Your Money Your Way

Review: Kotak Assured Income Plan

2012-02-05T11:52:00.000-08:00

Kotak Assured Income Plan is a traditional savings cum protection plan with 15 years premium paying term and provides protection for 30 years. The highlight of the plan is guaranteed tax free annual income for 20 years to the policyholder from the 10^th policy year until the maturity i.e. for a period of 20 years. The plan also pays, apart from the guaranteed annual income, a lumpsum amount of maturity that will be 104-110% of the basic sum assured. The plan also offers rides for extra protection and loan facility.

Let’s have a look on what you pay and what you get. The returns are based on a 30 year old healthy person:

Annual Premium	Life Cover/ Death Benefit	Total Premium Payable During Policy Term	Guaranteed Income	Total Guaranteed Income Received	Lump-sum receipt on Maturity	Total Returns From Kotak Assured Income
	10 Times The Annual Premium	Premium Paying Term is 15 Years	From 10^th Till 30^th Policy Year	Cumulated for 20 Years	107% of Sum Assured	After 30 years
10,000	1,00,000	1,50,000	9,100	1,82,000	1,07,000	2,89,000
25,000	2,50,000	3,75,000	24,000	4,80,000	2,67,500	7,47,500
50,000	5,00,000	7,50,000	48,000	9,60,000	5,35,000	14,95,000
75,000	7,50,000	11,25,000	75,000	15,15,000	8,02,500	23,17,500
1,00,000	10,00,000	15,00,000	1,01000	20,20,000	10,70,000	30,90,000

Let’s go through the features now:

1. Guaranteed Returns:

As mentioned early, the major highlight of this plan is the guaranteed or assured annual returns for 20 years from the 10^th policy year. The annual tax free guaranteed percentage returns depend upon the premium that you pay. The assured returns range from 9.10% to 10.10% per annum of the sum assured.

Premium Bands	Assured Annual Income
Up to Rs. 24,999	9.10%
Rs. 25,000 to Rs. 74,999	9.60%
Rs. 75,000 and above	10.10%

2. Premium Payment Period:

The premiums are to be paid for the period of 15 years.

3. Life Cover:

The plan offers you the sum assured 10 times of the annual premium for 30 years. In case of death of policyholder during the policy term, the nominee/beneficiary will get the basic sum assured.

4. Maturity:

The plan matures after 30 years. So in addition to giving a assured income for 20 years, the plan gives you a lumpsum equal to 104% to 110% of Basic Sum Assured on maturity.

5. Riders:

The plan gives you the following riders for additional protection:

v Kotak Accidental Death Benefit (ADB)

v Kotak Permanent Disability Benefit (PDB)

v Kotak Life Guardian Benefit (LGB)

v Kotak Accidental Disability Guardian Benefit (ADGB)

6. Eligibility:

v Age at entry: 0 to 60 years

v Age at maturity: 30 to 90 years

v Minimum & Maximum Premium: The minimum is Rs. 10,000 per annum and has no maximum limit. However the maximum amount always depends upon the financial and insurance writing norms.

7. Loan Facility:

After the policy completes 3 years, you can avail a loan against your policy. The maximum loan can be up to 80% of the surrender value and the rate of interest will be declared by the company from time to time. The minimum loan amount is Rs. 10,000.

8. Surrender Value:

The policy acquires guaranteed surrender value of 30% of the premiums paid after 3 years. However it excludes the first premium and the rider premiums.

9. Tax Benefits:

The premiums paid are eligible for tax deduction under section 80C and the annual guaranteed income will be tax free as per current tax laws.

Should You Take This Plan?

The people who seek the capital protection with guaranteed returns year after year may go for it. So if you would rather prefer the guaranteed returns with peace of mind and are not comfortable with the uncertainties and high risk market linked products where the returns are tied to market performance, then go for it. Among the traditional investment products on offer by insurance companies, this is certainly the excellent plan. However if you need a bigger life cover, check term plans.

Infrastructure Bonds At A Glance.

2012-02-04T12:29:00.000-08:00

Infrastructure Bonds: Additional tax savings

Last year, the tax payers were made available an additional deduction of Rs. 20,000 under Section 80CCF. This deduction is available for this year as well over and above the Rs. 100,000 deduction allowed under Section 80C. Under Section 80C an individual is allowed a tax exemption of Rs. 100,000 for investing in specified instruments that include insurance policies, ELSS funds, Provident Funds, Public Provident Funds etc. While some of these exemptions will undergo a change with the introduction of New Tax Code (it is expected from the new financial year), the current year tax exemptions allow for a Rs. 100,000 under Section 80C. It is in addition to this limit that a Rs. 20,000 exemption is allowed this year for investments in Infrastructure bonds under Section 80CCF.

Who can avail of this additional exemption under Section 80CCF?

As per the applicable Section 80CCF, any individual or HUF can invest in these bonds to avail a tax exemption up to a maximum of Rs. 20,000 in the current financial year. For a taxpayer in the highest tax bracket of 30%, such an investment can result in tax savings of approximately Rs. 6,000.

Which companies can issue infrastructure bonds under Section 80CCF?

The tax exemption will be available for investments in infrastructure bonds issued by institutions such as LIC, IDFC, IFCI and others as notified by the Reserve Bank of India as being non-banking finance companies operating in the infrastructure sector.

How does an investment in these bonds work?

These bonds are available for a minimum tenure of 10 years with a lock-in period of 5 years. This basically means that you cannot exit from the bonds for a period of 5 years. At the end of 5 years, investors will typically have an option to avail a buy-back by the issuer, trading it in the secondary market or take a loan by pledging the bonds with specified banks. The interest rates available on these bonds will vary from issuer to issuer and investors can typically opt to either receive interest annually or on a cumulative basis at the end of the holding period.

From a taxation perspective, while the investment in these bonds will allow you to avail of a tax exemption up to a maximum of Rs. 20,000, the interest paid on these bonds is taxable in the hands of the investor. The onus to declare such income and pay applicable tax on it will be on the investor.

Should I invest in infrastructure bonds?

The decision to whether or not to invest in these bonds should be taken keeping in mind the tax savings that you will make by these investments and comparing these against the tax payable on the interest earned and the opportunity loss of not having invested in any other alternate investment options which could give you higher returns.

2012-01-29T23:13:00.000-08:00

IDFC offers tranche 2 of long term infrastructure bonds

The Infrastructure Development Finance Company has announced the public issue of the second tranche of long term infrastructure bonds of face value of Rs 5,000, in the nature of secured, redeemable, non-convertible debentures, having benefits under Section 80CCF of the Income Tax Act, 1961, for an aggregate amount not exceeding Rs 4,400 crore.

This is the issue of the second tranche of long term infrastructure bonds having benefits under Section 80CCF of the Income Tax Act, 1961, by the company within the overall aggregate limit of Rs 5000 crore for the financial year 2011-12. The issue of tranche 2 bonds opened for subscription on January 11, 2012, and will close on February 25, 2012, or earlier, as may be decided by the board of the company. In the event of an early closure or extension of the issue, the company shall ensure that notice of the same is provided to the prospective investors through newspaper advertisements on or before such earlier or extended date of Issue closure.

Ratings: The tranche 2 bonds have been rated as (ICRA) AAA by ICRA and Fitch AAA(Ind) by Fitch. While the ICRA rating indicates stable outlook and the highest degree of safety for timely servicing of financial obligations, the Fitch rating indicates a long term stable outlook.

Issue structure:

The Tranche 2 Bonds will be issued in two series - Series 1 Tranche 2 Bonds and Series 2 Tranche 2 Bonds and will carry an interest rate of 8.70% per annum. The Tranche 2 Bonds will carry a minimum Lock-in period of Five (5) Years from the Deemed Date of Allotment and can be redeemed after Ten (10) Years from the Deemed Date of Allotment. The Tranche 2 Bonds also have a buy back option at the end of five (5) years. The Minimum Subscription will be two (2) Tranche 2 Bonds and in multiples of One (1) Tranche 2 Bond thereafter. For the purpose of fulfilling the requirement of minimum subscription of two Tranche 2 Bonds, an applicant may choose to apply for two Tranche 2 Bonds of the same series or two Tranche 2 Bonds across different series.

Security: The Tranche 2 Bonds are fully secured with first floating pari passu charge over certain receivables of the Company and first fixed pari passu charge over specified immoveable properties of the Company. The security cover is 1.0 times of the outstanding Tranche 2 Bonds at any point in time.

80CCF Benefit: The Bonds have been classified as "Long Term Infrastructure Bonds" and are being issued in terms of Section 80CCF of the Income Tax Act, 1961. In accordance with Section 80CCF, an amount, not exceeding Rs. 20,000 per annum in the year of investment, paid or deposited as subscription to Long Term Infrastructure Bonds during the previous year relevant to the assessment year beginning April 01, 2012, shall be deducted in computing the taxable income of a resident individual or Hindu Undivided Family ("the HUF"). In the event that any applicant applies for Tranche 2 Bonds exceeding Rs. 20,000 per annum in the year of the investment, the aforesaid tax benefit shall be available to such applicant only to the extent of Rs. 20,000 per annum in the year of the investment.

The first tranche of the Bonds was issued by the Company in December, 2011 on the terms set out in the Shelf Prospectus and the Prospectus - Tranche 1 dated November 11, 2011 for an aggregate amount of Rs. 532.62 crore. The funds raised through the public issue of Tranche 1 Bonds and Tranche 2 Bonds will be utilized towards "Infrastructure Lending" as defined by Reserve Bank of India ("the RBI") in the Regulations issued by it from time to time, after meeting the expenditures of, and related to the Issue. The Tranche 2 Bonds will be in the nature of Debt and will be eligible for capital allocation and accordingly will be utilized in accordance with Statutory and Regulatory requirements of Reserve Bank of India and the Ministry of Finance.

The Lead Managers to the Bond Issue are Karvy Investor Services Limited, HDFC Bank Limited - Investment Banking Division, ICICI Securities Limited, JM Financial Consultants Private Limited and IDFC Capital Limited. The Co-Lead Managers to the Issue are Bajaj Capital Limited, RR Investors Capital Services Private Limited and SMC Capitals Limited. The Registrar to the Issue is Karvy Computershare Private Limited.

Source: Moneycontrol.com

2012-01-29T13:29:00.000-08:00

Tax Planning For FY 2011-12 Where To Invest & Save Tax ?

The current financial year is going to be completed on 31st March, 2012. Everybody will be in planning How to Save Income Tax? Here we will discuss all about Tax Planning. We should pay taxes every year as responsible citizens. However, the law allows certain “tax-deductible” savings and we owe it to ourselves to benefit from these options, which could translate into future savings. Every citizen has a fundamental duty to pay taxes honestly and a fundamental right to avail of all the tax incentives that the law provides. Therefore, through prudent tax planning, not only can we reduce our income-tax liability but also secure our future through compulsory savings. Let us see how one can do successful tax planning to enjoy optimum benefits.

Know The Tax Slabs/brackets:

The Most Important Section For Individual Tax Payers For Tax Saving – Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Under this section, you can invest a maximum of Rs 1 lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000.

Qualifying Investment options under Section 80C

Investment options with Section 80C can be segregated as follows:

Provident Fund & Voluntary Provident Fund: Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer’s contribution. While employer’s contribution is exempt from tax, your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF).

Public Provident Fund: An account can be opened with a nationalized bank or Post office. The current rate of interest is 8%, which is tax-free and the maturity period is 15 years. The minimum amount of contribution is Rs 500 and the maximum is Rs 10,00,00.

National Savings Certificate: These are now 5-year small-savings instrument, where the rate of interest is 8% and is compounded half-yearly. The interest accrued every year is liable to tax but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.

Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can be included in section 80C deduction. If you are paying premium for more than one insurance policy, all the premiums can be included. Besides this, investments in unit-linked insurance plans (ULIPs) that offer life insurance with benefits of equity investments are also eligible for deduction under Section 80C. The things are however going to change after the introduction and implementation of DTC. So be careful if you are buying new insurance policies just to save tax. You may be in for shock later on. So better consult your financial planner (not insurance agent).

Equity-linked savings scheme (ELSS): An ELSS (equity-linked savings scheme), offered by mutual funds, is a diversified equity scheme with a three-year lock-in period, providing tax benefits under Section 80C of the IT Act. As 80-100% of the corpus in a diversified equity scheme is invested in the equity market, the performance of these funds is in line with market trends.

Tax benefits for ELSS, however, will become history once the new DTC comes into force on April1, 2012. So this year is probably is the last opportunity for anyone looking to save tax through ELSS.

Home Loan Principal Repayment: Your EMI consists of two components, namely principal and interest. The principal component of the EMI qualifies for deduction under Section 80C. Even the interest component can save you significant income tax – but that would be under Section 24 of the Income Tax Act.

Stamp Duty and Registration Charges For Home: The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C. However, this can be done only in the year in the year of purchase of the house.

Five-Year Bank fixed deposits: Tax-saving fixed deposits (FDs) of scheduled banks with tenure of five years are also entitled for section 80C deduction.

Children’s Tuition Fees: Apart from the above, things like children’s tuition fees expenses that can be claimed as deductions under Section 80C. However, you need receipts to claim the same.

Senior Citizen Savings Scheme 2004 (SCSS): A recent addition to section 80C list, Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Current rate of interest is 9% per annum payable quarterly. Please note that the interest is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on these deposits won’t earn any further interest. Interest income is chargeable to tax.

5-Yr post office time deposit (POTD) scheme: POTDs are similar to bank fixed deposits. Although available for varying time duration like one year, two year, three year and five year, only 5-Yr post-office time deposit (POTD) – which currently offers 7.5 per cent rate of interest –qualifies for tax saving under section 80C. Effective rate works out to be 7.71% per annum (p.a.) as the rate of interest is compounded quarterly but paid annually. The Interest is entirely taxable.

Investment Option To Save Taxes!

2012-01-29T13:18:00.000-08:00

What are the investment schemes where investors can save taxes?

An investor can save taxes by investing under the following sections of the Income Tax Act, 1961:

v Section 80C (Investment avenues are discussed below in detail)

v Section 80D (Health insurance premium etc)

v Section 80E (Educational loan)

v Section 80G (Donation to specified institutions)

v Section 80U (Deduction for handicapped people)

v Section 24 (Housing loan interest)

Under Section 80C tax deduction an individual could invest up to a maximum limit of Rs 1 lakh in one or more of the following options put together:

v PPF (Public Provident Fund): Under this scheme the maximum investment permissible in a financial year is Rs 100,000

v EPF (Employees Provident Fund)

v Life Insurance Premium

v Pension Plan premium (under Sec 80CCC)

v ULIP

v ELSS (Equity linked saving scheme)

v NSC (National Savings Certificate)

v 5-year bank fixed deposit

v 5-year post office time deposit

v Infrastructure bonds / NABARD rural bonds

v NPS (New Pension Scheme) under Sec 80CCD

A Liitle Known But An Excellent Tax Saving Option - My Personal Favorite

2012-01-29T13:14:00.000-08:00

All You Need To Know About Equity Linked Saving Scheme (ELSS)

Most of the people during the tax saving season (JAN-FEB-MAR) rush up for tax saving to invest upto 1 lac which qualifies for tax exemption under section 80C. And end up in paying LIC premium, PPF, NSC, 5 year bank FDs and other traditional tax savings instrument. Let us tell you one another option available: ELSS

What is ELSS?

ELSS - Equity Linked Savings Scheme is a type of mutual fund which is qualified for tax exemption under section 80C. Let’s dig into more information on this scheme.

Ø An ELSS is a mutual fund scheme that invests in equity and equity related securities.

Ø ELSS is just like a diversified equity fund in terms of their portfolio.

Ø They have a 3 year lock-in period.

Ø ELSS offers a tax deduction under section 80C upto investments of RS. 100000.

Advantages of ELSS over NSC and PPF

Ø Main advantage of ELSS is its short lock-in period of 3 years in comparison to any other tax saving instrument. Maturity period of NSC is 6 years and PPF is 15 years.

Ø Since it is an equity linked scheme earning potential is very high compared to PPF or NSCs.

Ø Investors who want periodic dividends can consider the dividend payout option under the ELSS category, wherein the dividends received are also tax free. In fact, this is the only investment option under Section 80C which provides interim cash flow during the lock-in period.

Ø Investor can opt for Systematic Investment Plan (SIP) rather than having to put money in lump sum.

Disadvantages of ELSS

Ø Risk factor is high compared to NSC and PPF.

Ø Returns are not guaranteed as these depend upon the market.

Ø Premature withdrawal is not allowed but it is allowed in other instruments in some specific conditions.

How can an investor buy ELSS from mutual funds? How is the return in the ELSS compared to other schemes like PPF and NSC?

ELSS could be open-ended or close-ended in nature. Majority of ELSS schemes are open-ended. This means they are open for subscription on all business days. As the name suggests, the scheme primarily invests in equity market by buying equity stocks of companies listed on the stock exchanges.

The units of the scheme are offered at the NAV (net asset value). The NAV is announced for all business days and keeps changing primarily depending upon the movement in the prices of stocks held in the portfolio of the scheme.

Equity as an asset class has given a higher return over the long term. ELSS has the potential to give substantially higher returns as compared to that from PPF or NSC over the long-term. The returns from PPF or NSC are in the range of 8 per cent and at times may not beat inflation.

Returns from ELSS could fluctuate depending upon the performance of the equity market and also the stock selection criteria of the particular fund manager. Returns from ELSS could even be negative in the short to medium term. As on 31st December, 2009, the average compounded annualised growth rate (CAGR) over 3 and 5 years period for the ELSS category of funds was 8.2 per cent and 20.1 per cent respectively. So ELSS is recommended for longer duration and SIP is the ideal method to invest in ELSS.

ELSS also scores over other tax-saving schemes since it offers tax-free return (long-term capital gains and dividends are totally tax-free as per the current tax structure). Only PPF offers tax-free return but it has a maturity period of 15 years.

What should be the criteria for choosing ELSSs offered by the different MFs?

The investor should apply the following criteria while selecting an ELSS for an investment:

Ø The track record of the fund at least over the last 3 to 5 years. One should not attach too much importance to the recent 1-month or 3-month performance.

Ø It is not necessary that the investor should select an ELSS based on its large size.

Ø The discerning investor could also look at the portfolio of the scheme to ensure that it is well-diversified across market caps.

Ø If the investment amount is more than Rs 20,000, then probably the investor could select two ELSS funds instead of one.

How much should one invest in ELSS?

The amount that needs to be invested in ELSS would depend on your risk profile as well as the other investments already committed towards PPF, EPF, insurance etc. A young investor with longer time horizon could use the entire limit of Rs 1 lakh for investing in ELSS if s/he is not investing in other tax-saving instruments under Section 80C whereas an aged investor could decide on a mix of three or four investment options. But, an investor should not ignore the ELSS option because this is the only option which has the potential of delivering higher returns.

Disclamier: This is not a recommendation. This is only for information use only. Please consult your personal financial advisor for the suitability of this or any other investment product. If you don't have a qualified personal advisor, please feel free to contact Your Financial Coach at satinder @yourmoneyyourway.in

All You Wanted To Know About Post office Monthly Scheme (PO MIS)

2012-01-29T13:02:00.000-08:00

All You Wanted To Know About Post office Monthly Scheme (PO MIS)

The post-office monthly income scheme (MIS) provides for monthly payment of interest income to investors. It is meant for investors who want to invest a sum amount initially and earn interest on a monthly basis for their livelihood. This scheme offers monthly income and is a safe, guaranteed-by-the-government option. The MIS is not suitable for an increase in your investment. It is meant to provide a source of regular income on a long term basis. The scheme is, therefore, more beneficial for retired persons. The MIS is not suitable for an increase in investment. It is meant to provide regular income on a long term basis.

Who is eligible to open the account?

Only individuals can open the account. Only one deposit is available in an account either single or joint (two or three).

Minimum and Maximum Investment

The minimum investment in a Post-Office MIS is Rs 1,500 for both single and joint accounts. The maximum investment for a single account is Rs 4.5 lakh and Rs 9 lakh for a joint account.

Duration
The duration of MIS is six years.

Interest

The post-office MIS gives a return of 8% interest on maturity. A 5% bonus is paid on maturity of the fund, therefore, the effective yield works out to 8.9% per year.

Tax Benefit

The interest earned is fully taxable. There is no tax deducted at source (TDS). The investment in PO MIS is exempt from wealth tax.

Withdrawal
Premature closure of the account is permitted any time after the expiry of a period of one year of opening the account. Deduction of an amount equal to 5 per cent of the deposit is to be made when the account is prematurely closed. Investors can withdraw money before three years, but a discount of 5%. Closing of account after three years will not have any deductions. Post maturity Interest at the rate applicable from time to time (at present 3.5%). Monthly interest can be automatically credited to savings account provided both the accounts standing at the same post office.

How to Open PO MIS Account

You can open a post office MIS at any post-office in India. When you open an MIS, you will get a certificate issued by the post office. In addition, the investor is provided with a passbook to record his transactions against his MIS.

Nomination
You can specify the nominee at the time of opening the account, or at any time later.

Be Smart & Intelligent With Your Money.
Your Life! Your Money! Your Way!

All You Wanted To Know About Senior Citizen Saving Scheme 2004

2012-01-29T13:00:00.001-08:00

All You Wanted To Know About Senior Citizen Saving Scheme 2004

Government of India introduced Senior Citizens Savings Scheme, 2004 (SCSS) with effect from 1st November 2004. As the name suggests this scheme is meant for senior citizens. This is the safest investment option and an excellent avenue of investment and return for Senior Citizens.

What are the salient features of the Senior Citizens Savings Scheme, 2004?

Tenure of the scheme	5 years which can be extended by 3 more years
Rate of interest	9 per cent per annum. The same will be payable on 31st March, 30th June, 30th September and 31st December each year.
Frequency of computing interest	Quarterly
Taxability	Interest is fully taxable
Whether TDS is applicable	Yes, Tax will be deducted at source
Investment to be in multiples of	Rs. 1000/-
Maximum investment limit	Rs. 15 lakh
Minimum eligible age for investment	60 years (55 years for those who have retired on superannuation or under a voluntary or special voluntary scheme). The retired personnel of Defence Services (excluding Civilian Defence Employees) shall be eligible to invest irrespective of the age limits subject to the fulfillment of other specified conditions
Premature withdrawal facility	Available after one year of holding but with penalty
Transferability feature	Not transferable to others
Tradability	Not tradable
Nomination facility	Nomination facility is available
Modes of holding	Accounts can be held both in single and joint holding modes. Joint holding is allowed but only with spouse
Application forms available with	Post Offices and designated branches of 24 Nationalised banks and one private sector bank
Applicability to NRI, PIO and HUFs	Non resident Indians, Persons of Indian Origin and Hindu Undivided Family are not eligible to open an account under the scheme.
Transfer from one deposit office to another	Transfer of account from one deposit office to another in case of change of residence is permitted

Can a joint account be opened under the scheme with any person?

Joint account under the SCSS, 2004 can be opened only with the spouse.

What should be the age of the spouse in case of a joint account?

In case of a joint account, the age of the first applicant / depositor is the only factor to decide the eligibility to invest under the scheme. There is no age bar/limit for the second applicant / joint holder

What are the withdrawal and pre-mature withdrawal conditions?

No withdrawal shall be permitted before the expiry of a period of five years from the date of opening of the account. The depositor may extend the account for a further period of 3 years.

Premature closure of account is permitted

1. After one year but before 2 years on deduction of 1 ½ % of the deposit.

2. After 2 years but before date of maturity on deduction of 1% of the deposit.

In case of death of the depositor before maturity, the account shall be closed and deposit refunded without any deduction along with interest.

Whether both the spouses can open separate accounts in their individual capacity with separate limit of Rs.15 lakh for each of them?

Yes. Both the spouses can open individual and / or joint accounts with each other with the maximum deposits upto Rs.15 lakh each, provided both are individually eligible to invest under relevant provisions of the Rules governing the scheme.

What happens to the accounts if both the spouses are maintaining individual accounts and not any joint account and one of them expires?

If both the spouses have opened separate accounts under the scheme and either of the spouses dies during the currency of the account(s), the account(s) standing in the name of the of the deceased depositor / spouse shall not be continued and such account(s) shall be closed

In case of a joint account, if the first holder / depositor expires before maturity, can the account be continued?

In case of a joint account, if the first holder / depositor expires before the maturity of the account, the spouse may continue the account on the same terms and conditions as specified under the SCSS Rules. However, if the second holder i.e. spouse has his / her own individual account, the aggregate of his/her individual account and the deposit amount in the joint account of the deceased spouse should not be more than the prescribed maximum limit. In case the maximum limit is breached, then the remaining amount shall be refunded, so that the aggregate of the individual account and deceased spouse’s joint account is maintained at the maximum limit.

Whether any income tax rebate / exemption is admissible?

No income tax / wealth tax rebate is admissible under the scheme. The interest income from the scheme is fully taxable. The prevailing income tax provisions apply.

Is TDS applicable to the scheme?

Yes, TDS is applicable to the scheme as interest payments have not been exempted from deduction of tax at source.

Whether any minimum limit has been prescribed for deduction of tax at source?

Tax is to be deducted at source if the interest paid or payable exceeds Rs.5000/- during the financial year.

Be Smart & Intelligent With Your Money.
Your Life! Your Money! Your Way!

All You Wanted To Know About Kisan Vikas Patra

2012-01-29T12:48:00.000-08:00

Kisan Vikas Patra (KVP) is a saving instrument that provides interest income similar to bonds. Amount invested in Kisan Vikas Patra doubles on maturity after 8 years & 7 months. Some people have a misconception that only a farmer can invest money in Kisan Vikas Patra. However, it is absolutely false. Anyone wishing to invest money at safe places can go for Kisan Vikas Patra.

How to Invest

One can invest in any head post office / sub-post office in cash, demand draft, or local cheques.

Who Can Invest

Kisan Vikas Patra can be purchased by the following:

An adult in his own name, or on behalf of a minor
A Trust
Two adults jointly

Tabs and Denominations

Kisan Vikas Patra are available in the denominations of Rs 100, Rs 500, Rs 1000, Rs 5000, Rs. 10,000 and Rs. 50,000. There is no maximum limit on purchase of KVPs.

Withdrawal
Premature encashment of the certificate is permissible from 2 ½ years though no interest will be payable in that case.

Who is not Eligible

Commercial Companies and institutions are not eligible to purchase KVP.
NRIs and Hindu Undivided Families cannot purchase Kisan Vikas Patra.

Maturity

Facility of reinvestment on maturity.
Maturity proceeds which are not drawn are eligible for Post office Savings account interest for a maximum period of two years.

Salient Features

KVPs can be pledged as security against a loan to Banks/Govt. Institutions.
KVPs are transferable to any Post office in India.
KVPs can be transferable from one person to another person before maturity.
Nomination Facility is available in case of KVPs
Duplicate can be issued for lost, stolen, destroyed, mutilated and defaced KVPs

Tax Benefits

No income tax benefit is available under the Kisan Vikas Patra scheme. Interest income is taxable, however, the deposits are exempt from Tax Deduction at Source (TDS) at the time of withdrawal. KVP deposits are exempt from Wealth tax.

Be Smart & Intelligent With Your Money.
Your Life! Your Money! Your Way!

2012-01-29T12:44:00.000-08:00

All You Wanted To Know About National Saving Certificates (NSCs)

National Savings Certificate, popularly known as NSC, is a post office tax saving instrument that combines adequate returns with high safety. NSCs are an instrument for facilitating long-term savings.

How to Invest

National Savings Certificates are available at all post-offices. The application can be made either in person or through an agent. Post office agents are active in nooks and corners of the country. Following types of NSC are issued:

Single Holder Type Certificate: This can be issued to: (a) An adult for himself or on behalf of a minor (b) A Trust.
Joint 'A' Type Certificate: Issued jointly to two adults payable to both holders jointly or to the survivor.
Joint 'B' Type Certificate: Issued jointly to two adults payable to either of the holders or to the survivor.

Who can Invest

An adult in his own name or on behalf of a minor
A trust
Two adults jointly

Denominations and Limit

National Savings Certificates are available in the denominations of Rs. 100, Rs 500, Rs. 1000, Rs. 5000, & Rs. 10,000. Minimum investment required is Rs. 100 and there is no maximum limit on the purchase of the certificates

Maturity
Period of maturity of a certificate is six years. Presently interest paid is 8 % per annum half yearly compounded. Investment of Rs. 1000/- grows to Rs. 1601/- in six years.

Premature Encashment of NSCs

Maturity value of a certificate of any other denomination is at proportionate rate. Premature encashment of the certificate is not permissible except at a discount in the case of death of the holder(s), forfeiture by a pledgee and when ordered by a court of law.

Tax Benefits

Interest accrued on the certificates every year is liable to income tax but deemed to have been reinvested.
Income Tax rebate is available on the amount invested and interest accruing under Section 80C of Income Tax Act, as amended from time to time.

Be Smart & Intelligent With Your Money.
Your Life! Your Money! Your Way!

2012-01-29T12:42:00.000-08:00

All You Wanted To Know About Public Provident Fund (PPF)

What is PPF?

Meant for general public, Public Provident Fund or PPF as popularly known is a long-term, government backed savings scheme started with the objective of providing old age income security to the workers in the unorganized sector and self employed individuals.

Who can open a PPF account?

A PPF account can be opened by an individual (salaried or non-salaried). An individual can open only one PPF account to which he contributes. A PPF account can also be opened in the name of your spouse or children.

Where a PPF account can be opened?

It can be opened at any branch of the State Bank of India (SBI) or branches of it’s associated banks like the State Bank of Mysore or Hyderabad. The account can also be opened at the branches of a few nationalized banks, like the Bank of India, Central Bank of India and Bank of Baroda, and at any head post office or general post office.

What is the duration of the investment?

People who are interested in liquidity or short term would not be very keen about PPF because the duration for the investment is 15 years. However, the effective period works out to 16 years i.e., the year of opening the account and adding 15 years to it. The contribution made in the 16th financial year will not earn any interest but one can take advantage of the tax rebate.

The account holder has an option to extend the PPF account for any period in a block of 5 years after the minimum duration elapses. The account holder can retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.

What is the minimum and maximum amount of deposit?

The minimum deposit that you can make into a PPF account in one whole financial year is Rs. 500 and the maximum is Rs. 100,000.

What are the tax benefits from PPF?

The amount you invest is eligible for deduction under the Rs. 1, 00,000 limit of Section 80C. On maturity, the entire amount including the interest is non-taxable.

Is it possible to withdraw the amount deposited at any time during the tenure?
Yes. You can take a loan on the PPF from the third year of opening your account to the sixth year. So, if the account is opened during the financial year 2009-10, the first loan can be taken during financial year 2011-12 (the financial year is from April 1 to March 31).
The loan amount will be up to a maximum of 25% of the balance in your account at the end of the first financial year. You can make withdrawals during any one year from the sixth year.
You are allowed to withdraw 50% of the balance at the end of the fourth year, preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower. For e.g., if the account was opened in 2000-01, and the first withdrawal was made during 2006-07, the amount you can withdraw is limited to 50% of the balance as on March 31, 2003, or March 31, 2006, whichever is lower.

Is the benefit of Tax Deduction under section 80C of the Income Tax Act available to a spouse when he or she contributes to the Public Provident Fund account maintained by the other?

Permissible! The benefit under Section 80C is admissible to both, a husband contributing to the wife's account and the wife contributing to the husband's account. However, there is one condition, the contributions should be made out of the contributor's taxable income.

If one wishes to continue a PPF account after the completion of a15 years tenure, is it better to go for extension in blocks of five years or should one start a fresh account after closing the previous one?

If you close the account and open another fresh PPF account, you have access to 100% of your account balance, while extending the same account for a block of five years give you access to only 60% of your account balance at that time. This means that a large amount of money gets blocked for five years. Starting a fresh account gives you the opportunity to decide the amount you want to invest with the entire maturity amount at your disposal. This is an important factor keeping in mind the recent interest rate cut

For how many years can a PPF account be extended after the initial 15 years of operating a PPF account?

After the PPF account has been in operation for 15 years, it can be extended for a duration of five years at a time. There is no limit, extensions can be taken any number of times.

Can I open an account in the name of a minor?

Certainly. Under the Public Provident Fund Scheme, an individual may open one Public Provident Fund account on behalf of a minor child of whom he is the guardian. It may be reiterated that only one account may be opened in one name. Thus, if a guardian opens an account on behalf of a minor child, another guardian cannot open an account on behalf of the same minor child.

Some more facts about PPF:

Investment in one or more installments up to a maximum of 12 installments in a year can be done.

Nomination facility is available in the name of one or more persons.

Nominee cannot continue the account of the deceased PPF account holder in his/her name.

Transferability

The account may be transferred at the request of the account holder free of charge by one branch of State Bank of India or its associates to a head post office or vice versa.

Revival of Discontinued Account

The discontinued account can be revived on payment of Rs. 50 per year along with arrears of subscription of Rs. 500 per year.

Attachment

It is free from attachment by a court in respect of any debt or liability incurred by the account holder. However it is subject to attachment under the orders of the income tax authorities.

Be Smart & Intelligent With Your Money.
Your Life! Your Money! Your Way!

Do You Find It Difficult To Save Money?

2012-01-29T12:37:00.000-08:00

The Ultimate Technique To Save Money

I had earlier shared with you that the secret to create wealth is to start early to save money and invest it properly and regularly. However most people find it really difficult to save money. Every month after paying for groceries, telephone/electricity/fuel/credit card bills, children’s school fees, EMIs etc, they realize that they are left either with very less money, no money or worse in negative i.e. their income is no longer able to cop up with their expenses. So how can one save in such a situation? What can one do to save money? So today I am going to share with you the ULTIMATE TECHNIQUE TO SAVE MONEY REGULARLY. However, before I do that, I will first like to share a possible solution for those people who often find their expenses exceeding their income most of the time. So folks if you find yourself in such situation, there are only two ways to handle this situation, either you find ways to raise your income (like find a better paying job) or cut your expenses. And from my experience, I can tell you such situation has more to do with the expenses than the income. Why I Say so. I say so because both saving and spending are habits and both are directly related to attitude and behaviour. So I strongly suggest that you sit down, note down your expenses on regular basis, analyze and cut your expenses wherever you can. You may be spending either too much on outings, parties, entertainment, fuel, mobile bills, expensive clothes or gadgets and so on. You may find it difficult in the beginning to cut your expenses. But if you are truly committed and you put your priorities in place, you should be able to do it. You have to prioritize whether you want instant gratification (which is often short lived) or the long term financial stability and security for you and your family. There is no other way than to prioritize your priorities if you are really looking for having long lasting wealth and financial success in your life.

Now comes the ultimate technique to save money. Listen it very carefully. PAY YOURSELF FIRST. Yes! You read it right. Pay Yourself First. What does it mean? Very simple. Before you pay your bills, your children’s fees, your EMIs and so on, Pay Yourself First. Before even you touch your salary or income, let a particular fixed amount go to your long term savings and investments. Let me explain. Let’s say you decide that you want to save 10% of your income every month and your income is 25000. So before you start spending 25k, take 2500 out of 25k and put it into your long term savings and investments whether it is PPF, Mutual Fund or any other instrument wherever you are doing your investments. But MAKE SURE YOU DO IT. And you spend the rest 22500 without any worry or guilt. This way you should be able to meet your saving targets.

I am sure if you adopt this technique, you can’t go wrong as far as saving money is concerned. Remember this is the first step towards financial success and having enough money in your life. So make sure YOU DOT IT.

Happy Saving!

Be Smart & Intelligent With Your Money.
Your Life! Your Money! Your Way!
____________________________________________________

Fee Free To Contact You Financial Coach At Satinder@yourmoneyyourway.in To Help You Take Charge of Your Personal Money Matters & Put in Order.
_____________________________________________________

2012-01-29T12:10:00.000-08:00

Actions Speak Louder Than Words.

If somebody asks me what will be one of the most important reasons that I will give for failure, I will put the finger on this: Lack of action. Failure to get started. You see, earlier the problem used to be lack of information, the ignorance. Today, information is not the problem. In fact too much of information is the problem today, thanks to internet. So you cannot say I did not know that. There is tons of information available at your finger tips if you are looking for it. Most of us have the information what to do. But the problem lies not with ‘what’ but ‘how to’. For example, most of us know that the first basic principle for financial success is saving. Still most of the people either don’t save at all or save much less than they should or they could. And some, who manage to save, don’t know what to do next. There are plenty of options available in the market where they can put their savings and chances are most of them end up choosing the wrong ones. There is one another aspect of this ‘too much of information’ problem. And that is confusion. If some article argues for something the other argues against it. So it all leads to indecisiveness and that leads to inertia, lack of action.

The other reason that I feel why most people don’t take action is that most of us get caught up in our routine, the daily chores of life and our vision about our long term future needs and goals gets blurred. We are always busy dealing with short term things, the immediate demands of current situations whether it’s utility bills, credit card bills, EMIs and so on. And the result of all this: we become short sighted failing to plan our future. Most of us just end up like ships without radars, directionless.

And other reason why most people don’t get started and fail financially or achieve way less than they could have is they either do not know how to get started or where to get started.

That’s where ‘Your Money Your Way’ fits in as far as your financial success is concerned. My job here is not only to help you get started and put you on the road to financial success but also make sure that you stay on the track. To give you a direction and purpose to your financial journey with a financial action plan, a financial road map. To help you take actions which take you towards your financial goals, your financial success.

Contact Your Financial Coach to help you to get started on your journey to financial success. I Am Here To Help You. Committed To Your Financial Success, Always!!!
Make the smart and intelligent choice: Your Money Your Way. Remember the saddest words in life are: “I Could Have”

Be Smart & Intelligent With Your Money.

Your Life! Your Money! Your Way!

Source: YourMoneyYourWay.in

How To Take Control Of Your Money?

2012-01-29T12:02:00.000-08:00

Take Charge Of Your Money

No matter who you are or how much you earn, it's easier than you think to take control of your money. A few steps taken regularly can really make a big difference.

A few good habits and simple adjustments will put you in charge of your money. You will be able to do more with your money today and let yourself do the things you want tomorrow. The important thing is to get started.

To Get Started:

Set some financial goals
Work out your budget
Get into the savings habit

Set Some Financial Goals - Your goals don't have to be big but you need to focus on what you really want. The beauty about goal setting is that it gets your started; it gives you the confidence as you get the clarity where you want to reach. Your goals will be based upon your age, your family commitments and your financial situation and your needs. You may need to control your debts, buy a new house, buy a new car, save for your kids’ education, save for holiday, or be ready to retire in comfort. It doesn't matter what your goals are, all that matters is that you have some.

Work Out Your Budget - Working out your budget does not have to be complicated and will help you take charge of your money. Knowing where your money comes from and where it goes is a good starting point towards reaching your goals.

Everybody who does a budget and keeps it up to date sees how it pays off. If you are spending more than you earn, a budget can show you where you might be able to save money.

If you have money left over, you might be able to make better use of it. Write down all of your income and expenses, subtract one from the other to see if you are spending more than you earn.

Get into The Saving Habit - The secret to successful saving is simple. Start NOW. Even a small amount saved regularly can really make a difference and help you reach your goals.

There are lots of ways to get started. Some people like to do a budget to work out what they can save. Others start by putting away a small amount on each pay. Whatever works for you, the trick is to start now. You can also make it easy by setting up an automatic deduction so you don't have to think about it.

Be Smart & Intelligent With Your Money.

Your Life! Your Money! Your Way!

Source: YourMoneyYourWay.in

How You Can Too Make Money Using Credit Cards?

2012-01-29T11:52:00.000-08:00

All You Need To Know About Credit Cards To Make Money

Did you know that you could make money using credit cards? Sounds impossible? Most of the people are scared having credit card and using it. The reason is not difficult to find. We have seen people getting into debt traps and paying exorbitant interests on their credit card money. The fault is not with the product but with the use of it. Let me make it clear in the beginning that credit card debt is the worst debt and if you are not careful and disciplined, it is easy to get into debt troubles. However if you are smart and disciplined, you can end up making money using your credit card. And for records, I myself have made dining table, got cash gift coupons, watched free movies, got discounts in restaurants and many more benefits using credit cards. So if you would also like to get the enormous benefits and make the best use of credit cards, keep reading.

WHAT IS A CREDIT CARD?

A credit card is a plastic card issued to make payment for the goods and services without having to pay immediately from your own pocket i.e. on credit every month within a certain limit called credit limit. It’s a very convenient way of making payment to pay your bills for your shopping telephone, mobiles, utility fuel etc, rather than carrying cash in your pocket. The user has to make the payment after the credit card bill is generated before or by the due date. If the user fails to make complete payment he/she has to pay penalties and the applicable interest which is usually exorbitant.

In other words you get a kind of loan for your spending free of cost for a certain time period i.e. till the due date of payment of your credit card bill. However if you are not careful about using your credit card and abuse it, you may get into an expensive debt trap which can prove extremely detrimental to your financial health. On the other hand if you are smart and disciplined, you can get good value and benefit from the usage of credit card. And using credit card can be quite rewarding thing.

So what are the things you should know about using credit card for your own benefit and avoid the debt trap. Let us first know more about credit card.

Who issues the credit card?

Credit cards are normally issued by banks or institutions that are authorized to issue the credit cards. Each and every credit card is a part of a payment network such as Visa, Master card, Diners club and so own.

Who is eligible to get a credit card?

Every credit card issuer has their own policies and terms & conditions for the eligibility criteria. These generally include income level, kind of profession/occupation, location of residence etc, these standards are set by them to have a sort of security so that the user will have the ability to pay back the money that he/she is going to spend from the card.

What is the rate of interest charge on credit card?

Credit cards are the most expensive mean to take a loan the monthly interest rate on a credit card normally varies between the range of 3% to 4% which on annual basis works out to be 36% to 48% or even more in certain cases.

What types of credit cards are available in the market?

There are many types of cards available in the market today because of innovation being done by the banks/institutions and the marketers. Each card comes with its own set of benefits. Some cards come free of cost and without any annual fees whereas some charge joining fees and annual fees. Then there are premium cards which are available to either higher income group people or people with good credit history and higher spending.

Let us see the types of cards:

Ordinary/Regular: Cards: Every credit card issuer has a basic credit card which comes with some basic features and benefits. Normally such cards are free of charge and do not charge any annual fees.

Premium cards: Normally named as Platinum, Titanium, World etc, these care may or may not charge the annual fees and often offer higher credit limits and benefits. As discussed earlier, these cards are offered to higher income and higher spending group of people with good credit history.

Co-Branded Credit Cards: These cards are normally issued by a bank in partnership with other merchant/product or services sellers like airlines, oil marketing companies, retailers etc. Examples are like Citibank has Shoppers’ Stop credit card as well as it has another card co-branded with Indian Oil. Similarly ICICI bank has co-branded card with Hindustan Petroleum. The user normally gets higher reward points or in certain cases special discounts for making the payment with the co-branded card at the specific merchants.

Corporate Credit Cards: The corporate houses normally have to make payments for their different types of expenses like hotel bills, air tickets, car rentals and so on. The banks issue the credit card to these corporates depending upon their financial health and their credit worthiness.

Things you should know about credit cards to avoid the unpleasant situations and to get the maximum value and benefits.

Credit Limit: First thing you should know about your credit card is the credit limit that it gives you i.e. the maximum amount that you can use on your credit card for one month.

Cash Limit: You credit limit also includes the cash advance limit i.e. the amount of cash you can withdraw. However, do not withdraw the cash ever from your credit card. As we discussed earlier, the rate of interest on a credit card is normally between 36% to 48% and the moment you withdraw the cash, the interest charges start immediately and till the money is paid back, the continues. Beside there are normally transaction charges on top of the interest rate that you have to pay. Just in case, you need cash, try other ways like getting personal loan as it comes at normally from 14% to 24% though still high but much cheaper than taking cash from the credit card. You should withdraw cash from the credit card only if you are not able to get cash from any other source.

Billing Date: It is the date when your credit card bill is generated. This is other important thing to know and remember so that you can plan your purchase or spending accordingly. I will also show you later how you can get the maximum benefit out of your card by knowing the billing date and make the best use of it.

Payment Due Date: This is the most important thing to know with regard to your credit card. This is the last day by which you must pay your bills or make full credit card payment if you want to avoid the penalties and exorbitant interest rate. You miss this date, and you’re liable to pay the penalties and interest rate.

Rate of Interest: You should also be aware about the rate of interest that your credit card issued charges you in case you do not make the payment of your bill.

Minimum Payment Due: When you receive your credit card statement, it shows you all the transactions that you have done in the previous month, total amount due, due date and the minimum payment to be made. This is the area where most people make the mistake thinking that they don’t need to make the complete payment and they need to make the minimum payment only. And they make the minimum payment only without realizing that they are being levied the interest on the balance payment. And it keeps going on and they get into a debt trap. Please note that you should make the complete payment of your credit card every month religiously before or by the due date to avoid the pitfall.

A word of advice with regard to using credit card. We have discussed the exorbitant rate of interest which is charged on credit card. So you can judge yourself that if you are not careful and disciplined how fatal a credit card debt can be to your finances. So, make sure that you do not abuse your credit card and spend unnecessarily just because you got a credit card. You should consider your credit card just a convenient mode of making payment of your spending rather than a reason to spend on thing which you don’t need or can’t afford to buy. You should spend only that much on you card which you would have otherwise spent had you not have the credit card.

How To Get The Maximum Value Out Of Your Credit Card?

1. Earn interest rate on your money while you use credit card money free of cost!

You can earn interest on your money while you use credit card. Surprised? Yes! you can earn interest on your cash lying in your bank while you use credit card to do your shopping and make payments for other expenditures through your credit card. Let me explain. The credit card issuer gives you normally an interest free credit period ranging from 48 days to 55 days. This means you can spend the money with your credit card and the payment has to be made by the due date after your credit card bill/statement is generated. However it depends when you make the purchase and when the bill is generated and the payment due date. Let me show it you with an example. Let’s say your credit card statement date i. e. the date on which your credit card bill is generated is 5th of every month and the payment due date is 25th of every month. So if you spend Rs. 10000 on the 6th January, the bill will be generated on 5th February and you will have to make the payment by 25th February as that is payment due date. So in this case you are using the money of credit card free of cost where as your Rs. 10000 lying in bank earns you interest for the same time period. (Also note that your money lying in your bank savings account earns interest on daily basis now). So that means your Rs. 10000 will earn you interest from 6th January till 25th February which is cool 50 days. But make sure you make the payments on time to avoid the penalties and exorbitant interest charges.

2. Reward Points: This is the other way to get value from your credit card. Almost all the credit card issuers have reward point programs for their credit cards. These reward points can then be redeemed for gift vouchers for shopping malls, dining, clothes, accessories, books, charity or even may be converted to air miles. So make sure you are aware about the reward point system of your credit card and make the best use of it to get the most out of it. The reward systems are not same for all the cards. So you can compare the reward point programs of different cards and try to get the best possible. As per my knowledge, Standard Chartered Bank’s Manhattan card is having one of the best reward program.

3. Build good and strong credit history: This is very important and if you continue to make your payments on time without any default, you can build a strong credit worthiness. The benefit of having a good track record is that you can easily get other loans like home loan, car loan or personal loan easily and may be even at lesser interest rates in case you need any of such loan. So make sure you make the payments on time not only for your credit card but also for other loans if you have EMIs going on.

So go ahead and use your credit card confidently and make the most of it. Be disciplined. Choose to be smart and intelligent with your money. After all it’s Your Money Your Way!

P.S. I was featured in Economic Times Wealth paper for using credit cards smartly and making money.

Be Smart & Intelligent With Your Money.

Your Life! Your Money! Your Way!

Source: YourMoneyYourWay.in

Can You Trust Your Bank Anymore?

2012-01-29T11:37:00.000-08:00

Can You Trust Your Bank Anymore?

I know what you may be thinking after reading the title of the article. First thing that might have come to your mind is recent Citibank fraud or should I say a fraud masterminded by one of Citi bank’s staff to be precise. Well, that is really sad event for sure and reminds us the dangers of having blind trust again as far as our money is concerned. But this article is not about Citi bank event. This article is, in fact, speaks about another bigger issue or should I say fraud which happens frequently with the innocent and gullible bank customers but we hardly get to hear about it in the media. This article is about the mis-selling of commission based products like insurance which is done by the bank staff or “Relationship Managers’ so to speak.

Banking system is an integral part of any economy. And so is banking of our lives. We cannot think of our financial life without banks. In fact, banking is the most basic and primary need as far as our money is concerned. You keep your hard earned money in your bank savings account. As a matter of fact most employees get their salaries transferred directly to their savings or salary accounts these days. The trust for banks comes out naturally as we know these are highly regulated institutions and government banks even give us the peace of mind as they have the backing of the government.

Being a part of our life, banks saw this as an opportunity to increase their profits and have started selling not only their own products but also of the third party like insurance and mutual funds on commission basis. And if you have even little bit of idea of sales, you may know how the sales targets are set and then poor sales people have to achieve it. Let me share with you a true story of my uncle’s in Delhi. He went to bank to make fixed deposit or FD three years back. And he ended up with an ULIP policy at the age of 50+ sold by one of bank staff. The reason given was that it was a better product that a boring FD. (I, myself, am not a huge fan of FDs though conditions apply). And if you are little bit updated, or yourself a victim of this product, you will have a real good idea of how horrible this product was. It was sold by all the people involved whether banks, brokers or individual insurance agents aggressively as they were making handsome commissions. And you, the customer lost hell lot of your money. Clearly the motive was and is to make a killing out of you, to earn big fat commissions not your wellbeing. Coming back to my uncle, he paid roughly Rs. 81000 and today if he surrenders that policy, he is able to get roughly around Rs. 38000. And that’s what happens when you go for investments blindly trusting either your so called “Relationship Manager/RM” at your trusted bank or insurance agent without understanding its implications, risks involved or putting any effort to understand in the first place. I know for fact that most of you reading this article have most of your investments, if any, either in insurance policies or PPF or NSCs or FDs. How Do I know that? Because I know the reason the most of the average salaried class people do the investments. For tax saving and safety trying to avoid risk. (And as far as risk is concerned, there is no investment with zero risk. I will discuss on this topic in another article). That’s about it. If there were no tax incentive today for these instruments, I bet almost everybody will stop buying insurance or stop investing in PPF and NSCs and so on. Because we don’t buy insurance for protection. We are sold (wrong) insurance product for tax saving. Read the last line again carefully. We don’t buy insurance but are sold or should I say mis-sold. Sad. But true.

Sometime back an interview of the head of Insurance Regulatory Authority of India (IRDA) was published in a magazine. He said the insurance industry made a mistake of selling insurance as an investment product. The immediate thought that came to my mind after reading this was who allowed them to do so all this in the first place.

The other day I received a call from one of my clients enquiring how much commission an agent gets normally for a money back policy. He didn’t ask me whether this policy was good for him or not. Whether he needed it or not in the first place. As I could make it out from the call, the reason he was curious to know about the commission part was so that he could negotiate with his agent some kickback (his share) out of that commission. No wonder, we deserve to be cheated, I mean mis-sold. If that is the attitude people have towards their hard earned money when it comes to taking care of it, what kind of financial future one can expect. So you the customer is also responsible to some extent. You allow yourself to be cheated by not asking the right questions or thinking whether you are doing the right thing before signing the cheque.

Anyway coming back to banks I have many similar stories where people were sold ULIP through banks and they got their fingers burnt badly, really badly. So the next time you visit you bank and you are approached by the smiling ‘RM’, give it a thought, “Can You Ever Trust Your Bank Anymore The Way You Did?”

Be Smart & Intelligent With Your Money.

Your Life! Your Money! Your Way!

Source: YourMoneyYourWay.in

5 Things To Keep in Mind Before You Invest Your Hard Earned Money

2012-01-29T11:24:00.000-08:00

What care should YOU take while investing?

Understand the investment product

Whichever investment product you go for whether stocks, Mutual funds. FDs, real estate, make sure that you understand its intricacies and the risks involved. For example FDs which are normally considered safe, have the risk of giving lower return than the inflation rate which will imply that you end up having negative return. Let’s say your FD gives you a return of 8% per annum whereas the inflation is 10%. That means your FD gives you -2% returns. Similarly you should also consider you time horizon while investing. If you have shorter time horizon less than 3 years, you should invest in debt oriented products. On the other hand if your time horizon is longer you should consider investing in equities through mutual fund route. Investing directly in equities is best left to the experts and professional. Other important point to consider while investing is you should consider your risk profile and risk tolerance. Will you be ok if the markets go down tomorrow or will you lose your sleep over it? If you consider all such factors you improve your chances of winning in the game of investing.

Understand the costs and benefits

You must know the costs and benefits of your investment. Most of the investments have certain charges involved. For example, mutual funds charge management fee to manage the fund. Similarly if when you buy or sell stocks, you pay the brokerage, STT, stamp duty etc. All these charges affect you rate of return. Other thing to keep in mind is the opportunity cost. Opportunity cost in general terms is defined as the cost of an alternative that must be foregone in order to pursue a certain action. Similarly opportunity cost in investment term may be defined as the difference in return between a chosen investment and one that is necessarily passed on. Let’s say you invest in a bank FD and earn rate of return of 8% whereas similar investment in mutual fund yields 10% return. So in this case the opportunity cost is 2%.

Know the liquidity and safety aspects of the investment

Liquidity means cash or cash equivalent. It means how easily you will be able to liquidate your investments at the right valuation if any such need arises. For example real estate investments are quite illiquid asset class as you may not be able to sell it quickly or get the right valuation as well. Similarly, equities are very easy to liquidate but you may not get the right price in bad markets. This is a very important point to keep in mind while going for investment. Similarly you should know the risk factors associated with your investments. Risk factors include liquidity risk, market risk, business risk, political risk etc.

Diversify your investments

There is very famous saying that you should not put your all eggs in one basket. And nothing can be truer than this as far as investing is concerned. In fact diversification of your investments can be one single most important critical factor that will determine your success or failure as an investor. Most people either go for too risky investments or too conservative investments resulting either losing the money or earning far less returns than what they could have achieve with right kind of mix of investments. You should have the right mix of equity and debt investments in your portfolio to get the optimum returns out of your investments.

Do goal based investments

You must have a clear purpose before putting your money into any investment e.g. whether your purpose is capital protection, regular income or higher returns from your investment. Similarly your investments should be able to meet your future needs, goals and aspirations. For this purpose, you should do proper financial planning. Financial planning not only takes care of your day-to-day needs but also offers you the security against uncertainties and emergencies and helps you to meet your future financial needs. These days there are professional financial planners offering their services at a very reasonable fee. A professional help can make a huge difference in the quality of your financial health and the results you get from your investments.

Be Smart & Intelligent With Your Money.

Your Life! Your Money! Your Way!

Source: YourMoneyYourWay.in

2012-01-29T11:20:00.000-08:00

Why Do People Lose Money?

Lack of fundamental knowledge

People generally invest their money without understanding the investment product and the risks associated with it. For example, people mostly invest in stocks to make quick money when they have little or no idea about what a stock is. They do not understand or know the company when they invest in its stock. They fail to understand that the valuations of a stock of a company depends upon factors like the quality of its management, its business model, its present earnings, the future growth prospects etc.

Investing on ‘hot tips’ by friends/neighbour/colleague

People often invest their money on ‘hot tips’ given by their friends, neighbours or colleagues rather than based on any strong research. It mostly happens when the markets are rising and everybody seems to be an expert. People follow the tips blindly without realizing that when the tide will turn, it can cost them very dear. And they find them sitting on the losses and dud investments. Internet is the other medium where there is lot of information is available freely and people rely on it without checking its authenticity, legitimacy and the reliability.

Mis-selling by institutions as well as individuals

Mis-selling of financial products by financial institutions like banks selling third party products on commission basis as well as individuals is quite rampant. In fact it has become a matter of grave concern as big scams keep unfolding now and then and the innocent people are taken for a ride. People are often sold wrong products and they are not told about the hidden charges or the risk associated with the products or often given the wrong information about the financial products.

Investing on impulse without having proper plan in place

One important factor responsible for the losses is that people often invest on impulse in haphazard manner without having any plan in place. For example traders lose money because they do not keep the stop-losses or targets for their trades. Similarly people do not have defined time horizons for their investments. For example people invest in equities or mutual funds and expect immediate returns. And if the markets go down, people either sell their good investments at loss or keep sitting with bad investments with mounting losses.

Be Smart & Intelligent With Your Money.

Your Life! Your Money! Your Way!

Source: YourMoneyYourWay.in

2012-01-29T11:05:00.000-08:00

How to reduce your car insurance premium

You can plan to reduce the insurance premiums paid on your vehicles. According to the Motor Vehicle Act, a vehicle cannot be driven on the road unless and until it is insured. The insurance is renewable each year. Vehicle insurance is a pre-requisite to vehicle ownership.

If a vehicle's insurance policy is not renewed, driving that vehicle is illegal. Also, if the vehicle has an accident, the insurance company will not pay out any claims.

All no claims bonuses will also be forfeited. You can renew your auto insurance with another insurer, including the bonus accrued at your earlier insurer.

The risks covered by a third party policy include death or injury to a third party and damage to third party property. Liability in the case of death or injury is unlimited.

A comprehensive motor insurance policy provides cover against damage caused to your vehicle due to man-made or natural calamities too.

A motor insurance policy covers your vehicle against:

Natural calamities

Man-made calamities

Personal accident

Third party legal liability

Any permanent injury /death of a person

Any damage caused to property previously, the premium was mainly based on geographical zone, engine capacity, price and age of the vehicle. Now, a number of other factors are also considered to arrive at the premium. One can avail a discount on the premium and reduce it by up to 25-30 percent.

Discount on premium

The most important discount is the no claim bonus. In case you haven't made a claim against your vehicle insurance in a given year, you get the benefit of no claims bonus in the form of a specific percentage reduction in your premium in the subsequent year.

No claim bonus increases with each claim-free year. It may go as high as 50 percent on the 'own damage premium' component of the vehicle insurance premium.

Voluntary deductible discount

In addition, the insurance companies also offer a discount on your vehicle premium if you bear a certain amount of loss associated with each claim.

Voluntary deductible is the amount that you agree to pay yourself towards a claim before the insurance company pays up the balance. The higher the voluntary deductible that you agree for, the lower your premium will be.

The discounts associated with this feature range between 20 and 35 percent of the premium, subject to a maximum of Rs 3,500.

However, you need to review the amount of voluntary deductible against thediscount to ensure the discount amount will actually be higher than the voluntary deductible.

Premium depends on make, model

Premiums depend on the make and model of the vehicle. Each model has its own claim record and the insurer prices the vehicle based on its claim experience.

Some models may be more claim prone because of their structure or usage, and the premium will factor in all these facets. Some models have high repair costs and the premium is affected by this.

Source: Economic Times

How to choose the right health plan

2012-01-29T11:00:00.000-08:00

Don’t get baffled by the policies that health & life insurers offer. Here’s how you can identify the plan best suited for you.

Medical costs are ballooning by the day — even a minor surgery can cost you anywhere between Rs 20,000 and Rs 50,000. Similarly, a cardiac treatment can set you back by Rs 5 lakh, depending upon the city and the hospital you choose. Save, invest, do whatever you want — there can be no dispute over the need for mediclaim to offset the impact of rising healthcare costs.

Given the plethora of options in the health insurance space, it is difficult to make a rational choice. With life insurance companies entering the health insurance space, customers are spoilt for choice. ET chalks out the differences between traditional mediclaim policies offered by general insurers and the new generation health covers offered by life insurers. Here’s a low-down on the key components of a comprehensive mediclaim:

Defined benefit & reimbursement plans

There are two kinds of medical policies available in India. The first is the indemnity policy, which is the traditional mediclaim policy that general insurers offer. These are largely reimbursement plans, which cover expenses related to hospitalisation. The claims are settled by the insurer either on a cashless basis through a tie-up with hospitals or by reimbursing bills. Then, there are defined benefit plans, offered by life insurers, which include critical illness policies and payment of a lump sum on the diagnosis of any of the named critical illnesses in the policy document.

“If the insurance company is stipulated to pay Rs 5,000 for a certain critical illness, the company will pay Rs 5,000 irrespective of the size of the claim,” says Rahul Aggarwal, CEO, Optima Insurance Brokers. However, critical illnesses such as cancer, stroke, renal failure or major organ transplants are not standardised and may vary from insurer to insurer. However, the insurers will not cover any of these illnesses if they get diagnosed within 90 days from the effective date of the policy.

Difference in premium

“The premiums of both versions of health covers are comparable but life insurers still outsource the service of claim settlement to TPAs. Among general insurers, most private sector companies have changed this practice and carry out the claim servicing business within the company itself.

In a way, the company becomes directly responsible for claim settlement. Earlier, even when the TPAs carried out the business of claims servicing, the onus was on the insurer to ensure a hassle free claim settlement for the policyholder,” says Sanjay Datta, head, Health Insurance, ICICI Lombard General Insurance.

Tenure of the cover

“The main difference between health covers offered by general insurers and those of life insurers is the tenure of the cover. The mediclaim has to be renewed annually whereas health covers (offered by life insurers are renewable after three years or more, depending upon the choice of insurance and insurance company).

The premiums are likely to remain unchanged in the three-year period. If the insurer wants to increase the premium within three years, the insurer has to seek the approval of Insurance Regulatory and Development Authority (IRDA). If the insurer wants to increase the premium after three years, it works like a regular mediclaim policy which usually revises premiums on an annual basis,” Binay Kumar Agarwala, senior V-P, health business, ICICI Prudential.

Size Matters

You should look at the annual limit of your policy. According to experts, if you hail from a small- or mid-sized town you should look at a cover of Rs 2-3 lakh. If you reside in a metro, then you should not look at covers less than Rs 4-5 lakh.

Look For The Clause On Sub-Limits

Insurers have introduced sub limits in mediclaim policies to tackle the rise in healthcare costs. The most common sub-limits are room rents, doctors’ fees and diagnostics. If you have a sum insured of Rs 1 lakh and the insurer has capped your room rent at 1-1 .5% of the sum insured then your room rent cannot exceed Rs 1,000. If it exceeds the specified amount, then you have to pay the balance from your pocket.

“If there is a sublimit on the room rent or the doctors’ fees, the ultimate payout will be much lesser than the sum assured,” Datta adds. Similarly, insurers also impose a sub-limit on doctors’ fee at 25-30 % of the bill amount. Check to see that the policy states the date the policy will begin paying (some have a waiting period before the cover begins) and what is covered or excluded from coverage. Moreover, it always makes sense to have an additional mediclaim even if you are covered under your employer’s mediclaim scheme.

Co-Payment Clause

This refers to the portion of claim that a policyholder agrees to bear, while the insurance company undertakes to chip in with the rest. “Co-payments happen only in certain reimbursement covers to make the insured more responsible for judicious payments.

This clause is seen mostly in health covers designed for senior citizens. It is also common in group mediclaim covers offered by employers, which covers the employees and his/her family members. The co-payment clause is applicable mostly to the family members of the employee,” Aggarwal adds.

The Pre-Existing Diseases Clause

There are mediclaim covers which do not cover pre-existing diseases for four years whereas some which do not cover it for three years. Similarly, ensure there is no ambiguity in the renewal clause of the policy. For example, under an individual mediclaim policy, Apollo Munich covers pre-existing diseases after three continuous policy years.

The New India Assurance, on the other hand, covers pre-existing diseases only after four years and covers hypertension and diabetes only if you pay extra premium.

The Ideal Choice

The defined benefit plan could be a handicap for an individual who has signed up for a less sum assured. But it could be a plus for an individual who has signed up for an adequate sum assured. Moreover, you will know how much you will earn from your cover in advance. Similarly your mediclaim could have caps and limits, which can be well augmented by the health cover.

But that doesn’t imply that a stand alone health cover can substitute a mediclaim in your financial kitty,” Aggarwal adds. You can top up your existing mediclaim if you want to increase the sum assured. Indemnity or reimbursement cover should be the ideal base cover for any policyholder as that would come close to the final bill amount of the hospital.

But there are various expenses which include commuting to the hospital, buying medicines post hospitalisation and so on, that fall outside the purview of a traditional reimbursement plan. In such cases, you could top up a traditional reimbursement plan with a defined benefit plan to be able to tackle all the medical-related expenses. After all you have the option of claiming a tax benefit of up to Rs 15,000 under Section 80D.

The health pack: General insurers

General insurance companies offer indemnity policies or reimbursement health plans Mediclaim has to be renewed on an annual basis. The company can increase the premium at renewal Look for the clause on sub-limits. The most common sub-limits are room rents, doctors’ fees and diagnostics Individuals from a small town should go for a cover of 2-3 lakh, and in metros up to 5 lakh.

Life insurers

Defined benefit plans, mostly offered by ife insurers, pay a lump sum on the diagnosis of any of the named critical illnesses listed in the policy document Insurers usually do not cover the specified critical illnesses if they are diagnosed within 90 days from the effective date of the policy Premiums are usually revised at renewal, which is usually three years or more If the company wants to increase the premium within three years, the insurer has to seek IRDA’s approval

Source: Economic Times

The Ultimate Success Formula

2012-01-29T10:27:00.001-08:00

Today I am going to share with you "The Ultimate Success Formula". You can apply in any area of your life and be successful. It's a very simple 4 steps formula but very effective and powerful:

Step 1: Decide what you want

Be clear and specific what you want to achieve. For example, many people wish to be rich or the want to have "lot of money" but this is very vague. There is no clarity. If you want to be rich how much money you want to have. What will make you feel that you are rich. Be specific about the amount of money, kind of car, kind of house and so on. Once you have clarity about your goals you will feel more empowered and you will know what it is that you are trying to achieve. Remember, Clarity gives you power.

Step 2: Take Massive Action

The next step is to take the massive action. Action is the father. Action gets the result. Massive actions will get the massive results.

Step 3: Review Your Progress

Only taking massive action is not enough. You should also review the results that your action produce. Whether the results are as you expected or not. If you do not review your results you may be going in circles again and again without moving forward towards your goals.

Step4: Be Flexible With Your Approach

If you are not getting the results you want, it is important to change your strategy and take new action. Remember, be flexible in approach while being firm to achieve your goals.

The First Step To Financial Success!

2012-01-29T03:05:00.000-08:00

Spend Less Than You Earn And Do It For Long Enough. Period!

Tax Planning For FY 2011-12 Where To Invest & Save Tax!

2012-01-17T00:25:00.000-08:00

The current financial year is going to be completed on 31st March, 2012. Everybody will be in planning How to Save Income Tax? Here we will discuss all about Tax Planning. We should pay taxes every year as responsible citizens. However, the law allows certain “tax-deductible” savings and we owe it to ourselves to benefit from these options, which could translate into future savings. Every citizen has a fundamental duty to pay taxes honestly and a fundamental right to avail of all the tax incentives that the law provides. Therefore, through prudent tax planning, not only can we reduce our income-tax liability but also secure our future through compulsory savings. Let us see how one can do successful tax planning to enjoy optimum benefits. Read More Here....

Diversify Your Risk.......

2012-01-17T00:20:00.001-08:00

Diversify Your Risk. Do Not Buy One Big Insurance Policy From One Company. Buy 2-3 Small Policies From Different Companies. E.g. if You Want To Buy 1 crore Term Insurance, Buy 2 Policies of 50 Lakh Each From 2 Different Companies. Beside Diversifying, You Can Also Leave One Policy Later On Just in Case You Don't Need That Much Insurance.

Plan Instantly Your Life With Rs. 11000 Per Month Only!!!

2011-12-22T00:42:00.000-08:00

Plan Instantly Your Life With Rs. 11k PM!!*

Rs. 50 lac Life Insurance.
Rs. 5 lac Health Insurance.
Rs. 2 Crore Fund Generating Income of Rs. 1.5 Lac PM. For 30 Years After Retirement.
Rs. 1 Crore For Children's Education & Marriage.

Drop in Your Queries at satinder@yourmoneyyourway.in or satindersikri@gmail.com.

* Based on certain parameters. Planning Fee Rs. 10000.