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How to save Income Tax in India: Reduce your ITR Burden

How to save income tax in India: 

Many households are facing liquidity crisis amid the coronavirus pandemic because salaries have taken a hit. In these times your tax outgo could create further problem for you. How to reduce the tax burden in current times when rebates on your House Rent Allowance (HRA), Leave Travel Allowance (LTA) have gone.

Here are a few questions first:

> How have taxes increased in the work-from-home situation

>  How to claim tax-free components of your salary; is it advisable to opt for a new tax system? Here is what you must do to save your money: 

Tax-free components of salary 

1.   HRA 

2.   Conveyance Allowance 

3.   LTA 

4.   Entertainment Reimbursements 

5.   Telephone and broadband services 

Shifting to your parent’s house will save your money but you will now have to pay tax on your HRA. Tax exemptions are there under Section 10(13A) of the Income Tax Act & you can avail it on producing the rent receipts.  

Since there are travel restrictions in place, claiming your LTA will be difficult. You can claim tax benefits twice in four years. Many companies are giving an option of giving LTAs along with the salary. You will get LTA after deduction of tax. Conveyance reimbursement is also given on production of receipts. Same is case with the entertainment reimbursement. Many people have stopped eating outside.   

Should you opt for the new tax system or stick with the old one? 

1.   You can opt for the new income tax system if you have still not submitted your bills 

2.   No tax-free components in new system 

3.   HRA, LTA taxable components of salary 

4.   You can opt for new system if unable to show proofs of expenditures 

5.   Carefully see which tax system suits you 

What is absent in new tax system 

1.   Standard Deduction -Rs 50,000 

2.   HRA -Rs 2 lakh 

3.   80C Deduction -Rs 1.5 lakh 

4.   80D (Medical Insurance) –Rs 50,000 

5.   80EE (Housing Loan Interest) -Rs 50,000 

 How to reduce burden :

• Employees working from home should get some tax benefits
• Tax benefits on things like laptop printers and computers
• Employees can renegotiate salaries with employers
• Flexibility in tax components. Employees should be allowed to allocate expenses in components where the expenses are less

ITR Filing 2019-20 : List of Documents Required for Filing Income Tax Returns

This year, Govt. has extended time limit for filing an individual income tax return for the Financial Year (FY) 2019-20 (Assessment Year (AY)  2020-21) from July 31st 2020, to November 30th 2020. Salaried people usually file their tax return using either ITR-1 or ITR-2 which is available on the e-filing website.

However, despite the online process, filing of  ITR can become a tedious job if one has not assorted all their documents properly.  It should be noted, first, that a taxpayer needs to mandatorily link Aadhaar with PAN for the AY 2019-20 on or before the filing of income tax returns.  The other documents that one must keep with them before filing your ITR for FY 2019-20:

1. Form 16 & Salary Slip : It is essentially a certificate that an employee gets from his/her employer.  It validates the fact that TDS has been deducted & deposited with the authorities on behalf of the employee. Form 16 consists of two parts - Part A & B. 

Part A is the portion that consists of the income tax deducted by the employer in the financial year. Separately, it has the name and address of the employer, Permanent Account Number (PAN) details of the employee, and the Tax Deduction Account Number (TAN) of the employer. 

Part B of Form 16 includes the break-up information of the employee’s gross salary.

An individual will require salary slips, as ITR-2 form asks individuals to specify the nature of salary income such as basic, dearness allowance, house rent allowance, among others.

2. Certificates related to interest income : The ITR form also asks taxpayers to specify the source of their interest income, such as fixed deposits, saving accounts among others. The interest income received from banks is taxable. However, an individual can claim deduction under Section 80TTA of up to Rs 10,000 on the interest earned on savings held with the bank or post office. Similarly, senior citizens can claim a deduction of up to Rs 50,000 on their interest income.

An individual must have updated bank statement/passbook for interest on a savings account, interest income statement for fixed deposits & a TDS certificate issued by banks & others for filing ITR.

3. Tax Saving Investments : Tax saving investment helps in lowering the tax liability of an individual. Popular tax-saving options available to individuals & HUFs in India under Section 80C of the Income Tax Act. An individual can claim deductions up to limit of Rs 1.5 Lakh in a financial year.

Common tax savings investments under Section 80C are, Employees Provident Fund (EPF), Public Provident Fund (PPF), Medical or Life Insurance, National Savings Certificate, National Pension System; ELSS Funds, etc. An individual can also claim a deduction of maximum Rs 25,000 in a year on health insurance premium paid for self, spouse, or children under Section 80D. Moreover, an individual can also claim a deduction of Rs 50,000 depending on the parent’s age. If the parents’ age is below 60 years, one can claim an additional deduction of Rs 25,000. If the age is 60 years or above, then a claim of Rs 50,000 can be made.

Interest on housing loan is eligible for tax saving of up to Rs 2,00,000. This is for a self-occupied house. Interest paid on home loan can lower your tax liability under section 24.

4. Form 26AS : It is a consolidated annual tax statement. This form includes details like TDS deducted by the employer, TDS deducted by banks, TDS deducted by other organisations from payments made to you,  self-assessment taxes paid by an individual.

5. Capital Gains : If an individual has earned some capital gains from the sale of the property &/or mutual funds/ equity shares, then he/she will be required to report these gains in their ITR. 

Tata Motors Journey to being Zero Debt in 3 Years

  * Tata Motors Eyes ‘Near-Zero’ Debt In Three Years

> Tata Motors Ltd. plans to become a “near-zero debt” vehicle maker in three years, according to N Chandrasekaran. The Tata Group—which makes cars in India under the Tata brand and owns Jaguar Land Rover—is fully committed to both the units, the group’s chairman told shareholders at the automaker’s annual general meeting on Aug. 25.

> We’re working on a strategic deleveraging plan to ensure that our Indian unit and JLR pare debt, improve portfolios and turn cash positive in the next two years, he said. Tata Motors has a net automotive debt of Rs.48,000 crore.

> We’ve also set a target for Tata Motors to generate positive free cash flow from FY22 onwards,” he said, adding that investments in the automaker have halved during the ongoing financial year and it aims to manage it “tightly” in the future.

> Tata Motors, he said, will also look to unlock investment in various non-core businesses. Chandrasekaran said it will focus on increasing sales & service for both JLR & domestic passenger vehicle business in the next 2-3 years.

> This comes as the firm had already announced a cost-savings programme that would free up nearly Rs.1,500 crore by the end of the ongoing fiscal & a cash improvement programme that would save nearly Rs.6,000 crore in the years ahead.

> JLR undertook a host of initiatives to drive efficiencies so that it improves its profitability despite decreasing volumes & reduced its cash outflows compared to previous years,” Chandrasekaran said.

> Chandrasekaran said Tata Motors is committed to JLR’s business & isn’t seeking funding from the U.K. government. 

> The Indian automaker, which hasn’t provided dividends to shareholders in the last four years, said value creation & dividend is the firm’s top priority & it’s working on that. “The last 3-4 years there has been no room for us to pay the dividends.”

Explained: How are bond investments taxed?

 > Bonds are type of investment that results in an investor lending money to bond issuer in exchange for interest payments. In simpler terms, bond investments work like a formal contract where borrowed money is repaid with an interest at fixed intervals.

> There are various types of bonds available with different duration, coupon rates & lock-ins. The taxation structure is also contingent upon the type of bond.

> Interest earned from investments determines tax applicable on earnings in case of regular taxable bonds. On the other hand, interest earned from tax-free PSU bonds is exempt from taxes.

> However, any appreciation realised at the time of sale or redemption is still taxed as income from capital gains in case of tax-free bonds. 

> Capital gain is the difference between sale price (Net off brokerage & selling expenses) and purchase price (increased by brokerage & selling expenses, if any)

> "Investments should not be made merely on the fact that interest is tax-free, but must be aimed at capitalising the primary rule of investing –Product choice, risk appetite & liquidity requirements that drive financial goals," suggests Chandwani.

> On the sale of bonds, capital gains are taxed as short term capital gains (STCG) or long term capital gains (LTCG) depending on holding period and whether these are listed or not.

> "Capital Gains are considered long-term for listed bonds, zero coupon bonds (whether quoted or not) if they are held for a period exceeding 12 months. On the other hand, in the case of unlisted bonds, capital gains are long-term if they are held for a period exceeding 36 months," explains Sandeep Sehgal, director -Tax & regulatory, AKM Global, a consulting firm.

> STCG from sale of bonds is taxable as per applicable slab rates.

> LTCG arising from sale of bonds (Listed & unlisted) are taxable under section 112 @ 20%.

> "A non-resident investor can choose to pay tax on LTCG arising from sale of unlisted bonds at the rate of 10 percent without benefit of indexation. Further, option to avail 10 percent rate is also available in case of long term listed bonds to all investors (resident and non-resident) without benefit of indexation,” Sehgal elaborates.

> Benefit of indexation is not available for bonds issued by an Indian company as it is restricted to LTCG arising from the sale of capital indexed bonds issued by the government and Sovereign Gold Bonds issued by RBI under the Sovereign Gold Bond Scheme, 2015.

(Data sourced from Moneycontrol.com)

Bonds-All You Wanted to Know About It

Want to strengthen your portfolio’s risk-return profile? Adding bonds can create a more balanced portfolio by adding diversification & calming volatility. Bond market may seem unfamiliar even to the most experienced investors. Many investors make only passing ventures into bonds because they are confused by the apparent complexity of the market & the terminology. In reality, bonds are actually very simple debt instruments. So how do you get into this part of the market? Get your start in bond investing by learning these basic bond market terms.

Key Takeaways of Bonds :

1. Bonds are a form of IOU between the lender & the borrower. 
2. Some of the characteristics of bonds include their maturity, their coupon rate, their tax status & their callability.
3. Several types of risks associated with bonds include interest rate risk, credit/default risk, and prepayment risk. 
4. Most bonds come with ratings that describe their investment grade. 
5. Bond yields measure their returns.

Basic Bond Characteristics

A bond is simply a loan taken out by a company. Instead of going to a bank, the company gets the money from investors who buy its bonds. In exchange for the capital, the company pays an interest coupon. The annual interest rate paid on a bond, expressed as a percentage of the face value. The company pays the interest at predetermined intervals, usually annually or semi-annually & returns the principal on the maturity date, ending the loan.

Unlike stocks, bonds can vary significantly based on the terms of its indenture—a legal document outlining the characteristics of the bond. Because each bond issue is different, it is important to understand the precise terms before investing. In particular, there are six important features to look for when considering a bond.

Maturity -This is the date when the principal or par amount of the bond is paid to investors & the company’s bond obligation ends. Therefore, it defines the lifetime of the bond.2 A bond's maturity is one of the primary considerations an investor weighs against their investment goals and horizon. Maturity is often classified in three ways:

Short-Term: Bonds that fall into this category tend to mature within one to three years

Medium-Term: Maturity dates for these types of bonds are normally over ten years

Long-Term: These bonds generally mature over longer periods of time

Secured/Unsecured - A bond can be secured or unsecured. A secured bond pledges specific assets to bondholders if the company cannot repay the obligation. This asset is also called collateral on the loan. So if the bond issuer defaults, the asset is then transferred to the investor. A mortgage-backed security (MBS) is one type of secured bond, backed by titles to the homes of the borrowers.

Unsecured bonds, on the other hand, are not backed by any collateral. That means the interest & principal are only guaranteed by the issuing company. Also called debentures, these bonds return little of your investment if the company fails. As such, they are much riskier than secured bonds.

Liquidation Preference - When a firm goes bankrupt, it repays investors in a particular order as it liquidates. After a firm sells off all its assets, it begins to pay out its investors. Senior debt is debt that must be paid first, followed by junior (subordinated) debt. Stockholders get whatever is left.

Coupon - The coupon amount represents interest paid to bondholders, normally annually or semiannually. The coupon is also called the coupon rate or nominal yield. To calculate the coupon rate, divide the annual payments by the face value of the bond.

Tax Status - While the majority of corporate bonds are taxable investments, some government & municipal bonds are tax-exempt, so income and capital gains are not subject to taxation. Tax-exempt bonds normally have lower interest than equivalent taxable bonds. An investor must calculate the tax-equivalent yield to compare the return with that of taxable instruments.

Callability - Some bonds can be paid off by an issuer before maturity. If a bond has a call provision, it may be paid off at earlier dates, at the option of the company, usually at a slight premium to par. A company may choose to call its bonds if interest rates allow them to borrow at a better rate. Callable bonds also appeal to investors as they offer better coupon rates.

Risks of Bonds - Bonds are a great way to earn income because they tend to be relatively safe investments. But, just like any other investment, they do come with certain risks. Here are some of the most common risks with these investments.

• Interest Rate Risk - Interest rates share an inverse relationship with bonds, so when rates rise, bonds tend to fall & vice versa. Interest rate risk comes when rates change significantly from what the investor expected. If interest rates decline significantly, the investor faces the possibility of prepayment. If interest rates rise, the investor will be stuck with an instrument yielding below market rates. The greater the time to maturity, the greater the interest rate risk an investor bears, because it is harder to predict market developments farther out into the future. 
• Credit/Default Risk - Credit or default risk is risk that interest & principal payments due on the obligation will not be made as required. When an investor buys a bond, they expect that the issuer will make good on the interest & principal payments just like any other creditor.

When an investor looks into corporate bonds, they should weigh out the possibility that the company may default on the debt. Safety usually means the company has greater operating income and cash flow compared to its debt. If the inverse is true and the debt outweighs available cash, the investor may want to stay away.

Prepayment Risk - Prepayment risk is the risk that a given bond issue will be paid off earlier than expected, normally through a call provision. This can be bad news for investors because the company only has an incentive to repay the obligation early when interest rates have declined substantially. Instead of continuing to hold a high-interest investment, investors are left to reinvest funds in a lower interest rate environment.

Bond Ratings - Most bonds come with a rating that outlines their quality of credit. That is, how strong the bond is and its ability to pay its principal and interest. Ratings are published and are used by investors and professionals to judge their worthiness.

Agencies - Most commonly cited bond rating agencies are Standard & Poor’s, Moody’s & Fitch. They rate a company’s ability to repay its obligations. Ratings range from AAA to Aaa for high-grade issues very likely to be repaid to D for issues that are currently in default.

Bonds rated BBB to Baa or above are called investment grade. This means they are unlikely to default and tend to remain stable investments. Bonds rated BB to Ba or below are called junk bonds, default is more likely, and they are more speculative and subject to price volatility.

Firms will not have their bonds rated, in which case it is solely up to the investor to judge a firm’s repayment ability. Because the rating systems differ for each agency and change from time to time, research the rating definition for the bond issue you are considering.

Bond Yields - Bond yields are all measures of return. Yield to maturity is the measurement most often used, but it is important to understand several other yield measurements that are used in certain situations.

Yield to Maturity (YTM) - As noted above, yield to maturity (YTM) is the most commonly cited yield measurement. It measures what the return on a bond is if it is held to maturity & all coupons are reinvested at the YTM rate. Because it is unlikely that coupons will be reinvested at the same rate, an investor’s actual return will differ slightly. Calculating YTM by hand is a lengthy procedure, so it is best to use Excel’s RATE or YIELDMAT functions (starting with Excel 2007). A simple function is also available on a financial calculator.

Current Yield -The current yield can be used to compare the interest income provided by a bond to the dividend income provided by a stock. This is calculated by dividing the bond's annual coupon by the bond’s current price. Keep in mind, this yield incorporates only the income portion of the return, ignoring possible capital gains or losses. As such, this yield is most useful for investors concerned with current income only.

Nominal Yield - The nominal yield on a bond is simply the percentage of interest to be paid on the bond periodically. It is calculated by dividing the annual coupon payment by the par or face value of the bond. It is important to note that the nominal yield does not estimate return accurately unless the current bond price is the same as its par value. Therefore, nominal yield is used only for calculating other measures of return.

Yield to Call (YTC) - A callable bond always bears some probability of being called before the maturity date. Investors will realize a slightly higher yield if the called bonds are paid off at a premium. An investor in such a bond may wish to know what yield will be realized if the bond is called at a particular call date, to determine whether the prepayment risk is worthwhile. It is easiest to calculate the yield to call using Excel’s YIELD or IRR functions, or with a financial calculator.

 Realized Yield - The realized yield of a bond should be calculated if an investor plans to hold a bond only for a certain period of time, rather than to maturity. In this case, the investor will sell the bond, & this projected future bond price must be estimated for the calculation. Because future prices are hard to predict, this yield measurement is only an estimation of return. This yield calculation is best performed using Excel’s YIELD or IRR functions, or by using a financial calculator.

The Bottom Line - Although the bond market appears complex, it is really driven by the same risk or return trade-off’s as the stock market. Once an investor masters these few basic terms & measurements to unmask the familiar market dynamics, then he or she can become a competent bond investor. Once you’ve gotten a hang of the lingo, the rest is easy.

What Is a Financial Advisor & What Do They Do?

Financial advisors help you create a plan for meeting your financial goals & guide your progress along the way. They can help you save more, invest wisely or reduce debt.

A financial advisor offers assistance with/or, in some cases, complete management of your finances. The catch all term “financial advisor” is used to describe a wide variety of people & services, including investment managers, financial consultants & financial planners. A financial advisor can also be a digital investment management service called a robo-advisor.

What do financial advisors do?

The services provided by financial advisors will vary based on the type of advisor, but generally speaking, a financial advisor will assess your current financial situation, including your assets, debts, expenses & identify areas for improvement.

A good financial advisor will ask you about your goals & create a plan to help you reach them. That may mean calculating how much you should save for retirement, making sure you have an adequate emergency fund, offering tax-planning suggestions or helping you refinance or pay off debt. Financial advisors also help invest your money, either by recommending specific investments or providing complete investment management.

In some cases, you can choose which services you want or need based on the type of advisor you select. For example, a traditional in-person advisor will likely offer personalized, hands-on guidance for an ongoing fee. A robo-advisor is a low-cost, automated portfolio management service, typically best for those who want help managing their investments. Then there are online financial planning services, which marry the lower costs of a robo-advisor with the holistic guidance of a human advisor.

    Do you need a financial advisor?

    If you’re struggling to prioritize your financial goals, need a plan for where & how to save, or want help with investment management, you may want to work with a financial advisor.

    Financial advisors bring an expert and outside view to your finances, take a holistic look at your situation & suggest improvements. 

    Financial advisors also can help you navigate complex financial matters such as taxes, estate planning and paying down debt.

 

Is a financial advisor worth it?

    A good financial advisor or robo-advisor can be worth the cost if you’re able to save more money, cut your expenses or better plan for the future. 

    A financial advisor can also help you feel more secure in your financial situation, which can be priceless.

    But financial advisors can also come with high fees. Depending on the type of advisor you choose, you might pay anywhere from 0.25% to 1% of your balance each year. 

    Some advisors charge a flat fee to create a financial plan, or an hourly, monthly or annual rate.

 Below, an overview of each type of financial advisor and what they do:

1.      Robo-Advisors:

        If you’re looking to invest for retirement or another goal, a robo-advisor can be a great solution. 

        They’re almost always the lowest-cost option & their computer algorithms will set up & manage an investment portfolio for you. 

        You’re probably a good candidate for a robo-advisor if:

        o   You need to save for retirement but aren’t sure where to begin.

        o   You want to benefit from stock market returns but don’t have a lot of time to learn how to invest.

        o   You have a lump sum you want to invest for one or more future financial goals.

        o   You don’t have much money to invest yet robo-advisors typically have low or no-account minimums.

    

    Here’s what to expect from a robo-advisor:

• Your first interaction will most likely be a questionnaire from the company you’ve selected as your provider. The questions help identify your goals, investing preferences & risk tolerance.
• Based on the information you provide, the robo-advisor’s algorithm will recommend an investment portfolio that’s typically built using low-cost exchange-traded funds & index funds.
• The service will then provide ongoing investment management, automatically rebalancing your investments as needed & taking steps to reduce your investment tax bill.
• The low-cost, easy-entry nature of robo-advisors makes them a good choice for many consumers.

2.      Online Financial Planning Services:

    Online financial planning services offer investment management combined with virtual financial planning. 

    The cost is higher than you’ll pay for a robo-advisor, but lower than you’d pay a traditional financial advisor.

    Consider an online financial planning service if:

o       You want to work with a human advisor, but you don’t mind meeting that advisor by phone or video. 

o       You’ll save money by meeting virtually but still receive investment management and a holistic, personalized financial plan.

o       You want to choose which financial advice you receive. Some services charge a flat fee based on the complexity of the advice you need (Investment management is included). Others charge a fee for investment management & offer a la carte planning sessions with an advisor.

o       For many people, this model is the right fit as it combines lower costs with a high level of service.

        

        Here’s what to expect from an online planning service: 

• Some services function like hybrid robo-advisors. Your investments are managed by computer algorithms, but you’ll have access to a team of financial advisors who can answer your specific financial planning questions. 
• At the other end of the spectrum are holistic services that pair each client with a dedicated CFP, a highly credentialed expert. 
• Either way, you should receive investment management and personalized financial guidance to help you meet your goals.

3.      Traditional in-person financial advisors:

 In addition to robo-advisors & online planning services, the term “financial advisor” can refer to people with a variety of designations, including:

1. CFP: Provides financial planning advice. To use the CFP designation from the Certified Financial Planner Board of Standards, an advisor must complete a lengthy education requirement, pass a stringent test & demonstrate work experience. 
2. Broker or Stockbroker: Buys & sells financial products on behalf of clients in exchange for a fee, commission or both. Must pass exams & register with the SEBI. 
3. Registered Investment Advisor: Provides advice and makes recommendations in exchange for a fee. RIAs are registered with the SEBI (Investment Advisors). Some focus on investment portfolios, others take a more holistic, financial planning approach. 
4. Wealth managers: Wealth management services typically concentrate on clients with a high net worth & provide holistic financial management.  
5. Human financial advisors generally cost more than robo-advisors & online services & may have minimum investment requirements in some cases. But you may decide to go for it if: 
• If you’re undergoing or planning a big life change, such as getting married or divorced, having a baby, buying a house, taking care of aging parents or starting a business. 
• Your investments have grown or your financial life has gain complexity beyond what a robo-advisor or online advisor can handle. 
• You want to meet with someone in person & willing to pay more to do so. 
• Here’s what to expect from a traditional in person financial advisor. 
• You’ll likely meet in person at his or your local office/home
• The advisor will provide holistic planning & assistance to help you achieve financial goals
• You’ll have in-depth conversations about your finances, short & long-term goals, existing investments & tolerance for investing risk, among other topics
• Advisor will work with you to create a plan tailored to your needs i.e.  retirement planning, investment help, insurance coverage, etc.
• Hire an advisor you’ll be comfortable working with &  of course, one who’s is qualified or experienced, meaning she’s required to put your interests first.

Mr. Buffet's 2020 AGM-Key Extracts

Mr. Buffet's AGM's is always an inspiration was as 5 hours event in 2020, but of absolute blissfulness. The ghost of speculations runs-away whenever you listen to Warren Buffet . 
Its also the first time Mr. Buffet used PPT in his whole career & kicks off the meeting by saying "who says you can't teach old dog new tricks!". The key takeaways from the AGM were :

1. Great depression, forced many people to loose faith in market - DJIA (Dow Jones Industrial Average) was at 381 points (In Sept, 1929) & after 3 months it fell 48% to 198. All so-called smart-fund-managers said "you never want a serious crisis to go to waste". Then after another 10 months (August 1929) market went up 20% (To 240 points) from 1929 low  & then there was a long-long great-depression for 20 years. (In 1932 DJIA went to 41 points!, while in Jan 1951 it reached 240 points).
2. Still as a country US,  endured, persevered & prospered - Today DJIAis above 24,000 points. This reminds of Mr. Taleb's anti-fragile lesson,  human-beings are most anti-fragile species (Things that gain from dis-order, which always comes back more strongly) amongst all .
3. You can't time the market - Impact of COVID is uncertain nobody can time the market (Nobody in 1929 could have predicted 20 years of market reaching no-where). Historically there were several instances of shutting down of markets (In 1924 for 4 months, after 9/11 for 4 days). COVID brings unique uncertainty on the table. No body knows if the second attack is on the offing (During winters) & how will that impact the market. People have different fear quotient (Fear Psychosis) & should accordingly take positions (Wait or take plunge) in current market. 
4. Farm example - If you own a farmland & the owner next to you keeps asking you to buy your farm or sell his on daily basis, that's ridiculous. You are not obliged to listen to this guy.  Man people take advantage of you by telling you that they know how much this farm would produce tomorrow, day-after, next year etc & hence inducing you to buy/sell. If there is no change in fundamental business pre-post COVID, one should not sell one's stocks. Outsmarting advisors or other people in the industry is not the right approach for investing. 
5. 40% cash position - Buffet has not taken plunge (To buy) in the current market as he says he is always prepared for the worst time (Both for himself along with his insurers). Being hyper-conservative & hyper-aggressive is reflective of Buffet's investment style. Mother nature & Gods are also hyper-conservative. Please note we humans have 2 eyes, 2 ears, 2 hands etc Any fund-manager in the name of optimization would have negotiated with the almighty for nothing more than 1 of each!...this is my view.
6. On Swelling of Fed Balance Sheet - Its better that Fed should swell it further, as we know the consequences if they don't do it while the consequences of doing it is not as harmful. Trick is to keep borrowing in own currency (As you can thus never default) as debt is not re-paid but just refunded. 
7. Negative interest rate makes the float from insurance premium to Berkshire inferior?? - Buffet says if companies are able to do what they were doing before interest rates were positive there is no need to worry to much about negative interest rate.
8. Companies that require less capital to offer same or higher growth are best companies to stay invested
9. Getting-real-rich (super returns) is different from staying-real-rich (decent returns) - Capital preservation is more important hence one should not get distracted by super-returns. 
10. On share buybacks - It should be not only price-sensitive but also need-sensitive (If any owner wants cash for his shares, assuming it's a significant chunk, companies can always buy-back his shares). There is a risk of buying back at slightly/moderately expensive valuation, but this risk is present when you do acquisitions. 
11. It's easy and more re-warding to sell money (as a commodity) than managing it - Index funds which earn less fees are never pushed to investors. 
12. Buying stocks of oil companies are equivalent of taking bet on oil prices - Mr. Buffet says there is a risk of permanent capital loss for oil companies. 
13. Air line industries - Sold of all the stake, Mr. buffet says he made a mistake by buying airline stocks as the future of this industry is much less clear. 
1. Don't know how many passengers will fly after the COVID impact 2-3 years down the line.
2. It’s a tough business as one small mistake puts life of so many people in danger. 
3. Also the reputation of company is endangered. 
4. Oversupply of planes will also have pressure on pricing power. 
5. Industry is highly capital intensive & over-dependance on borrowing is high. 

EPF Rate Announcement for FY 2019-20

Post Central Board of Trustees (CBT) meet on 5th March.'20, Employees Provident Fund Organisation (EPFO) has revised Rate of Interest (ROI) to 8.50% for FY19-20 from PY18-19 of 8.65%. This marks a 15 basis points cut from the previous year.

Movement of EFP Rate of interest announcements & movement from FY12-13 to FY19-20.

Financial Year	EPF Interest Rates
FY 2019-20	8.50%
FY 2018-19	8.65%
FY 2017-18	8.55%
FY 2016-17	8.65%
FY 2015-16	8.80%
FY 2014-15	8.75%
FY 2013-14	8.75%
FY 2012-13	8.50%

Cut in ROI is due to lower earnings from exposure in debt investments in some troubled companies.  EPFO has over 4,500 crores debt exposure in DHFL & IL&FS. Even at current rate, EPF ROI is better than some govt scheme (like post office savings, PPF etc) or bank FD investments, as it comes tax free at all stages. EPFO has over 60 million active subscribers.

Finance Ministry had earlier advised Labour Ministry to align EPF rates with other govt run scheme. As GOI stand guarantor, finance ministry vets EPF rate proposal to avoid additional liability on account of shortfall in EPFO income vs interest outgo for current Financial Year.

Why need for Personal Financial Planning??

Why the need for personal financial planning??

Personal financial planning helps you determine your short & long-term financial goals. It helps to create a tentative plan to meet those goals. The first step in developing your personal financial plan is to meet with a financial advisor.

Ø  Income: It's possible to manage income more effectively through financial planning. Managing income helps you understand how much money you'll need to pay for annual taxes, other household monthly expenditures & balance amount as savings. 

Ø  Cash Flow: Increase cash flows by carefully monitoring & managing your spending patterns & expenses. Tax planning, prudent spending & careful budgeting helps you keep more of your hard earned cash.

Ø  Capital: An increase in cash flow, can lead to an increase in capital. Allowing you to consider investments to improve your overall financial well-being. 

Ø  Family Security: Providing for your family's financial security is an important part of the financial planning process. Having the proper adequate life insurance coverage (preferably a term policy), medical insurance & home loan coverage policies etc in place can provide peace of mind for you & your loved ones. In case of all policies please maintain adequate files, which is known to spouse or other family members to track in case of any untoward incidents where these needs to be claimed.

Ø  Investment: A proper & flexible financial plan considers your personal circumstances, objectives & risk tolerance. It acts as a guide in helping choose the right types of investments to fit your various needs based on your life cycle, personality & future goals. 

Ø  Standard of Living: The savings created from good planning can prove beneficial in difficult times. You can make sure there is enough investment cover to replace any lost income should a family bread winner become unable to work. 

Ø  Financial Understanding: Better financial understanding can be achieved when measurable financial goals are set, the effects of decisions understood & results reviewed. Giving you a whole new approach to your budget & improving control over your financial lifestyle. 

Ø  Assets: A nice cushion in the form of assets is desirable e.g. 2nd house, freehold land, gold etc. Many assets currently come with liabilities attached.  It becomes important to determine the real value of an asset i.e. realizable value of asset after setting of attached liabilities. Knowledge of settling or cancelling the liabilities, comes with the understanding of your finances. The overall process helps build assets that don't become a burden in the future. 

Ø  Savings: It used to be called saving for the rainy day. Sudden financial changes can still throw you off track. It is good to have some investments with high liquidity in bank under fixed deposits. Liquidity investments should be able to take care for 6 months in case of loss or income. These investments can be utilized in times of emergency or for educational purposes. 

Ø  Ongoing Advice: Establishing a relationship with your financial advisor who you can trust & relate with is critical to achieving your goals. You should regularly meet your advisor maybe once in 6 months to assess your current financial position & develop & modify you financial plan based on your changed needs.