Conflicting Legally: Tax Evasion, Tax Avoidance and Tax Planning

Tax Evasion, Tax Avoidance and Tax Planning are three legally conflicting tax terms which keep on creating confusions time and again in the minds of tax payers.

The last quarter of the year is always about tax planning and this is also the time when we are filled up practically with all kinds of tax terms and tax related confusions. The above mentioned terms hold great importance for understanding tax planning and tax management and that is why it is significant that we learn the difference in Tax Evasion, Tax Avoidance and Tax Planning.

We need experts to talk about and explain the basics so that we can take prudent decisions and it is also very important to understand tax related legal parlance for making the right investment decisions.
Let us understand the meaning and comparison between the terms which forms the basis of Legal provisions in Indian Tax laws. i.e. Tax Evasion, Tax Avoidance and Tax Planning.

TAX EVASION

It refers to a situation where a person tries to reduce his tax liability by deliberately suppressing the income or by inflating the expenditure showing the income lower than the actual income and resorting to various types of deliberate manipulations. An assessee guilty of tax evasion is punishable under the relevant laws. Tax evasion may involve stating an untrue statement knowingly, submitting misleading documents, suppression of facts in assessments. An assessee who dishonestly claims the benefit under the statute by making false statements, would be guilty of tax evasion.

For example, submitting of false financial statements, claiming false exemptions on the basis of fake documents, not reporting correct income and investing in various tax heaven countries in order to reduce there tax liabilities in India.

TAX AVOIDANCE

The line of demarcation between tax planning and tax avoidance is very thin and blurred. click here

 

Retirement Planning for the Millennials

Retirement Planning for the Millennials

Many a times, financial advisors and experts have been found discussing about the rules of retirement. We at SBS Fin, are of firm belief that any person who touches the age of 33 must start planning for retirement and that too above & beyond the regular investments of annual financial goals like Travel, Health, Education, Real Estate etc.

How important is Financial Independence past Retirement?

Financial independence affirms a sense of freedom and individuality where each and every person, regardless of their age, is capable of generating ample income for paying forthcoming expenses. This passive income can be retrieved through savings or investment, real estate assets or general royalties from performed work in the past.

It is important that you start varying your options and integrating your savings and investments by the right time for a better future with financial independence and security.

Also, one should always participate in retirement plans which are employee-sponsored. There are many employers who contribute to the company-sponsored retirement matching plans by matching the employees’ contribution. It is important that you follow a retirement strategy and function organized and formulated.

The ideal age of looking forward to a retirement would be around 65 years of age, which is why it is important that you, as an individual, boost-start the establishment of your financial independence by your mid 30s-40s. Financially independent would sum up an individual to be completely mortgage-free, debt-free, liability-free, with sufficiently accumulated capital that would enable the person to live passively off interest and dividends and secure by all means.

Five Reasons to pursue Financial Independence:

 

  1. Freedom of Choice

Each individual works for a living. By pursuing this method, a person will attain the freedom to live and work on their own terms in the time-phase of retirement. You reach a point in life where you will choose to work than it being a must, financially. This sense of certainty arises with financial independence, which makes it the primary reason to pursue financial independence.

  1. Unemployment Insurance

This is one of the key adjuncts of financial independence. If you choose to neglect the benefits of financial independence, then you choose to be dependent on monthly paychecks, causing you to be caught in the vicious circle of insecurity that can make you prone to losing your job, being at mercy of those who trifle out instead of minimal, sufficient amounts of employment insurance, helping you jump all the hoops and grab loopholes.

  1. Expenditure & Investments

Whilst adopting the procedures of financial independence, you will not have to curb your expenditure with accordance to your priorities. Extra cash flow can always be invested and spent on increasing productivity. You can invest this cash as capital at risk or give aplenty of time to foster a business idea that helps you propagate financial returns in the forthcoming future.

  1. Peace of Mind

Security about the future results in incarnate peace of mind. One can spend hearty time with family, introspect and pursue their passion freely. Be in a semi-retirement phase or a retirement phase, this would help you to work with all your heart and mind. You can run small errands at your own time with no stress on your shoulders.

  1. Taxes don’t appear as vexatious

As a worthy and active citizen of the country, you should be aware that tax matters a lot, irrespective of varying incomes. The thin line between being depravedly rich to financially stable differs with the concept of how and where you’re holding your assets. For example, individuals with little wealth generate a good amount of taxable income while those who pursue financial independence generate abeyant gains in the form of real-estate appreciation, hidden capital gains and profits made through tax-free accounts.

How to Approach for a Retirement Planning?

 

Maintain an Emergency Reserve — It is significant to maintain an emergency reserve in the ever vulnerable life situations. One must always have three to six months’ worth of living expenses in the bank account.

Get rid of Debts — One must borrow for Education as you get a tax benefit but at the same time, the debts which our generation and millennials are getting used to of in the form of credit cards must be paid off at the earliest.

Keep aside 10% of your income for Retirement, yes on monthly basis. You can also start and SIP in a mutual fund.

Allow you investments to grow in direct proportion to your income growth. Also keep the income boosters such as tax refund, bonus income, long due payouts as the annual bonus of your investment income.

The thumb rule of investments in retirement planning should be, 100- age= Your allocation to stocks. We can say, at the age of 30 — one should keep 70% of your portfolio in equities. Once retired, you can limit your exposure to stocks to not more than 25–30% of your portfolio.

You must save 25 times your annual expense. Instantly buy a health insurance plan as the difficulty of making such a purchase increases once you are older.

Allocate, Diversify and Rebalance — If you are a risk-taking regular investor, you can also enjoy go with the strategy of allocation with diversification. You need to be vigilant on quarterly basis.

Retirement Planning Habits in a Nutshell:

  • One NEVER stops investing for retirement.
  • In retired life, you are likely to spend the same amount as today.
  • The best time to start saving and investing for retirement is with your first job or first post-high-school or post-college job. But if you haven’t started yet, then right now is the right time.
  • The Retirement Corpus shall not be used for things other than your retirement.
  • For the retirement accounts — Set it and forget it.

Henceforth, it is important that you realize that there is simply nobody who would guarantee you the security, financial independence and lifestyle you want at your millennial stage of life, except yourself.

Contact us for any queries regarding Financial Planning for Millennials feel free to write us, contact@sbsfin.com

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What’s your plan to enable a smooth retired life for your Parents?

In India, the kids have always been considered as the ultimate investment for your retired life. We can call it societal norm, peer pressure or the way families have been run & managed since ancient times when there was nothing like social security, pensions or facilities for that matter.

What still exists however it the fact that to secure the future of the kids, parents constantly try to give their offspring the best and therefore they end up risking their own future. Be it the education of children, weddings, settling them off with a house or a business – the Indian parents are mostly found without a proper and well managed plan of retirement.

The reason why having a retirement plan has become so significant is our expenditures are on arise, the lifestyles have evolved and therefore the expenses related to lifestyles. Our generations spend a lot on gadgets, some of these were not even in the market until then. When you are young, you ought to spend a major chunk on the extracurricular activities of your children, you also invest hugely in aesthetics – be it for your car, room, office or home. Some of these expenses were almost non-existent 2-3 decades ago when our parents should have planned for their retirement.

All of the above reasons make it all the more significant to Invest or to Help your Parents Save for Retirement. Here’s how we can do it:

Start now!

Do not wait or contemplate about the timing. Start the conversation now and ask your parents if they have any plan on how to handle any expensive emergencies or explain how this conversation can really help.

Tip: Try and do it for both sets of parents to avoid any sort of resentment between you & your partner.

Prepare & Have an Agenda for Conversation

Like our parents, we also sometimes overextend our planning and lose out on other financial goals. Set aside a clear agenda and see if theirs and your emergency fund is enough. The basics of this conversation should be to know the following:

Long term care insurance – What policies do they have for health, pension etc.

Retirement Funds – Know if they have invested in any long term ELSS, maintaining any liquid funds etc.

Mortgages – Check on their mortgages. It is very important that they have all mortgage free assets as it provides your parents with peace of mind.

Debt – Suggest them to keep a check on debts be it their credit cards, self-help groups or to any members in the family or friends.

Will and Estate Planning–The idea is not to grill your parents on what they plan to leave for you but it is to make sure that they have properly planned for their estate. The simplest and very basic check for the parents in India would be, Is your Mom a nominee on your Dad’s bank account and vice versa?

Check all the Documents – See and make sure that all their documents are in good state, well organized and arranged.

It is understood that the above mentioned things make it very uncomfortable topics to be discussed with parents especially in our country but you can make them understand that it imperative for them to better enjoy their retired life.

Why it is so significant?

Remember, your parents might have been saving for retirement ever since your birth and may be a little after that but the chances are that they must have exhausted a part of all of it in your educational spend, an extra course that you were keen on taking or may be the destination wedding that had become your dream of life. They did so to give you the best and most of the parents want to manage their own expenses always.

Through this you can help them set their Retirement Goals upright and guide them to plan their retired life better. And in case, you find it all the more difficult – speak to your Financial Advisor and seek help as to How you can help your parents through their retired life?

Contact us for any queries or feel free to write us, contact@sbsfin.com

Retirement Planning for the Millennials

 

Many a times, financial advisors and experts have been found discussing about the rules of retirement. We at SBS Fin, are of firm belief that any person who touches the age of 33 must start planning for retirement and that too above & beyond the regular investments of annual financial goals like Travel, Health, Education, Real Estate etc.

How important is Financial Independence past Retirement?

Financial independence affirms a sense of freedom and individuality where each and every person, regardless of their age, is capable of generating ample income for paying forthcoming expenses. This passive income can be retrieved through savings or investment, real estate assets or general royalties from performed work in the past.

It is important that you start varying your options and integrating your savings and investments by the right time for a better future with financial independence and security.

Also, one should always participate in retirement plans which are employee-sponsored. There are many employers who contribute to the company-sponsored retirement matching plans by matching the employees’ contribution. It is important that you follow a retirement strategy and function organized and formulated.

The ideal age of looking forward to a retirement would be around 65 years of age, which is why it is important that you, as an individual, boost-start the establishment of your financial independence by your mid 30s-40s. Financially independent would sum up an individual to be completely mortgage-free, debt-free, liability-free, with sufficiently accumulated capital that would enable the person to live passively off interest and dividends and secure by all means.

 

Five Reasons to pursue Financial Independence:

 1. Freedom of Choice

Each individual works for a living. By pursuing this method, a person will attain the freedom to live and work on their own terms in the time-phase of retirement. You reach a point in life where you will choose to work than it being a must, financially. This sense of certainty arises with financial independence, which makes it the primary reason to pursue financial independence.

2. Unemployment Insurance

This is one of the key adjuncts of financial independence. If you choose to neglect the benefits of financial independence, then you choose to be dependent on monthly paychecks, causing you to be caught in the vicious circle of insecurity that can make you prone to losing your job, being at mercy of those who trifle out instead of minimal, sufficient amounts of employment insurance, helping you jump all the hoops and grab loopholes.

3. Expenditure & Investments

Whilst adopting the procedures of financial independence, you will not have to curb your expenditure with accordance to your priorities. Extra cash flow can always be invested and spent on increasing productivity. You can invest this cash as capital at risk or give aplenty of time to foster a business idea that helps you propagate financial returns in the forthcoming future.

4. Peace of Mind

Security about the future results in incarnate peace of mind. One can spend hearty time with family, introspect and pursue their passion freely. Be in a semi-retirement phase or a retirement phase, this would help you to work with all your heart and mind. You can run small errands at your own time with no stress on your shoulders.

5. Taxes don’t appear as vexatious

As a worthy and active citizen of the country, you should be aware that tax matters a lot, irrespective of varying incomes. The thin line between being depravedly rich to financially stable differs with the concept of how and where you’re holding your assets. For example, individuals with little wealth generate a good amount of taxable income while those who pursue financial independence generate abeyant gains in the form of real-estate appreciation, hidden capital gains and profits made through tax-free accounts.

 

How to Approach for a Retirement Planning?

Maintain an Emergency Reserve – It is significant to maintain an emergency reserve in the ever vulnerable life situations. One must always have three to six months’ worth of living expenses in the bank account.

Get rid of Debts – One must borrow for Education as you get a tax benefit but at the same time, the debts which our generation and millennials are getting used to of in the form of credit cards must be paid off at the earliest.

Keep aside 10% of your income for Retirement, yes on monthly basis. You can also start and SIP in a mutual fund.

Allow you investments to grow in direct proportion to your income growth. Also keep the income boosters such as tax refund, bonus income, long due payouts as the annual bonus of your investment income.

The thumb rule of investments in retirement planning should be, 100- age = Your allocation to stocks. We can say, at the age of 30 – one should keep 70% of your portfolio in equities. Once retired, you can limit your exposure to stocks to not more than 25-30% of your portfolio.

You must save 25 times your annual expense. Instantly buy a health insurance plan as the difficulty of making such a purchase increases once you are older.

Allocate, Diversify and Rebalance – If you are a risk-taking regular investor, you can also enjoy go with the strategy of allocation with diversification. You need to be vigilant on quarterly basis.

Retirement Planning Habits in a Nutshell:

  • One NEVER stops investing for retirement.
  • In retired life, you are likely to spend the same amount as today.
  • The best time to start saving and investing for retirement is with your first job or first post-high-school or post-college job. But if you haven’t started yet, then right now is the right time.
  • The Retirement Corpus shall not be used for things other than your retirement.
  • For the retirement accounts – Set it and forget it.

 Henceforth, it is important that you realize that there is simply nobody who would guarantee you the security, financial independence and lifestyle you want at your millennial stage of life, except yourself.

Contact us for  any queries regarding  Financial Planning for Millennials feel free to write us, contact@sbsfin.com

Five Essential Habits to Reach Financial Independence

In broad prospective financial independence means having sufficient personal wealth or assets to live on without having to work constantly for basic necessities. And a financially independent person finds out ways to grow and generate enough income to cover all expenses. Basically generating an income which is greater than the expenses.
Over the years, I have seen people achieving this either through saving and investing or by building successful businesses that can generate income without daily supervision. There could be many other ways to reach financial independence but overall it’s actually a matter of taking the right steps early in life to develop sound financial habits. In this post we will discuss some wealth generating habits that can make financial independence a part of your future.

Say No To Consumer Debt – Interest Rates Shouldn’t Interest You

Credit cards, payday or car loans are such bugs which can bite someone to make him indebted for the rest of his life. You may be thinking it’s the best way to buy consumable goods and carry a balance but in short you are enriching the banks and not yourself. So the foremost step towards financial independence is to get rid of high interest debts as let your money work for you instead of the banks. But having said that there are few debts that help you make money. For instance education loans which eventually pay you back much bigger dividends in higher earning potential over the years. The same applies for real estate. If the profit gained by utilizing the bank’s money is greater than the interest you are paying to use the money, it’s a win-win for you.

Save First. Spend Later – Stitch In Time, Saves Nine, Remember!

To reach financial independence you will need to put your savings account in the picture first. You need to save a decent portion of your salary or income way before you set out for paying your utility bills, rent or others.  You can easily set up an auto-pay direct debit into some kind of savings vehicle, so that it automatically finds its way before reaching your hands. Saving money is an essential habit to have for achieving financial independence. The earlier you begin, the less you’ll miss the money. The goal is to live with what’s left after saving – a great way to build wealth.

Invest In Rising Assets – Don’t Let It Be a Liability

Once you start saving you can’t just keep it hanging. You will have to invest the money in assets which in turn will generate your income. For instance you can invest in a property instead of giving out your money in rent or invest in mutual fund or in stock market which has a good long-term track record, and many investors build wealth that way. You don’t need much to get started – but you do need to start. And when you do simply focus on buying assets that will make you money.

AT SBS Financial Advisory we help our customers in mutual fund distribution and management with proper guidance and personalized investment solutions.

Follow a Budget – Or Debt Will Follow You

You need to have a budget for every penny you pay. Keep your expenses down to a level where you aren’t broke every month. Most people are shocked when they document where their money goes each month. You need to limit your purchases on perky items and learn to set aside a certain percent of your income for saving and investing as discussed before. You can even utilize online tools (very common these days) that link with your bank account and help yourself with budgeting. The ultimate mantra is to live within your means and save the rest to build up your long-term economic equity.

At SBS Financial advisory, we believe each customer is unique and so is their need. So we customize investment plans based on the investment goals set by them and help them attain the same.

Keep Investing – The Motto Is To Grow More

Investing over a long term will gradually bring you close to your goals. You will have to keep investing in the market irrespective of the good and bad years. It’s much easier to keep buying no matter what the market is doing. That way you’re accumulating wealth over the long haul.

Financial independence is a long-term goal, you can’t achieve it over-night. We all need to take a long-term perspective and not give up even when things look tough. But like all great journeys, patience, perseverance and the right steps will take you to your goal in no time.

Contact us for  any queries regarding Financial Independence   feel free to write us, contact@sbsfin.com