Eight Simple Ways to Plan your Taxes.

The Inquisitive Minds, features guest authors who are interested to contribute to the readers of this blog and the author of this article is Ramalingam Kan MBA (Finance) and Certified Financial PlannerHe is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.  He has been a regular on this blog for a while now. If you would like to contribute something then please let us know on guest [at] melvinpereira.com.

You have got only a few more months to complete this financial year. Very soon you will get a call from your company to submit the proofs for tax saving investments. So why don’t you spend some time on organising your tax plan?

1)     Proper Allocation of Annual compensation

Restructuring your salary with some additional components can reduce your tax liability. This restructuring doesn’t require any additional cash outflow. The following components can be efficiently used to reduce your income tax liability.

v  Transport allowance to the extend of Rs.800 is exempt

v  Medical expenses which are reimbursed by the employer are exempt to the tune of Rs.15000

v  Food coupons like sodexo or ticket restaurant are exempt from tax up to Rs.60000

v  Individuals who are all living in a rented accommodation can include House Rent Allowance ( HRA ) as a part of their salary

v  Leave Travel Allowance (LTA) can be part of your salary as this can be claimed twice in a block of 4 years.

2)     Effective Utilization of Tax Exemption

As far as possible utilize the maximum exemptions available under section 80 C, 80 CCF and 80 D. The maximum exemption available under section 80 C is Rs. 100000.

Under this section Rs.100000 investment or contribution can be made in PPF, NSC, Life insurance premium, 5 year FD with banks and Post offices, Mutual Fund ELSS, Principal Repayment of housing loan, and the tuition fees paid for children’s education.

Under Section 80 CCF, you can invest up to Rs.20000 in infrastructure bonds.

Under Sec 80 D, the premium paid towards the mediclaim policies are exempt. The maximum limit of exemption is Rs.15000 and for senior citizens the limit is Rs.20000 and for covering senior citizen parents there is an additional exemption to the extend of Rs.15000.

3)     Properly Structure your Housing Loan

The Principal repayment of a housing loan is eligible for a deduction up to Rs.100000. The interest paid on a housing loan is eligible for a deduction up to Rs.150000. If the housing loan is for a sizeable amount, then it is possible that the principal repayment and interest may exceed the specified tax exemption limit. To utilise the maximum tax benefit, an individual can consider going for a joint home loan with his/her spouse or parent or sibling. This will make sure that both the co-owners can claim tax deductions in the proportion of their holding in the loan.

 4)     Tax Plan in Sync with Overall Financial Plan

You should not do your tax plan in isolation. You need to do it in sync with your overall financial plan. So a tax plan is not only to just save taxes and also it should assist you in achieving your other financial goals like children’s higher education, buying a home or retirement.

5)     Avoid Last Minute Rush

In fact the right time to do the tax plan is the beginning of the financial year. If you postpone your tax planning even now and do it in the last minute, then you will not be able to choose the right investment. In the last minute rush, you will be forced to choose a scheme which gives the proof immediately. Is the investment sound and profitable? Is there any other better options? You will not be able to choose the best scheme and you may settle with a mediocre one.

6)     Invest Some Quality Time

Before investing your money, you need to invest your time. You need to take some quality time to understand the various tax saving options and compare their benefits and limitations.

7)     Check for Future Commitments

Some tax saving options like NSC or ELSS need only onetime investment. Some other tax saving options like PPF, Ulips need periodical investments year after year. You need to be careful in choosing a tax saving scheme where you need to commit for periodical future payments. You need to check on a few things like; do you need such a future commitment? Will you be able to meet the future commitments at ease? The law may change and you may not get any tax exemption for your future payments. Would you consider the scheme irrespective of tax benefit for the future payments?

8)     Changed Your Job; Redo your Tax Plan

Did you switch your job in the middle of the financial year? Then you need to redo your tax plan with consolidating the income from both the companies. It is advisable to inform the new company about the income during the particular financial year from the old company. So that your new company will deduct the right amount of TDS. Otherwise you may need to pay extra tax at the end of the financial year.

Whenever you change your job, you need to have a sitting with your financial planner or tax advisor. So that the required changes in your tax plan can be done proactively. With proper tax planning you can reduce your tax liability; save more; invest better and become wealthier.

10 Things To Do Before You Retire

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in. If you want to write for us please send an email to me [at ] melvinpereira.com or get in touch with us at the contact page.

Don’t put off today what you can’t afford to do tomorrow. In spite of the world wide pension crisis and a growing acceptance that we must plan and save for our retirement, the harsh reality is we are actually not saving enough. Research reports reveal that only 15% of the individuals are saving sufficiently for their retired life. Here are a few tips on things to do before you retire so that your retired life is more comfortable and enjoyable.

Get Rid of All Your Debts

If you are taking a housing loan, personal loan, car loan or any other loan make sure that you will be repaying them on or before your retirement. You need to choose the term of the loan in accordance with your retirement age. You can enjoy your retired life when you have 100% financial freedom, not when you have to repay your loans.

Protect Your Emergency fund

Emergency expenses can happen any time. But the possibility goes up during the old age. So we need to enhance the emergency reserve year on year based on the inflation and change in your expense levels. Emergency fund will give you a sense of security and also you need not touch your other investments during emergency where you need to pay pre-closure penalty. Also don’t forget to refill the emergency fund once you met an expense out of emergency fund.

Establish a Retirement Budget

You need to visualize your retired life well in advance and need to create a budget for your retirement. That is you will not be going to office. So the expenses on transport and clothes may come down. Also you will have more time to spend. You may need to spend more on leisure travel and health care.

 

Examine Your Cash Flow

Take a close look at your cash inflow as well as outflow. Is there going to be any income after retirement? Like rent, royalty…. Would there be any unwanted outflow during retired life? Like paying life insurance, or SIP. At times during your beginning of the career , you could have taken a policy where you need to pay premium up to the age of 60. But now you may plan to retire at 55 itself. So you need to realign your existing policy and other investments in sync with your retirement age.

 

Grow Your Retirement Corpus

Find out how much corpus you need to have when you retire so that you will be having complete financial freedom. A professional financial planner will of great assistance to you in this regard.

 

Develop a withdrawal strategy

How are you planning to withdraw your cash outflow during retirement from the retirement corpus? Monthly, quarterly, half yearly or annually? Through Sytematic Withdrawal plan in mutual funds or by way of dividend or interest. All these will have a great impact on the corpus you need to accumulate. So you need to decide in advance.

 

Minimize taxes

Your retirement corpus and retirement income need to be tax efficient. You need to pay taxes as and when the fixed deposits matures irrespective of that you withdraw interest or reinvest under a cumulative option. But you need to pay interest only when you withdraw from the mutual funds. Careful selection of investment vehicle can reduce your tax during the retired life.

 

Get Sufficient Mediclaim coverage

The moment you retire, your employer will stop covering you under the group mediclaim. So you need to plan for your individual medical cover well in advance. At old age the medical expenses are inevitable. If you have not planned it properly the all your retirement plan will become a mess.

Consider Inflation adjusted annuities

The monthly income you need when you retire is not going to be the same even after 5 years of your retirement. Inflation will increase your retirement expenses year after year. So year after year your retirement income needs to go up.

Oversee estate planning

How your fixed assets and financial assets need to be distributed to your legal heirs? Create a WILL. You can avoid creating relationship problems to your next generation because of your left out wealth.

10 Technologies that will change the world in 2010

Of course technology is the  field that can be described in one word ‘Change’, without it innovations and new inventions in all the various fields of the world nothing would have evolved. From the wheel to the automobile, from fire to solar energy all aspects of our lives have been engulfed and enriched by this change in technology. So naturally like everyone who wants to have a good look at the future to be prepared, I want to check out the future technologies early so that I can adapt easily into the change and grow with it.

Well this is a bit late as most websites actually did this during the new year. In fact, I was resisting the urge to put up a list like this and at that time thought that it was not something I wanted to be covering, as nearly everyone else does it. However when MIT the cradle of innovation and technology brings out a list, it is something we should talk about. I wanted to just add in their list here for the benefit of the readers of my blog. So well here is the list from MIT Technology Review, reordered in the my list of importance, Green Concrete, Solar Fuels, Engineered Stem Cells, Light Tapping Photovoltaics, Implantable Electronics, Dual Action Antibodies, Cloud Programming, Social TV, Mobile 3D and Real Time Search are all in the list, lets see them in detail.

Continue reading 10 Technologies that will change the world in 2010

18 Uses for your Phone Camera as a tool

When the first camera phones were introduced we all said, “Why the heck would I need a camera phone?”. It will never replace my camera because the quality and clarity is really bad with the camera phones. More so now, that a lot of people are looking and slowly upgrading to SLR’s. So where is the need for the camera of the camera phone ? Well in the new technology world, the camera becomes a very handy tool for managing your life. In fact the camera serve a lot of functions making your life all the more easy. I have listed out a few below but then definitely there will be more uses, these few are enough to convince you take your camera phone around everywhere if you don’t already do so. Your camera may be a toy, but there’s no reason it can’t also be a tool. Continue reading 18 Uses for your Phone Camera as a tool

10 Websites that changed the Internet (India Edition)

Ever wonder what made the Internet the monster it is, starting only within the CERN research facility to now reaching nearly ever home with a computer ? Well it was the services and the websites that were there online. The more people saw value and entertainment, the more they got involved and more the internet grew. Influenced from the article here, I wanted to make a list of my 10 websites that actually made a difference to the Internet.

1. Geocities.com

Like a few million people around the planet, this was one of the sites that helped amateur web enthusiasts like me to enable my first attempt at making an online presence. I saw a lot of web pages, self learnt HTML from the pages and got to a stage where I wanted to really make a mark online. Unfortunately engineering in Instrumentation and Technology did not make it any easy to keep in touch with the internet. But it sure told a lot of us that making and keeping a website was not very very hard, and its a skill that can be learnt with a bit of patience and a liking for web design. However, amateurs like me are responsible for most of those ugly websites that started during the days of Geocities and exist even until this day. The internet bid farewell to this beauty last year. Geocities will be missed but the job is now taken on by a few websites out there like Google Sites, Tumblr etc

2. Wikipedia.org

With an intent to enable the entire world free access to knowledge, this was one of the real success stories of the Internet. I think the donation doors have time and again raised enough money to ensure that such a great resource as wikipedia stays alive and more importantly free. Giving a major competition to closed loop education and knowledge resources like the Microsoft Encarta Encyclopedia, this is one world class product and project that definately changed the internet. Did you know that you can download a copy of the latest backup version of wikipedia ? Check it out at this location for yourself. http://download.wikimedia.org/

3. Hotmail.com

India’s first big mark on the online world came from a relatively unknown guy then named Sabeer Bhatia, and what he did was not only did he give a face to email but also a big mark for startups that get bought up. Starting Hotmail with some investment from a venture capitalist this Indian American Entrepreneur sold Hotmail for about $400 Million to Microsoft. Hotmail generated the interest in people to actually go online and create the account for an Email Address. Later the major chunk of the emails was taken up by USA.net which converted to a paid service at which point people moved to Yahoo Mail or Gmail. This was the state in India at least.

4. Rediff.com / Indiatimes.com

Between the international players, India had some shining stars for web portals. Rediff.com and Indiatimes.com are two sites that are running successfully even today. Both the sites integrated the online news / mail / sports / entertainment sections so well that it seemed that a lot of people had accounts with Rediff or Indiatimes at one time. After the popularity of Gmail this is shifted a little bit. However quite a few friends of mine still use their Rediff account as their primary communication medium. Interestingly, these sites were the first news sites in India, additionally they added the other craze of India cricket with live scores etc. Other similar sites at that time were sify.com and Indya.com.

5.  Amazon.com / eBay.com

The entire eCommerce bubble I would say was fuelled by these websites. Amazon and Ebay showed how to legitimately make money and substantial amounts of it. They provided customers a lot of support for people who were looking for collectibles, home appliances etc. Interestingly they grew so big that there were individuals who survived by searching eBay and providing people who were looking for stuff from stamps and coins to electronics and real estate; all for a small premium. They provided people a platform to buy and sell things and make money with garage sales and second hand goods and make money without having to build their own website.

6. Youtube.com

You tube provided the missing piece to the expanding internet, Video. Vanity is one of the most famous things that gets people do unbelievable interesting or goofy things. You tube gave people an outlet to get their 15 minutes of fame. Be it by making their dog sing a song or perform bizarre stunts. However, it now is one of the most visited website on the planet. Providing millions of hours of entertainment to people with a lot of time on their hands and looking for entertainment. From movies to the present IPL, India is all over the You Tube.

7. Blogger.com


Blogger is an awesome platform that provides amateurs like me a platform to post their views about anything under the sun. Although I am not using Blogger anymore and have moved on to WordPress.com, it is still one of the first services with Live Journal that enticed users to blog and made the buzz on the blog-o-sphere. Blogger is not only easy to use but also allows users to monetize their blog by posting Google Ads on it. It is one of the services that encourages users to write and make money at the same time.

8. Facebook.com


There is no introduction required for facebook.com. Nearly everyone is hooked on to this magical website. Although there were earlier sites that encouraged people to network socially like orkut.com, hi5.com, friendster.com, facebook is the one that we can see taking over the internet. In fact it just surpassed Google as the most visited website within the U.S. Facebook not only revolutionized social networking, but also sharing photos, websites, videos, messaging, walling and the ever famous pokes.

9. Twitter.com


It is not something that can be comprehended in the world of blogging, websites etc, a website that restricts you to 140 characters is now taking the internet to the next phase of its evolution. The Mobile. Before twitter, Mobile internet was completely restricted to emails through exchange and messages and some websites that were wap friendly. But twitter along with good mobile hardware has just changed how people use the internet on their phones. This definately is worth the mention.

10. Google.com

The Search Giant that indexed the Internet and provided information to all people for free to be able to get around the vast and ever growing Internet. AdSense provided them with enough revenue for them to be able to provide a lot of services from the Google stables for free. Gmail, Google Earth, Google Docs, Google Maps, Google Sketchup, Google Picasa and many other services that we have come to love have all been born out of the revenue of AdSense. Google is one of the most loved and most visited single website on the world and they definately changed the Internet for good.

On a more personal note, the very first website that I had visited was unbelivable http://www.bharat-rakshak.com which is not as popular as one wold think, considering that they are almost like an unofficial website of the entire Indian Armed forces, the Army, Nave and the Air force. I was then looking for information related to getting to the NDA and this was one of the best resource, The internet was at a cyber cafe off Brigade Road in Bangalore and they were charging about Rs 140/- per hour, the internet connection was dial up and the one hour that my friend and I used the Internet we just browsed about 8 pages of that website.

10 Golden rules of using Facebook

or an other social network.

[tweetmeme] Facebook has crossed 400 Million users online, and with the addition of more people comes the risk of something going wrong, meaning unreliable people and scams, phishing, identity thefts and of course the self inflicted fails. The inclusion of location based services are not only making interesting applications but are providing information that might not be what you want to portray, this is something that is highlighted in the new service Please rob me which shows the empty homes based on the location based service of their owners.

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These threats can however be negated by the users as all of us love using Facebook, In fact these days you are nobody if you are not on Facebook ! Facebook, twitter and the sorts are making our lives not only more truthful but also a bit more entertaining with the regretful posts and updates by people. Here are 10 Golden rules to use our beloved sites:

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  1. Pay attention to what you are posting online especially concentrating on what images and videos you are posting online and the information you choose to publish.
  2. Avoid posting sensitive information, be it personal or even professional.
  3. Verify all your contacts and do not accept friend requests from people you do not really know.
  4. Be careful how you portray your company, organization or bosses online, you never know what will hit you if you bad mouth your employers.
  5. Try not to mix your business contacts with your friend contacts.
  6. Your personal information and profile should be visible to only those people who you want it to be visible to.
  7. Be careful about what you publish about others and untag yourself from anything negative posted about you.
  8. If ever you get the time, read the full privacy policy and the condition and terms of use of the social network you choose.
  9. Use privacy-oriented settings (check who can see your pictures, who can contact you and who can add comments)
  10. Deactivate location based services as they are a serious threat to not only your online privacy but also your physical privacy.

The story of stuff, we are just consumer numbers …

Its been about a year since someone sent me a viral video about the Story of Stuff, and I was enlightened, frightened, and motivated all at the same time. Historically, I have been a person who has spoken about made presentations about and actually published presentations about going green. And after seeing the video again, I realized that I am not doing nearly as much as I could be doing. The video attacks the linear economic model that our economy is currently based on. Some of the info. presented is new, a lot is repeat, but it’s brought together in a very clear and compelling way. You can download and watch the video also on their website http://www.storyofstuff.com/

From its extraction through sale, use and disposal, all the stuff in our lives affects communities at home and abroad, yet most of this is hidden from view. The Story of Stuff is a 20-minute, fast-paced, fact-filled look at the underside of our production and consumption patterns. The Story of Stuff exposes the connections between a huge number of environmental and social issues, and calls us together to create a more sustainable and just world. It’ll teach you something, it’ll make you laugh, and it just may change the way you look at all the stuff in your life forever. Since the film was posted, viewers in over 200 countries have visited the site over 7.5 million times. The Story of Stuff is more than a video cleverly explaining the life cycle of stuff. It’s a catalyst for awareness that gets people thinking about how all of our stuff is connected to environmental and societal issues.

Here is my list of 10 little and big things we can do, to make a change :

  1. Power Down: A great deal of the resources we use and the waste we create is in the energy we consume. Look for opportunities in your life to significantly reduce energy use: drive less, fly less, turn off lights, buy local seasonal food (food takes energy to grow, package, store and transport), wear a sweater instead of turning up the heat, use a clothesline instead of a dryer, vacation closer to home, buy used or borrow things before buying new, recycle. All these things save energy and save you money.
  2. Waste Less: There are hundreds of opportunities each day to nurture a Zero Waste culture in your home, workplace, community. This takes developing new habits which soon become second nature. Use both sides of the paper, carry your own mugs and shopping bags, get printer cartridges refilled instead of replaced, compost food scraps, avoid bottled water and other over packaged products, upgrade computers rather than buying new ones, repair and mend rather than replace … the list is endless!
  3. Talk to everyone about it: At work, your neighbors, in line at the supermarket, on the bus… A student once asked Cesar Chavez how he organized. He said, “First, I talk to one person. Then I talk to another person.” “No,” said the student, “how do you organize?” Chavez answered, “First I talk to one person. Then I talk to another person.”
  4. Make your voice heard: Write letters to the editor and submit articles to local press. In the last years, and especially with Al Gore winning the Nobel Peace Prize, the media has been forced to write about climate change. As individuals, we can influence the media to better represent other important issues as well. You could use your social networks like Facebook and Twitter for the same as well.
  5. Detox: Many of today’s consumer products — from children’s pajamas to lipstick — contain toxic chemical additives that simply aren’t necessary.
  6. Unplug: The average person watches TV over four hours a day. Four hours per day filled with messages about stuff we should buy. That is four hours a day that could be spent with family, friends and in our community.
  7. Park and Walk: Car-centric land use policies and lifestyles lead to more greenhouse gas emissions, fossil fuel extraction, and conversion of agricultural and wildlands to roads and parking lots. Driving less and walking more is good for the climate, the planet, your health, and your wallet.
  8. Change your light bulbs: Changing light bulbs is quick and easy. Energy efficient light bulbs use 75% less energy and last 10 times longer than conventional ones. That’s a no-brainer.
  9. Recycle your trash: Recycling saves energy and reduces both waste and the pressure to harvest and mine new stuff. Unfortunately, many cities still don’t have adequate recycling systems in place. In that case you can usually find some recycling options in the phone book to start recycling while you’re pressuring your local government to support recycling city wide.
  10. Buy Green: Shopping is not the solution to the environmental problems we currently face because the real changes we need just aren’t for sale in even the greenest shop. But, when we do shop, we should ensure our support businesses that protect the environment and worker rights.

I am sure you can think of many more uses of the same, the point is we need to do something. Anything.