Decoding GST - How Things Can Change From April 1?

Rajya Sabha’s Monsoon session saw the passage of Goods and Services Tax (GST) bill last week, which appeared to be a landmark development in tax reforms. However, there were split opinions over the bill with some saying that it will benefit the consumers at large and other news segments highlighting the downside that it will have on services.

The bill, which has received clearance from Lok Sabha as well is likely to be rolled out starting April 1, 2017. In light of recent developments, it is crucial to understand the key aspects of this bill and to be clear as how it will impact common man. 

What is GST?

GST is aimed at implementing comprehensive tax on manufacture and sale of goods and services across India. The new tax regime, when come into force, will replace the existing taxes that are levied at several stages by the central and state government. Thus, the new system endeavours to eliminate duplication of taxes. 

How Things Will Change?

In order to clarify how things will change after implementation of GST, here is an example explained for non GST and post-GST tax scenario.

Non-GST Scenario		GST Scenario
Raw Materials Purchased Incl Taxes	Rs 900 + Rs 100 (Tax) Rs 1,000	Raw Materials Purchased Incl Taxes	Rs 900 + Rs 100 (Tax) Rs 1,000
Cost To Manufacturer	Rs 1,000	Cost To Manufacturer	Rs 1,000
Value Addition	Rs 200	Value Addition	Rs 200
Gross Value For Manufacturer	Rs 1,200	Gross Value For Manufacturer	Rs 1,200
Tax Applicable @10%	Rs 120	Tax Applicable @10% - Tax Already Paid (Rs 100)	Rs 120- Rs 100 Rs 20
Cost To Wholesaler	Rs 1,320	Cost To Wholesaler	Rs 1,220
Wholesaler Profit Added	Rs 200	Wholesaler Profit Added	Rs 200
Gross Value for Wholesaler	Rs 1,520	Gross Value for Wholesaler	Rs 1,400
Tax Applicable @10%	Rs 152	Tax Applicable @10% - Tax Already Paid (Rs 20)	Rs 140- Rs 20 Rs 120
Cost To Retailer	Rs 1,672	Cost To Retailer	Rs 1,520
Retailer Profit Added	Rs 200	Retailer Profit Added	Rs 200
Gross Value for Retailer	Rs 1,872	Gross Value for Retailer	Rs 1,720
Tax Applicable @10%	Rs 187	Tax Applicable @10% - Tax Already Paid (Rs 120)	Rs 52
Cost To Customer	Rs 2,059	Cost To Customer	Rs 1,772

The above illustration satisfactory proves how consumers will benefit post implementation of GST. GST bill will enable companies to set off taxes paid at various stages during the entire supply chain. 

Final Take

It is to be noted that GST will reduce tax burden on consumers, but at the same time it will bring broader goods and services under its ambit. It is estimated that goods entailing higher tax rate will see their prices going down after GST, while services that are taxed at lower rate, are likely to become dearer. Since price structure is an important element, therefore, it is difficult to predict the final impact as of now. 

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 Things To Do While Building Retirement Corpus

‘A Smooth Sail’ is what everyone wants for retirement. Many people go on saving endlessly and accumulating assets just to ensure they have enough during their ‘silver’ years. While saving is certainly the first stepping stone towards building a retirement kitty, the process does not end there. Amassing retirement corpus involves figuring out near-to-accurate corpus requirement and executing an investment plan that makes money work harder than oneself. 

To ensure that existing lifestyle remains undisturbed by old-year challenges, it is recommended to follow below mentioned basic principals for building a retirement corpus. 

1) Know The Number - No matter how dismaying it seems to do the math, there is no getting away from it. It is likely that procrastinating this calculation is only widening the gap between your actual and real retirement needs. 

    Having Trouble Doing The Calculation? Here’s A Quick Help

• Current Yearly Expenses X Inflation X Number of Years to Retirement = Future Yearly Expenses

• Future Expenses X Post Retirement Years = Retirement Corpus* Discounted by Expected Interest Rate

• Many online calculators are available to calculate the retirement corpus online

2) Make Money Work - Once the retirement corpus is known, it’s time to channelise savings into appropriate vehicles that can fetch better returns. Instead of trying to fill the bridge by overthinking about savings, it will be wise to shift existing investments from conventional products to high-return oriented products. Moreover, regular monthly investments can also be started into equity-based products to make the most of it. 

Retirement Planning
	Fixed/Recurring Deposit 5 Yrs & Above	Equity & Mutual Funds   5 Yrs & Above
Rate Of Return	6.50% -8.50%	12%-14%
Investment Amount	10 Lakhs	10 Lakhs
After 5 Years	15 Lakhs	19.25 Lakhs
After 10 Years	23 Lakhs	37 Lakhs

3) Start Now - To be able to have enough corpus to last retirement, it is recommended to start investing immediately, irrespective of the amount of savings. It is established that early investors are less likely to sacrifice or reduce their lifestyle expenses post retirement compared to those who start late. Below table is self-explanatory as how early investors reap benefit of time. 

Power Of Time
Age-Group	20	30	40
Investment Amount Per  Month	Rs 5,000	Rs 5,000	Rs 5,000
Years To Retirement	40	30	20
Rate of Return	10%	10%	10%
Corpus At Age 60	Rs 3.12 Crores	Rs 1.12 Crores	Rs 38 Lakh

4) Don’t Let Retirement Take Backseat - Life is uncertain and there are times that need for higher funds for children education or desire to buy another property or may be new business plan can force one to withdraw from retirement corpus. Such a decision can jeopardise the whole retirement planning and is, therefore, not at all recommended. Under circumstances of urgent financial need, an individual should ideally evaluate other options and costs than drawing out from retirement funds. 

5) Staying Disciplined - Lastly, one has to stay focused on building retirement nest, which includes timely reviewing the investments and their returns and adjusting portfolio. As one nears retirement, it is recommended to systematically shift investments to debt-based funds from equity products so as to counter market risk post-retirement. 

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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Why You Should Look Beyond Employer-Provided Health Insurance?

Almost 80% of Indians are not covered by any health insurance scheme, reveals the most recent report from the National Sample Survey (NSS). The glaring number is testimony to the fact that health is the most neglected aspect in both rural and urban India. 

Lack of awareness can explain the reason behind negligible uptake for health insurance schemes in rural India, it is the dependency on employer-provided health insurance as well as high premium that can be blamed for insurance gap among urban population. It is still common to see that salaried employees are keen on buying health insurance for their parents without spending a moment on analysing their own medical needs. Thus, employer-provided health covers are the only way out for many in case any critical illness descend upon them. 

In view of alarming statistics, it is imperative to uncover harsh realities confronting every employee, who is dependent on employer-provided health insurance, which are listed below. 

1. Cover that may last immediately - Employer-provided health cover remains in force only until an individual continues to remain employed with a firm. Health cover comes to an end, once an individual decides to resign or leave job. This means that employee is not covered for medical eventualities at the time of his/her transition from one job to another. Things can turn worse if employment ceased due to termination by employer and securing another job can take longer-than-expected time. These are the times when having separate personal health plan does wonders. 
2. Inadequate of coverage sum - Employer-sponsored health plans are not customised as per an individual’s medical needs, but are merely group insurance. It is possible that such covers fall short of an employee or his/her family’s actual requirement. This leaves an employee and his family exposed to possibilities of higher money outflows, in case medical costs outrun employer-provided allocations. 
3. Specific coverage might not continue - Most of the employer-provided health covers include specific coverages such as maternity or senior citizen cover. Thus, during job loss or change, these special coverages will also cease, requiring an employee to bear future expenditures. 
4. Time is money - In case an employee parts with employment to start own venture or business, then the need of an independent health cover in place for self and family is inevitable. However, such procrastinated buying will translate into higher spending towards premium costs than what it would have been earlier. Moreover, an individual has to take onus of paying for medical emergencies for pre-existing diseases during waiting period. 
5. Exorbitant retirement - Decision to buy independent health cover when nearing retirement could be the most flawed decision one can make. Retirement age is the time when most of the health issues emerge, which is why one has to pay a hefty price to seek an optimal health cover. 

These reasons explain why one should look beyond employer-provided health covers to buy an independent cover immediately. Usually, family floater policies are appropriate for families with children that witness lower medical emergencies. However, separate health covers are recommended for families that have a history of frequent hospitalisations or medical care. 

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 Pointers To Check Before Investing In Land

Among plethora of investment avenues, land is the most sought after investment in India because it has the potential to multiply capital at a far greater speed than anything else. Unlike flats that are governed by set residential rates, land has a broader scope to fetch higher returns, which is relative to the development of area around. 

However, investing into land is not as simple as it sounds. There are several legal and other factors  involved that need to be considered before taking any decision. Here is a brief summary of important points that should help you filter most appropriate land for investment. 

1. Clearance from local authority - While many buyers are aware of the difference between agricultural land and non-agricultural land, most of them fail to validate the availability of clearance from local authorities. It is prudent to stay away from land deals, which lack transparency in terms of clearances. 
2. Not within scope of government plan - Before taking negotiations any further, it is imperative to verify that the land in question does not interfere with any development plan by the government. Land under Eminent Domain can leave an investor’s money stuck in the project, forfeiting his/her right to even sell it again. Investors should be extra cautious about cheap lands being offered in interior or rural areas that are meant for public use. 
3. Clear title and demarcation - One needs to ensure that a land has clear title and its demarcation is in accordance with map. Moreover, knowing the history of land in question is also advisable. One can either hire a firm specialised in such verification or accomplish it at an individual level. Record of past transactions and title can be retrieved from Sub-registrar while stamped and signed copy of demarcation map should be requested from the government office. 
4. Basic utilities - Just because you are buying land for investment purpose does not mean that basic utilities can be overlooked. One has to evaluate a property based on the amenities, both present and in future. Land sans septic tank or drainage system will be unappealing and will find hard to get buyers. Besides this, availability of ground water is nowadays key for potential buyers and is important even from an investor’s perspective. 
5. Free from encumbrance - Before closing the deal, check for records to ensure that the land is free from encumbrance by any person or authority. When in doubt, it is advisable to publish a public notice in a newspaper or reach to a lawyer. 

While entering into a land deal for investment purpose is a lengthy process, investors can look forward to launch of Real Estate Investment Trusts (REITs), which has finally received  nod from the Securities and Exchange Board of India (SEBI). Although there are no listed REITs at the moment, but few of them are already in the offing. These REITs are structured similar to mutual funds and will enable even small investors to participate in India’s booming real estate. 

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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Sequential Order In Which Loans Should Be Repaid

Got extra cash and wondering which loan to repay first?

For most of the loan borrowers, repaying loans with higher interest rate appears to be obvious route. However, this task should not be put into action without incorporating a strategy to cut loose of unproductive debts first so as to make the most of the monthly EMIs.

Here is an ideal sequential order, in which loans should be repaid.

1) Personal Loan - Undoubtedly, personal loans being unsecured carry higher interest rate while they also attract higher pre-payment charges. Still, this loan should take priority over others to save big on interest outgo.

2) Loan against other assets - After personal loans, one should preferably free up assets that are mortgaged for loans such as loan against property, gold, insurance policies, etc. Rationale behind repaying these loans is the fact that they do not carry any tax benefit and also reflect a charge on productive assets. Loans with higher interest rates such as loan against property and gold loans should precede in priority over loans carrying lower interest rates such as PF, insurance policies, fixed deposits, etc.

3) Car Loan -  Loan on car or vehicle comes next in order as it does not entail any tax soap for an individual unless it is used for business purpose or owned by a self-employed individual. Moreover, car is a depreciating asset, therefore, continuing car EMIs till the end of its tenure is not recommended.

4) Education loan - Although interest on education loans is higher compared to car loan, yet tax benefit under Section 80E offsets the difference between the two loans. An individual can claim deduction for interest paid on education loan for a period of up to 8 years or the actual term of interest payment, whichever is earlier. Also, there is no ceiling on the amount that can be claimed for interest deduction in a year. Therefore, it is ideal to retain this debt over others.

5) Home Loan - Being one of the most common forms of debt that Indians hold, home loan fetches tax advantages in terms of both interest and principal payment under Section 24 and 80C. Also, added tax soaps for first-time buyers under Section 80EE further enhances the value of this loan. Because of these tax incentives, home loan should be paid only at last after other loans are settled. Apart from this, limitless deduction allowed on interest payment for second home enlists this loan into good debt. Ideally, repayment of home loan should be completed during the initial years of loan tenure, when interest component is higher than principal outgo.


While the above order reflects best possible way in which loans should be repaid, it could differ from one individual to other, based on interest rate and other factors. It is suggested that one should evaluate all aspects of existing loan to make a sound judgment.

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 Ways To E-Verify Your Income Tax Returns Within Minutes

Through with Income Tax filing and planning to send ITR-V to CPC, Bangalore?  Save yourself from this obligation as Income Tax Department has launched e-verification to do away with paperwork. Below are various methods described to successfully e-verify your returns. 

1) Electronic Verification Code (EVC) - EVC is a ten-digit code, which is generated before filing returns and is received on mobile number and email id of the taxpayer. After an individual uploads Income Tax Return on e-portal, he will get two options for EVC, i.e., 

First Option -  ”I already have an EVC to e-verify my return." 

Second Option - “I do not have an EVC, and I would like to generate EVC to e-verify my return." 

Under the first option, EVC received on mobile number and email ID should be entered and to successfully e-verify your returns. Second option is only available to taxpayers, whose income is below five lakhs and have not filed for a refund. Taxpayers with income above five lakhs will have to e-verify using other modes. 

2) Aadhaar OTP - E-verification through Aadhaar is possible only when mobile number is linked with Aadhaar, and both Pan and Aadhaar of a taxpayer is linked to the income tax site. Linking Aadhaar with e-filing portal is easy as taxpayer has to input Aadhaar number in the pop-up window while logging into account. After submission, OTP is sent to Aadhaar linked mobile number. It is to be noted that Aadhar OTP is valid only for 10 minutes. Hence it needs to be submitted within the given timeframe to e-verify returns. 

3) Netbanking - to e-verify through net banking, a taxpayer has to first log into his/her own online bank account and click on the “income tax e-filing” section. This will redirect the taxpayer to income tax website, where e-verification can be done by simply submitting request against the returns pending for e-verification for a given Assessment Year.   

4) Using Bank Account number - Taxpayers can e-verify by validating their bank account number on e-filling portal. Bank account details including Indian Financial System Code (IFSC) and other required details needs to be submitted, after which EVC is sent to email ID and mobile number. E-verification can be done using the code, and taxpayer should retain the system-generated message, which states that returns are e-verified. 

5) Using Demand Account number - Similar to bank validation, a taxpayer has to submit Demat a/c details in order to e-verify returns using this mode. By submitting information against depository type, DP ID, Client ID, and other relevant fields, taxpayers can generate EVC, which will be sent to the registered mobile number. 

Taxpayers can physically verify tax returns by sending ITR-V to Bangalore if none of the above options works. 

Physical ITR-V should be signed and sent through Post to -  Income Tax Department - CPC, Post Box No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka, India. 

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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Make A Choice Between Saving And Investing

Saving and investing are used interchangeably, but in reality, the two have distinctive roles to play when it comes to financial planning. Though both of these functions contribute to the future corpus, realizing the difference between the two is crucial to reap the benefits of a well-planned financial strategy.

Most of the times, people try to focus more on savings and fail to channel it into appropriate investment vehicles without realizing that it is only half job done. This calls for a need to demarcate the features and functions between the two so that savers can become investors and are aware of the fact that risking now is far better than putting everything on stake later. 

1. Risk - Risk is the key factor that draws a line between savings and investments. Any investment vehicle that guarantees the return of principal amount is categorized as a savings instrument. Bank deposits, fixed deposits, NSC or corporate deposits fall under this head whereas those avenues that aim to seek profits but also entail risk of losing principal amount are investment vehicles. Mutual fund investments, stocks, real-estate, forex are examples of investments.
2. Tenure of need - Savings works best when the need is short-term while it loses appeal over longer horizon. For instance, it is appropriate to park emergency funds into saving account or fixed deposit, but it would be unwise to leave retirement funds to sit into the same account. It will not be an exaggeration to state that retirement funds in a fixed deposit, or PF is another way to ensure that your retirement dream never comes true. 
3. Return - Investments, if done right, can fetch extraordinary returns versus savings by making your money work hard. For example, a fixed deposit could have returned an average of 9% to 10% returns while same amount, when invested in a stock, can deliver double returns. Savings seek interest but investments aim for profits and thus, higher return. 
4. Accessibility - Ease of access separates out investments from savings. Easier the access to funds, the higher likelihood that your money is working as mere savings and not investments. 
5. Inflation - Most  important factor to consider is how your money is encountering inflation effectively. Biggest drawback of savings is that interest earned is balanced out against inflation. So cash stacked at your home, money parked in bank deposits are not really working to benefit you but simply losing value with each passing day. On the other hand, investments strive to maximize wealth and aim to negate and grow beyond impact of inflation. 

What to Do Next?

Once these differences are clear, it’s time to pull out the statements and analyze if your money is really working or losing value. Do not fret if you discover that your savings urges did not evoke similar investment impulses as you can still make a difference by undoing the wrong.

If work is demanding and you find it difficult to set the ball rolling then reach out to a Financial Planner to help figure out things for you to help you become an informed investor from an assured saver.

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.

Image Source: tfl.guide.com

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