Investment - making money from money

“It’s not your salary that makes you rich, it’s your spending habits” but the question is how & where to spend/ invest. Through this blog I am explaining some basic guidelines for investment that will help you to secure future & help you in making money from money.

Step 1 - Life & Health Insurance: This is your first step of investment buy life & health insurance for yourself & your family members depended on you. Life insurance will help your depended in case of unfortunate circumstances. Many employers provide health insurance to their employees, if you employer doesn’t provide than buy health insurance for yourself & depended.

Step 2 – Secure retirement life: Once you cover yourself under health & life insurance than secure retirement life – invest into retirement plan. Retirement plan investment at early stage of your life helps you to get good return. You should consider inflated value of money at time of your retirement while choosing retirement plan.  

Step 3 – Step towards making money from money: You have secured life & future now take small steps towards making money from money. Invest into low risk & fixed return investment plan like fixed deposit (FD) & PPF (Public Provident Fund). 

Step 4 – Taking higher risk: Now it’s time to invest into higher risk & return products like Mutual fund, Bonds, Stock & Commodity Market. To enter the game of stock & commodity you need to invest some time to have some basic market knowledge & therefore it’s better to start with mutual funds than move to stock & commodity. There are many website & rating agencies which rate mutual funds on the basis of their past performances, study them for your reference. You should stay invested for medium to long term (at least 3 – 4 years) in these products to get good returns. 

Step 5 – Fixed Assets: Once you have secured life, future & getting fixed returns on our investment than invest in property & precious metals. 

Dos & Don’ts:

• Do not put all your eggs in one basket – Always follow this basic rule of investment 
• Do maintain cash savings – it’s very important to understand the objectives of your saving & how to invest it to achieve your goals. A separate cash saving account should always be maintained for immediate needs. 
• Do your research before investing – take an advice from others but do not follow the advice blindly, you should do your own study. 
• Do not invest in depreciating asset where cost of fund is high (like car loan)

These are the some basic guidelines for investment, I will cover each steps in detail in my subsequent blogs. 

ONE NATION, ONE TAX - GST

GST bill passed by upper house. It will be the game changer reform for Indian economy by developing common market & reducing cascading effect of multiple tax on cost of goods & service. As per Finance Minister, GST will boost GDP by 2-3%. I am trying explain what is GST, How it work, advantage & disadvantage of GST.

What is GST 

• GST is a value added tax, collected at all points in the supply chain with credit allowed for any tax paid on inputs acquired for use in making the supply. It would apply to both goods and services.
• GST would replace taxes levied by the Central and State governments such as:

Central Government	State Government
Central Excise Duty Service tax Additional Customs Duty (CVD) Special Additional Duty of Customs (SAD) Central Sales Tax Central surcharges and cesses	Value Added Tax Octroi and Entry Tax Purchase Tax Luxury Tax Taxes on lottery, betting & gambling State cesses and surcharges Entertainment tax (other than the tax levied by the local bodies)

             *Basic Custom duty is not included in GST

• GST will be administrated by GST Council, which will be the apex policy making body for GST. Members of GST Council comprised of the Central and State ministers in charge of the finance portfolio.

How GST Work

India shall adopt a Dual GST model, meaning that the GST would be administered both by the Central and the State Governments.

• SGST – State GST, collected by the State Govt.
• CGST – Central GST, collected by the Central Govt.
• IGST – Integrated GST, collected by the Central Govt.

Case I: Sale in one state & resale in same state

 Case II: Sale in one state & resale in other state

Case III: Sale outside the state & resale in same state

Advantage of GST: 

• Elimination of multiplicity of taxes and their cascading effects.
• Rationalization of tax structure and simplification of compliance procedures.
• Reduction in prices, due to full and seamless credit, manufacturers or traders do not have to include taxes as a part of their cost of production.
• Increase in government revenues because many people resorted to paying taxes rather than avoiding the same. 
• Automation of compliance procedures to reduce errors and increase efficiency.

Disadvantage of GST: 

• As per some studies, in initial 1-2 years inflation will increase, if GST will be 18% than inflation may increase by 0.8 to 1%.
• The GST is a destination based tax, not the origin one. In this case consuming state will be benefited than manufacturing state, in present tax system manufacturing state is benefited than consuming state.