Seven Things To Help Tax Return Filing For Salaried Individuals

Last date to file tax returns is four weeks away, and it’s time to get into action and escape the urge to wait for the last moment. Here are few things that will help to refresh tax return do’s for the Assessment Year (AY) 2016-2017. 

1. e-Filing or not - Tax returns have to be filed online if salary or total income exceeds Rs 5 lakh. Total income implies salary income along with income from other sources and interest from bank account surpassing Rs 10,000 a year. However, if this income is below Rs 5 lakh, as well as interest from bank account, is less than Rs. 10,000 then e-filing is not mandatory. 
2. Be thorough with Form 16 - For salaried individuals, Form 16 is the key document that matters. Salary details are required to be entered manually on government site while some of the online tax filing platforms automatically upload Form 16 details to do away with manual entry. However, it is advisable to match the numbers before proceeding ahead. Individuals who have switched job during the year need to be extra careful as they will have to enter details of Form 16 from both previous and current employer. 
3. Revisit deductions - Although Form 16 accounts deductions correctly most of the times, individuals should re-check if all the deductions are in place. Change of jobs within a year or failing to submit investment proofs in time would require employees to input the data manually. 
4. Tax Deducted at Source (TDS) - Ensure to enter and reconfirm the TDS already deducted as mentioned in Form 16 or TDS certificate. Form 26AS credit statement is the best way to reconcile TDS. Form 26AS can be sought by registering on the income tax website. Employer or corporate should be reached out if there is any difference between the TDS certificates/Form 16 and Form 26AS. 
5. Type of ITR Form - Most of the online tax filing portals direct tax filer to the right ITR form based on the occupation details provided, however, one has to choose the form manually on the government site. There is a thin line between ITR 1 and ITR2. For instance, a salaried individual owning more than one house property will have to file ITR2 instead of ITR1. The latter is meant for those who draw salary income, own only one house property and have exempt income below Rs 5,000 a year.
6. Enter income from other sources and capital gains - Never miss out on entering income from other sources such as income from subletting, interest on bank or fixed deposits, winnings from lotteries. For clarity, any income that cannot be categorized as income from salary, business, profession or assets, fits this income head. Moreover, income from second property and gains from mutual funds should be recorded under capital gains. 
7. e-Verify - Save yourself from the hassles of sending ITR-V acknowledgment by physical mail when you can e-verify online. Government has enabled e-verification through Aadhaar or net banking to simplify post-filing processes. 

Follow us more to know about the e-verification process in detail. Until then, move ahead with filing your returns. 

Why You Should Stop Treating Insurance As Investment?

“Both terrorism and insurance sell fear -- and business is business” ― Liam McCurry, Author, Terminal Policy

This quote is self-explanatory to highlight the very basis of buying life insurance. But, what can be more ironical than the fact that life insurance is now days pitched as an investment, targeting the deep-rooted fear, which is “what will you get after death?”  It is obvious that anything that does not provide any benefit over your money is undesirable, and our return-prone tendencies veer towards those options that have something to offer to our family members or beneficiaries.

Know the facts
I recently came across an inquisitive client, who was bogged down by the idea that ‘Term Insurance’ is the most expensive insurance on earth. When explained that term insurance is the cheapest form of insurance to manage life risks for a pre-specified tenure, he enquired, what if he will die after the insurance tenure is over as he will not get his money back? However, there is nothing unusual in this question as most of the innocent clients are brainwashed by insurance agents in a similar way.

Answer is simple - Term Insurance is a cost to take care of one’s liabilities through their earning tenure. As far as ‘Benefits’ are concerned, there are other cost-effective alternative solutions such as mutual funds to meet return objectives. Life insurance buyers should not be influenced by only benefits, but should also consider other factors beyond it.

For example, premium for Rs 50 Lakh basic 25-year term plan cover for a 30-year-old non-smoking individual range from Rs 5,000 to Rs 12,000 annually. On the contrary, money back plan for similar cover will start from Rs 3,50,000 onwards for a policy term of 20 years. Similarly, annual premium for endowment plan for 20-year policy term starts from Rs 2,66,577 onwards.

Is the purpose solved?
Such a widening gap in premium between term insurance and conventional plans should be an eye-opener in itself. Second factor that is critical to examine is that steep premiums on traditional insurance policies often drive individuals to buy a lesser cover, which can lead to underinsurance or insufficient insurance. Under such instances, buying insurance does not fulfil its basic role, which is to cover fully against adverse events, i.e., risk management.

A 5 lakh or 10 lakh of insurance cover cannot repay an outstanding home loan of Rs 25 lakh if any unfortunate event occurs. Even this amount is insufficient to meet the living costs of beneficiaries for a reasonable amount of time till they find other income streams on their own. Now imagine how things will be if there was a term plan of Rs 50 lakh to 75 lakh in place.

Then came ULIPs
Just when investors were warming up to the idea of keeping investments separate from insurance, ULIPs (unit-linked insurance plans) made an entry, emerging as one answer to investment and insurance needs. Unfortunately, ULIPs route funds to investment vehicles only after applying list full of charges such as commission and mortality charges. Moreover, insurance companies are not transparent about revealing the actual sum that go towards life insurance and investment while shifting between investment options is quite inflexible too. Hence, it is very much likely that ULIPs can leave one both underinsured and underinvested at the same time.

Final word
Rather than depending on non-transparent means of investments, it is ideal that individuals should buy an appropriate term cover and invest the excess surplus in alternative investment vehicles that can deliver higher returns over a longer-term. This way investors will have better control on their investments and term plan will cover liabilities.
To reiterate, the role of term plan ends once an individual attains 60-65 years of age when liabilities such as home loan, education loan of children or any other debt usually stands repaid. Meanwhile, investments other than insurance become a source of fulfilling life goals such as retirement, vacations or children marriage. For those who are still seeing insurance as investment, it is high time to draw a line between the two.

About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. Reenika Avasthi is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.

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Five Illusory Salary Components That Can Overstate Your Cost-To-Company (CTC)

Several news reports recently surfaced highlighting that some of the premier Management and Technology institutes across India have blacklisted a bunch of startups after they failed to honor their committed cost-to-company (CTC) package offered to graduates. If reports are to be believed than few of those companies even went ahead to trim nearly 25% of the salaries they promised to graduates. 

While tussle between institutes and companies continues, it is critical to understand that hefty packages do not necessarily translate into higher take-home for employees. Hiring decisions made by managers are dominated by budgets rather than desired skills of candidates required for a job. Under such circumstances, employers often structure impressive CTC package, which in reality, has nothing tangible to offer to employees. TimesJobs.com survey this year revealed that 60% of hiring managers agree that CTC is given preference over skills. 

Given this reality, it is prudent to be aware of what is put on the table than being ignorant. Here are five common tools that hiring managers employ to bloat CTC without causing any substantial hike in take-home salary. 

1. Variable Pay - Variable pay is one component, which adds up to CTC but could fail to reach employees’ hands if conditions are unmet. Variable pay depends on performance of both employee and company during a year, which if unsatisfactory could simply force organizations not to pay it. 
2. One Time Bonus - Many organizations offer one-time bonus when a candidate agrees to accept the offer. As the name suggest, this bonus is only one-time and could result in sharp fall in CTC during the subsequent year. Moreover, bonus is released only after being taxed as per an individual’s tax slab, which makes little sense than the same amount being added to take-home salary. 
3. Structuring salary to avoid PF -  Employers also indulge in designing salary structures that will take away their PF liability. Nowadays, employers are structuring basic salary component above Rs 15,000 per month to make EPF contributions voluntary for employees following new EPF rule. Due to lack of awareness, most employees opt out of scheme, which save employers from contributing their share to EPF, minimum being Rs 1,800 per month. In case, if an employee insists on continuing EPF account than employers add this mandatory EPF share to the CTC, resulting in reduced take home. 
4. Employee Stock Options - Another fancy component that can make a staggering impact on CTC is stock option.  Employers award stock options, which allows employees to buy pre-specified amount of company’s shares at a fixed price within a set period of time. Employers quantify these shares, but actual gains come only when employee sell those stocks and thus, it is not a real booster to CTC. 
5. Other Incentives - Employers add group insurance, training facilities, and cafeteria allowances into CTC, which are less desirable. First of all, group insurance does not matter much because an employee should ideally have his/her own separate insurance cover irrespective of whether it is provided by employer or not. Though training allowance can be a huge incentive, it will get reimbursed only if an employee puts extra time to pursue an approved course. Meanwhile, food coupons or travel allowances are mere reimbursements, and such payouts are far lesser than actual expenses incurred. 

Becoming familiar with intricacies of CTC structure gives more power to employees to negotiate wisely with their employers and choose the best for their future. It also enhances an individual’s decision-making to align their salary structure from tax perspective. 

About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. Reenika Avasthi is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.

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Seven Reasons Why Investing On Your Own Could Backfire

Periodic access to stock market information and motivation to take charge of own financial future might encourage many investors to take a dive into direct investing. At times, investors debuting in stock markets or mutual funds might even hit beginner’s luck, and everything appears to be in place, until reality strikes.

It is crucial to understand that investing does not end right after writing a cheque towards a fund or placing an order online, rather it begins there. There are various aspects associated with investing such as periodic reviews, monitoring and knowing what-to-do and when. Few of the common errors that direct investors often make while investing are listed below. 

1. Losing sight of crucial goals - New investors often get carried away by bigger goals, which put them at risk of neglecting smaller but basic goals such as adequate insurance cover or emergency corpus. 
2. Disconnect between objective and investments- Every investment has an underlying investment objective or financial goal, but problem occurs when an investment product is a misfit for such an objective. Like equity stocks or mutual funds are not the right place for emergency corpus. Similarly retirement corpus cannot be built through debt vehicles alone.
3. Clueless about investment strategy - Each individual has a unique financial goal and risk appetite, which is paramount in developing an appropriate investment strategy. However, most of the direct investors place greater emphasis on products and end up accumulating more than they actually need. 
4. Placing lot of significance on historical returns - Even when most of the mutual funds categorically specify that ‘past performance is no guarantee of future returns,' most investors find themselves swayed away by stellar fund performances. Apparently, oversight of other parameters cost those investors dearly.
5. Herd mentality and peer influences - Direct investors are vulnerable to peer influences and herd mentality, i.e., they endorse the acts of others and try to follow the same path. This happens mostly in offices or professional and social groups as any investment strategy followed by one instantly becomes a handbook for others. In the process, investors forget about the differences that exist between risk appetite, life goals and existing financial circumstances between themselves and peers.
6. Improper diversification - Investing on own might even lead to under or over diversification, which means that a portfolio lacks the right mix of assets. Investing into too many funds with the same objective or putting all funds into real estate can lead to a skewed portfolio and so the returns.
7. Loose ends - As said earlier, investing process ends only after an investor reviews and monitors his/her portfolio. Leaving funds invested in a product for long could defeat the whole purpose of investing itself for lack of adequate returns. 

Taking swift decisions on how to manage investments such as booking profits and re-investing in better avenues are crucial, without which, an investment is not really an investment in a true sense.

Best way to counter these challenges is to seek professional advice as doing everything all alone can become a daunting task and might not fetch desired results.

About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. Reenika Avasthi is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.

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