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From the Rat Race to Financial Freedom... A common man's journey
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Happiness Unlimited...How to be happy..always !!
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Dream On...Every setback is a little nudge from HIM to Dream On
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The Autobiography Of A Stock
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A Father's Diary
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Monday, December 30, 2013

Set your goals for 2014 and get going - Destiny awaits action !!

As 2013 comes to an end, it is the right time to look back at how great the year 2013 was. Many of us only look forward to new goals for the new year but fail to give a pat on our backs for the hard work and rewards that we did achieve in the year that is passing by.

Here is what i have found works out the best. List down some of your biggest accomplishments in the year going by ie 2013, and then list down what you plan to achieve in the coming year 2014. I am happy to share what i have prepared for myself. 


2014 goals gives me the ammunition to go after the coming year fully charged up, while 2013 accomplishments keep giving me the energy and keep up my faith in my own abilities.

Never take the guilt - even if 2013 has been a disaster, because that's gone. Collect all your lost threads, make fresh goals and get going with what lies in front of you.

Once you have prepared your goals for 2014, make sure that you document them or take a print, laminate it and put it on your alimrah, door or any other place from where you can see them at least 2-3 times a day. It will be best if this is placed in your bedroom, so that you see it first thing when you wake up, and last thing before you go to bed. This technique does wonders because whatever you think with your passion and emotions, starts to get manifested in reality sooner or later. Nature is responsible to get that done for you.

Set your goals, and get going - track them daily, weekly, monthly. This daily tracking will give you the happiness which is a part of the journey to achieve goals.
If you have failed to plan, you have planned for failure !!

I wish you all the best for a happy and prosperous 2014 !!
Your destiny awaits your action.

Cheers


Manoj Arora
You are entitled to happiness unlimited !!

Set your goals for 2014 and get going - Destiny awaits action !!

As 2013 comes to an end, it is the right time to look back at how great the year 2013 was. Many of us only look forward to new goals for the new year but fail to give a pat on our backs for the hard work and rewards that we did achieve in the year that is passing by.

Here is what i have found works out the best. List down some of your biggest accomplishments in the year going by ie 2013, and then list down what you plan to achieve in the coming year 2014. I am happy to share what i have prepared for myself. 


2014 goals gives me the ammunition to go after the coming year fully charged up, while 2013 accomplishments keep giving me the energy and keep up my faith in my own abilities.

Never take the guilt - even if 2013 has been a disaster, because that's gone. Collect all your lost threads, make fresh goals and get going with what lies in front of you.

Once you have prepared your goals for 2014, make sure that you document them or take a print, laminate it and put it on your alimrah, door or any other place from where you can see them at least 2-3 times a day. It will be best if this is placed in your bedroom, so that you see it first thing when you wake up, and last thing before you go to bed. This technique does wonders because whatever you think with your passion and emotions, starts to get manifested in reality sooner or later. Nature is responsible to get that done for you.

Set your goals, and get going - track them daily, weekly, monthly. This daily tracking will give you the happiness which is a part of the journey to achieve goals.
If you have failed to plan, you have planned for failure !!

I wish you all the best for a happy and prosperous 2014 !!
Your destiny awaits your action.

Cheers


Manoj Arora
Lead a Financially Free Life !!

Sunday, December 29, 2013

What are Thematic Funds

A thematic fund is a specialized mutual fund - one where the fund's objective is to deliver optimal returns by investing in stocks which qualify to belong within the particular theme that is considered. The theme could vary from multi-sector, international exposure, commodity exposure etc...read on...
Unlike a sector fund, theme funds have a broader spectrum to operate in. Theme based funds are often mistaken to be sector funds. Although one could draw some broad comparisons, the scope of a theme fund is typically wider. 

Though they have a broader spectrum when compared to sector funds, but their spectrum is limited when compared to Diversified equity mutual funds. Thematic funds by nature are more prone to risk and volatility. The performance of these funds is dependent on the performance of a particular set sector or a theme, unlike a diversified fund which moves in line with the broader markets. Thematic funds could have themes ranging from Multi-Sector, International / Multi - Economy, Commodity, particular style of investing etc. Thematic funds are suited for investors who are well versed with market trends and are hence in a better position to take thematic calls.

It may be tough to understand the objective / real 'theme' of the fund by merely looking at the fund name. It becomes pertinent to read the prospectus, the investment objective, the fund manager's background and his past performance in handling other funds. For a novice investor to assess the right theme could be a herculean task, hence for someone starting out to invest in mutual funds, it is best that they stick to diversified equity mutual funds. 

Theme based funds should not be a part of one's "core" portfolio, the exposure should be categorically limited to 10% - 12% and one should add themes which complement the existing portfolio.

Cheers


Manoj Arora
Lead a Financially Free Life !!

Sunday, December 22, 2013

The Race of my life

Being a part of rat race through most of my life, it was an overwhelming, humbling and a soul satisfying experience to be a part of a different kind of race - the Airtel Delhi Half Marathon run on 15th Dec 2013 - the race of my life till now.

The trigger Around 18 months back, i made an attempt to run 2KM every day, for a week, and failed miserably. A few days later, i met one of my colleagues struggling with a sever back pain, came to know of one of my colleague's close relative dying of heart attack, and saw my body from head to toe.. in the mirror. However hard i may have tried to control my breath and justify that i am fit, i was unable to fool myself anymore.

The journey
Something had to happen. Something unnatural and uncomfortable had to give way to something that is more natural. And was born a desire to get fitter - as God made us.
Of course, the ambitions were not too high at that tine. I just wanted to make sure that i continue with my morning walks fairly regularly. From that point 18 months back till date, it has been an awesome journey. To be able to run 21.097 Km at a stretch and successfully completing a half marathon has given me joy as a bi-product but health and fitness as the main product.

The result
Today, I am fitter, faster, slimmer, lighter and more energetic than i ever was in my life. The fact that i am 40+ gets thrown out of the window because age has nothing to do with a burning desire. It has only to do with what you think. I sometimes feel that the age should be counted by the the maturity level of our thinking process rather than days and years - which seems such an unnatural and artificial mechanism created by a jealous mankind.

Life Principles that i learnt from the Marathon Race
Approx 2 hours and 40 min of the half marathon run taught me some key life principles. Some of these principles were new discoveries to me, while some were reiterated and proven once again, beyond any doubt. So, here is what i learnt:
  • Anything is possible. We only place constraints in our mind, no one else.
  • Age, time, people's opinion, current state, situations, weather, family etc etc has nothing to do with a burning desire in a person's mind. When the dream is big enough, facts do not count. There was a 61 year man running with me. He has been running for 20+ years. He finished just 12 min after me. There are hundreds of such examples in the run.
  • People are looking towards you to show them the way. Anyone (You) can be an inspiration.
  • A fit body can energize your mind and thoughts to an elevated level. 
  • Whenever you feel like giving up, look back and see how far you have already reached. This happens many time during the run of the marathon as well as our lives.
  • Taking an expert view always helps. There is no point re-inventing the wheel. Never shy away from asking for help.
  • Once you have taken a decision, don't go back till you finish it. Openly publicize your decision. Even if you try to go back on your decision, your peers, society, friends and relatives will keep reminding you.
  • Practice, Practice, Practice...there is no short cut to success. And when you are practicing something that you are passionate about, you will not feel the pain.
  • There is no right or wrong that has been prescribed by God. Do what you feel is right - applies equally to what we do in our lives. Right and Wrong are only subjective assessments.
  • Live yourself out fully. Do not constraint yourself because of people, situations or anything else. When you are happy, keeping others happy is not difficult.
  • The reward of a goal achieved (medal, certificate, satisfaction etc..), is not the actual reward.The true reward is the new person that we become in the process of achieving the goal. The dream, the desire, the perseverance, the strategy, the execution, the pain, the victory - all these make us a better person - better than what we were, when we started.
It is such an amazing experience - with cheering crowds, loud DJ music, men and women of all age running together and inspiring each other, through the best 21km of lush green Delhi. 
As i recover from cramps this week, looking forward to the next run - not because  i want to be ranked anywhere in these run - but because fitness is my right, and i shall not loose it, for anything else in this world. Fitness is one key element that adds happiness to our lives.

Cheers

Manoj Arora
(Upcoming book : Happiness Unlimited)

Sunday, December 15, 2013

What is HUF - Hindu Undivided Family

As you become wealthy, you must get smarter about saving taxes. If you are married, having an HUF or a Hindu Undivided Family can be a real boon. It is a safe and easy way to save tax. Lets see what an HUF is, how to make use of it and who it helps you to save tax....READ ON..

Sunday, December 08, 2013

DTAA - Double Taxation Avoidance Agreement for NRIs

To my NRI friends who earn money in more than one country, this post was long awaited. See how you can avoid double taxation. Read on...

Sunday, December 01, 2013

Smart Ways to Save Taxes and avoid Clubbing of Income

A penny saved is a dollar earned. This is how important saving a few extra rupees can be in your life. One of the prudent ways to save money is to be smart about avoiding taxes.
With the right professional guidance, you can legitimately avoid paying tax on the income earned on your investments. On popular demand, this post describes some smart ways to avoid taxes and hence increase your investible income.

1. Use indexation to nullify tax
High inflation has been a curse for investors in the past few years, but for some, it has been a boon. Tax rules allow investors to adjust the cost of an asset to inflation during the holding period. The taxpayer has the option to pay a 10% flat tax on the long-term capital gains or pay 20% after indexation. Though the rate is higher, the high inflation has made indexation the better option in the past few years.
The taxpayers who have availed of this inflation indexation benefit have been able to reduce their tax to nil. In fact, if you invested in a debt fund or a debt-oriented scheme three years ago and earned annualised returns of 10%, your tax liability would be close to zero.
Not all investments are eligible for the indexation benefit. Only certain capital assets, including debt funds, FMPs, debt-oriented hybrid funds and gold ETFs, make the cut. Stocks, equity funds and equity oriented hybrid schemes don't get this benefit as long-term gains from these are already tax-free. Bank deposits and bonds are also out. The interest on bank deposits is fully taxable at the normal rates.

2. Use Double Indexation to your benefit
This is another smart way to utilise the benefits provided in the tax laws. Under this strategy, you earn through your investments for one year and you get double indexation benefit (inflation indexation for 2 years). 

3. Invest through a non-working spouse
A homemaker's work is never finished. From sending kids to school to shopping and managing the household, her day is fully packed. Now, add one more task to this long list—investing to earn tax-free money.
This is not as simple as it appears. If you gift money to your wife, there is no gift tax implication. However, if this money is invested by your spouse, the taxman will club the earning with your income for the year. The clubbing provision under Section 60 is meant to check tax evasion.
If you are taxed on the income, is there any point in investing in your wife's name? Yes, there is. The clubbing happens only at the first level of income.
If this money is reinvested and earns an income, the income will be treated as your wife's, not yours. The income from the reinvested income does not attract the clubbing provision. Read more about income clubbing here.
Here's how you can make this rule work for you. Gift money to your spouse (gifting is tax free) and then get her to invest in any of the several tax-free investment options, like Public Provident Fund (PPF). The earning will be clubbed with your income, but since investment options like PPF are tax-free, it won't push up your tax liability. Your wife can then reinvest that money, and this time, the income will not be clubbed, and will be considered as her income. If it is her income, it is likely to come in tax free bracket or at least a lower tax bracket than yours.
There's another way to escape clubbing. Instead of gifting, give her a loan to buy property. Rental income from the property will be treated as her income as long as she pays you a nominal interest on the loan.

4.  Avail of minor child exemption
If a parent invests in a minor child's name, the income is clubbed with that of the parent who earns more. In some cases, a minor child may have a personal income, such as a cash prize in a competition or payments for commercials and events. However, this is rare and mostly it's the parent who invests on behalf of the child. There is a small Rs 1,500 exemption per child per year for the income earned by such investments.
When you make investments in your child's name, the income earned from these investments will be clubbed with your income. However, if you have invested anywhere in your minor child's name and this investment generates an income, you can claim that up to Rs 1500 income that is earned through minor child is tax free. Post that, the income is clubbed with yours as per your tax bracket.
This is available for up to two children.
For example, you can invest up to Rs 15,000 in a long term FD which gives an annual return of 10%, and be exempt from tax. Remember that if the interest is on a compounding basis, the interest amount will grow over the years, resulting in an increase in tax liability.
You can avail of this for a maximum of two children. This means, you can safely invest Rs 15,000 in a fixed deposit in your child's name. If you have two children, that's Rs 30,000 earning tax-free income every year. Opt for the annual payout option because the cumulative option will push up the earning beyond the tax-free limit in a couple of years as the compounding effect comes into play.

5. Exemptions with investment for Adult Child
After a person turns 18, he is treated as a separate individual for tax purposes. This means his earnings are no longer clubbed with his parent's income and he enjoys the same exemptions and deductions as any other adult taxpayer. Read more in Clubbing of Income.
The rule is that if an individual turns 18 anytime during a financial year (even on 31 March), he gets the benefit for the entire year. Even those with children aged 16-17 years can use this strategy. Just invest in a 500-700 day FMP.
By the time the scheme matures, the child would have turned 18 and the income will be his own. A child over 18 also raises your investment limit in the PPF. You can separately invest up to Rs 1 lakh a year in his PPF account. In case of minors, contributions are clubbed with that of the parent and the combined total cannot exceed the annual limit of Rs 1 lakh. This helps build a capital base for the child for future use.
Gifting money to an adult child and investing in his name is tax-efficient but won't be a great idea if the child is financially irresponsible.

6. Parents can help too
Your parents can also help you avoid the tax net. If any or both of your parents do not have a high income, while you are in the highest 30% tax slab, you can invest in their name to earn tax free income. Every adult enjoys a basic tax exemption of Rs 2 lakh a year. For senior citizens (above 60 years), the basic exemption is higher at Rs 2.4 lakh a year. Unlike the investments made in the name of a spouse or a minor child, there is no clubbing of income in the case of parents. So, a person above 60 can potentially earn Rs 2.5 lakh per year without any tax implication. If he invests in tax saving schemes under Section 80 C, the income can be as much as Rs 3.5 lakh a year. In the highest tax bracket, this saves you more than Rs 1 lakh in a year. It gets even better if you rope in a grandparent who is above 80. Very senior citizens have a basic exemption limit of Rs 5 lakh. The grey population has a wide range of investment options.

Other tax saving options:
There are a host of allowances specified in the Income Tax Act, which is allowed by an employer as a deduction from the income of the employee.

  • The first is a hostel allowance of Rs 300 per month per child, up to a maximum of 2 children. However, these expenses need to be incurred in India.
  • The next is an education allowance, wherein Rs 100 per month per child up to a maximum of two children is exempted from income. Here also, the expenses need to be incurred in India.
  • Medical expenses incurred for dependent children are allowed as a deduction up to Rs 15000 per year on furnishing of medical bills.
  • Expenses on treatment of disabilities and certain ailments is exempted from tax. The Income Tax Act allows the parent to claim a deduction from his income, an amount incurred towards treatment of specific disabilities and illnesses of his child under two sections. Sec 80DD of the Act states that expenses incurred towards medical treatment of dependent children suffering from a disability are eligible for deduction. The limit of deduction under this section is Rs 50,000 for a normal disability (impairment of atleast 40%) and Rs. 1 lakh for severe disability (impairment of 80% or above). Sec 80DDB of the Act allows expenses incurred towards treatment of specified illnesses for children to be deducted from income, upto Rs 40,000.
  • Payment of tuition fees. Tuition fees paid by the parent to fund his child's education in any school, university, college or any other education institution within India can be deducted under Sec 80C, upto Rs 1 lakh in a year. The amount of deduction is restricted to two dependent children and should pertain only to actual tuition fees paid. However, both husband and wife have a separate limit of two children. So each parent can claim for two children each.
  • Interest on education loan. The cost of education for your child is a huge outflow, and needs to be well planned. Most of you may opt to take a loan to fund your child's higher studies. While this results in a repayment burden, you can gain partially, as the interest portion on education loan is fully tax deductible under Section 80E of the Income Tax Act. This loan can be taken by the borrower, parent or spouse of the student from a recognized financial institution. The loan must be taken for a full-time course, which can either be a graduate course in engineering, medicine or management or post graduate course in engineering, medicine, management, applied sciences or pure sciences including mathematics and statistics.

So, get smart, save taxes, and invest the saved money to earn more money for yourself.

Cheers


Manoj Arora
Lead a Financially Free Life !!