80C: stupid provision time to ignore it.
Immaterial of how much you are earning, the limit of 80C is Rs. 1.5L. This was fixed long long long ago. It is an irrelevant number.
80C includes provident fund, term insurance, and children’s school fees.
So if you are earning about Rs. 15L a year…and have a housing loan, the chances are that you do not need any investment under 80C.
So who is chasing 80C?
I do not know. Too much hoopla around an insignificant provision. Unless the government decides to raise the limit to say Rs. 5L or something like that 80C will be irrelevant. Yes 90% of mutual fund agents get into “which elss to buy” and its shitty equivalents.
First sit down with a pen and paper – see how much is ALREADY deducted for 80C. If you have some old stupid ulip or pension plan where you are putting 2L remember you have ALREADY EXHAUSTED the 80C limit.
So check for your PF, term insurance, home loan repayment, some idiotic endowment or pension plans that you are continuing to pay the premium….if yes, see whether it exceeds Rs. 1.5L. If it does, evaluate the plan. Decide to continue or discontinue…
repeat till you drop dead.
End of story.
Tushar Chaudhari
Will continue till India gets CA finance minister…
Kush Goel
80C is not a stupid provision , it does help significantly in reducing the taxable income. For someone learning 10lakh, its a significant saving
You can say that if earning 15+lakhs , you will probably have the limit covered by PF and home principal. So it does not require much of a planning . But that does not mean its a useless provision.
Its also used by government to direct people’s money to long term savings like PPF; which will not happen in absence of 80C.
Also the limit was raised from 100K to 150K by Arun Jaitely , so it was not a long long time ago
Pradeep D
You hit the nail hard. Govt gets 15 year commitment of PPF money from people at 8% which is so cheap to borrow. It also helps LIC sell their policies to plenty of young unsuspecting employees who just join work without much financial knowledge. LIC returns are even more measly at 5% over 15 or 20 years. What’s more, govt can use LIC money to sell their banks like IDBi, airlines like Air India, etc.
Now you get why we have 1.5 lac deduction which our criminal FM increased to that limit 5 years ago.
Yes they have home loan principal and ELSS also covered there but you bet 90% of the people use LIC and PPF with EPF to achieve the 1.5 Lac savings.
For anything govt does, they have bigger benefit than us.
Adarsh
Sir,
Person earning 15L an year may be the poorest person you may have come across. But for people like me who earn 5L – 10L , this is a big relief.
SS
Hi Pradeep, Can you show a link that show Government (whether NDA or UPA) making tons of money from LIC and misappropriating it?
Actually, you can check the real facts here if you are interested : https : // http://www.indiabudget.gov.in / afs.asp <- remove spaces and go to this link. Click pdf on all kinds of receipts. LIC is not there in picture. Google search says LIC is just paying some 3K Cr dividends to Govt. That is about it! you cannot bail out banks with this money. You may know that india govt revenue from income taxes is only 14% of the total. How much will (and why would) they earn by cheating income tax payees? If that is the case, will opposition (whether NDA or UPA in opposition) sit quiet ?
LIC is not investment instrument, it is insurance instrument. I wonder if one is expecting high returns on this though they are giving something. 80C is not provision for Insurance alone. Lot of tax saver instruments, even Tax saving FDs fall under this category.
SVargh
LIC’s direct payment to government is miniscule but they do make indirect payments when they pick up stake in PSUs when the government comes out with FPOs. IDBI Bank, ONGC are some of the examples. Ultimately the money belongs to the millions of policyholders of LIC. LIC is an insurance instrument but the insurance is paltry and so the investment returns. Endowment policies are neither. The only benefit is it helps in saving some money for those who are not disciplined.
Pradeep
Hi SS,
Its fair to say you missed the point by a country mile. Govt budgets wont tell you how it uses LIC.
You need to look at LIC’s investments. For a start read these.
https://www.livemint.com/Industry/1gp2lF6JAZECirikbSBBhL/LIC-IDBI-Bank-deal-The-good-the-bad-the-ugly.html
https://economictimes.indiatimes.com/news/economy/policy/finance-ministry-confirms-lics-rs-1-5-lakh-crore-railway-ticket/articleshow/61811378.cms
https://www.bloombergquint.com/markets/lic-funded-nearly-50-of-government-ipos-in-fy18#gs.hgnW2rGp
You might have read LIC buying IDBI bank, basically LIC is buying a bank from govt that has 30% of its loans that wont be paid back. They also need to give money to the bank for it to lend.
Have you ever asked why an insurance company should own a bank?
LIC is giving 1.5 lac crore to Indian railway, which is another govt entity for its development. Why?
LIC buys most of govt company shares, because there are not many takers for them. Why?
Do you understand how Govt is using LIC money? They make LIC invest in toxic companies, get loans at cheap rates like the Railways loan, etc. All of that money goes to govt coffers which they then use to spend for other things.
And forallthat money they only need to pay LIC about 4-5% which LIC pays to its policy holders.
Agreed insurance wont give much returns, but let me tell you what you pay and what you get by a simple real life comparison.
I have a pure term plan for 75 Lac for which I pay 6000 Rs premium every year for 20 years of coverage bought in early 30s. The mortality cost for every Lac comes as 6000/75 = 80Rs. This is a private insurance company.
I used to have a LIC policy for 5 Lac for which I used to pay 35,000 premium for a period of 16 years bought in my early 20s.
If you consider say 100Rs as mortality cost,then for 5Lac its about 500Rs.
So the remaining 34,500 Rs to LIC goes as investment component. I will get about 9 Lac at maturity.
The returns is about 5%.
Why is it so low? precisely because of LIC investment decisions taken by the govt.
As a side effect,the private insurers too give only 4-5% returns on endowment plans because LIC is used a benchmark.They dont need to give more. Now imagine they kind of profits they make since their investments will be much more sound and profitable.
Hope you get the point.
Pradeep
Hi SS,
Its fair to say you missed the point by a country mile. Govt budgets wont tell you how it uses LIC.
You need to look at LIC’s investments. For a start read these.
https://www.livemint.com/Industry/1gp2lF6JAZECirikbSBBhL/LIC-IDBI-Bank-deal-The-good-the-bad-the-ugly.html
https://economictimes.indiatimes.com/news/economy/policy/finance-ministry-confirms-lics-rs-1-5-lakh-crore-railway-ticket/articleshow/61811378.cms
https://www.bloombergquint.com/markets/lic-funded-nearly-50-of-government-ipos-in-fy18#gs.hgnW2rGp
You might have read LIC buying IDBI bank, basically LIC is buying a bank from govt that has 30% of its loans that wont be paid back. They also need to give money to the bank for it to lend.
Have you ever asked why an insurance company should own a bank?
LIC is giving 1.5 lac crore to Indian railway, which is another govt entity for its development. Why?
LIC buys most of govt company shares, because there are not many takers for them. Why?
Do you understand how Govt is using LIC money? They make LIC invest in toxic companies, get loans at cheap rates like the Railways loan, etc. All of that money goes to govt coffers which they then use to spend for other things.
And forallthat money they only need to pay LIC about 4-5% which LIC pays to its policy holders.
Agreed insurance wont give much returns, but let me tell you what you pay and what you get by a simple real life comparison.
I have a pure term plan for 75 Lac for which I pay 6000 Rs premium every year for 20 years of coverage bought in early 30s. The mortality cost for every Lac comes as 6000/75 = 80Rs. This is a private insurance company.
I used to have a LIC policy for 5 Lac for which I used to pay 35,000 premium for a period of 16 years bought in my early 20s.
If you consider say 100Rs as mortality cost,then for 5Lac its about 500Rs.
So the remaining 34,500 Rs to LIC goes as investment component. I will get about 9 Lac at maturity.
The returns is about 5%.
Why is it so low? precisely because of LIC investment decisions taken by the govt.
As a side effect,the private insurers too give only 4-5% returns on endowment plans because LIC is used a benchmark.They dont need to give more. Now imagine they kind of profits they make since their investments will be much more sound and profitable.
Hope you get the point.
Pradeep
Hi SS,
Its fair to say you missed the point by a country mile. Govt budgets wont tell you how it uses LIC.
You need to look at LIC’s investments. Do Read details about below investments by LIC in internet.
You might have read LIC buying IDBI bank, basically LIC is buying a bank from govt that has 30% of its loans that wont be paid back. They also need to give money to the bank for it to lend.
Have you ever asked why an insurance company should own a bank?
LIC is giving 1.5 lac crore to Indian railway, which is another govt entity for its development. Why?
LIC buys most of govt company shares in IPO and otherwise as well, because there are not many takers for them. Why?
Do you understand how Govt is using LIC money? They make LIC invest in toxic companies, get loans at cheap rates like the Railways loan, etc. All of that money goes to govt coffers which they then use to spend for other things.
And for all that money they only need to pay LIC about 4-5% which LIC pays to its policy holders.
Agreed insurance wont give much returns, but let me tell you what you pay and what you get by a simple real life comparison.
I have a pure term plan for 75 Lac for which I pay 6000 Rs premium every year for 20 years of coverage bought in early 30s. The mortality cost for every Lac comes as 6000/75 = 80Rs. This is a private insurance company.
I used to have a LIC policy for 5 Lac for which I used to pay 35,000 premium for a period of 16 years bought in my early 20s.
If you consider say 100Rs as mortality cost, then for 5Lac its about 500Rs.
So the remaining 34,500 Rs to LIC goes as investment component. I will get about 9 Lac at maturity.
The returns is about 5%.
Why is it so low? precisely because of LIC investment decisions taken by the govt.
As a side effect, the private insurers too give only 4-5% returns on endowment plans because LIC is used a benchmark. They dont need to give more. Now imagine they kind of profits they make since their investments will be much more sound and profitable.
Hope you get the point.
SS
Hi Pradeep, Thanks for the links. I am not economist. So, learning from you.
PM openly said NPA issues of banks and these need to be bailed out (with tax payer’s money) not a secret. NPA was a situation when this Govt took over. For some (eg. depositors in these banks) it is a relief. For others it is a stupid idea. Every rupee taxpayers pay, Government has full authority and control on how to spend it. (You may know Governments have spent 10 Crores for Hurriyat leader’s security in past 10 years both upa and nda – google search in tribuneindia, links here delay the posts – how is that, to a taxpayer?)
If LIC/Govt is using its money within its authority and legal to do so, it is fine. The budget links do not show that Govt is in any kind of distress/fraud (& neither does the links you send). It is not possible (for any Govt) to please 135 Crore opinions and run the govt. If people at large aren’t happy with the policies/expectations, Govt will fall in the next elections.
You mentioned Criminal FM. What I was wondering is if FM misappropriated some money from LIC and took it personally (for their private consumption/ private hands) leading to criminal activity etc. OR If LIC has denied paying you anything it originally promised to you when you signed up its policy papers?
Pradeep
Hi SS
I dont agree that Govt has the authority to spend LIC money as it likes. LIC is answerable to its policy holders and they are supposed to pay proper returns to them. It is an open secret that govt uses public sector banks to issue loans as per its wish, totally crippling the management standards. This is the reason why those banks are deeply distressed with NPAs. Then using LIC to bail them out,making them buy shares of poor PSUs, these are cheating. IDBI saga is clearly masterminded by the FM.
Would you agree for a bank to not pay you interest on deposit saying they didnt get decent enough returns?
Govt not in distress is not correct, it borrows money every year and if its finances are not in order, its interest costs can increase. Rating companies can downgrade India that will also increase interest rates. So govt has to be careful about doling out freebies.
Finally, I hope you do know that our PPF and EPF money is used to buy govt bonds which is again a kind of loan to the govt. The returns are slightly better in those instruments though.
Much of 80C focuses primarily on EPF, PPF and LIC. I dont think people will put money in PPF or LIC unless they get the tax benefits.
LIC as you could see is very loyal to govt while it stamps its policy holders.
SS
Hi Pradeep, Agree with some of the points you mentioned. But not all, and it is okay to differ. No one puts gun on our heads to agree.. 🙂 I agree on some of points in first para. But, question is which Govt allowed bad lending policies. Current or previous? Find out.. Can’t blame anyone without facts. 2nd para – Banks assure you interest. Most of LIC policies does not assure you fixed percentage returns (unless policy says assured). If LIC assures, they pay you, without default. If it is not fixed, you can’t demand. No one insists you to take out their policy for returns (but for life insurance). On 3rd para pls see the US and China Debt and deficit situation. Comparatively, India is doing reasonably good. Since it is a dollar denominated representation, the inflation and rupee devaluation cushions this debt to an extent as well. I agree on 4th para.
Raghav Hegde
Pradeep: “Now you get why we have 1.5 lac deduction which our criminal FM increased to that limit 5 years ago.”
You lost me there. Yes, we had a criminal FM by the name of Chidambaram who is today trapped in many court cases along with his son. But I though it was Arun Jaitley the current FM who increased the PPF limit to 1.5 L from 1 L about 4 years back. Are you saying Arun Jaitley is a criminal?
How? Why? Do you have any proof that he has indulged in criminal activities? In the same token I can call you a criminal as well. Kahne mein kya jaata hain. Criminal Pradeep.
Pradeep
Thank you blind BJP supporter Raghav for calling me criminal. You read below and start thinking better.
I will call Modi as criminal for not appointing Lokpal after being in power for 5 years.
I will call Modi as criminal for pressuring Rafale to give defence contract to ADAG who is bankrupt with RelComm and owes 50,000 crores to banks
I will call Arun Jaitley as criminal for using LIC policy holder money to bail out sinking banks like IDBI bank
I will call Arun Jaitley as criminal for taking 2 years to deposit EPF interest into subscriber accounts
I will call Arun Jaitley as criminal for promising cash to farmers instead of addressing their concerns regarding the priceof their produce.
I can go on and on.
Arun Jaitley was rejected by the people of his constituency, he lost his Lok Sabha election. He has no authority to be FM.
Even though I may agree Chidambaram has multiple cases to answer to, why would you call him criminal unless the cases are proven? Innocent until proven guilty does not apply?
I am not a STUPID to call Raghav Hegde a criminal. But I did call him something else.
Pradeep
SS,
I am not into which govt did wrong, etc. Fixing one mistake by committing another is not right.
Eg, Would you approve if a thief returns money to his previous victim by stealing from another person?
But if you are saying BJP govt is very honest, etc then here are some points which you need to think.
1) Why wasn’t a Lokpal not appointed after 5 years in power despite SC questioning the Govt on this
2) Why didn’t Modi bring reforms in political party funding? He has made it even more opaque after getting donations 10 times more than others
3) Read DHFL expose saga with open mind, you will understand how BJP is ready to pay 50 crore each to buy MLAs in Karnataka
4) Why Modi has not brought about any reforms in the way Public sector banks are managed,to prevent misuse by politicians
5) How Anil Ambani got Rafale deal without any experience and without a factory,he owes 50,000 crores in RelComm bankruptcy to banks and other lenders. How is he getting credit for this defence business? Would your bank or anyone give you loan if you defaulted on another loan payment?
6) Do you believe some of the statistics this govt brings out is genuine?
I can go on and on. I dont believe Congress too but I am not blind enough to believe BJP.
They are not honest in their deeds.
SS
Hi Pradeep,
I think you referring to link in return on capital post comments section. This is GoI link. Not Modi link. There are an army of bureaucrats & government officers, IAS officers, IPS officers, Secretaries, Directors, Under Secretaries, Researchers, Government critics (who do not change often when govt changes) who endorse these numbers and are putting up for public view. Any mis-information/untrue is up for RTI investigations. (you can also file RTI).. So, they are careful while posting this in a Government of India site.
However, I did not expect you to believe the statistics there. Nirupam, Kejriwal did not believe Surgical strikes happened. But the guys who got the ‘taste of medicine’, know it happened. Likewise, the people who got the economic benefits know that they got the benefits. These are not small numbers. So an individual’s choice to believe it or not does not suppress the economic fact.
Your reply to Raghav you are contradicting yourself ! In one case you are not ready to believe, without proof, even when cases pending against individual. There are guys out on bail. In other case you have ‘declared’ Modi and FM as criminals even without a single case being filed even. They had legal authority for their actions. I don’t get a single Rupee by supporting UPA or NDA (unlike media and other party spokesperson). I am non-partisan. But just for a moment, step outside yourself and see what you have typed. You are going blind with hatred, Not Raghav.
Pradeep
No, my question was to Raghav who declared Chidambaram as criminal even though nothing is proved in our courts. He is the one who says one cannot be called a criminal unless proven so. Then why does he call Chidambaram a criminal?
To be sure Mr.Modi had cases against him for Gujarat riots and he continued to be CM of Gujarat as cases went on, Jaitley has cases against him on DDCA corruption.
The biggest joke of this govt is they were totally against fuel price increases when they were in opposition and fuel prices were $100/barrel.
Within 6 months of coming to power, excise duty on fuel prices increased (at $30/barrel) and they looted from people which they don’t want to bring it down even when it became $70/barrel.
Double standards?
Legally you can do anything when in power, it applies for dictators too but is it right morally?
Wake up non-partisan. A non-partisan means one should be ready to question both sides when they do wrong.
I guess you have no answers for my points 1 to 5 in my previous comment. You read those points again and ask yourself why is it happening.
I am no fan of Congress either, they are a divide and rule and corrupt party
SS
This is an investment blog. Not politics blog. So I just restricted myself to discussions where investments, economics and politics overlap (and pure investments topics). Lets not going into pure-politics topics and debate in this blog. Things you discuss in 1-5 does not affect investor at an individual level in any manner. Even the transformingindia report card site has lot of other development work. But we restrict to economics only, here in this blog.
Political view: A democratically elected government in power ruling over 135 Cr Indians cannot please everybody and run the show. Be it either UPA or NDA. People do wish things should happen like in a 20-20 match, but you can be sure it is a test match. There will be many dot-balls, but occasionally punctuated by dazzling boundaries. It is a collective responsibility. Just like you and I cannot go to forest and catch all the baboons; Modi (and MMS) cannot go to offices and book all the Baboo(n)s personally. There are lots of hostile, anti-social, anti-national activities due to jealousy and hatred happening within and outside India to show us Indians in poor light and to restrict our economic pace. There are people who do not want india to prosper. Suggest that we appreciate the actions of people in power, not lose sight of the big picture and be patient. It is like turning a big ship, not a small motor boat.
This post “80C: stupid provision. time to ignore it” has discussions of legislative and investment overlap. Focus on investment ideas here. I am here to see for facts, learn something and make use of it as an investor. At the same time brick-bating anyone without any backing is not a healthy discussion either.
PS: If Subra-sir brings up a political topic, then we can comment on it. But otherwise, lets leave it at that.
Raghav Hegde
Let’s just stick to the facts shall we…
#1: About Rafale case, refer to the Supreme Court judgment. The Indian government did not give Anil Ambani any contract, it was given to him by Dassault. Why? The contract was given to Pipav Shipyard, a leading company in defence production, which was acquired by Ambani. Also, Ambani’s company was chosen as one of the 72 offset makers. Why talk only about him and not about the other 71 offet makers? What does Anil Ambani’s bankruptcy or whatever have to do with the prime minister? Fact that he goes bankrupt shows he gets no favors from the government.
#2:” The biggest joke of this govt is they were totally against fuel price increases when they were in opposition and fuel prices were $100/barrel. Within 6 months of coming to power, excise duty on fuel prices increased (at $30/barrel) and they looted from people which they don’t want to bring it down even when it became $70/barrel.”
What UPA did was to keep fuel prices at 80 Rs. by buying oil bonds worth billions of dollars. So they basically left time bombs for the next government to solve. The PM does not get anything from raising the oil prices – he took a remarkable reform by tying that to the price of Brent Crude. A lot of the money from the tax gained from the government goes into paying off the interest on oil bonds taken by the UPA and infrastructure and other stuff.
#3: “Why wasn’t a Lokpal not appointed after 5 years in power despite SC questioning the Govt on this”
Who cares about that? LOL
#4: “Why didn’t Modi bring reforms in political party funding? He has made it even more opaque after getting donations 10 times more than others”
Why didn’t Modi do this, that etc. There is a lot Modi has done, a lot he may have not have done. Everyone has a list. Me, I am more than happy. This is the first Prime Minister that makes me proud to be an Indian. (Vajpayee as well, but I was too young then and had other things on my mind).
#5: “Read DHFL expose saga with open mind, you will understand how BJP is ready to pay 50 crore each to buy MLAs in Karnataka”
LOL…okay, great, so is this DHFL the new Rafael, sorry Rafale? Haha. Even assuming that was true…I am from Bangalore. Here, some of the Congi MLAs are worth 5,000 crores or more. So 50 crore will get what? Haha.
#6: “Do you believe some of the statistics this govt brings out is genuine?”
Absolutely. In fact, India has never been as prosperous or better than it is today. Anyway, the stock market is the biggest lie detector. NIFTY went from 7000 when Modiji was made PM candidate in Oct 2013 to present level of 11,000. I have personally made a lot of money from the stock markets over the last 4 years. I follow Mr. Subra’s blog closely and have benefited a lot from his advice. Was a silent lurker, but decided to bare my fangs so to speak finally. (Hi Subra Sir, big fan 🙂 )
Finally..
“I am not a STUPID to call Raghav Hegde a criminal. But I did call him something else.”
You called me a blind BJP supporter. Well, I checked my eye sight, I am not blind, but yes, I am a hardcore BJP supporter. I get what you are trying to say, matter of semantics. You think you can shame me by that. LOL. I am bloody proud to be a BJP supporter.
You know why?
A BJP supporter is not an agent. He gives, not takes. I work hard, pay my taxes and donate to worthy causes. I am a self-employed professional and freakin’ tax paying citizen who was given a tax certificate by Modi Sarkar for giving tax of over 1L/year.My involvement in politics is about turning up on voting day and voting for BJP. That’s it.
Calling someone a blind or whatever BJP supporter is not a pejorative, but the highest honor possible. Thank you for your compliment.
As for you, you are not a criminal. You lack the brains or guts to be one. You are just a frustrated fool venting spleen in the safety and anonymity of the internet. Tilting at the windmills, so to speak. Haha.
(Hey Subra Sir, is there anyway I can get in touch with you? Would love to talk to you and tell you about the things I have learned from your blog over the years and the changes I made to my life based on your advice. (And maybe discuss my portfolio with you). Have read your books too and shared with my friends and relatives. First time I am commenting here though 🙂 )