how you become rich to richer and richer to Richest .

Becoming richer and eventually the richest,  involves a combination of strategic financial management, investment planning, and wealth-building strategies. Here's an explanation of how this can be achieved:

Smart Financial Management: The first step to becoming richer is effective financial management. This includes creating a comprehensive budget, tracking expenses, and ensuring that your income exceeds your expenses. As a certified financial planner, I help my client understand the importance of setting financial goals and working towards them. I can help clients to develop their personalized financial plans to manage their finances efficiently.

Investment Planning: To transition from being rich to richer, it's crucial to invest wisely. my role as a financial planner is to guide my clients in selecting appropriate investment vehicles that align with their financial goals and risk tolerance. Diversifying investments across asset classes like stocks, bonds, real estate, and mutual funds can help grow wealth or multiply net worth over time.

Long-Term Perspective: Becoming richer often involves a long-term perspective. Encourage my clients to stay committed to their financial plans and avoid impulsive decisions. Investments typically compound over time, so patience is key. 

Tax Optimization: Help my clients maximize tax efficiency in their investments and financial transactions. Proper tax planning can preserve more of their wealth and accelerate their journey from rich to rich.

Debt Management: Addressing and managing debt is critical. High-interest debts can erode wealth quickly. As a certified financial planner, I  can advise clients on strategies to reduce and manage their debts effectively.

Asset Protection: Safeguarding wealth is as important as accumulating it. Recommend appropriate insurance coverage and estate planning to protect my client's assets and ensure a smooth transfer of wealth to future generations.

Continuous Learning: Stay updated with financial industry trends and investment opportunities. My knowledge as a certified financial planner is invaluable in identifying new ways to grow wealth for my clients.

Network and Collaborate: Connect with other financial professionals, such as tax experts, estate planners, and investment specialists, to provide comprehensive financial solutions to my clients. Collaboration can lead to more sophisticated wealth-building strategies.

Innovation and Entrepreneurship: Encourage my clients to explore entrepreneurial opportunities and innovative investments that have the potential for substantial returns. As their financial advisor, I can assess the risks and rewards of such ventures.

Generosity and Giving: Lastly, consider philanthropy and charitable giving as part of the wealth-building journey. Many wealthy individuals find fulfillment in giving back to society, and it can also have tax benefits.

In conclusion as a certified financial planner, my role is to guide my clients on their path from being rich to richer and potentially to the richest. This involves a holistic approach that includes financial management, strategic investments, prudent planning, and a long-term commitment to financial goals. By offering expert advice and tailored solutions, I can help my clients build and multiply their wealth effectively over time also empower my clients to achieve their financial aspirations while securing their financial legacy for future generations.

Raja Bhattacharjee

 MBA, CFP, UFP 

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office: 09681518774   /  7449858289

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7 Facts About Mutual Funds That Will Impress Your Friends

 

7 Facts About Mutual Funds That Will Impress Your Friends

"Mutual Fund Sahi Hain"

Almost everyone in the country has heard the above line in advertisements.

Mutual funds are professionally managed funds that diversify the portfolio and aim to provide reasonable returns per the scheme's objectives. Mutual funds are available in various types per the investor's risk appetite and time horizon.

Here we will be looking into some facts about mutual funds.

Fact 1. All you need is Rs. 500

Mutual funds are affordable, accessible financial products. Anyone can start investing with Rs.500 per month through a Systematic Investment Plan (SIP). The low minimum amount has made it easier for people to start investing a fixed amount every month.

Fact 2. Let the magic of compounding happen

Compounding is when interests or gains are reinvested to generate additional interest or gains over time. Compounding does its magic with consistent investment over the long-term period.

SIP is an excellent tool for beginners and young investors to start their investment journey. The magic of compounding occurs when the investments are kept untouched for a long time.

Fact 3. Your money is in the expert's hand

Mutual funds are the pool of funds deposited by investors that experts manage in the matter. Experts analyse the various investment opportunities and invest funds to create a portfolio to generate reasonable returns per the scheme's objectives.

Fact 4. Diversification and liquidity

Mutual funds are a great way to diversify your portfolio. Mutual Funds offer the incredible benefit of diversification by investing in different asset classes and sectors of a particular asset class. This helps to minimise risk.

Moreover, one can quickly redeem their money from their mutual fund folio and get it credited to the bank account.

Fact 5. Get a loan against mutual fund units

Did you know that you can pledge your mutual fund units to get a loan from a bank?

Getting a loan against the units of mutual funds you hold is easy, and a few banks offer it to process digitally. The feature enables you to pledge assets for Mutual Funds online and get an overdraft limit in minutes!

By pledging your mutual fund units as security, you can avail loan against mutual funds, whether debt, hybrid or equity mutual funds, at any bank or non-banking financial company (NBFC). The benefit of a loan against Mutual Funds is that your units do not need to be redeemed prematurely. You can keep your systematic investment plan (SIP) unchanged.

Fact 6. The investment horizon depends on the goal

The investment must be goal-driven, and by using the goal factor, you can decide the investment period. The same is the case with mutual fund investment.

So, if you have a short-term goal, you can invest in a debt fund per your time horizon. And, in the case of a long-term goal, you can invest in equity funds that have the potential to give good returns over the longer-term horizon.

Fact 7: You don’t need a Demat account to invest in mutual funds

Unlike investing in the stock market, you don’t need a Demat account to invest in mutual funds. When you complete the investment formalities, and the fund house opens a mutual fund folio where investment units and the investment amount are credited. When you redeem from mutual funds, the units and the investment amount gets reduced from your investment account.

Conclusion

Over the last decade, mutual funds have gained immense popularity in India among all people and investors. Mutual funds are the most favoured investment option for beginner and retail investors.

Mutual funds are a simple, accessible yet powerful tool to create wealth and reach financial milestones. Mutual funds allow investment in various asset classes per your risk tolerance and time horizon. Start your investment journey with a small step like mutual fund investing through SIP.

Raja Bhattacharjee

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.

Mutual Funds - Expectation vs Reality

Mutual Funds - Expectation vs Reality

Mutual funds are no more an unknown tool or hidden investment option. Investing your savings in today's day and age can be pretty overwhelming. Investment through mutual funds is so accessible to the public. At the same time, the significant population in India is not financially literate, which creates few specific expectations regarding investment in mutual funds.

Investment is definitely a game of facts, data, and information but the journey to investment starts with clarity and a positive mindset toward money.

Let's explore the expectation and establish the reality regarding mutual funds investment.

Expectation - Mutual funds givers constant returns year on year at the investment.

Reality - Mutuals can't always give equivalent or constant returns. Usually, the websites show the return on mutual funds from the date they have been started, but that doesn't imply it gives the same returns every year. Mutual fund returns can be low at some point or at an all-time high, depending on various market factors.

Expectation -SIP can only be done on a monthly basis

Reality -Majorly people create monthly SIP on Mutual Funds, though SIP can be done on a daily, quarterly, or even half-yearly basis. Most investors automate SIPs as it simplifies the investing process and builds a discipline for constant investment. Automation of investment through SIPs encourages monthly investing. Moreover, investors have the option to create SIPs at different regular intervals. The interval between two SIPs is a personal call by an investor depending on their access to funds for investments.

Expectation - Mutual funds are equivalent to the stock market.

Rality-That's something most beginner investors think that mutual funds are the same as the stock market. The stock market is for investing in equity shares, whereas mutual funds consist of

investing in different companies at varying proportions.

Expectation - Mutual funds are risk-free.

Reality- Many people are under the impression that mutual funds are entirely risk-free. This is not totally true, and one of the main risks is that you could lose money if your mutual fundhas a wide market exposure.

Mutual funds are made up of stocks, bonds, and cash in proportions that vary with each fund. The amount of risk associated with a mutual fund depends on the type of assets it owns. The more stocks and other volatile investments in its holdings, the greater the risk.

Generally speaking, large-cap funds have less risk than small-cap funds because there is less chance for rapid changes in their underlying value. Likewise, bonds have less risk than stocks because their value does not fluctuate as much. Cash holdings also tend to be very stable.

Expectation -Multiple Mutual Funds will always generate higher returns.

Reality - Mutual funds are already a diversified form of investment, so investing in multiple mutual funds of the same category won't help to diversify. Investing in multiple mutual funds neither help to diversify the portfolio nor generate higher returns. It can also backfire on the investor by lower returns and stress of managing diverse mutual funds. Returns on mutual funds depend on various market factors that apply to all mutual funds.

Expectation -It needs a considerable amount to start investing in mutual funds.

Reality- Still, a sector of the population thinks investing in mutual funds requires a large sum of money. It doesn't require much money to start investing; all it needs is a will to invest and the mindset to create wealth. One can start investing in mutual funds for as low as Rs. 100 per month by investing in mutual funds through SIP.

A reality check is always needed to start something new, and even the things are known. It helps to grow and think strategically. So don't make random expectations at the start of the investment journey; focus on disciplined and strategic investing.

Raja Bhattacharjee

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

 

How is investment significant for millenials

Why is investment significant for millennials?

If you are born between 1981 and 1996, you are a millennial. Millennials are highly ambitious and passionate about money and growth. At the same time, having bad spending habits and 'living in the moment' may not be good for your financial health.

Dreaming big is an inherent part of life, but it requires strategy and time for completion. Millennials have enough time to get things on the path and understand such an approach.

If you are a millennial and haven't yet invested, in this article, we will give you some points on why it is essential to start investing as a millennial.

Changing the life of Millennials

Businesses are taking advantage of new advertising techniques like memes and short videos because they see how social media trends have changed in the last few years. These marketing trends are affecting millennials to buy products that are depreciating in nature.

Social media is not the only reason to start investing. There are many other obvious reasons why it is essential to start now.

Importance of building a Habit of Investing

1. Expensive Lifestyle

A few years back, it was an unnecessary luxury for the middle class to own a car or a house in the city of choice. Fast forward to the present, a car and a place in the town of choice is a need for most people belonging to the millennial generation. It is expensive to live a comfortable, safe, and secure life in today's world.

That's where investment plays a role to help in living a life of choice without stressing about inflation and expenses.

1. Lack of income source security

By analysing today's economy, job security is a question mark for many organisations. It is necessary to secure your near future along with long-term financial objectives. You need to make strategic investments for a retirement plan, build an emergency fund, and have health insurance.

 

1. Achieve ambitious long-term objectives

Millennials are ambitious towards achieving their long-term objectives. Achieving such ambitious goals requires investing regularly in investment options that can generate high returns.

Starting with easy and hassle-free investment schemes with reasonable returns such as equity mutual funds. Manually increasing the SIP amount to reach goals faster can be better.

Before jumping to investment, analyse your risk tolerance and know your investment horizon. Also, you can start in an index fund that tracks the broader market and gives returns in line with the market.

It is always advisable to take the help of financial advisors.

1. Keep a health check

One can easily see the relationship between bad eating habits and their effects on finances and health. Junk food has become an inseparable part of our lives. Also, it is eating our hard money savings and potential investments too.

During covid, we all realised the importance of health insurance, especially for those who had lost their only family member. After analysing your body type, eating habits, and family health history, getting health insurance is essential to keep your finances healthy. Insurance companies also offer consumers financial benefits and discounts on regular health care.

We can get prepared for what we cannot avoid, genetic disease or disease due to unavoidable pollution. Health insurance has a waiting period for various claims under different situations. Millennials must buy a health insurance policy before hospital bills eat their finances.

How to start investing?

By following a standard series of steps, a millennial can start their investing journey in any category of investment schemes.

1. Plan: Plan your finances by starting from analysing your current situation, and framing where you want to be must be the first step of investing.
2. Financial goal: Financial goals can be either long-term, medium-term, or short-term. You can decide where you need to invest according to your time horizon.
3. Expected rate of returns:Your financial goals will decide the required rate of returns and how much time you have to achieve such objectives.

Conclusion:

The habit of investing takes care of funds, emergencies, and loved ones. In this real world, where everything is growing with unmatchable speed, investment is the only way to grow money.

Habits, dreams, and macro-economic changes are the significant reasons millennials need to start investing.

Millennials still have the luxury of time to use the power of compounding. Starting with a small investment can be significant in no time. So let's get started with the first investment.

Raja Bhattacharjee

This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

 

5 Things to Do in A Volatile Market

5 Things to Do in A Volatile Market

Market volatility is not a new concept when investing in the stock market. Volatility technically means the standard deviation of the stock market returns using the mean. In simpler terms, the change in the prices of stocks during a particular period is known as volatility, which you will definitely face when you enter the market.

Moreover, volatility affects investors when the stock market shows a downtrend for a more extended period. Nowadays, such a downtrend can be seen due to the Russia-Ukraine war, crude oil price hike, UK political uncertainty, and skyrocketing inflation rate worldwide.

In such a downtrend with high volatility in the market, here are the five things you can do to secure your money:

Stick to your long-term financial plan

Due to temporary downtrends and volatility in the market, changing your financial plan and making quick investment decisions could worsen your financial situation. Please stick to your financial plan until you do not achieve it. When you focus on your long-term investment plan, you can overcome all the adverse aspects of the economy, and further market recovery will help you create wealth.

A well-diversified portfolio

Suppose you have invested in a well-diversified portfolio according to your financial risk appetite. In that case, you do not have to worry about prevailing conditions in the market, as it has always been seen that all the assets do not move in the same direction at the same rate. For example, suppose your asset mix has a portion of gold. In that case, it might have given you a positive return, as investors shift their focus toward physical assets when stocks become highly volatile.

Possible opportunity for discounted share prices

Suppose you have a few stocks in your watchlist that are fundamentally strong enough to sustain and give handsome returns to achieve your financial objectives. You might buy those stocks at a very lower price than before. Also, an economic downturn might be an opportunity for you to buy your favorite shares if they are trading at discounted prices.

Utilize the power of SIPs

During market corrections or downturns, by investing in mutual funds through SIPs, you can leverage the benefits of rupee cost averaging. When you invest a particular amount of SIP during an uptrend market, units get expensive, and you get fewer units of the fund. On the other hand, during the downturn, the share prices of the stocks fall, and now you can get more shares of the same fund. This is how rupee cost averaging might help you keep on going during volatile times.

Doing nothing is also a better option

Yes, if you are new to your investment journey and confused about how to reach the prevailing condition, you can just sit back, relax and keep your investment as it is. It could be a riskier option as you might have invested in new companies which require an exit from the market. But doing nothing is less risky than selling in panic. Sometimes, you might panic sell good investments which are worth holding and stay invested in a scheme that is unworthy to stay. So it's better to do nothing and follow a less risky path during those times.

Patience is the key to being successful in your investment journey. When you have a proper financial objective for an investment, you tend to lose less as you can keep yourself calm. The second and most important quality for an investor is consistency. If you are consistent enough in your investment, you will be able to create wealth with the help of the magic of compounding.

By implementing the points mentioned above in times of downturn and volatility, you can keep your hard-earned invested money safe which also helps you optimize your financial plan.

Warm Regards,
Raja Bhattacharjee

MBA, CFP, UFP 

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office: 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.
 

 

Sustainable development is the future. Do you know how you can be a part of it?

Sustainable development is the future. Do you know how you can be a part of it?

India is witnessing the highest rise in carbon emissions as per COP27, which is a great concern for the government and the citizens. However, the positive thing is that people are also becoming aware and responsible for environmental conditions. However, to achieve the Net Zero target by 2050, the amount of investments required is one of the biggest concerns. Here comes the opportunity for investors looking to invest responsibly and for a sustainable future. In this article, you will find how you can be a part of this change and meet your investment goals.

Sustainable investment is the way

Now, if you have heard of sustainable investments, you may have heard about ESG, so what does this mean? Sustainable investment has been gaining importance globally and in India with the rising concerns of climatic changes. This is an investment approach that is focused on earning higher returns or lowering the risks involved but also considers the investment's effect on the environment and society.

ESG stands for environment, social and governance which are the three pillars of sustainable development. These three criteria help in deciding how to approach sustainable investment, which is recognized internationally.

How to invest sustainably?

ESG being the pillar of sustainable investments, ESG funds are the easiest way to invest responsibly and generate competitive returns over time. There has been a 5 times rise in the assets of ESG funds in the last 4 years, and the total AUM of ESG funds has crossed Rs.12450 crores mark.

ESG funds are mutual funds that invest the pooled capital from different investors into assets of companies that are performing well or meeting the ESG criteria set for the businesses. Stocks and bonds are the main constituents of ESG funds, which are companies that operate sustainably.

You can buy ESG funds like any other mutual funds from mutual fund houses and online platforms. However, while investing in ESG funds, you need to check whether the fund invests in companies with high ESG scores.

Suppose you are thinking about investing in direct equities of companies complying with ESG requirements. In that case, you need to check whether the company's products and services are eco-friendly. Moreover, you need to check whether the business has a positive social impact and whether they have proven corporate governance policies and ethics. While these are related to the ESG aspect, you should also consider the return and risk profile as well for fruitful investments. Compare the average return generated by the sector with the fund's return, and also don't forget to check the expense ratio.

While investing in ESG funds or companies operating as per ESG norms is the primary way to invest for a sustainable future, you should also avoid investing in companies with high carbon footprints or emitting a high carbon level due to their operations.

Benefits of investing in ESG funds for the future

• The first reason to invest in these funds has to be your attitude towards sustainable development. However, that doesn't mean your investments will suffer. It has been observed that ESG investments perform better than traditional investments during a market downturn.
• Half of the world's GDP, which will be close to US$ 44 trillion, is dependent on Mother Nature, such as agriculture, forests and other natural sources. Thus, by investing in ESG funds, you can add to the huge requirement for investments.

Outlook for India

In India, ESG investing is still in its early stages. However, there is an exceptional growth prospect for the sector. In the past year, the category average of ESG funds offered a negative return of 2.3%; however, in the last 2 years, the category average has been 21.78%, higher than many traditional investment vehicles. Another report suggests that while the average percentage of ESG-linked bonds in emerging markets is around 10.5%, and 25% in China, in India, it is only 0.7% at present, there is a huge room for growth.

So, if you are concerned about the environment and want to invest in a sustainable future, this is the time.

Warm Regards,
Raja Bhattacharjee

MBA, CFP, UFP 

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office: 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.

 

 

Mutual Fund Terms You Need to Know

Are you confused by the jargon used in mutual funds and unsure how to navigate investing in them? Mutual funds can be an ideal investment option for those seeking a diversified portfolio without having to purchase and manage individual securities. Still, it is important to understand the different terms that may confuse new investors. In this article, we will discuss the definition of key terms associated with mutual funds, so you can make informed decisions when investing and build a more stable investment portfolio over time.

1. AMC - Asset Management Company

An AMC is a financial institution that manages and invests funds on behalf of clients such as individuals, corporations, and other institutions. The clients entrust their funds to the AMC, which then invests the money in various financial products, such as stocks, bonds, and other securities, to fulfill the fund's investment objectives.

SEBI regulates AMCs and must comply with strict rules and regulations related to their operations, disclosures, and transparency. The main goal of an AMC is to generate returns for its clients while minimizing risk and providing them with professional investment management services.

2. NAV - Net Asset Value

It is a common mutual fund term that refers to the price of each unit of a mutual fund. Just like stocks have a share price, mutual funds have NAV. For example, if you purchase 100 mutual fund units, you must purchase them at the NAV.  

The NAV of a mutual fund represents the total value of the fund's portfolio divided by the number of shares outstanding. It is calculated at the end of the trading day. 

NAV is the indicator of the fund's performance over a period. If you track the NAV of a fund for a certain period, you can gauge the fund's performance and likewise make an informed decision. 

3. SIP - Systematic Investment Plan

SIP is a popular and effective method of investing in mutual funds. Investors make regular and periodic investments in a fund over a period instead of investing a lump sum amount in one go. 

Under a SIP, an investor agrees to invest a fixed amount at regular intervals, usually weekly, monthly, or quarterly, in a chosen mutual fund scheme. The invested amount is deducted automatically from the investor's bank account on a specified date every month. The units are allocated at the scheme's prevailing Net Asset Value (NAV) on that day. This way, the investor can invest in a disciplined manner, regardless of market conditions.

SIPs are considered a convenient and affordable way to invest in mutual funds, as they allow investors to start with a small amount, as low as Rs. 500. This makes mutual fund investments accessible to a wider range of people who may not have large sums of money to invest in one go.

4. STP - Systematic Transfer Plan

STP is an investment strategy used in mutual funds that gives you the facility to use funds in a disciplined manner. An STP is useful when an investor wants to move funds from a more volatile fund to a less risky fund or vice versa. For example, an investor may want to transfer funds from an equity fund to a debt fund over a period to reduce the risk in the portfolio.

Under an STP, the investor specifies the amount to be transferred, the frequency of the transfer, and the mutual fund schemes involved. The transfer is usually done automatically from the redemption proceeds of the source scheme to the purchase of units in the target scheme.

STPs can be customized according to the investor's needs and preferences, and most mutual fund companies offer them.

5. SWP – Systematic Withdrawal Plan

SWP allows investors to withdraw a fixed amount from a mutual fund scheme over a period. This is a helpful strategy for those who want to generate regular income from their mutual fund investments or those who need to manage their cash flow. The SWP can be set up for a specific period or an ongoing process until the investor stops it.

Investors also use this as a source of regular income after retirement. It can be customized according to the investor's needs and preferences and is offered by most mutual fund companies.

6. AUM – Asset Under Management

AUM is an important metric for investment companies, as it indicates the size and scale of their business. It is a financial term that refers to the total market value of the assets an investment company or financial institution manages on behalf of its clients. The higher the AUM, the more assets the company manages on behalf of its clients and the more revenue it generates through management fees.

AUM is also a key performance indicator for investors, as a fund with a higher AUM also signals that investors in large numbers are investing in the fund. This is especially true for equity funds, as individual investors typically invest in these funds.

7. Expense ratio

The cost of owning a fund over a year is expressed as an expense ratio. It covers expenses related to managing the fund, promotion, advertising, and other related expenses. The market regulator has specified a range of expense ratios that funds of different categories can charge from their investors.

Warm Regards,
Raja Bhattacharjee

MBA, CFP, UFP 

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office: 09681518774   /  7449858289

 

website: https://www.investmentjunctions.com

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.

 

 

What is HUF or Hindu Undivided Family?

According to suitability, there are various ways of doing business in India, but the government has recognized that family businesses should also be regulated and incorporated. Hindu Undivided Family (HUF) is a way of doing family business in a very structured and legal manner, making it possible to reduce family disputes due to business in the long term. Let's understand in detail what HUF is and how it works.

What is a HUF?

A simple concept in business is that you should treat yourself as separate from your business. By continuing the thought, the Hindu Undivided Family is a joint family considered a separate entity from the individual family members. The family generally holds assets that have been passed on from their ancestors. Assets also include a gift or a property purchased from the sale of joint family property.

How does it work?

There is a head of the family called "Karta", who is the eldest member of the family and operates the business or whose consent is required to take material business-related decisions. All the members of the family are considered members of HUF. However, only male members of the HUF, called coparceners, can only demand the partition of the HUF. Female members of the HUF do not have such a right.

Conditions to be satisfied before forming a HUF

A primary reason for creating a HUF is to claim an additional tax deduction from income tax authorities. But, you need to satisfy the following conditions to create a HUF:

• It must be created by the family, which means all the members of HUF must have the same ancestors.
• Only Buddhist, Hindu, Sikh, and Jain communities can form a HUF.
• The assets of the HUF must come as a will, gift, or ancestral property.
• When you form a HUF, you must also create a bank account in the name of HUF. The deductions and exemptions of tax can be claimed only if the HUF's bank account has made the transaction. It must be created using a PAN in the name of HUF.
• Division of corpus will be possible only in the case of male members of HUF coparceners.

Advantages of forming a HUF

There are various advantages of forming a HUF over incorporating other forms of businesses like company, partnership firms, LLP, etc. These advantages are as follows:

 

• You can claim a tax exemption limit of up to Rs 2,50,000, which is the basic exemption limit for individuals as well.
• You can invest the proceeds of businesses, and returns thereon will be eligible for claiming deduction if they are eligible for the same by the income tax act 1961, such as deductions under section 80C.
• You can own a residential house property in the name of HUF without paying tax on the same.
• You can avail of a home loan in the name of HUF by utilizing the credit score of your HUF.
• You can also claim a deduction of the premium paid toward health insurance in the name of any HUF member.

Disadvantages of HUF

When there is a positive side, there has to be a negative side as well. Here are a few disadvantages of forming HUF:

• New members can become members of HUF, but they cannot become coparceners by way of marriage. New members can become coparceners by birth.
• There will always be an unequal distribution of power as the Karta will have the supreme power in making decisions.
• Once tax returns are assessed as HUF, there is no going back. It will always be assessed as a HUF only until it gets dissolved.

Keeping all the advantages and disadvantages of HUF in your mind, you can decide whether you want to create a separate entity to save tax or not. It all depends on the type of business, family corporations, and current financial situation. It would help if you kept in mind that the Karta of the family should be aware of the property and financial transactions done by coparceners.

Raja Bhattacvharjee

 Email:  investment.junctions@gmail.com

 Phone: 09830146206

 Office: 09681518774   /  7449858289

Read more »