Capital Float

September 5, 2020

Tax Computation – 2 regimes

India’s Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman, on February 1, 2020 tabled the Union Budget for the FY 2020-21 in the Lok Sabha. She announced a new income tax regime in addition to the existing one, to provide relief to individual taxpayers.

However, this new regime is optional and the taxpayers can choose between the old and the new, basis their suitability. The new regime has foregone certain deductions and exemptions. The tax rates have been reduced, but taxpayers will have to forego exemptions when choosing the new tax regime.

Let us take a look at the tax rates of individuals whose age is less than 60 years under both the regimes:

Income tax slabs	Tax rate (Old Regime)	Tax rate (New Regime)
Up to 2.5 lakhs	Nil	Nil
2.5-5 lakhs	5%	5%
5-7.5 lakhs	20%	10%
7.5-10 lakhs	20%	15%
10-12.5 lakhs	30%	20%
12.5-15 lakhs	30%	25%
Above 15 lakhs	30%	30%

From the above table, it is evident that the tax rates are lower in the new regime than the old regime. But, there is a list of exemptions and deductions that has to be conceded by the taxpayers. This list includes but is not limited to the following:

i) Leave Travel Allowance (LTA)

ii) Conveyance

iii) House Rent Allowance (HRA)

iv) Uniform Allowance

v) Helper allowance

vi) Professional tax

vii) Standard deduction

viii) Other special allowances [Section 10(14)]

ix) Interest on housing loan (Section 24) on self occupied property

x) Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJA)

Savings calculation based on income

PARTICULARS	Old Tax Regime(Rs.)
Gross Income	15,00,000
Less: Deductions-
U/S 80C (Investment in PPF)	1,50,000
U/S 80D (Medical Insurance – Self, spouse, children)	25,000
U/S 80TTA (Interest Income from Savings account on a bank)	10,000
Taxable Income	13,15,000

TAX ON TAXABLE INCOME (OLD TAX SLAB)	(Rs.)	(Rs.)
At normal rate, on the income of Rs. 13,15,000:
Up to 2.5 lakhs	Nil
2.5-5 lakhs @5%	12,500
5-7.5 lakhs @20%	50,000
7.5-10 lakhs @20%	50,000
10-12.5 lakhs @30%	75,000
12.5-13.15 lakhs @30%	19,500
Total		2,07,000
Add: Cess @4% on Rs. 2,07,000		8,280
Tax Liability		2,15,280

From the above illustration, it is evident that taxpayers can reduce their taxable income by investing in tax saving instruments such as Provident Fund, Medical Insurance, etc. that appear as deductions under section 80C to 80U of the Income Tax Act, 1961.

PARTICULARS	New Tax Regime (Rs.)
Gross Income	15,00,000
Less: Deductions	Nil
Taxable Income	15,00,000

TAX ON TAXABLE INCOME (NEW TAX SLAB)	(Rs.)	(Rs.)
At normal rate, on the income of Rs. 15,00,000:
Up to 2.5 lakhs	Nil
2.5-5 lakhs @5%	12,500
5-7.5 lakhs @10%	25,000
7.5-10 lakhs @15%	37,500
10-12.5 lakhs @20%	50,000
12.5-15 lakhs @25%	62,500
Total		1,87,500
Add: Cess @4% on Rs. 1,87,500		7,500
Tax Liability		1,95,000

From the above illustration, having regard to the income level and the deductions being claimed by the taxpayer, it is possible that taxpayers can save money because of the low tax rates of the new regime, however the same needs to be evaluated on a case-to-case basis.

Tax rates under both the regimes for senior citizens

Tax rates for individuals whose age is 60 years or more but less than 80 years (Senior citizens):

Income tax slabs	Tax rate (Old Regime)	Tax rate (New Regime)
Up to 2.5 lakhs	Nil	Nil
2.5-3 lakhs	Nil	5%
3-5 lakhs	5%	5%
5-7.5 lakhs	20%	10%
7.5-10 lakhs	20%	15%
10-12.5 lakhs	30%	20%
12.5-15 lakhs	30%	25%
Above 15 lakhs	30%	30%

Tax rates for individuals whose age is 80 years or more (Super senior citizens):

Income tax slabs	Tax rate (Old Regime)	Tax rate (New Regime)
Up to 2.5 lakhs	Nil	Nil
2.5-5 lakhs	Nil	5%
5-7.5 lakhs	20%	10%
7.5-10 lakhs	20%	15%
10-12.5 lakhs	30%	20%
12.5-15 lakhs	30%	25%
Above 15 lakhs	30%	30%

The Government has offered two types of regimes for tax computations for individuals– the old and the new system. The taxpayers should scrutinize and study both systems before opting for one. They should take into consideration their salaries, expenditures, savings, etc to select the system that is suitable for them.

Disclaimer: This blog post is based on the provisions of the Finance Act,2020 as passed by the Parliament. Any subsequent notifications have not been factored into this post.

September 3, 2020

5 reasons to pay EMIs/Credit Card payments on time

Timely payment of EMIs or credit card bills is an essential aspect of taking charge of your financial life. Very often, people miss their bill payments because of their busy schedules. Making on-time bill payments a priority will lead to many benefits and will keep you out of debt traps.

Here are five reasons to pay your EMIs or credit card payments on time:

Good credit standing: Making timely payments of EMIs or credit card bills will ensure that your credit history remains positive. A good credit score makes you creditworthy. Having a high credit score will enable you to avail quick, formal finance to address your needs in the future.

Avail loans easily: If you have a high credit score, banks or financial institutions won’t hesitate to sanction your loans. You can even get higher loan amounts with low-interest rates.

Save on fines: You may avoid the penalty or late payment fee that banks charge by paying the EMIs or credit card bills on time. This helps avoid increasing your financial burden.

Save money: When you pay your EMIs or credit card bills on time, you save more as the interest on the outstanding amount does not increase. Lenders may charge high interest on delayed repayments.

Keep the monthly payments low: When you miss your bill payment for a month, you will need to pay it the following month. So, the amount to be paid in the next month will increase. Your next payment will include two installments and also the penalty charge, thereby compounding the owable amount.

Late payments can affect the financial position of people adversely. Make it a habit to pay all your dues on time. It will not only reduce your stress level but also help you avail of all the benefits mentioned above.

August 31, 2020

7 TIPS TO SAVE MONEY WHILE MANAGING PERSONAL FINANCES

In today’s world, saving money is of the utmost importance. If you are stressed about how to save money, then you are not the only one in this regard. Financial planning sounds easier than to practice. Even though it may be more exciting to spend money, you should try to practice saving for contingencies, as the future cannot be predicted and is uncertain.

Why is saving money essential?

Saving money can help you to become financially independent, providing you with security in the face of emergencies. Financial planning is necessary to set aside money for the family’s needs, such as the education of children, marriage expenses, healthcare expenses, planning for significant life events, retirement, etc. Saving money is an effective financial practice and a lifestyle choice with several proven benefits.

7 tips to save money

Though there are several ways to save money, you could consider implementing these seven tips:

Awareness: Being aware is one of the most critical factors. If you are aware of your finances and spending habits, you will be able to consciously set more money aside.

Prepare a budget: Begin by identifying your fixed and flexible expenses. This will help you evaluate how much of your corpus is depleted by unnecessary expenditure. After this, you can prepare a budget on a weekly or monthly basis by setting expenditure limits. This will help you pay your bills while simultaneously creating a pool of savings. You can make a budget on a weekly or monthly basis (based on your preference) with spending limits clearly defined. This budget may help you in saving extra money and restricting unnecessary expenditures.

Curb the spendthrift in you: Many people aren’t always conscious of how lavishly they spend money on unimportant things. Tracking expenses will help you maintain a close vigil on expenses and keep the spendthrift within under control.

Create an emergency fund: While facing emergencies, financial support in the form of insurance or loans may not be immediately available or they may not cover the need of the hour. At such times, savings come in handy to address the contingency. Therefore, make sure you set aside a fund for unforeseen expenses.

Sell things you no longer use: There are many things we buy, and after some time, do not use any more. These items can be sold to generate funds.

Savings calculator: Various types of savings calculators can be found online. These can be used to calculate the amount one can save over a given period of time. Using these calculators could encourage the habit of saving.

Switch to a personal finance money management app: Spends tracking and budgeting can be made easy with personal finance management apps. Walnut is one of the most loved and rated apps in the market with over 10 million downloads. Use this app to unlock the financial planner in you.

It is necessary to save money, as it provides security, financial independence, and reduces stress. Get started on your journey of personal financial planning to achieve peace of mind and money in the bank for when you need it.

August 31, 2020

WHAT DATES ARE CHANGED FOR ITR FILING THIS YEAR?

The COVID-19 pandemic is an unforeseen shock for the Indian economy. The country is expected to experience a lengthy economic recession with extended lockdowns in several states. Due to the Coronavirus outbreak, the global economic crisis, and subsequent instability in production and supply chains is also likely to be perpetuated.

How are the people of India affected?

Coronavirus has disrupted the lives of millions of Indians. Incomes have reduced and several people are experiencing a financial crunch, and as a result, it has become challenging for households as well. Many people have lost their jobs; many others are struggling to run their businesses.

Has the Government extended dates for filing ITR?

In the context of COVID-19 and to provide the people with immediate relief, the Government, in a press conference on May 13, 2020, has announced that the Income Tax Return (ITR) filing deadline has been extended to November 30, 2020 for the financial year 2019-20. Earlier, it was decided that the deadline would be 31^st July 2020. But, looking at the condition of the economy, the Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman decided to extend the date of the deadline for filing of ITR even further to November 30.

The Government has not only extended the date for ITR filing but has also extended the tax audit from September 30, 2020 to October 31, 2020. The TDS and TCS rates were reduced by 25% to provide more funds to the taxpayers for the period between 14 May to 31 March. Furthermore, in April 2020, they announced that the pending income tax refunds up to INR five lakhs would be released to the taxpayers to benefit them in these times of crisis.

The Government has authorized certain financial measures to increase the liquidity of tax paying individuals in India. Prudent decision-making and personal financial management will be key to ensuring that funds are available to run households for the foreseeable future and in case of contingencies.

August 28, 2020

HOW TO ENSURE CUSTOMER RELATIONS ARE MAINTAINED DURING COVID-19?

The world is not what it used to be since the Coronavirus outbreak. The virus has distorted the daily lives of millions of people across the globe. Social distancing, travel restrictions, work from home - are becoming the new normal. To gain customers' trust, companies should understand the buyers and their requirements in this unprecedented environment.

Why is maintaining customer relations essential?

Good customer relationships can help a company to grow. As with personal relationships, creating and nurturing customer relationships is essential as well. When organizations develop strong customer relationships, it can lead to loyal customers, positive word of mouth, and higher sales.

What are the customers expecting from you?

For your company’s long-term well-being, you should put the needs of your customers first. Customers will always prioritize their safety and that of their families. They expect businesses to understand their shopping style, keep essentials well-stocked, be treated as a valued customer, and get benefits even in these hard times.

How to maintain customer relations in the pandemic?

Maintain hygiene: The safety of the customers should be the priority of any business concern. Therefore, businesses should keep their stores thoroughly sanitized. When a customer goes to the store, there should be provisions for social distancing and contactless operations to reduce the risk of contracting the virus.

Communicate with the customers: In the wake of the pandemic, everyone is in distress and fear. In such times, if a company can keep communicating with its customers, they will feel considered and cared for. By maintaining contact with its customers, the company can also stay informed about the customers’ needs and wants through feedback, thereby stocking inventory accordingly.

Make them feel special and valued: By storing customer information such as important dates, companies can surprise their customers with gift vouchers, coupons, gift hampers for special occasions such as birthdays and anniversaries. They can even send over medicines for the aged family members of the customers. Such little things can increase customer loyalty.

Understand what customers are looking for: Businesses can identify the needs and wants of its customers through research and surveys.

Added benefits: In these hard times, companies can give their customers free masks and sanitizers with the items they purchase.

It is important for a company to bear in mind the immediate needs of its customers during the Coronavirus crisis. By maintaining strong customer relationships, companies can ensure sustainability and brand loyalty while running their businesses in these challenging times.

August 28, 2020

HOW RESTAURANTS CAN RESPOND TO THE CHALLENGES POSED BY COVID-19?

Coronavirus pandemic has impacted millions of people around the world. The virus has also affected lakhs of people in India, leading to several lockdowns to curtail the transmission of the virus.

These lockdowns have severely affected various sectors throughout India, chief among these being the restaurant industry. If the coronavirus pandemic lasts for a long period, people may get habituated with the idea of not dining out, which will inevitably take the industry longer to recover.

In India, the restaurant industry has faced numerous challenges because of the COVID-19 outbreak: the end of group dining at restaurants, protecting the health of both the employees and the customers, following the safety regulations laid down by the Government, working with a limited number of workers, running expenditure without revenues to match, etc.

Restaurants can address these challenges by actioning the following:

Focus on takeaways: Group dining has become a thing of the past due to the coronavirus pandemic. In this situation, focusing on building the business via takeaways would be a wise decision. This would promote social distancing and would prevent the virus from spreading while ensuring operations are sustained.

Collaboration: Restaurants can collaborate to benefit from each other’s strengths. This would not only reduce cost but also increase the number of customers (combining the customers of both the restaurants). The merged restaurant can prepare their best dishes (for which they are famous) and focus their efforts on selling these (which would also result in zero wastage). Collaboration would also help in merging the workforce and have more people available for extensive cleaning and door-to-door delivery.

Social media marketing: With the onset of COVID-19, traditional marketing wouldn’t prove to be fruitful. On the contrary, it will be expensive. Owing to the lockdowns, people are getting time to surf on social media. Thus, social media marketing would catch their attention. Restaurants will also be able to connect directly with their customers to build effective customer relationships.

Opt for online food ordering: Since people cannot go to restaurants, the only way for these businesses to operate would be through food delivery. They can list themselves on Swiggy, Zomato or other food delivery aggregators to increase sales. They can even opt for food orders placed directly through phone calls. This would reduce costs and create a revenue stream.

Create a social awareness program: The restaurants can create a social awareness program around frontline healthcare workers of COVID-19 by supplying them food. Apart from the element of social service, this can also be marketed or advertised on social media and other digital platforms to create goodwill amongst customers.

Follow the norms laid down by WHO on hygiene: There are operational challenges in the wake of the pandemic. To overcome those, restaurants should maintain hygiene by extensively using hand sanitizers. They should bear in mind that food safety should be their priority. The working stations should be wiped down at regular intervals using a bleach solution. The executives and valets should be cautious during food delivery and opt for contactless payments.

February 17, 2019

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