. Also used for: Calculating the maturity value on lumpsum investment (bank fixed deposits and National Savings Certificate, for example) over a fixed period at a certain rate of interest.