Blog - VSRK Capital | Trusted Mutual Fund Distributor & Financial Advisory Services

June 10, 2020

How Do Mutual Funds Work?

Mutual funds are one of the most popular financial instruments in town. Mutual fund is a collection of funds pooled in by investors and managed by a portfolio manager. Such funds are invested into various schemes in accordance to the earlier set objectives.

While the above information is generally available on all the online sites, the actual working of such funds isn’t told with much clarity and we ought to clear all your doubts on the actual working of mutual funds. So, let’s start.

As mentioned earlier mutual funds are a pool of resources instead of being a single resource which means there are multiple investors who have put money in a fund. Each person who has invested their money into the fund gain ownership over a part of the fund, known as a unit. We can also say that the entire fund is subdivided into multiple parts known as units. So, when a person wants to invest in a fund he has to buy these units.

Such mutual funds are of many types like equity funds, debt funds, hybrid funds, income funds, growth funds, index funds etc. Each fund has its own objectives, risk & reward. Different investment bankers offer different schemes. You may select the one which favors your objectives the most.

When you select the scheme you want to invest into, you have to buy the units. Once you buy the units, the investment bankers allocate the money to that fund. Generally, under the umbrella of a mutual fund there are many companies under it. They are known as sub-holdings.

Let’s understand this more clearly with an example of an equity mutual fund. Normally such mutual funds allocate around 70% of the total corpus in equity, 18% in debt and 12% in other securities. Within such umbrella of securities, there are a large number of companies.

The investment of money into a various types of securities a dividend supported by fixed returns. Also, within such types of securities, example- equity, there are a lot of companies existing in various sectors such as banking, refineries, housing finance and construction, etc. This helps the corpus through the benefit of diversification so that if any of these sectors under performs there is a low impact on the overall value of investment.

June 5, 2020

What are Mutual Funds?

Mutual fund is an investment fund where multiple investors pool their money to purchase securities. Such funds are managed by a highly trained professional commonly known as a fund manager or portfolio manager. This individual invests this corpus of funds into different securities such as stocks, debentures, bonds, gold, etc. as per the objective of the fund and with the aim of reaping profits out of such investment.

Let’s understand this more clearly with an example of a mutual fund known as Hybrid Equity Fund. Normally, all invest such mutual funds around 70% of the total corpus in equity, 18% in debt and 12% in other securities. Within such umbrella of securities, there are a large number of companies.

June 3, 2020

Top 5 Reasons to Start Investing Money For Future Financial Stability

Investing refers to the process of setting out a certain sum of money for a set purpose and participating in certain securities which help in the achievement of the objective for which such investments are created. The sole purpose of such investment is to earn profits in the course of investment in such funds & securities.

Diversify your assets & associated risks

Economic assets are of essential value to our livelihood especially in times of extreme difficulties such as the ongoing pandemic. Distributing your money into several modes of investment and investing in various securities helps us to minimize the associated risks.

Saving money loses to inflation

After making the necessary expenses a lot of us set aside the amount left. However, due to the effects of inflation and the concept of time value of money such amounts kept in our wallets or savings bank accounts continuously lose their actual value.

For example- If the rate of inflation is 2% per annum and you could buy 1 kg apple for INR 100 toda, the next year it would cost INR 102 for the same 1 kg of apples and similarly after 10 years the same 1 kg apple would cost you around INR 120.

Due to the inherent limitation of time value, saving is not the best option. Investing such saved funds helps you fight the effects of inflation by generating returns in the form of dividend or interests or in such other manner as maybe applicable.

Increases earning potential

Making informed investment helps you in many ways such as reducing the risks of losing all the money by diversification as well as generating revenues in the form of interest, dividend, etc. Such extra income helps in increasing the earning potential in many ways. You may use the extra amount in starting a new venture, initiating a side hustle or just further investing such an amount.

Power of compounding

Compounding is said to be the 8th wonder of the world. The power of compounding could be understood by the following example- if you start investing INR 500 month for the next 40 years at 18% interest rate per annum the total investment over the period would be just INR 2.4 Lac but the accumulated value received would be INR 4.29 Crores.

Get tax benefits

The Income Tax Act provides various exemptions and deductions from the taxable income. So, for example- if you were falling under the 30% tax slab and you make an eligible investment of INR 1 Lac you save around INR 30,000 just by making such an investment as you won’t have to pay the tax on the same.

June 1, 2020

The Indian GDP and Its Future Estimates

Economic Growth during FY20

In the FY20 GDP growth was mere 4.2 per cent dragged down by the 3.1 percent growth in the January-March quarter. The revised the growth issued by the government for the first three quarters of FY20 are 5.2% in Q1, 4.4% in Q2 and 4.1% in Q3. The growth numbers were the lowest in past decade. In the previous financial year 2019 economy had grown at 6.1 per cent. Together with the contraction of exports by 3%, Private Final Consumption Expenditure contracted to 5.3 percent and the Gross Fixed Capital Formation was also contracted by 2.8 per cent highlighting the weakness of the Indian economy.

Effect of lockdown on Industries

Many industries such as tourism, aviation, hospitality as well as MSME sector were directly burdened by the losses during lockdown and the effect of pandemic on their businesses leading to high losses and loss of jobs within such sectors. Many industries, such as construction and automation were already under huge losses, had to completely stop their production. Talking with numbers, the overall growth was considerably slow for almost all industries. The hospitality sector expanded this year by only 2.6 percent. For the year of FY20, the manufacturing sector recorded nil growth. The agriculture sector grew by 5.9 per cent in the fourth quarter.

Future Estimations

The economic growth at 5 percent for the present fiscal year (FY21) has been estimated as 5% along with a contraction of 45 per cent in the Q1.
The Indian Government has announced a INR 200 Lakh crore package which mainly aims at medium & long term growth and short term stimulus is only INR 20 Lakh crore. In addition to this, a INR 21 lakh crore package has been announced to offer credit guarantee to the falling MSME sector, the repo rate has been reduced to 4 per cent.

Shaktikanta Das, The Governor of RBI, has said that economy has been badly affected by the disruption in supply and compression in demand. The RBI has projected a negavtive growth rate for FY21 and expects that the growth impulses to improve in the second half of the fiscal year.

May 20, 2020

4 Tips to Manage Your SIPs in Lockdown

We understand that due to these turbulent times when there is almost no trade, business are having huge losses and thousands of people are losing jobs it has become very difficult to manage your SIPs (systematic investment plan). We would like to advise you the following tips to manage your SIPs effectively without knowing its shortcoming or a better alternative.

You Can Invest More Without Starting Another SIP
If you intend to take advantage of such a situation where the markets are down you can. You don’t need to start an additional SIP alternatively you can opt for a top-up.
You Can Pause Payments
Unlike the above case, you might find yourself in a situation where the payment is not possible due to any reason maybe loss of job, receipt of lower salary or maybe the intend to keep liquidity. In such situations you have the option to cancel the SIP; however there is an alternative to pause it. You may pause the payment instead of cancelling the same.
Consider the Exit Load
Some people may be thinking of cancelling their SIP. If you cancel your SIP before the said lock-in period, a charge known as exit load shall be chargeable. Each SIP has its own lock-in period and exit load
Tax applicability
When you opt to sell your investment, capital gains are applicable. Period of holding for the purpose of Long-term capital gain is as per the Income Tax act. Last we checked it was one year for equity funds and three years for debt, gold and other securities.

April 10, 2020

How to Save Tax Without Fresh Investment in FY 2019-20?

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When the month of March is comes to end, the only thing that comes to the mind of a salaried person is Tax Liability and Returns. Tax Liability is a duty levied by the government on your income which aids it to conduct public welfare activities. Tax planning here becomes a necessity as there are a lot Individuals who often pay tax more than they were required. The only reasons are the lack of weakness and knowledge about various deductions and schemes issued by the government in order to help the individuals avoiding excess tax liability. In common parlance, the best time for tax planning is in the starting of the year but people tend to procrastinate till the year end and end up either making errors in filing statements, paying more tax or filing belated returns.

However the good news is that even if you have been careless towards planning tax the whole year you can still claim certain deductions on expenses that you have incurred in the normal course of your daily routine. Some of the deductions are-

Children’s Education & Hostel Allowance and Tuition Fees (Sec 80C & Sec 10(14))

The most common expense generally an individual incurs is the tuition fees of school, college or any other recognized institution for the purpose of full-time education of any two children of the employee is eligible for deduction. Please note that any sum in the name of donation, development fees or capitation fees or any other payment of similar nature shall not eligible for deduction. In certain cases where the Children’s Education & Hostel Allowance is provided by the employer, such sum shall be added to the gross income of the individual & deduction of Rs 100 & Rs 300 per month per child upto 2 children shall be eligible.

Medical & Life Insurance (Sec 80D & Sec 80CCC)

Keeping in mind the uncertainty of human life and importance of medical and life insurance, the government has incorporated sums expended in such regards as an eligible deduction. Tax deduction based on health insurance premiums paid for individual, spouse, and dependent children shall be eligible for deduction up to Rs 25,000 per budgetary year. Similarly, for investments made with respect to life insurance shall be eligible for deductions as per the related provisions.

House loan and interest (Sec 80E, Sec 80E, Sec 24)

Employer’s contribution to NPS

Every individual whose employer has made contribution under section 80CCD(2) to the notified pension scheme which is not covered within the overall cap of Rs 1.5 lakh for cumulative deductions under sections 80C, 80CCC and 80CCD(1) shall be eligible for the deduction in accordance to the said section. Such deduction under is in addition to the cumulative deduction available under section 80C, where the overall limit is Rs 1.5 lakh, and 80CCD(1B) which is Rs 50,000.

Contribution made towards PPF and other approved schemes

There are a lot of regular investments that a common person invests in for which deductions is allowed under the Income Tax Act. This includes any deposits made with National Savings Certificate, Sukanya Samriddhi Account, Senior Citizen Savings Scheme 2004 (SCSS), NABARD Rural Bonds,

Equity Linked Savings Schemes (ELSS)

ELSS is tax saving mutual fund that help the investors to save taxes up to Rs 1.5 lakh under Section 80C of the Income Tax Act. ELSS funds are considered ideal for new investors to start their investments in equity mutual funds. They, generally, have a mandatory lock-in period of three years and are among the shortest lock-in period among tax-saving investments permitted under Section 80C.

Standard deduction

A standard deduction up to Rs 50,000 is allowed for all salaried employees. This deduction is is mandatorily available and is considered by the employer while computing tax liability of each employee. The respective deduction is available at the time of filing ITR. However, while planning your taxes for FY 2019-20, you must consider standard deduction as well to compute your total tax liability.

Apart from all the deductions mentioned above there are multiple other deductions under the Income Tax Act 1962 which are available to an Individual.

April 1, 2020

3 Reasons Why We Should Invest in Falling Markets?

Recently the Indian Stock markets were seen crashing into a bearish phase where the stock prices fell more than 20% from the recent highs. Bear markets occur during economic recessions or depressions when pessimism prevails. In such markets, the prices of the securities drop heavily, and a negative sentiment causes a selling pressure upon the current which force the prices to stoop down even further.

As a general human behavior, most of the investors opt out of the securities they were holding and are ready to sell their investments at a lower price. This situation is often seen with a skeptical point of view. There is, generally, a lot of pressure upon the investors as well as on their financial advisors. One wrong decision or miscalculation could lead to a major financial loss. In common parlance, this situation is very stressful and involves a lot of decision making. But, despite all such risks in investments such scenarios can actually prove to be a good chance to reap some good alphas and it might not be incorrect to say that no matter how much villainous this phase looks like, it might offer you a good opportunity to earn.

Good Stocks at Affordable Rates

Legendary investor Warren Buffet had once stated, “Whether we’re talking about socks or stocks, I like buying quality merchandise, when it is marked down.” This is what happens in a bearish market. The prices of all shares both good and bad tend to fall down, opening a window to invest in lower than normal rates. As more people invest in such securities, the prices tend to recover and the growth is set back to the track.

Better Investment Options Highlight Up

As we have seen, the bearish markets are always preceded by tough economic conditions. In difficult environment, the corporates may struggle in paying their debts and other liabilities highlighting their creditworthiness. The creditworthiness is often rated by various independent credit rating authorities. When such reports declare a good report it means the organization is financially sound and is a good to shot to take.

In short, we can summarize that bearish phase is comparatively shorter than its counterpart, i.e. Bull. Therefore, the impact of bearish market upon the securities doesn’t sustain for a long time. The good stocks of companies having great creditworthiness shine in the bullish market following the bearish phase. So, the advice to invest in falling markets is highly justified subject to risk & careful

March 3, 2020

What is the New and Simplified Personal Income Tax Regime

On 1st February, Smt. Nirmala Sitharaman (Finance Minister of India) in the First Annual Budget of this decade announced the Annual Budget 2020-21 which included a lot of changes in the current tax regime to revive our slow economy. Being one of the best Tax planners in Delhi NCR, we think that this was done to revive the economic slow-down and to battle the investment and consumption-led stress factors.

Being the Top Tax Planning Consultancy in Delhi NCR, we can state that the changes that were proposed aim to stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations and thereby provide significant relief to middle class taxpayers.

The New and simplified personal income tax regime proposed is as follows:

Taxable Income Slab (Rs.)	Existing tax rates	New tax rates
0-2.5 Lakh	Exempt	Exempt
2.5-5 Lakh	5%	5%
5-7.5 Lakh	20%	10%
7.5-10 Lakh	20%	15%
10-12.5 Lakh	30%	20%
12.5-15 Lakh	30%	25%
Above 15 Lakh	30%	30%

Everything about the new regime is very exciting but there is one set back of the new scheme, the tax payers in the new regime would not be allowed to claim around 70 of the existing exemptions and deductions (more than 100) would be removed.

We have gone through the fine print of the Annual Budget 2020-21 and providing the Leading Tax Planning Services in Delhi NCR, we would like to please note that the new tax regime is optional and that an individual has the option to continue to either opt the new scheme or pay tax as per the old regime and avail deductions and exemptions. As per the reports, this bold step of the government would cost them estimated revenue forgone of Rs. 40,000 crore per year.

In addition to the above, measures to pre-fill the income tax return are initiated so that an individual who opts for the new regime gets pre-filled income tax returns and would need no expert assistance to pay income tax.

Now in order to reap the full benefit under the new regime, you would now have to calculate tax payable under both the tax regimes, old as well as new. You would have to chalk out your taxable income, deductions and exemptions under the old schemes and see whether it is more than or less than the tax payable under the new regime. If the tax payable under the old regime comes less than that under the new one, please opt for the old scheme only, however if the tax amount under the new scheme is less than that the old one, then go for the new scheme.

February 10, 2020

Missed ITR Deadline- Here’s What You Should Do

If given a choice, most of us wouldn’t even want to pay tax on the income we earn. But we should. As citizens of India, it is our rightful duty to pay taxes as we are also consumers of the country’s public infrastructure and facilities, and income tax is an important source of revenue for the government. So, it is our responsibility to contribute towards building and maintaining the public infrastructure. Paying income tax and filing income tax returns on time ensure that.

The best time to start planning your tax-saving investments is at the beginning of the financial year. Most taxpayers procrastinate till the last quarter of the year, resulting in hurried decisions. Instead, if you plan at the start of the year, your investments can compound and help you achieve long-term goals. Remember, tax-saving should be an additional perk and not a goal in itself.

But, if you are reading this, it means you have already missed the last date to file the returns for the said A.Y. 2019-20. Being a registered taxpayer with the Income Tax department, a lot of reminder e-mails and text messages are send literally every other day to file your tax returns before August 31, 2019. The government had extended the last date for filing the returns for FY 2018-19 from July 31 to August 31. This was done in a bid to increase tax compliance and incentivise citizens to file their returns without being penalised.

Can you still file ITR?

The answer is yes, even after the extended return filing time period, you could still file your overdue tax returns for the previous financial year, but this obviously comes with a penalty for late filing. The penalty is levied as per Section 234F according to which an individual would have to pay a fine along with the tax liability. Please note that if the taxes have been paid and only filing the ITR is pending, then there will not be any Interest Implications.

What is the Penalty Amount?

In accordance to Section 139(1) of the Finance Act, if return after due date (belated return) is filed but before December 31, 2019, the penalty will be Rs 5000. In cases, where the returns are filed on or after January 1, 2020 but before the end of the Assessment Year (i.e March 31, 2020) the penalty shall be Rs 10,000. However, where the declared income is below Rs 500,000, the amount of penalty shall be Rs 1000. Along with the penalty, you may also have to pay interest at 1% per month or part of the month, on tax due under Section 234A. The interest rate is calculated from the end of the deadline to the actual date of filing returns on a simple interest basis.

How to file belated returns

The procedure to file belated returns is the same as filing the return on or before the due date. The only difference is while filing belated returns you have to select Return filed under section 139(4) from the given drop-down menu.

Once you have filed your returns, you will have to verify it as well (ITR-V). The IT department only starts processing your returns once you do so. You have 120 days from the date of filing to get the returns verified. You can e-verify the returns via multiple channels, such as the Income Tax website, Aadhaar OTP or net banking channels. Refunds, if any, will be processed only for returns that have been verified.

Our Suggestions for you

Even though the tax department has a provision for filing belated returns, it is best to adhere to the mentioned timelines. Although the above-mentioned solution might help you file the return every time you are late on filing your ITR, filing returns after the deadline may create some additional issues for you. Some of the issues in late filings are mentioned as below:

Losses under any head of income other than those from house property cannot be carried forward if the taxes have not been filed before the due date. This becomes especially critical for individuals with operating business losses or that of capital gains
Your refunds could get delayed further.
The IT Department may take more time in processing your returns
Not only would you incur a penalty plus interest on your tax obligation, it could also bring you under scrutiny

How does VSRK tax advisory help you with tax planning and filings?

We, at VSRK are a team of highly trained Taxation professionals. We are one of the best Tax Planning Company in Delhi providing Online Tax Advisory Services to all our clients. We are a well known name Tax Advisory Services in Delhi NCR.

February 3, 2020

What Are The Highlights Of The Budget 2020-21 Related To Direct Tax?

On 1st February, The Finance Minister of India announces the Annual Budget 20020-21 which included a lot of measures to revive our slow economy. This was inclusive of various short term, medium and long term measures. The following actions were made in Direct Tax:

One of the major changes that were proposed to stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations and thereby provide significant relief to middle class taxpayers.

The New and simplified personal income tax regime proposed is as follows:

TAXABLE INCOME SLAB (Rs.)	EXISTING TAX RATEs	NEW TAX RATEs
0-2.5 Lakh	Exempt	Exempt
2.5-5 Lakh	5%	5%
5-7.5 Lakh	20%	10%
7.5-10 Lakh	20%	15%
10-12.5 Lakh	30%	20%
12.5-15 Lakh	30%	25%
Above 15 Lakh	30%	30%

However, there is one set back of the new scheme, the tax payers in the new regime would not be allowed to claim around 70 of the existing exemptions and deductions (more than 100) would be removed.

However, please note that the new tax regime is optional and that an individual has the option to continue to either opt the new scheme or pay tax as per the old regime and avail deductions and exemptions. This bold step of the government would cost them estimated revenue forgone of Rs. 40,000 crore per year.

Apart from the above the following changes are also entailed:

Corporate Tax:

Tax rate of 15% extended to new electricity generation companies.

Indian corporate tax rates now amongst the lowest in the world.

2. Dividend Distribution Tax (DDT):

DDT has been removed in the hands of the corporate making India a more attractive investment destination. Deductions will be allowed for dividend received by holding company from its subsidiary. Please note that the dividend would be taxable in the hands of the investors.

3. Start-ups:

Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years. Tax payment on ESOPs has been deferred.

4. MSMEs to boost less-cash economy:

Turnover threshold for audit has been increased to Rs. 5 crore from Rs. 1 crore for businesses carrying out less than 5% business transactions in cash.

5. Cooperatives:

Since cooperatives are an important instrument of growth of an economy, option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions is given in order to bring parity brought between cooperatives and corporate sector.

Also, Cooperative societies exempted from Alternate Minimum Tax (AMT) just like Companies are exempted from the Minimum Alternate Tax (MAT).

6. Tax concession for foreign investments:

For boosting foreign investment 100% tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31st March, 2024 with a minimum lock-in period of 3 years by the Sovereign Wealth Fund of foreign governments has been given.

7. Affordable housing:

The additional deduction up to Rs. 1.5 lakhs for interest paid on loans taken for an affordable house has been extended till 31st March, 2021. Date of approval of affordable housing projects for availing tax holiday on profits earned by developers extended till 31st March, 2021.

What are the Tax Facilitation Measures?

- Now Instant PAN would be allotted online through Aadhaar.

- Under the Finance Minister’s ‘Vivad Se Vishwas’ scheme, with a deadline of 30th June, 2020, to reduce litigations in direct taxes:

- Waiver of interest and penalty – only disputed taxes to be paid for payments till 31st March, 2020.

- Additional amount to be paid if availed after 31st March, 2020.

- Benefits to taxpayers in whose cases appeals are pending at any level.

- In order to reducte corruption and bring transparency in governmental operations faceless appeals to be enabled by amending the Income Tax Act.

- For charity institutions:

- Unique registration number (URN) would be issued to all new and existing charity institutions.
- Pre-filling in return through information of donations furnished by the Donee.
- Process of registration would be made completely electronic.
- Provisional registration to be allowed for new charity institutions for three years.
- CBDT to adopt a Taxpayers’ Charter.

How does VSRK help you with the new tax planning and filings?

We, at VSRK are a team of highly trained Taxation professionals. We are one of the Best Tax Planning Company in Delhi providing Online Tax Planning Services to all our clients. We are a well-known name for Tax Planning Services in Delhi NCR. As per the new scheme Income Tax Payers has the option to choose between the 2 schemes. We step herein and help you to calculate the amount of taxes, applicable deductions and exemptions in order to assist you in tax-planning and filings and saving you the hassles to compare between the two regimes of the Income Tax. Being a Best Tax Planning Company in Delhi, we provide the best tax planning advisory.