Why do we need a financial book especially for Software Professionals? struck my mind as I started reading the book.
Unlike our parents Indian markets offers a plethora of options to investors. A bank deposit is no longer the only place to park your surplus funds as other asset classes may better fulfill your financial needs. You can choose among debt, equity, commodity, real estate , life insurance and pension products. But how to choose what you want. So this book is for beginner explaining various options, Do’s’ and Don’ts ,Merits and Demerits.
Who is Software Professional : Specialists related to hardware,software,programming,networking and database or web all come under the purview of software professionals It refers to all who are part of the value chain but those who are into software , programming and database specialization seem to be more in demand.
Life as a software professional is sprinkled with various hurdles. Being an export driver sector IT has to depend on overseas market especially US for most of business. Also IT is a profession that requires constant upgrading of knowledge. A job can get monotonous at times, following the same process again and again makes the process repetitive. Entering the world of technology is glamorous but brings with itself immense responsibilities and uncertainties, when recession strikes it causes lay-off, lack of employment opportunities and soaring prices which can have a negative impact on your lifestyle. So a book for Software professionals is much needed. As the blurb of the book says
Financial Planning Essentials has been written expressly keeping Software professionals in mind. As it acquaints you with financial concepts and products, it constantly puts you at ease by drawing parallels with topics that you are familiar with. It takes you seamlessly from square one, which is defining goals, to the ultimate objective, achieving them. It tells you how to cope with foreign exchange income and taxes along the way and leaves you with 5 simple yet all pervading golden rules of financial planning.
Cover of book financial planning essential for Software professionals
Book Organization
Book is divided into 15 chapters, an overview of which is given below :
- Getting there : What it takes to become a software professional (explained in detail later)
- Aims and aspiration : All of us want to be rich but getting there takes some planning. Just like an IT person needs to plan for a project, he needs to plan for each goal. Linking planning for an IT project to planning for goals.
- Goals defined : It explains What are goals, how to set goals, when to review your goals. How does inflation reduce the real value of wealth you own. Investing and not saving is needed for fighting inflation and to capitalize on Compounding. It also gives Four mantras and Four pillars of investment:
- Invest early
- Invest regularly
- The market cannot be timed
- Patience is the key.
- Four pillars of investment:
- Define your needs and financial goals : some examples regular income, purchasing a house, child’s education etc
- Risk appetite : How much risk can you take? This will decide on which investments are suitable for you
- Time horizon : When do you need funds – in near future or after longer time
- Cash flow : What do you prefer : regular income or lump sum amount after a certain period of time.
- Paths to achievement : Gives an overview of various investment options available to investor such as equity investing : Stocks, Mutual Funds , debt instruments like Fixed Deposits.
- Equity investing : It explains about What is equity, who should invest and why? It explains concept of bonus shares and split of shares, understanding equity markets the Cash market and derivatives market. The investment strategies, Trading versus Investment, Do’s and Don’t of equity investment, Merits and Demerits of equity investments.
- About ESOP : What are ESOPs, how does it work.
- Investing in Mutual funds : Explains about Mutual Fund architecture(Custodian, Asset Management Company,Registrar), nuts and bolts of MF (Unit,Fund house, NAV), Types of Mutual Funds
- Debt investments : Gives overview of Govt securities, Fixed Deposits : bank fixed deposits, Company Fixed Deposits, Post office schemes, Tax free bonds, Risks associated with debt instruments
- Investing in Gold and silver : How to buy gold : Coins and Bars,ETF,Mutual Funds, e-gold.
- Investing in real estate : Types of real estate investment (Residential, Commercial), Returns from investment in property in form of capital gains,Points to keep in mind before investing, How to invest in property,
- Earning in foreign currency and dealing with taxation : Difference between Tax avoidance :Minimization of tax liabilities in what which takes on loophole in system but is not ethical, Tax evasion : Method involves non disclosure of income and fraudulently convincing the authorities on lower tax liability. Illegal option Tax planning : You reduce your tax liability by using legal permitted means. Explains the various options or rather sections in Income tax act such as Section 80C, 80D, 80G in which one can invest to reduce tax.
- The project must be completed : Are you protected enough against potential risks of market, Need of life insurance,amount of insurance, types of life insurance plans Advantages, Disadvantages, Suitability, Insure your most valuable asset – your life
- Five golden rules to fulfilling goals : Explains the golden rules which are :
- Invest first then spend
- Start early
- Invest more each year
- Invest at a higher rate
- Use SIP (Systematic Investment Plan)
- Case Studies from Financial Planners : by some leading Financial planners of India like Hemant Beniwal of tflguide.com, Jitendra P.S.Solanki of yourpocketmoney.com, Kiran Telang of Abt capitak advisors, Manikaran Singhal of goodmoneying.com, Stevan Frenandes of Proficient Financial Planners.
- Glossary : help you wade effortlessly through financial jargon defines words like Asset Allocation, Compounding, Mid Cap fund,Risk Tolerance.
Topics Dedicated to Software Professionals
While book can be used by any beginner some portions of the book would appeal more to Software professionals such as Getting it there, ESOPs,Case studies as discussed below.
Getting it there
All it takes to be a cutting edge techie. It takes an approximate sum of Rs 5 – 7 lakh to get there of preparing before the exams, manifestation of the dream, how people get sources for their dream : parent’s money, part time job, education loan, scholarships. But being a techie is a roller coaster ride .. The journey can be broken down into
- The formative years : Getting recruited in the campus by the Global tech giants and Indian IT Firms. the induction sessions,corporate games, parties along with job related training and skills training
- Growth Years : The first years see quick promotions and pay hikes. Gearing up for onsite phase.
- The later stages.
About ESOPs : What are ESOPs, how does it work, Purpose and taxation of ESOP. An example would have been helpful to explain the taxation.
Earning in foreign currency and dealing with taxation : Your obligations under the income tax act. How to find if you are resident or not for those you go for onsite projects. It scratches the surface of taxation and earning in foreign currency. Could have been a little longer.
Case studies specific to the Software professionals and solutions by leading Financial Planners
- Case study of Nisha whose personal finance were in mess owing to huge liabilities in personal loans and credit card debt. Her financial advisor asked Why run away from the situation, face it with courage and confidence. How due to guidance of her financial advisor she was able to become debt free in 1 and half year by living with bare minimum and saved every penny) (Wish there would have more details on it)
- Financial planning of Mr Dipanker aged 35 years works with leading IT company in Gurgoan, He is married to Yogita aged 33 years who is home maker. Dipankar relies heavily on insurance products for meeting his life goals.Also much like his friends and relatives he too desires to build real estate assets and achieve high returns in less time. He faces a serious challenge of not meeting his life goals owing to poor investment decisions and huge responsibilities But during discussion it was revealed that he is not averse to invest in growth assets which can generate higher returns but lacks proper understanding of various asset classes and needs to be counselled on their risk and return characteristics. Case prepared by Hemant Beniwal of TFLguide.com
- The other cases are also by noted financial advisers such as Jitendra P.S.Solanki of yourpocketmoney.com, Kiran Telang of Abt capitak advisors, Manikaran Singhal of goodmoneying.com, Stevan Frenandes of Proficient Financial Planners
Language is simple, font and presentation software manual style. A sample page from the book is given below. More can be read at Flipkart page on Ebook version of book (Click on image to enlarge)
Sample from Book Financial Planning for Software Professionals
Quotes from the book
Book is sprinkled with quotes about money,wealth, financial planning. Some of the quotes are given below (I will be tweeting them from my twitter account @bemoneyaware)
- Wealth is the ability to fully experience life – Henry Dravid Thoreau
- Your life is a journey; it is your money that fuels it
- To make a financial plan, you should have a life plan
- There is not much you can do without money today
- A financial plan is nothing but an exercise of marrying your dreams with your reality,
- Do today what you want for your tomorrows : Robert Kiyosaki
- Finance no longer has to do with money, it has to do with information and advise : Peter F Drucker.
- Investment planning helps fulfil goals
- When buying shares ask yourself would you buy the whole company – Rene Rivkin
- What you risk reveals what you value : Jeanetter Winterson
- Good plans shape good decisions. That’s why good planning helps make elusive dreams come true : Geofery Fisher
- Money buys you everything except the chance to do it again – Mattew J Clayfield
The book explains in simple terms basics of financial planning especially w.r,t software professionals. It is suited for beginners giving an overview of various concepts. It is nice to know that now we have many books for Indians, by Indians of Indians for explaining finances. (When I started reading about personal finances I came across Rich Dad Poor Dad, Dave Ramsey books and not any book targetted towards software professionals!). I would recommend all the IT offices to buy one copy of it for their library for while software professional might earn good money, it is equally important for him to invest and not to be caught in debt trap . Finances give headache and may affect the productivity of employees. At 499 Rs or 350 Rs for ebook , one can also buy to get the basics right for as a popular advertisement says “Because you are worth it!” Or as the say about books One must always be careful of books and what is inside them, for words have the power to change us.”
Remember learning financial language is no use unless you use it. And Just like programming writing out a program is only half the job. Until you run and execute your programme you will never know whether it works. There are bound to be few glitches in your plans and you can iron out these out as you go along with the help of further reading or by consulting a financial planner.
Note: Thanks to CNBC TV18 for giving the book for review.
Related Articles :
- Personal Finance Books For Adults And Young Adults
- Book Review-JagoInvestor:Change your relationship with money
- Books on Money for Children
- Personal Finance Shows in India : Smart Money, Plan F
- Review of Book:11 Principles To Achieve Financial Freedom
Hi Kirti,
I am being offered a contract work form a start-up firm in US. I agreed to work them for 3-4 hours per day totaling 20 hours per week. We have agreed to a billing rate per hour. They will transfer the amount via xoom.com to my bank account in rupees.
I want to know is it legal in India to transfer money in such cases. What are the tax implications for this income for me?
Regards,
Gagan
Congrats Gagan. yes It is legal to earn by freelancing. Any income derived by way of freelancing job is taxable under the provisions of Income Tax Act. 1961 as Profits and Gains from Business / Profession. As a freelancer or business income, you can claim certain expenses such as rent, stationary, telephone, postage, electricity etc against the receipts and deduct it from the income earned through freelancing. A person earning on his own is considered a Sole Proprietor and needs to file income tax returns using the ITR-4 return form . If you have any other income source (maybe your full time job) you need to include that as well while filing your income tax return.
Thanks Kirti for the reply and wishing you a Happy New Year 21014.
Just to confirm again even if my income from my full time job is much more than the freelancing work, would i still need to fill ITR 4 or can I go with ITR 1 using Other source of Income column for freelancing work income.
In case I have to fill ITR 4 , would I be able to get 80C deductions on my salary from my full time job.
What all expenses can I show in ITR 4 for my freelance work.
Would electricity bills, internet bills, telephone bills, house rent can be shown as expenses in case I am operating from my father’s house.
Would you advise me to take professional assistance in filling ITR 4 or would filling ITR 4 be as simple as filling ITR 1 ?
Regards,
Gagan
Gagan the amount of income earned in different types of income is immaterial. So income from freelancing is income from business or profession.
Income earned during the year can be classified into categories like :
Income from Salary
Income from House Property
Income from Business & Profession
Income from Capital Gain
Income from Other Sources :Any income which does not fall under the heads of Salary, House Property, Business & Profession and Capital Gain will fall under the head Income from Other Source. Hence, this is the residuary head of income.
Example of Income from other sources are interest of Saving Bank Account, Fixed Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS)
So you cannot say income from freelancing as income form other sources
Deductions , exemptions all remain the same. So yes you can claim 80C deductions of any income including income from full time job
Expenses : There is no hard and fast rule here. Typically if the bill is in your name and you have made payment by cheque/from your account then you can claim it.
Is internet bill in your name? Do you pay from your account? See these bill are questioned when and if your case comes for scrutiny. So if you are starting out try to find which bills will you claim as Business bills.
You don’t need to show expenses in ITR4 just deduct it from your income.
Fill ITR4 is not rocket science and it’s just a level above ITR1 simply because of many sections involved.
I would recommend getting it filled once by a CA (he can help you in claiming expenses) understand it and if you find you can manage it do it next year yourself.
Hi Kirti,
I am being offered a contract work form a start-up firm in US. I agreed to work them for 3-4 hours per day totaling 20 hours per week. We have agreed to a billing rate per hour. They will transfer the amount via xoom.com to my bank account in rupees.
I want to know is it legal in India to transfer money in such cases. What are the tax implications for this income for me?
Regards,
Gagan
Congrats Gagan. yes It is legal to earn by freelancing. Any income derived by way of freelancing job is taxable under the provisions of Income Tax Act. 1961 as Profits and Gains from Business / Profession. As a freelancer or business income, you can claim certain expenses such as rent, stationary, telephone, postage, electricity etc against the receipts and deduct it from the income earned through freelancing. A person earning on his own is considered a Sole Proprietor and needs to file income tax returns using the ITR-4 return form . If you have any other income source (maybe your full time job) you need to include that as well while filing your income tax return.
Thanks Kirti for the reply and wishing you a Happy New Year 21014.
Just to confirm again even if my income from my full time job is much more than the freelancing work, would i still need to fill ITR 4 or can I go with ITR 1 using Other source of Income column for freelancing work income.
In case I have to fill ITR 4 , would I be able to get 80C deductions on my salary from my full time job.
What all expenses can I show in ITR 4 for my freelance work.
Would electricity bills, internet bills, telephone bills, house rent can be shown as expenses in case I am operating from my father’s house.
Would you advise me to take professional assistance in filling ITR 4 or would filling ITR 4 be as simple as filling ITR 1 ?
Regards,
Gagan
Gagan the amount of income earned in different types of income is immaterial. So income from freelancing is income from business or profession.
Income earned during the year can be classified into categories like :
Income from Salary
Income from House Property
Income from Business & Profession
Income from Capital Gain
Income from Other Sources :Any income which does not fall under the heads of Salary, House Property, Business & Profession and Capital Gain will fall under the head Income from Other Source. Hence, this is the residuary head of income.
Example of Income from other sources are interest of Saving Bank Account, Fixed Deposit, Recurring Deposit, Senior Citizen Saving Scheme(SCSS)
So you cannot say income from freelancing as income form other sources
Deductions , exemptions all remain the same. So yes you can claim 80C deductions of any income including income from full time job
Expenses : There is no hard and fast rule here. Typically if the bill is in your name and you have made payment by cheque/from your account then you can claim it.
Is internet bill in your name? Do you pay from your account? See these bill are questioned when and if your case comes for scrutiny. So if you are starting out try to find which bills will you claim as Business bills.
You don’t need to show expenses in ITR4 just deduct it from your income.
Fill ITR4 is not rocket science and it’s just a level above ITR1 simply because of many sections involved.
I would recommend getting it filled once by a CA (he can help you in claiming expenses) understand it and if you find you can manage it do it next year yourself.
Very thorough review of the book.
Very thorough review of the book.