Investment Archives -

How ELSS Helps You in Cutting Tax Liability?

Mon, 12 Jun 2023 18:04:26 +0000

The Buyt Desk

If you to invest money in a manner that will help you save tax then equity linked saving scheme could be a smart choice. Under section 80C of the Income Tax Act, 1961 a maximum investment of 1.5lakh can be claimed as a tax deduction. Equity Linked Saving Scheme (ELSS) investment can give you the benefit of a Section 80C deduction. It comes with multiple benefits apart from providing you with a safe option for wealth accumulation and tax deduction.

What is Equity Linked Saving Scheme?

It is the only mutual fund eligible for tax deduction under section 80C provision of the Income Tax Act 1961. In this mutual fund, 65% allocation goes into equity and equity-linked securities like listed shares. It may have some exposure to fixed-income securities as well. The best part of this fund is that it comes with the shortest lock-in period of 3 years as compared to the other investment avenues in section 80C. It allows you to invest as much as you wish, but the tax benefit will be on 1.5 lakh. The scheme has been broadly classified into two types.

Growth Funds – This is a long-term wealth creation platform, and the investor receives the full value at the time of redemption.

Dividend Funds – This has been again divided into Dividend Payout and Dividend Reinvestment. In the first option, Dividend Payout, you get a tax-free dividend. On the other hand, in Dividend Reinvestment, the dividend received is reinvested as a fresh investment.

What are the Upsides of Investing in ELSS Over Other Options in 80C?

The fund offers tax deductions of up to Rs. 1,50,000 a year under the section 80C provision.
It has the shortest lock-in period. The lock-in period of all options in 80C is as follows

Investment	Lock-in Period
Equity Linked Saving Scheme (ELSS)	3 years
National Savings Certificate	5 years
Public Provident Fund	15 years
Employee PF and VPF	More Than 15 years

The return that you earn in ELSS is better than the other investment options

Investment	Estimated Return
Equity Linked Saving Scheme (ELSS)	15-18%
National Savings Certificate	7-8%
New Pension Scheme	8-10%
Public Provident Fund	7-8%
5 Year Bank Fixed Deposit	6-8%

There is no upper capping in ELSS investment. On the other hand, minimum capping depends on the mutual fund house.
It is the only tax-saving investment that offers inflation-beating interest. Also, it is the highest among all other options in section 80C.
It gives twin benefits. You can create wealth while saving tax.

How to Start Investing in ELSS?

Investing in ELSS is easy. You can do it online too. To start, you need to open an account with the fund house of your choice and complete the KYC process there. After the verification, you can invest the following way.

Choose the platform through which you will invest.
In the category, select the option “Tax Saving”.
Select the fund you want to invest in.
Tap on “Invest Now”. Follow the remaining process to start.

The features mentioned make ELSS a better option to save tax and accumulate capital. However, keeping all precautions while selecting the fund house will protect you from risks. A direction from an expert is good if you are doing it for the first time.

Also, ELSS redemption is not tax-free. The long-term capital gain of Rs 1,00,000/year is tax-free. Gain above the limit, attract tax of 10% in addition to applicable surcharge and cess.

The dividend you receive from your investment is added to the overall income and taxed according to the tax slab you fall. Despite all the conditions, it is the best tax-saving option under section 80C of the income tax act.

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Advantages and Disadvantages of NPS Tier-2 Account

Wed, 04 Jan 2023 17:28:46 +0000

The Buyt Desk

‘NPS or the National Pension Scheme’ is an investment scheme that helps you to save for your retirement. People have the choice of investing in two types of the NPS account.

NPS Tier 2, a voluntary savings account facility, can be activated only after you have an NPS tier 1 account. The biggest difference between the 2 accounts is that you can withdraw your investment from NPS Tier 2 at any point in time. There is no lock-in on your investment in NPS Tier 2.

NPS Tier 2 Account Features

Voluntary

As mentioned above, NPS Tier 2 is a voluntary savings account. This means you can contribute at any specific point in a financial year. You can also change the saving amount every year.

Great Flexibility

You can enjoy the flexibility to select pension funds and investment options accordingly and see the outcomes. You are free to change the fund manager or the pension scheme if not satisfied.

Easiness

Opening an account with any Points of Presence is very simple. It can be done in just some steps.

Transparency

NPS Tier 2 account holders enjoy extreme transparency as it features transparent investment rules. NPS trust does regular monitoring even the fund managers’ performance is also reviewed.

Portability

Subscribers can run their accounts from anywhere via a huge network of Points of Presence.

Advantages of NPS Tier 2 Account

Withdrawal at Any Time

Holders can easily withdraw the amount deposited in their NPS Tier 2 account anytime without any problem.

Flexibility

You are free to select any of the Investment Options and registered Pension Fund options. Moreover, you can easily shift from one investment option to another. This scheme provides numerous options.

Tax Benefits

Just government employees avail of tax benefits on all contributions made to Tier 2.

Fund Managers

The entire fund are invested by experienced and qualified fund managers according to the approved investment guidelines.

Good Returns

You can decide on an appropriate asset allocation pattern based on the subscriber’s risk appetite.

Huge Coverage

All NRIs and Indian citizens having a Tier 1 account are eligible to open NPS Tier 2 account. The age of the applicants must lie between 18-60 years. Self-employed people and freelancers can also invest in this account.

Easier Access

Contributing to Tier 2 scheme is a convenient and simple process.

Low Investments

You don’t need to have a big amount to open NPS Tier 1 and Tier 2 account. These can be opened with less investment. You can use a demand draft, cheque, or crash to deposit the amount.

Low Management Cost

The low management cost makes NPS Tier 2 scheme the lowest-cost pension product. Low account maintenance and management cost increase the benefits of the collected pension amount to the subscriber.

Frequency

You don’t necessarily require to pay the funds at a certain time. You can deposit the amount yearly, half-yearly, quarterly, or even monthly. You can rise or reduce the contribution as per your need while ensuring that you make the minimum contribution.

Disadvantages of NPS Tier-2 Account

No Pension

The account holder can’t receive any pension after retirement. This scheme will only help in collecting the retirement corpus.

Limited Eligibility

Just Indian citizens and NRIs who age between 18-60 years can open the account. Other people don’t fall under the category of eligible candidates.

Limited Managers

Investors have just a few restricted options to select from for fund managers. They don’t have a right to select a single fund manager for debt as well as equity.

Single Account

A single person can keep only one NPS Tier account in his/her lifetime. You can’t open another account when you move to another location or switch your career path.

Risks

Opening and maintaining an NPS Tier-2 account comes with some risks. For example, modified duration, credit risk, average maturity, and more.

Taxability

The account holders can withdraw the amount as they do in bank FDs (fixed deposits). But, unlike bank FDs, the entire NPS Tier 2 withdrawn amount is taxable instead of taxing only interest.

Withdrawal Limitations

The withdrawal amount can’t be higher than the total sum of the whole contributions made by the subscriber.

No Assured Returns

The account amount is calculated based on the returns, which are created under corporate bonds, and securities by the equity and the government. The returns can also be affected badly by market fluctuations.

Investment Restrictions

Investment options also have some guidelines. The applicant is not allowed to invest more than 50% of his or her total investment in Tier 1 or Tier 2 account.

Eligibility Criteria for NPS Tier 2 Account

To become eligible for opening an NPS Tier 2 account, you have to meet certain criteria.

You must be an Indian citizen (resident or non-resident).
You must have an actively running NPS Tier 1 account.
The subscriber must comply with KYC (Know Your Client) compliances as mentioned in the subscriber registration form.
You must age between 18-60 years on the submission date of application to the POP-SP. People over 60 years of age are not allowed to make further contributions to their NPS account.

How Can You Open NPS Tier 2 Account?

You can apply for opening an NPS Tier 2 account online or offline. Let’s discover these methods in detail.

Online Approach

Visit the eNPS website and click on National Pension System.
Click on ‘Tier 2 Activation’ in an appearing pop-up.
Enter your PRAN (Permanent Retirement Account Number), DoB (Date of Birth), PAN number (Permanent Account Number), and the Captcha on the next page.
Now, hit on Verify PRAN.
A Tier 2 account will be opened after the complete verification of PRAN details with the existing Tier 1 account.

Offline Approach

Use the POP-SP of the subscriber to open a Tier 2 account.
Install the Annexure 1 Tier 2 information form, fill it out, and then send this form to the PPOP-SP.
Submit your bank details to open a Tier 2 account. It will help in directly sending the withdrawal amount to your bank account.

After completing the PRAN account setup, the subscriber is allotted a login ID and a password to review their NPS account online.

Rounding Up

An NPS Tier 2 is a voluntary account in which basic transactions can be made as deposits and withdrawals. It works as an investment option. Unlike NPS Tier 1 account, Tier 2 account doesn’t have the necessary rules for withdrawal. Also, it doesn’t have a fixed interest rate.

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Where Can Senior Citizens Invest?

Tue, 03 Jan 2023 16:48:21 +0000

The Buyt Desk

Choosing the right and profitable investment options is a difficult but important decision for senior citizens. If you don’t know how you should invest as a senior citizen, this post is worth reading.

What Is The Right Investment Strategy?

Proper funds allocation is an important aspect of any investment strategy. Senior citizens prefer short and medium-term options rather than long-term options. Safety of the invested money as well as good return both matter. But senior citizens don’t want to invest in assets that may have lots of ups and downs which is why a conservative approach with more focus on debt works best for them.

Examining the risk factor is also equally important while considering investment options. Go for a safer investment option with slightly lesser returns than opting for extremely high-risk options although they promise astronomical returns.

Start investing some years before your retirement. Your investment strategy when you are young should be concerned with taking care of your future requirements once you retire. At this moment, consider what type of senior citizen you are. You can add more mutual funds to your portfolio if you will get a regular pension. It will help in receiving the collected returns in post-retirement life.

For salaried or self-employed people who would not get a pension, it’s good to choose an investment option that helps them to earn a regular income after their retirement. Then, make your investment decisions accordingly. Now, include the most suitable investment option in your portfolio. Depending on an investment advisor is the best choice if a senior citizen can’t manage several investments.

Senior citizens should also consider the tax efficiency of their investments. Retired investors must emphasize investing in assets that offer them maximum tax benefits rather than the options where the earning income is completely taxable at the investor’s hand.

Best Investment Options For Senior Citizens

Here are the best investment options senior citizens can consider at present.

Pradhan Mantri Vaya Vandana Yojana or PMVVY scheme

Operated by the LIC or Life Insurance Corporation, this scheme is a low-risk investment option that is in operation till March 2023. This scheme is recommended for people who don’t have a vast risk desire and are comfortable with making a lump sum investment. It has 10 years term plan and provides a 7.4% interest rate. The minimum and maximum amount limit is INR 1.56 lakh and INR 15 lakh respectively.

An investor can expect a pension between Rs.1000-10,000 monthly based on their investment amount. No tax deductions can be availed under Section 80C. However, the income is released from GST.

National Pension Scheme

People who age between 18-65 years find this voluntary retirement savings scheme best. It provides senior citizens the chance to increase their tenure up to 70 years. All the investments in this scheme are directed toward equity, corporate bonds, alternative assets, and government bonds.

Regular investments are compulsory till the subscriber becomes 60 years old. Once they turn 60 years, they can withdraw 60% of the collected corpus as a tax-free amount. The remaining 40% must be used for buying an annuity plan. Less than Rs.2 lakh corpus can be withdrawn on a lump sum basis.

Applicants who join this scheme when they turn 65 years can exit it after three years from its opening date. They can withdraw 60% of the collected corpus as a lump sum and use the remaining 40% to purchase an annuity plan. The complete amount can be withdrawn on a lump sum basis if you have less than Rs.5 lakh in the corpus.

When you buy an annuity using a minimum of 80% of the corpus and use the remaining on a lump sum basis, you can leave the account before completing 3 years. You can withdraw the whole amount on a lump sum basis when the corpus is less than Rs.2.5 lakhs.

All investors under this scheme are offered a unique PRAN number (Permanent Retirement Account Number) and are eligible for 2 types of accounts-

(a)NPS Tier- I account

This is the primary account essential for all people who opt for this scheme. 10% of the monthly salary of government employees gets deposited towards this account. However, the Central Government deposit 14% of the monthly salary along with the dearness allowance. For other subscribers, a minimum contribution of Rs.1000 is mandatory for every financial year.

(b) NPS Tier-II or tier-2 account

This account is a voluntary savings account that can be opened by people who already have their Tier 1 account.

Contributions made to Tier I account with a maximum of Rs.1.5 lakhs are considered for tax deduction under Section 80C. Subscribers can get a deduction of up to Rs.50,000 for Tier-1 account contributions under Section 80CCD (IB).

Senior Citizen Savings Scheme (SCSS)

Offering a comparatively higher interest rate, this scheme is a good investment plan for senior citizens who are looking for a long-term saving scheme with better returns. It provides up to Rs.1.5 lakhs of tax benefits under Section 80C. The maximum contribution of Rs.15 lakhs can be made by the investors.

This scheme provides 5 years maturity period that can be extended by 3 years. While opening this account, the applicant has to add a nominee. The account can be opened in any Post Office or scheduled commercial bank in India.

Mutual Funds

This investment plan is a blend of equity as well as short-term debt. You can invest in debt mutual funds which are comparatively less risky and less volatile. Money market instruments, government, and corporate bonds, and corporate debt securities are some underlying securities. People with a regular income but no risk appetite can choose this mutual fund scheme to enjoy capital appreciation.

ELSS or Equity Linked Savings Scheme is an equity tax-saving mutual fund that offers inflation-beating returns. In this scheme, investors can receive up to Rs.1.5 lakh tax deductions under Section 80C every year. This mutual fund scheme has 3 years lock-in period. So, investors can’t make a premature exit. The minimum amount you can invest depends on which fund house you select.

Fixed or Recurring deposits

Under Section 80TTB, income up to Rs.50,000 is entirely tax-free. On average, banks provide between 3-7% rates of interest. However, senior citizens can receive 0.5% extra. Under this investment plan, you can purchase a bank loan up to 90% of the fixed deposit amount. Hence, senior citizens who may require a huge amount of funds urgently can opt for this safe investment option.

Tax-Free Bonds

Senior citizens can also consider investing in the infrastructure bonds issued by IRCON, NHAI, REC, and IRFC companies to increase money from the market. You can receive around 6% tax-free interest and returns with no TDS. It has 10 years of maturity. Investors receive no liquidity in the interim but can entitle to annual interest during this duration. You can invest at least Rs.5,000 and then multiples of Rs.5000.

Summary

And these are the best investment avenues for senior citizens for securing their life after retirement. Select the option that better matches your risk profile to have a comfortable and secure retired life.

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NPS Rules Changed – No Need to Fill Two Forms for Pension

Wed, 28 Sep 2022 04:12:27 +0000

The Buyt Desk

Download- Pensioner filling

IRDAI has announced new rules for pensioners which will provide to people opting for National Pension System’s(NPS) annuity. Less paperwork will make pensioners’ life easy. Let us see what it is.

From now on, under the new NPS rule, Indian pensioners’ paperwork is reduced by one form. IRDAI has reformed a few rules to provide relief to pensioners. Till now, National Pension System (NPS) retirees had to submit the exit form to the Pension Fund Regulatory and Development Authority (PFRDA) and submit the proposal form to the insurance company at the time of superannuation. Now Insurance Regulatory and Development Authority of India (IRDAI) says there is no need to fill one more proposal form for NPS subscribers for annuity selection after exiting. IRDAI has relaxed the requirements for the same with the interests of policyholders as it wants ease of doing business in the insurance industry. As per IRDAI, this new rule that provides relief to pensioners will come into force immediately.

What is the New Rule?

As per the IRDAI statement on September 13, 2022, the Exit Form presented by NPS retirees will be considered as the Proposal Form going forward. The submitted Exit Form will be Proposal Form for presenting the immediate annuity product by the insurance companies

What was the Need For This Change?

Under the National Pension System rules, the subscriber who superannuates must purchase an immediate annuity, not including the commuted value from any insurer (Life Insurance Company). When buying immediate annuities, the subscriber must submit a separate application form that is collected to the life insurance company.

All the data that needs to be filled in the proposal form is already present in the exit form. So to avoid this unnecessary duplication of information, IRDAI directed insurance companies to consider exit forms as proposal forms henceforth. Now, NPS retirees on submitting exit forms can purchase annuities without any more forms to be submitted. This move will make doing business in the insurance industry easy while protecting the interest of policyholders.

How is the new Rule Different?

At the time of superannuation, rules to date asked NPS retirees to submit an Exit form to PFRDA and a Proposal form to insurance companies. Now as per the new rule, the insurance company will treat the exit form of NPS as a proposal form for purchasing an annuity.

How will it impact pensioners?

This new rule will smooth the progress of servicing annuity policies purchased by annuitants.
This new rule will reduce the time taken to purchase an annuity
This new rule will reduce the work of senior citizens as well as insurers.

Who presents annuities to NPS subscribers?

As per the norms of the Pension Fund Regulatory and Development Authority, a minimum of 40% of the accumulated pension wealth of a subscriber must be used towards the purchase of an annuity that provides for a monthly pension to the subscriber while the balance is paid in a lump sum.

Regulated by IRDAI and empanelled by PFRDA the Annuity Service Providers (ASPs) are insurance companies that provide the annuity to the NPS subscribers. ASP offers a bouquet of annuities and one should be selected by the subscriber. ASPs are responsible for providing a monthly annuity pension to the subscribers. The PFRDA has pension fund managers under the NPS who have to invest the pension corpus of the subscribers prudently and judiciously.

Current withdrawal rules of NPS

As per current withdrawal rules, pensioners are allowed to withdraw up to 60 % of the contributions as a lump sum. And it is mandatory to park a minimum of 40 % of the pension contributions in government-approved annuities.

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What Next After You Miss Your Mutual Fund SIP?

Thu, 25 Aug 2022 03:49:45 +0000

The Buyt Desk

SIP in mutual funds is a long-term investment tool and hence you may miss paying sometimes because of a financial crunch. Let us understand what happens when you miss.

A systematic investment plan (SIP) is one of the best ways to invest in mutual funds. SIP is an investment tool in which the investor needs to invest an amount as per affordability into a mutual fund scheme of investor choice. The investment happens through a bank account so it is necessary to link your bank account to your SIP. On a monthly basis, the SIP amount will be debited on the scheduled date.

Missing Mutual Fund SIP payment

Mutual fund SIP investment is a long-term plan. It needs financial discipline and regular investment into mutual funds. Every month the money will be debited from the bank account so it is the investor’s task to make sure that the SIP amount is there in the bank account on the due date. Because it is a long-term plan, it is quite common to miss one or two due dates. You may miss it because of other financial commitments. Let us see various scenarios of missing SIP instalments and what to do next after missing the due date.

What next after you miss your Mutual Fund SIP?

SIP is a long-term investment vehicle and this makes investors a bit worried because no one knows how their future will be and if they will always have funds in their bank account to pay regularly. They are worried because they may miss a few payments in the long term. Studies say that it is common to miss SIP payments. The top reason for missing SIP payments is the insufficient balance in their bank account. Sometimes investors may forget the due date and miss maintaining the SIP funds in their bank account. You should not worry if you miss a SIP instalment as your investment will continue. Let us see a few scenarios.

The AMC/ Mutual fund house does not charge a Penalty for Non-Payment of Mutual Fund SIP Installment – An asset management company (AMC) or the mutual fund house to whose mutual fund scheme you have invested will not charge any penalty for missing an instalment of Mutual fund SIP. Only when the SIP instalments are missed for 3 consecutive months, SIP get cancelled automatically.

Banks fine on the failure of auto-debit mandate – Bank charges a penalty anywhere between Rs 250 to Rs 750 when you dishonour the auto-debit mandate of mutual fund SIP.

No-Penalty SIP – Jupiter-the neo banking entity has a No-penalty SIP feature. This feature does not charge unfair charges. The No-Penalty SIP is a smart feature that auto-skips any such charges. The bank’s SIP mandate is automatically skipped when the investor’s bank balance is running low.

When you foresee that you cannot continue with SIP – There might be a situation in life where the investor can foresee that they may not be able to pay Mutual fund SIP payments in future.

In such situations, you can stop the SIP. In that case, already invested funds via SIP will continue to earn returns. You need not withdraw funds when you stop the SIP. You need to apply for a SIP stop request either online or offline with your AMC at least 30 days in advance.
You can also pause the SIP for some duration until you can restart investing in the same SIP. In this case, there will be no charges by either the AMC or Bank.

Summing up

You need not worry if you have missed a SIP instalment. But make sure you do not miss paying on 3 consecutive months as it will end your Mutual Fund SIP. Frequently missing payments will affect your corpus in a big way. Financial discipline and regular payment are key to building a good corpus.

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Should NRIs invest in immovable properties in India?

Sat, 20 Aug 2022 09:01:30 +0000

The Buyt Desk

NRIs are eligible to buy or own immovable properties in India. Indians consider this investment most valuable. But is it a good idea to invest in Indian Real Estate?

Investment in immovable property is considered a good investment in India. NRIs cannot escape this belief system. In compliance with the FEMA (Foreign Exchange Management Act) regulations, NRIs buy or own property in India.

Indian Real Estate

For Indians be it, residents or Non-residents, investing in the Indian real estate sector has always been a personal favourite. Elders believed in buying lands and the same culture is passed on to generations. Irrespective of where NRIs reside, buying properties in India is a must for most. Maybe it is a feeling of attachment to their homeland. In compliance with the FEMA (Foreign Exchange Management Act) regulations, there is a provision for NRIs to buy or own immovable properties in India.

In the Indian law system, it is easy for NRIs to invest their funds in any immovable property in India as there are not many legal formalities for NRIs. They just need to go through registration procedures in real estate.

Why should NRIs consider investing in immovable property in India?

Real estate investment must be always done carefully as the chances of scams are very high. It should be well planned, and properly assessed and only after confirmation should be put into practice. Generally, NRIs are opportunistic and smart in their investment decisions.

Indian Laws – Now that the Indian government has updated rules and given relaxations to NRI real estate investors, buying real estate in India is very easy for NRIs. The government of India and the Reserve Bank of India are emphasizing the need to increase NRI property investment in India. And also have plans to streamline NRI’s ability to purchase more real estate. As per Indian laws, NRIs are allowed to invest in any immovable property in India but not agricultural land, plantation property or a farmhouse. Only residents can buy cultivation lands for agriculture purposes.

Banking – In India, banking laws are also encouraging NRIs who want to invest in immovable property in India. With very few terms and conditions, real estate loans are available through leading financial institutions for NRIs. Under this, loans can be availed for buying lands, renovation of the property, construction, purchasing a dwelling unit or buying a commercial property. EMIs can be paid by transferring funds from a foreign land.

Retirement plan – Few foreigner invest in immovable properties as their retirement plan. When the NRIs wish to return back to India, this property will serve them as retirement homes.

Returns – Investment in the immovable property be it land or constructed property, is always precious in India. Considering the current expanding economy, NRIs increased disposable incomes and lowered interest rates have attracted many NRIs to invest in immovable property in India. Returns are good in Indian real estate.

Legal matters –

NRI must comply with income tax regulations if he /she is earning a rental income from the property.
NRI’s investment in real estate projects in India is exempted from any major legal requirements.
NRI may transfer immovable property to a person who is an Indian resident, NRI or a person of Indian origin residing outside of India.

Summing up

With so many benefits NRI should consider investing in immovable property in India. Just be cautious when selecting the property and dealing with the seller. Legal formalities are all eased out for NRIs buying or owning immovable property in India.

Happy Investing.

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Don’t Plan Retirement But Plan A Happy Retirement – Things That You Must Do

Wed, 09 Feb 2022 10:37:18 +0000

The Buyt Desk

Earlier you start better it is- this is very true when it comes to retirement planning. You must start planning for your retirement as early as you can. Retirement is a long-term goal and thus requires to be planned in a disciplined manner if you want to enjoy a hassle-free retired life. Nowadays lots of people want to retire early and if you are one of those then you need to be more meticulous with your investment and savings. The crucial part of retired life will be the pension that you receive. Your lifestyle post-retirement depends mainly on the amount you receive monthly after retirement. Plan well so that you have a good retired life. Here are a few things that you must do to have a happy, secure and satisfying retired life.

Make your retirement budget and retirement income plan

If you start planning your retirement from the day you start earning, your retired life will be smooth and secure. And if you are planning for early retirement then even more planning and investment need to be done. The more years you lose and go unplanned, the more load and stress you have to bear in the coming years to build a sizable corpus for your retired life. Calculate your essential expenses including rent, food, logistics, clothing, health insurance, life insurance and other conveniences. Based on this decide on the lump sum amount that you need per year for stress-free retired life. But do not forget inflation, consider this factor while calculating. Also, consider the family responsibilities that you will be having post-retirement like kid’s education or marriage or parent’s medical expenses.

Increase your investment

The earlier you want to retire, the more you have to save for retirement corpus. The normal retirement age in India is 60. The thumb rule says that if you want to retire at the age of 60, you have to put 15% of your annual income into your retirement savings after you start earning. Similarly, 20-25% if you want to retire by age of 55 and around 38% if you retire by 50 years of age. Basically, your investment for retirement increases as you prepone your retirement.

Create adequate insurance cover

Even after all the planning, you do for your retirement, you still cannot foresee what you will encounter in your future. Maybe you have accumulated a good amount, enough for a comfortable retirement life but what if you go through some serious illness that will cost you all your savings or if you are no more? You can secure your retirement planning with good life insurance and health insurance. Also, plan your savings considering the premiums to be paid for your insurance post early retirement. Consider buying term insurance cover, critical illness health insurance, medical insurance for self and family and accidental disability cover.

Clear all your debt before retirement

You might have taken some loans for your business, kid’s education, marriage, illness or vehicle loans, clear all these loans before you go for retirement. If you plan to pay up your loans post-retirement then it will definitely cause a hole in your retirement corpus. So make sure all the payments are done and you are debt-free at the time of retirement.

Complete your big-budget family responsibilities

If you have a family, then make sure all your major family duties like child education and marriage, buying a house, buying a car etc are achieved before your retirement period. But if you have some duties which need heavy spending, then do heavy investments so that you have enough funds to fulfil the commitments post-retirement. Never burden your funds that are meant for post-retirement.

Create different sources to earn

You just cannot rely on pension and retirement corpus for luxurious retired life. Yes, a basic simple life with little entertainment can be led with these funds but to enjoy your retired life you need to generate money from different sources. A passive income source is a key to earning even after retirement. To reduce the load on retirement corpus and to make it last longer, extra earning is a must. There are many ways to generate extra income and these two are easy ways

Invest in real estate very early in life so that you can have rental income for retired life.
Invest in RBI gold bonds so that it gives extra income post-retirement

These two investments even take care of inflation. Hence these investments are best to generate income post-retirement. Convert your hobby to a profession post early retirement. This will keep you busy and happy while generating a good amount too.

Summing up

Only meticulous planning and good investments made very early in professional life will ensure a good life post early retirement. Planning for early retirement should start in the late 20s or early 30s. The earlier you start investing for retirement, the smoother your post-retirement life. There are professionals out there who help you plan your retirement, seek their help if needed.

Invest early and enjoy early retirement.

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Add Real Estate To Your Investment Portfolio In A New Way Via REIT

Mon, 24 Jan 2022 11:10:05 +0000

The Buyt Desk

Real Estate Investment Trust known as REIT is a way to invest in real estate without actually buying a property. REIT’s enable the investor to earn assured rental returns without having to buy a property. You will invest in real estate but you don’t buy an immovable asset like a house, shop or land. This investment does not require a huge amount, no maintenance cost or any worry about project delivery. Till now, investing in real estate meant that there should be a huge amount in the pocket or opt for a loan. But REITs are making it possible to invest in real estate with just Rs.5000.

Real Estate Vs REIT?

What happens when you decide to buy a property? You search for the right property which is best suited to your budget. Then you figure out your finances for not only buying the property but also for making that house livable you will incur some expense on the interior. If you already have a house and you are buying for renting it out then too you will have to maintain the property. But in Reits you neither buy a property nor maintain it. In fact, a team of professionals take care of the property and you simply earn a return.

How does REIT work?

Now the big question is how does REIT work? REITs are companies that own, operate or finance income-producing real estate. It is like a mutual fund wherein a company announces a REIT and it takes money from people and invests it in a property that rents out. Out of this earning, you will get a return in proportion to your investment. These companies buy ready rent-yielding property whose maintenance is taken care of by the owners of the property. You just invest in a unit of that ready property.

There are two types of REITs. First – REITs which are listed in the stock market. You can buy and sell them like stocks. One can also start investing by buying a share in a listed REIT. Another way to invest in REIT is through mutual funds. These are funds that invest in global REITs through their funds. That is, they earn from your money by investing in properties located abroad. Like a mutual fund, you buy its units with a minimum investment of Rs 5000.

REITs In India

As of now, there are three listed REITs in India – Embassy Office Park, Brookefield India, and Mindspace Business Park. The Returns of Listed REITs have been as follows-

Embassy Office Parks 21% (from April 2019)
Brookfield India Real Estate 10% (from February 2021)
Mindspace Business REIT 8% (from August 2020)

There are three Funds of Funds- Kotak International, Mahindra Manulife, and PGIM India Global Select Real Estate. As far as the REIT Fund of Funds is concerned. The oldest fund is Kotak International REIT FOF which gives market returns by investing in REITs of Hong Kong, Singapore, Japan, and Australia.

The Securities Exchange Board of India (SEBI) is the regulator of REITs. Under its guidelines, it is mandatory to invest 80 percent of the REIT in ready-to-move and rent-paying properties. Listed REITs have to pay 90% of their earnings to the investor. Investors will get this in the form of dividends and interest. All the existing REITs are investing in commercial properties only. Recently RBI has allowed Foreign Portfolio Investors i.e.FPIs have also been allowed to invest in REIT.

Expert’s View

Personal Finance experts suggest that REIT gives an opportunity to include real estate in its portfolio at a low cost. In an investment portfolio, an exposure of around 5 % to REIT is sufficient. Those investing in listed REITs get more benefits in terms of tax and earnings. The interest and dividend paid on a quarterly basis in the listed REITs are tax-free. But if you are apprehensive about the capital market then it is better to invest in the Global REIT Fund of Funds. REIT FoFs also provides international exposure to your portfolio.

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Saving Schemes That Can Give Risk-Free Income to Senior Citizens

Fri, 26 Nov 2021 08:27:48 +0000

The Buyt Desk

Senior citizens looking for regular income prefer to invest in schemes that pay them a higher interest rate and good return. Therefore, they choose to invest their corpus in investment schemes like FDs, Post office saving schemes, and others. However, various banks and the government have cut down the interest rates on these schemes drastically, which is a setback to them. Further, experts say that higher interest rates on saving schemes will not sustain in the coming time. In this scenario, senior citizens must look for better ways to park their money.

Here we suggest five investment options that can give attractive returns to senior citizens.

Senior Citizen Saving Schemes (SCSS)- Senior citizen saving scheme is popular among senior citizens because of its attached benefits. An investor can invest money in this scheme for five years and reap its benefits. One can open multiple accounts in this scheme, but the maximum amount one can invest should not be over 15 Lakhs in total. The government fixes the interest rate of this scheme every quarter, and investors get the interest amount for the whole year.

Note – Interest earned from SCSS is taxable as income from other sources.

Post Office Monthly Income Scheme (POMIS) – POMIS is the post office five-year saving scheme offering an interest rate of 6.6% per annum. One can open multiple POMIS accounts and invest up to 4.5 Lakhs in a single and 9 Lakhs in a joint account.

Note – The investor receives interest as a monthly payout from the scheme. The interest earned is taxable.

Pradhan Mantri Vaya Vandana Yojana (PMVVY) – The government has extended this scheme up to 2031, 31 March. It is also a profiting investment scheme for senior citizens as it provides a guaranteed pension at 7.40% per annum, which is paid monthly. It is a ten-year investment scheme where an investor can invest up to 15 Lakhs.

Note – The interest rate of this scheme is not fixed and get reset every April 1st.

Floating Rate Saving Bonds – The tenure of this scheme is seven years, and its interest rate changes every six months. The interest is paid out to investors twice a year, i.e. January 1st and July 1st. The scheme has an interest rate of 7.15%, and there is no cap for the investment amount.

Note – The interest earned through this scheme is fully taxable

Bank Fixed Deposits – Banks FD has always been the best choice for low risk-taking investors, like senior citizens. Most banks give a 6% interest rate on FDs for the tenure of 5-10 years and give investors an option to take the payout monthly, quarterly and annually. Some Cooperative banks and small finance banks provide 7% interest on senior citizens FD.

Whilst the interest rate is falling for popular and secure investment schemes, senior citizens can still earn a better interest rate by investing in less known saving schemes. Collect more insight into these schemes before choosing one for yourself.

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5 Ways to Park Your Retirement Money

Fri, 27 Aug 2021 05:33:44 +0000

The Buyt Desk

People retire from active jobs between the age of 50 to 60 years while life expectancy has risen to 80-90 years. This makes it essential that one must plan for their post-retirement expenses as you will be living for a longer time. If you are salaried you will receive a good amount of retirement corpus in the form of gratuity. You must ensure to invest your money in a way that will help you in generating a stream of passive income for you. Your retirement portfolio can possess some fixed income investment, some exposure to equity and a few government schemes that will help you in saving taxes.

Let’s look at some of the safer investment options for retirees-

Bank Fixed Deposit

Bank Fixed Deposit is one of the oldest ways of investment. Though the interest rate of FDs has seen a sharp decline still it is considered to be a safe and secure investment with a guaranteed return. The interest on FD at the present is somewhere around 4 to 7.5%. Ensure that you choose a recognised bank for parking your money and do not get mesmerised by slightly higher returns of not so known cooperative banks or other financial institutions.

Senior Citizen Saving Scheme

Anyone above the age of 60 can invest in a Senior Citizen Saving Scheme. The investor could deposit his/her money in SCSS through a bank and as well as in post offices. The tenure of SCSS is 5 years that can be extended by a block of 3 years after the scheme matures. It gives you interest on your deposit and currently, it is 7.4%per annum. This scheme specifically encourages retirees to invest their retirement corpus within three months of receiving it. The deposit in an SCSS account enjoys a tax deduction of up to Rs.1.5 lakhs under Section 80C of the Income Tax Act. TDS applies to the interest earned every quarter under the senior citizen saving scheme if greater than Rs.50, 000. To prevent TDS deduction if your income is non-taxable, fill the form 15H and submit it to the bank.

PM Vyay Vandana Yojna

It is a pension and retirement scheme operated by the Life Insurance Corporation Of India (LIC). The applicant must be 60 years of age and he/she will have to take this policy for the term of ten years. The minimum corpus for policy purchase is Rs 1.5 Lakh which will offer a monthly pension of Rs. 1000. The maximum corpus an applicant could invest is Rs 15 Lakh, which will offer a monthly pension of ten thousand rupees (Rs. 10,000). It provides the assured return at the interest rate of 7.40 per cent per annum for ten years. PM Vya Vandana Yojna offers a fixed amount as a pension, every month, quarter, half-yearly and yearly as chosen by the applicant.

Monthly income scheme (MIS)

The Monthly Income Scheme can be opened only in the post office. This scheme enables you to get a monthly income from your investment. You deposit a specific amount in MIS and the scheme in return gives the interest back to the investor. The upper limit that you can contribute in MIS individually is Rs 4.5 lakh but if the account is held jointly hen you can invest up to Rs 9 lakh during five years. The interest rate for the quarter ending 30 September 2021 is 6.6% per annum, payable monthly.

Equities

Putting a portion of your money in equity-based products is very important. Equity investment helps you generate inflation-adjusted returns as compared to any other investments. You can always choose a plan which helps you to withdraw a certain portion of your money through the Systematic Withdrawal Plan (SWP). For someone in his/her, 50’s or 60’s wanting to invest in equities can opt for hybrid funds which give a mix of equity and debt both. This will give a good diversification to your portfolio.

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