The surprising truth behind Fixed Deposit Returns

The answer is B or 7.4%. Surprised?
What you probably didn’t consider was the tax charged on the interest you earn which is calculated based on your prevailing tax slab. So if you fall in the 20% tax slab (which you will normally, if you make Rs. 9 lakh/year), your interest earned will be taxed at the same rate.
What this means is that while normally you would have expected to earn roughly Rs. 18,616.6 as interest, you actually earn Rs. 14,893.3.

While FDs might be considered safe, the returns they provide are not tax efficient. Considering inflation is currently hovering around 8-9%, you actually lost money in real terms.

The Union Budget 2015-16 Been for Senior Citizens.

The Union Budget 2015-16, which was announced last week, made several proposals for promoting economic growth in the country. The thrust of the Budget remained on rural empowerment, infrastructure development, encouraging industrial growth and reducing regional disparity. However, along with this, another aspect which the budget focused on was providing benefits to senior citizens of the country. 

Here are the proposals made by the Union Budget 2015-16 for senior citizens: 

• Increasing the deduction limit for premium paid in respect of health insurance
  
  The premium paid for health insurance in case of senior citizens is eligible for deduction under Section 80D up to Rs 20,000 p.a. at present. While there were expectations that this be increased to 25,000 p.a. in case of senior citizens (and Rs 20,000 p.a. in case of non-senior citizens); the budget 2015-16 outlived these expectations. The deduction limit for senior citizens was raised to Rs 30,000 p.a. (while for non-senior citizens to Rs 25,000 p.a.). 
  
• Deduction for expenditure incurred for medical treatment by very senior citizens
  
  For very senior citizens (with age of 80 years or more) who are not covered by health insurance, the Union Budget 2015-16 proposed a deduction of Rs 30,000 p.a. towards expenditure incurred on their treatment. 
  
• Raising the deduction for expenditure incurred on medical treatment of specified diseases
  
  The amount incurred on medical treatment in relation to specified diseases of serious nature is allowed to be deducted from your Gross Total Income (GTI) up to a maximum of Rs 60,000 (for very senior citizens) currently under Section 80DDB. The Budget 2015-16 proposed to raise this deduction limit to Rs 80,000. 
  
• Creation of a Senior Citizen Welfare Fund
  
  The Union Budget 2015-16 also proposed the creation of a Senior Citizen Welfare Fund for subsidising the premiums paid by old age pensioners, BPL (Below Poverty Line) card-holders, small and marginal farmers and others. This fund would be created using the unclaimed deposits lying in the Public Provident Fund (PPF) and Employee Provident Fund (EPF) (about Rs 9,000 crores in total).
  
  But here PersonalFN is of the view that subsidising in such a manner is inappropriate and can lead to troubles when legitimate PPF holders and / or EPF holders or their heirs claim the unclaimed balance in their account. 
  
• Introduction of Pradhan Mantri Suraksha Bima Yojna
  
  The Union Budget 2015-16 also proposed to shortly launch the Pradhan Mantri Suraksha Bima Yojna, which will provide a cover of Rs 2,00,000 for accidental death and full disability and a cover of Rs 1,00,000 for partial disability. The premium for this will be just Rs 12 per year. This Yojna will be made available to citizens who are from 18 years to 70 years of age and having a bank account. 
  
• Service tax exemptions on Varishtha Bima Yojana
  
  As a pleasant surprise, the Union Budget 2015-16 proposed that service tax exemptions be provided on the Varishtha Bima Yojana for the benefit of senior citizens. 
  
• New scheme for providing physical aids and assisted living devices 
  
  As the number of senior citizens living in the country is quite high, the Finance Minister has decided to establish a scheme that will provide physical aids and assisted living devices to senior citizens who are below the poverty line (BPL). 
  

Hence, if you are a senior citizen, the Budget has left you with many reasons to smile. We are having the view that senior citizens must take advantage of these announcements made by the Finance Minister. They can help you to reduce your tax outlays and thus leave you with a higher disposable income. We believe that tax planning is an integral aspect of financial planning which must be handled prudently. Leaving the tax planning exercise for the last minute can cost you a fortune and can also harm your financial wellbeing. 

Indian Budget 2015 – Top Announcements

This is the first complete budget announced by Narendra Modi’s led BJP government and in summary we give thumbs up to this budget to set the right tone for development. Not every thing was done to please the masses, but on a macro front, it ticked many boxes. Our analysis is focused on a few of such right boxes :

1. Bringing off shore fund managers to India – Financial services tends to be amongst the highest pay masters and also attracts the best brains. Unfortunately most of the Indian brains get drained towards our western counterparts. This budget has provided them the necessary tax relief which will potentially reverse the brain drain in favour of India by changing the Permanent Establishment norms in Income Tax. The geographical presence of a fund manager in India would not attract adverse tax consequences.

2. For Salaried employees – Transport allowance has been increased from Rs. 800 to Rs. 1600 per month. Choice has been given to invest PF amount in either EPF (Employee’s Provident Fund) or NPS (New Pension Scheme). Option has been given to employees below a threshold salary to avoid deduction towards PF without limiting employer’s contribution. Additional 10,000 Rs. deduction has been given towards payment of health insurance premiums. – ALL good steps.

3. Pension, Social Security & Insurances – This was desperately needed for Indian masses who are having no financial security and where the concept of insurance is not known. Providing budgetary allocation in this direction will go a long way in securing the livelihood of the Indian masses.

4. Wealth Tax replaced by a higher Surcharge – People having over 30 lacs of wealth were subject to 1% wealth tax. While this was not strictly enforced, the tax liability was always looming. This has now been replaced with a 10% additional surcharge for super rich people (having income over 1 crore).

5. REIT (Real Estate Investment Trusts) – Budget has rationalised the taxation around the creation REITs which will now facilitate creation of REITs and help retail investors to take part in the India’s real estate story. Units of REITs could be bought by investors who seek returns from the real estate sector without directly buying real estate. You could relate this some what to a Gold ETF where in you invest in units of Gold ETF and get exposure to Gold. The budget has also made investments in REITs attractive by making their taxation similar to Equity shares listed on stock market. This would possibly be a big boost to the liquidity strapped real estate market.

6.  Corporate Tax reduced to 25% – Indian Corporates are known to have amongst the highest tax in the world. This budget has reduced the tax from 30% to 25% for 4 years starting from 2016 onwards. A very welcome step for promoting ‘Make in India’ slogan.

7. Bankruptcy Code – This would help in creating the right business environment in parallel to our western counterparts. Such a law will facilitate smoother operations of business for entities facing excessive debt positions.

8. Crack Down on Black Money – a comprehensive law will be enacted to check black money menance which will make hiding of black money in foreign assets a punishable offence with upto 10 years of jail. Amongst list of measures, a key measure includes avoiding payments in cash for over 20,000 Rs. for all real estate transactions and quoting of PAN for all transactions over 1 lac. However, we feel that it will be still difficult to curb the cash transactions and would be interested to see the next series of steps being taken on track and curb the flow of cash.

9. India’s Gold Pot – New gold deposit schemes will be announced to provide gold depositors with interest on their gold deposits. In addition, Gold Sovereign Bonds will be launched. Such bonds will bear interests and could be regarded as an alternative investment in Gold Metal.

10. Service Tax Hike to 14% – Amongst the list of negatives, the biggest drag is the increased Service Tax rate from 12.36% to 14%. Being an indirect tax, this will impact each individual buying services such as telephone bills, internet, travel, restaurants, etc.
No changes in the direct tax rates have been announced for this year and the taxation rates of last year will prevail.
A. For individual or HUF upto 60 years of age, the following slabs apply

Income Slab (in INR)	Tax Rate
0 – 250,000	NIL
250,000 to 500,000	10%
500,001 to 10,00,000	20%
Above 10,00,000	30%

B. For individual within 61-80 years of age, the following slabs apply

Income Slab (in INR)	Tax Rate
0 – 300,000	NIL
300,000 to 500,000	10%
500,001 to 10,00,000	20%
Above 10,00,000	30%

C. For individuals beyond 80 years of age, the following slabs apply

Income Slab (in INR)	Tax Rate
0 – 500,000	NIL
500,001 to 10,00,000	20%
Above 10,00,000	30%