Financial Cocktail Samosas: Bitesized Money Morsels For You, 11/07/2024


Understanding Tax Filing: Simplified Guide


Filing your Income Tax Return (ITR) can seem daunting with all the new terms and abbreviations. Let’s try and break it down to a simpler understandable language.

Key Terms to Know

  1. Assessment Year (AY): This is the year when your income from the previous year is reviewed for taxes. For instance, income from FY 2022-23 is assessed in AY 2023-24.
  2. Gross Total Income (GTI): All your income from different sources before any deductions or exemptions.
  3. Taxable Income: The income left after deducting eligible expenses and exemptions from your GTI, which is then used to calculate your tax.
  4. Tax Deducted at Source (TDS): Tax deducted from your income at the source of payment of that income by entities like employers or banks, deposited with the government on your behalf. TDS is a part of your overall tax due from you.
  5. Tax Payable: The total tax you owe after accounting for TDS and eligible tax credits.

Income Sources

Salary Income: Earnings from your job, including basic salary, allowances, and perks.
House Property Income: Rental income from properties you own.
Business or Professional Income: Income from your own business or self-employment, after expenses.
Capital Gains: Profits from selling assets like stocks, mutual funds, or property.
Other Sources: Includes interest from savings, dividends, and agricultural income.

Deductions and Exemptions

Deductions: Expenses or investments that reduce your taxable income, like contributions to PPF, EPF, insurance premiums, and charitable donations.

Exemptions: It refers to types of income that are not subject to taxation. Examples include agricultural income up to a specified limit, long-term capital gains from property reinvested in another property, and scholarship income for students.

Tips for Filing

  • Begin early to avoid last-minute stress and errors. Filing accurately and on time helps contribute to the country’s development.
  • If you have complex income sources or deductions, consider consulting a tax professional for guidance.

Filing your ITR doesn’t have to be stressful. With this guide, you’re well on your way to a smooth and confident tax season!

(Contributed by Abhinandan Singh, Relationship Manager, Team Vikrant, Hum Fauji Initiatives)

How Your Feelings Can Hijack Your Portfolio?


Investing can be exciting, but scary too. The market can go way up, then way down, making you feel like you’re on a crazy rollercoaster. If you let your emotions take the wheel, your investments will almost surely suffer. Let’s see how emotions can hijack your portfolio and what you can do to stay grounded.

Common Emotional Traps

Fear of Falling: Say the market takes a big dive. You might panic and sell everything to avoid losing more. But remember, short-term dips are normal. In fact at least one 10% every year is a normal phenomenon. Selling in a panic just converts notional losses into actual losses.

Greed for Green: The market’s on fire! You might be tempted to buy anything that’s hot, hoping to get rich quickly. But risky bets can backfire badly. Slow and steady wins the investment race. Buying stocks or mutual funds at elevated levels will come back to haunt you when reversion to mean happens.

Feeling Stuck: The market’s all over the place, and you’re frozen, not sure what to do. This indecisiveness can stop you from making any progress.

Strategies of Emotional Control

Pick a Path: Decide what you’re saving for (retirement, dream house, children’s education, car, traveling, wealth creation, etc) and how much risk you’re comfortable with. This plan will be your compass.

Spread the Wealth: Don’t put all your eggs in one basket! Invest in different things to avoid major losses. Eg, Mutual Funds are natural diversifiers. A small Rs 1000 investment even in a single fund could be spreading your money across 40-60 stocks or 30-40 debt instruments like govt bonds, bank FDs, and corporate FDs.

Stay Informed, But Chill: Keep an eye on things, but don’t check your investments all the time. It can make you anxious and lead to bad decisions a la ‘itchy fingers syndrome’.

Get Help if Needed: A financial advisor can be your investment buddy and stabilizing compass, giving you personalized advice based on your goals.

Remember, serious investing is a long-duration game. By controlling your emotions and following a plan, you can ride out the ups and downs and reach your financial goals in an easy and grand manner!

(Contributed by Anjali, Financial Planner, Team Prithvi, Hum Fauji Initiatives)

Key Takeaways from the Quant AMC Front-Running Incident

You must have heard about the recent saga of the Quant AMC (Asset Management Company, or the mutual fund company) front- running case. In the evening of 23rd June 2024, a news broke out in the media that ‘Securities and Exchange Board of India, SEBI’, has initiated an investigation into a ‘front running’ case involving Quant Mutual Fund.

Let’s first understand what is front running
Mutual fund houses buy and sell stocks through brokers, known as dealers. If a dealer knows that a fund house is about to place a purchase or sell order for a particular stock in a large quantum which can influence the stock price, he can profit unfairly from this information by buying or selling that stock beforehand. This incident serves as a stark reminder of the importance of transparency and robust compliance in the financial sector. This is what SEBI suspects might have happened in case of Quantum AMC in some cases with some insiders involved.

Here are some key takeaways:

  • Importance of Compliance: Quant’s case, and similar two cases in the recent past in four years in Axis and HDFC AMCs, highlight the need for continued robust compliance frameworks within the AMCs. Regular audits, segregation of duties, and stringent data protection protocols can help prevent insider information leaks.
  • Surveillance and Enforcement: SEBI’s swift action in investigating the Quant case demonstrates its commitment to safeguarding investor interests. Effective market surveillance and strong enforcement mechanisms are crucial for deterring malpractices.
  • Focus on Accountability: The incident raises questions about accountability within AMCs. It’s essential to have clear lines of responsibility for ensuring ethical conduct and adherence to regulations.

SEBI’s swift action in the Quant case sends a strong message – protecting investors is paramount for it as the regulator. We need continued vigilance and effective enforcement to deter future wrongdoing.

(Contributed by Mausam Gupta, Relationship Manager, Team Prithvi, Hum Fauji Initiatives)

What Did Our Clients Ask Us in the Last 7 Days?


Query: What is the ideal duration for a term insurance? My wife is a homemaker and dependent on me. Till what age should I buy a term insurance plan.

Our Reply: When selecting time frame for life cover, the choice essentially depends on many factors – some of them are enlisted below-

Key Points

  • Planned Retirement Age: Most individuals retire around their 60s. A term plan until 60 is often sufficient since, by then, you should have accumulated enough savings and investments to support your spouse without needing additional life insurance coverage. If that is not likely to be the case, take the insurance accordingly.
  • Dependents’ Needs: If your spouse is a homemaker and entirely dependent on your income, it’s crucial to ensure her financial security. If you plan to work beyond 60 or have financial responsibilities extending into your later years, you might consider a longer policy.
  • Premium Costs: Longer-term plans, such as those extending to 85 years, come with higher premiums. It’s essential to balance these costs with your financial capability and the value of extended coverage.
  • Asset Transfer: Make sure to designate your spouse as the nominee for your investments. This ensures a smooth transfer of assets, providing financial stability if you pass away after the term insurance expires.

Expert Advice
We typically recommend a term plan until 60-65, aligning with the usual retirement age. By this point, most people have sufficient savings to support themselves and their spouses. If you opt for coverage beyond this, be prepared for higher premiums but ensure it aligns with your financial strategy and needs.

Choose the term insurance duration based on your retirement plans, financial situation, and the needs of your dependents. While a plan until 60 is generally adequate, extended coverage might be necessary for long-term financial security, if you have some different family situation.

Of course, this needs no reiteration that a Term Insurance Plan is the ONLY insurance plan anybody needs. Anything else is the worst of both worlds – poor insurance cover and a poor investment product.

(Contributed by Team Prithvi, Hum Fauji Initiatives)

order here