A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.
- Suze Orman
Financial services are the heart of a Nation. India cannot become a Developed Nation, unless there is economic progress. The Prime Minister Narendra Modi had realized this long ago. The Prime Minister launched the Pradhan Mantri Jan Dhan Yojana on August 28th 2014. This was a very ambitious scheme to provide you and all households in India, access to banking and insurance services.
Pradhan Mantri Jan-Dhan Yojana is a National Mission for Financial Services. The aim of PMJDY is at least one savings bank account for every household in India. The Prime Minister had also launched Pradhan Mantri Suraksha Bima Yojana (PMSBY), which is an accidental death and disability insurance scheme and the Pradhan Mantri Jeevan Jyoti Bima Yojana, which is a Government backed life insurance scheme.
Now, its time for the implementation of GST. It's one of the biggest reforms of the Government and can be a game changer in the Indian economy. Yes, the Goods and Services Tax (GST), will be implemented from July 1st and will replace all indirect taxes. GST could make some goods cheap and some goods costly.
It's time to understand the impact of GST on financial services. You must be curious to know the impact of GST on your Mutual Funds, Insurance plans and banking services. Want to know more on tax planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
You must be wondering if GST will have an impact on your investments. Yes..It will. Mutual funds fall in the GST 18% tax bracket. This is an increase in service tax from the current 15% to 18%, making your mutual fund investments a little more expensive. A higher expense ratio will mean lower returns.
Service tax is charged on custodian fees, registrar and transfer agent fees and also management fees. These are sub-elements of the total expense ratio (TER). After GST, all these fees will increase and TER of the mutual fund scheme, will go up. There is a cap on expenses that AMC's can charge and TER is not allowed to go up. This means you and other investors will have to pay just around 0.03 - 0.04% more on your mutual fund investment charges.
GST is very good for equity mutual funds. Most of the items of mass consumption used by the common man, fall in the GST 0% and 5% slab. This will keep inflation low, boost the economy and increase the profits of companies. Equity mutual funds which invest in shares of these companies will see good profits.
The premiums of your life insurance plans will go up after GST, depending on the type of life insurance plan you avail. Service tax is charged on the entire premium of a term life insurance plan. This is because term life insurance is a pure risk plan. Life insurance falls in the GST tax slab of 18%. A service tax of 18% will be charged on the entire premium of a term life insurance plan, from the current 15%.
Expect the premium of your term life insurance plan to go up after GST.
What about the premiums of your endowment life insurance plan and ULIP's? Endowment life insurance plans and ULIP's deduct charges from the premium you pay. Currently a service tax of 15% is levied only on these charges. After GST, tax will be 18%.
Expect the premiums of your endowment life insurance plans and ULIP's to go up after GST.
You are eligible for a certain number of free ATM transactions each month. If you exceed your free transactions or do not maintain the minimum monthly average balance in your bank account, you will be taxed at 18% instead of 15%, which is a good 3% more.
You will have to pay INR 3 more for every INR 100 paid for banking transactions. This is just a marginal hike.
Banks are cutting interest rates offered on fixed deposits. The Government is cutting interest rates on small saving schemes like PPF, Post Office Schemes and even NSC. You have no option but to shift investments to equity mutual funds. GST means lower taxes on items of mass consumption. This helps the economy, the industry and equity mutual funds which invest in stocks of fundamentally strong Companies. Be Wise, Get Rich.
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