Monthly Archives: May 2024

Setting financial goals is crucial for every family, especially in a dynamic and diverse country like India. Here’s a guide to help Indian families plan their financial future effectively.

1. Setting Clear Financial Goals

• Short-term Goals: These include creating an emergency fund, paying off minor debts, and saving for upcoming expenses like vacations or festivals.
• Medium-term Goals: These might involve saving for a down payment on a house, buying a car, or funding children’s education.
• Long-term Goals: These are typically retirement planning, buying a second home, or creating a substantial investment portfolio.

2. Creating a Budget

• Track Income and Expenses: Start by listing all sources of income and tracking monthly expenses. This helps in understanding spending patterns.
• Categorize Expenses: Divide expenses into fixed (rent, utilities) and variable (entertainment, dining out). This helps in identifying areas where you can cut costs.
• Set Limits: Allocate specific amounts for each category and stick to these limits to avoid overspending.

3. Investing Wisely

• Diversify Investments: Invest in a mix of assets like stocks, bonds, mutual funds, and real estate to spread risk.
• Start Early: The earlier you start investing, the more you benefit from compound interest.
• Seek Professional Advice: Consult a financial advisor to tailor an investment plan that suits your family’s needs and risk tolerance.

4. Building an Emergency Fund

• Save Regularly: Aim to save at least 3-6 months’ worth of living expenses in a liquid and easily accessible account.
• Use Wisely: Only use this fund for genuine emergencies like medical expenses or sudden job loss.

5. Insurance Coverage

• Life Insurance: Secure your family’s future with a comprehensive life insurance policy.
• Health Insurance: Opt for a health insurance plan that covers all family members and includes critical illness coverage.

6. Retirement Planning

• Pension Plans: Invest in pension plans or retirement funds that offer regular income post-retirement.
• Health Insurance: Ensure you have adequate health insurance to cover medical expenses in old age.

7. Planning for Children’s Education

• Start Early: Begin saving for your child’s education as soon as possible. Consider education-specific savings plans or mutual funds.
• Explore Scholarships: Research scholarships and grants that can help reduce the financial burden.

8. Regular Financial Reviews

• Annual Check-ups: Review your financial plan annually to ensure it aligns with your goals and make adjustments as needed.
• Stay Informed: Keep up with changes in financial markets and adjust your investments accordingly.

By setting clear financial goals and following a disciplined approach, Indian families can secure their financial future and achieve their dreams. Remember, the key is to start early, stay consistent, and seek professional advice from Adorn Solutions for well-planned individually or in group for best and effective mode.

Under the Income-Tax Act of 1961, an individual resident aged 60 years or above but below 80 years at any point during the previous year qualifies as a Senior Citizen for Income Tax purposes. An individual resident who is 80 years or older during the previous year is categorized as a Super Senior Citizen.
For the fiscal year 2023-24, investments for tax savings made by March 31, 2024, will be eligible for income tax deductions. The new tax regime does not include benefits such as those under Section 80C for medical insurance premiums and interest income. However, the old regime still continues to provide benefits under various sections.

The taxable income for senior citizens is subject to specific tax rules and exemptions. The taxable income is calculated for senior citizens as follows:

1. Income Sources: Consider all sources of income, including salary, pension, interest income from savings accounts, fixed deposits, rent from property, capital gains from investments, etc.
2. Exemptions and Deductions: Senior citizens are eligible for higher deduction limits as well exemption benefits compared to other taxpayers. Accordingly, senior citizens would be required to take into consideration such higher limits for deductions and exemptions while calculating their taxable income.

For example, senior citizens can avail themselves of additional deductions such as Section 80D for health insurance premiums, Section 80TTB for interest income from deposits, and the benefits of deduction under Section 80C for investments in the Senior Citizens Savings Scheme, among others.

3. Calculation of Taxable Income: By subtracting the eligible exemptions and deductions from the total income, we will get the taxable income. For example, if a senior citizen has a total income of Rs 10,00,000, and avails of the full benefit of the basic exemption limit of Rs 3,00,000 and deductions under various sections amounting to Rs 50,000, the taxable income would be Rs 6,50,000.
4. Tax Calculation: Once the taxable income is determined, apply the applicable tax rates to calculate the tax liability. It is pertinent to note that senior citizens and super senior citizens enjoy a higher basic exemption limit of Rs 3 lakhs and Rs 5 lakhs, respectively.

However, no such benefit of higher basic exemption limit is available under the new tax regime. The applicable tax rates for Financial Year 2023-24 under the old tax regime and new tax regime (default) are as follows:

Income Slabs	Old Tax Regime		Income Slabs	New Tax Regime (Default tax regime)
	Tax Rate for Senior Citizens (60-80 years)	Tax Rate for Super Senior Citizens (80 years and above)		Tax Rate for Senior Citizens & Super Senior Citizens
Up to Rs 3,00,000	Nil	Nil	Up to Rs 3,00,000	Nil
Rs3,00,001 to Rs 5,00,000	5%	Nil	Rs3,00,001 to Rs 6,00,000	5%
Rs 5,00,001 to Rs 10,00,000	20%	20%	Rs 6,00,001 to Rs 9,00,000	10%
Above Rs 10,00,000	30%	30%	Rs 9,00,001 to Rs 12,00,000	15%
			Rs 12,00,001 to Rs 15,00,000	20%
			Above Rs 15,00,000	30%

5. Rebate u/s 87A: Calculate the applicable rebate under Section 87A. Senior citizens would be eligible for a rebate under Section 87A if their total income is up to a specified limit (Rs. 5 lakhs under the old tax regime and Rs. 7 lakhs under the new tax regime). Such rebate would be lower of the actual tax amount or Rs. 12,500 (enhanced to Rs. 25,000 in case of new tax regime).
6. Surcharge & Health and Education Cess: The applicable surcharge, if any and health and education cess @ 4% would be computed to arrive at the final tax liability. In case there are any interest consequences or penalty/ late filing fees, the same would be added to the tax liability amount.

Taxability of Pension

The taxability of Pension would depend upon the nature of Pension as follows:

Government Pensions: Income from a Commuted Pension, which is received as a lump sum, is fully exempt and not subject to tax rates. However, Uncommuted Pension income is taxable under the category of “Salaries” and falls under the applicable marginal tax slab rates.

Income from a commuted pension received from private companies is taxable under the category “Salaries” and is subject to the prevailing tax rates. However, an exemption under section 10(10A) is available as follows:

One-third of the commuted pension amount, which the employee would have received if he had commuted the entire pension, is exempt if the employee also receives gratuity.

One-half of the commuted pension amount is exempt if the employee has not received any gratuity.

Income from an uncommuted pension is taxable under “Salaries” and is subject to the applicable marginal tax rates.

Tax regimes for seniors with NPS

Old tax regime allows various deductions and exemptions which otherwise may not be allowed under the new tax regime u/s 115BAC. If an individual follows old tax regime, then he is eligible for the following deductions pertaining to the pension income. A taxpayer derives the following benefits from NPS:

Tax benefits on Partial withdrawal from NPS account

Taxpayer would be eligible for tax exemption on the amount withdrawn upto 25% of the self-contribution, on such terms and conditions as may be specified by PFRDA u/s 10(12B).

Tax benefit on Lumpsum withdrawal

Taxpayer would be eligible for tax exemption on lumpsum withdrawal of 60% of accumulated pension wealth upon attaining the age of 60 or superannuation under section 10(12A).