N.H. Khan, 40 is married to a Doctor, a specialist engaged in providing happiness to infertility patients. Khan works in NCR as Senior Engineering Manager. They have one son aged 5 and enjoy a combined package of Rs240, 000.
He had no liabilities and based on his budget he can save Rs150,000 pm. Khan has been exposed to volatility and risk.
Investor’s Concerns: It was a great exercise for Khan to identify a SEBI RIA who understands faith-based investments. Shariah bans investment in companies that make alcohol, tobacco, pork products, and weapons.
Khan’s Philosophy: Steer clear of interest (considered sin) and other prohibited aspects of financial dealing. Being a practicing Believer real wealth or obligatory charity is a priority. Buying stock on margin and short-selling are prohibited trades due to interest. Selling something which you do not own is forbidden.
Khan’s Goals and Objectives:
• Minimize tax
• Own the family home
• Focus on obligatory charity (Zakat)
• Retirement Income
Strategy and Solution
As a better way to save tax in India we advised the couple to invest Rs.50, 000 each in a Shariah-compliant index ETF Scheme which qualifies under RGESS. The deduction is available on 50% of the amount invested and gives him a tax benefit under Sec 80CCG of IT Act.
We also planned donations to prescribed funds and institutions which qualify for deductions under Sec 80G of IT Act. This will give benefit of both in saving tax and also discharge the obligation of Zakat payment when donated to eligible institutions.
In addition to initial investment, we registered multiple SIPs in 2 Ethical Funds (diversified) of different Asset Management Companies.
A depository account was opened for trading in Direct Equity. All trades in equity are delivery based and stocks selected are tested both for business activity and financial ratios prescribed by a Board comprising Shariah Scholars.
Result
An understanding of the special needs and seeking knowledge as an informed Adviser makes the biggest difference. We have mapped his faith-based financial goals within the regulatory framework. We help investors write their “success story.” Then we design and implement a plan to help them achieve it.
(M S Shabbir is Managing Director, SenSage Financial Services Pvt Ltd, a SEBI Registered Investment Adviser, Hyderabad)
