Key financial things to do earliest now
As the new financial year 2023-24 approaches, you may have already started planning your investments to achieve your financial goals. But before we dive into the new financial year, it is necessary to complete certain tasks at the earliest now, maybe before 31st March 2023, to ensure maximum savings and a good start to the new fiscal year. Taking care of these important things will enable you to save on taxes and prevent yourself from paying certain penalties.
So, let’s take a look at the top Four things you need to do earliest now:-
- Advance Tax Payment: The last date to pay the final installment of advance tax payment for the financial year 2022-2023 was March 15, 2023. However, you can still pay it, as any tax paid before 31st March is also considered to be advance tax. After 31st March 2023, a 1% penalty per month will be charged on the tax amount due till the day you pay your taxes. So, make sure you clear all your dues of advance tax payments before 31st March 2023.
- Tax-saving Investments: Check out on your tax-saving investments such as PPF, ELSS, Life Insurance Policies, etc. In case you’ve missed your tax-saving investments and have yet to utilize the 1.5 Lakhs deduction available u/s 80C, you still have a couple of days left to make these investments.
- Linking PAN with Aadhaar: The government had made it mandatory to link PAN with Aadhaar by 31st March 2023 (extended to June 30, 2023, now). In case the deadline is missed, you will not be able to use your PAN for any financial transactions. The linking of Aadhaar and PAN can be done online through the Income Tax Department’s website: https://eportal.incometax.gov.in/iec/foservices/#/pre-login/bl-link-aadhaarYou can also check it here on the mentioned link if your Aadhaar has been linked to your PAN https://eportal.incometax.gov.in/iec/foservices/#/pre-login/link-aadhaar-status
- Mutual Fund Nominee Update: If you have invested in mutual funds, it is mandatory to link your PAN with your Aadhaar by 31st March 2023 (extended to September 30, 2023 now). Failure to do this linking can result in disruptions in the transactions. It can be done online through the following websites.
CAMS – https://www.camsonline.com/Investors/Service-requests/Nomination/Nomination-Opt-in_&_Opt-out
Karvy – https://mfs.kfintech.com/investor/general/NCTNomineeUpdation#
In case of any queries or problems, please contact your financial planner at Hum Fauji Initiatives.
(Contributed by Yogesh Gola, Financial Planner, Team Vikrant, Hum Fauji Initiatives)
Master the art of debt-free living
When you google the term ‘become debt free’, the search result will also display a query: “Is it good to be debt free”!!
There is a lot of generic financial advice available for getting out of debt: gain more wealth, take your credit cards apart, eat out less, etc. This straightforward advice is ultimate of little practical use.
So, try out some ideas which can actually change your life in a positive manner and get you out of your debt:-
- The One-Week Rule – There is a straightforward strategy you can employ if, like a lot of consumer debt, your debt is a result of impulsive spending: WAIT! Try putting this one-week rule into practice – waiting a week before making any unnecessary purchases – and see what happens! Because it enables you to establish new spending patterns, this is especially helpful as you work toward paying off debt. In addition, the one-week rule is similar to a budget in that it allows you to spend however you want, but with intentions.
- Snowball: A Strategy with Sense – Make use of the debt snowball strategy to tackle your debt incrementally. Start with the debt with the lowest balance while paying your other debts in full as usual. After you have paid off your lowest-balance debt, move on to the next lowest debt. Accumulate the amount saved from the first debt’s monthly outgo to pay off the next-smallest debt. Soon you will start seeing the result of how it will improve your debt scenario.
- Dedicate unexpected windfalls to your debt – When you get unexpected money, it’s easy to think of fun ways to spend it: Go on a vacation or buy that brand-new smartphone you’ve been eyeing. However, if you have a lot of debt, it might be better to use the cash to pay it off than to get into a new one or indulge in fantasies. Try not to consider a financial bonus as ‘additional cash’ that you can use for optional purposes.
Please remember that it is always better to look at debt from a ‘screen of affordability’ – what you can afford to buy?
(Contributed by Gautam Arora, Associate Financial Planner, Team Sukhoi, Hum Fauji Initiatives)
What’s better – Traditional Insurance Policies or a Combination of Pure Term Plans and Mutual Funds
Experienced financial planners will always tell you to avoid most of the traditional insurance cum-investment policies and go in for a combination of a Pure Term Insurance Plan and good Mutual Funds to get the best of both worlds – good life insurance cover and good investments.
Let’s check this advice given by the financial advisors through a real-life example using the popular LIC policies:-
An annual premium of Rs 5.7 lakhs must be paid if a 30-year-old purchases the well-known ‘LIC New Jeevan Anand plan’ with a 20-year term for Rs. 1 crore insurance cover. This policy is the typical combination of Insurance-cum-Investment plan.
After 20 years, and assuming the tax-free status of the policy continues, this plan will mature with a return of around 5% and a maturity corpus of Rs 1.98 crore.
Now let us see if this person had gone in for the Term Insurance and Mutual Fund combination instead of this Insurance-cum-Investment policy.
Again taking a policy from LIC stable only the ‘LIC New Tech Term plan’ which is a term insurance policy with no investment component. The premium is approximately Rs 11,000 for a cover of Rs 1 crore for a 30-year-old with a 20-year term.
So instead of paying Rs 5.7 lakhs as the premium, we are only paying a premium of Rs 11,000 for the insurance part.
If the balance of Rs 5.59 lakh (Rs. 5.70 lakh – Rs. 11,000) per year is invested in long-term predominantly-equity mutual funds and assuming a lowly 10 percent average annualized returns over 20 years, you will get – hold your breath – approx Rs. 3.52 Crore. In fact, we would expect it to be much more than this amount.
That is why it makes sense to go for a combination of a term insurance plan and equity funds rather than traditional term insurance plans.
Our CEO has also articulated the same views in this article by Economic Times recently:- https://m-economictimes-com.cdn.ampproject.org/c/s/m.economictimes.com/wealth/insure/life-insurance/why-mutual-funds-plus-term-insurance-can-be-better-than-traditional-life-insurance-investment/amp_articleshow/98651000.cms
(Contributed by Ujjwal Dubey, Associate Financial Planner, Team Prithvi, Hum Fauji Initiatives)
