This is a professional requirement under Practice Guidelines of FPSB

Transcription

1 Abhishek Sawant Solutions Q1 A. Income Tax Liability of Abhishek Answer Gross Receipts from the profession Less: Allowable Expenditures Net Profit Less: Deductions U/S 80C E: Not Allowable since not made out of Chargeble income 0 Taxable Income Income Tax on Total Tax S/C Tax after S/C E.Cess Total Tax Tax Payable Or Living Expenses Total Cash in flow Q2 FDR should be gifted in the name of Abhishek s wife Chhaya otherwise in both other options interest would be clubed back in Abhishek's income only Q3 Q4 Springing Power of Attorney This is a professional requirement under Practice Guidelines of FPSB Answer Q5 On Add: T/C 2% Total Credit Minimum Due on (5%) Bal After Min Due after intt on after intt on after intt on /(1077/1000) or Q6 Abhishek's liquid assets= Cash in hand family's monthly expenses (800000/12)= Expanded Liquidity Ratio (125000/66667)= or 1.87

2 Q7 Expenses required for Chhaya= Current Age 35 Life Expectancy 75 Risk/Interest Free Rate 6% Inflation Rate 5% Inflation adjusted rate of return 1.06/ % pa *((1-(1/ )^40)/ )* Corpus required Q8 If Abhishek takes term insurance policy then annual premium= (2.18*100*100)= Maturity Value in term plan= Nil If Abhishek takes endowment policy then annual premium= (4.36*100*100)= Maturity Value in endowment plan (43600*20)= So effective annual investment portion in endowment plan ( )= PMT= MV= Term= 20 Mode= Begin So R= 6.77% pa Risk free rate of return= 6% pa So Plan 2 is advisable due to its IRR Q9 No, he should not take the policy from back date in term plan as if you take the policy from back date you are paying the premium for the period for which your life risk has already passed out. Q10 Term=(65-40) 25 Equity portion Gold ETF Bond/Bank FDR So Effective Rate of return in 25 years= Equity=.60*1.15^25= Gold=.20*1.1^25= Bank FD=.2*1.08^25= Eff Rate= ^(1/25) % Or 13.42%

3 Q11 Current living Expenses Rate of Inflation 5.00% Rate of expenses increment 5.00% Years till retirement 25 Years during retirement 10 Pre-Retirement rate of return 13% Post retirement rate of return 6% Estate leaving at the end of life ( value of 25 lakh rupees at the end of Abhishek's life) Insurance annuity starting age 45 Insurance annuity ending age 50 Annuity Amount (per annum) After retirement expenses reduction=inflation Step One: Expenses figure at retirement (65)=800000*1+( )^25= Step Two: corpus required at retirement= PV=? FV= Pmt= Mode= Begin Rate of Return= 6% NPER= 10 Step Three: FV of insurance annuity at retirement= first annuity at 45 till *1.13^ Second Annuity at 46 till *1.13^ Third Annuity at 47 till *1.13^ Fourth Annuity at 48 till *1.13^ Fifth Annuity at 49 till *1.13^ Sixth Annuity at 50 till *1.13^ Balance courpus to be accumulated= Monthly investment required= 417,126 FV= PV=0 0 PMT=?? NPER=25 25 ROI=13% 13 Mode=End End

4 Q12 Account opening date 31/03/2003 Maturity date 31/03/2018 Bal as on 31/03/ Rate of intt= 8% Contributions left= 10 Maximum permissible contribution= Extension Blocks= 5 years total extension= 3 times After extension maturity on= 31/03/2033 Pre extension maturity amount= PV= ROI= 8% PMT= NPER= 10 Mode= End FV= -1,769, After extension maturity amount= PV= ROI= 8% PMT= 0 NPER= 15 Mode= End -5,613, FV= Rate of Appr Time FV= Cottage Current Price= % 25 Years So MV of PPF account=56.13 lakh/yes Q13 None of the above Q % {(97.75)(1+r)^1}*0.98=115 hence r=20.04 Q15 70% in PPF+30% in Bank FDR since equity investment has a higher SD of 15% therefor from risk adjusted return point it is not advisable. Maximum permissible investment in PPF is at Rs currently. So is advisable.

5 Solutions Satish Gupta PM Exempt** Right 1 Q Basic salary DA (50% to be included for SRB) Bonus/Commission Medical Re-imb ** For the purpose of RFA calculation Total =510000*15% Add= 10% of Furniture Cost Total Q.17 FDR fixed on Intt as on Intt as on Intt as on Intt as on Intt as on Intt as on Intt Includable in Satish's Income as his mother expired on 30/9/07, 24333/ aftterwards to period interest is to be divided equally in 4 parts as Satish has 3 other siblings Answer Q.18 FDR fixed on Intt as on Intt as on Intt as on Intt as on Interest Q.19 Rupee Value of Current Rs after 10 pa inflation= FV=1000 I= 7% N= If 1000= then 1000= 1000/ = Q. 20 PV FV NPER 4+(1/12) Rate 18.50% Q.21 Loan Principal Rs. 3 lakh Term 36 Months EMI Rs. 9,610 So the ROI= 9.50% IF ROI= 9.50% then term= 30 PV= 3 lakh PMT= 9,610 So the FV= 56,091 So the payment on 31/03/2009=

6 Q22 Since the insurance company allows a 15 days grace period for the renewal, Satish can win his case on the ground of Estoppal Q.23 Total Sum Assured Bonus (12000*20) Less SB= * MV Q.24 There is no life insurance need for Satish Q.25 Satish contribution to the EPF 780 Employer contribution 8.33 in EPS 3.67 in EPF Monthly Total Contribution Years in Job 15 So Monthly Contribution= 1019 Rate= (9%/12) Term= (15*12)= 180 Months Mv= 1019*(((1.0075)^180-1)/.0075)= So the MV Q.26 Option 1 Monthly pension offered Retirement tenure 15 years Rate of interest 8% So the PV of his pension Option 2 Total Due Pension=(18000*12*15)= Total Commuted Value=76% Tax free Value=1/ Taxable= Tax= %=33.99% After Tax Total In hand pension=d279+d Option 3 VRS Amount Tax=33.99% After Tax So option 2 is suitable

7 Q27 MIS MATURITY ORIGINAL Bonus Last month interest 4000 Total MV Q.28 Option 1 Option 2 Year Sale Comm Intt Total Comm Only IRR= % % Q29 Bond Issue Price 8500 MV= LTCG= LTCG Tax=@10% 1150 After Tax Gain= CAGR= 18850/8500= ^ CAGR= 8.29% pa