Jigar Quotes

The only thing i learnt & loved so far which i don want to change is CHANGE

This can also apply for an investment decision. Always ask how many years it would take to double your investments. To

To know the number of years, divide 72 by your return percentage (Rule of 72). For

For example, if an investment is generating 6% after tax return, you would double your investments in 12 years (72/6). If you could increase your after tax return to 9%, your investment would double in 8 years (72/9). While this may not matter for 1-2 years, but in 48 years, Rs. 100,000 would double 4 times (16x) at 6% and 6 times (64x) at 9% and become Rs. 1,639,387 and Rs. 6,258,524, respectively. If you invest in a way that generates 12% or 15% annual return, your investment would be Rs. 23,039,078 or Rs. 81,940,071 in 48 years. Increasing the return from 6% to 15% could give you 50 times more money (1,639,387 81,940,071) in 48 years. This is the power of compounding and higher tax free return.

Power of compounding is real and is extremely important. If you understand it, you earn it; if not, you pay it. The rule for compounding is simple - the sooner you start investing, the more time your money has to grow.

Think of the long term effect of return on your investment; Long term is not 1-2 years but could be indefinite – multi generational.

You could increase your standard of living and make a huge difference of enjoying financial freedom for you and your future generations.

Having a right advisor is extremely crucial. An advisor can make or break your investment or your investment experience. It

It is a very important and delicate relationship and care should be taken as if you are selecting your life partner. While

While your life partner supports you for your life, a right advisor affects and supports your life and the lives of your future generations.

The most important and crucial criteria for selecting the right advisor is the character of the advisor. He

Please research the history of the advisor, the

the firm as well as the number of satisfied clientele. Ask

In India, advisors may receive incentives as referral fees, commission, brokerage, etc. from various financial services organizations including banks. In

In that case, he may not work for you but for the company. It

The advisor should ONLY work for you.

be prudent to get a declaration from the advisor that he does not receive any compensation from banks or other financial organizations for recommending you their products or services. The

He should be experienced and have dealt in similar situations and be able to guide you in a proper way by explaining the probable short term and long term implications to help you make  informed decisions.

The advisor should be innovative in providing services to increase your experience. Also, an advisor cannot function in solo. Thus, there should be a support system in place with well-defined processes and people to back him up.

An NRI may have a CA in India helping him for Indian taxes, CPA in his country of residence helping him for his local taxes and a bank relationship manager or agent/advisor friend for investments in India. All

If you want to invest $10,000, you do not need an advisor. If you want to invest $100,000, you may need an advisor. However, if you want to invest $1,000,000, you definitely need an advisor even for investment in NRE bank deposits. An

An advisor can help you with a better conversion rate (saving

better deposit rate (0.25%

An advisor should add value, give a positive experience and give you a better return on your investment through his advice.

Before hiring, evaluate the 5 Cs – Character (trust, ethics, integrity, independence), Capacity (education, experience, holistic perspective), Collateral (what you get in return), Conditions (scope of work, fees, confidentiality) and Capital (financial soundness of advisor).

If not us, at least, hire someone to help you in your investment decisions.

In short, hire an advisor who you trust, who is right for your needs, who can get the job done and who works for ONLY you. If

Benefits:               There are unlimited or “N” number of benefits but these can be summarized into the following 5:            Get a friend, philosopher and guide who helps you when you actually need his advice the most

Increase knowledge, understanding and compliance with investment, tax and other rules, regulations and requirements

Bring a holistic approach as well as discipline to investments

Better liaison with the bank, financial intermediaries, governments that save you time and money

Easy is right. Begin right and you are easy. Continue easy and you are right. The right way to go easy is to forget the right way and forget that the going is easy” - Chuang Tzu Truly speaking, there are very few and basic investment concepts that can make you rich. They

Financial and Investment Planning is THE MOST IMPORTANT. If

Have clear objectives, understand your risk profile and return requirements, allocate your investments in asset classes (equity,

diversify your investments, etc.

You also need to have enough medical and life insurance as well as a will explaining how you want your assets to be distributed.

Know “Who you are”. Every investment product is unique and is good for someone. The

Please accept the fact that “There is NO Free Lunch” i.e. everything has a price and nothing is available for free. If it is free, it cannot be sustained or it may have a hidden mechanism that you do not know anything about.

Almost always, FREE will turn out to be the MOST EXPENSIVE for you.

Have reasonable realistic expectations,

such as the fact that the Indian equity market will generate about 12-15% annual return in INR, the INR will depreciate in future, etc.

Higher the risk, higher the expected return. In

Time is more important than timing

Time is more important than timing for any investment. No one can accurately say the best time to invest, EVER. Start early, have patience, no fear. Please understand the power of Time i.e. compounding.

Tax is a very important consideration.

Each and Every cost counts and is very important, whether direct,

Keep investment simple and invest in products that you understand.

Gold outside India is cheaper and of better quality and with better options.

India does not have gold mines and all the gold is imported. Gold outside India is cheaper and of better

India does not allow dual citizenship. If

If you are in dire need of funds, you may have to sell the FMP at a discount as the liquidity and price efficiency of the FMP is an issue.

The MF also offers 3 unique investment and/or redemption options to investors given below: Systematic Investment Plan (SIP) Systematic Withdrawal Plan (SWP) Systematic Transfer Plan (STP)

An investor would invest a specific amount of money in a particular MF scheme at a particular interval - daily, weekly or monthly.

The biggest benefit of SIP is that an investor buys more units when the market is low and fewer units when the market is high giving him a better average cost per unit. It

SWP allows an investor to withdraw a fixed or variable amount (gain) from the MF scheme on a predefined regular interval – monthly, quarterly, semiannually or annually.

the biggest disadvantage is that when the market is down, more units are redeemed at a lower NAV. Thus, if the bear market is long and deep, and if a higher withdrawal rate is selected for SWP, it

it could result in a total loss of funds. It is very important to select the right withdrawal rate, keep

STP is the best way to systematically change the asset allocation. STP

STP includes both a sale / redemption of units in one MF and purchase of units in another MF at the same time. STP

RBI has given a general permission for NRIs and PIOs to invest in immovable property in India other than agricultural land/plantation property or a farm house. As

He may also acquire any immovable property (including agricultural land, plantation property or farm house) as inheritance from a person resident in or

The investment in immovable property is also subject to the Wealth Tax.

Transfer of Immovable Property An NRI may transfer any immovable property in India to a person resident in India. Thus, an NRI is allowed to transfer (sell, give gift, inheritance or any other way of transfer) any property (residential, commercial, agricultural, plantation, farm house, etc.) to a person resident in India.

The payments cannot be made by travellers cheque, foreign currency notes or by any other modes specifically mentioned for acquiring immovable property.

Any profit on the sale of these properties can only be credited to an NRO account and can be remitted abroad up to the overall ceiling of US$ 1 million per financial year. The

There are several structures available to foreign investors to carry out business in India as follows: Investment in proprietorship or partnership firms Investment in Limited Liability Partnership (LLP) in India as a partner Project Office (PO) Liaison Office (LO) Branch Office (BO) Company

A foreign resident or a foreign company can invest in a company or LLP in India, subject to the Foreign Direct Investment (FDI) Policy of the Government of India.

in the CRB group companies got nothing, the investors of the mutual fund received a part and would get something. Only after the CRB case, SEBI tightened the regulations and introduced stringent measures for the protection of the investors’ interest. In short, MF investments are safe and it is practically very difficult for sponsors or managers to run away with the money. 

Entry load of 1% on investment of Rs. 1,000,000 means a deduction of Rs. 10,000 and investment of Rs. 990,000. If this investment becomes 1,500,000 and is redeemed which is subject to 1% exit load, you would only get 1,485,000 after a deduction of 15,000 as the exit load.

Dividend received from a mutual fund is exempt from tax for the investor. However, other than equity oriented MF schemes, Dividend Distribution Tax (DDT) is required to be paid by the MF schemes issuing the dividend. Please refer to DDT for more details.

A minimum allocation of 65% in equity shares of domestic companies is required to consider any MF scheme as an equity oriented MF for taxation purpose.

Interest on NRE and FCNR deposits are exempt from income tax in India. However, while explanation 2 of section 10 (15)(iv) mentions that “interest” includes hedging transaction charges on account of currency fluctuation, taxation of gain due to entering into forward contract may not be straight forward.

The interest rate on RFC and FCNR deposits for corresponding currency and maturity are usually the same. While the minimum term of an FCNR deposit is 1 year, there is no such limitation for RFC deposits. An account holder can open an RFC deposit for one month or even less.

While RFC deposits can be withdrawn pre-maturely, banks are allowed to levy any penalty.

While the payment in foreign currency can be credited in an EEFC account, it should be converted into INR on or before the last day of the next month after adjusting for approved purposes and forward commitments.

Before investing, an NRI needs to analyze the investment product, its features, expected return, terms of investment as well as his risk profile, objectives, time horizon, liquidity constraints, effect of investment on the total portfolio, taxation in India and in the resident country and any

An equity investor buys and holds the shares of stock in a company in anticipation of dividends and/or capital gains.

may invest in the equity shares of the company under the FDI scheme of the Government of India.

The tax free bonds are issued with the maturity of 10 or 15 years and the interest rates on

The maximum deposit (investment) a person can make in the PPF account is regulated and is recently increased from Rs.100,000 in 2013-14 to Rs. 150,000 from financial year 2014-15.

Any gain on sale of a capital asset i.e. investment, is considered as a capital gain. The taxation of capital gains varies widely depending upon the type of capital asset, whether short term or long term and whether the Securities Transaction Tax (STT) has been paid.

Any buy or sell transaction in the shares of a company listed in a recognized stock exchange is subject to STT. The mutual funds with at least 65% allocation to investment in shares of companies (equity) are considered as an equity mutual fund and are also subject to STT. The

The taxation of capital gains on sale of equity or equity mutual fund is different and depends on whether STT has been paid or not.

India is a country with comparatively higher inflation. If an investor invests in an asset, which gives a positive return but is not able to meet or beat inflation, there is no real return to the investor and if he has to also pay tax on the positive return, it would result in a double whammy – return not enough and pay tax on the not enough return.

The indexation benefit is not available to either the sale of depreciable assets, sale of bonds and debentures (except capital indexed bonds) or sale of any asset resulting in a short term capital gain.

Mr. Bharat Shah sold shares of MBK Private Limited for Rs. 1,500,000 on July 1, 2014. The shares were acquired for Rs. 1,000,000 on January 1, 2013. STT is not required to be paid on the sale of shares of a private limited company. As shares are unlisted, sale is made before July 10 and period of holding is more than 12 months, the capital gain would be considered as a LTCG. The indexed cost of acquiring shares would be Rs.1,201,878 (1,000,000*1027/852) and LTCG would be Rs. 298,122. Mr. Bharat would pay income tax @ 20% of Rs. 59,624.

Listed equity shares or equity MF (STT is paid) Not Taxable - Exempt 15% Listed equity shares (STT is not paid) Lower of 20% with indexation or 10% without indexation Taxable as per slab rate Unlisted equity shares (STT is not paid) 20% with indexation Taxable as per slab rate Equity MF sold until July 10, 2014 (STT is not paid) Lower of 20% with indexation or 10% without indexation Taxable as per slab rate Equity MF sold after July 10, 2014 (STT is not paid) 20% with indexation Taxable as per slab rate Let us calculate and understand the taxation with the examples given below.

Mr. Kalpit from Oman invested Rs. 3,000,000 in a residential property in India in June 2012 and sold the property for Rs. 4,000,000 in July 2014. As the period of holding is less than 36 months, the gain of Rs. 1,000,000 would be a STCG and added to his other income and taxed as per the slab rates as regular income.

Mr. Kunal from Uganda invested Rs. 3,000,000 in gold in February 2010. If he sold the gold for 4,000,000 in January 2013, the capital gain would be a STCG as he sold it within 36 months. The STCG of Rs. 1,000,000 will be added to the other income and taxed as a regular income based on the income tax slab.

The investment needs to be made within a period of six months from the sale and is restricted to Rs. 50 lakhs. Also, the investment

investment in NHAI or RECL bonds have a lock in period of 3 years i.e. the investment cannot be sold, transferred or redeemed before 3 years. If investment is transferred before 3 years, the

Can you buy more than one residential house and claim an exemption? When the exemption was introduced, it mentioned “a residential house”. It was held by various courts that “a residential house” also means more than one. Thus, if a joint family of a father and two sons living together sells the residential property owned by the father, they were allowed to buy 3 residential properties in the same building to claim the exemption as “a residential house”. However, it was not easy to prove as the taxpayer should have the patience to present his case at every level – Income Tax Officer, Commissioner of Income Tax, Tribunal and sometimes the High court. This has created a lot of controversies as well. The Finance Act (No 2) 2014 amended the provisions to allow exemption for investment in one residential house. Now, the taxpayer cannot invest in multiple residential properties for claiming exemption.

The Finance Act (No 2) 2014 amended the provisions to allow exemption for investment in one residential house. Now, the taxpayer cannot invest in multiple residential properties for claiming exemption.

the TDS provisions are not complied with, interest @ 1% per month or part of the month for failure to deduct tax or short deduction and interest @ 1.5% per month or part of the month for TDS deducted but not paid until paid is levied. In

which is now increased to 250,000 for the financial year 2014-15. The

A PPF account generates interest as income. The

NRE, FCNR, NRO or inward remittances, the amount can only be credited to the NRO account. The company may accept deposits under a private arrangement or public deposit scheme. A non-banking finance company (NBFC) is required to get registered with RBI and follow the RBI guidelines. Any firm or company accepting deposits are not allowed to use the funds for agricultural/plantation activities, real estate business or investing in other concerns engaged in these activities. Also, the funds cannot be used for re-lending (except NBFC) or repatriated outside India.

(except NBFC) or repatriated outside India. The maturity period of a deposit should not be more than 3 years. Also, there are certain restrictions on the interest rates as well. The borrowing organization is also required to comply with any other laws related to the acceptance of deposits. Income: The income from deposits made in a firm or a company is interest. Taxability: Interest on deposits with an organization is chargeable

During the period between 2008-2010, many money laundering schemes/ scandals were exposed; two mostly publicized scandals being UBS (overall) and HSBC (for NRIs).  Both UBS and HSBC banks accepted that they were involved in practices of money laundering,

Both the banks paid huge fines, promised not to solicit US residents’ investments abroad AND declared information about the account holders to the IRS. The