DSPBR Top 100 Equity: INVEST ::Business Line

Making a fresh life start on debt ::Business Line

Sunila walked out of the debt counsellor’s office in a pensive mood. She had accompanied a close friend for moral support. Her friend had opted for it having run into some financial trouble and some pending loan dues.

The discussion in the debt counsellor’s office was an eye opener. Sunila realised she had to make a fresh start herself to get her finances in order.

Her husband had gone abroad for a short tour on the work front.

She realised now was as good a time as any for him to give this a lot of thought.

She decided to send him a mail right away, lest her resolve melted in the rigours of routine daily life. This was what was happening currently – they were taking it one day at a time, oblivious to what tomorrow will hold, when the larger picture could prove to be a real shocker, when at the verge of their retirement they discover they do not have the funds to spend the rest of their lives not working!

So her letter imbibed the pearls of wisdom she gathered at the counsellor’s.

I now rue the way we’ve wasted options. When we got married, our combined income was Rs 60,000...our loan eligibility (if we had opted for a home loan) was around Rs 30 lakh with about Rs 10,000 left to run the home after rent.

We could have easily set aside that assumed Rs 30,000 EMI every month. At the end of two years, we would have had around Rs 7.20 lakh as savings!

However, it’s never too late to start thinking about some financial goals! So how do we go about this? We should seriously consider a 75 per cent -25 per cent ratio in our debt and equity investment ratio.

This is the only way we can catch up on the option we lost out and also gives us the option of making some miracle money while we are young, salaried and fit to face some ups and downs in terms of financial losses. We can slow this accelerated run as we near our retirement deadline.

Here are my ideas.

I would like to start off on -

a. A contingency fund to offset a job loss. I’m pegging it at 6 months’ worth of salary.

b. Savings - a small portion of 10 per cent as small savings accessible at the bank account.

c. Investment - 75 per cent in equity – that is stocks and MFs and 25 per cent in debt – which is FDs, PPF, NSCs.

d. An infant fund - that takes care of all medical (vaccinations), clothing, toys for the first 2 years. Let’s draw a rough estimate based on research and arrive at a target figure and target time to save.

These four are the top priority in my list. But other funds we could include are a medical fund, parents’ fund, maintenance fund, entertainment fund, luxury fund, vacation fund and so on.Do take sometime to do a similar checklist. We can compare notes and decide how we want to take this forward.

Until I see you on chat,

Love and hugs,

Sunila

So take care not to give in to the temptations of your current lifestyle, where everything is screaming “buy now” at you – a bit of careful indulgence and careful planning could hold you good for the rainy days ahead.

(The author is Content & Research Head at BankBazaar.com.)

14 March- Tax Talk ::Business Line

I have just started agricultural commodity arbitrage trading for specific short time periods through commodity exchange. At what rate will I have to pay tax for income earned from such trading during FY 2013-14? I am a senior citizen.

— Sudhansu

In case of stock market transactions, whether the income is chargeable as business income or capital gains will depend on the facts and circumstances of each case, taking into consideration factors such

the nature of the transaction, frequency and volume of transactions.

We understand that the transactions have been carried out on MCX which is a recognised stock exchange. Considering that your transactions are frequent in nature and for the purpose of earning short-term profits, the income, most likely, should be taxable as non-speculative business income under the head “Profits and Gains of Business and Profession” at applicable tax slab rates to a senior citizen. According to the Budget proposal for FY 2013-14, the minimum amount not chargeable to tax for resident senior citizen is Rs 2,50,000.

I am a senior citizen earning Rs 2.5 lakh Govt pension annually. My wife, also a senior citizen, is a home maker. We have joint accounts in banks. From these, we made FDs in joint names with my wife as the first holder. As the interest received on bank FDs is taxable, I would like to know whether the entire interest amount will be clubbed to my income or is taxable in my wife’s hand, she being the first holder of FDs.

— Rajendran Nair

In case of fixed deposits opened in joint names all holders are assessable to tax in relation to interest earned on the portion contributed by them individually towards the fixed deposit. Further, the interest will be taxable in the hands of the person who has actually contributed towards the fixed deposit even though the FD is jointly held.

We understand that you have opened certain fixed deposits with your wife in joint name with your wife being the first holder. Further, we assume that the funds were contributed solely out of your funds, since your wife does not earn any income. Therefore, interest earned on such fixed deposits will be taxable in your hands, irrespective of the fact that your wife is the first holder.