A young assistant professor at Shri Ram College of Commerce (SRCC), Dr Saumya Aggarwal, shares her views on savings and investments in a telephonic interview with Livemint.
She also talks about the latest changes in the income tax legislation, which affect the Gen Z, scope of cryptocurrencies as an asset class, the impact of artificial intelligence, among other things.
Edited Excerpts:
What are the latest income tax changes that affect young investors such as new tax regime?
As youngsters’ starting salary is not very high, they need to understand that the new tax regime is good for them.
If your total deductions in a year is less than or equal to ₹1.5 lakh, the new tax regime is better. And when the total deduction is more than ₹3.75 lakh, the old tax regime turns out to be more favourable. But if the total deduction falls between these two brackets, one needs to make use of income tax calculator and make a comparative analysis before opting for one regime over the other.
Another important thing that the youngsters need to remember is that daily travel and conveyance allowances are still permitted in the new tax regime. This is beneficial for the young people who might have to travel a lot for their office work.
What is the advice you have for young investors with regards to investment and tax-saving?
I believe they should invest in four financial instruments right from the young age: term insurance, medical insurance, PPF and equity & mutual funds.
I can say from my personal experience that starting term insurance early is good because the premium would be quite affordable. Also, insurance should be treated differently from investment.
And if they have a side gig or have an income from internship, they can invest the same in mutual funds. It is important to remember that you don’t learn about personal finance unless you do it. They should do it themselves instead of relying on a broker. They can even seek their bank’s help for making an investment.
And as far as PPF is concerned, it is a far more rewarding investing instrument with EEE (exempt, exempt, exempt) benefit. I, therefore, highly recommend it over fixed deposits.
How has saving and investment climate changed in the past few years?
Now with so many options available, you don’t need to rely on anyone. And the important thing is that you can do your own research and evaluate your options carefully.
From the fund manager’s details to the past returns data, you can find everything on your own. Another change that I can notice is that investing has gone global.
Now one doesn’t need to rely only on FDs and mutual funds, but in stocks around the world.
Also, now with every transaction being tracked, you know more than you knew earlier. Earlier, people didn’t remember income such as those coming from dividend, but now it is there for you to see on the details shared on the AIS (Annual Information Statement) and the TIS (Taxpayer Information Summary).
What is the investment advice you wish you were given when you were younger, say 10 years ago?
If I knew that time, I would have started my mutual fund investment and term insurance much earlier.
What is your opinion about investing in the new age assets such as cryptocurrencies and NFTs?
We understand that physical currencies won’t exist after a few years. Different governments are experimenting with digital currencies. But when you talk about cryptos, regulation is the issue. When you don’t know how to regulate it, it becomes highly volatile.
Before the pandemic, there was a lot of hype around these currencies and a similar amount of ambiguity. But the future is not clear on this and the government considers this as a danger.
Do you think artificial intelligence (AI) would impact savings and investments? If yes, how?
AI has a number of benefits in terms of handling large data and doing quantum computing. It is useful in research also and with AI, we can analyse millions and billions of data points, and it can do the job with perfection.
But it can’t compensate for the human characteristics such as honesty and integrity.
However, AI can be a danger too. It can imitate the human voice, for instance. Imagine someone calling you, with AI’s help, in the voice of a person you know, and in a panic-like situation, s/he can take all your secure financial information such as passwords, OTP. So, it can be very powerful.
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Updated: 04 Nov 2023, 10:59 AM IST