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Navigating the New NPS Withdrawal Rule: How Will It Impact Your Savings

February 27, 2024

Have any news updates ever impacted your life, savings, or investment strategy? If so, it’s a positive sign that you stay informed about market trends and developments. This blog also provides an update on how changes to National Pension System (NPS) withdrawal guidelines starting from February 2024 could potentially affect your retirement plans.

What are the updated guidelines for making partial withdrawals? What should you remember? Is it a good option to go for a partial withdrawal or not? We will discuss all of these in this blog.

National Pension System

The National Pension System (NPS) is a retirement scheme for Indian citizens. It is a good scheme for those who are willing to plan their retirement and have a lower risk tolerance when it comes to investing. Want to know how NPS is better than any traditional savings scheme? Read here

What are the new rules for partial withdrawals from NPS?

An NPS subscriber may withdraw partially from his/her account after a three-year period. But it has to be kept in mind that there is a limit on the withdrawal amount. According to the master circular issued by the Pension Fund Regulatory and Development Authority (PFRDA) on January 12, 2024, an NPS account holder may withdraw up to 25% of his contributions. The employer-contributed portion of the corpus cannot be withdrawn. Additionally, a partial withdrawal of the returns generated by the contributions will not be permitted.

Let’s understand with an example. If you have invested ₹5 lakhs in NPS and your corpus is around ₹10 lakhs, then you are allowed to withdraw 25% of your contributions, not the entire corpus. So 25% of ₹5 lakh is ₹1,25,000, which is the maximum you can partially withdraw.

How many times in NPS is a partial withdrawal permitted?

Withdrawals from your NPS account are limited to a total of three times over the account’s duration, with a mandatory five-year gap between each withdrawal. However, this five-year gap condition is waived if the withdrawal is for medical treatment of a specific ailment.

Having covered the rules and criteria for partial withdrawal, let’s now explore the reasons that are taken into consideration for NPS partial withdrawal.

National Pension Scheme: Partial Withdrawal Reasons

Withdrawal from NPS is allowed under certain conditions only. What are they? Let’s learn them one by one, briefly.

  • Higher education for your child: If your child is willing to go abroad for higher education or he/she wants to pursue the course in India itself, then you are allowed to withdraw your contribution.
  • Marriage of your child: You can also withdraw contributions to prepare for the wedding of your child.
  • Chronic illness and disease: In certain circumstances, when someone suffers from a chronic disease like heart or kidney failure, you are allowed to take a partial withdrawal.

Conclusion

It is always fruitful when you stay updated and know the terms and conditions of a particular investment plan. Making sure that you take the time to understand the intricacies of NPS and devise a comprehensive strategy beforehand can help in a more secure financial future. Get started here.

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Maximize Your Tax Savings with NPS: A Complete Guide

February 22, 2024

As the end of the financial year approaches and a new one begins, individuals are gearing up to start planning for their goals and aspirations for the upcoming year. For many, planning taxes is a crucial part of this process, especially for those subject to income taxes.

But the question is: Can investing in the National Pension Scheme (NPS) lead to tax savings? The answer is YES! Let’s explore how we can leverage NPS to achieve tax benefits.

What is the National Pension System (NPS)?

NPS is a voluntary investment and retirement savings scheme for salaried people as well as for business owners. It was introduced by the Government of India in 2004, and it is regulated by the PFRDA (Pension Fund Registrations and Development Authority), a government entity that monitors NPS. NPS is a market-linked pension scheme that is managed by fund managers.

There are various aspects related to NPS tax savings, which are explained below.

Tax-saving Under NPS

As you know, there are two types of NPS accounts: Tier 1 and Tier 2. Contributions made to an NPS Tier 1 account are entitled to receive NPS-tax savings deductions, whereas a Tier 2 account does not offer any tax deductions or benefits. To know more about Tier 1 and Tier 2 accounts, read here.

Tax-Saving Benefits in NPS

  • Section 80C: You can receive NPS tax benefits under 80C as the deduction limit is ₹1.5 lakhs. If you want tax benefits under this section, you can invest the entire amount in NPS and claim the deduction.
  • Section 80CCD (1B): This is an additional tax benefit for NPS subscribers. An investor can claim additional tax deductions for his or her investments up to ₹50,000 under this section.
  • Section 80CCD (2): By opting for a corporate NPS contribution, you can contribute up to 10% of your basic pay to NPS which is tax deductible with a limit of ₹5.5 lakh..

However, it is to be noted that, up to 60% of your corpus is exempt from tax, and subsequent income from annuities is taxed under Section 80CCD (3) of the Income Tax Act.

Conclusion

In summary, there are several sections available for tax savings through NPS investments, but proper planning is essential. As this financial year will be ending soon, it will be beneficial for you to gain knowledge on this at the right time to help you save taxes while investing in NPS.

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How to Level Up Your Mutual Fund Services Game?

February 19, 2024

We live in a fast-paced world where technology is a crucial factor for every industry, including finance. We witness the need for technology in every sphere of life. From sending money through UPI, making transactions, booking a flight or train ticket, and purchasing goods online. When it comes to mutual fund services, there is a rise in demand for mutual fund software as it increases efficiency and reduces the chances of errors. Mutual fund software has evolved with time in the landscape of mutual fund solutions. So, what are the advantages of mutual fund services for distributors? We’ll explore this in this blog. Before we look at the advantages, let’s understand mutual fund services in brief.

What are mutual fund services?

Mutual Fund Solutions provides a wide range of cutting-edge transactional and information services that automate, standardize, and centralize processes to increase efficiency, lower costs, and lower risk for the mutual fund marketplace. Looking to choose the right mutual fund services in India? How would you do it? Click here.

In terms of mutual fund services, what can distributors do with mutual fund software?

Mutual fund software is made to assist mutual fund distributors in effectively managing the portfolios of their clients. It simplifies the various aspects of the distribution process, such as

  • Client onboarding
  • Online transactions
  • Tracking and reporting
  • Rebalancing of investment portfolios

Now, let’s explore some of the advantages of mutual fund software in the realm of mutual fund services.

Advantages of Mutual Fund Software

  • Enhanced efficiency: It includes robust features like portfolio rebalancing and business intelligence to increase efficiency.
  • Less paperwork: It reduces manual errors while increasing overall productivity.
  • Quick processing: It provides customers with timely services without wasting time.
  • Precise reporting and analysis: It gives mutual fund distributors a better grasp of their client’s portfolios by giving them access to extensive reports and analytics.

In India’s evolving mutual fund distribution landscape, leveraging technology through investment software has become critical. The best financial software, the KFintech Mutual Fund Distributor app, gives distributors a competitive advantage by streamlining operations, providing insightful analytics, and ensuring compliance. While the initial cost may be an issue, the long-term benefits and return on investment justify the use of such technology. For more information, visit here.

Conclusion

Lastly, everything evolves with time and we need to stay updated with technology to provide above-par services. Mutual fund distributors need to stay up-to-date about trends and technological advancements to serve their customers better.

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AIFs are only for HNIs – Should small investors invest in AIFs? 

January 30, 2024

In our childhood, remember, there were few things that were only for our elder siblings? We used to play with small toys, such as lighter cricket bats made of plastic or even softballs, but we witnessed that our senior siblings used to play with hard balls, wooden bats, and some high-end games. And this was not only limited to sports but also to studies as well.

We used to have a less difficult syllabus to study, whereas our seniors used to study day in and day out as their subjects were hard. This fact is self-explanatory. We didn’t have the calibre, age, mindset, and talent to study and play at the senior level. But gradually, as we grew, we started participating in those events or learning the harder subjects.

This is somewhat true of Alternate Investment Funds in India. Experts advise small investors not to invest in AIFs. Investing in Alternative Investment Funds requires a sizable corpus; it might not be the best choice for small investors who wish to make regular small investments. As a result, AIFs are typically thought to be appropriate for large investors, such as HNIs (high-net-worth individuals), who are prepared to take on greater risk and have the capacity to invest a sizable sum of money at once.

Before we dive in and look at why HNIs invest in Alternative Investment Funds in India, let’s briefly understand what AIFs, or Alternative Investment Funds, are.

What is an Alternative Investment Fund (AIF)?

AIF, or Alternative Investment Fund, is a private pooled investment vehicle that makes investments in alternative asset classes like derivatives, real estate, commodities, hedge funds, private equity, and venture capital. Since the investment amount in AIFs is significantly higher, HNIs (high-net-worth individuals) and institutions generally invest in them.

Why do HNIs invest in AIFs?

Investors who are looking for alternatives to traditional asset classes like stocks and bonds and diversification, as well as the possibility of higher returns, may find AIFs an appealing choice. Investors may want to think about making an AIF investment for the following reasons:

  1. Possibility of Higher Returns: Since AIFs are exposed to a wider range of assets and investment strategies than traditional investments, they may provide higher returns than the latter. But there’s a higher risk associated with this higher return.
  2. Diversification: Alternative investment funds (AIFs), which give investors access to hedge funds, real estate, and private equity among other asset classes, facilitate portfolio diversification. Know the role of AIFs in diversification here.
  3. Low Volatility: Compared to other investments like equity or mutual fund investments, AIFs are less volatile because they are not correlated with the stock market.

Conclusion

In conclusion, because AIFs are complex products, only experienced investors should consider them as a good option for diversification. Alternative investment funds enable them to access exclusive investing techniques and diversify their portfolios.

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In and Out of Wealth Management – How Much Money is Required for Wealth Management?

January 24, 2024

Buying an expensive car or a mere ₹1000/- earphones, we try to keep everything on a budget. Today, in a fast-paced era, it is essential to keep a check on your expenses and income, as you need to create a balance between them. You don’t want to find yourself in a place where you have spent more than you have earned or are likely to earn.

The tale of wealth management is not different from our budgeting. But what if we tell you that there is no hard and fast rule in terms of how much money you need to get wealth management services, as it solely depends on your portfolio, assets, your goal, and the organization you choose to manage your private wealth?

Before we discuss this in detail, let’s understand wealth management first, briefly.

What are wealth management services?

Wealth management is a comprehensive service that caters to individuals with significant assets, assisting them in expanding their wealth, mitigating liability risks, and developing plans for transferring their wealth to their chosen beneficiaries. Wealth management services provide a holistic approach to the financial situation of clients with higher net worth, as opposed to working with an advisor who only focuses on financial planning or investment management.

So now that you know about wealth management, let’s discuss how much money you need for a wealth management service.

To answer this question, there is no set rule of minimum and maximum access to wealth management services. This thoroughly depends on firms and individual wealth managers and how much they consider managing your assets, portfolio, wealth, etc. As mentioned, each organization has different minimum requirements.

What are the duties of a wealth manager?

Wealth management solutions are tailor-made and client-specific. So, the products and investment types are suggested based on your preferences. Your risk appetite, timeline, liabilities, assets, etc., are kept in mind before devising a plan of action. Wealth manager offers various services such as:

  1. Providing a range of financial services: A wealth manager’s duties extend beyond simple advice. Rather, they provide a range of financial services, including wealth management, wealth creation opportunities, and plan review at regular intervals.
  2. Tax management – Tax management, retirement planning (annuity plans), managing personal finances, and insurance planning are some of the responsibilities of a wealth manager.
  3. Professional knowledge – Wealth managers specialize in particular areas of finance. To manage wealth, they thus provide their professional knowledge in a variety of distinctive fields.

Just knowing about this is not enough if you do not know how to choose the right wealth manager. This blog discussed things you need to know before hiring a professional wealth manager.

Conclusion

The decision to take assistance from wealth management services or a wealth manager, this solely depends on your financial goals and situations. If you have clarity about your financial goals or firm’s objectives then this should be in line with wealth management solutions. Choose a strategy or wealth manager that helps you grow and protect your wealth.

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New Year Resolution? Avoid these 5 mutual fund investment mistakes in 2024

January 23, 2024

We are now into the new year 2024. With newer hopes and aspirations, everyone has celebrated the new year in their own way. But one thing that we all agree on is not repeating our mistakes from last year. Smart people always keep learning, as Da Vinci famously said, “Learning never exhausts the mind.”

As we are putting our steps into 2024, what mutual fund solution mistakes do you need to avoid? In this blog, we’ll discuss the same.

Avoid 5 mutual fund solutions mistakes while investing

Making mistakes is natural but learning from mistakes and not repeating them is wisdom. Knowing the following will make you wiser:

  1. Don’t chase the performance of a particular fund –  Leave the chase to the authorities or films. It is always tempting when you witness a fund giving you huge returns and you feel all your dreams are about to come true. But, unfortunately, it doesn’t happen with most funds because top-performing funds change every year.
  2. Don’t compare apples with oranges –  You cannot compare a movie with a sitcom. The same goes for mutual fund solutions. While you invest in mutual funds, you cannot compare a small-cap fund with a large-cap fund, as both funds have a different approach to the market. The comparison should be done based on the right peers, categories, and benchmarks.
  3. Don’t invest without a goal – You make new-year resolutions to achieve them. Similarly, you cannot invest in a mutual fund without a goal. You can look for mutual fund solutions to have clarity on how to achieve your financial goals this new year.
  4. Don’t invest without a financial advisor – While welcoming this new year, it is advisable to seek professional help while investing in mutual funds. Many reputed firms and financial advisors provide expertise in mutual fund solutions.
  5. Don’t set your expectations too high – Whether in life or mutual fund investments, you cannot set expectations that are beyond the realm of reality. You can achieve your financial goals, but they need to be realistic and well-planned.

Things you need to consider while investing in mutual fund solutions:

We have mentioned a few pointers that you need to avoid while investing. Here are a few things you can apply this year during the new year.

  • Financial goals – This new year, keep your financial goals in mind and stay focused while you invest.
  • Balance your portfolio – Things change with time. You need to review your portfolio and change it if necessary.
  • Investment horizon – Remember your investment horizon, don’t deviate from your goals.
  • Diversification – If you haven’t diversified your asset allocation in the past year or have created a diversified portfolio, then you need to view it and diversify accordingly.
  • Avoid behavioral investing – Emotions are good to have, but it will be great if you keep them out of your investment strategy. Try to avoid them while investing.

 If you are wondering what the traits of equity and debt funds are, you can read our blog by clicking here.

Conclusion

You have 366 opportunities in 2024, so take full advantage of them and avoid mistakes while investing in mutual fund solutions. 2023 is a story of the past; you need to look forward with a more positive frame of mind.

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