Finance notes

 

Terminology

P/E ratio: Share price/ The amount the company is earning TODAY on each share.

P/B ratio: Share price/ Book value (total assets of company - Liabilities of company) per share

Mutual funds

• Flexi cap- Fund manager can invest literally anywhere. Minimum 65% in equity.
• Multicap- New category introduced. Fund manager can invest anywhere, with constraint that atleast 25% has to be invested in large cap, small cap and mid cap, respectively.
• Focused equity fund- Fund manager can invest anywhere, but on not more than 30 stocks. SBI focused has exit load of 1% if one exits before a year. Minimum 65% in equity.

Exit load is charged on total asset being withdrawn, and not on profit!!

Indian Tax System

In the old tax regime, there are different provisions to save tax, other than the 50k tax deduction and 1.5 lakh extra deductions provided for ELSS etc.

Standard deduction

Every individual can claim a the standard deduction is a fixed amount (50 thousand rupees) of deduction that is allowed to salaried individuals and pensioners from their gross salary income before the calculation of income tax. So, if you are earning 10 lakh per year, the actual income on which you will need to pay tax is 9.5 lakh only.

Extra deduction

Extra deduction refers to additional deductions that taxpayers can claim over and above the standard deductions and other deductions available under various sections of the Income Tax Act. These extra deductions are aimed at encouraging taxpayers to invest in certain specified avenues, such as savings schemes, insurance policies, and other investment instruments.

Tax harvesting-

Every financial year, 1 lakh long term capital gains tax is exempted from tax. Exhaust this 1 lakh amount every year! Redeem your money and reinvest in the same place. So if your asset does not grow faster than 1 lakh every year, you will NOT have to pay any tax, although if you don't do this, you will have to pay a lot of tax in the end.

Look at this link for more information on this.