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Karniti Part 11 (Sachin Tendulkar Special)

“Sachin” like Retirement and its Financial Planning

Keeping conversation between Lord Krishna and Arjuna as the foundation we will learn certain basic financial and tax matter. Let us try to get answers to our questions in a bit different and joyful manner. The character of Arjuna will be played by the common man or tax payer and the character of Lord Shri Krishna the Expert for giving solutions to all problems. Conversation is named as “KARNITI”.

Arjuna: Dear God! God of Cricket “Sachin Tendulkar” retired. In view of the same, how a common man should make financial and mental planning of his retirement?

Lord Krishna: Yes Arjuna! Life is also like a Cricket game. A sports person like Sachin is rare to born again. Many great players were there and may be there in future but none would be like Sachin because of his humanity, loyalty, charm, dedication and other qualities of his character. Retirement like Sachin is not in destiny of everyone. Arjuna, common man should take the decision of retirement considering his own family, working style, earnings, health, etc.     

Arjuna: Krishna, How salaried person make financial planning of retirement?

Lord Krishna: Financial life of the salaried person is like a test match. By playing slowly and for longer time money (runs) has to be earned (scored). Salaried person should contribute up to 12% of the salary to public provident fund and the employer also contributes the same amount. By doing it, one can make large score i.e. saving. The inning for Savings should start from the age of 25 years, so that by the age of 40 or 50, many centuries (money) could be scored.

Arjuna: Krishna, are there any benefits available for salaried person in income tax on the money received after retirement from various funds? 

Lord Krishna: As in Cricket there are various rules for Bowling, Fielding; in Income Tax there are various provisions for taxability of these funds. Investment should be done accordingly. As per rules of income tax, tax exemption can be taken on the Gratuity, Pension, Leave encashment, Superannuation fund, retirement compensation, etc. received to government, non-government and other employees.  Further, the person above age of 60 years will have tax exemption up to Rs. 250,000/- of income and above age of 80 years have tax exemption up to Rs. 500,000/- of income.

Arjuna: How a businessman or a self-employed should make planning? 

Lord Krishna: Arjuna, Financial life of a businessman or a self-employed is like a one day match or 20-20 match. Earning more in Power Play (market season) and playing carefully and scoring in rest of the time. Further there is a risk of getting out (loss) anytime due to market situations in business. Like a salaried person provisions of provident fund is not applicable to businessman. But they should invest 20% to 25% of income in public provident fund or retirement insurance schemes.

Arjuna: Apart from this, what are other ways of saving?

Lord Krishna: As in cricket, selection of shot is based on type of delivery of ball, in the same way selection of investment option should be based on financial position of each person time to time. For e.g. investments can be made in various mutual funds, fixed deposits, government bonds, etc. which will help in retirement. Further, investments in new pension schemes, house, land, gold is beneficial but please note the risk involved and liquidity timings. As for winning match, one has to play best till last over to win and if lost, then runs scored earlier goes in vein. Likewise situation should not arise in the last years of life due to no saving of money.

Arjuna: Krishna, How planning should be done for big expenditures in life such as house, children education, marriage, etc.

Lord Krishna: Arjuna, keep in mind, savings are like helmet and it saves from bouncers (unexpected expenditure) in life. Please note that retirement money and money for big expenditure or investments should be kept separately. Such expenses may be made by bank loan and repaying regular installments. It is said that, up to 60 years of age one should have investments worth 20 times of his annual expenditure. Because after retirement income will decrease and due to inflation of 10% expenditure will increase.

Arjuna: But nowadays earnings are exhausted in paying the bank installments! 

Lord Krishna: As in Cricket, many players earn name and fame and then they disappear. Some loose there concentration due to publicity thus withdraws from the international cricket and try their luck in commercial cricket like IPL. Likewise many people try to imitate others and take financial decision for show off and take loans without considering their earnings. Bank installments should be limited up to 25% to 40% of income. Further one should take loan on future income generating things such as for home, plot, gold or education and minimize loan component on expensive things like vehicle or house hold equipment, etc.

Arjuna: Krishna, how senior citizens can take advantage of new reverse mortgage loan scheme? 

Lord Krishna: Dear Arjuna it’s a good scheme. In this scheme, loan from the bank can be taken by mortgaging the house. Based on fair market value and as per bank rules monthly installments will be disbursed to borrower, which can be used for medical and other expenditure in old age. Further from the age of 60 years till death or up to 20 years installments will be given by bank. Alive borrower or his nominee can repay the loan or bank may sell the house. Thus question of repayment does not arise. A husband or wife having independent children can enjoy the home till the end of life without struggling for money.    

Arjuna: Krishna, What one should learn from retirement of Sachin?

Lord Krishna: As Sachin played with dedication and concentration in the same way others should achieve success in their business or job. Remember Sachin got out on duck many time still without losing faith he played with courage. Likewise due to failure and loss without losing faith, one should work with courage in life. Look Sachin made many records but does not have any ego, likewise others should not have ego of success and wealth. Sachin retired just because of his health not by mind, he will carry on work as Member of Parliament and in other interested fields in life. Likewise one should never get retired by his mind. In the old age also one should carry on some able work, so that fitness is maintained. At last Sachin while busy in cricket had given good parental guidance for development of character of his children, this is the real investment of retirement. Similarly, a person’s children are his support and investment of his retirement, so invest in them. If everyone gets Guru, family and friend like Sachin had got, then life will be easy and more joyful. Further there are various schemes and incentives given by government to senior citizens which are also a part of prudent financial and tax policy.  Look Arjuna, play life like a cricket where winning and losing is a part of the game. Invest in Family values like Sachin and then everyone can retire like Sachin.

Dear Devotees (readers) please give your valuable comments, it may be one of the best article of Karniti Series written by me. I have taken lot of efforts for this creative writing. Your comments are require for further improvement and guidance.


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Category Income Tax, Other Articles by - CA Umesh Sharma 



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