Thursday, January 4, 2018

How Does Indexation Impact Tax Charged on Gains from Debt Mutual Funds?

debt mutual fund
When you invest, you aim to maximize your returns. However, inflation eats into your actual returns. Additionally, when you exit your investments, you need to pay capital gains tax. Fortunately, the government offers a solution for this, which is known as the indexation benefit.

The basic reasoning for indexation benefit is to ensure you pay tax only on your returns after being adjusted for inflation. This allows you to pay 20% capital gains tax after taking advantage of indexation benefit.

Indexation plays a pivotal role in taxation when it comes to debt mutual fund investments. You may wonder what indexation is. In simple terms, it considers the rate of inflation when you calculate your returns on investments. Indexation results in a significant impact on your actual returns earned when you exit your investments in debt funds. Through indexation, your investment price is adjusted for inflation for the purpose of determining your tax liability when you exit. Indexation offers you several benefits because of the inflation adjustment.

Benefit of indexation

The indexed cost of your investment in debt mutual funds is based on the ratio of the inflation index at the time when you exit your investment. Therefore, a higher value means a reduction in your tax liability. During the long-term, the rising inflation adds up to the purchase cost of your debt funds. On a cumulative basis, it may result in the reduction of your taxable returns when you redeem your investment.

In case of smaller returns over a longer period, your entire returns on investments may be eaten up due to rising inflation. It is likely that in such a situation, you may not have to pay any taxes. It is beneficial because if most of your returns are erased due to inflation, paying taxes is not logical. Furthermore, the returns are only notional and not real due to the rising inflation.

Working of indexation

Indexation takes into account the date on which you invested your funds and the rate of inflation since then. When you apply the indexation benefit, your purchase cost increases. As a result, your profits at the time of exit reduce thereby reducing your tax liability.

Indexation and debt funds

Mutual fund investments are liable either to short-term or long-term capital gains tax. When you opt for tax-saving investments, long-term is defined as at least three years. Therefore, when you stay invested for at least three years, you will be liable to pay long-term capital gains tax. The current applicable rate is 20% post-indexation benefit.

For applicability of indexation, the formula is:

Original investment cost X Cost of Inflation Index (CII) at the time of exit/CII at the time of purchase

Let us understand this further with an example.

Assume that you invested INR 20,000 in tax-saving investments in May 2010. Further, assume that you redeemed your investment in June 2013 to earn INR 40,000. Therefore, your long-term capital gains before indexation are INR 20,000. However, your entire returns are not liable to tax because you remained invested for a period exceeding three years. You are allowed to avail of the indexation benefit, which reduces your long-term capital gains tax.

The indexed returns will be (20000*220)/167, which is equal to INR 26347 (CII was 167 in 2010-11and 220 in 2013-14).

Therefore, your taxable profits = 40000 – 26347 = INR 13653, which is a reduction of INR 6347 (20000 – 13653).

Until recently, the indexation base year was 1981, which is now modified to 2001. Therefore, if you invested before April 1, 1981, your profits may be calculated based on 1981 fair value. However, all investments after April 1 2017 will use 2001 as the base year to calculate the fair value.

In addition to earning profits, investments aim to determine how to save tax. One way is to use the indexation benefits on your long-term investments. You may also choose to pay taxes without taking the indexation benefit at a pre-specified tax rate.

You may choose from several mutual fund schemes. However, you may not have the experience or expertise to compare different schemes. In such a situation, you may consider using the ARQ investment engine, the core feature of Angel Wealth’s mobile application.

One major differentiation of ARQ from other available options is that all the recommendations originate through machines without any human bias or intervention. Based on your personal requirements and risk appetite, ARQ offers investment options that only deliver better returns but also help you know how to save tax.

Download the Angel Wealth app today and enjoy smart and quick investment tips.

Wednesday, January 3, 2018

Stop Being A Financial Burden For Your Family

money burden
As New Year’s resolutions still go, you may want to add a financial health point to your wishes for self-improvement this year. For a lot of people, the beginning of the year is the time to express their dreams and aspirations, from becoming a millionaire to travelling around the world. In reality, resolutions are extremely similar to a toddler’s Santa’s list. They are often full of impossible, unnecessary and self-focused items. Instead, it’s still time to make a difference this year with a selfless aspiration: Not being a financial burden for anybody. Don’t let your family pay for your mistakes anymore.

Payday shark loans that hurt the guarantor

It’s not uncommon at the beginning of the year to struggle to make ends meet, especially as a result of the traditional Christmas debt. You might need a short-term solution to manage the bills this month. Nevertheless, you need to stay avoid from payday loans, even though they may seem accessible and quick. Most payday loans require a guarantor who will have to make repayments if you can’t. With high-interest rates (over 1000%) and lack of security, these shark loans can tear a family apart and put your guarantor in troubles.

How much are you really worth?

While most people tend to believe that their worth in unquantifiable, financial institutions disagree. Your worth is estimated at the end of your life and will be measured in terms of funeral costs, capital assets and remaining debts. In other words, if you don’t want to leave your loved ones exposed to a financial nightmare, you need to take early dispositions, such as researching funerals on a budget and sorting out your debts. Don’t be that person who bankrupts the family with their lack of financial planning.

Ill-advised investment? Don’t take that chance

Did you know that most wealthy families lose their fortune within three generations? One of the main reasons for this misfortune – pun intended – is the pursuit of bad investment decisions. However, you need to be prepared to lose a lot of money if you don’t understand the financial subtleties of the market. In other words, if you don’t understand the business or the market, you shouldn’t invest. But even if you do, you need to stick to amounts that you can lose comfortably instead of betting your entire household income on the success of an unknown startup.

Sharing is not caring

If you’re prone to financial uncertainty, it’s important not to share the risk with your spouse. Joint bank accounts are the most common way to drag your partner into your debts. A poor rate score or the accumulation of unpaid creditors can impact on your spouse’s financial health. If you still need a joint account, you can choose to create an additional and isolated account in which you can both pay money for the weekly or monthly use. This will ensure that you keep daily financial activities separated and don’t put your partner at risk. Show you care and don’t take them down with you!

In the end, becoming debt-free is naturally an objective. But it’s essential that you remember that there is no need to let your financial hiccups affect your family.

Tuesday, January 2, 2018

Do You Know What To Do After You’ve Been In An Accident?

The shock

Whether you’re injured or not, the event of a car crash can leave us feeling shocked for long periods of time, and it can be hard for us to figure out what happened. In times like these, it can be hard to make the right decisions when it comes to trying to resolve the situation. You might be left feeling angry about it, or maybe devastated; it usually depends on the severity of the crash. Road accidents are generally pretty dangerous and are known to be lethal, and if caused by poor driving or illegal practices behind the wheel, then trying to make sure justice is brought is the right thing to do. If there’s no evidence of these crimes, then you may find it hard to bring up your claim, because it can be hard to hold prejudice against someone who meant no ill will towards you.

Your plans

In some cases, this is the point where you would try to build up a compelling case to represent your claims; it can be easy if you have some form of proof. Some drivers keep cameras on their dashboards, or maybe motorcycle helmets. If the property isn’t damaged too much, this alone might be enough evidence for the offender to be judged as guilty. Proof like this might even be enough to avoid the court case altogether, meaning you can come to a much simpler solution. It all depends on how far you want to take the case, and how much you feel you’re entitled to.

If you don’t think you’re qualified or able to make up this case, then it’s best that you invest in having a professional represent you instead. There are services out there for all kinds of drivers, for example, see the motorcycle accident attorney. If your memory of the crash isn’t so clear, it’s best to have someone who can arrange investigations to find the truth, at which point you can decide if you want to take the case any further; or if you're going to drop it. Either way, investing in this option can save you a lot of money if you’re not too sure. Yes, you’ll have to pay for the attorney services, but if you’re in the position of blame, you may cost yourself a lot more.

Not only do these professionals have more experience when dealing with these cases, but they can also make the whole process a lot less time to consume; while also a lot more convenient. You might find that there are extra options available if you didn’t want to go to court, which can save you time and money. In some cases, the attorneys won’t charge unless the case is won; meaning you’re not going to be losing too much if the case doesn’t end in your favor.

Some people can come out of road accidents with serious injuries, which can potentially ruin their entire lives. At this point, receiving the compensation is an essential factor of recovery. If you break any limbs, then the chances are you’re going to be out of work for a while; while also coping with the anxiety you’ll have from being at the wheel. You’ll need the money to help get you by on a day to day basis.

Monday, January 1, 2018

Doing trust management through binary options

investment options
Trading binary options has long become one of the favorite occupations of thousands of traders — having the simplest mode of use, this tool really works and brings impressive profits. Despite this, many traders look for possibilities of passive earnings by means of trust management. In this article, we will explain what trust management is, and how reasonable and realistic using this service in binary options is.

What is capital trust management

Classical capital trust management is an investment tool that allows those who do not know how to trade to earn by investing in the professionals of the trading business. This service has long been practiced in the stock and currency markets, where it has originated. Capital trust management is, in fact, precisely the service that allows absolutely everyone to earn in the financial market. This service is an optimal tool for investors who do not know how to trade or do not want to dive into all the nuances of exchange trading, as well as traders who know how to earn professionally and need additional funds to increase the amount of their profits.

The working principles of the trust management are based on the following scheme:

1. The managing trader with professional skills in earning carries out trade using the investor’s funds and receives commission.

2. An investor wishing to earn without trading himself, transfers a certain amount of funds to the manager for a certain period of time; the latter uses them for trading or managing in the financial market.

The manager and the investor sign a legal contract according to which the transfer of funds and the payment of profit and compensation to the manager is carried out. The investment contract always includes the duties and rights of both parties, the amount of funds, the investment period of managing the investor’s funds, the amount of commission payment.

It is worth noting that in the classical trust management the amount of investor’s funds remains in his own account, to which the manager is granted temporary access. This means the investor can monitor and control the entire process of options trading and block the manager’s access to trade transactions at any time. Another traditional feature of direct trust management is that for the distribution of profits, the investor first needs to withdraw funds from his account and then transfer the percentage (the monetary compensation) to the manager through a payment system.

Where can I use the trust management service

Although a growing number of binary options traders are looking for this investment service, it is only available from stock brokers and investment companies. That is, the classical binary options brokers do not provide this service. This is because direct trust involves large amounts of investment (starting from several thousand dollars) not available to the majority of binary brokers’ clients, especially in companies that offer the most minimal trading conditions.

Why does trust management require large amount of investment? The high investment threshold is due to the fact that in order to be effective, professional trader should only manage a small number of accounts simultaneously; if the amount of funds is small, the percentage of the manage (that is, his earnings) will be scanty.

Thus, those who want to profit on binary options with small investments have only one option — learning how to trade on their own. Moreover, today you can learn binary options trading free of charge on the websites of broker companies that provide comprehensive training programs for novice traders. For example, Binomo broker provides traders with a stock exchange dictionary, interactive tutorial, video lessons, step-by-step instructions and a demo account on a real platform with virtual funds for training.

In addition, the broker’s platform features tools that allow you to apply various strategies of market forecasting: a set of built-in technical indicators and graphical tools, extended list of quotes with various functions. Also, the broker offers an option yield of up to 90% and a profit withdrawal within 24 hours. Thus, a trader can quickly learn to trade independently and earn using an advanced trading terminal.