Are we rich or are we poor? A readers story

”Are we rich; or are we poor ?”……..

This was the question my daughter framed when she was old enough to seek pocket-money. Instead, we chose to keep money in a safe spot for ALL expenses including household and my job was to keep replenishing it.

It was tricky to deny them a fixed amount with peer-pressure from more affluent classmates. When there was a new doll in stores, a visit to a wholesale market helped them understand the cost of impulse purchases and buying-convenience. My wife till date does not know what was my salary at any stage and we spent money carefully all along.

The mindset developed helped the family is not seeking the best cars, or stay on in my father’s house in the upmarket part of the city.

NOTE : This is a personal money story of Mr. Vijay, a regular reader of this blog.

A little bit about my family

My parents landed in Delhi from Pakistan after 1947 and my father took up a job in a respected school. Funds were just enough to meet basic needs and did well enough in studies to have a choice of engineering colleges. Opted for a local one to save on expenses and on graduation joined a leading Indian engineering company.

As a sales engineer for a product that went to all large industries, got a good exposure to the insight of businesses and economy. Working in a highly diversified company meant interaction with colleagues serving other industries in the age when financial newspapers only reached senior people.

That was a good grounding for the stage when you have to choose between hundreds of listed companies and there was only market grapevine to go by.

Investment in policies and loans I had taken

Apart from the life insurance policies taken very early in career, never looked at this avenue for savings or investment. This was about the time old MNCs were forced to go public and have held on to many of the purchases made in that era. Once the potential looked visible, branched out to the secondary market to plough savings.

More often have gone for non-family companies, but not necessarily international MNCs. Probably the most successful investments have been in Indian companies that grew to be successful in the developing countries.

The only time I took any loans was against LIC policies in the era when you could just withdraw a good percentage of your year’s contribution at low rates, and the cumulative figure just reduced the maturity amount. Such were the amounts which went into equity and there was never even thought of taking a loan to acquire assets.

My first capital purchase of Rs.3500 for a Vespa came out of mortgaging with my father a yearly scholarship for engineering studies.

How my wife build her own portfolio

In the days when people made uncles & aunties open bank accounts to put a maximum number of IPO applications, my wife’s portfolio started building up. Resisting pressure for short-term gains, built further on it by capitalizing gifted funds from the family. When the valuation reached lacs, made her purchase the flat we were living in to have a steady rental income.

She built a portfolio again and then invested in the post office/bank FD’s to get tax-free income. Once we could see surplus funds, I decided to go for forced-savings by opening Recurring Deposit accounts every April. This has been a major advantage as I have future savings earning interest at 9 – 9.5 % and maturing to give me tidy sums for holidays across the world and even gifting it for our grandchildren’s education.

The next phase of my life

When in my fifties, salaried people became better off and I got the opportunity to head a small MNC’s Indian operations. There was more to save or we could have raised our standard of living. We chose to calibrate lifestyles at what we could support after retirement, for which I had an age of 58 in mind. And that was exactly when I left my last 9 to 5 job to work on short projects and supported NGOs from my savings.

In stock-selection, we have taken the route where long term economy is important, not the market. Playing contrary to “100 minus your age in Equity ” has assumed that investments are for the family, not individual. Accordingly, self and wife have Demat accounts with a spouse as 2nd and one daughter each as 3rd holder.

At 72, I should still be able to manage things for another 10 years but this would allow us to pass on the investments to them by a change in the order of names. It can be at a stage when we want to go into the next stage of retirement, or earlier if any of them need over Rs. 4 Crore each in their accounts.

My portfolio churn is limited to under 5% over a year; more often when FDs are maturing and equity may be doing better. I prune a holding which has done well and its weightage in total can be brought down.

Identifying a BUY candidate for a ‘switch ‘ transaction, would track the movement of the two stocks, disregarding index movements, and choose the time to switch. Most such transactions have happened when good companies have disappointed for some transient reason.

If I could go back into time, like the characters of science fiction movies, would I do things any differently?

At the micro-level, I would have picked up an additional 50 M&M shares at Rs.27 in the 1970s. I had asked for 50 but the broker picked 100 by mistake, and I had no funds to spare.

That Rs.1350 would have been worth about Rs.8 Lacs today. At the macro level, I feel that my occupation as a project manager has made me think ahead of major decisions. Once having done that, second thoughts have limited space.

I wanted to share one more thing. When I received nearly Rs 5 Cr from the sale of family property, allocated all of it to my daughters. For one, a purchased a flat while the second got it in cash. Since I have enough to live on , felt that it should be invested by them to suit their needs


And what more I would like to do?

Too many of us are too busy at the height of a career to develop interests that will keep them usefully occupied in the latter half of their retired life. Going to the bank or post office is no longer an option and you cannot travel all the time.

So people in their late fifties need to be helped by their employers in finding the traits that will keep them from coming in the way of their housemaids. I would be happy to be part of such an initiative.

There is the acute failure of financial planning among people in the fifties and would love to be part of groups analyzing the basics of inflation and the effect of longer life-spans on savings.

The height of it is the Bollywood blockbuster of 2003 (Baghban) showing a retired bank manager splitting from his wife as they had no roof over their heads after helping kids with their savings.

Let us know if you have any thoughts coming up after reading this money story?

11 changes in Personal Finance Industry in last 10 yrs

We just entered 2020, and I thought let me pen down some observations of the last decade.

I had started blogging from the last 12 yrs and it’s been quite a long and amazing journey. From a small blog, we are now one of the biggest personal finance websites in India with millions of readers benefitting from our work.

We had conducted dozens of workshops, interacted with thousands of investors and provided paid services to tons of investors across India and abroad.

So I thought that I will share what changes I have seen in the last 10 yrs in the personal finance industry and what are some changes I am expecting in the coming decade.

1. People want to buy “term plan” now

Back in 2009-2010, the concept of the term plan was just launched. Aegon Religare was the first entrant in the space and very few people had heard about term plan. A lot of my time and energy went into convincing people in the comments section to buy a term plan and not a money-back plan.

Unlike today, the advertisements on TV also didn’t mention the word “term plan”.

In the last 10 yrs, term plans have become quite famous and the default choice for evolved investors for their insurance needs. Now everyone “knows” that term plan has to be bought for insurance purposes.

Same is true for Health insurance also

2. Huge awareness about “Mutual funds”

It’s been around 25 yrs when mutual funds were properly launched in India (not considering UTI-64), so even in 2009-10, mutual funds were quite old products, but even during those times, they were not very famous products. It was a big PUSH Product, which means that various advisors and distributors had to spend a lot of energy into sharing about mutual funds and the way it worked.

No TV ads ever mentioned about mutual funds. Even the use of technology was quite slow, so there was no concept of online investing, online redemptions, etc, and processing of KYC used to take months.

mutual funds sahi hai

With the “Mutual fund Sahi hai” campaign for the past few years, mutual funds have become a buzz word and everyone has at least heard about “mutual funds”. Now investors flock to online apps and are willing to invest in mutual funds. From Rs 5 lacs crore AUM in 2010, the current AUM is 27 lacs crore in mutual funds. That’s an impressive 18% CAGR growth.

3. Trust issues with ULIPS

Back in 2010, there were horror stories of ULIP misselling. I used to get so many comments about how people were missold ULIPs product and they were not getting back their money.

Somewhere in 2014-15 that episode ended and investors just stopped even touching ULIPS. Now ULIPS have made a comeback with much better structures and they are way better than what they were used to be.

Now if you buy ULIPS, they are not that bad, however, I still do not buy the argument that ULIPS are great products now (more on that later). Subra has done a wonderful write up on ULIP’s here

4. Dependence on Loans has increased

Compared to the last decade, we can clearly see the usage of credit for various things in life. Start from vacations, cars, houses, furniture, and even mobile phones. You name it and it’s all available on credit.

You can even buy a Rs 4,000 saree in Varanasi shops and pay in 6 easy installments. Bajaj finance has made sure that it’s possible now. You can clearly see the trend of over-dependence on credit in such a way that the stock prices of Bajaj finance have gone up.

bajaj finance stock price

5. Financial Planning + Goals Planning becoming famous

The buzz about “financial goals” and “financial planning” is more now. Back in 2010, financial planning was an alien word. It looked like someone is trying to cheat you and make money without providing anything valuable. But the financial planning community has made sure that the word “Financial planning” reaches more and more people.

Today’s urban investors are thinking of various goals and now to “plan” for it. It’s very common to hear people saying that they want to invest for the future education of their children” and “retirement”.

6. More Choices and confusion for investors

Compared to the last 10 yrs, now we have too many products and services, and many people claiming to work for investor’s interests. We have advanced products like Robo advisory, small case, and whatnot.

The world of personal finance has become more complex now compared to the past which also increases the chances of an investor making more mistakes and at the same time also pick better options for themselves if they have proper understanding.

7. More spending on lifestyle

I remember, in 2010 I was in Bangalore and I saved close to 60% of my income. There were very few avenues to spend and the maximum, I did watch movies in the theatre and went on treks.

Investors have also moved from the category of “savers” to “spender’s first, then savers later”. We now have online shopping, food on delivery, international vacations on EMI’s, etc ..

Literally everything is available to you if you can afford to pay the “EMI” (not the product). Do read my article 7 Incredible reasons why you spend more money each month & how you can control it related to spending.

8. Moving from Physical assets to Financial Assets

While the pace is slow now and we still have a long way to go. People are moving from physical assets (gold + real estate) to Financial assets (equity mutual funds, stocks, PPF, FD). As per a Karvy report, in 2014 around 48% of assets held by Indians were physical, but in 2018, it came down to 40%.

financial vs physical assets India

The mutual funds itself has gained from 3% to 6%, and direct equity went up from 21% to 24%, however, we still have a long way to go in this space

9. Online Wallets + Cash backs are a way of life

In the last 10 yrs, I saw the emergence of online shopping websites like Amazon and homegrown Flipkart. We saw uber and ola in our lives and are also seeing how swiggy and Zomato are changing the way we are having our food.

All these apps brought the concept of online wallets and cashback which in my opinion is doing more harm to us than helping us. It’s more of a marketing tactic and making sure that clients are always in the maze of collecting points/cash back to spend it for the next order.

Most of the websites have stopped giving “discounts” and instead give “cashbacks” which is nothing but a future discount. This means that you will have to again spend and in total, the amount of benefit for you is often less than what your mind perceives. And stop thinking that you “found” an awesome coupon, it’s actually given to you by companies to make sure you feel better while transactions. It’s just pampering!

10. Online Frauds and Scams have increased manifold

Online transactions like net banking, mobile payments, and use of debit and credit card has increased in many folds in India in the last decade. Which also gave rise to online frauds and scams. The most vulnerable were the senior citizens and those people who had very less understanding of how banks and insurance companies work.

Many people got a call in the name of RBI, IRDA and SBI bank where the fraudster tried to gain access to their OTP and other critical details and many people lost a big amount to these frauds.

I even created a video on this.

Today in 2020, the fraudsters are now using google pay to cheat people.

11. Introduction of Robo-Advisory

In last few years, there are platforms that are promoting the concept of Robo-advisory. I think delivering advice through algorithms is an idea worth trying and looks cool. There are certainly some aspects of advice that can be delivered through automation, but there will always be some aspects of advisory which would need a human element.
Here is Robo-advisor definition from Investopedia

“Robo advisors are digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision. A typical robo advisor collects information from clients about their financial situation and future goals through an online survey, and then uses the data to offer advice and/or automatically invest client assets.”

After all, investors are humans and they have feelings. We need someone to talk to, share our insecurities and also take human-advice. Robo-advisory is great in all aspects which are pure formula based, but wherever human emotions will come, you would need a human there, unless you yourself are a robot!

What do I expect in the next decade?

I am not an expert in predictions, but still, I will try it out. Here are a few things which my gut feeling says may happen in the next decade (read around 2030)

  • Rise of Professional Advice – The more we interact with people who leave their inquiry with us for financial planning, we are very convinced that people are not able to manage their own financial lives. They need professional help once they have reached a certain net worth. You might be having a Rs 10 lacs portfolio today and you might be managing it, but once it becomes Rs 1 crore portfolio, you can understand that it could have been 1.5 crores with professional help.
  • Rise of materialism – We as a country have not seen huge spendings at home and we have been traditionally savers. We are now opening up to spending and I can see we are also enjoying it. While the incomes are increasing, the avenues to spend are also going up and I can sense that we will be spending too much on brands, enjoyment, eating out, international vacations and whatnot. We will celebrate possessions more and more in the come decade. Here I am talking about the overall country as a whole.
  • Retirement Time-bomb – In my latest talk with Subra, he mentioned that the retirement crisis is right in front of us even now, not just in the future. We have a penniless parent to take care of even now, but it’s not visible because they are living with the earnings of their son/daughter and it’s not visible. With families getting more and more fragmented in the future, we will see more and more senior citizens without much of retirement savings and it will ring an alarm bell-like no before.
  • Mutual Funds will be a big thing – Mutual funds revolution has just begun in India. Even right now, the number of people who invest in equities is just 2-3% of the total population. A big part of our population has to still invest and when that happens, we will see massive growth in mutual funds (and other space too).
  • Heavy changes in Economy and Infrastructure – We are standing today at the same place, where China was in the ’90s. We have very huge potential when it comes to Infrastructure building and we are already on it, though it is not going in a smooth way as compared to China. We will see a lot more highway’s, Metro, rural infrastructure coming up and much bigger and high rise buildings all over the place. Our economy is already near the J-curve and over the next decade we will see tremendous growth as the next lot of population will enter into jobs and move from small villages/cities to bigger ones.

As of now, I could think of these 4 points – but I would like to hear from you about your opinion on what all we will see in the coming decade!

5 Major Changes in Budget 2020 (NRI Taxation Myths + New vs Old Slab)

Budget 2020 was a big event.

For last so many days before the budget, there was this noise and expectations around raising 80C limits, change in tax slabs, and reversal of Long term capital gains tax on equity or at least giving the benefit of Indexation in equity taxation.

However, nothing like that happened.

budget 2020 highlights

Infact, things have become more complicated for investors while I think the govt intention was to make it simple. So let me jot down all the relevant points and important news items.

Here is my audio commentary for 15 min on Budget 2020



1. New Tax Slabs vs Old Tax Slabs

A new (and optional) tax slab is introduced now which has lower tax rates compared to old one. The investor will have choice of either staying with the old slabs along with various exemptions and deductions they used to enjoy, or they can shift to new slabs without any exemptions/deductions.

New Income tax slab rates

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Tax Slab

Tax Rate

Below 2.5 Lacs No Tax
2.5 Lacs- 5.0 Lacs 5%
5.0 Lacs- 7.5 Lacs 10%
7.5 Lacs – 10.0 Lacs 15%
10.0 Lacs – 12.5 Lacs 20%
12.5 Lacs – 15.0 Lacs 25%
Above 15 Lacs 30%


  • Education cess @4% on the tax amount
  • Surcharge of 10% applicable if income > 50 Lacs and 15% if income > 1 Cr

Old Income tax slab rates (for those below 60 yrs.)

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Tax Slab

Tax Rate

Below 2.5 Lacs No Tax
2.5 Lacs- 5.0 Lacs 5%
5.0 Lacs- 10 Lacs 20%
Above 10 Lacs 30%


Which tax slab is better?

Basically the new tax slabs are of not much to those who take benefit of various deductions and benefits anyways, because they are able to bring down their taxable income by some decent margin. Only those who have income range of 6-9 lacs and do not take benefit of any exemption/deduction will benefit from the new slabs.

Example 1 – Let’s see an example here and calculate the tax to be paid under old and new system.

  • Income : Rs 15,00,000
  • 80C – Rs 1,50,000
  • Home Loan Interest – Rs 2,00,000
  • Medical Insurance – Rs 20,000
  • Standard Deduction – Rs 50,000

Calculation of Tax under OLD SLABS

You can see that here, the taxable income will come down by 4.2 lacs directly. So under the old slab system, the taxable income will be Rs 10.8 Lacs (15 lacs – 4.2 lacs)

Let’s see tax calculations

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Slab Slab Higher Amount Income Tax Rate Taxable Income under Slab Tax
0 – 2.5 Lacs 250000 0% 250000 0
2.5 – 5 lacs 500000 5% 250000 12500
5 – 10 Lacs 1000000 20% 500000 100000
Above 10 lacs No Limit 30% 80000 24000
Income Tax 136500
Education Cess @4% 5460
Surcharge 0
Total Tax 141960

Calculation of Tax under NEW SLABS

In new slab, there is no way of getting any deductions/benefits , so let’s directly jump into the tax calculations

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Slab Slab Higher Amount Income Tax Rate Taxable Income under Slab Tax
0 – 2.5 lacs 250000 0% 250000 0
2.5 – 5 lacs 500000 5% 250000 12500
5 – 7.5 Lacs 750000 10% 250000 25000
7.5 – 10 lacs 1000000 15% 250000 37500
10 – 12.5 Lacs 1250000 20% 250000 50000
12.5 – 15 Lacs 1500000 25% 250000 62500
Above 15 lacs No Limit 30% 0 0
Income Tax 187500
Education Cess @4% 7500
Surcharge 0
Total Tax 195000


Which tax system is better – Old or New?

  • Old slab tax is Rs. 1,41,960
  • New slab tax is Rs. 1,95,000
  • Difference of Rs. 53,040

We can clearly see that the tax is lesser in the older system, compared to the newer system.

Important Points

  • You can choose each year which tax system you want to choose from – New vs Old. However this choice is only those, who do not have a BUSINESS INCOME. For those who have any kind of business income, will not be able to switch back to the other system once they have done it.
  • Remember, that there is a tax rebate under sec 87A in both new and old tax slabs where a person earning up to Rs 5 lacs gets a tax rebate of Rs 12,500, which technically means that if someone’s taxable income is less than 5 lacs, then they will have to not pay any tax.

2. No Deductions or Exemptions under New Tax Regime

I have already mentioned this, but if one chooses the new tax regime, they will not be able to take benefit of following things

  • 80C investments (PPF, ELSS, EPF, Life Insurance Premium)
  • Medical Insurance Premium
  • Home Loan Interest
  • HRA
  • LTA
  • Standard Deduction of Rs 50,000
  • Extra 50,000 deduction for NPS (apart from 80C limit)
  • Donations under 80G
  • Education Loan Interest

Note that you can still put your money in all those 80C investment products and medical insurance etc., but you will not be able to take tax benefits (not for those who stick with old system)

However, the employer contribution to NPS and EPF is still tax free up to 7.5 lacs per year. So you can ask your employer to contribute more on your behalf in these two things.

3. NRI definition change + Taxation Rule

There was too much confusion around new rules for NRI’s for the whole day and twitter saw many people debating if many NRI’s especially from Middle east will have to pay taxes in India or not.

Here is what the new rule says –

“If a person is not resident of any country, then they are deemed to be a resident of India and they will be taxed on their global income”

Check out the official confirmation here

There are a lot of citizens of India, who stay in different countries for small period of time and technically are not resident of any country and hence don’t pay any taxes. Those investors will not have to pay the TAX in India for their global income.

This is different than those investors who are living in countries like UAE etc. where there is ZERO tax. Because they are a “tax resident” of these countries. They are just not paying tax because the law is like that. So these kinds of investors don’t have to worry at all, and nothing changes for them. Check out the video clarification from officials

Now as per the new rule, a person has to stay out of India for more than 240 days to qualify as an NRI, against the old limit of 182 days.

4. Dividends will be taxable in the hands of investors

The DDT (dividend distribution tax) is now abolished and the dividends will now be taxed in the hands of investors as per their slab rates.

Till now the DDT rates for companies was 20.35%. So every investor who got any kind of dividend took that kind of hit indirectly (even thought it was tax free in investors hands).

This is not great news for those who are in higher tax bracket, because they will pay higher tax now compared to what they paid earlier and now there will be additional headache to track and mention all dividend income while filing tax returns.

There will be TDS @10% deducted by mutual funds, if the dividend to be given is more than Rs 5,000 in a financial year to an investor.

Important Update : There was a big confusion around investors and advisors community that TDS of 10% will also be applicable on redemption from mutual funds or not? But the govt has already clarified that the TDS is only applicable on mutual funds dividend and nothing else. Any redemptions you do from mutual funds, that will not attract any TDS for residents (for NRI’s , the TDS is already there since long time)

Clarification from govt that TDS will only apply on TDS from mutual funds and not on capital gains

5. Banks Deposit Insurance raised from 1 lacs to Rs 5 lacs

The insurance on your bank deposits have gone up from Rs 1 lacs to Rs 5 lacs. This was much needed change and finally it’s done. Recently we saw the problems in PMC bank (the bank is not yet closed or shut, hence the insurance will still not apply there)

Bank deposit insurance in India vs other countries


As govt said, they want to simplify taxation rules in long run and I feel over next 5-6 yrs, they will slowly try to remove the old system of deductions and exemptions with lesser tax rates coming in.

However I feel, most of the investors needs that carrot of “tax saving” for investments otherwise they don’t do it.

While, its correct that one should invest anyways whether there is tax benefit or not, but when you go to ground level and see, the reality is that people need that nudge to invest. We need to trick them for their own benefit, else they will not think of investments.

From that point, it might be a bad news.

Also, for some years, we will see this confusion of old vs new tax rules and which one should we be choosing, but this can’t continue forever and eventually we will have a single tax system and you guess it right, it will be the new one.

Let me know what are your comments on this budget and how do you see it?