1Feb 24, 2016

Achieve your Financial Goals

By : Rachna Rego

DirectorRight Horizons

" The dream is not something you see in sleep....The dream is the thing that doesn't let you sleep..." - Abdul Kalam

Agenda• Financial Planning

– Concept and Process• Case Study• Simple Techniques For All Markets• Investment Avenues • Right Horizons Profile• Q & A

Financial Planning – Why?• Rate of cost escalation is huge for each of these goals – average

being 6.5%– Retirement Planning– Higher Education / Marriage of Children– Medical Expenses

• Every individual has different needs, hence, avail customized service – ‘What suits your friend, may not suit you!’

• Appropriate ‘Asset Allocation’ enables you to avail optimal risk-adjusted returns – Design your portfolio with a heady mix of Debt / Equity suitable for your risk profile

• Wealth Creation is possible only if you are able to ‘Make your money work for you!’

Why Financial Planning• To achieve your dreams and fulfil your future

obligations, you need to carefully plan your finances

Managing the Risk – Return Equation across multiple asset classes

Liquidity Needs

Safety Needs

Potential

upside

Need Based Approach to Investments

Wealth Creation

Wealth Management

Wealth Preservation

Your needs are our Services

Financial Planning Process…basic

• Where do you want to be & when• Define your financial goals in terms of how

much you will need and when• Where are you?

• Check your financial resources• Check your financial commitments

• How do you get there• The financial plan / asset allocation

• Are you on course• Periodic review of your investments / your

own condition

Impact of taxes and inflation on FDs

Bank FDs may not help you help in Wealth Creation in the Long Term

You also run the risk of Interest Rates going down *source:

www.statebankofindia.com

Returns (5 yr Lockin) * SBI 9%Tax @ 30.9% 2.8%Post Tax yield 6.2%Avg Inflation Rate 7%Net Yield -0.8%

Summary: Financial Planning

• Choose Avenues considering following– Taxation– Post tax returns – Financial Requirements and Goals

• Diversify into avenues with varied risk profiles– Real Estate / Real Estate Funds– Debt – Deposits, Debt Mutual Funds– Gold funds– Equity

• Balance the risk and returns• Reduce Equity Risk thru

– STP and SIP– Profit booking in market volatility

We hope our contrarian approach will help take advantage of the opportunity that we see in the future

Case Study• Age Band – 25 – 30 Yrs• Needs

– Car – Rs. 5 Lakh– Vacation – Rs. 50,000/-– Marriage – Rs. 3 Lakh

• Age Band – 30 – 40 Yrs• Needs

– Children Education – Rs. 5 Lakh

– Vacation – Rs. 1 Lakh

– House Construction – Rs. 35 Lakh

Tax Planning

Part A: Tax Laws & Planning

Part B: How to do Tax planning

By

Right Horizons Financials Pvt. Ltd.

Taxation

Agenda

• Heads of Assessment

• Save Taxes – Without Investing

• Housing loan benefits

• Deductions

• Tax Computation

Invest for Tax Saving?…But what about my goal

planning?!

Investing to save taxes, match goals & reap high returns…Is it possible to achieve all these at once??

Income from SalarySalary Structure – Basic, Bonus, Medical/conveyance/House Rent/ Leave Travel/other Allowance, Variable Pay, PF

Taxable Components – Basic, Bonus, Variable Pay, etc

Income Exempt from Tax – Allowances – HRA, LTA, Medical, Conveyance (Rs. 800/ Month)

Deductions – PF/EPF, Professional Tax

Perquisites – Taxable – Rent Free Accommodation, Accommodation at concessional rent, Subsidized or Interest Free Loan (perquisite to the extent of interest)

Tax-free* – Food coupons, Medical reimbursement, Medical premia paid by employer on behalf of employee*w.e.f Last year budget declaration FBT is abolished and hence tax – free perks will not be subject to

Fringe benefit taxes

Other Heads of Income• Income From House Property

• Profits and gains of Business or Profession

• Income from Capital gains

• Income from Other Sources

Save Taxes without Investing!!

Section Permitted LimitsHouse Rent Allowance1. Actual amount of HRA2. Rent Paid - 10% of Salary (Basic)3. 50% of salary in 4 metros or 40% salary for other cities

10(14) Conveyance allowance Rs. 800/ - p.m. is limitLeave Travel Concession >> 2 trips in a block of 4 Yrs >> Amount not exceeding Air-Economy or Rail-AC 1 >> Fare shall be for journey to the place of destination by the shortest route

10(13A)

10(5)

Tax Saving Tip:

Rent paid to the extent of Rs. 3000 / Mth, will not require rental receipts as proofs, a self-declaration is mandatory

Housing Loan

Section Permitted LimitsSelf Occupied PropertyInterest on borrowed capital for purchase/ construction deduction currently Rs 150,000. (self occupied property)If House given on RentDeduction of 30% available on Rental Income on NetAnnual Value(Rent-Taxes) for property given outon rent inaddition to deduction of interest

24(2)

24(1)

Interest payments on housing loan would get the following deductions:

Tax Saving Tip:

Structure your home loan effectively to optimize on tax breaks, if both self & spouse want to claim, both home and loan should be held in joint names

**Deduction of 30% available on rental income towards maintenance is

proposed to reduce to 20% as part of direct tax code

Deductions

Section 80CCG was introduced recently during the budget

Under Investment Instruments featuresSection 80 C Premium for Life Insurance or ULIP,PF, Public

Provident Fund (PPF) - only up to Rs. 70,000 in a year,Equity Linked Savings Schemes (ELSS) of Mutual Fund,Tax Saving Fixed Deposits with Banks,Repayment of home loan principal,National Savings Certificates (NSC), Tution fees for children

Section 80C gives every income tax payer up to a maximum of Rs. 1,00,000 tax free income in a year if they invest in mentioned instruments

Section 80D Medical/ Health Insurance Premium Max Rs 15000 { additional 15k if availed for parents}

Section 80E Interest paid on educational loans You can claim a deduction on the interest paid on loans taken for higher education for yourself, your spouse and children.

Section 80G Donations to Charitable institutions You can claim a deduction for any donation that you might have made to a charitable fund or institution.

Section 24 Interest paid on housing loan maximum of Rs 1,50,000 can be deducted from your taxable income as interest repayment for a self occupied house.

Section 10(13A) House Rent Allowance submit your rent receipts to employerSection 10 (14) Rule 2BB(10)Transport Allowance max upto Rs 800 pm./ 9600 pa.80 CCG Rajiv Gandhi Saving Scheme For Income less than 10 lakhs & upto 50KSection 17(2) Medical Reimbursement upto Rs 15000- submit bills to your company

Tax Saving Avenues

Tax Saving Overview & Tips

Tax Savings – Where to Invest?

Returns

HighLow

LowH

ighR

isk

PPF, Infra Bonds, NSC, Traditional Insurance

Non Market Linked Flexible Plan

Capital Guaranteed Plans

Market Linked Plans

Equity Linked Savings Scheme

Investments in these avenues qualify for dedn. u/s 80C

Conservative Investments

Min / Max Invt. Term Withdrawa

l ReturnsPost-Tax

ReturnRisk

Profile

PPFRs. 500 /- to Rs. 70,000 /-

15 Yrs* 7 Yr onwards (Partial)

8.5% (Tax – Free)

8.5% Low

Fixed Deposit

s

Rs. 1000* / No Limit

Min. 5 Yrs (For tax benefit)

None 8.5% (Taxable)

5.95% Med

*Can be increased to 30 Yrs in blocks of 5 Yrs; **Differs from bank to bank

Qualifying Investments (Contd.)Insurance: Some options you can consider –

• Non Market Linked Flexible Insurance Plan:

– Benefits: Guaranteed returns, lower risk (invests in Govt. bonds mainly),

simple plan, flexibility in terms of withdrawal, top-ups

– Negative: Customer cannot decide where the funds would be invested.

Investment pattern fixed by IRDA

• Market Linked Insurance Plan

– Benefits: Choice of investment portals, ability to choose higher risk- higher

return avenues, lower charges, flexibility (top ups, payment for a shorter

period, free switches, etc.)

– Negative: Market Linked and hence subject to market risks

• Capital Guaranteed Insurance Plan:

– Benefits: Market Linked returns and assures Capital guarantee, withdrawal

flexibility, top-ups

– Negative: No choice of investment portals (provides a balance of equity and

debt)

Tax Saving Mutual Funds

Features

• Block lock-in of 3 Yrs• High Risk Profile• Tax – Free returns• SIP mode available• Start with a minimum Rs. 500/Mth

Suitability

When the markets are lying low

Provides for potential upside

Investment Via Systematic route is advised

Judicious choice of funds is required

Equity Linked Savings Scheme

Past Performance (YoY Returns)

Source: Bajaj Capital; Jul 10

CostFund Name Rating 1Y 3Y 5Y Risk Grade Beta Expense RatioELSSDSPBR Tax Saver 4 Star 36.30 7.95 0.94 Avg. 0.85 2.25HDFC LT Advantage 4 Star 25.81 8.48 2.99 Below Avg. 0.85 2.11ICICI Prudential Tax Plan 5 Star 33.40 9.39 4.50 Avg. 0.88 1.98Canara Robeco Equity Tax Saver Regular 5 Star 27.46 10.81 6.74 Low 0.71 2.29Reliance Tax Saver 4 Star 42.43 11.04 3.45 Avg. 0.94 1.9

RETURNS (%) Risk Analysis

About Right Horizons

Investment Banking & Consulting

Individual's Financial Planning

Real Estate

Portfolio Advisory Corporate Services

Right Horizons -Services

How have we managed risk• Financial Planning and Asset Allocation• Contrarian Approach• Profit booking at peak

– Conducted only for long term assets– Not done for short term assets since it adds to cost

• Diversification into avenues that are less risky at a peak– Real Estate Funds– Capital Protection funds– Gold funds

• Diversification of ESOPs and using debt to enhance returns• Systematic Investments

RH in the NEWS…

Featured in almost all leading dailies.

Our USPsIs a one stop shop on all financial needs – from tax planning to investments providing value and a structured oversight

Having to work with multiple Wealth Managers and Advisors

SPO

C

Wealth Advisory by MNC/Indian BankRight Horizons Provides

In-depth Expertise / Advice on ESOPs to deliver best returns, alerts to sell

Biased/Minimal advice on my ESOPs

ESO

P

Multiple avenues; Multiple options under each avenue – providing range and reducing bias. Eg we provide the range of ICICI Bk, HDFC Bank, Templeton PMS all under one roof without bias

Wealth Management advice only suggests their own products and does not have a complete range of avenuesO

wn

Prod

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Planning provides the foundation – advice completely customized to each individual

Minimal planning at the individual level, no customization

Plan

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Managing Risk given primary importance – help provide long term growth; multiple vendors help diversify e.g. spread across multiple PMS

Advice without financial basis: not founded on Risk ManagementRi

sk m

gt.

Advice based on market outlook; a unique de-risked modelSe

ll Advice based on what was easier to sell

Why Right Horizons…?• Are you getting unbiased advice?? • We deal across all investment avenues with multiple options

within each avenue – hence giving you unbiased advice• Finance driven to provide you right advice

– Suggestion based on your needs– Advice from professionals with strong financial background – provide you

with strategies to manage risk– Focus on Financial Planning– Backed by a research team

• Service at your doorstep – Help desk on campus• Different levels of services to Swiss re employees

– Free Services – Tax & Investment Advisory (Complete process taken care of – includes handing over of proofs)

– Paid Services – Tax Filing, Need Based Analysis & Financial Planning

Our Special Offer to employees

• FREE Services – Tax Advisory and individual advice on tax saving investments– Investment advice is free (Insurance, MFs, Govt Bonds, etc) – Answer queries on your queries on Taxes & Investments– One point contact for all your tax related investments incl providing forms,

collection, payment and receipts• Paid Services at discounted rates:

– Tax Filing– Financial planning and advisory – Rs 2,500+tax – Detailed financial planning on each need, investment reco, weekly market

reports, stock picks, alerts, online mutual funds info, monthly statements, tracking, opportunities info, ESOPs

Mail : contactus@righthorizons.com / Rachna@righthorizons.com or Ph : 080-32718679/41209582 Website : www.righthorizons.com

Questions and Answers

Contacts: Mail : contactus@righthorizons.com

Phone : 32718679 or 41209582 or 98453 99780 Website : www.righthorizons.com

Rupee Cost Averaging

Risk Reduction

Market Timing Not required

Advantages of SIP/ Monthly mode for ULIP/MFs

Key Terms• Debt• Equity• Asset• Asset Allocation• Bonds• Fixed Vs Floating Rates• Risk• Portfolio• Diversification• Mutual Funds• Insurance