Tips for Strategic Investment Planning and Tax Management

| April 25, 2013

PlanningFinancial planning is one of the most crucial and vital areas of concern into which people are engrossed to the fullest. People make a preposition of their savings and investments in order to have the leverage of cost and return. Be it a corporate house or a partnership or an individual a proper financial planning is essential for all due to the following reasons.

  • One can have proper management and allocation of financial resources over different portfolios.
  • Proper channelization of funds through appropriate intermediaries
  • Helps in capital formation and wealth creation.

With the increase in the number of corporate frauds, there is a greater responsibility on the regulatory authorities to keep a close watch on the proper functioning of the business houses and individual, so that there is immunization against probable losses.

Resource Planning

To maximize returns, there is a need to determine the prospective avenues of investment so as to exploit the best market opportunities.The rate of return has a priority for measuring the optimality of the investment decision. Whether an individual invests for a short term gain or a long term gain solely depends upon the objective of the investor which is also significant.An enterprise also has to determine the various ways of raising capital weighing the cost of capital and cost of debt servicing. Banks, financial institutions and other intermediaries are an important part of the financial system. With the allowance of foreign direct investment, there is free flow of foreign capital which has enhanced the availability of funds to meet the sectoral needs. Budgetary technique is one of the important parameters of control and monitoring the resource utilization. The accumulations and the accruals are also relevant, if the firm has a long term growth strategy   and is required to finance its future projects. The securities market is prone to volatility with the gains and losses being observed across different segments.

Compliance Norms

There is a need for adherence to the various statutory norms by the individuals and the business entities. The various provisions laid by the Companies Act, Partnership Act, SEBI Act have to be compiled   To ensure the accuracy of the books of accounts and check transparency and fairness in the system, firms have to undertake the audit process. It may be audit of accounts or IT audit or social audit or tax audit and has to comply with the regular filing of returns with the authorities like Income tax department, customs and excise as well.

Techniques of risk Management

All are exposed to a risky environment. Different types of risks as credit risk, interest rate fluctuation risk, currency risk, market risk, business risk and default risk effect in varying degrees. It is necessary to adopt proper diversification options for risk minimization.A risk averse investor has an attitude of risk avoidance which is highly contrasting to the perception of a risk neutral and risk loving investor.Even a corporate house measures and identifies the level of risk so as to define specific strategies for its minimization and control be it with regard to fund management or portfolio management. The complex business environment has multidimensional risks in the macro environment. Some are interested to pursue fixed income securities whereas some entities prefer bonds, commercial paper, certificate of deposits, mutual fund investments. For the business entities there is a desperate need for efficient management of working capital management so as to ensure short term liquidity and long term solvency.

Author Bio

Joseph Tennyson is a reputed tax consultant with a well established firm engaged in tax audit for the past fifteen years and offers valuable advices for effective decision making.

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Category: Investment Planning, Tax Management