New Financial Year Beginning

New financial year, new beginning. By the time you will have this issue of newsletter, we all would be talking about planning for new financial year. Salaried class would be waiting for their annual bonus and increments while business class would be busy planning their business targets for FY15-16. More often than not, we tend to keep all personal finance related matters pending, mostly to be done at the 11th hour and end up taking inappropriate decisions, harmful to our personal finance health. Beginning of the year is in fact the most appropriate time to take stock of one’s financial situation. Where does one stand at the end of financial year with regards to his investment, insurance and other needs. It is that time of the year to align your portfolio with changes happening in your personal life as well as regulatory changes.

New Budgetary Changes at a glance:

See what you can make most out of the new budgetary announcements made in Union Budget 15-16.

• Personal Income Tax: No change in rates and exemptions to individual tax payers to continue. Individual tax payer to get tax benefits of Rs. 4,44,200 taking into account the tax concessions in this & last Budget.
• Wealth-tax replaced with additional surcharge of 2 per cent on super rich with a taxable income of over Rs.1 cr. Annually.
• Deduction limit of health insurance premium increased from Rs.15000 to Rs. 25000, for senior citizens limit increased from Rs.20000 to Rs.30000.
• Senior citizens above the age of 80 years, uncovered by health insurance, to be allowed deduction of Rs. 30000 towards medical expenditures.
• Deduction limit of Rs.60,000 w.r.t. specified decease of serious nature enhanced to Rs. 80,000 in case of senior citizen.
• Additional deduction of Rs.25,000 allowed for differently abled persons.
• Limit on deduction on account of contribution to a pension fund and the New Pension Scheme (NPS) increased from Rs. 1 lakh to Rs.1.5 lakh.
• Additional deduction of Rs. 50,000 for contribution to the New Pension Scheme u/s 80CCD.
• Exemption of transport allowance at Rs. 19,200, up from 800 p.m. to Rs.1,600 p.m.

Review Your Asset Allocation:
Beginning of new financial year means lumpsum gain in form of year end bonus and incentives for salaried individuals. Review current asset allocation of your portfolio against decided allocation and make necessary changes in consultation with your advisor. This is the perfect time of the year to review portfolio and decide on allocation of fresh investments with deployment of onetime bonus/incentive amount. Also consider if any material changes have happened in your personal life like addition or deletion of any family member, or if there Is any windfall gain. It’s always better to get in touch with your advisor and plan accordingly for the coming year.

Tax Aspect:
We always start thinking about tax planning either towards beginning of 3rd quarter of the financial year (Oct-Dec) as many employers ask for tax investment details by the end of December or in worst case towards end of the financial year in March. When we know about our tax liability, why not to plan in advance and start doing tax planning at the beginning of the year. This will also allow you take informed investment decisions and take advantage of full year return on your investment.

Review your Insurance Need:
We will not repeat here the increasing cost of health care or importance of term insurance, as readers of our communication must have read about these aspects often. At the beginning of the year, what is required is to review your insurance portfolio. Discuss openly with your advisor and study your insurance need. It might be possible that health insurance taken few years back may not be relevant in value terms and require increase in coverage. If there is a new member in the family don’t forget to add his/her name in the policy document.

Keeping Things in Order:
With every passing year you might have added either new insurance policy taken from a friend or relative to fill Rs. 1.50 lac investment limit under section 80C or added new ELSS from mutual funds for the same purpose. You might also have PPF account active or Bank FD to provide security and stability to your portfolio. What we fail in our busy working schedule is to keep the documents in order, which make life difficult at the end of the year at the time of filling tax return. Store all acknowledgments, premium receipts, ELSS statements at one place and create a backup system. Store all relevant details in your computer and take a backup, so that even if you misplace original receipt or document, these back up data can come in handy to ask for duplicate from service provider. Beginning of the year is surely the time to relax after hectic work of financial year closing and meeting business targets. You must have burnt midnight oil in an attempt to meet your year-end business/revenue targets.Surely beginning of the year is time to relax and plan for summer holidays with your family but little caution can make coming financial year hassle free and can prove a step ahead in your family’s financial well being.