Good time to invest

With the Global recession going on, I have thought of investing not for tomorrow but for my post retirement  life! I am beginning to worry if what i have been saving will be over with time as i go on...marriage, children, new home, car, holiday , childrens education and what not?? I believe that i would manage the mid way path, but I am not certain about what and how much amount i will be left with post retirement? Will it be sufficient enough for me to reire or would it be engulfed in my childrens education ... the cost of education will too be increased manifold with time !

So i am in a confusion, what to do.. how much to invest today and till what time? This needs a well calculated risks involved along with it and so are the benefits that i would be reaping post retirement and not now. So there is a big question if i would be able to manage it?  Thats why there is a plan called Systematic Investment Plan (SIP). I need to go right through it in a few days time and do all the calculations till i am in office (say calculations till 60 years of age), and not to forget the TVM (Time Value for Money) in it.

Suppose i invest Rs 1000 only per month till 60 years of age, my savings would be something like this...

Savings at 60 years of age flatly (Present value) = 1000*12* (60 - 26) = Rs 408000/- (pretty good huh!)
Now the TVM factor , say Compounded at 8% for (60-26) i.e. 34 years

Future Value (FV)  = Cash Flow * FVIFA k,n
where,
Cash Flow = 1000*12 =12000
FVIFA k,n = [(1+k)^n -1]/k
k = 8% = 0.08
n = 34

Future Value (FV) = 12000 [ (1+0.08)^34 -1]/0.08
= 12000*158.626  
= Rs 1,903,520 /-

Hence i will be having 19 lacs after 34 years, if i invest every month an amount of Rs 1000 only for 34 years.  So i think you should also go for this type of investment. But please make sure that  you invest the excess amount only and not the basic amount which you have. As the saying which is famous nowadays goes like this.. " Invest when people aree greedy, and be greedy when people invest " by some author i forgot.
Please note that the amount has to be deducted every month for 34 years and its a big commitment from ones side. Hence make sure you are ready for it otherwise it isnt worth  the investment.

Likewise an investment of Rs 4166 per month or Rs 50k per annum can lead you to Rs 79,31,333 after 34 years. Keep calculating :)

Advantages:
1) Be a regular investor
2) Commitment in investments
3) Streamlined perspective of what you are going to get
4) A clear picture of your future demands
5) Doesnt need  very large premium

Disadvantages:
1) Inflation or recession may affect the rates
2) Amount invested so far will be freezed and can be realised only on maturity
3) If you discontinue the investment, penalty may be attracted depending on the rules of the Bank or type of investment

Disclaimer:
The calculations shown here are based on the formulas known to us in Finance. The calculations are based on my own thoughts and necessarily do not refelct someones. Please read the instructions or agreement and rules before investing.

Investment plan 3

As mentioned in my last Blog on Income tax calculation, a person can claim a maximum of Rs 1 lac only in a financial year to evade tax. I was thinking otherwise.... what if i invest the same amount which i would be saving for the financial year and invest in something which will yield higher benefits. So i came up with a small calculation which stuck quite in my  favor .
Remember Investment plan 1?

For that i need at least RS 1,27,000/- only; which is 27k more. With that amount invested, you will be reaping benefits over benefits. Let me share u the calculations...

Amount i will get out of the investment = 7775*12 = 93300
Tax I have to pay without investing the 1lac rupees in a financial year (after deduction of other tax benefit claims like room rent, medical claims, life insurance etc which already have been invested) = Rs 47550 (approx)

Amount i will gain even after not paying off taxes = 93300 - 47550   = Rs 45750/- (approx)


Disclaimer: Please do not take this for a ride. Investment decision is purely yours and should not be driven by any advices or counsels. This plan is shared by me based on my thinking and beliefs, please do not bais yourself on the same.

Investment plan 3

As mentioned in my last Blog on Income tax calculation, a person can claim a maximum of Rs 1 lac only in a financial year to evade tax. I was thinking otherwise.... what if i invest the same amount which i would be saving for the financial year and invest in something which will yield higher benefits. So i came up with a small calculation which stuck quite in my  favor .
Remember Investment plan 1?

For that i need at least RS 1,27,000/- only; which is 27k more. With that amount invested, you will be reaping benefits over benefits. Let me share u the calculations...

Amount i will get out of the investment = 7775*12 = 93300
Tax I have to pay without investing the 1lac rupees in a financial year (after deduction of other tax benefit claims like room rent, medical claims, life insurance etc which already have been invested) = Rs 47550 (approx)

Amount i will gain even after not paying off taxes = 93300 - 47550   = Rs 45750/- (approx)


Disclaimer: Please do not take this for a ride. Investment decision is purely yours and should not be driven by any advices or counsels. This plan is shared by me based on my thinking and beliefs, please do not bais yourself on the same.

Investment Plan 2

The Plan:
Buy a house somewhere in Navi Mumbai/Thane/ Vashi/ Panvel which has lower land rate in Mumbai. Currently its in the range of 3500-6100 PSF .

Soaring land rates:
Navi Mumbai has seen a lot of action in the past 1 year. The property prices in Kharghar, Belapur, Vashi etc. are touching new heights. The Palm Beach road is getting busier by the day and the Malls and large revocations in DAKC and other IT Parks has seen a surge in Corporate Population. There is surely potential in these locations. Airoli is the next hot spot with a lot of action in Commercial and Retail. Average Rates Rs.2000/- to Rs.4500/- PSF. Outlook Bright Future with Maha Mumbai and SEZs and Airport planned out, it may be a beneficial to invest now in select projects.

Initital assumptions:
Supposing you need at least 1BHK tp start with of say 500-600 SF area, It will come somewhere in 30 -40 Lacs

Finance:
Initial finance will be taking home loans. Today SBI offers Home loans at 11.5% for 25 years upto some 50-60 lacs. Take it on fixed rate and not floating rate.

Rough Calculations:

The EMI for 40lacs will be

EMI = 3000000/(12*25) (Home loan for 25 years)
= 10000 (Per month excluding interest)


Option 1
If you give the room for rent , you will get at least 7-10 K per month. Supposing you get 10k on an average,
10000*12 = 120000 which t will cover your EMI.

Option 2
Staying in the house. A house in Mumbai means all expenses cut down. You can stay as long as you are in Mumbai, its your own house anyway. When u plan to move out of Mumbai; make sure not to keep the room idle .Give it on rent ,if the home is less than 4 years of possession or sell it if its more than 4 years of possession. The amount you can fetch is around 4 to 5 times the original price in 4 years time (believe me) i.e you will get around15 lacs after 4/5 years time.


Advantages
1) A home of your own eventually
2) EMI covered by rent (if rented)
3) No need to nvest (10k per month for a year is 1.2 lacs, no need to show investment for 25 years)
4) Sell at 4/5 times its original price after 5 years
5) Interest rates at 11% now
6) Expenditure will be less if you are staying in the house
7) Family oriented, cozy home feeling


Disadvantages
1) Property tax, society tax payable one time per annum
2) A pain to take 30lacs home loan
3) May have to spend more if rented intially
4) Have to go to a broker to lease out the room if you are going to rent it out


So try your luck. Think about it and give a go. Please do not held me responsible for anything. This is in exception to market risk and market rates known to me. The land rates, interest rates and space area may differ from actual plan. Please read the property and loan papers carefully before investing or going for a loan.

Investment Plan 2

The Plan:
Buy a house somewhere in Navi Mumbai/Thane/ Vashi/ Panvel which has lower land rate in Mumbai. Currently its in the range of 3500-6100 PSF .

Soaring land rates:
Navi Mumbai has seen a lot of action in the past 1 year. The property prices in Kharghar, Belapur, Vashi etc. are touching new heights. The Palm Beach road is getting busier by the day and the Malls and large revocations in DAKC and other IT Parks has seen a surge in Corporate Population. There is surely potential in these locations. Airoli is the next hot spot with a lot of action in Commercial and Retail. Average Rates Rs.2000/- to Rs.4500/- PSF. Outlook Bright Future with Maha Mumbai and SEZs and Airport planned out, it may be a beneficial to invest now in select projects.

Initital assumptions:
Supposing you need at least 1BHK tp start with of say 500-600 SF area, It will come somewhere in 30 -40 Lacs

Finance:
Initial finance will be taking home loans. Today SBI offers Home loans at 11.5% for 25 years upto some 50-60 lacs. Take it on fixed rate and not floating rate.

Rough Calculations:

The EMI for 40lacs will be

EMI = 3000000/(12*25) (Home loan for 25 years)
= 10000 (Per month excluding interest)


Option 1
If you give the room for rent , you will get at least 7-10 K per month. Supposing you get 10k on an average,
10000*12 = 120000 which t will cover your EMI.

Option 2
Staying in the house. A house in Mumbai means all expenses cut down. You can stay as long as you are in Mumbai, its your own house anyway. When u plan to move out of Mumbai; make sure not to keep the room idle .Give it on rent ,if the home is less than 4 years of possession or sell it if its more than 4 years of possession. The amount you can fetch is around 4 to 5 times the original price in 4 years time (believe me) i.e you will get around15 lacs after 4/5 years time.


Advantages
1) A home of your own eventually
2) EMI covered by rent (if rented)
3) No need to nvest (10k per month for a year is 1.2 lacs, no need to show investment for 25 years)
4) Sell at 4/5 times its original price after 5 years
5) Interest rates at 11% now
6) Expenditure will be less if you are staying in the house
7) Family oriented, cozy home feeling


Disadvantages
1) Property tax, society tax payable one time per annum
2) A pain to take 30lacs home loan
3) May have to spend more if rented intially
4) Have to go to a broker to lease out the room if you are going to rent it out


So try your luck. Think about it and give a go. Please do not held me responsible for anything. This is in exception to market risk and market rates known to me. The land rates, interest rates and space area may differ from actual plan. Please read the property and loan papers carefully before investing or going for a loan.

Open all links in a new window

Many a times you will find that you wish to open a link given on the blog to be opened in a new window without affecting the Blog page, which normally doesn't happen.

Instead of coding each individual link to a blog, picture, or web site, you can make all links within your blog open in a new window. Simply do the following steps as shown in image below



Please remember to backup your template before making any changes, so that you can roll back later in case it doesn't work out. Thats it, mine is working. Try it at your own risk!

Income tax revisited

I have come across many people who do not have any idea about Income tax. This post is to help then understand the basic things on how it works. Please refer the Income tax rates and slabs for different individuals in India in table given below.

Income Tax Calculation
Income tax is calculated on the gross salary. In CTC, we use to add all the reimbursements. On Reimbursements like Medical, LTA, Driver Salary, Petrol etc, if the employee would provide the bills, it will be tax exempted.All unclaimed amount will be paid by the end of the financial year i.e. with the March salary after deduction the Tax.

Bonus, Ex-gratia, Variable Pay are coming under the taxable salary.
HRA ( In Metro) 50% of the basic would be tax exempted provided the employee has to produce the rent receipt. Conveyance Allowance - Rs 800/- monthly would be tax free.

Is tax from all my accounts?

In India, we have Tax Deduction at Source (TDS), which means that Tax is applicable at the source of your income. So if you are working, then tax is applicable to your salary account only.

Income Tax Rates for FY 2008-09:

I) For any guy in India

Total Income Range	Tax Rates	Surcharge	Education Cess (% of I.T)	Secondary and Higher Education Cess
Upto Rs.1,50,000/-	Nil	Nil	Nil	Nil
Rs.1,50,001- Rs. 3,00,000	10% of the amount by which the total Income exceeds Rs.1,50,000	Nil	2%	1%
Rs.3,00,001- Rs. 5,00,000	Rs.15,000 + 20%of amount by which the total Income exceeds Rs.3,00,000	Nil	2%	1%
Above Rs. 5,00,000	Rs.55,000 + 30% of amount by which the total Income exceeds Rs.5,00,000	Nil	2%	1%

It means that a person having a gross salary of upto Rs 1,50,000 is exempted from tax.
In a Financial year, an individual can show a saving of Rs 1,00,00 only to save Tax. It can be Govt Tax saving Bonds of 5 year term, Medical Insurance, Mutual funds, Life Insurance, ULIP Plans, Home Loan etc but it does not include Gold and Stocks


(II) In case of resident women below 65 years of age.

Total Income Range	Tax Rates		Surcharge			Education Cess (% of I.T)	Secondary and Higher Education Cess
Upto Rs.1,80,000/-	Nil		Nil			Nil	Nil
Rs.1,80,001- Rs. 3,00,000	10% of the amount by which the total Income exceeds Rs. Rs.1,80,000		Nil			2%	1%
Rs.3,00,001- Rs. 5,00,000	Rs.12,000 + 20% of amount by which the total Income exceeds Rs.3,00,000		Nil			2%	1%
Above Rs. 5,00,000	Rs.52,000 +30% of amount by which the total Income exceeds Rs.5,00,000		Nil			2%	1%

It means that a woman having a gross salary of upto Rs 1,80,000 is exempted from tax. Same goes for a women too in terms of saving in a financial year. Tax Calculation Suppose a guy has a gross salary of Rs 3,80,000 ; lets calculate how much tax he has to pay in a financial year. In a financial year, one has to declare his Income at the start of his work - say after 2/3 months of joining in a Company. Suppose he declares an investment of Rs 1 Lacs, be it of any distribution like ... Govt Bonds Rs 30,000 Mutual Funds Rs 60,000 Insurance Rs 10,000 Then his tax liability becomes 3,80,000 - 1,00,000 = 2,80,000 On that, tax is levied only when the amount is above Rs 1,50,000 Hence the amount which is taxable is 2,80,000 - 1,50,000 = 1,30,000 Therefore income tax payable = 10% of 1,30,000 = 13,000 Above that Education Cess (% of I.T) = 2% of 13,000 = 260 and Secondary and Higher Education Cess = 1% of 13,000 = 130 Total tax payable = 13,000+260+130 = Rs 13,390 in that financial year. Isnt that simple? Hope you can calculate yours now :)

Income tax revisited

I have come across many people who do not have any idea about Income tax. This post is to help then understand the basic things on how it works. Please refer the Income tax rates and slabs for different individuals in India in table given below.

Income Tax Calculation
Income tax is calculated on the gross salary. In CTC, we use to add all the reimbursements. On Reimbursements like Medical, LTA, Driver Salary, Petrol etc, if the employee would provide the bills, it will be tax exempted.All unclaimed amount will be paid by the end of the financial year i.e. with the March salary after deduction the Tax.

Bonus, Ex-gratia, Variable Pay are coming under the taxable salary.
HRA ( In Metro) 50% of the basic would be tax exempted provided the employee has to produce the rent receipt. Conveyance Allowance - Rs 800/- monthly would be tax free.

Is tax from all my accounts?

In India, we have Tax Deduction at Source (TDS), which means that Tax is applicable at the source of your income. So if you are working, then tax is applicable to your salary account only.

Income Tax Rates for FY 2008-09:

I) For any guy in India

Total Income Range	Tax Rates	Surcharge	Education Cess (% of I.T)	Secondary and Higher Education Cess
Upto Rs.1,50,000/-	Nil	Nil	Nil	Nil
Rs.1,50,001- Rs. 3,00,000	10% of the amount by which the total Income exceeds Rs.1,50,000	Nil	2%	1%
Rs.3,00,001- Rs. 5,00,000	Rs.15,000 + 20%of amount by which the total Income exceeds Rs.3,00,000	Nil	2%	1%
Above Rs. 5,00,000	Rs.55,000 + 30% of amount by which the total Income exceeds Rs.5,00,000	Nil	2%	1%

It means that a person having a gross salary of upto Rs 1,50,000 is exempted from tax.
In a Financial year, an individual can show a saving of Rs 1,00,00 only to save Tax. It can be Govt Tax saving Bonds of 5 year term, Medical Insurance, Mutual funds, Life Insurance, ULIP Plans, Home Loan etc but it does not include Gold and Stocks


(II) In case of resident women below 65 years of age.

Total Income Range	Tax Rates		Surcharge			Education Cess (% of I.T)	Secondary and Higher Education Cess
Upto Rs.1,80,000/-	Nil		Nil			Nil	Nil
Rs.1,80,001- Rs. 3,00,000	10% of the amount by which the total Income exceeds Rs. Rs.1,80,000		Nil			2%	1%
Rs.3,00,001- Rs. 5,00,000	Rs.12,000 + 20% of amount by which the total Income exceeds Rs.3,00,000		Nil			2%	1%
Above Rs. 5,00,000	Rs.52,000 +30% of amount by which the total Income exceeds Rs.5,00,000		Nil			2%	1%

It means that a woman having a gross salary of upto Rs 1,80,000 is exempted from tax. Same goes for a women too in terms of saving in a financial year. Tax Calculation Suppose a guy has a gross salary of Rs 3,80,000 ; lets calculate how much tax he has to pay in a financial year. In a financial year, one has to declare his Income at the start of his work - say after 2/3 months of joining in a Company. Suppose he declares an investment of Rs 1 Lacs, be it of any distribution like ... Govt Bonds Rs 30,000 Mutual Funds Rs 60,000 Insurance Rs 10,000 Then his tax liability becomes 3,80,000 - 1,00,000 = 2,80,000 On that, tax is levied only when the amount is above Rs 1,50,000 Hence the amount which is taxable is 2,80,000 - 1,50,000 = 1,30,000 Therefore income tax payable = 10% of 1,30,000 = 13,000 Above that Education Cess (% of I.T) = 2% of 13,000 = 260 and Secondary and Higher Education Cess = 1% of 13,000 = 130 Total tax payable = 13,000+260+130 = Rs 13,390 in that financial year. Isnt that simple? Hope you can calculate yours now :)

iPhone woes

Today i had went to the famous phone market in Mumbai - Alfa. It was my first time, and being a sunday it just took me fifteen minutes by bus; had it been a working day it would have taken me an hour at least. It was the first time for me and so it was so much fun to see the Alfa shops in line from 1 to 5. One can get anything you want from the Alfa store from one of the 5 stores. I took a sneel peek into to stores and had fun. There were some nice traveling bags which were worth buying - but the anticipation of prices were quite quite different from the price there !

The iPhone price of 3G for 8 Gb is some Rs 29,450 and Rs 34,000 for 16 GB . What the heck i said! Its better to buy off a second hand one i thought. There is not much difference in price from those sold in Airtel and Vodafone centres then. But if you are on a shopping mood, you definitely gotta go to his Alfa stores.Its worth taking a look. I also had some look on Sony DSLR alpha series, Nikon D50 and Canon EOS Series. It maybe the first time i am looking at a DSLR, taking it into my hands. I was tempted to buy the Sony Alpha at Rs 22000 but then i thought i should not go for impulsive shopping. If i have to buy somethng, i need to be sure about it first and then buy it - no matter what the price. By putting in some thousand bucks, if i can get a better one - whats the big deal huh! I believe in buying the best thing i can get hold of, witht the price tag in mind. Most people think of just buying it to fulfil thir wish but i have found that it doesnt stick long with the interest with which you had bought it with , along with passing time. So i tend to go for the best quality thing, though it may cost a little more. If i have to buy a DSLR, i need to make sure what my requirements are, then make sur the camera fulfills my need and then finally negoatiation on the prce. Indian mind generally tend to buy more then buy less with the same amount, i feel that its not necessary.

I will maybe buying it in December when i get some more money : )
So till then i have to hang on, Till then i have to make up my mind on what my requirement is - iPhone or DSLR. But this december, at least one of them is sure to be in my hand :)

iPhone woes

Today i had went to the famous phone market in Mumbai - Alfa. It was my first time, and being a sunday it just took me fifteen minutes by bus; had it been a working day it would have taken me an hour at least. It was the first time for me and so it was so much fun to see the Alfa shops in line from 1 to 5. One can get anything you want from the Alfa store from one of the 5 stores. I took a sneel peek into to stores and had fun. There were some nice traveling bags which were worth buying - but the anticipation of prices were quite quite different from the price there !

The iPhone price of 3G for 8 Gb is some Rs 29,450 and Rs 34,000 for 16 GB . What the heck i said! Its better to buy off a second hand one i thought. There is not much difference in price from those sold in Airtel and Vodafone centres then. But if you are on a shopping mood, you definitely gotta go to his Alfa stores.Its worth taking a look. I also had some look on Sony DSLR alpha series, Nikon D50 and Canon EOS Series. It maybe the first time i am looking at a DSLR, taking it into my hands. I was tempted to buy the Sony Alpha at Rs 22000 but then i thought i should not go for impulsive shopping. If i have to buy somethng, i need to be sure about it first and then buy it - no matter what the price. By putting in some thousand bucks, if i can get a better one - whats the big deal huh! I believe in buying the best thing i can get hold of, witht the price tag in mind. Most people think of just buying it to fulfil thir wish but i have found that it doesnt stick long with the interest with which you had bought it with , along with passing time. So i tend to go for the best quality thing, though it may cost a little more. If i have to buy a DSLR, i need to make sure what my requirements are, then make sur the camera fulfills my need and then finally negoatiation on the prce. Indian mind generally tend to buy more then buy less with the same amount, i feel that its not necessary.

I will maybe buying it in December when i get some more money : )
So till then i have to hang on, Till then i have to make up my mind on what my requirement is - iPhone or DSLR. But this december, at least one of them is sure to be in my hand :)