Tag Archives: Jinay Savla

Thursday Trivia ~ XIRR v/s CAGR

CAGR and XIRR are the most commonly used investment terminologies in the financial services industry while describing the investment returns to an investor. At times, an investor tends to get confused whether the two are same or carry some stark difference.

Let’s start by looking at the definitions.

Compounded Annual Growth Rate (CAGR) 

(source: Investopedia.com)

Compound annual growth rate (CAGR) is the rate of return that would be required for an investment to grow from its balance in the beginning to its balance at the end of the tenure, assuming the profits were reinvested at the end of each year of the investment’s lifespan.

CAGR is nothing but the geometric mean of returns for all the years you stayed invested. So for to find out a CAGR for an investment over 10 years, one needs to find out annual returns of 10 years. Each annual return is then added by 1 and then multiplied to find out the Compounded Annual Growth Rate.

Extended Internal Rate of Return (XIRR)

XIRR or extended internal rate of return is a measure of return which is used when multiple investments have been made at different points of time in a financial instrument like mutual funds. It is a single rate of return when applied to all transactions (investments and redemptions) would give the current rate of return.

Surprisingly, the definition of XIRR is not given on Investopedia.

CAGR and XIRR will be the same in the case of a lump sum investment.

Scenario 1: Rs. 1 lakh invested at the beginning grows at 5% in the first 5 years and 10% in the next 5 years.

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Scenario 2: Rs. 1 lakh invested at the beginning grows at 10% in the first 5 years and 5% in the next 5 years.

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Observation:

A reader would notice that in these 2 scenarios, Mr. X’s investment of Rs. 1 lakh will generate the same amount of corpus after 10 years. Compounding at different rates for different time periods don’t have any impact since there are no cash flows.

CAGR and XIRR are same in both the cases.

Only difference is that in Scenario 2, the investment will compound at the faster rate in the first 5 years and in Scenario 1, investments will compound at a faster rate in the remaining 5 years.

CAGR and XIRR will be different when there are multiple cash flows due to which annual returns for each cash flow is variable.

A brief background

Extending on the context of above two scenarios, suppose Mr. X, an investor decides to invest Rs. 10,000 every year for a period of 10 years. In the first scenario, the investments grow at 5% in the first 5 years, then 10% in the next 5 years. In the second scenario, the investments grow at 10% in the first 5 years and then at 5% in the remaining 5 years. Here, we are trying to figure out whether the CAGR and XIRR will be similar or different in both the scenarios. 

As part of the exercise, we recommend you to do a quick calculation in your mind as well.

Scenario 1: Investments grow at 5% in the first 5 years and then at 10% in the next 5 years.

Scenario 2: Investments grow at 10% in the first 5 years and then at 5% in the next 5 years

Observation:

In the first scenario, Mr. X makes a decent Rs. 1,60,596 at the end of 10 years with an investment of Rs. 1 lakh. Whereas, in the second scenario, Mr. X makes Rs. 1,43,729 at the end of 10 years. A reader would observe here that the magic of compounding can lead to a better experience when the investments are compounded at higher rates towards the end of the tenure. 

Whereas the interesting part here is that CAGR in both scenarios remain the same, in fact a reader would notice that CAGR has remained the same in all 4 scenarios, the reason for this is that CAGR is a geometric mean of returns and has nothing to do with cash flows during the period. Hence, a reader might feel that Mr. X will end with the same corpus because the CAGR is the same. That is clearly not the case.

Yet, there is a difference in XIRR. Sequence of returns matters, in case of recurring investments (or multiple investments).

How does an investor with a layman approach to finance looks at returns?

‘Returns’ is the most important part of conversation for any investor. The objective is simple; money should make more money. Let’s say for example, a person born in 1960s or 70s has a very different way to think about investment return. The conversation with such a person is pretty straight forward, he or she bought a house in 1990s worth Rs. 10 lakhs which today can be sold at Rs. 1 crore. In their conversation, Rs. 90 lakh is their investment return. No second thoughts. But if you ask a person who understands finance, he would take out his calculator, run some numbers and say it’s just 8% Compounded Annual Growth Rate (CAGR) in a period of 30 years.

Since, a lot of investors tend to use CAGR for a house since they look at point to point investment returns as there is no cash flow in between.

In case of investments in mutual funds for instance, an investor tends to have multiple cash flows in the form of Systematic Investment Plans (SIPs) or partial redemptions for different periods of time. At such a time, an investor can calculate CAGR for each SIP which will be for a different duration at a different rate than other SIPs or XIRR can be simply used to ascertain the investment returns for the same.

In a nutshell, an investor should look at XIRR when there are multiple cash flows and returns generated. But in case of point to point investment, CAGR can also be looked at since the XIRR too will remain the same.

– Saurabh Mittal and Jinay Savla

Thursday Trivia ~ The Rise of Quick Service Restaurants, Burger King IPO and Cafe Coffee Day wind up!

When the malls first arrived in Mumbai, I distinctly remember sitting with my uncle and discussing the way small shop owners are going to be impacted due to it. He was too casual around the subject and mentioned that it’s just a matter of 5 years, Indians are price conscious and they won’t buy expensive things. On the contrary, he would go on to tell me how costly it is to build a mall and that too a profitable one. Well, fast forward 2 decades and you see a very different story. My uncle was partly right, say around 20% that malls aren’t really a profitable business for everyone. But the fact that he got wrong was about change in tastes and preferences of Indians, which is 80% of the story.

Taking cue from another industry that has impacted our life in the most significant way is the mobile phone industry. In 2001, the most expensive phone that I had seen was Nokia Communicator which used to cost some Rs. 45 thousand. The phone was highly advanced and ahead of its time. Buying a Nokia 3310 or Samsung R220 which used to cost less than Rs. 5,000 was a costly affair. Why? Because the phone calls were chargeable. Internet was practically a luxury only a few could afford. Reliance Communications changed the game for incoming calls by making them free and Jio recently has changed the way the entire telecom industry operates. Now, buying a phone worth Rs. 45,000 isn’t a luxury anymore. The game has changed completely. Nokia was late to understand that just like my uncle and due to their own short-sighted approach, both are out of their respective businesses.

Coming back to the mall culture, several years back when Crossroads, the first shopping mall came to Mumbai, it had McDonalds at the ground floor. For some of us it was a weekly ritual to go there, do some window shopping and have some French fries with coke. If at that time, had anyone said – that food service business in the form of quick service restaurants will be the next big thing then people would have simply laughed and never given it a single thought.

Back then, Sunday dinners meant going to a few fixed places where right from waiter to restaurant manager knew you really well. But this has changed. So has the spending habits. It’s the millennials that have given these quick service restaurants its due. Places such as McDonalds, CCD, Barista, Burger King, etc. are more than about food now. Millennials want to hang out, have long romantic conversations, share a business idea, business meetings of startups when an office isn’t feasible.

Crossroads mall in Haji Ali changed the way Indians perceived malls. The second blow to small shops was delivered by Big Bazaar which was opened in Phoenix Mills, Lower Parel. It was a gigantic success. Weekend rush was a terrible affair to deal with. This is one thing my uncle missed out on contemplating that people usually get tired after shopping for long hours. So they simply enter a quick service restaurant (QSR) like McDonalds, Dominos, Pizza Hut, etc. for their dinner. After a few times, it’s the McDonalds that become the center point due to a distinct taste in food and priced at a reasonable rate. Hence, it sort of becomes a combo offer! Add to it movie theatres such as PVR and Inox, combine them with Café Coffee Day and Starbucks. A perfect Sunday hang out plan is prepared!

Millennials don’t spend their weekends like baby boomers (predecessors). They spend more on experiences which result in instant gratification. With easy access to bank loans and credit, they are able to fulfil their goals much faster than baby boomers. They won’t wait for 10 years to buy a SUV or sedan. When the loan is a go, they will book it immediately. Now whether this is the right approach and what are its repercussions, is an entirely different subject which we will discuss some other time. 

This spending culture has definitely given a rise to the food services business in India. Let’s have a closer look at the numbers. 

The Indian food services market is classified into two segments – organized and unorganized. Total market has grown by 9% CAGR over the last 5 years. Organized market has grown fastest. Standalone organized outlets have grown at 13% and chain restaurants have grown at 18% The unorganized market constitutes 62% of the total market. However, this is on a declining trend. Right from 69% in Financial Year 2014 versus currently 62% in Financial Year 2019. 

Out of the organized market, quick service restaurants which we were talking about earlier holds 46% of the market which has grown fastest by 18% over the last 5 years. It’s close cousin casual dining restaurants, hold 34% of the market and has grown by 15%.

Let’s talk about Burger King! A company that has given Mumbai a VIDESHI Vada Pav!

Burger King was founded in 1954 in the United States and is owned by the Burger King Corporation, a subsidiary of restaurant brands international inc. Burger King has a global network of over 18,000 restaurants in more than 100 countries.

Burger King India has a master franchise and development agreement with Burger King Asia Pacific, which is an affiliate of Restaurant Brands International Inc. The master franchise agreement is valid until December 31,2039. The company operates in the QSR segment and was a late entrant in the Indian markets. It opened its first restaurant in November,2014. And now the company has 216 company owned and 8 sub franchised Burger King restaurants spread across 16 states and UTs and 47 cities across India.

You will be surprised to know that 60% of Indians eating out are millennials. Add to it increased internet and smartphone penetration, or we can say it’s the Jio effect. Plus, the menu of burger king is not heavy on the wallet too. For instance, the company has a lot of products which are under Rs 100 and runs promotions like 2 crispy veg burgers for Rs 69. The incremental pricing between products is also kept low – 10-20 Rs, this enables the customer to upgrade easily. 

The combination of tech and food is going well for Burger King right now. As it files for an IPO. This simply indicates the confidence of private investors in the food service business of India. It’s for the millennials, by the millennials and of the millennials.

Although all is not well in the food services business. Few months ago, we witnessed the tragic death of VG Siddhartha, the founder and CEO of Café Coffee Day. Apart from the fact that the company never made a profit and was buried in debt, people actually came out and refreshed their memories about the first time they had a coffee in a CCD outlet either with a friend or someone special. CCD certainly changed the way Indians consumed coffee.

CCD was the place which showed millennials the experience of drinking a coffee. Starbucks too is riding a similar wave. Different versions of coffee and its pricing is something baby boomers wouldn’t have thought about in 1990s or early 2000s. Spending Rs. 500 on a coffee is now an experience. Consider the most popular Starbucks at Fort which was the first store in India for the company, it has spent a fortune on its interiors. When you compare it blatantly with some South Indian restaurants that have filter coffee, you would look at me and say, come on – there is no comparison. The coffee is completely different, right from its brewing technique to the flavors, it’s a different world. But for baby boomers who were born in 1960s, a cup of filter coffee equals a latte or a mocha. That’s the gap!

Quick service restaurants are here to stay. There is no going back. Technology has changed the way we approach our food completely. Swiggy and Zomato are simply giving the QSRs the much required push that they are about. Millennials will spend their money. Weekends will be about fun with friends and not about staying at home and cooking dinner for family plus relatives. The World is much closer now due to internet where QSRs can market themselves and millennials can reach out to experience something new, something different. Money is not about saving anymore, it’s about YOLO – you only live once!

Please note: We don’t recommend any investment in Burger King and neither do we hold any position in Café Coffee Day or have recommended to anyone in the past. This blog is for information purpose only and not an investment advice. We only talk about the trends of these industries and what sort of impact it has on our lifestyle and personal finances.

– Jinay Savla

Thursday Trivia ~ 5 New Year Resolutions for Creating Wealth and Managing Finances

Resolution 1: Create a budget for life

When it comes to finances, life can be viewed as cash flowing in—and out. Saving and investing during your working years, if you stick with it, should lead to a rising net worth over time, enabling you to achieve many of life’s most important goals. Creating your own budget and net worth statement can help you build your road map and stay on track. Here are steps that can help:

  • Create a budget and pay yourself first. At a minimum, be sure to have a high-level budget with three things: how much you’re taking in after taxes, how much you’re spending, and how much you’re saving. If you’re not sure where your money is going, track your spending using a spreadsheet or an online budgeting tool for 30 days. Determine how much money you need to cover your fixed monthly expenses, such as your mortgage and other living expenses, and how much you’d like to put away for other goals. For retirement, our rule of thumb is to save 10–15% of pre-tax income, including any contribution from an employer, starting in your 20s. If you delay, the amount you may need to save goes up. Add 10% for every decade you delay saving for retirement. Once you commit to an amount, consider ways you can save automatically. Research shows that saving is easier when you “pay yourself first.” 
  • Calculate your personal net worth annually. It doesn’t have to be complicated. Make a list of your assets (what you own) and subtract your liabilities (what you owe). Subtract the liabilities from the assets to determine your net worth. Don’t panic if your net worth declines during tough market periods. What’s important is to see a general upward trend over your earning years. 
  • Project the cost of essential big-ticket items. If you have a big expense in the near term, like children education or house rennovation, allocate your savings and treat that money as spent. If you know that you’ll need the money within a few years, keep it in relatively liquid, relatively safe investments like short-term deposits or money market funds. If you choose to invest in a FD, make sure the term ends by the time you need the cash. If you have more than a few years, invest wisely, based on your time horizon.
  • Prepare for emergencies. We suggest creating an emergency fund with three to six months’ worth of essential living expenses, set aside in a savings account. The emergency fund can help you cover unexpected-but-necessary expenses without having to sell more volatile investments.

Resolution 2: Manage your debt

Debt as we have been saying can be seggragated into good loan or bad loan. For most people, some level of debt is a practical necessity, especially to purchase an expensive long-term asset, such as a home. However, problems arise when debt becomes the master, not the other way around. Here are 3 things that I want to discuss which one should resolve to manage debt.

  • Keep your total debt load manageable. Don’t confuse what you can borrow with what you should borrow. Keep the monthly costs of owning a home which includes principal, interest and insurance below 30% of your pre-tax income and your total monthly debt payments including credit cards and auto loans and below 35% of your pre-tax income.
  • Eliminate high-cost consumer debt. Try to pay off credit card debt and avoid borrowing to buy depreciating assets, such as cars and mobile phones. The cost of consumer debt adds up quickly if you carry a balance. Consider consolidating your debt in a low-rate loan or liquidating some of your assets to generate cash. You can also check with your bank if any to up is available on your home loan. Set a realistic budget and have a planned schedule to pay back your loans.
  • Keep a check on your credit score. CIBIL allows you to generate a free credit score report every year. You can search for free credit report and find the link for CIBIL’s website. Resolve to generate this report and keep a track of your score. Any outstanding credit card balance which is pending due to dispute will also show up here. Its important that you settle all these outstanding balances. Outstanding dues lead to detoriation of credit score which will impact your ability to borrow in future. 
  • One Time Settlement of outstanding dues. Once you have settled the disputes and repaid all outstanding, make sure to receive a no due confirmation from the lender.

Resolution 3: Optimize your portfolio

We all aim for getting better returns on our investment. But research shows timing of markets is difficult and can be counter-productive. Also this urge of making higher return forces you to keeping looking for new products and take bigger risk. So create a plan that will help you stay disciplined in all kinds of markets. Follow your plan and adjust it as needed. 

What are the ideas to help one stay focused on their goals.

  • Focus first and foremost on your overall investment mix. After committing to a savings plan, how you invest is your next most important decision. Have a targeted asset allocation that you’re comfortable with, even in a down market. Make sure it’s in sync with your long-term goals, risk tolerance and time frame. The longer your time horizon is, the more time you’ll have to benefit from up or down markets. I cannot stress enough on this point. Its very simple but difficult to implement. Resolve that one should invest looking at the future goals. 
  • Diversify across and within asset classes. Diversification reduces risks and is a critical factor in helping you reach your goals. Mutual funds and exchange-traded funds (ETFs) are great ways to own a diversified basket of securities in just about any asset class.
  • Consider taxes. Invest in relatively tax-efficient investments, like debt mutual funds instead of Fixed Deposits. If you trade frequently, do consider that transaction cost and taxes do eat up into your investment returns. Various tax benefits are available on certain investments, but as pointed earlier invest with future goal in mind and not only for saving tax. 
  • Monitor and rebalance your portfolio as needed. Evaluate your portfolio’s performance at least once a year using the right benchmarks. Remember, the long-term progress that you make toward your goals is more important than short-term portfolio performance. As you approach a savings goal, such as the beginning of a child’s education or retirement, begin to reduce investment risk, if appropriate, so you don’t have to sell more volatile investments, such as stocks, when you need them.

Resolution 4: Prepare for the unexpected

Risk is a part of life, particularly in investments and finance. Your financial life can be upended by all kinds of surprises—an illness, job loss, disability, death, natural disasters. If you don’t have enough assets to self-insure against major risks, make a resolution to get your insurance needs covered. Insurance helps protect against unforeseen events that don’t happen often, but are expensive to manage yourself when they do. So let me lay out the guidelines that can help you prepare for life’s unexpected moments.

  • Protect against large medical expenses with health insurance. Select a health insurance policy that matches your needs in areas such as coverage, deductibles, co-payments and choice of medical providers. I think this is a no brainer and more and more people are aware about it and are ready to allocated money for covering this risk.  
  • Purchase life insurance if you have dependents or other obligations. If you have minor children or you have large liabilities, you need life insurance. Consider having a low-cost term life policy. These days policy is available to age of 80 or even 85 which is more than enough. Also make sure not to mix investment with insurance and go only for pure term cover. 
  • Protect your earning power with add on insurance covers. Generally these covers get ignored because of lack of awareness. 2 covers that one must look at is Personal accident or a disability cover and a critical illness cover. These covers come in handy when these particular risks play out help one retain his earnings in scenarios where one might get incapacitated. 
  • Protect your physical assets with property insurance. Check your homeowners and auto insurance policies to make sure your coverage and deductibles are still right for you. Review your homeowner’s policy to see what’s covered and what’s not. Talk to your agent about flood or fire insurance if either is a concern for your area. 

If you’re tech-savvy, consider storing inventories and important documents on a portable hard drive. It’s also a good idea to have copies of birth certificates, passports, wills, trust documents and insurance policies in a small, secure “evacuation box” the fireproof, waterproof kind you can lock is best, that you can grab in a hurry in case you have to evacuate immediately. Make sure your trusted loved ones know about this file as well, in case they need it.

Resolution 5: Protect your estate

An estate plan may seem like something only for the wealthy. But, there are simple steps everyone should take. Without proper nominations, a will and other basic steps, the fate of your assets or that of your children may be decided by the court. Taxes and fees can eat away at these assets, and delay the distribution of assets just when your heirs need them most. Here’s how to protect your estate—and your loved ones.

  • Review your nominations, especially in PF account, pension plans and life insurance. The nomination is your first line of defense, to make your wishes for assets known, and ensure that it gets transfered to whom you want, quickly. Keep information on nomination up-to-date to ensure the proceeds of life insurance policies and retirement accounts are consistent with your wishes, your will and other documents
  • Update or prepare your will. A will isn’t just about transferring assets. It can provide for your dependents’ support and care, and help you avoid the costs and delays associated with dying without one. Keep in mind that what’s written in a will is considered the ultimate wish and will override the nominations in various assets, so make sure all documents are consistent and reflect your desires. When writing a will, we recommend working with an experienced lawyer or estate planning attorney.
  • Coordinate joint holding with the rest of your estate plan. Designation of someone as a joint holder of your property or any other investments, can affect the ultimate disposition of your assets. Talk to a lawyer to make sure they reflect your wishes, and are consistent with will you are writing.
  • Consider creating a revocable family trust. This is especially important if your estate is large and complex, and you want to spell out how your assets should be used in detail. A family trust may not be needed for smaller estates where nominations, joint holding and a will can be sufficient. But talk with a qualified financial planner. 
  • Take care of important estate documents. Make sure a trusted and competent family member or close friend knows the location of your important estate documents.

Budget 2019 – Snapshot for an Investor!

As a taxpayer, our interest in the budget is usually limited to the changes in the tax slab that we belong to. If there is any significant change on it, then we communicate it as a good or bad budget.

However, a budget is more than that.

There are other aspects in the economy that substantially impact our wealth creation which are covered under the budget. And as investors, we should prudently take an interest in understanding it’s impact. Of course, we will speak about tax reforms in this article too and we shall cover other aspects that will directly impact your wealth in the long term.

  1. Aadhar now interchangeable with PAN cards for Tax filing

Slowly, Government seems to be in the mood of saying a good bye to PAN cards. Why? Because they were easily made before. People used to make multiple PAN cards for tax evasion purposes. This had become a rampant exercise.

Mandating Aadhar number for filing of tax returns is a welcome move for tax collection.

  1. Aadhar card for NRIs

Earlier Non Resident Indians had to stay for 180 days in India in a year which would classify them as Resident Indian citizens. Only then their Aadhar card could be generated. However, this has now been done away with.

NRI can simply make their Aadhar card and no need to wait for 180 days.

  1. Tax collection increased by whopping 78% during last 5 years

After Piyush Goyal thanked all the tax payers in this year’s Interim Budget speech, so did Mrs. Nirmala Sitharaman. We are glad that finally someone understood a taxpayer’s effort in national development.

There has been an Increase in tax collection by 78% from ₹6.4 lakh crore in 2013-14 to ₹11.4 lakh crore in 2018-19.

This is good news as Governments start to collect more taxes, they are more comfortable to widen their tax base in the future. So good times to come!

  1. Increase in Minimum Public Shareholding of Listed Companies from 25% to 35%

It’s a good thing as more shares will be available in the market for investors to buy. Will also provide for more liquidity in the market. It will further boost investing in times to come.

  1. Social Stock Exchange for Voluntary and Social Organizations

It’s a boost to the social organizations to receive more funds for the amazing work they do. Also, they will become more transparent as the stock exchange has certain listing requirements that ask them to present their Revenue statement and Balance Sheets.

  1. Recapitalization of Public Sector Banks by Rs. 70,000/- crores during the year.

Public Sector Banks have been in the focus since 2013 now. After years of irresponsible lending, they had been asked to disclose their Non-Performing Assets with the structure provided by the RBI.

To make them healthy again, a slurry of measures have been taken. Insolvency and Bankruptcy Code has been opened up where banks can get into litigation with such NPAs. Upto Rs. 4 lakh crores have been recovered till date. 6 PSU Banks were put into Prompt Corrective Action framework where RBI basically asked them to clean up their act before lending again. Now these Banks have come out of that framework and healthy to lend again.

Also, there were mergers of bad PSU banks with good PSU banks. This has brought down to PSU bank number to 8 in total.

Flow of credit from these banks have been at 13.8% for the last year. Which is good but we need to increase it to around 18% before any visible impact can be seen.

  1. Door Step Banking and Online Loans

With the use of technology, loans will be disbursed quickly. Will benefit middle class the most.

  1. Housing Sector

Post IL&FS and DHFL crisis, RBI will now overlook the Housing sector. Earlier National Housing Board (NHB) had been entrusted with that responsibility.

  1. Affordable Housing

Enhanced interest deduction up to ₹3.5 lakh for purchase of an affordable house. This will give a breather to the middle class.

  1. Disinvestment

Disinvestment target for the year has been kept to Rs. 1 lakh 50 thousand crores.

Re-initiate sale of Air India. This is much needed before it drains out tax payers money.

Strategic sale in Central Public Sector Enterprises (CPSEs) in which Government holds 51% or more will see a strategic disinvestment on case by case basis.

More retail investors participation is encouraged by issuing CPSE ETFs in ELSS segment. ELSS is a tax saving option for investors. It will be seen how these CPSEs perform and create wealth for ELSS holders rather than simply being a tax saving option.

  1. The Big Infrastructure Push

Rs. 100 lakh crores to be invested in Infrastructure sector of India over the next 5 years. This doesn’t mean every company in this sector will start to generate returns immediately. An investor must remember that most of these companies are under huge debt obligations which needs to paid out first before creating profits for shareholders.

  1. Bond Markets

Retail investors will be encouraged to invest in Treasury Bills through stock exchanges. This is a welcome move!

Finance Ministry will work with RBI and SEBI to allow stock exchanges to use Triple A rated Bonds as collateral. This move will definitely add some liquidity with stressed housing finance companies. Flow of money will improve.

Bond and CDS Markets will be notified for an Infrastructure focus investments.

  1. Boost to Electric Vehicles

Rs. 1.5 lakhs of deduction provided on taking loans for electric vehicles.

  1. Change in Securities Transaction Tax in Options

Something to cheer for options market. Earlier, STT was levied on the Option price which used to make it costly.

Now, STT will be levied on the difference in Option Price and Strike Price. Will bring the cost down substantially for an option trader.

  1. Petrol and Diesel to get costly by Rs. 1 cess per liter

Hopefully, crude prices will come down in the future and this impact will not be felt.

  1. Hike in customs duty on Gold and Precious Metals from 10% to 12.5%
  2. Nominal excise duty on crude and tobacco products.
  3. Hike in surcharge of taxable income

Income from Rs. 2 crores to Rs. 5 crores – 3% effective tax hike

Income above Rs. 5 crores – 7% effective tax hike

  1. 2% TDS on cash withdrawal of more than Rs. 1 crores in a year.
  2. In case of Buy Back by listed companies, additional tax of 20% to be imposed. As is the case with unlisted companies currently.

Conclusion

It’s a decent budget with not much visible changes. Although the reforms carried out in the housing and banking sector will help the middle class of India in a big way. Not to mention the Infrastructure push by the Government which is need of the hour, this will give our next generation a great place to live in.

The overall budget proposals are good, how they will be implemented in the future is something every Indian citizen should keep an eye on.

– Jinay Savla

Disclaimer : The article has been prepared based on our first reading of the Budget 2019. A reader should not consider taking any action based on the same.