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Personal Finance

I believe every aspect of personal finance is equally important. They work in conjunction. Yes, it can be overwhelming, but if you

Preeti Taneja

@ Entrepreneur | Posted 28 May, 2018 | Finance

Posted By: Preeti Taneja (Updated 29 May, 2018)

7 Tax-Exempted Incomes in India Every Savvy Investor Should Know About


Contrary to the popular belief, Indian tax law has always been extremely lenient to the tax payers. And this fact is clearer to all the savvy investors who, every year, manage to save a large part of their income tax by legal means.


Whether you’re an investor or not, belong to the middle-class or wealthy-class, if you’re a tax payer in India, it’s important you know about the ways around to save income tax.


Here are 7 types of income where you get exemption:


1. Savings account interest


Yes, while you were busy complaining about the low interest rate on your savings account, you might have totally forgone the fact that this type of income is totally tax-free. However, only a total of Rs 10,000 interest-income is exempted from the tax slab. So, say if your bank interest is Rs 15,000 in a year, you will be taxed on Rs 5,000.


2. Long-Term Capital Gains


This is something many people don’t know about. Under the current tax rules, your income from equities or equity mutual fund will be exempted if you have held that asset for more than one year. So your long-term capital gain will be tax free. After selling your holding, you will only have to pay taxes on the principal amount and not on the profit.


3. Partner Profit in a Firm


If you’re a stakeholder in a firm that’s bound by the partnership agreement, the profit you (and other partners) will get from here will be exempted from tax. Because the return of the firm is already assessed and taxed!


4. Interest on Government Instruments


One of the reasons why successful investors have government securities in large number in their portfolio is because of the tax benefits they get. From securities and bonds to savings and annuity certificates, the interest and premium on redemption of instruments issued by the government is totally tax-free.


5. Return from Life Insurance Policy


There’s more than one reason to have your life insurance done. The maturity amount that you receive as a benefit from the policy, after the end of the decided span, is exempted from the tax.


6. EPF Account Income


Your Employees’ Provident Fund is more than just a safety net for your bad days. The returns from EPF comes tax-free, provided you fall in the 30 percent tax bracket and that you’re taking out your money after 5 years of service. To be benefitted from this exemption, you’re going to have to stay at your day-job for about 5 years. Bummer.


7. Money as gift


If you’re getting money as gifts, you don’t have to pay tax on that amount. However, there are few limitations here. While if you’re getting the gift from family and relative there is not upper limit on the exemption. But if you’re getting it from someone else (say friends), only Rs 50,000 will be tax-free. The remaining would be taxed according to the slab you fall into.


These are 7 types of income that you don’t have to pay taxes on in India. Of course, there are few more avenues. Unsurprisingly, the government employees enjoy more benefits.


So start planning for the upcoming tax season. Find right ways to save your Income tax legally.


Posted By: Preeti Taneja (Updated 29 May, 2018)

10 most important things about personal finance a newbie should know about


I believe every aspect of personal finance is equally important. They work in conjunction. Yes, it can be overwhelming, but if you’re a beginner in this area, there are more than a handful of things you must keep in mind—at least to get the right results.


However, but since you have asked, here are 10 crucial personal finance tips that I wish someone gave to me a decade back when I started my first job:


i. Your salary is not sufficient


It’s imperative to have multiple sources of income. Because your salary, regardless how high it is, is not sufficient to survive and plan your future. So come up with better and different ways that will add more weight to your bank account.


ii. You must think about your retirement at the earliest


Many people undermine the importance of retirement planning (I was one of them!). But here’s a thing: you must start thinking about how you’re going you to survive after turning 50 at the earliest. You must set aside a plan and fund for when you’re retired. The late you start, the bigger the problem will be as you approach your 40s and 50s.


iii. Never undermine the medical cost


Medical treatments can (and will) take up a big part of your finance. Be it your own check-ups and treatments or your family’s. So, when planning your finance, do not undermine this aspect. Always set aside some amount of medical cost.


iv. Find ways to legally save on taxes


There are many legit ways you can save on taxes. So don’t try to avoid paying taxes (like many do). Don’t take any illegal means either. Just try to find out ways how you can save some money on your taxable amount. Consult an expert for this.


v. Stop saving in a bank


Yes, saving your money in the bank could possibly be a big mistake. Instead of just leaving your money lie like that, make it work. Put that money from your savings account to mutual funds and FD, and other avenues.


vi. You don’t need to purchase high-risk, high-reward assets


Avoid investing money in high-risk high-reward assets—unless you know what you’re doing. You don’t really need to take any such untowardly risks. See, if you’re in your 20s, you don’t need to take such risks to make money. You have got a long way to go. Remember, there are many ways to make big without even taking such risks.


vii. Have a well-defined budget for everything


Budget management may not necessarily be one of your top priorities, but it’s extremely important. So instead of forming a habit where you spend as you go, have a well-defined budget for everything, right from your daily cost to leisure expense. This will prevent you from overspending. And the amount you save, you can put it in other avenues.


viii. Evaluate your wealth every month


When you evaluate your financial health every once in a while, you stay informed; and when you stay informed, you’re likely to make right decisions regarding your expense and savings. So do spend some time every month to evaluate your wealth. And see if everything is going right or not.


ix. Real estate is one of the best investment avenues


Yes, even till this day, real estate stands as one of the best investment avenues. Even better than gold, whose value relative to inflation has been lost since 1981. So if you can, purchase apartments and lands! Aside from increasing in value and making you rich in the long-term, you can also put them on rent (using services like OYO and Airbnb) and enjoy decent return every month.


x. Avoid the burden of loans


Don’t take loans. Avoid it for as long as you can. Avoid the techniques of taking home loans to save on taxes. Have a clear credit history. Because if you take a loan, the burden will fall on your shoulder for decades, which will often restrict you from enjoying more income from various resources. Whatever extra money you’re making, you will then have to spend it on the repayment of the loan.


BONUS


xi.  Don’t be an impulsive buyer

This is the handiest tips I got recently— even more relevant today when every brand on digital channels are trying to sell you something. If you aren’t cautious enough, you can end up purchasing things that you don’t even require. So get a control on your impulse buying habit. Avoid buying irrelevant stuffs online.


These are 10 (+1) tips about personal finance a newbie must remember. Of course, there are plenty more aspects that you would need to focus on to get good results. But for the starters, start with the mentioned tips. Good luck!

1.       How do bots and market whales function in stocks and Bitcoin market?


Well, both of these function to make the most of asset market by edging the small investors on every front. Whales are ultra-wealthy investors who hold a large number of stocks or cryptocurrencies. With their purchasing or selling decision, they can literally change the scope of the market, either creating a positive perception or triggering Fear, Uncertainty, and Doubt (FUD) among the investors.


On the other hand, bots are computer programs, integrated with the inbuilt code of the exchange, that trade on the behalf of individuals. They are super quick and efficient, ensuring the person using it is always ahead in the market – ahead of everyone – in bidding and making the right decisions.


So one is big, other is fast. All the burdens then fall on the medium and small-scale investors who are not only fighting against the uncertainty of the market but also the play of whales and bots.


Remember, trading (stock, crypto, or any asset) is a game where the impatient and less smart pass the money to those who are more patient and smarter. These whales (backed by experts and smart bots) are the more patient and smarter ones. They are constantly trying to beat the small and new investors. If you want to make more money in trading, you must stay ahead of them all the time. 


Posted By: Preeti Taneja (Updated 29 May, 2018)

10 Smart Money Habits That Will Make You a Millionaire in 11 Months


You can’t make a million overnight (not even in the crypto market). It requires a thorough planning, lot of work and consistency. Ask those rich people, they would give you the same answer. They are rich not necessarily because they work the hardest – but because they are smart enough to pick up right habits that accrue, grow and sustain them money in the most efficient manner.


Now what they do is not rocket science, but it’s not very evident either. After all majority of the population fails to keep up with their footsteps as the path isn’t clearer. But all being said, does that mean you can’t be one of those in the upper echelon?


Well, it depends on your money habit—how you make money, how you spend, where you save and where you invest. In fact, making your first million in and about a year is quite possible if you have picked the right personal finance approach. How?


Here are 10 money habits that will help you reach your financial goal of one million in the quickest way possible:


1. Learn About Personal Finance


The first step in setting the right financial habits is to explore and learn about this niche. So invest your time reading the right books, blogs and watching relevant videos. Start by reading all-time-classic ‘Think and Grow Rich’ by Napoleon Hill. Ramit Sethi’s ‘I Will Teach You To Be Rich’ is a very popular blog; follow it.


Check out this TED talk by Shlomo Benartzi on personal finance - 


2. Have multiple sources of income


You cannot become rich if you’re solely relying on your salary or business income. It is imperative that you have multiple sources of income. So aside from your day job, have a part-time gig. Invest in different assets. Rent your empty flat and unused car. Freelance, provide consultancy, pick up any ideal source of income that you can spot. A small contribution from here and there, if sustained long enough, can make a big difference in your bank account.


3. Treat your time as an investment


Time is your biggest asset. It’s also your biggest asset. How you spend most of your time is directly related to how much money you make. If you take the example of any millionaire and billionaire, you will almost always find them super-efficient in managing their time. Because they know, as clichéd as it is, time is really money. So be careful about how you spend your time; avoid committing too much of your time in doing something that isn’t delivering you adequate returns.  


4. Set Definite Mini Money Goals


You can’t reach somewhere if you don’t really know where you’re supposed to go. So in order to make your first million, you must set mini goals with definite timelines. Know exactly how much money you will make in the next 1 month and the following months. Outline a plan how you’re going to do that.


5. Review Your Expense Regularly


We’re living in an age where so many of us are impulsive buyers. We spend big money on things that we don’t need. So it is no less than essential that you keep an eye on your spending habit—how, how much and where you’re spending your money the most. Review your expense every week, if doing it daily is not possible. Keep a check on where your money is going, and then stop the unnecessary leakages.


6. NEVER fail to pay bills on time


Failing to pay your bills on time is the biggest budget blunder you can make. So always pay your rents, bills, and other essential expense on time without failing. And if you have to too many payments to make every month, you’re better off automating this entire proves. There are applications out there that can time your payments every month from your account, without you worrying about paying your dues.


7. Don’t save, make your money work


Even till this day, many of us prefer saving our money in our lockers. Some save their money in a savings account and settle for the meager interest rate. If this sounds something like you then stop right away. The biggest mistake you can make with your money is to let it stay somewhere without growing in sufficient proportion. To be rich, it’s important that you let your money work and grow. So start investing in stocks, bonds, mutual funds, real estate and other assets and avenues.


8. Surround yourself with smart minds


You’re an average of the 5 people you spend the most time with. So if you’re spending your time with people who are not monetarily efficient, don’t have a proper financial plan and spend extravagantly, you will eventually turn up to be like them. So, while this piece of the tip isn’t quite common, it’s very relevant. Surround yourself with smart minds. Attend conferences and seminars, follow self-made millionaires online, and communicate with them in any way possible. To make your first million, you need to be motivated and inspired.


9. Stop showing off


Do you really need to order such extravagant food whose name you cannot even pronounce? Or do you really require that expensive clothe and bag? One of the biggest flaws of today’s millennial is believing that showing off is a social validation to success. If you too spend too much of your money (and time) in showing off, you’re harming your own-self. STOP. NOW. Realize your limited needs and stop getting influenced by the extravaganza and pretense of other people. 


10. Think about money every day

If you want to get something, you must invest your time in thinking about it. You must stimulate that dream until that dream becomes a reality. So think about your monetary goal all the time, think how you’re going to achieve it and, most importantly, think about how you’re going to sustain it. The more you think about it, the closer you will feel towards it.

These are 10 smart money habits that can (and will, if executed well) help you get your first million in as less as 1 year. Remember, becoming rich isn’t difficult—and it shouldn’t be your goal in the first place. Your goal must be to make enough wealth to adequately sustain your own life, as well as your family’s, and additionally, give a portion of it to charities.