Wealthsane | The Power of Goal-Based Investing

The Power of Goal-Based Investing

Sachin Jain — Thu, 21 Nov 2024 12:07:03 +0000

Meet Ravi and Neha, a young couple who love making memories together. Whether it’s planning a dream vacation, saving for their first home, or ensuring their newborn’s future, they’re starting to realize that their dreams need more than just wishful thinking—they need a financial plan. The idea of goal-based investing entered their lives when Ravi’s friend suggested it at a weekend gathering. He explained that instead of saving randomly and hoping for the best, Ravi and Neha could create investments for specific goals. With this approach, each dream could have its own plan, making it far more achievable. Intrigued, they decided to look into it further. Financial planning isn’t just about managing your income; it’s about making sure that your hard-earned money is working for you and helping you reach your life goals.

Why Set Specific Financial Goals?

Think of goal-based investing as a GPS for your finances. When you input a destination on your GPS, it shows you the fastest, most efficient route to get there. Similarly, when you set a financial goal—whether it’s a new house, a comfortable retirement, or your child’s education—you get clarity on how much you need to save and the best way to do it.

For Ravi and Neha, setting specific goals helped them break down their big dreams into smaller, actionable steps. They now had three clear financial goals:

A Down Payment for Their Dream Home in the next five years.
Their Daughter’s Education Fund, to be ready in 18 years.
A Retirement Fund for when they both turn 60

The Power of Matching Investments to Goals

Once their goals were clear, the next step was choosing the right investments to match each one. Instead of treating all their savings the same, they divided their money based on each goal’s timeframe and purpose

Short-Term Goals (1-5 years): Buying a Home

Since they planned to buy a home within five years, Ravi and Neha needed a safe place to park their savings, but one that offered a little more growth than a regular savings account. They chose a balanced fund, which combines moderate growth potential with lower risk. This way, their home fund had the chance to grow steadily without much fluctuation.

2. Long-Term Goals (10+ years): Daughter’s Education and Retirement

For longer-term goals, like their daughter’s education and their own retirement, they could afford to take a bit more risk, as the money wouldn’t be needed for many years. They opted for equity mutual funds, which have shown good growth potential over the long run. This way, they’re likely to earn a higher return on their investments, allowing them to reach these larger goals more comfortably

A Story of Consistency and Patience

Once they set up these investments, Ravi and Neha’s lives didn’t change drastically. Every month, a portion of their salary went into each goal, just as if they were paying monthly bills. They didn’t have to worry about stock markets or interest rates—everything was automated.

The beauty of goal-based investing, they found, was in its simplicity. Each month, they knew they were steadily moving closer to their dreams. They could check in every once in a while to see how their goals were progressing, but mostly, they just let the plan do the work.

Avoiding Common Pitfalls

As the years passed, Ravi and Neha had moments of temptation. Sometimes, when the markets dipped, they thought about pulling money out of their long-term funds. Other times, when they saw friends splurging on big purchases, they considered dipping into their savings.

But having their investments linked to specific goals made it easier to stay disciplined. They weren’t just “saving money”; they were putting aside funds for a bigger purpose. This clarity kept them on track even when it would have been easy to stray.

The Results of Staying the Course

Years later, Ravi and Neha’s dedication began to pay off. When it came time to put a down payment on their home, they had the funds ready. As their daughter approached college, her education fund was growing just as they’d hoped. And as they looked toward retirement, their long-term investments gave them peace of mind, knowing they’d have a comfortable life in their golden years.

Goal-based investing transformed their approach to money. By matching each investment to a specific dream, they could enjoy their present while still building a secure future.

How Wealthsane Can Help You Achieve Your Financial Goals..

Setting financial goals is one thing, but understanding how to allocate your money for each goal? That can feel overwhelming. This is where Wealthsane steps in. Just as we learned from the experience of Ravi and Neha, our goal at Wealthsane is to help you identify, prioritize, and invest smartly for each life goal.

Here’s how we do it:

Personalized Goal Planning: We begin by understanding what matters to you, whether it’s a comfortable retirement, your children’s education, or something else entirely. With a tailored approach, we align your investments to fit your unique financial priorities and timelines.

Smart Investment Choices: With Wealthsane, you don’t have to navigate the financial world alone. We recommend funds and investment strategies that match each goal’s timeframe, risk level, and growth potential, helping you stay on track without needing constant monitoring..

Regular Check-Ins and Adjustments: Life is unpredictable, and financial goals may shift over time. Wealthsane provides ongoing support to help you adjust your investments as needed, ensuring that each goal stays aligned with your evolving life circumstances

A Partner in Financial Discipline: One of the hardest parts of goal-based investing is sticking to the plan. With Wealthsane, you have a partner to guide you and offer expert advice during market ups and downs, helping you stay consistent and confident.

Goal-based investing can be a game-changer for those wanting more from their savings than just an account balance. It’s about building a clear, secure, and meaningful path to the future you envision. At Wealthsane, we’re here to support you at every step—because we believe in making your dreams a reality, one goal at a time.

We are AMFI Registered Mutual Funds Distributors & Top Tax Consultants based out of Thane

Financial Planning for Doctors

Sachin Jain — Thu, 24 Oct 2024 12:07:33 +0000

As a doctor, your main focus is always your patients—helping them live healthier, happier lives. But while you spend so much time caring for others, it’s important to remember to take care of your own financial health too. After all, building a secure financial future doesn’t happen on its own—it takes planning. Financial planning isn’t just about managing your income; it’s about making sure that your hard-earned money is working for you and helping you reach your life goals.

Why Financial Planning Matters for Doctors

Irregular Income
Many doctors, especially those with their own practice or who work as consultants, deal with income that goes up and down. There might be months when your practice is booming and others when things slow down. This unpredictability can make it tough to manage day-to-day expenses, pay off loans, or save for the future.
For example, Dr. Neha, a cardiologist, experienced inconsistent income during her first few years of practice. To make things easier, she created an emergency fund, so she wasn’t worried about paying bills when things slowed down. Having this safety net gave her peace of mind, while her long-term financial plans focused on growing her wealth steadily.
Limited Time, Quick Decisions
With such busy schedules, many doctors don’t have the time to actively manage their finances. Often, the default choices are real estate or low-interest savings accounts, because they seem safe and familiar. But these options aren’t always the best fit for growing your wealth in the long run.
The key is to make your investments work smarter, not harder. That means looking for ways to balance your portfolio so that it fits both your financial goals and your lifestyle. At the same time, it’s a good idea to make sure your investments are tax-efficient. This way, you’re not only growing your money but also keeping more of it when tax season comes around.
Planning for Retirement
While doctors often work longer than most professionals, it doesn’t mean you shouldn’t plan for your retirement early on. Medical practice can be physically and emotionally demanding, and eventually, you’ll want to slow down or retire altogether.
Building a retirement fund that grows over time will give you the freedom to decide when you’re ready to step back. Whether it’s through mutual funds or other long-term investments, the goal is to ensure that when you’re ready to retire, your money is still working for you.
Leaving a Legacy
Many doctors dream of leaving a legacy, whether it’s supporting charitable causes, setting up a clinic, or simply securing their family’s future. Without a proper plan, these goals can be hard to achieve.
Thoughtful financial planning helps ensure that your wealth is distributed according to your wishes. It also helps minimize taxes on your estate, so you can leave behind something meaningful for your loved ones or the causes you care about.

Why Wealthsane?

At Wealthsane, we understand the unique challenges that doctors face when it comes to managing their finances. Our goal is to help you grow your wealth while keeping things simple and efficient. We’ll guide you through creating a plan that fits your life, whether it’s managing irregular income, planning for retirement, or achieving your other financial goals.

With our expertise, you’ll be able to focus on what you do best—taking care of your patients—while knowing your financial future is in safe hands.

We are AMFI Registered Mutual Funds Distributors & Top Tax Consultants based out of Thane

Systematic Withdrawal Plans (SWP)

Sachin Jain — Mon, 14 Oct 2024 12:00:28 +0000

After dedicating years—whether it’s 10, 15, or even 20—to diligently accumulating a substantial Mutual Funds corpus, the time has come to reap the rewards. You’ve worked hard to build that nest egg, and now you want to enjoy the fruits of your labor without depleting your savings all at once. Enter the Systematic Withdrawal Plan (SWP). This powerful tool allows you to withdraw money systematically while ensuring that your investments continue to grow.

How Does SWP Work?

Let’s say you have accumulated ₹3 crore through your mutual fund investments via regular SIP & Lumpsum investments and want to withdraw money for your usage, you can use SWP to do that. Here’s how it works:

Choose Your Amount: Decide how much you want to withdraw each month. For instance, let’s say you want to withdraw ₹1 lakh every month.

Pick Your Frequency: You can choose how often you want the money—monthly, quarterly, or annually. We’ll go with monthly.

Automatic Withdrawals: Every month, ₹1 lakh will be withdrawn from your mutual fund investment & hit your bank account at your desired date.

Keep Growing: The remaining money will stay invested, giving you the potential for further growth, even while you’re taking money out

Why is SWP a Great Choice?

SWPs come with several benefits that make them a valuable tool in your financial plan. Let’s break down some of these advantages:

1.Consistent Income

Imagine being retired and enjoying your golden years without worrying about monthly expenses. With an SWP, you can ensure that you receive a reliable income. If you’ve accumulated ₹3 crore and withdraw ₹1 lakh each month, that amounts to ₹12 lakh annually—providing a comfortable lifestyle while still having money invested.

2. Tax Efficient

A key advantage of Systematic Withdrawal Plans (SWPs) is their tax efficiency. Withdrawals from equity mutual funds held for over a year are subject to long-term capital gains tax (LTCG) at 12.5% on gains exceeding ₹1 lakh annually.

Since each withdrawal consists of both capital gains and principal, only the gains portion is taxed. For example, if you withdraw ₹1 lakh monthly, only ₹30,000 may be taxed as a gain, with the remaining ₹70,000 being tax-free principal. This makes your overall tax burden significantly lower.

3. Flexibility

Life is unpredictable, and your financial needs can change. SWPs allow you to adjust your withdrawals based on your current needs. For instance, if you plan a vacation in December, you can temporarily increase your monthly withdrawal for that month and adjust it back down afterward. This flexibility can be a lifesaver when managing your finances.

4. Ongoing Growth

With SWP, your remaining investments continue to grow. If you’re withdrawing ₹1 lakh every month but your investment earns an annual return of 10%, your investment can keep growing, providing a cushion against inflation and ensuring that you have enough for the future.

SWP vs Traditional Withdrawals

You might wonder why you should choose an SWP over just redeeming units whenever you need cash. Here’s where the discipline comes in: HDFC Flexi Cap through the crashes of 2000, 2008, 2013, and 2020 saw their patience rewarded handsomely. The lesson here? Don’t let short-term market movements shake your long-term vision

Consistency: An SWP provides a structured approach to withdrawals. You don’t have to worry about market timing or whether it’s a good time to sell.
Tax Efficiency: By spreading your withdrawals over time, you can avoid triggering higher tax liabilities associated with large lump-sum withdrawals as explained above.

Who Should Consider SWP?

SWP can benefit a variety of investors. Here are some groups who might find it particularly useful:

Retirees: If you’re enjoying your retirement, an SWP can provide that regular income to maintain your lifestyle while your investments continue to grow.

Individuals Planning Major Expenses: Whether it’s a child’s education, a wedding, or a dream vacation, SWP can help you plan for significant expenses without liquidating your investments all at once.

People with Variable Income Needs: If your income fluctuates, an SWP can help you manage your cash flow. For example, freelancers or business owners can use SWPs to maintain a steady income during lean months.

Long-term Investors: If you believe in the power of compounding and want to keep your money invested for growth while enjoying some liquidity, SWP strikes a balance between accessing funds and allowing for investment growth.

Investors Looking for Financial Discipline: If you tend to overspend when you have lump sums of money, an SWP can help instill financial discipline by providing a steady income while limiting the temptation to spend too much at once.

Summarizing

A Systematic Withdrawal Plan (SWP) can be a powerful tool for managing your finances, offering the benefits of regular income, tax efficiency, flexibility, and ongoing growth. Whether you’re planning for retirement, looking to fund significant expenses, or simply want to manage your investment returns, SWP provides a structured approach that can help you achieve your financial goals without the stress of liquidating your entire portfolio.

So, whenever you accumulate some corpus in Mutual funds, don’t rush to take it out, unless you need all of them, rather use SWP to withdraw systematically & enjoy the fruits of your labor, Your future self will thank you!

At Wealthsane, we understand that each client has unique needs and goals. That’s why we specialize in managing SWPs tailored to various purposes—from ensuring a comfortable retirement to funding your child’s education and everything in between. Let us help you navigate your financial journey and make your investments work for you!

SIP Success: The Journey from ₹10,000 to ₹20 Crore Over Time

Sachin Jain — Wed, 18 Sep 2024 13:19:59 +0000

Get ready to be amazed! A monthly SIP of ₹10,000 in the HDFC Flexi Cap Fund, started in 1995, has now grown into a mind-blowing ₹20.42 crore. Yes, you read that right—₹20 crore! With a phenomenal 21% CAGR, this is the power of long-term investing at its finest. It’s not just about numbers—it’s a real-life example of how patience and discipline can create unimaginable wealth. Achieving 21% annual growth over nearly three decades is nothing short of extraordinary. This is the magic of compounding in action, and it’s a rare achievement in the investment world.

There are a 4 few powerful lessons to take from this:

1) Time is Your Best Friend:

This journey took about 29 years. The key takeaway? Start investing as early as you can and keep at it. The longer you stay invested, the more you allow your wealth to grow

2) SIP Brings Discipline:

Systematic Investment Plans (SIPs) are the best way to invest in mutual funds. They take the guesswork out of when to invest and instill the discipline needed to grow your wealth steadily. With SIPs, you’re consistently investing, regardless of market conditions, which can lead to better long-term outcomes.

3) Patience is Everything:

It’s tempting to cash in when your portfolio looks good, but here’s the thing: no one knows when the market will dip or surge. Some investors redeem their funds, planning to reinvest when prices drop, but there’s no guarantee that you’ll get a better entry point. Those who stayed the course with HDFC Flexi Cap through the crashes of 2000, 2008, 2013, and 2020 saw their patience rewarded handsomely. The lesson here? Don’t let short-term market movements shake your long-term vision

4) Apply this to your own situation:

Not everyone has 29 years to invest, but that’s okay. The point is to invest for as long as you possibly can. The more time you give your investments to grow, the better your results will be.

We are sharing this with you because we have seen firsthand the power of sticking with your investments. It’s not always easy to ride out the ups and downs, but the rewards of staying invested can be truly life-changing. Let your money work for you—over time, it can grow beyond your expectations.

Ready to build your own success story? Start today.

If you’re interested in investing in mutual funds, our team is here to guide you.

How can STEP UP SIP help you reach your Financial Goals Faster?

Sachin Jain — Mon, 09 Sep 2024 07:21:35 +0000

Step-Up SIP is an enhanced version of the regular Systematic Investment Plan (SIP), where you gradually increase your investment amount over time. Typically, in a regular SIP, you invest a fixed amount every month. However, with a Step-Up SIP, you raise your SIP contribution by a certain percentage, say 10%, every year.

Why Consider a Step-Up SIP ?

Align Your Investments with Your Growing Income: As your income increases, your financial goals may become more ambitious. Whether it’s planning for a child’s education, a bigger home, or an early retirement, a Step-Up SIP ensures your investments grow along with your aspirations.
Stay Ahead of Inflation: You know how inflation can erode the value of money over time. By increasing your SIP contributions regularly, you’re not just keeping pace with inflation—you’re staying ahead of it, ensuring that your wealth continues to grow in real terms.
Maximize the Power of Compounding: The more you invest, the more you benefit from compounding. Even a small increase in your SIP amount can significantly boost your returns over the long term. It’s like giving your existing SIP a turbocharge!

The Impact of a 10% Step-Up SIP Over 15 Years

Let’s consider the following scenario:

Initial SIP Amount: ₹10,000 per month
Investment Duration: 15 years
Expected Rate of Return: 12%* per annum
Step-Up Percentage: 10% annually

Scenario 1: Constant SIP (No Step-Up)

Monthly SIP: ₹10,000 (constant)
Corpus After 15 Years: ₹50.6 Lakhs

Scenario 2: 10% Step-Up SIP

Starting Monthly SIP: ₹10,000
Year 2 SIP: ₹11,000
Year 3 SIP: ₹12,100
…and so on, with a 10% increase each year.
Corpus After 15 Years: ₹98.9 Lakhs

The Difference

By simply stepping up your SIP by 10% each year, your corpus at the end of 15 years nearly doubles compared to a constant SIP. Corpus Difference: ₹48.3 Lakhs, That’s an additional ₹48.3 lakhs.

SIP vs Step up SIP (by 10%) returns difference in just 15 years

Why This Matters?

Just by gradually increasing your SIP contributions! This extra amount could be the difference between reaching your financial goals sooner or settling for less than you hoped for.

By opting for a Step-Up SIP, you’re making a smart, disciplined choice that aligns with your growing financial capacity. It’s a simple change, but the impact over time can be significant.

Ready to Maximize Your Investments?

If you’re interested in setting up a Step-Up SIP, we are here to guide you through the process and make sure your investments are working as hard as you do.

TDS on purchase of property | Form 26 QB filing | Section -194IA

Sachin Jain — Mon, 02 Sep 2024 12:46:03 +0000

When purchasing immovable property (such as a building, part of a building, or land, excluding agricultural land) where the sale consideration exceeds ₹50 lakh, the buyer must deduct tax at source (TDS) at the time of payment to the seller.

Let us understand the key points

TDS Rate: The buyer is required to deduct TDS at 1% of the total sale value.
Threshold: TDS is applicable only if the total purchase value exceeds ₹50 lakh.
Installment Payments: If the payment is made in installments (common in under-construction properties), TDS must be deducted on each installment paid.
Inclusive Consideration: The sale consideration includes all additional charges like club membership fees, car parking fees, electricity or water facility fees, maintenance charges, advance fees, or any other charges incidental to the transfer of the property.
TDS on Full Amount: Importantly, TDS is calculated on the entire purchase value, not just the amount exceeding ₹50 lakh. For example, if the property is purchased for ₹65 lakh, TDS must be deducted on ₹65 lakh, not just on ₹15 lakh (i.e., ₹65 lakh minus ₹50 lakh). This applies even if there is more than one buyer or seller.
No TAN Requirement: If the seller is a resident of India, the buyer is not required to obtain a Tax Deduction Account Number (TAN) to deposit the TDS.
PAN Requirement: The buyer must obtain the seller’s valid PAN for TDS deposit. Without the seller’s PAN, TDS must be deducted at a rate of 20%.
Timing of TDS Deduction: TDS should be deducted at the time of payment to the seller, including installment payments.
Form 26 QB : Form 26QB is a challan cum return statement that is required to file for the deposit of TDS on the property.
Payment of TDS: The TDS must be paid to the government using Form 26QB within 30 days from the end of the month in which the TDS was deducted.
Issuance of TDS Certificate: After depositing the TDS, the buyer must furnish the TDS certificate (Form 16B) to the seller. Form 16B can be obtained from the TRACES portal within 7-10 days after the TDS payment.

Consequences of Non/Late Filing of TDS Statements

For Buyer of Property:

Late Filing Penalty: If Form 26QB is not filed on time, a fee under Section 234E of the Income Tax Act will be levied. The buyer will incur a late fee of ₹200 per day for each day the default continues.
Additional Penalties: The buyer may also be liable for penalties related to late deduction, late payment, and interest thereon. A penalty under Section 271H may also be imposed by the Assessing Officer.

For Seller of Property:

TDS Credit: The seller will not be able to claim TDS credit if Form 26QB is not filed or is filed late.

Penalties/Late Fees/Interest on Non-Filing of Form 26QB

Non-Deduction of TDS: If TDS is not deducted, the penalty is 1% per month from the due date of deduction until the actual deduction.
Non-Payment of TDS: If TDS is deducted but not paid to the government, the penalty is 1.5% per month from the date of deduction until the date of payment to the government.
Late Submission of Form 26QB: If Form 26QB is not submitted or is delayed, a fine under Section 234E may be imposed at ₹200 per day until the form is submitted. This fine is in addition to any interest accrued.

You can also refer to a popular, old but relevant video of Miss Rounak Jain to understand the TDS on purchase of Property. Click on the image

Why Job Changes Can Lead to Higher Tax Liability?

Sachin Jain — Wed, 21 Aug 2024 07:59:54 +0000

Changing jobs brings new opportunities as well as challenges, especially financial ones. A common issue we've seen in this year's ITR filings is that clients with multiple Form 16s end up with higher tax liabilities. This isn't due to job changes themselves but because both the previous and new employers may under-deduct TDS, resulting in more in-hand salary than expected. Consequently, you'll need to pay the additional tax, along with interest, when filing your ITR. Let's understand this scenario in detail

Understanding Form 16

Form 16 is a certificate issued by an employer detailing the total amount of salary paid to an employee and the tax deducted at source (TDS) on that salary. It is crucial for filing your income tax return (ITR) as it serves as proof of the taxes you’ve already paid.

The Problem with Multiple Form 16s

When you change jobs within a financial year, you receive a Form 16 from each employer. While each employer deducts TDS based on the salary paid during their tenure, they may not account for your total income for the entire year. This can lead to under-deduction of TDS.

Here’s why this happens:

Different Employers, Different TDS Calculations: Each employer calculates TDS based on the salary they pay you, assuming that you will stay with them for the entire financial year. If you switch jobs, the new employer starts the calculation afresh without considering the income from the previous employer.
Standard Deduction and Tax Slabs: Both employers give you the benefit of standard deduction and apply tax slabs as if the salary they are paying is your only income for the year. This can result in a lower TDS being deducted than what is actually required.

By early planning & investing, you can ensure that your savings grow at a rate that outpaces inflation, preserving the purchasing power of your money over time.

Example Scenario

Let’s say you worked with Company A from April to September and then joined Company B from October to March. Both companies deduct TDS considering their respective payment periods. However, your total income for the year is the sum of salaries from both companies. Since each company doesn’t have a complete picture, TDS might be deducted at a lower rate than necessary.

Consequences of Under-Deducted TDS

Higher Tax Liability at Year-End: When you file your ITR, you may find that you owe additional taxes because the TDS deducted was insufficient.

Interest and Penalties: Under Section 234B and Section 234C of the Income Tax Act, you may have to pay interest on the unpaid tax liability due to under-deducted TDS.

How to Manage Multiple Form 16s

Inform Your New Employer: When you join a new company, inform them about your previous employment and provide them with details of your previous salary and TDS. This will help them calculate TDS more accurately.

Submit Form 12B: You can submit Form 12B to your new employer, which contains details of your income from the previous employer. This ensures that your new employer deducts TDS considering your total income for the financial year.

Review Your Form 26AS: Form 26AS is a consolidated statement of your tax deducted and deposited. Regularly review this form to ensure that TDS has been correctly credited to your account.

Estimate Your Total Income: Calculate your estimated total income for the financial year and determine the approximate tax liability. Compare this with the TDS deducted by both employers and pay any advance tax, if required, to avoid interest and penalties.

Conclusion

While job changes can offer great career growth, they also bring financial responsibilities, especially when it comes to managing taxes. By being proactive and ensuring accurate TDS deductions, you can avoid the shock of a higher tax liability at the end of the financial year

7 Reasons to plan for your Child Education as early as possible

Sachin Jain — Fri, 21 Jun 2024 13:12:27 +0000

Darshana and Ganesh (name changed), our recently added income tax clients, took a ₹50 lakh education loan this year to send their daughter abroad for higher education. Mr. Ganesh, who is 56 and likely to retire in the next 2-3 years, regrets not planning earlier and investing towards her daughter’s higher education. This would have reduced the need to borrow such a large amount, especially when his priority now is saving for retirement.

Like Mr. Ganesh, many Indians aspire to send their children abroad for higher education. When that isn’t feasible, they strive to provide their kids with the best possible education here in India. While every parent wants to give the best opportunities to their children, planning for these opportunities often takes a backseat to life's other demands. It’s a sad reality that very few people actually plan and invest with such a vision.

Let's us today understand the potential benefits of early planning and investing for your child’s education

Inflation:

It’s a well-known fact that the cost of goods and services increases over time due to inflation. However, when it comes to education, the rise is significantly higher than the average inflation rate.

Consider the following data:

Field of Professional Education	2009 (fees)	2024 (fees)
MBA	5.89	24.61
Engineering	2.05	8.55
Medical	16.97	70.88

According to this study, the cost of pursuing professional education courses such as MBA and Engineering in India has risen sharply over the last decade. The expenses for similar courses abroad are even higher.

Why Education Costs are Rising?

Indian educational institutions, driven by limited supply and high demand, possess significant pricing power. As a result, their fees are expected to continue increasing over the next 10-20 years. This trend should not come as a surprise.

By early planning & investing, you can ensure that your savings grow at a rate that outpaces inflation, preserving the purchasing power of your money over time.

2) The Uncertainty of Life

Life is unpredictable. What we earn today might not be the same tomorrow. Economic downturns, deteriorating health conditions, and unforeseen circumstances can put brakes on our earnings and, eventually, on our child’s aspirations. In such an uncertain world, having an investment plan can significantly mitigate these risks and secure your child’s future.

3) Reduced Stress and Anxiety

Financial planning for education in advance reduces the stress and anxiety associated with sudden large expenses. It allows you to manage your finances more effectively, without compromising on other financial goals such as retirement planning.

4) Better Loan Management

If loans are still necessary, early planning can reduce the loan amount and make repayment more manageable. Smaller loans mean less interest over time, and a more secure financial future for both you and your child.

5) Teaching Financial Responsibility

Involving your children in the planning process can teach them valuable lessons about money management, the importance of saving, and financial responsibility. This can set them up for a financially prudent future

6) Compounding:

By starting your investment early in instruments like Mutual Funds, you can take advantage of compounding interest, allowing your investments to grow significantly over time. This reduces the amount you need to save each month compared to starting later

7) Flexibility in Educational Choices:

With a well-funded education plan, your child has the freedom to choose the best educational institutions, whether in India or abroad, without financial constraints limiting their options.

Take Action Now

Investing in your child’s education is not just about securing their future but also about ensuring your own financial well-being. Start planning and investing early to maximize these benefits and provide the best opportunities for your child without compromising your financial stability.

Remember, the best time to start was yesterday. The second-best time is now. Take the first step towards a secure educational future for your child and a worry-free retirement for yourself.

Schedule a 30 minutes appointment with us to create a investment plan for your child education

Types of ITR forms for filing income tax returns

Sachin Jain — Fri, 07 Jun 2024 14:49:09 +0000

There are currently seven different ITR forms: ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7. Each taxpayer must file their ITR every year before the due date, which is July 31st. The specific form a taxpayer needs to use depends on their income sources, total earnings, and classification (such as individual, Hindu Undivided Family (HUF), or company). Let's take a closer look at these forms:

1) ITR-1 OR SAHAJ

This IT return form is to be used by a resident individual whose total income for the year includes:

Income from Salary or Pension
Income from One House Property (excluding cases where a loss is carried forward from previous years)
Income from other Sources (excluding winnings from lottery and income from race horses)
Agricultural income up to Rs 5000

Who cannot file ITR-1 ?

Total income exceeding Rs 50 lakh
Agricultural income exceeding Rs 5000
Taxable capital gains
Income from business or profession
Income from more than one house property
Directorship in a company
Investments in unlisted equity shares at any time during the financial year
Ownership of assets (including financial interest in any entity) outside India, including signing authority in any account located outside India
Resident not ordinarily resident (RNOR) or non-resident status
Any foreign income
Tax deducted under Section 194N
Deferred payment or deduction of tax on ESOP
Brought forward loss or loss to be carried forward under any income head

2) ITR-2 | who can File?

This IT return form is to be use by an individual or a Hindu Undivided Family (HUF) whose total income for the year includes:

Income from Salary or Pension
Income from One House Property (excluding cases where a loss is carried forward from previous years)
Income from Other Sources (excluding winnings from lottery and income from race horses)
Agricultural income up to Rs 5000

Who cannot file ITR - 2 ?

This Return Form is not applicable for individuals whose total income for the year includes Income from Business or Profession. For reporting such income, you may need to utilize either ITR-3 or ITR-4.

3) ITR-3 | Who can file?

ITR-3 Form is intended to be used by those individuals or Hindu Undivided Families who are having income from a proprietary business or who engaged in a profession. Individuals falling under the below mentioned categories are eligible to file ITR-3:

Those engaged in a business or profession required to maintain books of accounts and/or undergo auditing
Individuals serving as Directors in a company.
Individuals who have made investments in unlisted equity shares at any point during the financial year.
The return may encompass income from House property, Salary/Pension, and Income from other sources.
Income derived from a person’s partnership in a firm.

4) ITR 4 or Sugam | Who can file?

The current ITR-4 form is applicable to individuals, Hindu Undivided Families (HUFs), and Partnership firms (excluding LLPs), who are residents and whose total income includes:

Business income under the presumptive income scheme as per sections 44AD or 44AE
Professional income under the presumptive income scheme as per section 44ADA
Salary or pension income up to Rs 50 lakh
Income from one house property, not exceeding Rs 50 lakh (excluding any brought forward loss or loss to be carried forward)
Income from other sources, with income not exceeding Rs 50 lakh (excluding income from lottery and race horses)

It’s important to note that individuals earning income from the above mentioned sources as freelancers can also choose the presumptive scheme if their gross receipts are not more than Rs 50 lakhs.The presumptive income scheme under sections 44AD, 44AE, and 44ADA is when an individual or entity opts to calculate its income based on a presumed minimum rate, typically a percentage of gross receipts or turnover in case of 44AD.44ADA, or based on the ownership of commercial vehicles in case of 44AE. However, if the business turnover exceeds Rs 2 crore, the taxpayer must file ITR-3.

Who can not file?

If your total income exceeds Rs 50 lakh,
If you receive income from more than one house property,
If you possess any foreign assets,
If you hold signing authority in any account located outside India,
If you earn income from any source outside India,
If you serve as a Director in a company,
If you have invested in unlisted equity shares at any time during the financial year,
If you are a resident not ordinarily resident (RNOR) or non-resident,
If you have foreign income, If you are assessable for the income of another person for which tax is deducted at the source in the hands of that person,
If tax payment or deduction has been deferred on Employee Stock Ownership Plans (ESOP),
If you have any brought forward loss or loss that needs to be carried forward under any income head.

5) ITR-5

ITR-5 is meant to be filed by the entities such as firms, LLPs (Limited Liability Partnerships), AOPs (Association of Persons), BOIs (Body of Individuals), Artificial Juridical Persons (AJPs), Estates of deceased individuals, Estates of insolvent individuals, Business trusts, and investment funds.

6) ITR-6

For companies other than those claiming exemption under section 11 (Income from property held for charitable or religious purposes), this return must be filed electronically only.

7) ITR-7

For individuals and entities, including companies, required to submit returns under section 139(4A), 139(4B), 139(4C), 139(4D), 139(4E), or 139(4F):

Return under section 139(4A) must be filed by any person receiving income derived from property held under trust or other legal obligation, wholly or partly for charitable or religious purposes.
Return under section 139(4B) must be filed by a political party if its total income exceeds the maximum amount not chargeable to income tax, without considering the provisions of section 139A.
Return under section 139(4C) must be filed by:
- Scientific research associations
- News agencies
- Associations or institutions referred to in section 10(23A)
- Institutions referred to in section 10(23B)
- Funds, institutions, universities, educational institutions, hospitals, or medical institutions.
Return under section 139(4D) must be filed by universities, colleges, or other institutions not required to submit returns of income or loss under any other provision.
Return under section 139(4E) must be filed by every business trust not mandated to furnish a return of income or loss under any other provision.

Return under section 139(4F) must be filed by any investment fund referred to in section 115UB, not obliged to furnish a return of income or loss under any other provision

Key Points to take way

Due Date: All taxpayers must file their ITR before July 31st each year.
Form Selection: The correct form depends on the taxpayer’s sources of income, total income, and classification (individual, HUF, company, etc.).

To file your ITR for FY 2023-24!

Schedule FA- Effect of Non-Disclosure of Foreign Assets while Filing ITR & Black Money Act

Sachin Jain — Tue, 28 May 2024 13:14:12 +0000

All the residents and ordinary resident of India as per income tax act, HUF, NRIs (specifically those who Returned to India and now resident), Foreign Citizens (OCIs, PIOs, Others), who either returned back to India on permanent basis or come to India for a longer duration of time and become Tax Resident in India as per NRI Income Tax rule of based on the number of days they reside in India. Once these NRIs, Foreign Citizens become Tax Residents in India, they are liable for fair and true disclosure of Foreign Assets and Income in a section called Schedule FA while filing their income tax returns in India. In case if it is not done, they might attract the penalty provisions of income tax act hence, it is very important to understand the disclosure of Foreign Assets and Income and its Implications on Returning NRIs/Other Tax Residents.

Requirement of schedule FA

As per the Indian tax act 1961, every ordinary tax resident individual who owns any kind of Foreign Assets inclusive of but not limited to Bank Account, Foreign Shares, Foreign Mutual Funds, Immovable Property Outside India or any other Foreign Asset, then it is mandatory for such individual to properly disclose all the information pertaining to such assets in schedule FA while filing his ITR.

If an individual has invested in any foreign assets (being shares or mutual funds in a foreign company, etc.) directly or holds stock options (ESOPs) of foreign companies, even then it is mandatory for such individual to fill schedule FA of his ITR.

What is The Black Money Act?

Black Money (Undisclosed Income and Assets) and Imposition of Tax Act, 2015 enforced in 2015. However, in recent 2-3 years, the tax authorities (Foreign Assets Investigation Unit ‘FAIU’), who are entrusted to investigate and implement the proceedings of Black Money Act, has started sending notices for non-compliances of this Act.

• Section 43 of Black Money Act empowers authorities for penalty for non-disclosure of foreign assets detail in ITR.

• Its provisions are applicable on Resident Individual i.e. Individual who is ordinary tax Resident of India.

• As per this provision, it is mandatory to provide information of foreign assets outside India while filing the ITR.

• Failure to disclose foreign assets in ITR – A penalty of Rs 10 Lacs per year i.e. the year in which the foreign assets were not reported in ITR. If non-disclosure is in more than one year, then Assessing Officer can levy penalty for each defaulting year.

• Further to above, section 3 of Black Money Act empowers to levy of tax on undisclosed Income or Foreign Asset. It provides straight tax @30%(Maximum marginal rate) on undisclosed Income or Foreign Asset.

• Further, as per section 41 of Black Money Act, if there is any taxes levied under this Act because of non-disclosure of income or Foreign assets, then a penalty of three times of the tax amount shall be levied as penalty. Hence, if any amount is found undisclosed under this Act, then total of 120% (30% plus 3 times of the tax amount) of that amount is payable under this Act.

Foreign Assets Investigation Unit (FAIU) – Proceedings To Investigate Foreign Assets Transactions

Income Tax Department has set up a separate department in all major cities of India to investigate the Foreign Assets Transactions. It is named as Foreign Assets Investigation Unit (FAIU). It is headed by an officer of Deputy Director of Income Tax (DDIT).

• The FAIU Department receives data from various sources (including foreign country income tax department under the agreement with that country for information exchange) eg. FATCA.

• When this department has reasons to believe that Foreign Assets information is not disclosed or disclosed incompletely/inaccurately, the FAIU Office can issues summon under section 131 of Income Tax Act to initiate the investigation.

• On receipt of the information from the foreign counterpart the FAIU office prepares a report and submit the same to higher authorities and on their approval, FAIU finalizes its findings.

• Many of NRIs/OCIs are also receiving notices u/s 131. Reason for the same is, FAIU gets foreign assets information however there is no ITR filed by these NRIs/OCIs, which gives reason to FAIU office to initiate an enquiry. Hence, for NRIs/OCIs, ITR filing is highly recommended to avoid this summon or other type of notices.

• If there are negative findings then proceedings of Black Money (Undisclosed Income and Assets) and Imposition of Tax Act, 2015 are initiated by this office to levy & collect penalty and taxes.

Note-Though provisions of foreign asset disclosures under Income tax act 1961 are not applicable to NRIs/OCIs living abroad. However, Income Tax Department (FAIU) gets information from the tax officials of foreign countries (under mutual information exchange clause of Tax Agreements between countries) and also some other sources. Hence, when there is no ITR filed by these NRIs/OCIs, then to confirm, FAIU issues notice to NRIs/OCIs. Hence, it is advisable for NRIs/OCIs that they file ITR in India to submit their non-resident status with the Tax Department.
However If an individual has a foreign bank account(s) and balance in total of all said foreign bank account(s) does not exceed Rs 5 Lakh, then penalty under section 43 of the Black Money Act cannot be imposed even if such bank account was not declared in schedule FA.