SAVE TAX AND DESTROY WEALTH
Printed From: The Equity Desk
Category: Personal Finance & Lifestyle-Strategies & problems
Forum Name: Personal Finance - Startegies
Forum Discription: Discuss startegies for tax planning, insurance coverage, Retirement planning, Home loans car purchases or any thing that affects personal finance.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=874
Printed Date: 04/May/2025 at 11:35pm
Topic: SAVE TAX AND DESTROY WEALTH
Posted By: basant
Subject: SAVE TAX AND DESTROY WEALTH
Date Posted: 26/Apr/2007 at 1:52pm
SAVE TAX AND DESTROY WEALTH
Tax savings Instruments
Ř Additional taxable Income Rs 60,000 Ř Rate of return 8.5% Ř Total amount after 15 years compounded at 8.5% Rs 2,03,984 Non- Tax savings Instruments
Ř Additional taxable Income Rs 60,000 Ř Tax at 30% of Total Income Rs 18,000 Ř Net income after tax Rs 42,000 Ř Rate of return 15% Ř Total amount after 15 years compounded at 15% = Rs 3,41,756 Net wealth destroyed Ř Rs 3,41,756 -- Rs 2,03,984 = Rs 1,37,720
ELSS is the best option it saves tax and is an equity instrument.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Replies:
Posted By: tigershark
Date Posted: 26/Apr/2007 at 3:49pm
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thks that is really an eyeopener! ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: drpatils
Date Posted: 26/Apr/2007 at 4:23pm
hmmmm.....make me repent for all these yrs waste of tax saving...Basant Ji aap mujhe 10 sal pehle kyon nahi mile?God's Master plan indeed.He wants me to accumulate wealth now onwards. ------------- The journey of thousand mile begins with single step-Chinese Proverb |
Posted By: kishan
Date Posted: 26/Apr/2007 at 5:26pm
Wow, looks like you have answered my doubt 
Thanks for that. Shall act on my ULIP's right away
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Posted By: basant
Date Posted: 26/Apr/2007 at 5:44pm
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You all would be surprised to know that in the last 5 years My tax liability has been less then .01% of my income!!!Howeveer p[eople having slalary income cannot practice this as they are most severely taxed in our system.
Not that I steal from the Govt. but I try investing for long term gains and if at all there is a liability I pay it off rather then going the tax saving way!!!
This is how it works:
Suppose I have 10 shares of Tv18 at Rs 20 then if I feel like after one year I sell 1 share of Tv18 at Rs 200. This is a long term gain so does not attract tax.
If prices fall then I would shift from some other company back into Tv18 say at rs 160 - I keep doing a jig in the stocks that I own - sell a little Pantaloon and buy TV18 or vice versa so this new purchase would be at Rs 180 and if I want to sell again at rs 210 then the shares bought first would be taken into account that is the ones bought at Rs 20 - hence long term again after a year I can sell the Rs 180 stock also and still save tax.
This is another benefit of holding concentrated portfolios!!!
taxes and brokerage kill our portfolio just that we do not feel the pinch because they suck us in installements- each time a trade is done they are there for the taking. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kishan
Date Posted: 26/Apr/2007 at 5:59pm
| Well, we were convinced you do it best and you showed us with your stats ;) |
Posted By: omshivaya
Date Posted: 26/Apr/2007 at 6:49pm
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Yups, he is da man... ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: kulman
Date Posted: 06/Oct/2007 at 7:50am
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These things should be taught from school/college levels. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: equity analyst
Date Posted: 12/Oct/2007 at 9:02pm
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Excellent analysis Sir. One can get easily convinced by it. for eg If we can wait for 15 years when depositing money in PPF, then why not wait in ELSS.
------------- "Markets are the places where two types of people meet up in the morning: those with experience and those with money. Towards the end of the day, they exchange their assets and go home." |
Posted By: kulman
Date Posted: 12/Oct/2007 at 9:42am
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Interesting article from http://www.dnaindia.com/report.asp?NewsID=1126812 - Dna Money....excerpts...
http://www.dnaindia.com/report.asp?NewsID=1126812 - Capital safety is just a mirage
How often have you heard of people investing their entire retirement-oriented savings in PPF, endowments or NSC on the sole ground that these are safe avenues, even though their returns may not even beat inflation? Often enough for sure, for that is the popular practice. But, is capital safety really that important, considering one has a long investment horizon, and must safety be equated with low-interest-earning instruments? Short-term capital
Here's a deal - suppose I give you Rs 10,000 in cash and ask you to keep it 'safe' for a week. What would you do with the money? Most people would either keep it in their safe-locker at home, or would deposit it in a bank for safety. The more savvy ones would put it in a liquid fund and hope to make a small cut in the process. But, not many would put it in a 'risky' asset like shares. Thus, the factor that tilts the balance towards debt or cash holding is the lack of materiality of the return, and the short nature of the time duration. Long-term capital Now, let us enter into a different deal. I give you Rs 10,000 in cash and ask you to keep it 'safe' for 25 years. ......you would also realise that Rs 10,000 is worth much more today, and you could put it to a lot of productive use. In fact, you would be foolish to not make productive use of this money for 25 long years and only end up with the same principal at the end of it. Thus, 'safety' in the context of a long time horizon is about generating a reasonable return on the sum invested, not about retaining the principal alone. 'Safety' is about ensuring that the money invested today at least provides the same (if not more, to compensate for delay in spending the person agrees to undertake) ability to buy goods and services. Investors sing different tunes Yet, several investors fail to apply thought to this principle of safety. Safety, to them, is about retention of principal at all costs, irrespective of the time horizon. Never mind that their Rs 10,000 saved today would mean next to nothing when they retire 25 years hence. In the process, they lose out on the productive capacity of this amount; which in most cases, thanks to the power of compounding, is a return of 800-1,000% over the 25-year period. The fixation with low-interest-earning avenue like PPF, LIC endowment and NSC is really a hangover of the past decades, when investors had few other options, and when PPF and fixed deposit interest rates were 12% or higher. Risk-taking is no longer an elitist luxury Today, the situation is different. With good regulatory oversight, we now have a fairly well-developed equity and mutual fund market. As with all developed markets, there is certainly market risk, but little chance of getting swindled in the process of investing. Investor education literature, too, is plentiful and readily available. Given a nominal GDP growth of 12% or greater forecast for the next few decades, it is not inconceivable that the markets grow by at least this rate over the medium to long term. Anyone growing his/her asset base by less than this in the earning period is, therefore, likely to get left behind in the race against, among other things, inflation. The capital you have today is anyway going to be immaterial by the time you retire.
Unless you take calculated risks in today's flourishing market, you are likely to be left short on your returns in future years, as the power of compounding works against you. The author is a certified financial planner and a MBA from IIM, Ahmedabad. He is a director at PARK Financial Advisors ( http://www.parkfinadvisors.com - www.parkfinadvisors.com ), Mumbai and can be reached at mailto:[email protected] - [email protected]
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: catcall
Date Posted: 14/Oct/2007 at 5:00pm
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The fixation with low-interest-earning avenue like PPF, LIC endowment and NSC is really a hangover of the past decades, when investors had few other options, and when PPF and fixed deposit interest rates were 12% or higher.
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Interesting article indeed, there is however an extension to this thought of how fixation to a paricular mindset, and resistance to change effects investors's inability to change over from what they now realise to be investment mistakes to better stocks... almost like people suffering from OCD and cannot throw away the junk in their house (Sigmond Freud calls such people Anal Retentive)..... people tend to often hold on to these junk stocks with a "kabhi na kabhi to badhega" mindset...... ------------- There are two times in a man's life when he should not speculate-when he can't afford it and when he can-Happy investing! |
Posted By: kulman
Date Posted: 14/Oct/2007 at 5:50pm
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Sigmond Freud calls such people Anal Retentive
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Freud was an interesting personality, wasn't he?
While on the subject, today Sunday Times carries nice http://timesofindia.indiatimes.com/Opinion/Sunday_Specials/PPF_vs_Equity/articleshow/2456193.cms - write up on
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Posted By: omshivaya
Date Posted: 14/Oct/2007 at 6:06pm
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Yes, read that one today on Sunday TOI. Nice! ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: aloksahi1971
Date Posted: 14/Oct/2007 at 7:38pm
| Just for security you must know that PPF is the only account that cannot be attached in court cases. Debt does seem a bad word in abull market but then stability and asset alocation can be done with this.PPF also has a loan clause and this can be used by the more interprising of us to leverage our positions. |
Posted By: basant
Date Posted: 14/Oct/2007 at 7:51pm
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RJ has Rs 40 lacs ina PPF account. I remember him making this disclosure ona Tv show. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 14/Oct/2007 at 7:52pm
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Alok jee You are right.
The asset allocation balance needs to be as per individual risk appetite, age, family liabilities, profile, ambitions and above all the factor known as 'good peaceful sleep' factor.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: rider.royal
Date Posted: 25/Nov/2007 at 6:56am
Here since 2 months and i found this thread today by chance. Amount of knowledge I have found is priceless. TED is my bookmark...  JUst one question basantji... can you elaborate what you mentioned in this post? I cudn't get it.. Does this mean that If i hold few shares of a company for long term but sell and purchase few others of same company, then my first purchase date of said company will be taken as calculating date for tax purposes?? |
Posted By: basant
Date Posted: 25/Nov/2007 at 8:00am
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Yes, tax departments follow a first in first out method but you need to keep rotating in the same stocks once you have held them for 12 months.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: rider.royal
Date Posted: 21/Dec/2007 at 1:02pm
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Sorry for delay in reply basantji, thanks for timely reply (and sorry again for my untimely thanks.) Will talk to my friend doing his CA how exactly it is done, its easy to ask him questions when i know what i am asking about .. |
Posted By: tarkeshwar
Date Posted: 20/Mar/2008 at 5:42pm
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How do you calculate your short terms taxes? I mean - calculating in First-In-First-Out way matching sell quantities with buys are not very intuitive or easy to do it with paper and pen? Is there something in spreadsheet etc.? I have written a little software code for doing this. Was wondering if other ppl do this by hand. In that case, I will put this code someplace to share. |
Posted By: basant
Date Posted: 20/Mar/2008 at 6:15pm
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Techies always make things easier. Don't they. I have outsourced the accounting job to a CA to whom I send all contract notes/bank statements etc and then he does the whole thing.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: PrashantS
Date Posted: 20/Mar/2008 at 7:32pm
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well i also do things plus trying to write a software which has everything a person needs to search before investing ........the news the accounting , growth ...various ratios ...it is fun coz everything can been done with a click of a button ..... the use of technology will increase a lot in the coming days . |
Posted By: gopal
Date Posted: 20/Mar/2008 at 8:43pm
Bhai you can use MONEY CONTROL, everytime you buy make entries accordingly and everytime you sell make the entry in it accordingly ..... I have instructed my broker that every time he sends me the contract note for purchase or sell .... he should send without fail a second sheet also giving the final rates with calculation of brokerage, service tax, STT, transaction charges and stamp duty .....
Then simply click on money control to know your short term or long term gains .....
------------- Women are like the stock market Coz they're irrational n can bankrupt u if u're not careful |
Posted By: abhinavkapoor9
Date Posted: 29/Sep/2010 at 5:44pm
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Dear Basantji
I am think of withdrawing money from my PF account (which will not attract any TDS since I have completed 5 years of service) and investing in instruments like Stocks/MFs/SIP etc. which yields higher returns.
Is is advisable to do so?
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Posted By: kmp_saij
Date Posted: 29/Sep/2010 at 6:00pm
Is there any s/w which calculates short term gain and long term gain if we provide data in excel format.... or any website which do this thing...?? ------------- Own whatever’s feared, shun whatever’s beloved. |