Personal Finance

Tax Saving ?

Posted by : radhika_nandlal

Subasu,

I am having 35Lakhs in one FD at 9.5% intrest, now state bank offers 11% interest. Since this FD was booked for 3 years if i break it now i will have to pay back some money as FDs less than 3 years only earned 8.5% interest...

Should i break it and put it in the 11% FD?

Thanks

Also i have so many insurance policies that mature in 2020 thereabouts.. do u think it would be foolish on my part to discnotinue them and claim the money for investment in stockmarkets? Woudl u advise. One of them is a pension plan whose instalment premium is 27K per year and notional cash option is 20L and amount of annuity is 2L.. how much pension will this give me from 2020? Would you know its Jeevan Dhara.. since it will only give me pension and not lump sum shall i discontinue it? If i continue what pension do i get.... thanks in advance.

Tax Saving ?

Posted by : subasu

Index of Industrial Production is released by the Government of India, Department of Statistics in the Ministry of Finance. As we all know, statistics in India is a science yet to be perfected. Not all industries report their performance in time. That is why you will find the data published in the RBI`s monthly bulletin has data which is six months old at the time of publication. I am in agreement with the Honourable FM. Now, I foresee a drop in interest rates as that will put back the industrial production on rails. Borrowers of home finance will also have some relief in home loan interest rates.

Tax Saving ?

Posted by : subasu

Index of Industrial Production is released by the Government of India, Department of Statistics in the Ministry of Finance. As we all know, statistics in India is a science yet to be perfected. Not all industries report their performance in time. That is why you will find the data published in the RBI`s monthly bulletin has data which is six months old at the time of publication. I am in agreement with the Honourable FM. Now, I foresee a drop in interest rates as that will put back the industrial production on rails. Borrowers of home finance will also have some relief in home loan interest rates.

Stick to largecap over midcap funds

Posted by : milind_finance

Analisis is ok , but which are the best Large cap funds ? and what is there performence? Please give it.

Tax Saving ?

Posted by : radhika_nandlal

Ashal,

I realized i am no good in finance. If i remember one thing i forget the next and my parents know nothign but FDs... so its no use.. most brahmins are like that...

I have so many policies, ICICI MILLINOARE BONDS, etc etc.. the houses i sold off coz i knew if i sell this i get this and its a multiple but in these insurance policies and millionare bonds i have to calculate inflation to see the worth and i dont know how to consider inflation when arriving at networth.

BTW ystday finance minister said IIP numbers may not be correct.. i was aghast.. i though IIP numbers are released by the govt? Wonder who releases the IIP numbers.. so they have no hand in the release of such data? What a disconnect between growth and IIP numbers.

When u plan do u take inflation also into account.

Going forward do u see interest rates hardening or softening?

Tax Saving ?

Posted by : subasu

I find that you will still be able to get Rs. 28K more after paying the penalty of 1% for two years.

I suggest you straightaway go to SBI and ask them what will be the net gain accruing to you if you break this deposit. (Some official of SBI once told me that there may not be any penalty since you are not closing the FD but only renewing it for a fresh period at a different rate of interest.)

Tax Saving ?

Posted by : ashalanshu

Dear Radhika_nandlal, U r time & again talking about Jeewan dhara Plan, but in my view ur Hubby had started New Jeewan Dhara or New Jeewan Dhara - 1.

The reason is, the plan named as Jeewan dhara was discontinued by LIC way back in 2001. This plan was just like an FD/KVP offering from LIC. Under this plan, the single prem. invested `ll be returned after 10Years as 3 times. Say u had invested 1L Rs. in 2000, u `ll get 3L Rs. in 2010.

As u r telling that u r paying prem. yearly, it means the older jeewan dhara plan is not with U. Infact the new Jeewan dhara Plan is a deffered annuity plan. Returns under this plan r very pathetic. Only around 2.5 to 3.5% during accumulation phase. Every year LIC announces bonuses for these policies & these bonuses r simple reversionary bonuses.

Even after completion of defferment period (read prem. paying term), the pension received from these plans is very - very poor.

Make an informed decision.

Thanks

Ashal

Tax Saving ?

Posted by : radhika_nandlal

Subasu,

Hubby followed ur methods.. invested in FDs, stocks and insurances and real estate.

Stocks and real estate i sold off for a song only Insurance and FDSs remain.

What i wanted to understand was will breaking the FD of 35L earning me 8.5% interest (this is a 3-year FD with two years already up), to invest in an FD which can earn me 11% for one year (11% FDs available only for one year) be a mistake. I have to pay some money for breaking my 35L FD at 9.5% coz if i break it then only a 2-year term will be applicable to me and the 2-year FDs fetched only 8.5% interest. So if i have to pay back that 1% interest for 2 yaers and put it in 11% for one year it wont make a big difference is it not? I am not able to caculate this simple thing. LOL.

Thanks

Tax Saving ?

Posted by : ashalanshu

Dear Radhika_nandlal, U r time & again talking about Jeewan dhara Plan, but in my view ur Hubby had started New Jeewan Dhara or New Jeewan Dhara - 1.

The reason is, the plan named as Jeewan dhara was discontinued by LIC way back in 2001. This plan was just like an FD/KVP offering from LIC. Under this plan, the single prem. invested `ll be returned after 10Years as 3 times. Say u had invested 1L Rs. in 2000, u `ll get 3L Rs. in 2010.

As u r telling that u r paying prem. yearly, it means the older jeewan dhara plan is not with U. Infact the new Jeewan dhara Plan is a deffered annuity plan. Returns under this plan r very pathetic. Only around 2.5 to 3.5% during accumulation phase. Every year LIC announces bonuses for these policies & these bonuses r simple reversionary bonuses.

Even after completion of defferment period (read prem. paying term), the pension received from these plans is very - very poor.

Make an informed decision.

Thanks

Ashal

Tax Saving ?

Posted by : radhika_nandlal

ashalanshu,

But i blew up all my hubby`s money and sold things for a song in the past.. dont want to be so consumed by money anymore.. i think these FDs represent stability... let me keep them.. besides i understand debt instruments are not 100% risk free... i am afraid to invest huge money in risky instruments and MFs are definitely risky.

You replied to my jeevan Dhara query.. oh i completely missed it.. let me check.

Thanks a lot.

Tax Saving ?

Posted by : ashalanshu

Dear Radhika_nandlal, here is the No. crunching u wanted. The bank FDs u r talking about current one u r holding & new one u want to switch, normally offers quarterly compounding.

Case - 1 Continue the current FD of 9.5%
Base amount = 35L
Maturity amount (pre Tax) = 4638686
I assume u r in 30.9% Tax slab, Post Tax maturity amount = 4286832

Case - 2 break the current FD & invest the maturity proceeds in a 1 year 11% FD.
As the older FD is completing 2 years & as per ur info the applicable interest rate is 8.5%,
Base amount = 3500000
Maturity amount for 2 years @ 8.5% (Pre Tax) = 4141185
Post Tax maturity amount = 3943059 This `ll be the base amount for new FD of 11%
Maturity amount @ 11% (Pre Tax) = 4395017
Post Tax maturity amount = 4255362

U can see urself that, Post Tax mat. amount is more in ur Older FD, so the bottom line is continue the same.

Tax Saving ?

Posted by : radhika_nandlal

Typos read it as

What i wanted to understand was will breaking the FD of 35L earning me 9.5% interest

Tax Saving ?

Posted by : ashalanshu

Dear Radhika_nandlal. Investing in bank FDs is not a wise thing on ur part if u r already a Tax payer. According to our prev. discussions i know u r a tax payer. For every Tax slab of 10, 20, 30 & highest Tax slab the post TAX return of this 11% FD `ll be as below.

For 10.3% Tax slab - Effective interest earning from FD 9.867%
For 20.6% - 8.734%
For 30.9% - 7.601%
For 33.99% - 7.261%

It `ll be better on ur part if u invest this amount in a mix of FMP, MIP, Floating rate, Short Term & Long Term debt funds. Dividend in each of the above funds is taxed @ 14.15% by MF itself & the same is taxfree in ur hand. So if u r above 10.2% Tax slab, u may opt dividend transfer option, to invest the dividend in Eq. MFs of ur choice. This way ur basic capital is almost secure, u r earning an average return of 8-11% in the form of dividend & increase in the value of Units & the dividend invested in Eq. MFs for 3 years, `ll provide the extra kick in ur returns, so for a time frame of 3 years u may expect a post tax return of 10-12%.

Regarding ur Jeewan Dhara policy i already expressed my views some days back.

Thanks

Ashal