How to navigate tax changes to protect your long-term money goals

Ways to Handle Income Tax Reforms to Secure Long term Financial Objectives!

Taxes, as well as increases in tax rates, are inevitable. Changes in tax rates will wreak havoc on your long-term savings goals. Following demands from the banking industry for tax parity between bank fixed deposits (FDs) and debt mutual funds, the holding period for long-term capital gains for non-equity funds was increased from 12 to 36 months.

After mutual funds demanded a level playing field, the tax was imposed on ULIPs with annual contributions of more than Rs 2.5 lakh.

There is no tax on the death benefit of insurance plans in India, as is the case across the world, but the government has recently levied a tax on ULIPs with annual maturity premiums of more than Rs 2.5 lakh. Experts say it’s not out of the question that traditional plans will be added to the list in the coming years. Banks continue to campaign for favourable conditions in the form of indexation incentives for debt funds. Since capital gains are expected to be taxed on the wealthy, long-term capital gains on all goods will rise in the future.

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When it comes to implementing tax reforms, the grandfathering clause comes to the rescue. Long Term Capital Gains (LTCG) of 10% on equities is only applicable to investments made after January 31, 2018. From April 1, 2021, the new tax on EPF interest will be limited to amounts invested over Rs 2.5 lakh per annum. Additionally, the amount invested in ULIPs prior to the deadline would be exempt from this levy. There have been instances where grandfathering has been disregarded. The concept of a long-term debt fund, for example, was modified from one year to three years without grandfathering. As a result, investors who invested in a one-year debt FMP were taxed.

Long-Term Financial Objectives

What goals come to mind when you think of long-term goals or goals that are significant but not urgent in your life? Here are a few examples that you may find useful:

  • Investing in your first home (home-ownership)
  • The aim of a child’s higher education
  • The aim of a child’s marriage
  • Retirement aspiration

The retirement target remains an exception to the investment planning approach, despite all the targets you might add to the list. As a result, we should make an effort to keep retirement planning apart from other objectives.

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Long-Term Financial Goals Planning

Before we go into how to use ULIPs, you should have a firm grasp on your financial objectives. Defining your target in the following terms is the easiest way to create a strong vision for it:

  • The time it will take you to reach your target is estimated.
  • The goal’s current cost as well as its potential benefit
  • You can use your current savings to help you achieve this aim.
  • For example, if your child’s higher education target is to accumulate Rs. 50 lakh in 15 years, with a current allocation of Rs. 1 lakh, you might describe it as – Accumulate Rs. 50 lakh in 15 years, with a current allocation of Rs. 1 lakh.

Due to the government’s fiscal stress, it is highly likely that tax rates will be revised, and the latter will want to include more investment goods in the taxation ambit.

Income tax laws have been relaxed, allowing you to pay Rs 2 lakh or more in cash for Covid care.

Income tax rules eased, now you can pay Rs 2 lakh+ in cash for Covid treatment

The government announced on Friday that hospitals, pharmacies, and COVID-19 care centres will accept cash payments of more than Rs 2 lakh from patients or their family members until May 31. The Central Board of Direct Taxes (CBDT) released a notification stating that such entities would be needed to obtain the patient’s and payee’s PAN or Aadhaar numbers, as well as their relationship.

“The Central Government hereby specifies Hospitals, Dispensaries, Nursing Homes, Covid Care Centres, or similar other medical facilities providing Covid treatment to patients for the purpose of Section 269ST of the Income-tax Act, 1961 for payment received in cash between April 1, 2021, and May 31, 2021, on obtaining the patient’s PAN or AADHAAR and the relationship between the patient and the payee and the relationship between the patient and the payee and the relationship between the patient and the pay

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Shailesh Kumar, a partner at Nangia & Co LLP, said that in the current situation, various hospitals and nursing homes have demanded payment in cash for COVID-19 care. Section 269ST of the Income Tax Act, however, prohibits cash payments in excess of Rs 2 lakh.

“In light of the exceptional pandemic situation, in which saving people’s lives is paramount, and in light of people’s real suffering, the government has released the current notification authorising people to make cash payments for COVID care well beyond this cap.”

“The notice applies to all cash payments made on or after April 1, 2021, until May 31, 2021,” Kumar added.

COVID: A Rs 8 lakh crore package is needed to assist low-income groups, according to a survey.

  • 06 May 2021
  • Income Tax
  • Comments Off on COVID: A Rs 8 lakh crore package is needed to assist low-income groups, according to a survey.

According to a study released on Wednesday by Azim Premji University, the government would need to implement a relief package worth Rs 8 lakh crore to alleviate the economic difficulties faced by lower-income groups as a result of COVID-19’s economic effect. Consumer Pyramids Household Survey, Azim Premji Foundation, and many other civil society organisations contributed to the study.

According to estimates based on CMIE-CPHS data, due to the effect of COVID-19 on the economy, about 23 crore people are projected to have dropped below the national minimum wage poverty line, and around 1.5 crore jobs are expected to remain jobless by the end of 2020, according to the study titled State of the Work 2021.

Between late 2019 and late 2020, nearly half of formal salaried employees migrated into informal jobs, either as self-employed (30%), casual wage (10%), or informal salaried (9%) workers, with a corresponding drop in their wages.

According to the survey, the poorest 20% of households lost their entire income in April and May, while the wealthier households lost less than a quarter of their pre-pandemic incomes.

The Azim Premji University report released on Wednesday recommended steps to alleviate the misery of people affected by COVID-19, which would cost the government an additional Rs 8 lakh crore.

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“Between this year and last, the policies we suggest would push the government of India’s spending to 4.5 percent of GDP, or around Rs 8 lakh crore. We believe that this is not even remotely comparable to what other countries have accomplished, but it is precisely what India requires “Amit Basole, an associate professor of economics at Azim Premji University, said during the release of the study.

According to the survey, approximately 30% of citizens in some states did not receive rations under the Pradhan Mantri Gareeb Kalyan Yojana, which requires further investigation.

“We found that about 30% of PDS priority ration cardholders did not receive the extra grains, at least in these two states (Karnataka and Rajasthan), and this number is broadly similar in a few other states that we have done as part of our other COVID livelihood survey,” Basole said.

The public distribution system, according to the study, has a broader scope than the Jan Dhan Yojana, and free rations under the PDS should be extended beyond June, at least until the end of 2021. In Karnataka and Rajasthan, 60% of women with Jan Dhan accounts received one or more transfers, 30% did not receive any transfers, and 10% were unaware of the fund status in their account, according to the study.

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According to the university study, a three-month cash transfer of Rs 5,000 should be made to as many marginalised households as possible using existing digital infrastructure, such as Jan Dhan accounts.

According to the study, the programme budget must be increased to at least Rs 1.75 lakh crore.

It also suggests launching a pilot urban employment programme in the worst-affected districts, increasing the central contribution in old-age pensions to at least Rs 500, providing a COVID hardship allowance of Rs 30,000 to 25 lakh Anganwadi and ASHA workers, and automatically enrolling all MGNREGA workers who do construction work as registered workers

“Various organisations, including the Azim Premji Foundation and Azim Premji Philanthropic Programs, the Initiative for What Works to Advance Women and Girls in the Economy, and several civil society organisations, have all contributed to getting the knowledge that we have been able to gather,” Basole said.