Author: Team Humfauji

20 Feb 2020
Sanjeev Govilla

Are you confusing Tax Planning with Financial Planning?

The tax season is upon us. We, and almost every financial advisory company in the country, receives numerous calls from people about the ‘the best’ tax-saving opportunity right now.

Somewhere tax saving is considered the best form of financial planning and in fact, all that is there to it. Is it so? Is your financial responsibility towards yourself and your family over with saving tax for the year?

May not be so.

This episode of Money Guru, telecast yesterday (5th Feb 2020) on Zee Business, deals with the aspect of Tax Planning Vs Financial Planning in comprehensive details. Our CEO, Col Sanjeev Govila (Retd), is the financial expert featured in the show explaining these aspects. The show covers the following aspects:-

1. Role of Tax Planning in your Financial Planning.
Understand the significance of financial planning for wiser tax planning that is in-sync with your life goals.

2. Life Goals for which Financial Planning is necessary.
Goal Planning for Life Protection considering the necessity and need for protecting your loves ones through Insurance for Life, Health and even term plan.

3. Power of Compounding and to how you can make Rs 3 Crore by allocating Rs 5000 each month.
Understand the categories of funds, risk appetite and the funds that are most appropriate as per your investor profile.

4. How to strike a balance between savings and investments in case of a new job or career shift? 
Understand the dynamics of Tax Saver Funds in your portfolio and how relevant it is for savings and investments in different life phases.  Similarly the scope of Small Cap, Mid Cap and Large Cap vis vis savings and investments.

Watch the complete video here,

08 Feb 2020
Budget 2020

Budget 2020 : Does It Change Anything in Your Life?

This year’s budget quite confused the financial gurus, media and even the stock markets; stock markets didn’t know how to react – plunged on the day of the budget, went sideways the next working day and then up from there. Let us see how the relevant provisions of the budget affect or don’t affect you.

New Optional Tax Structure. A new tax structure has been introduced with lower tax brackets. However, the normal deductions that one claims on Income Tax, ie, Standard Deduction (Rs 50,000), Section 80C deductions (maximum up to Rs 1.5 Lakhs in instruments like DSOPF/ PPF/ EPF, AGIF/ NGIS/ AFGIS, other life insurances, ELSS, Principal part of home loan, children’s tuition fee, etc), home loan interest (24(b)), NPS, medical insurance (80D), LTA, education loan interest (80E), etc will then not be available if you choose the New structure.

[For those financially inclined, all deductions under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc) will not be claimable by those opting for the new tax regime.]

Income Brackets Current New Optional Structure
Up to Rs 2,50,000 lakhs Nil Nil
Rs 2,50,001 – Rs 5,00,000 5% 5%
Rs 5,00,001 – Rs 7,50,000 20% 10%
Rs 7,50,000 – Rs 10,00,000 15%
Rs 10,00,000 – Rs 12,50,00 30% 20%
Rs12,50,000 – Rs15,00,000 25%
Rs 15,00,001 and above 30%

The new structure is Optional. Should you opt for the new structure or continue with the old one? Income Tax Dept has made a calculator available for you at the link: Just feed in your visualized income details for the next financial year (Apr 2020 – Mar 2021) and come to know what to do. Also, remember that you can switch the tax regime every year between the old and the new regime. ‘Taxpayers can switch back and forth between the existing income tax regime and the new one that offers lower slabs without exemptions’, said the Central Board of Direct Taxes (CBDT) Chairman PC Mody. However, business owners won’t have this option.

Why has the Govt. introduced this new system? The overall aim is to simplify tax structure so that it is easily understood by the common man with the least of complications. We see all or most of tax exemptions going off in few years with tax rates coming down and personal tax calculations themselves being much simpler than they are today.

Dividend Distribution Tax (DDT) which the companies had to deduct at their end on the dividends being paid out (in shares and mutual funds typically) at a flat rate of 20.36% will not be deducted, the individuals will have to show dividends received in their own income and pay the tax as per their tax slab. This dividend will also be subject to a TDS (Tax Deduction at Source) at the rate of 10% if the dividend amount exceeds Rs. 5000 during the FY. However, please note that the dividend referred to here is the dividend received from shares as also from mutual funds. The gains made in the shares or mutual funds (called capital gains or increase in NAV/stock price) is not within the ambit of this tax, contrary to popular belief amongst some people post-budget.

Deposit Insurance. Last year, we had the infamous PMC bank scandal where thousands of depositors were left stranded after the RBI imposed strict withdrawal limits thanks to a major scandal. One of the biggest talking points was how it would have been amazing if bank deposits were insured beyond the nominal amount of 1 lakh, considering many people had deposits running into several lakhs all locked up because of RBI notification. The government has listened to us and increased the amount to 5 lakhs. So in case, you lose your bank deposits, you’ll now have 5 lakhs as insurance to protect your downside.

Definition of NRI (Non-Resident Indians) has changed now. Earlier, to qualify as an NRI, one had to be out of India for 183 days. The number of days has gone up to 240 days now. This will affect many individuals like merchant navy guys and NRIs who frequently visit India in a major way.

Tax on NRI Income. The Union Budget has proposed that NRIs had to pay up taxes on global earnings if they were not paying in any other jurisdiction or country, generating much debate, especially with regard to some gulf countries where there is no income tax. The ministry said it was an anti-abuse provision amid growing instances of NRIs shifting their stay in low or no-tax jurisdiction to avoid tax payment in India. Later it has been clarified that NRIs would be liable to pay tax only on income derived from business or profession in India even if they themselves are based abroad. However, some confusion about the merchant navy guys still remains since they are technically the resident of no country!

Employer’s contribution to provident fund, NPS and superannuation funds worth more than 7.5 lakh a year will be taxable. Please note that this pertains to yearly contributions and not the accumulated amount in such avenues. This provision is of concern only to the faujis who’ve transited to the corporate and are (luckily!) earning great salaries, and to similarly placed children and spouses of faujis. Of course, the serving faujis don’t have to bother – your employer (i.e the Govt) makes no contribution to your DSOPF – so no worries!

Other smaller provisions of this budget which may be of interest to some select few:

  1. I-T Act will be amended to allow faceless appeals so that the person appealing cannot be hounded by the IT Dept.
  2. Tax on Cooperative societies to be reduced to 22% plus surcharge and cess, as against 30% as at present. So your housing society can do some more good for its residents!
  3. Tax holiday for affordable housing extended by one more year. Additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house is extended further till 31st March 2021.
  4. The tax burden on employees due to tax on ESOPs (Employee Stock Options) to be deferred by five years or till they leave the company or when they sell, whichever is earliest.
  5. Defense gets Rs 3.37 lakh crore as the defense budget. Last year. It was 3.18 lakh crores.
  6. 100 more airports to be set up by 2024 to support the UDAN scheme.
  7. More Tejas-like trains for tourists.
  8. India is now 5th largest economy in the world.
  9. Central Govt debt reduced to 48.7% of GDP from 52.2% in March 2014.
  10. Govt plans to sell part of its holding in Life Insurance Corporation (LIC) by way of Initial Public Offering (IPO). If it comes out on favorable terms, it’ll be a good business and stock to buy!

Finally Our Take on the Budget?

It is a budget that doesn’t do anything much earth-shaking to the Indian economy! Hard to see how the Rs 5 Trillion economies will be carved out from this, unless Govt does more things outside the budget ambit, like the way corporate tax was lowered a few months back.

The direct personal tax line of thought of the Govt is very clear now. Rates of personal tax will remain low but the innumerable tax sops that are present there right now will be phased out gradually. So, do not plan anything financial long term based merely on tax concessions.

Also, remember that these budget provisions take effect only from the financial year starting from 1st April 2020. So, the Income Tax Return (ITR) that you file this year in the Jun-Jul period (for the earning period Apr 2019 – Mar 2020) will still be based on the provisions existing today.

In the end, All Izz Well!
We can again get down to our lives and planning it well till the next budget comes around 🙂


19 Mar 2019

PMS – What is it?

Portfolio Management Service (PMS), as offered by a large number of PMS companies, has a very concentrated portfolio consisting of about 20 high-conviction stocks (shares) managed in a very ‘hands-on’ manner by a professional portfolio manager. PMS surged in popularity last year after generating outstanding returns, much over the market indices and even most of the mutual funds, during that bull market (2017-18). However, they also fell equally fast when markets entered a bearish phase later in the year (2018). PMS almost always invest in small companies which have not been discovered by the general investing public – and that precisely is where the risk is.
Such stocks are likely to go up hugely when markets go up but are also almost the first ones to fall down when the tide turns. Eg, one of the most popular PMS was down by about 50% last year-end when markets went down.

PMS are primarily designed for the HNIs (High Net-worth Individuals) as they offer a high level of personalization, entry level is a minimum Rs 25 Lakhs as per the regulations and of course, they work on the principle of high concentrated risks. Despite this fact, PMS remains a popular investment avenue for HNIs especially when the markets are subdued, due to their future high return potential.

Characteristics of PMS

  • A high conviction, ‘high Risk- high Reward’ strategy for a long-term investment horizon of 5 years or more.
  • PMS get hit the first when stock markets go through a bearish phase. It is not uncommon to find PMS funds eroding upwards of 30% investor value during such times.
  • Very concentrated portfolio consisting of around 20 stocks primarily from the mid and small cap sector.
  • As per regulations, minimum amount to invest in PMS is Rs 25 Lakhs. However, some companies don’t accept anything less than Rs 50L or even 1 Crore.
  • Due to personalized management, PMS have very high expense ratios for the investors, even going up to as high as 4-4.5% per year. Alternately, the charges may be linked to their performance. Eg, a PMS may charge 10% of all profits earned in excess of 10% annualized returns, or 20% of profits earned in excess of 12%, etc. Such fee structures can eat away significant portions of the overall returns over a period of time

PMS returns with the safety of Mutual Funds is an alternative we suggest…

Ever since the 2017-origin bull market ended, the mid cap and the small cap segments have been going through a rough patch and have been two of the worst performing segments in the entire stock market. The downward spiral has been so severe and prolonged that large number of even seasoned investors have abandoned these segments. However, the segment is now probably at its lowest point and a turn-around seems quite imminent. Some very good stocks have been unreasonably beaten down and present a good buying opportunity – that is why some of the good mutual fund managers are quietly buying them right now. If one learns to ignore all the negative hype surrounding elections scare, doomsday gossips, performance of Indian economy and the likes, it is possible to generate PMS like returns over a long-term horizon of 5 years or so from now by choosing the right mid and small cap Mutual Funds (MFs) combinations now.

That is what we are proposing and are hence offering our own version of PMS using MFs. By researching and investing in a carefully curated list of select mid and small cap mutual funds, we not only provide the opportunity for possible considerable gains but also maintain significantly lower risk than a PMS.

What advantages would such a strategy have over a PMS?

  • There are likely to be 4-5 funds in the portfolio being proposed by us. Typically, each such fund would invest in about 30-70 stocks compared to the an entire PMS portfolio investing in about 20 stocks. So, the eggs are definitely not in one basket but rather widely spread, thus evenly and fairly spreading the risk.
  • MFs always have much more institutionalized and process driven methodology of selecting, monitoring and turning over stocks than most of the PMS which are generally run by much smaller companies.
  • Your costs in our strategy would be typically about half of what a PMS charges. Similarly, the tax on the gains is also likely to be almost negligible.
  • Minimum investment is being kept at Rs 5 Lakhs one-time or Rs 85,000/- per month of SIPs over next 6 months, compared to a minimum of Rs 25 Lakhs in a PMS.

How would it work?

  • A portfolio consisting of Mid Cap and Small Cap Funds, researched and selected by us, would be created for you under this scheme. It would be kept as a separate portfolio even if you already have your regular investments through us. Its report also will be separately generated.
  • The lock-in period in this scheme is 5 years. We may close the portfolio before that and refund you the money if we find very good gains have been made earlier. However, if you wish to exit before while the scheme hasn’t been closed, you would be charged an exit load of 1% of the total portfolio value by us. If the scheme continues beyond 5 years, there would be no exit load.
  • The scheme is open for subscription only for one month from now till 15 April 2019. This is to ensure that the investments take place in the current attractively priced markets. However, the period can be extended or shortened depending on how long we think the markets remain under-valued.
  • If you decide to invest in this strategy, please invest the money that you don’t require for next 5 years. Also, it is a long-term strategy – neither evaluate its performance in the short term of few months or years, nor get unnerved by market volatilities, which would be very common in such a portfolio.
  • Rs 5 Lakhs is the minimum starting point. In case you are comfortable with such a portfolio and its strategy, you may increase your exposure in it, but we do not recommend you to go beyond a maximum of 15% of your overall investments, depending on your risk profile and comfort level.
  • There is not likely to be another entry point given in this portfolio after the current initial offer.
  • The on-boarding one-time charges would be Rs 2000/- to be paid initially up-front but there would be no other charges from our side for the rest of entire period of the scheme for our monitoring, advising, managing and reviewing the portfolio

Please note that this is a unique strategy devised by us and such an opportunity may not present itself very often. We urge you to make the most of it provided you are prepared for getting into high risk stocks in the stock markets and to wait patiently for 5 years for the intended returns to come.


  • This is a High Risk – High Returns, high conviction strategy. While we are very confident of its efficacy and ability to generate very good returns for you in the long-term horizon of 5 years (or earlier) that this scheme is likely to run, there is no guarantee of any returns, including the possibility of a capital loss even though its chances are very low. However, we do promise you a very high level of research, monitoring and sincerity from our side using our wide experience in this field.
  • Please note that we would be getting a small commission for the funds subscribed by you under this strategy from the MF companies whose funds are selected by us. In case you wish us to take you through the Direct mode of investing in this strategy, we would charge 1.25% per year as our annual fee since there would be no commissions accruing to us from the mutual fund companies.


Micro-learning Initiative by Hum Fauji