Category: Personal Finance

EPF

The rule of the Provident Fund has been in effect for many decades and is required to be delivered to its employees by an employer. For employees with a minimum wage of less than INR 15,000 p.m., it is mandatory for an establishment having more than 20 employees to contribute to EPF. Employees who receive a basic salary above this limit can contribute towards EPF. Pursuant to Section 80C of the Income-tax Act, such contributions are tax-free up to Rs 1.5 lakh per year. The accrued interest is tax-free and even the withdrawal if the employee has supported continuous employment for at least five years within a contribution limit of Rs 2.5 lakhs annually. At age 58 or after two months of unemployment, the corpus can be withdrawn by the employee. The interest rate is determined annually by EPFO, i.e. the rate for FY20 was capped at 8.5%. Employees can also consider Voluntary Provident Fund (VPF), which provides the same interest rate and tax incentives as the EPF, with more than the standard 12 per cent deduction. As a voluntary contribution to the EPF, the employee can also donate 100 per cent of his/her minimum wage. But the Rs 2.5 lakh cap will mainly impact individuals who contribute to VPF and have a high income.

NPS

NPS is a pension scheme where the pension benefits are linked to the market. NPS contributions are tax-free under Section 80C up to Rs 1.5 lakh and under Section 80CCD(1B) up to a limit of Rs 50,000. NPS returns vary significantly as per equity, corporate bond and government bond performance, which are the three asset groups that NPS enables you to allocate in. Contributions towards this retirement fund mature when you hit the age of 60 where you can make a tax-free withdrawal of 60% from the corpus and the remaining 40% should be used to purchase taxable annuity products. Compared with the 8-9 per cent interest historically delivered by EPF, NPS returns vary significantly, considerably NPS is a voluntary contribution system with a minimum deposit limit in Tier I of Rs 500 and in Tier-II accounts of INR 1,000.

Withdrawal comparison

You can withdraw all of your EPFO corpus upon meeting the retirement age. The NPS, though, is organized as a pension scheme. Thus, at retirement, you can make a tax-free withdrawal of 60% of your accrued corpus. The 40 per cent left must be used to purchase an annuity product as we discussed above. For those who wish to use a large portion of the retirement corpus for financial purposes such as owning a house or financing the marriage of children, NPS can’t be a smart bet here. In certain situations, proceeds from the EPF are considered for financial objectives rather than covering retirement life.

Our take

No doubt NPS has achieved in respect of returns over EPF in the last two years, but its yields compared to EPF are not secure and fixed. Early-age investors should contribute towards NPS and settle for a high allocation of equity to build a massive corpus to meet retirement plans. If you are not willing to take market likelihood in the final decades of your employment, then you can consider EPF. Returns under PF are set at the interest rate decided annually by the government. The return from NPS, however, depends on the NAV of equity and debt. Therefore, since PF provides secure and guaranteed returns, NPS provides risk and higher returns. Even though the interest received from contributions above Rs 2.5 lakh is taxable, the acceptable interest rate proceeds to render the EPF a smart decision. Considering the additional deduction open, one can contribute to NPS as well. High-income investors must diversify their holdings instead of focusing on a single retirement vehicle to minimize their tax exposure and optimize returns. Investors must consider first his or her risk appetite, lock-in, liquidity, maturity and so on of the investment vehicle before opting a one.

EPF

The rule of the Provident Fund has been in effect for many decades and is required to be delivered to its employees by an employer. For employees with a minimum wage of less than INR 15,000 p.m., it is mandatory for an establishment having more than 20 employees to contribute to EPF. Employees who receive a basic salary above this limit can contribute towards EPF. Pursuant to Section 80C of the Income-tax Act, such contributions are tax-free up to Rs 1.5 lakh per year. The accrued interest is tax-free and even the withdrawal if the employee has supported continuous employment for at least five years within a contribution limit of Rs 2.5 lakhs annually. At age 58 or after two months of unemployment, the corpus can be withdrawn by the employee. The interest rate is determined annually by EPFO, i.e. the rate for FY20 was capped at 8.5%. Employees can also consider Voluntary Provident Fund (VPF), which provides the same interest rate and tax incentives as the EPF, with more than the standard 12 per cent deduction. As a voluntary contribution to the EPF, the employee can also donate 100 per cent of his/her minimum wage. But the Rs 2.5 lakh cap will mainly impact individuals who contribute to VPF and have a high income.

NPS

NPS is a pension scheme where the pension benefits are linked to the market. NPS contributions are tax-free under Section 80C up to Rs 1.5 lakh and under Section 80CCD(1B) up to a limit of Rs 50,000. NPS returns vary significantly as per equity, corporate bond and government bond performance, which are the three asset groups that NPS enables you to allocate in. Contributions towards this retirement fund mature when you hit the age of 60 where you can make a tax-free withdrawal of 60% from the corpus and the remaining 40% should be used to purchase taxable annuity products. Compared with the 8-9 per cent interest historically delivered by EPF, NPS returns vary significantly, considerably NPS is a voluntary contribution system with a minimum deposit limit in Tier I of Rs 500 and in Tier-II accounts of INR 1,000.

Withdrawal comparison

You can withdraw all of your EPFO corpus upon meeting the retirement age. The NPS, though, is organized as a pension scheme. Thus, at retirement, you can make a tax-free withdrawal of 60% of your accrued corpus. The 40 per cent left must be used to purchase an annuity product as we discussed above. For those who wish to use a large portion of the retirement corpus for financial purposes such as owning a house or financing the marriage of children, NPS can’t be a smart bet here. In certain situations, proceeds from the EPF are considered for financial objectives rather than covering retirement life.

Our take

No doubt NPS has achieved in respect of returns over EPF in the last two years, but its yields compared to EPF are not secure and fixed. Early-age investors should contribute towards NPS and settle for a high allocation of equity to build a massive corpus to meet retirement plans. If you are not willing to take market likelihood in the final decades of your employment, then you can consider EPF. Returns under PF are set at the interest rate decided annually by the government. The return from NPS, however, depends on the NAV of equity and debt. Therefore, since PF provides secure and guaranteed returns, NPS provides risk and higher returns. Even though the interest received from contributions above Rs 2.5 lakh is taxable, the acceptable interest rate proceeds to render the EPF a smart decision. Considering the additional deduction open, one can contribute to NPS as well. High-income investors must diversify their holdings instead of focusing on a single retirement vehicle to minimize their tax exposure and optimize returns. Investors must consider first his or her risk appetite, lock-in, liquidity, maturity and so on of the investment vehicle before opting a one.

Government Securities (G-Secs)

Retail investors have several ways to invest in Government securities Treasury bills (T-Bills) and the Government of India (GoI) dated bonds on the primary market. G-Secs come in a variety of maturities from 91 days to 40 years, based on the length of the particular arrangement of the liabilities of the respective organizations.

Benefits of investing Government Securities

• As they are Sovereign secure, there is no risk of default.
• No TDS applicable on interest
• G-Secs can be stored in a current Demat account
• They can be quickly traded on the secondary market
• G-Secs can also be used as collateral to borrow funds in the repo market.

Sovereign Gold Bonds (SGBs)

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. The Bond is issued by Reserve Bank on behalf of the Government of India. Investors must pay the agreed price in cash and the bonds will be redeemed in cash at maturity. The SGBs are issued by Reserve Bank on behalf of the Government of India.

Benefits of SGBs

• The risks and costs of storage are eliminated.
• SGB is exempt from problems such as making charges and purity
• The bonds can be held Demat form
• TDS is not applicable on the bond.
• The bonds are eligible as collateral for loans from banks.

Atal Pension Yojana

Atal Pension Yojana (APY), a pension scheme for Indian residents, focuses on unorganized sector workers. Under the APY, a fixed minimum pension will be provided at the age of 60 years, based on the donation rendered by the subscribers.

Benefits of joining APY scheme

• On the death of the contributor, the pension automatically vests to the spouse who is the default nominee
• Tax exemption is applicable to payments made by individuals to Atal Pension Yojana under Section 80CCD of the Income Tax Act, 1961
• GoI will also co-contribute 50% of the subscriber’s contribution or Rs 1000 per annum, whichever is lower.

in to or toward the inside of More (Definitions, Synonyms, Translation)

National Pension Scheme

NPS aims at encouraging people the practice saving for retirement. It is an effort to find a permanent solution to the issue of providing every citizen of India with a sufficient retirement income. The NPS is a successful scheme for someone who wishes to schedule early retirement and has a low-risk appetite.

Benefits of NPS

• There is a deduction of up to Rs 1.5 lakh can claim for the contribution made
• NPS offers a broad variety of investment choices and the preference of pension funds (PFs)
• Opening an account with NPS is simple. It provides seamless portability across jobs and locations
• Until retirement, the accumulation of pension wealth rises over time with a compounding effect.

Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana scheme was launched by the Government, designed to improve the betterment of the girl child. Investments made under the Sukanya Samriddhi scheme are excluded from income tax according to section 80C of the Income Tax Act.

Public Provident Fund (PPF)

Public Provident Fund, PPF is one of the popular investment avenues among Indians. It is a tax-free savings scheme. Individuals may invest up to Rs 1.5 lakh per year in their PPF account and can also claim tax benefits under section 80C of the Income Tax Act.

Prime Minister Vaya Vandana Yojana

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension scheme offered by the Government of India specifically for senior citizens aged 60 years and above.

Benefits of Pradhan Mantri Vaya Vandana Yojana

• Pension is payable at the end of each period, during the policy term of 10 years, as per the frequency requested
• Loan up to 75% of the purchase price will be allowed after 3 policy years.
• The scheme is exempted from GST.
• The scheme initially offers a fixed rate of return of 7.66% every year for 2020-21 per year and would reset thereafter.

Pradhan Mantri Jeevan Jyoti Bima

Pradhan Mantri Jeevan Jyoti Bima is a term insurance plan launched by the Government of India. This plan aims to secure your family’s future with a life cover. This insurance scheme offers life insurance cover for death due to any reason.

Benefits of Pradhan Mantri Jeevan Jyoti Bima

• The premium charged in the scheme is liable for tax benefits as provided for in Section 80C of the Income Tax Act.
• This provides a death coverage of Rs 2,00,000 to the beneficiary in the case of a sudden demise.
• Other Important Government schemes

National Savings Certificate (NSC)

National Savings Certificate (NSC) provides you with a guaranteed return and bears practically no risk as it is sponsored by the Government of India. NSC comes with a set maturity period of 5 years. There is no upper limit on the purchase of NSCs, but under Section 80C of the Income Tax Act, only investments up to Rs.1.5 lakh can earn you a tax rebate.

Make sure you keep a watch on the investment schemes as the government continues to adjust the functionality and the interest rate on a regular basis.

GoodReturns.in

Government Securities (G-Secs)

Retail investors have several ways to invest in Government securities Treasury bills (T-Bills) and the Government of India (GoI) dated bonds on the primary market. G-Secs come in a variety of maturities from 91 days to 40 years, based on the length of the particular arrangement of the liabilities of the respective organizations.

Benefits of investing Government Securities

• As they are Sovereign secure, there is no risk of default.
• No TDS applicable on interest
• G-Secs can be stored in a current Demat account
• They can be quickly traded on the secondary market
• G-Secs can also be used as collateral to borrow funds in the repo market.

Sovereign Gold Bonds (SGBs)

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. The Bond is issued by Reserve Bank on behalf of the Government of India. Investors must pay the agreed price in cash and the bonds will be redeemed in cash at maturity. The SGBs are issued by Reserve Bank on behalf of the Government of India.

Benefits of SGBs

• The risks and costs of storage are eliminated.
• SGB is exempt from problems such as making charges and purity
• The bonds can be held Demat form
• TDS is not applicable on the bond.
• The bonds are eligible as collateral for loans from banks.

Atal Pension Yojana

Atal Pension Yojana (APY), a pension scheme for Indian residents, focuses on unorganized sector workers. Under the APY, a fixed minimum pension will be provided at the age of 60 years, based on the donation rendered by the subscribers.

Benefits of joining APY scheme

• On the death of the contributor, the pension automatically vests to the spouse who is the default nominee
• Tax exemption is applicable to payments made by individuals to Atal Pension Yojana under Section 80CCD of the Income Tax Act, 1961
• GoI will also co-contribute 50% of the subscriber’s contribution or Rs 1000 per annum, whichever is lower.

in to or toward the inside of More (Definitions, Synonyms, Translation)

National Pension Scheme

NPS aims at encouraging people the practice saving for retirement. It is an effort to find a permanent solution to the issue of providing every citizen of India with a sufficient retirement income. The NPS is a successful scheme for someone who wishes to schedule early retirement and has a low-risk appetite.

Benefits of NPS

• There is a deduction of up to Rs 1.5 lakh can claim for the contribution made
• NPS offers a broad variety of investment choices and the preference of pension funds (PFs)
• Opening an account with NPS is simple. It provides seamless portability across jobs and locations
• Until retirement, the accumulation of pension wealth rises over time with a compounding effect.

Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana scheme was launched by the Government, designed to improve the betterment of the girl child. Investments made under the Sukanya Samriddhi scheme are excluded from income tax according to section 80C of the Income Tax Act.

Public Provident Fund (PPF)

Public Provident Fund, PPF is one of the popular investment avenues among Indians. It is a tax-free savings scheme. Individuals may invest up to Rs 1.5 lakh per year in their PPF account and can also claim tax benefits under section 80C of the Income Tax Act.

Prime Minister Vaya Vandana Yojana

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension scheme offered by the Government of India specifically for senior citizens aged 60 years and above.

Benefits of Pradhan Mantri Vaya Vandana Yojana

• Pension is payable at the end of each period, during the policy term of 10 years, as per the frequency requested
• Loan up to 75% of the purchase price will be allowed after 3 policy years.
• The scheme is exempted from GST.
• The scheme initially offers a fixed rate of return of 7.66% every year for 2020-21 per year and would reset thereafter.

Pradhan Mantri Jeevan Jyoti Bima

Pradhan Mantri Jeevan Jyoti Bima is a term insurance plan launched by the Government of India. This plan aims to secure your family’s future with a life cover. This insurance scheme offers life insurance cover for death due to any reason.

Benefits of Pradhan Mantri Jeevan Jyoti Bima

• The premium charged in the scheme is liable for tax benefits as provided for in Section 80C of the Income Tax Act.
• This provides a death coverage of Rs 2,00,000 to the beneficiary in the case of a sudden demise.
• Other Important Government schemes

National Savings Certificate (NSC)

National Savings Certificate (NSC) provides you with a guaranteed return and bears practically no risk as it is sponsored by the Government of India. NSC comes with a set maturity period of 5 years. There is no upper limit on the purchase of NSCs, but under Section 80C of the Income Tax Act, only investments up to Rs.1.5 lakh can earn you a tax rebate.

Make sure you keep a watch on the investment schemes as the government continues to adjust the functionality and the interest rate on a regular basis.

GoodReturns.in

Amid IPO frenzy, today another public issue by B2C company into the area of wellness and healthcare will open its Rs. 100 crore IPO for public subscription. And ahead of the issue, the company aggregated close to Rs. 45 crore from anchor investors last Friday.

Issue details: The issue closes for subscription on February 17, 2021. And the price band has been fixed in the range of Rs. 396-400. Investors can bid for a minimum of 35 shares and in multiples of 35 shares thereafter.

Company details: The company offers solutions to track one’s health and its products and solutions gained traction amid the pandemic and now as with the roll out of the vaccine, things are normalizing, in the long run there shall be difficulty in sustaining the performance. Nonetheless, the company’s technology adoption will help scale its business.

Valuation of the issue: IPO is valued at 5.6x annualized earnings report in 1HFY21, which looks to be attractively valued given high asset turnover and return ratio of the company,” Jain of Reliance Securities said. And in view of the attractive valuations, the brokerage has given a ‘subscribe’ rating to the issue.

SMC Global Securities Ltd is of the belief that considering the P/E valuation, on the upper end of the price band of Rs 400, the stock is priced at pre issue P/E of 46.91x on its FY20 EPS of Rs 8.53. Post issue, the stock is priced at a P/E of 62.55x on its EPS of Rs 6.40. Looking at the P/B ratio at Rs 400 the stock is priced at a P/B ratio of 5.81x on the pre issue book value of Rs 68.86 and on the post issue book value of Rs 187.83 the P/B comes out to 2.13x. While on the lower end of the price band of Rs 396 the stock is priced at pre issue P/E of 46.44x on its FY20 EPS of Rs 8.53.

Prospects of the issue -listing wise: Amid strong market momentum, we might see over-subscription as the issue is a small one and this might help in decent listing of the issue.

GoodReturns.in

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