Is Demonetization Friendly to your Child Education Plans ?

child's future

How is the recent demonetization going to affect your child education plans? It is a question that many of you might be having in your minds.

With Prime Minister’s announcement of withdrawing Rs.500 and Rs.1000 currency notes likely to adversely  impact the short-term consumption, but will eventually benefit the country in the long run. This significant economic measure taken by the government has given birth to the wild hopes and is also being lauded for its potential to suck out the black money from Indian economy.

In our previous post, we have already elaborated how demonetization will impact the common man’s life. Now we are going one step further by discussing on how parents can take advantage of demonetization in making their child education plans.

So, read this article further to know about the useful tips that allow you to shape your child education plans after demonetization.
The Path for Low-Cost Education Awaits You: This audacious move could result in tremendous changes in the long run, especially in the case of education loan available on floating rates. With interest rates of loans expected to go down, it would be a wise move to take an education loan so as to secure your child’s future. In coming days, you can avail the loan at lower interest rates, which will also result into reduction in EMIs. Thus, overall outgo from your pocket will decrease when you plan your child’s future while availing an education loan.

Real Estate Calling: With real estate sector witnessing a drastic downfall in the near future, it would be a smart decision to invest in realty market. By investing your hard earned money in real estates, you will reap the benefits as you can use the same for your child’s education when property rates will rise in the future.
Take a Mutual Path of Debt: With demonetization creating its impact on almost everything, how can mutual funds be left alone. Investors can fetch huge benefits by investing in mutual fund products such as government bonds and other top rated bonds due to the deflationary impacts in the wake of demonetization. With the falling inflation, the debt market is anticipating further rate cuts by the RBI, which will obviously be good for debt investors out there. Experts are expecting a rate cut of 50-75 basis points in the next 6-9 months. Other factors prompting investment in debt market include-increased tax compliance. So, taking a mutual path while investing in mutual funds can also be a best medium to plan your child’s future.

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Savings to Rise: Want to double your savings? Want a relief from tax burden? If yes, say thanks to demonetization of Rs.500 and Rs.1000 currency notes to make this possible for you. With the surge in tax collection, there are chances the government will transfer the benefits of the same by increasing the existing tax exemption limit of 2.5 Lakhs to 4-5 Lakhs in the upcoming budget. Through this way, your savings will rise, and you can utilize your savings to brighten your child’s future.

For example your annual income is Rs.6 lakhs. Let’s see below the tax implication of both current and expected scenarios.
Tax Implication

On Current Tax Exemption Limit of Rs. 2.5 LakhsOn Expected Tax Exemption Limit of Rs. 5 Lakhs
Upto Rs. 2.5 Lakhs- NILUpto Rs 4 Lakhs- NIL
10% of next 2.5 Lakhs-25,00010% of Rs. 1 Lakh-10,000
20% of Rs.1 Lakh-20,000
20% of next 1 Lakh- 20,000Tax payable-30,000
Tax payable-45,000Net tax saving= Rs. 45,000-30,000= Rs. 15,000

So, the time is ripe to invest in the aforesaid mediums to boost your child education plans. Of course, you may have to make subtle changes in your strategy from time-to-time,but these investment tools will more or less allow your children to fulfill their aspirations.

(Updated on:16 November,2016)


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