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Should I invest in CPSE ETF

Most mutual funds in India are generally pretty much like numerous other funds. Many claim uniqueness but are in reality occur in a mould which are set on common platforms. However, if there’s one fund that has some legitimate claim to being distinctive from every other, then it’s the CPSE ETF.

The name stands for Central Public Sector Enterprises Exchange Traded Fund, which really is a mouthful but virtually explains what the fund is. Needless to say, the uniqueness, on it’s own does not signify that the fund is investment worthy ­ it’s unusual nature {means that|implies that|ensures that} investors must {look at it|view it|consider it} closely.

Currently , this fund is in news because it’s having an’FFO ‘, a’Further Fund Offer ‘, that is not really a common term either. To know how this fund is structured and how a FFO plays a function in deciding whether you must invest in this fund or not, one needs to know the unusual advantage this fund gives to investors who invest in FFOs and those who committed to the the initial NFO

ETFs are often predicated on an equity index and replicate that index within their portfolio to ensure that investors can invest in it easily. The CPSE fund’s underlying index is one which NSE created specifically for this fund when it was launched. The index has ten stocks as its components, Coal India, GAIL, ONGC, Indian Oil, Bharat Electronics, Oil India, PFC, REC, Container Corp and Engineers India.While ETFs are MFs, are bought and sold on stock exchanges like mutual funds. An investor who would like to invest in this basket of public sector stocks can buy this ETF instead.

At the time of the fund’s launch in March 2014, investors who had invested in the initial offering received a 5% discount in price over what would have been the normal price. Moreover, there clearly was a unique ‘loyalty bonus’ built in to the fund ­ if the initial subscribers stuck around for a year , then they’d get  a 115 bonus.

They certainly were sweeteners that the government had thrown in to make sure that investors bought the fund in good numbers in the NFO and then made adequate returns to stay| enthusiastic about the fund. This structure has succeeded in this job and so it’s not surprising that the government is repeating the incentives now when it needs a fresh round of disinvestment.

Investors who invest in FFO too will receive a 5% discount on the market price of the underlying stocks, along with bonus units after finishing a year. Investors from the initial offer of 2014 have observed money grow 12.21% pa, in addition to the bonus, that was an additional one time boost of 6.66%.

Clearly , this can be a fund that has reasonably good returns, especially with the enhancement of the special deal given by the government. So could it be a great investment for fresh investors? It’s important to note that the advantages this fund brings includes a large amount of caveats.

In the first place it is a thematic fund, and it’s generally not good for fund investors to invest in sectoral or even a thematic fund ­ diversified funds are usually better.

However, even though one accepts the logic of a particular theme, it needs to be an investing-related theme, like banks or IT or consumer goods or auto or something different seems like doing better compared to rest of the market. The CPSE ETF is in contrast to that. Instead, it is a thematic fund where the theme is actually the promoter. What’s worse is that it’s not really a promoter who has a great track-record of looking following the interest of the business or minority shareholders.

Given the necessity of the government to keep returning for more funds, and the sweeteners it has put with this deal, investing a small amount in the fund might make sense, as long as an investor understands the uncertainties that originates from being the Government of India’s business partner.


6 things you need to know about the new way to make more money on your Savings Bank Account, one of India’s premier on line mutual fund platform, has released Super Savings Account, that’s a new-age mutual fund which brings with it the superior advantages of an ordinary savings account.

This Super Savings Account will allow a patron to get better returns as compared to their ordinary savings account, without missing out on flexibility and easy withdrawal of money.

Right here are some advantages you have to understand about the awesome savings Account:

1. What exactly is Super Savings Account?

The Super savings Account is a brand new product offered by FundsIndia, which offers clients the ability to invest in a savings account with the increased benefit of a mutual fund. This new providing will permit a customer to get higher returns compared to their ordinary savings bank account, with out lacking out on flexibility and smooth withdrawal of money.
2. How does it vary from everyday savings account?

The Super Savings Account is the upgraded version of a normal savings account. The account also offers a free ATM + debit card, giving customers the power of instantaneous withdrawal from an ATM, buying in associate stores and on line, and smooth redemption. In quick, it offers them the blessings of a savings account – however with the ability to earn a good deal extra amount.

3. How does it perform?

The extremely good Super Savings Account invests in Reliance cash supervisor Fund, which as of January 7, 2017, gave returns of 8.65% within the ultimate 365 days.  Through ‘depositing’ funds in the Super Savings Account, account holders get the dual advantage of both saving and helping their money grow at the same time.

4 Who can open this account and how?

Any resident of India can open the high-quality Super Savings Account. To invest within the account, customers can go browsing to With the advantages of e-KYC and paperless transaction, the registration method simply takes a couple of minutes.
“The tremendous financial savings Account is ideal for clients who are seeking for higher returns at the money mendacity round in their financial savings financial institution bills, without lacking out at the liquidity and versatility that they currently enjoy. By making an investment in a liquid fund, the Super Savings Account gives them the fine of both worlds,” says C R Chandrasekar, co-founder and CEO,
Srikanth Meenakshi, co-founder and COO,, says, “Customers can easily sign up for the Super Savings Account and transfer funds to it from their existing bank accounts instantly. The entire process is paperless and easy, as are our other products.”

5. What are its advantages?

The Super Savings Account will help account holders earn appealing returns on idle money. This account also comes with a unfastened debit card that gives users the ability to save with well suited retail and on line companions and withdraw cash from ATMs, simply as they could with their financial institution debit cards. There aren’t any account commencing or renovation expenses, no lock-in on savings, and a minimum balance preservation of just Rs. 500. If the customers need to redeem money into their bank account, they could do so 24×7 with a click of a button. the amount will be despatched to their bank account within half-hour. It normally takes only 2 -3 minutes.

“The Super Savings Account will change the way Indians bank and will inculcate the habit of investing in a large segment of society,” says Chandrasekar.

6. what is the minimal and most funding quantity?

The minimal funding quantity is Rs.500, and in multiples of Re.1 thereafter. there is no maximum limit for investments


Revised Interest Rate on Small Savings Schemes for Financial Year 2014-15

interest rate on various  savings deposits

Interest Rate on Saving Schemes

The Government of India on the recommendations of the Shyamala Gopinath Committee for Comprehensive Review of National Small Savings Fund (NSSF),  has revised the Interest Rates for Small Savings Schemes for the Financial Year 2014-15.

With the approval of the Finance Minister, the rates of interest on various small savings schemes for the FY 2014-2015 effective from 01.04.2014, on the basis of the interest compounding/payment built-in in the schemes, shall be as under :

Scheme Name Rate of Interest w.e.f. 1-Apr-2013 Rate of Interest w.e.f. 1-Apr-2014 Change over last year
Savings Deposit 4.00% 4.00% NIL
1 Year Time Deposit 8.20% 8.40% 0.20%
2 Year Time Deposit 8.20% 8.40% 0.20%
3 Year Time Deposit 8.30% 8.40% 0.10%
5 Year Time Deposit 8.40% 8.50% 0.10%
5 Year Recurring Deposit 8.30% 8.40% 0.10%
5 Year Senior Citizens Savings Scheme (SCSS) 9.20% 9.20% NIL
5 Year Monthly Income Scheme (MIS) 8.40% 8.40% NIL
5 Year NSC 8.50% 8.50% NIL
10 Year NSC 8.80% 8.80% NIL
PPF 8.70% 8.70% NIL

PPF rate remains unchanged at 8.7%. While 5 year NSC and 10 year NSC interest rates also remains unchanged at 8.5% and 8.8 % respectively.

The revised rates apply only to the new accounts opened during the respective year (except PPF where the new rate is applied on the outstanding account balance). For existing accounts the contracted rates remain unchanged until maturity.


50% discount on health insurance for families with girl child

medical insurance family

50% discount on family floater if you have girl child

The country’s largest general insurance company, New India Assurance, on the eve of International Women’s Day launched a special health insurance scheme for families with girl child.

The scheme ‘New India Asha Kiran’ is a floater policy offered to the entire family, but restricted to families with girl children.

The policy gives 50 per cent discount for the girl children. Further, in case of accident to parents, the sum insured will be placed as fixed deposit in the name of the girl children. Sum assured offered are Rs 2 lakh, Rs 3 lakh, Rs 5 lakh and Rs 8 lakh. As a family floater policy, it covers immediate family including the proposer, spouse and dependent girl children.

This health insurance policy also has daily cash benefit on hospitalization, critical care benefit up to 10 per cent sum insured and reimbursement of emergency ambulance charges.

The company also announced health policies with added benefits for women that are being sold through a tie-up with the all women bank “Bharatiya Mahila Bank”.

Speaking on the occasion, Chairman and Managing Director of New India Assurance G. Srinivasan said “We have launched this product, specially designed for families with only girl children, on the occasion of International Women’s Day. This product is reasonably priced as discounts are offered for insuring girl children”.

Other health insurance policies that have been launched with Bharatiya Mahila Bank, especially for women, include BMB Saki, which is targeted at lower income group women, and BMB Nirbhaya for women in higher income groups. One unique feature of these policies is that they include maternity benefit.

The company has posted a 36 % rise in net profit at Rs 701 crore in the third quarter ended December 31, 2013 from Rs 517 crore in the same period last year.


RBI extends date of exchanging pre – 2005 currency notes to Jan 1st, 2015

get your notes exchanged to new one

RBI grants 9 more months to exchange notes printed before 2005


If you have currency notes which were printed and issued before 2005, you don’t have to rush to get them exchanged with the new ones in this financial year.

The Reserve Bank of India (RBI) today has extended the date for exchanging the currency notes, which were  printed before year 2005, to January 2015. The new date to get your old currency note exchanged is now 1st January 2015, which means an additional nine months. This includes the bigger denominations of Rs.500 and Rs.1,000.

Earlier on 22 January, RBI had issued a circular stating that from 1st April 2014, it would withdraw from circulation all currency notes which were printed before year 2005, and after July 1, 2014, exchange of more than 10 pieces of Rs 500 and Rs 1,000 notes would not be allowed at a bank where you are not the customer, unless you furnish proof of identity and residence. The public was advised to approach banks to exchange such notes. Now this date stands extended.

The currency notes issued before 2005 do not have the year of printing on the reverse side. In notes issued after 2005, the year of printing is visible at the bottom of the reverse side.

RBI has clarified that the general public “can continue to freely use these notes” for transactions and can unhesitatingly receive these notes in payment as all such notes remain legal tender. The Reserve Bank of India in a statement said “RBI has also advised banks to facilitate the exchange of these notes for full value and without causing any inconvenience whatsoever to the public”.

RBI said it will monitor and review the withdrawal and exchange process so that the public is not inconvenienced in any manner.

It further added that  “This withdrawal exercise is in conformity with the standard international practice of not having multiple series of notes in circulation at the same time. A majority of such notes have already been withdrawn through the banks and only a limited number of notes remain with the public”. Earlier, the RBI had withdrawn a certain series of currency notes at the bank level but bearers were not asked to get them replaced.

RBI governor had earlier said the withdrawal was not an attempt at demonetization, nor had it anything to do with the forthcoming general elections. Post-2005 notes have added security features and help in curbing the menace of fake currency. At present, currency notes are issued in denominations of Rs.5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1,000.

According to the RBI’s Annual Report, around 14.1 billion pieces of soiled banknotes were processed and removed from circulation during 2012-13. The number of bank notes withdrawn from circulation and eventually disposed of at the RBI offices increased over the previous year by 358 million pieces. During 2012-13, around 8.97 billion pieces were processed through 59 Currency Verification and Processing Systems (CVPS) and the remainder were disposed of under other modes.


Not filing proper income tax return – expect a notice from IT department soon

not filed income tax return

Not Filed Income Tax Return

If you have made a cash deposits of more than Rs. 10,00,000.00  in your saving bank accounts, or have invested more than Rs. 1 lakh in shares, or have received interest income of more than Rs. 50,000, but have not filed your taxes for this assessment year, beware, as over 40.72 lakh high value spenders are under the scanner of the Income Tax department, and your name may be featuring in their list.

Not only cash deposits, the income tax department has compiled a list of  persons who have invested more than Rs. 2,00,000.00 in mutual funds, or more than Rs. 5,00,000.00  in  bonds or debentures, more than Rs. 1,00,000.00 in stocks.

The income tax department official data contains a list of 15,55,220 people who have purchased or sold immovable property of Rs 30,00,000.00 or more; 20,61,443 people who have made transactions of Rs 2,00,000.00 or more in a year through credit card; people who have received interest income of Rs 50,000 and above from banks and people who have purchased bullion or jewelry of Rs 5,00,000.00 or more.

The Financial Intelligence Unit (FIU) has been assigned task of looking for such suspicious and high-value money transfer. “We just want to send the across the message that nothing in clandestine and the department would get to know every transaction especially high value ones”, and failure to declare correct income and liability is now taken on a priority basis in the department and defaulters stand to be penalised up to 300 % on the evaded tax and prosecution in a court of law is also initiated, said a senior I-T department official. Income tax department has compiled a list of 40,72,829 potential tax evaders.

The idea behind publicising this is to make such people file their tax return before 31st March 2014 and increase the tax collection in this fiscal year. With technical solutions at the department’s disposal, there is a lot of information that is readily available to the authorities.


Tata Value Homes National Home Buying Day 2014, offering guaranteed appreciation of up to 33%

Tata Value Homes

Guaranteed appreciation of up to 33% by Tata Value Homes in an on online sale

Tata Value Homes (TVHL), which is a 100 % subsidiary of Tata Housing, is organising its National Home Buying Day. A first of its kind, this will be a unique opportunity being offered to general public, including NRIs, to buy quality homes from one of the biggest and most trusted brands in India.

The most interesting part of this offer is a guaranteed appreciation of upto 33% on the Tata Value homes. This offer will be available from 21st to 24th February 2014 on various projects of Tata Value homes in different cities such as Bengaluru (New Heaven), Pune (Inora Park and La Montana), Ahmedabad and Chennai (Santorini).

The buyers from across the globe can participate in this initiative by making an online payment of Rs 20,000, which is refundable subject to non-allotment of a home.

TVHL has introduced two pan-India brands – Shubh Griha (Value Homes) and New Haven (Affordable Homes. Some of its projects include — “Santorini”, which is a 18 acre project on the Chennai-Bangalore Highway, about 40 km from Chennai, offering over 1,000 houses of one to three bedrooms ranging from 576 sq ft to over 1,500 sq ft. Prices range from Rs. 24 lakh to over Rs. 52 lakh, with the delivery planned for 2016. Another project is “New Haven” at Tumkur Road, neighborhood of Bengaluru. “La Montana” is a project near Talegaon in Pune, built on a Mediterranean themed development, offering 2 BHK apartments of 1053 sq ft starting at Rs 4,600 per sq ft. “The Inora” Park is located at Undri in Pune, close to NIBM annexe.  It offers 2 BHK flat with area of 976 sq ft and 3 BHK flat with area of 1132 sq ft and 1322 sq ft.

Commenting on the ‘National Home Buying Day’ initiative, Head of Marketing, Mr. Pawan Sarda, said, “Following our vision of being the largest provider of Homes in the Value and affordable segment, we have launched the National Home Buying day to enable our consumers buy their dream homes at prices that ensure guaranteed appreciation on quality homes across the country”. It will be a once in a lifetime opportunity for home buyers to purchase their homes at the click of a button.

All projects with limited units will be showcased in each price band. Allotment of the projects will be done by KPMG through random selection on 5th March 2014.

Earlier also in the Great Online Shopping Festival (GOSF) organised by Google in the month December 2013, Tata Value Homes sold over 50 flats, registering sale of over Rs 25 crore in just 4 days. NRI contributed a big 30% of the total sales.


Interest Rate on Employee Provident Fund raised for 2013-14

Employee provident fund

Interest rate on EPF Account

Contrary to the expectation of retaining the 8.5% interest rate on the Employee Provident Fund for the financial year 2013-2014, the Employees’ Provident Fund Organisation (EPFO) has decided to  raise the Provident Fund interest rate from 8.5 % to 8.75 % for yr 2013-14. Last year also, in the fiscal year 2012-13, EPFO had increased the interest rate to 8.5% from previous 8.25%.

The EPFO in its proposal to the trustees earlier has observed that “Payment of interest to the members is expenditure for the Trust (EPFO), which is to be met out of its earnings. Thus, the rate of interest should be commensurate with the total earnings of the Trust,”. The EPFO, with an estimated income of approx. Rs 20,797 crore, needed Rs 20,740 crore to pay 8.5 % interest to the subscribers and thus would have left a surplus of around Rs. 57 crores.

The Central Board of Trustees, which is the apex decision making body of EPFO, has approved the interest rate that will now be forwarded to the finance ministry for formal notification.


Importance of appointing nominee and RBI guidelines on claims

nomination in bank accounts

Why nomination is important

Nomination is an ideal tool to mitigate hardships of common persons in settlement of claims in the event of death of the account holder. Though Nomination is optional for customers, if availed, would ensure smooth settlement of claim to the nominee or the legal heir. It simplifies the procedure for settlement of claims of deceased depositors as banks / institutions get a valid discharge by making payment of the balance outstanding in a depositor’s account at the time of his death or delivering contents of locker or articles kept in safe custody to the nominee, and the legal heir doesn’t have to face unnecessary hardship in such cases.

However, nomination does not take away the rights of legal heirs on the estate of the deceased. The nominee would be receiving such stock as a trustee of the legal heirs.

What is Nomination :

Nomination is a facility that enables a deposit account holder (individual or sole proprietor) or safe deposit locker holder to nominate an individual, who can claim the proceeds of the deposit account or contents of the safe deposit locker, post the demise of the original depositor or locker holder.

Who can Nominate?

  • Bank account holders having deposit accounts in their individual names or in joint names of two or more individuals can appoint a nominee to their accounts
  • A sole proprietor can appoint a nominee to the sole proprietorship account with the bank
  • In the case of a deposit account in the name of a minor, nomination shall be made by a person lawfully entitled to act on behalf of the minor in respect of a deposit account
  • Safe deposit locker holder(s) can appoint nominee(s) on their Safe deposit locker(s)
  • A nomination can be made only in respect of a deposit account which is held in the individual capacity of the depositor, and not in any representative capacity such as the holder of an office like Director of a Company, Secretary of an Association, partner of a firm, or Karta of an HUF.

Nomination in PPF Accounts :

In case of death of the account holder, irrespective of the sum outstanding in the account, the legal heirs will get a maximum of Rs 1,00,000 only if there is no nominee mentioned in that PPF account. So it is imperative to have nominee mentioned in your PPF account. However, you cannot nominate for accounts opened in the name of a minor.

Nomination in Life Insurance Policies:

Because of the Principal of Insurable Interest in Life Insurance, do ensure that the nominee is a close family member. In case you want to nominate a non-family member like a friend or third party, you will have to provide enough evidence to the insurance company that there is some insurable interest for the person. A policyholder can appoint multiple nominees and can also specify their shares in the policy proceeds. You can appoint minors also as nominee, but make sure to provide the name of guardian till the minor attains the age of 18.

Nomination in Mutual Fund Accounts:

You can nominate up to three people, who can be registered at the time of purchasing the units in Mutual Funds. Nomination in mutual funds is at folio level and all units in the folio will be transferred to the nominee(s). If an investor makes a further investment in the same folio, the nomination is applicable to the new units also.

Concept of Survivorship

A joint account opened as “Either or Survivor” or “Anyone or Survivors” or “Former or Survivor” or “Latter or Survivor” will permit the surviving account holder(s) to have unimpeded access to the credit balance in the account for withdrawal if one of the co-account holders dies. If the mandate of survivorship is given / provided, the survivor(s) can give a valid discharge to the institution / bank in the case of “Either or Survivor” / “Anyone or Survivors” and “Former or Survivor” / “Latter or Survivor” joint accounts. In short, payment to survivor(s) can be made in the normal course subject to the only rider that there is no order from a competent court restraining from making such payment.

Delays in settlement of claims of the nominee / legal heirs of the deceased depositors by banks cause considerable hardship. Claims by legal heirs / nominee could be in respect of deposits, safe custody articles or contents of lockers. In the absence of nomination or clear mandate in respect of a joint account or a will left behind by the deceased depositor, banks are required to pay the stock (balance outstanding) at the time of death of the person to all the legal heirs. Considering the risk involved, banks traditionally used to look for legal representation (in the form of a succession certificate, letter of administration or probate) for settlement of claims.

In order to remove the hardships faced by Common Person, Reserve Bank of India (RBI), vide circular No. DBOD.No.Leg.BC.95 /09.07.005/2004-05, has issued detailed guidelines for evolving simplified procedure for settlement of claims in respect of deceased depositors. We can broadly define these guidelines as:

1… Accounts where the Survivor / Nominee is available:

In the case of deposit accounts where the depositor had utilized the nomination facility and made a valid nomination or where the account was opened with the survivorship clause (‘either or survivor’, or ‘anyone or survivor’, or ‘former or survivor’ or ‘latter or survivor’), the payment of the balance in the deposit account to the survivor(s) / nominee of a deceased deposit account holder represents a valid discharge of the bank’s liability provided :

a. the bank has exercised due care and caution in establishing the identity of the survivor(s) / nominee and the fact of death of the account holder, through appropriate documentary evidence;
b. there is no order from the competent court restraining the bank from making the payment from the account of the deceased; and
c. it has been made clear to the survivor(s) / nominee that he would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him shall not affect the right or claim which any person may have against the survivor(s) / nominee to whom the payment is made.

It may be noted that since payment made to the survivor(s) / nominee, subject to the foregoing conditions, would constitute a full discharge of the bank’s liability, insistence on production of legal representation is superfluous and unwarranted and only serves to cause entirely avoidable inconvenience to the survivor(s) / nominee and would, therefore, invite serious supervisory disapproval. In such case, therefore, while making payment to the survivor(s) / nominee of the deceased depositor, the banks are advised to desist from insisting on production of succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee, irrespective of the amount standing to the credit of the deceased account holder.

General practice among banks :

Banks generally asks for the following documentation

  • Application
  • Copy of the death certificate issued by the Municipal Authority or Village Panchayat
  • Identification documents of the nominee such as valid Election ID Card, PAN Card or Passport or any other satisfactory proof of identification as acceptable to the concerned bank

The bank generally make the payment to the nominee unless on or before the time of payment any order of court is received prohibiting the bank from making such payment.

2… Accounts where the Survivor / Nominee is not available:

In case where the deceased depositor had not made any nomination or for the accounts other than those styled as ‘either or survivor’ (such as single or jointly operated accounts), banks are advised to adopt a simplified procedure for repayment to legal heir(s) of the depositor keeping in view the imperative need to avoid inconvenience and undue hardship to the common person. In this context, banks may, keeping in view their risk management systems, fix a minimum threshold limit, for the balance in the account of the deceased depositors, up to which claims in respect of the deceased depositors could be settled without insisting on production of any documentation other than a letter of indemnity.

General practice among banks :

Banks generally define a threshold limit for releasing the sum, and ask for the following documentation

  • Application
  • Copy of the death certificate issued by the Municipal Authority or Village Panchayat
  • Indemnity – with or without surety
  • Identification documents of the nominee such as valid Election ID Card, PAN Card or Passport or any other satisfactory proof of identification as acceptable to the concerned bank

For cases beyond the threshold limit some additional documents may be asked :

  • A Succession Certificate
  • A Probate (in case of a Will)
  • A Letter of Administration

3… Premature Termination of term deposit accounts :

In the case of term deposits, banks are advised to incorporate a clause in the account opening form itself to the effect that in the event of the death of the depositor, premature termination of term deposits would be allowed. The conditions subject to which such premature withdrawal would be permitted may also be specified in the account opening form. Such premature withdrawal would not attract any penal charge.

4… Treatment of flows in the name of the deceased depositor :

In order to avoid hardship to the survivor(s) / nominee of a deposit account, banks are advised to obtain appropriate agreement / authorization from the survivor(s) / nominee with regard to the treatment of pipeline flows in the name of the deceased account holder. In this regard, banks could consider adopting either of the following two approaches:

  • The bank could be authorized by the survivor(s) / nominee of a deceased account holder to open an account styled as ‘Estate of Shri ________________, the Deceased’ where all the pipeline flows in the name of the deceased account holder could be allowed to be credited, provided no withdrawals are made.


  • The bank could be authorized by the survivor(s) / nominee to return the pipeline flows to the remitter with the remark ‘Account holder deceased’ and to intimate the survivor(s) / nominee accordingly. The survivor(s) / nominee / legal heir(s) could then approach the remitter to effect payment through a negotiable instrument.

5… Access to the safe deposit lockers / safe custody articles :

For dealing with the requests from the nominee(s) of the deceased locker-hirer / depositors of the safe-custody articles (where such a nomination had been made) or by the survivor(s) of the deceased (where the locker / safe custody article was accessible under the survivorship clause), for access to the contents of the locker / safe custody article on the death of a locker hirer / depositor of the article, the banks are advised to adopt generally the foregoing approach, mutatis mutandis, as indicated for the deposit accounts.

6… Death of Karta in a HUF account :

In case death of the Karta of a HUF account, the banks generally seek a confirmation from the existing members on whether they will be continuing with the HUF. In case they are, then a revised HUF declaration signed by the remaining co-parceners appointing the Karta is obtained. In case not, then the relevant documents relating to partition of the property should be obtained before co-parceners are allowed to withdraw the funds.

7… Time limit for settlement of claims :

Banks are advised to settle the claims in respect of deceased depositors and release payments to survivor(s) / nominee(s) within a period not exceeding 15 days from the date of receipt of the claim subject to the production of proof of death of the depositor and suitable identification of the claim(s), to the bank’s satisfaction.


Employee Unique Identification Number required for all Mutual Fund Transactions

Investments in Mutual Funds

EUIN for Investments in Mutual Funds

In order to address the problem of mis-selling of Mutual Fund products, SEBI (Regulatory body) has made it mandatory to mention the unique identification number (EUIN) of the employee / relationship manager / sales person of the distributor interacting with the investor, in addition to the AMFI Registration Number (ARN) of the distributor.

What is Employee Unique Identification Number (EUIN) :

EUIN is a unique number that will capture the identification of the sales person / employee / relationship manager interacting with the investor, irrespective of whether the transaction is “Execution only” or “Advisory”. It is allotted to each Sales Person holding a valid NISM certificate and associated with an ARN holder who wish to interact with the investor for the sale of mutual fund products. However, a mere quoting of EUIN will not give an “advisory” character to the transaction.

ARN holders are requested to intimate AMFI, in case they employ any ‘Sales Person’ so that EUIN could be allotted to them.

Purpose :

It has been observed that there is a lot of mis-selling happening in the mutual fund sector. And at times it becomes difficult to track the person responsible for such mis-selling. EUIN will assist in tackling the problem of mis-selling even if the employee / relationship manager / sales person leaves the employment of the distributor or his / her sub broker.

Is it Mandatory to provide EUIN in transaction ?

Quoting of EUIN is mandatory irrespective of whether the transaction is “Execution only” or “Advisory”. The ARN Holder should put his / her EUIN in the column provided in the application form. Investors are therefore advised to check & mention the AMFI allotted ‘Employee Unique Identification Number (EUIN)’ of the distributor’s sales personnel who has advised / executed the investment/switch.

However, in case of certain exceptional instances where the investment / switch has been carried out or submitted without any interaction by the employee / sales person / relationship manager of the distributor / sub broker with respect to the transaction, Investors are requested to submit the following declaration separately:

“I / We hereby confirm that the EUIN box has been intentionally left blank by me/us as this transaction is executed without any interaction or advice by the employee / relationship manager / sales person of the above distributor / sub broker or notwithstanding the advice of in-appropriateness, if any, provided by the employee / relationship manager / sales person of the distributor / sub broker.”

Separate declaration must be furnished for each separate transaction / application. Investors are advised to use new application forms which have the provision for ARN code, Sub broker ARN code, EUIN, Sub broker code (code allotted by the ARN holder).

Applicable Transactions :

  • EUIN Applicable : Purchases, Switches, Registration of Systematic Investment Plan (SIP) and Registration of Systematic Transfer Plan (STP) including transactions routed through stock exchanges
  • EUIN Not Applicable : Registration of Systematic Withdrawal Plan, Ongoing instalments under SIP / STP / SWP, Dividend Reinvestments, allotment of Bonus Units and Redemption, transactions routed through overseas distributors.

As an Investor what you must ensure ?

  • If routed through a distributor, please use new forms that have space for EUIN and Sub broker code and must ensure that the application form shall have a valid EUIN besides a valid ARN code and, Sub broker ARN code.
  • Investors transacting online or through any other mode offered by a distributor, do mention the EUIN and sub-broker ARN code while placing the transaction. In case of transaction where there is no interaction with any representative / agent of a distributor, investors are requested to clearly indicate the same by submitting the above declaration format.

Challenges :

Challenge will come to ensure that all salespersons are EUIN compliant. Moreover mis-selling is so rampant at all levels and mere getting EUIN may not prevent employees to indulge in mis-selling. There is still no clarity on what constitutes mis-selling. Though the new system of labelling the mutual funds is already there, yet its not fool-proof. Further, mutual fund advisors rarely undertake proper risk profiling of the clients, or ascertain their needs and goals.


Your insurance policies are set to change

insurance policies

New guidelines for Insurance policies

You will soon be offered new insurance policies with added benefits. IRDA has mandated some key changes in the insurance policies for the benefit of policyholders. The new guidelines will offer better life insurance cover, better surrender values and improved disclosures. All the 24 insurance companies (including LIC) have to withdraw all existing products and come out with new ones.

Old policies, where the contract had already been made, will continue to get renewed. However, at the time of renewal of group policy, the insurer will have to give the policyholder an option to switch to the modified version. In case the policyholder does not switch to the new modified policy, the insurance company will have to take a written consent that the policyholder will continue with the old policy.

Though the deadline to roll out new policies was 1st October, IRDA has extended the date to 1st January’ 2014, except for the insurance products which offer highest NAV, or are indexed linked. You may be curious to know the new guidelines for the insurance policies. As per new guidelines issued by IRDA, all new insurance products will be divided into three broad categories —

• Traditional
• Variable
• Unit-linked

Traditional Products: The earlier versions of traditional insurance products, viz. participating and non-participating would continue. Henceforth, all traditional products will have a higher death cover. Regular paying premium policies will have a cover of 10 times the annualised premium paid for people with an age of less than 45 years and 7 times for others.

Bonus for participating policies will be linked to the performance of the fund and is not declared or guaranteed in advance. However, in case of non-participating policies, the return in the policy is to be disclosed in the beginning.

Unit-linked Products : Due to various charges in the insurance policy, the investment growth gets reduced. Now the insurers have to inform policyholders about such reduction in the yield of their products on a monthly basis. Further an annual certificate has to be issued, mentioning the premiums paid and the charges, including the tax, deducted from the fund value.

Variable Products : All variable insurance plans will guarantee a minimum rate of return at the beginning of the policy. Variable insurance products will be treated at par with Unit-linked Products, including charge structure and the commission package as applicable for Unit-linked Products. Agents of such policies will get commission of up to 10% only.

Commission Structure : As per new guidelines, commissions will be linked to the premium paying period for all products and will be less for policies with shorter tenure. Single premium-non pension products will earn commission of up to 2% of the premium paid. In case of regular premium paying insurance policies, a policy with a premium paying term of up to 5 years, will earn a commission of up to 15% in first year and 7.5% in second and third year. Subsequent years will earn up to 5% of commission in such policies. For premium paying term of more than 12 years, commission can be up to 35% (for companies older than 10 years) and 40% (for companies not older than 10 years).

Lock-in period / Surrender : For Unit-linked Products, the lock-in period will continue to be five consecutive years from the date of commencement of the policy. In case of Unit-linked and Variable insurance products, the maximum surrender charge will be Rs.6,000 in the first year, tapering off to Rs.2,000 in the fourth year and becoming nil fifth year onwards Further, except in the case of death or any other contingency covered under the policy during this five year period, the proceeds of discontinued policies cannot be paid to the insured.

Based on the premium paying term, all individual non-linked life insurance and pension policies will have a minimum surrender value. The policy shall acquire a guaranteed surrender value, if all the premiums have been paid for at least three consecutive years for products with a premium paying term of 10 years or more. Similarly, for products with a premium term of less than 10 years, if all premiums have been paid for at least two consecutive years, the policy shall acquire a guaranteed surrender value of any subsisting bonus.

For pension products, the insurer has to offer insurance cover throughout the deferment period or offer riders. In all such pension products, the sum of all rider premiums attached to the pension product cannot exceed 15% of the premium paid. Such rider premiums will be separately accounted for and cannot be included in arriving at the assured benefit.

Revival of policies : To revive a discontinued policy, the insurer will collect all due and unpaid premiums without charging any interest or fee. However, the insurer can levy policy administration and premium allocation charges and any guarantee charge, if such a guarantee is reinstated.

For policies that have not completed two years of revival period at the end of the lock-in, the insurer will have to take written consent from the policyholder to revive the policy immediately or within the two-year period.

Health insurance : Now, all health insurance products, except for customised products, would be renewable for life-time. All new individual health insurance policies, except those with tenure of less than a year, will have a free-look period and this will be applicable at the inception of the policy. Also, cumulative bonus will not be allowed on benefit-based policies with the exception of personal accident cover. Insurers now have to settle claims within a period of 30 days from the receipt of all documents.

Health insurance providers will have to provide coverage to non-allopathic treatments also. But to avail of the cover, the policyholder will have to get the treatment done in a government hospital or in any institute recognised by the government or any accredited institute by the Quality Council of India or the National Accredition Board on Health. In case of claim, no-claim bonus can be reduced proportionately, but cannot be made zero.


0% Interest Free EMI — is it really “0%”

0% interest free EMI

   0% Interest on EMI — Is it really “Zero”

Do you feel excited to get that “Special Zero Interest EMI” on mobile phones, LED TVs, washing machines, laptops and virtually every high value product in the market. Think twice before jumping to avail such offers. Even RBI has issued an advisory, asking banks to be more transparent in offering “0% EMI” schemes.

Remember – “There are no free lunches”. Most of these schemes offer you EMI on the MRP of the product. What they fail to mention is the cash discount you may otherwise get if you buy the product by paying the entire price in one go. Thus if a “Samsung Galaxy” has a price tag of Rs. 30000/-, and is available in the market at a discount of 12 to 15%, your credit card bank would offer you 0% EMI on the tag price of Rs. 30000/-. In other words you are still paying the cost of availing such free EMI schemes by not availing the discount of 12-15%. Not to mention that even in such schemes most banks would charge processing charges.

RBI noticed that banks were not disclosing the processing charges and the amount of cash discount otherwise available to the customers. Further on schemes offered on credit card outstanding, the interest amount is often camouflaged and passed on to customers as “processing fee”. And in some cases banks were loading the expenses which was being paid out as commission to DSAs.

The RBI has issued a operational circular and sought more disclosures under the zero per cent EMI scheme as RBI was worried over the “hidden costs” involved. It wants full disclosures to the made to the customers, including the processing charges.

Though after the advisory issued by the RBI, most banks have started withdrawing such zero interest EMI schemes, do take into consideration the entire cost and discounts available before buying your big purchase this festive season.


A good opportunity for NRIs to earn more money

NRI investment in india

Investment opportunity for NRI

There is a good opportunity for rich NRIs (Non Resident Indians) to take advantage of the new directive by the Reserve Bank of India. The Reserve Bank of India has allowed banks to swap dollars raised through FCNR deposits for Indian Rupees at a fixed swap rate of 3.5 percent. This is much lower than the market rate of 7 percent to 8 percent. This comes after RBI liberalized interest rates on FCNR deposits from LIBOR + 300 bps to LIBOR + 400 bps. Though this decision of RBI was to provide support to the falling Indian Rupee and also to bridge the current account gap, but it also gives an ample opportunity for a NRI’s to take advantage and earn more money by investing his funds in FCNRB account.

Big banks generally provide leverage to their premium customers on their money as loans. This leverage can go up to 20 times depending on the relationship and risk profile of the customers. If a NRI customer of bank in Singapore invests $1000 in a FCNRB deposit, and his bank lends him another $9000, the NRI customer gets interest on a total of $10000. While the bank may charge 2.5 percent (1 percent to 2 percent over the LIBOR), the NRI will get around 4.5 percent as deposit interest.

The NRI customer gets an effective 2 percent (FCNR interest less interest charged by his lending Bank) on his leveraged amount and the entire 4.5 percent on his own principal. Thus the total amount a NRI earns is:

Own Money ($1000): $45 (@ 4.5 percent)

Loan extended by bank ($9000): $180 (@2 percent)

This total return of $225 on his $1000 investment translates into a whopping 22.5 percent on his own invested amount.

And if this NRI customer has a good relationship with the bank and has an appropriate risk profile, he can earn 42.% on his $1000, assuming his bank would be willing to lend him $19000.

So, there is a great opportunity for NRI customers to earn better returns on his money while India gets much needed dollars to save its falling rupee.


New color scheme for investment in mutual funds

color scheme for mutual funds

color scheme for mutual funds

Your investments in mutual funds now becomes colorful. SEBI, the market regulator, in order to  help investors assess the risk associated with the mutual fund schemes, has issued a framework on ‘product labelling’ with colour coding. This would help investors to better understand the product they are investing in and its suitability to them. This would be effective from July 1, 2013, for all existing and forthcoming schemes.

All common application forms, scheme advertisements and product brochures would have a product label. The labels would include details about the nature of schemes “such as to create wealth or provide regular income in an indicative time horizon (short/ medium/ long term)”. Moreover, mutual funds would have to state a brief about the investment objective in a single sentence followed by kind of product in which investor is investing (equity or debt).

This will be followed by the level of risk in a colour box.

A blue colour coded box would indicate low risk, yellow would signify a medium risk, and brown would represent schemes with high risk.

As per SEBI illustration, a product label of an equity scheme which carries a brown label will say : “This product is suitable for investors who are seeking long-term capital growth, investment in equity and equity-related securities, including equity derivatives of top 200 companies by market capitalisation and carries high risk”. If an investor, who want to play safe and conserve capital and does not wants low or no exposure to equities, the brown colour could serve as a warning bell.

As per the guidelines, mutual funds would also have to include a disclaimer that “investors should consult their financial advisers if they are not clear about the suitability of the product”.

However, this new scheme has its own disadvantages. Financial products are much more complex. The type of risk associated with a product may differ with different products. As per the guidelines issued by the SEBI, the product labelling, all equity schemes will carry the high-risk tag, hybrid schemes will have the medium risk tag and fixed income schemes will have the low risk tag.

This is a very basic level of classification. In the same product category itself, there could be a huge difference in the return of the schemes. For example, over the last one year, the best equity scheme delivered a return of over 15%, but the worst scheme of the same category delivered a return as low as -14%. Further, there is no distinction of risks associated with index, large, small and mid-cap schemes. An index fund may offer comparatively lower risks than a small-cap fund. Also, an MIP and a balanced fund both would carry a yellow colour. While a MIP could have merely 5-10% equity component, a balanced fund could even have 70% of its corpus invested in equities, thereby carrying higher risk.

Investors need to consider their goals, and objective of investing in a mutual fund. Due diligence should be made before investing in any mutual fund scheme.


Deposit Schemes available for Non Resident Indians (NRIs)

Deposit Schemes available for Non Resident Indians (NRIs)

Deposit Schemes for NRIs

With the Indian Rupee depreciating at the record levels, and interest rates having peaked in India, it is a good time to invest in India. Moreover, the interest rate differential is very high, making Indian markets even more attractive. Lets learn about the different types of deposit options available for NRIs.

NRI deposits are offered under three categories – foreign currency non-resident (banks), or FCNR (B), non-resident ordinary, or NRO, and non-resident external (Rupee Account), or NRE (RA). In case of NRE (RA), the foreign exchange risk is borne by the depositor, and hence tends to gain at the time of conversion when the rupee is appreciating through the tenor of the deposits.

While NRE funds are repatriable, NRO money cannot be remitted abroad. On the other hand, FCNR accounts are denominated in forex and the funds are fully repatriable.


Foreign Currency (Non-Resident) Account (Banks) Scheme [FCNR (B) Account]

Non-Resident (External) Rupee Account Scheme 
[NRE Account]

Non-Resident Ordinary Rupee Account Scheme [NRO Account]





Who can open an account

NRIs (individuals / entities of Bangladesh / Pakistan nationality / ownership require prior approval of RBI)

NRIs (individuals / entities of Bangladesh/Pakistan nationality / ownership require prior approval of RBI)

Any person resident outside India (other than a person resident in Nepal and Bhutan). Individuals / entities of Bangladesh / Pakistan nationality / ownership as well as erstwhile Overseas Corporate Bodies require prior approval of the Reserve Bank.

Joint account

In the names of two or more non-resident individuals provided all the account holders are persons of Indian nationality or origin;
Resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on ‘former or survivor’ basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder.

In the names of two or more non-resident individuals provided all the account holders are persons of Indian nationality or origin;
Resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on ‘former or survivor’ basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder.

May be held jointly with residents





Currency in which account is denominated

Any permitted currency i.e.  a foreign currency which is freely convertible

Indian Rupees

Indian Rupees




Not repatriable except for the following:
i) current income ii) up to USD 1 (one) million per financial year (April-March), for any bonafide purpose, out of the balances in the account, e.g., sale proceeds of assets in India acquired by way of purchase/ inheritance / legacy inclusive of assets acquired out of settlement subject to certain conditions.

Type of Account

Term Deposit only

Savings, Current, Recurring, Fixed Deposit

Savings, Current, Recurring, Fixed Deposit

Period for fixed deposits

For terms not less than 1 year and not more than 5 years.

At the discretion of the bank.

As applicable to resident accounts.

Rate of Interest 



Deposits  of all maturities contracted effective from the close of business in India as on November 23, 2011, interest shall be paid within the ceiling rate of LIBOR/SWAP rates plus 125 basis points for the respective currency / corresponding maturities (as against LIBOR / SWAP rates plus 100 basis points effective from close of business on November 15, 2008).

On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency/maturity plus 125 basis points. For floating rate deposits, the interest reset period shall be six months.

Subject to cap as stipulated by the Department of Banking Operations and Development, Reserve Bank of India :

Banks are free to determine the interest rates of saving’s and term deposits of maturity of one year and above.
Interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

Banks are free to determine their interest rates on savings deposits under Ordinary Non-Resident (NRO) Accounts. However, interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

Operations by Power of Attorney in favour of a resident by the non-resident account holder

Operations in the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.

Operations in the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.

Operations in the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments in rupees, remittance of current income to the account holder outside India or remittance to the account holder himself through normal banking channels.

Remittance is subject to the ceiling of USD 1 (one) million per financial year.

Loansa. In Indiai) to the Account holder

i) to Third Parties

Permitted only up to Rs.100 lakhs

Permitted only up to Rs.100 lakhs

Permitted up to Rs.100 lakhs

Permitted up to Rs.100 lakhs

Permitted subject to the extant rules

Permitted, subject to conditions

b. Abroad
i) to the Account 
ii) to Third Parties

(Provided no funds are remitted back to India and are used abroad only)

(Provided no funds are remitted back to India and are used abroad only)

(Provided no funds are remitted back to India and are used abroad only)

(Provided no funds are remitted back to India and are used abroad only)

Not Permitted

Not Permitted

c. Foreign Currency Loans in India i) to the Account holderii) to Third 

Permitted up to Rs.100 lakhs

Not Permitted

Not Permitted

Not Permitted

Not Permitted

Not Permitted

Purpose of Loan
a. In India 
i) to the Account holder

i) Personal purposes or for carrying on business activities *

ii) Direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms / companies

iii) Acquisition of flat / house in India for his own residential use. (Please refer to para 9 of Schedule 2 to FEMA 5).

i) Personal purposes or for carrying on business activities.*

ii) Direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms / companies.

iii) Acquisition of flat / house in India for his own residential use. (Please refer to para 6(a) of Schedule1 to FEMA 5).

Personal requirement and / or business purpose.*

ii) to Third Parties

Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities *. (refer to para 9 of Schedule 2 to FEMA 5).

Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities*. (refer to para 6(b) of Sch. 1 to FEMA 5)

Personal requirement and / or business purpose *

b. Abroad 
To the account holder and Third Parties

Fund based and / or non-fund based facilities for bonafide purposes.

Fund based and / or non-fund based facilities for bonafide purposes.

Not permitted.

* The loans cannot be utilised for the purpose of on-lending or for carrying on agriculture or plantation activities or for investment in real estate business.

NRI means a person resident outside India who is a citizen of India or is a person of Indian origin [Regulation 2 (vi) of Notification FEMA 5/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Deposit) Regulations, 2000].

Overseas Corporate Body (OCB) means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty per cent by Non-Resident Indians and includes overseas trust in which not less than sixty percent beneficial interest is held by Non-resident Indians directly or indirectly but irrevocably, which was in existence as on September 16, 2003 and was eligible to undertake transactions pursuant to the general permission granted under Foreign Exchange Management Regulations.

When a person resident in India leaves India for Nepal and Bhutan for taking up employment or for carrying on business or vocation or for any other purpose indicating his intention to stay in Nepal and Bhutan for an uncertain period, his existing account will continue as a resident account. Such account should not be designated as Non-resident (Ordinary) Rupee Account.

Authorised Dealers (ADs) may open and maintain NRE / FCNR (B) Accounts of persons resident in Nepal and Bhutan who are citizens of India or of Indian origin, provided the funds for opening these accounts are remitted in free foreign exchange. Interest earned in NRE / FCNR (B) accounts can be remitted only in Indian rupees to NRIs and PIO resident in Nepal and Bhutan.


Checklist before buying a property

Checklist before buying a property

Checklist before buying a property

One of the most difficult, emotional and major decision we make in life when we buy a property. Hundred of questions cross our mind especially when we invest a major part of our life saving into property that today cost from many lakhs to many many crores. Be sure you do not go wrong while buying a property and that the property has a clear and marketable title and is free of any encumbrances.

The following is a checklist that you must look at before buying a property:

1) Legal right: Making sure that the seller has the legal right to the property. One must look at the Title deed of the property in original. Make sure that the property is in the name of the seller and he has all the rights to the same, and the same has not been pledged to any other person or institution in order to take a loan. Kindly note that in a recent judgment, the Supreme Court of India has ruled that property bought through the power of attorney no longer has the legal sanctity.

Check whether the property is leasehold or freehold. In case of a leasehold property, the lease can be transferred only with the permission of the lessor.

If the seller has taken any loan for buying the said property, make sure that the seller pays back all the pending loan amount. Financial institutions generally issue a release certificate which legally clears the right to sell. In order to play safe, you must obtain the release certificate before you sign on any paper to buy the land.

And if there are more than one owner of the property make sure that you get release certificate / NOC from each of them.

If you are buying a flat make sure that the project is approved and sanctioned by the local authorities. And whether you have to pay anything extra for the parking facilities, local services or any other service charge to the society.

2) Real Estate Rating: In case you are buying a flat from a builder do check on the past record, credibility, quality of the structure and all the legal certificates in original. You must also check if the project has been approved by the banks. Crisil has introduced Crisil Real Estate Star Ratings (Crest), which provides valuable information about projects in a standardized manner. The rating indicates the quality of the project and also gives an opinion on the project. One can also track the progress of the project through their website.

3) Physical inspection of the property: You must check whether construction of the property adheres to the local municipal laws. And that all the construction carries the clearance certificates from the local municipal office. Also check whether the size and measurement of the plot is as per the figures mentioned in the original documents.

4) Encumbrance certificate: It is essential that you must visit the sub registrar office where the deed has been registered, and obtain encumbrance certificate which states that the property is not mortgaged and there are no complaints and legal dues against the property. You might need it in case you want to avail a loan for the said property. You can obtain the record from the office for up to 30 years.

5) No dues: You must find out that no property taxes are due and that no legal notice have been pending on the matter of property taxes. The same can be found out from the local municipal office where the property falls. The seller of the property should also be able to produce all the tax receipts on demand. You must also check all the electricity bills and water bills to find out there are no dues and penalties and whether usage is under in the permissible limits and sanctioned load. In case of a flat, you must also check from the society register whether all the dues have been paid.

6) Agreement to sell: After you have decided on the price, the time frame, advance payment and the payment method, kindly enter into a legal agreement which besides above, should also state the penalty clause for both the parties in case any one backs down.

7) Registration: Now as per the time line drawn in the sale agreement you must get the property registered under your name. One can visit the registrar office and can find the Government approved document writer to prepare the deed. A sale deed, which is also known as conveyance deed, is also prepared. This is the main document through which the seller transfers his rights on the property to you. You need to carry original title deed and all the previous deeds, house tax receipts and two credible witnesses whom you can trust. You must also carry the original photo id proof and photographs of all the parties, including that of witnesses. In addition you may also attach torence plan which is prepared by a licensed surveyor on the measurements of the property.

8) Rules for NRI: NRI do not require any special permission from any local authority before buying any property. However, he cannot repatriate for more than 2 residential properties if they have been bought from an NRE account and if the funds have been sent of a rupee account then the limitation is that he has to hold the money in the account or in India for 10 years.


Understanding Financial Planning and the key areas of a Financial Plan

Financial Planning

Financial Planning

A life without goals is really not worthy.

Goals may include worldly things like buying a home, saving for your child’s education or marriage or planning for retirement or even planning a vacation. In order to accomplish these goals, a proper planning and management of your money is required.

Thus Financial planning is the process of meeting your life goals through proper management of your finances.

Globally, money environment has witnessed a sea change in the last few years. Gone are the days when there were limited investment options and investors did not have much to plan on their investments and generally, bank managers, accountants, share broker and insurance agents generally provided advice on investment to individuals. Most of it is restricted to recommending you one particular product, more often from their own parent company or is guided by their targets or commission.

But now we have multiple choices. This has added complexity to the decision-making process about our money. And thus more and more people are now turning to professional financial planner for a comprehensive roadmap on financial planning to achieve their all money related goals. A financial planner in essence, assist them to make informed decisions about their money and how it can be used to best advantage.

Financial planning essentially involves the following steps:

1. Assessment: The first step is to assess the financial position with the help of personal financial balance sheets and income statements. A personal balance sheet includes personal assets such as investments in various financial instruments, including bank, cash, property etc. The balance sheet also includes personal liabilities, which includes all the loans, credit card balance, any other liabilities.

2. Defining goals: As explained earlier goals may include worldly things like buying a home, saving for your child’s education or marriage or planning for retirement or even planning a vacation. One must also define objective and time frame of goals.

3. Making financial plan: The financial plan gives you  the structure and clear cut roadmap to achieve  your goals. A financial plan includes the investments you can make (with whatever existing fund and income sources), their expected yields, your current and expected future income and expenses. It also helps you visit your current investments and help you take a decision on whether to keep them or replace them with more secure / better yielding asset. It also help you look at the current expenses and how they might impact your financial goals.

4. Execution: An effective execution of  personal financial plan can help you achieve your financial goals. Your financial planner plays a very crucial role in helping you execute the plan.

5. Monitoring: You must take help of your financial planner to monitor your financial health and the effectiveness of the investments you have made. It is essential to monitor on a regular basis as the micro and macro economic changes might ask you to take a look into your current financial health.

Some of the key areas that a well drafted Financial Plan must include are:

a) Current financial position: This can be ascertained with the help of making a net worth statement that includes your assets and liabilities.

b) Emergency fund: Emergence fund helps you meet your emergency expenses. A reasonable amount of money which may be calculated depending on the your current lifestyle, family, flow of income.

c) Risk and Protection planning: Risks in the context of financial planning can be divided into liability (loans etc.), property (fire, theft etc.), death (loss of income to your dependents) , disability and health (medical emergencies). Lets look at the generally heard life insurance. Different people buy life insurance for different reasons, but most of us have a need for it at some point in our lives. The type we need, the amount we need, and the reasons why we need it may change; but it definitely plays a vital role in most financial plans. Here are some reasons why people purchase life insurance:

To Pay off debts
Life insurance can be an inexpensive way to make sure there is ready cash to cover any financial obligations (Loans etc.) you leave behind.

Replace your income for your family
It helps to cover the uncertainties in our life. It helps your Children to complete their education, your wife to take care of the household expenses, your dependent parents to live their life comfortably in case you are not with them.

Tax planning ( u/s 80 C )
Many people use life insurance as part of tax planning strategy designed to potentially reduce taxes.

One must choose his insurance plan with utmost care. The choices available are:

  • Term Insurance
  •  Endowment
  •  Whole Life Insurance
  •  Medical Insurance (Regular)
  •  Critical Illness
  •  Accidental and Permanent Disability
  •  Key Person Insurance
  •  Employee Benefit

Other Key Insurance requirement includes :

  •  Vehicle Insurance
  •  House Insurance
  •  Factory Insurance
  •  Travel Insurance
  •  Professional Indemnity

Determining how much insurance to get, at the most cost effective terms will help you get better value for money.

d) Investment planning: What rate of return do you need to meet your goals? Are your current investments achieving the return? What is the best asset allocation (Mutual Fund, FD’s, Bullion, Cash, Insurance, PF, Bonds, Property etc.) suited to your profile. What investments opportunities do you use to implement this asset mix? What shall be the best Mutual Fund, FD and other such investments are suited to your needs?

Their is no definite answer to all these. It all depends on person to person. You may have a different risk profile, life goals, time horizon, and current portfolio than that of your friend.

e) Tax planning: Tax Planning essentially means using a strategy to either reduce or shift your current tax liabilities. Even Government allows and encourages tax saving to us. Tax planning saves you your hard earned money. And avoids last minute rush to put your money into investments such as u/s 80C. And other sections also you ample opportunity to save you your taxes.

There are investments that are totally exempted from Tax on their profit. And some get concessional tax treatment, which means they are taxed at a lower rate. It also benefits if you meticulously define out in whose name in the family to invest, so as to reduce the tax liability, if any. A salaried person can also reduce its Tax liability by various means. Lets look at some of the tax saving instruments :

U/s 80C
Public Provident Fund. Maximum amount is s. 70000/- in a year
Employee Provident Fund
National Saving Certificates
Kisan Vikas Patra
Insurance Policies
Tax saving FDs
New pension schemes
Senior citizen saving scheme
Children Tuition fee
Repayment of housing loan (Principal)

U/s 80CCF
Specified Infrastructure bonds upto Rs. 20000/-

U/s 80D
Premium paid for mediclaim insurance for individual Rs. 15000/- and another Rs. 20000/- if paid for parents who are senior citizens

U/s 80DD
Expenditure on handicapped dependents from Rs. 50000/- to Rs. 100000/- depending on the severity

U/s 80DDB
Expenditure incurred on specified diseases or ailments

U/s 80E
Interest paid on higher education loan

U/S 24(1)(Vi)
Interest paid on housing loans

f) Retirement Planning: Old Age typically brings income Insecurity, dependency on children, medical expenses, but most of the people are generally not worried about their old age and retirement.  Let’s start tackling the how of retirement planning by asking the No.1 retirement question: “How much money do I need at the time of my retirement’’ ?

The answer to this question contains some good news and some bad news. First, the bad news: There really is no single number that would guarantee everyone an adequate retirement. It depends on many factors, including your desired standard of living, your expenses (including any medical costs) and your target retirement age. Now for the good news: It’s entirely possible to determine a reasonable number for your own retirement needs. All it involves is answering a few questions and doing some number crunching. Providing you plan ahead and estimate on the conservative side, it’s entirely possible for you to accumulate a nest egg sufficient to last you through your golden years. There are several key tasks you need to complete before you can determine what size of nest egg you’ll need in order to fund your retirement. These include the following:

Decide the age at which you want to retire.
Decide the annual income you’ll need for your retirement years. It may be wise to estimate on the high end for this number. Generally speaking, it’s reasonable to assume you’ll need about 70% – 80% of your current annual salary in order to maintain your current standard of living.
Determine a realistic annualized real rate of return (net of inflation) on your investments. Conservatively assume inflation will be 6-7 % annually.
A realistic rate of return would be 7 -10%. Again, estimate on the low end to be on the safe side.

g) Estate planning: Estate Planning essentially includes having a succession plan in place, so that your dependents, other family members and the people you love must know how your assets be distributed in an unfortunate event of you being no more in this world. If a person dies without a will or trust, known as dying intestate, he / she generally leaves heirs confused or fighting over who gets what from their assets.
In order to have a good succession plan in place, one must consider the following :
• Decide whether you need will or living trust!
Both are part of estate planning. A Will act as a guide on distribution of assets. Living trust is generally safer and let your assets be distributed in a cost effective manner and without the hassle of probate of will. You can have a living trust that allows you manage your assets during your life. And after your demise these assets are then passed on to your beneficiaries. Trusts are more helpful when you have valuable properties and / or a complex successor tree. Having both will and trust is a better idea in certain cases.

Who shall be the beneficiaries
• If your children are still very young then who shall be their guardian
• Who shall be the best person to execute your will or act as successor trustee
• Assignment of medical power of attorney
You must take inventory of all your assets, which includes your
• Immovable and movable property
• Financial assets such as shares, bonds, insurance policies
• Business interests
After you have taken the stock of all your assets, name the beneficiaries to whom you wish to pass on your assets. You can make changes in your will any time; make sure to add details of the old will to avoid any ambiguity. You must also review your succession plan regularly, especially if you there is a change in your marital status or a new baby is born.

Determining how much insurance to get, at the most cost effective terms will help you get better value for money.


Senior Citizens Savings Scheme, 2004

Senior Citizens Scheme

Senior Citizens Scheme

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

The salient features of the Senior Citizens Savings Scheme, 2004 are given below.

Tenure of the deposit account 5 years, which can be extended by 3 years.
Rate of interest 9.2 per cent per annum
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 ` 1000/-
Maximum investment limit ` 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) will be eligible to invest irrespective of the age limits subject to the fulfillment of other specified conditions

Premature  closure/withdrawal facility Permitted after one year of opening the account but with penalty.
Transferability Not transferable
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 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 (NRIs), Persons of Indian Origin (PIO) and Hindu Undivided Family (HUF) 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 is permitted.

2. 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. [Rule 3 (3)]

3. 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 (i.e. spouse). [Rule 3 (3)]

4. What will be the share of the joint account holder in the deposit in an account?

The whole amount of investment in an account under the scheme is attributed to the first applicant / depositor only. As such, the question of any share of the second applicant / joint account holder (i.e. spouse) in the deposit account does not arise. [Rule 3 (3)]

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

Both the spouses can open individual and / or joint accounts with each other with the maximum deposits up to Rs.15 lakh each, provided both are individually eligible to invest under relevant provisions of the Rules governing the Scheme. (Rules 3 and 4 )

6. Whether any income tax rebate / exemption is admissible?

No income tax / wealth tax rebate is admissible under the Scheme. The prevailing Income Tax provisions shall apply. (GOI letter F. No.2/8/2004/NS-II dated October 13, 2004)

7. 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. (GOI letter F. No.2/8/2004/NS-II dated March 28, 2006)

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

Tax is to be deducted at source  as per the minimum limit prescribed by the Government.

9. What is the rate at which TDS is to be deducted from the account holder?

The rate for TDS for a financial year is specified in Part II of Schedule I of the Finance Act for that year. (GOI letter F. No.2/8/2004/NS-II dated June 06, 2006)

10. Whether TDS should also be recovered from the undrawn interest payable to the legal heirs of the deceased depositors?

Tax shall be deducted at source even from any interest paid / payable to the legal heir of the account holder. (GOI letter F. No.2/8/2004/NS-II dated June 06, 2006)

11. Whether TDS on interest payments will be applicable with retrospective effect or prospective basis?

TDS is applicable from the very first day when SCSS, 2004 was made operational regardless of the fact that the Central Government or Reserve Bank of India or any authority might have issued any Notification / circular / clarification at a later stage. (GOI letter F. No.2/8/2004/NS-II dated June 06, 2006)

12. Whether only one person or number of persons can be nominated in the accounts opened under the Scheme?

The depositor may, at the time of opening of the account, nominate a person or persons who, in the event of death of the depositor, will be entitled to payment due on the account. [Rule 6 (1)]

13. Can a nomination be made after the account has already been opened?

Yes, nomination may be made by the depositor at any time after opening of the account but before its closure, by an application in Form C accompanied by the Pass book to the deposit office. [Rule 6 (2)]

14. Can a nomination be cancelled or changed?

Yes, the nomination made by the depositor may be cancelled or varied by submitting a fresh nomination in Form C to the deposit office where the account is being maintained. [Rule 6 (3)]

15. Can nomination be made in joint account also?

Nomination can be made in joint account also. In such a case, the joint holder will be the first person entitled to receive the amount payable in the event of death of the depositor. The nominee’s claim will arise only after the death of both the joint holders. [Rule 6 (4)]

16. Can a person holding a Power of Attorney sign for the nominee in the nomination form ?

No, a person holding a Power of Attorney cannot sign for the nominee in the nomination form. (GOI letter No. F.15/8/2005/NS-II dated March 02, 2006)

17. 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. [Rules 6 (4) and 8 (3)]

18. 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 deceased depositor / spouse shall not be continued and such account(s) shall be closed. [Rule 5 of the Senior Citizens Savings Scheme (Amendment) Rules, 2004 notified on October 27, 2004]

19. Whether any fee has been prescribed for nomination and / or change / cancellation of nomination?

No fee has been prescribed for nomination and / or change / cancellation of nomination(s) in the accounts under the SCSS, 2004. (GOI letter F. No.2/8/2004/NS-II dated October 13, 2004)

20. What is the age limit in the case of retired Defence Personnel for investment in the scheme?

The retired personnel of Defence Services (excluding Civilian Defence Employees) will be eligible to subscribe under the scheme irrespective of the age limit of 60 years subject to the fulfillment of other specified conditions. (The Senior Citizens Savings Scheme (Amendment) Rules, 2004 notified on October 27, 2004)

21. What is the meaning of ‘retirement benefits’ for the purpose of SCSS, 2004?

“Retirement benefits” for the purpose of SCSS Rules have been defined as ‘any payment due to the depositor on account of retirement whether on superannuation or otherwise and includes Provident Fund dues, retirement / superannuation gratuity, commuted value of pension, cash equivalent of leave, savings element of Group Savings linked Insurance scheme payable by employer to the employee on retirement, retirement-cum-withdrawal benefit under the Employees’ Family Pension Scheme and ex-gratia payments under a voluntary retirement scheme’. (Rule 2 (a) of the Senior Citizens Savings Scheme (Amendment) Rules, 2004 notified on October 27, 2004)

22. Can deposits under the SCSS scheme be made only from amounts received as retirements benefits?

In case an investor has attained the age of 60 years and above, the source of amount being invested is immaterial [Rule 2 (d)(i)]. However, if the investor is 55 years or above but below 60 years and has retired under a voluntary scheme or a special voluntary scheme or has retired from the Defence services, only the retirement benefits can be invested in the SCSS. [Rule 2(d) (ii)].

23. Is there a period prescribed for opening deposit account under the SCSS scheme, by the senior citizen, from the retirement benefits?

If the investor is 60 years and above, there is no time period prescribed for opening the SCSS account(s). However for those below 60 years, following time limits have been prescribed.

(a) the persons who have attained the age of 55 years or more but less than 60 years and who retired under a voluntary retirement scheme or a special voluntary retirement scheme on the date of opening of an account under these rules, subject to the condition that the account is opened by such individual within three months of the date of retirement.

(b) the persons who have retired at any time before the commencement of these rules and attained the age of 55 years or more on the date of opening of an account under these rules, will also be eligible to subscribe under the scheme within a period of one month of the date of the notification of the SCSS, 2004 i.e. 27th October 2004, subject to fulfillment of other conditions. [Rule 2 of the Senior Citizens Savings Scheme (Amendment) Rules, 2004]

(c) the retired personnel of Defence Services (excluding Civilian Defence Employees) will be eligible to subscribe under the scheme irrespective of the above age limits subject to the fulfillment of other specified conditions. [Rule 2 of the Senior Citizens Savings Scheme (Amendment ) Rules, 2004]

24. Can an account holder obtain loan by pledging the deposit / account under the SCSS, 2004?

The facility of pledging the deposit / account under the SCSS, 2004 for obtaining loans, is not permitted since the account holder will not be able to withdraw the interest amount periodically, defeating the very purpose of the scheme. (GOI letter F. No.2/8/2004/NS-II dated May 31, 2005)

25. Is premature withdrawal of the deposits from the accounts under the SCSS, 2004 permitted?

Premature withdrawal / closure of the deposits from the accounts under the SCSS, 2004 has been permitted after completion of one year from the date of opening of the account after deducting the penalty amount as given below.

(i) If the account is closed after one year but before expiry of two years from the date of opening of the account, an amount equal to one and half per cent of the deposit shall be deducted.

(ii) If the account is closed on or after the expiry of two years from the date of opening of the account, an amount equal to one per cent of the deposit shall be deducted.

However, if the depositor is availing the facility of extension of account under Rule 4 (3), then he/she can withdraw the deposit and close the account at any time after the expiry of one year from the date of extension of the account without any deduction. [Rule 9 (1) (a) (b) and (2)]

26. Are Non-resident Indians, Persons of Indian Origin and Hindu Undivided Family eligible to invest in the SCSS, 2004?

Non resident Indians (NRIs), Persons of Indian Origin (PIO) and Hindu Undivided Family (HUF) are not eligible to invest in the accounts under the SCSS, 2004. If a depositor becomes a Non-resident Indian subsequent to his/her opening the account and during the currency of the account under the SCSS Rules, the account may be allowed to continue till maturity, on a non-repatriation basis and the account will be marked as a Non-Resident account. [Rule 13 and GOI letter F.No.2/8/2004/NS-II dated June 19, 2006)

27. Can an account be transferred from one deposit office to another?

A depositor may apply in Form G, enclosing the Pass Book thereto, for transfer of his account from one deposit office to another. If the deposit amount is rupees one lakh or above, a transfer fee of rupees five per lakh of deposit for the first transfer and rupees ten per lakh of deposit for the second and subsequent transfers shall be payable. [Rule 11 and GOI Notification GSR.(E) dated March 23, 2006)

28. Can an SCSS account be extended?

A depositor may extend the account for a further period of three years by making an application to the deposit office within a period of one year after maturity.

29. Does an account, which is not extended on maturity, earn any interest?

In case a depositor does not close the account on maturity and also does not extend the account, the account will be treated as matured and the depositor will be entitled to close the account at any time subject to the condition that the post maturity interest at the rate as applicable to the deposits under the Post office Savings Accounts from time to time will be payable on such matured deposits upto the end of the month preceding the month of the closure of the account.

30. What happens if an account is opened in contravention of the SCSS Rules?

If an account has been opened in contravention of the SCSS Rules, the account shall be closed immediately and the deposit in the account, after deduction of the interest, if any, paid on such deposit, shall be refunded to the depositor. (Rule 12)

31. Which are the banks authorized to open an account under the SCSS, 2004?

At present, 24 Nationalized banks and one private sector bank, as per list below, are authorized to handle the SCSS, 2004. It may be noted that only designated branches of these banks have been authorized to handle SCSS, 2004.

  1. State Bank of India
  2. State Bank of Hyderabad
  3. State Bank of Bikaner and Jaipur
  4. State Bank of Patiala
  5. State Bank of Mysore
  6. State Bank of Travancore
  7. Allahabad Bank
  8. Andhra bank
  9. Bank of Baroda
  10. Bank of India
  11. Bank of Maharashtra
  12. Canara Bank
  13. Central Bank of India
  14. Corporation Bank
  15. Dena Bank
  16. Indian Bank
  17. Indian Overseas Bank
  18. Punjab National Bank
  19. Syndicate Bank
  20. UCO Bank
  21. Union Bank of India
  22. United Bank of India
  23. Vijaya Bank
  24. IDBI Bank
  25. ICICI Bank Ltd.


Investments options available in India for NRIs and PIOs

Investment options available for NRIs

Investment options for NRIs

More and more NRI’s (Non Resident Indians) and PIOs (Person of Indian Origins) are investing in India in order to get higher returns on their investments as compared to the country they are living in. And the Government of India has also made it easy for NRIs and PIOs to invest in India. NRIs and PIOs are permitted to open bank accounts in India out of funds remitted from abroad, foreign exchange brought in from abroad or out of funds legitimately due to them in India, with authorized dealer.

What are the different types of accounts which can be maintained by an NRI/PIO in India?

If a person is NRI or PIO, she/he can, without the permission from the Reserve Bank of India (RBI), open, hold and maintain the different types of accounts given below with an ‘Authorised Dealer’ in India, i.e. a bank authorised to deal in foreign exchangeNRO Savings accounts can also be maintained with the Post Offices in India. However, individuals/ entities of Bangladesh and Pakistan require prior approval of the Reserve Bank of India.

Types of accounts which can be maintained by an NRI / PIO in India :

A. Non-Resident Ordinary Rupee Account (NRO Account)

NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts.

● Savings Account – Normally maintained for crediting legitimate dues /earnings / income such as dividends, interest etc. Banks are free to determine the interest rates.

●  Term Deposits – Banks are free to determine the interest rates. However, theycannot be higher than those offered by them on comparable domestic rupee deposits.

● Account should be denominated in Indian Rupees.

● Permissible credits to NRO account are transfers from rupee accounts of non-resident banks, remittances received in permitted currency from outside India through normal banking channels, permitted currency tendered by account holder during his temporary visit to India, legitimate dues in India of the account holder like current income like rent, dividend, pension, interest, etc., sale proceeds of assets including immovable property acquired out of rupee/foreign currency funds or by way of legacy/ inheritance.

● Eligible debits such as all local payments in rupees including payments for investments as specified by the Reserve Bank and remittance outside India of current income like rent, dividend, pension, interest, etc., net of applicable taxes, of the account holder.

● NRI/PIO may remit from the balances held in NRO account an amount not exceeding USD one million per financial year, subject to payment of applicable taxes.

● The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/PIOs.

● The accounts may be held jointly with residents and / or with non-resident Indian.

● The NRO account holder may opt for nomination facility.

● NRO (current/savings) account can also be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India.

● Loans to non-resident account holders and to third parties may be granted in Rupees by Authorized Dealer / bank against the security of fixed deposits subject to certain terms and conditions.

B. Non-Resident (External) Rupee Account (NRE Account)

● NRE account may be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney.

● NRIs as defined in Notification No. FEMA 5/2000-RB dated May 3, 2000 may be permitted to open NRE account with their resident close relatives (relative as defined in Section 6 of the Companies Act, 1956) on ‘former or survivor ‘ basis.  The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the life time of the NRI/PIO account holder.

● Account will be maintained in Indian Rupees.

● Balances held in the NRE account are freely repatriable.

● Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.

● Authorised dealers/authorised banks may at their discretion/commercial judgement allow for a period of not more than two weeks, overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/repaid within a period of two weeks, out of inward remittances through normal banking channels or by transfer of funds from other NRE/FCNR accounts.

● Savings – Banks are free to determine the interest rates.

 Term deposits – Banks are free to determine the interest rates of term deposits of maturity of one year and above. Interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

● Permissible credits to NRE account are inward remittance to India in permitted currency, proceeds of account payee cheques, demand drafts / bankers’ cheques, issued against encashment of foreign currency, where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category-I / Category-II, transfers from other NRE / FCNR accounts, sale proceeds of FDI investments, interest accruing on the funds held in such accounts, interest on Government securities/dividends on units of mutual funds purchased by debit to the NRE/FCNR(B) account of the holder, certain types of refunds, etc.

● Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of person eligible to open such accounts, remittance outside India, investments in shares / securities/commercial paper of an Indian company, etc.

● Loans up to Rs.100 lakh can be extended against security of funds held in NRE Account either to the depositors or third parties.

● Such accounts can be operated through power of attorney in favour of residents for the limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself.

C. Foreign Currency Non Resident (Bank) Account – FCNR (B) Account

● FCNR (B) accounts are only in the form of term deposits of 1 to 5 years

● All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also.

● Account can be in any freely convertible currency.

● Loans up to Rs.100 lakh can be extended against security of funds held in FCNR (B) deposit either to the depositors or third parties.

● The interest rates are stipulated by the Department of Banking Operations and Development, Reserve Bank of India. In respect of FCNR (B) deposits of all maturities contracted effective from the close of business in India as on November 23, 2011, interest shall be paid within the ceiling rate of LIBOR/SWAP rates plus 125 basis points for the respective currency/corresponding maturities (as against LIBOR/SWAP rates plus 100 basis points effective from close of business on November 15, 2008). On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency/maturity plus 125 basis points. For floating rate deposits, the interest reset period shall be six months.

● When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him.

● NRI can open joint account with a resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on former or survivor basis. The resident close relative will be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder.

Can an individual resident Indian borrow money from his close relative outside India ?

Yes, an individual resident Indian can borrow sum not exceeding USD 250,000 or its equivalent from his close relatives staying outside India, subject to the conditions that:

  1. the minimum maturity period of the loan is one year;
  2. the loan is free of interest; and
  3. the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR(B) account of the NRI.

Can an individual resident lend money to his close relative NRI / PIO?

Yes, an individual resident can lend money by way of crossed cheque /electronic transfer within the overall limit of USD 200,000 per financial year under the Liberalised Remittance Scheme, to meet the borrower’s personal or business requirements in India, subject to conditions. The loan should be interest free and have a maturity of minimum one year and cannot be remitted outside India.

Can an individual resident repay loans of close relative NRIs to banks in India?

Yes, where an authorised dealer in India has granted loan to a non-resident Indian such loans may also be repaid by resident close relative (relative as defined in Section 6 of the Companies Act, 1956), of the Non-Resident Indian by crediting the borrower’s loan account through the bank account of such relative.

What are the other facilities available to NRIs / PIO?

A. Investment facilities for NRIs :

NRI may, without limit, purchase on repatriation basis:

● Government dated securities / Treasury bills

● Units of domestic mutual funds;

● Bonds issued by a public sector undertaking (PSU) in India.

● Non-convertible debentures of a company incorporated in India.

● Perpetual debt instruments and debt capital instruments issued by banks in India.

● Shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids.

● Shares and convertible debentures of Indian companies under the FDI scheme (including automatic route & FIPB), subject to the terms and conditions specified in Schedule 1 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.

● Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 3 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.

NRI may, without limit, purchase on non-repatriation basis :

● Government dated securities / Treasury bills

● Units of domestic mutual funds

● Units of Money Market Mutual Funds

● National Plan/Savings Certificates

● Non-convertible debentures of a company incorporated in India

● Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedules 3 and 4 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.

● Exchange traded derivative contracts approved by the SEBI, from time to time, out of INR funds held in India on non-­repatriable basis, subject to the limits prescribed by the SEBI.

Note : NRIs are not permitted to invest in small savings or Public Provident Fund (PPF).

B. Investment in Immovable Property

● NRI / PIO / Foreign National, who is a person resident in India (citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank of India), may acquire immovable property in India other than agricultural land/ plantation property or a farm house out of repatriable and / or non-repatriable funds.

● The payment of purchase price, if any, should be made out of

(i) funds received in India through normal banking channels by way of inward remittance from any place outside India or

(ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank of India.

Note : No payment of purchase price for acquisition of immovable property shall be made either by traveller’s cheque or by foreign currency notes or by other mode other than those specifically permitted as above.

● NRI may acquire any immovable property in India other than agricultural land / farm house plantation property, by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India

● NRI may acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India

● After the purchase is made, it is required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

● An NRI may transfer any immovable property in India to a person resident in India.

● NRI may transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.

In respect of such investments, NRIs are eligible to repatriate:

● The sale proceeds of immovable property in India if the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account.

● The amount to be repatriated should not exceed the amount paid for the property in foreign exchange received through normal banking channel or by debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account.

● In the event of sale of immovable property, other than agricultural land / farm house / plantation property in India, by a person resident outside India who is a citizen of India  / PIO, the repatriation of sale proceeds is restricted to not more than two residential properties subject to certain conditions. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993, will have to be credited to the ordinary non resident rupee account of the owner of the property. Applications for necessary permission for remittance of sale proceeds should be made in form IPI 8 to the Central Office of Reserve Bank at Mumbai within 90 days of the sale of the property.

● If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD one million per financial year out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.

● Refund of (a) application / earnest money / purchase consideration made by house-building agencies/seller on account of non-allotment of flats / plots and (b) cancellation of booking/deals for purchase of residential/commercial properties, together with interest, net of taxes, provided original payment is made out of NRE/FCNR (B) account/inward remittances.

Repayment of Housing Loan of NRI / PIOs by close relatives of the borrower in India

Housing Loan in rupees availed of by NRIs/ PIOs from ADs / Housing Financial Institutions in India can be repaid by the close relatives in India of the borrower.

C. Investment under the Portfolio Investment Scheme (PIS)

NRIs and PIOs are permitted purchase or sale of equity shares / CCPS / CCDs of Indian companies listed on Indian stock exchanges through a registered broker, subject to the following conditions:

● The total paid-up value of shares or convertible debentures purchased by an NRI both on a repatriation and non-repatriation basis does not exceed 5% of the paid-up value of the Indian company’s shares

● The aggregate paid-up value of shares or convertible debentures purchased by all NRIs in the Indian company does not exceed 10% of the paid-up value of the Indian company. The ceiling of 10% can be raised to 24% through a special resolution.

The sale proceeds of equity shares / CCPS / CCDs are permitted to be credited by the NRI to:

● His / her NRO account where the purchase was made out of the funds held in his Non Resident ordinary (NRO) account or where the purchase was on non-repatriation basis

● His / her NRE/FCNR/NRO account where the purchase was on a repatriation basis.

D. Facilities to returning NRIs/PIOs

● Returning NRIs/PIOs may continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or property was acquired, held or owned when resident outside India

● The income and sale proceeds of assets held abroad need not be repatriated.

Foreign Currency Account

● A person resident in India who has gone abroad for studies or who is on a visit to a foreign country may open, hold and maintain a Foreign Currency Account with a bank outside India during his stay outside India, provided that on his return to India, the balance in the account is repatriated to India. However, short visits to India by the student who has gone abroad for studies, before completion of his studies, shall not be treated as his return to India.

● A person resident in India who has gone out of India to participate in an exhibition/trade fair outside India may open, hold and maintain a Foreign Currency Account with a bank outside India for crediting the sale proceeds of goods on display in the exhibition/trade fair. However, the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/trade fair.

Resident Foreign Currency Account

● Returning NRIs /PIOs may open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account to transfer balances held in NRE/FCNR(B) accounts.

● Proceeds of assets held outside India at the time of return can be credited to RFC account.

● The funds in RFC accounts are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form outside India.

● RFC accounts can be maintained in the form of current or savings or term deposit accounts, where the account holder is an individual and in the form of current or term deposits in all other cases.

RFC accounts are permitted to be held jointly with the resident close relative(s) as defined in the Companies Act, 1956 as joint holder (s) in their RFC bank account on ‘former or survivor basis’. However, such resident Indian close relative, now being made eligible to become joint account holder shall not be eligible to operate the account during the life time of the resident account holder.

General facilities

Can Exchange Earners Foreign Currency (EEFC) accounts be held jointly with a -resident Indian?

Yes, EEFC account of a resident individual can be held jointly with a resident close relative on a ‘former or survivor’ basis.

However, such resident Indian close relative will not be eligible to operate the account during the life time of the resident account holder.

Can a resident individual holding a savings bank account include nonresident close relative as a joint account holder?

Yes, individuals resident in India are permitted to include non-resident close relative(s) as a joint holder(s) in their resident bank accounts on ‘former or survivor’ basis. However, such non- resident Indian close relatives shall not be eligible to operate the account during the life time of the resident account holder.

Can a resident individual gift shares/securities/convertible debentures etc to NRI close relative?

Yes, a resident individual is permitted to gift shares/securities/convertible debentures etc to NRI close relative up to USD 50,000 per financial year subject to certain conditions.

Can a resident individual give rupee gifts to his visiting NRI/PIO close relatives?

Yes, a resident individual can give rupee gifts to his visiting NRI/PIO close relatives by way of crossed cheque/electronic transfer within the overall limit of USD 200,000 per financial year for the resident individual and the gifted amount should be credited to the beneficiary’s NRO account.

What types of services can be provided by a resident individual to his / her nonresident close relatives?

A resident may make payment in rupees towards meeting expenses on account of boarding, lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India. Further, where the medical expenses in respect of NRI close relative are paid by a resident individual, such a payment being in the nature of a resident to resident transaction may also be covered under the term “services”.


HUF and Financial Planning

hindu undivided family

Importance of HUF

As per Hindu Law, a Hindu Undivided Family (HUF) is a legal term related to the Hindu Marriage Act and consists of a family consisting of all lineal male descendants of a common ancestor and includes their wives and unmarried daughters. Hindu Undivided Family (HUF) has been granted the status of an independent tax entity. Thus, an HUF has assumed a useful role in personal financial planning.

Let us first understand the structure of a HUF. A HUF consists of “Karta” , “Coparcener” and “Members”. A Karta is the senior most male member of the family. Only the Karta has the right to manage the property and business of the HUF. He can enter into contract on behalf of the HUF and bind all the members to the extent of their share in the property / business. If Karta of the family passes away, his wife cannot become the Karta. His eldest son will take his place. If the chooses not to become the next Karta, he can give up his right and the next son in line can take his place.

Coparceners are all the other male members of the family. A Hindu coparcenary includes the sons, grandsons and great-grandsons of the holder of the joint family property. By virtue of their birth, they acquire an interest in the property. All the coparceners and Karta may authorise any one or more adult coparceners to manage the business. Such a person is known as “Manager”.

Female Coparceners: The Hindu Succession (Amendment) Act 2005 has given equal rights to male and female in the matters of inheritance as a result a daughter also acquires status of Coparcener. Some experts also believe that in absence of any male member or only/all male member(s) is/are minor, a female member can become Karta / manager of HUF after this act. The female members are also called members.

No Formal action is required to form a HUF. It automatically comes as soon as you are married. However, it is advisable to register HUF by furnishing a creation deed. But do remember that you cannot mention the property and assets under HUF in your Will.

Besides other things a HUF is useful in saving taxes. Under the Income Tax Act, a HUF is treated as a separate entity for the purpose of assessment. The income of a joint Hindu family can be assessed as the income of a HUF only if there is a coparcenary. and there should be a joint family ancestral property. HUF is regarded as a separate entity and can earn income from the following sources:

1.. Income from House Property
2.. Profits from business or profession
3.. Capital gains
4.. Income from other sources

Tax structure of a HUF is similar to an individual tax payer and thus is also eligible for the benefits u/s 80C and other such exemptions and benefits. The ways you can save taxes with HUF are:

Saving tax by getting gifts

Take gifts in the name of HUF. That way the gift will be treated as income of HUF and taxed separately. You can take Rs 50,000 as gift from strangers and dont have to pat tax on this Rs. 50,000. But actually it can go up to Rs 2.0 lacs which is the tax free limit of total income, You can claim the benefits of section 80C and thus you can have a total income of Rs. 3,00,000 and not pay any tax in HUF.

Assign ancestral properties and wealth to HUF and invest it

If your family is going to receive an ancestral property or any wealth, then it’s better to transfer it to your HUF so that whatever earnings happen in future in form of rental income or capital appreciation of assets becomes income of HUF and taxed in its own hands. This is yet another way to reduce your total tax liabilities.

Invest and make payments with HUF income

As HUF enjoys separate tax benefit and exemptions under sec 80C, 80D, 80G, 80L, 54, 54F, invest in life and health insurance for family, PPF, ELSS and other instruments from the income of HUF.

Pay Remuneration to Karta

One way to reduce tax is to pay remuneration to Karta and the members for their services rendered to the family business. This remuneration would be allowed as a deduction from the total income of the HUF.

Wealth Tax

As per Wealth Tax Act 1957, a HUF enjoys a distinct liability and thus have a separate exemption under wealth tax liability and other benefits u/s 5 of the wealth tax act.


I-T dept will “Name and Shame” the habitual tax defaulters

I-T dept to publish name of habitual tax defaulters

Name and shame habitual tax defaulters

The habitual ‘Tax Defaulters’ are going to get a lot of publicity soon. All thanks to the Income Tax department, who has decided to publish the particulars of ‘chronic’ tax defaulters.

The list will include defaulters who either have a huge outstanding tax against their name and are absconding / failed to reply back repeatedly to IT department notice / habitual evaders / defaulters whose assets are not identifiable. Such names will be published on the IT department website once the procedure and process of finalizing the defaulters and such cases is identified.

The department has noticed that while its public campaign asking taxpayers to pay their dues has had a positive result, yet there are select cases of ‘chronic’ and ‘persistent’ defaulters who needs to be put in public domain so as to obtain some information / leads in these cases.

The department ‘may’ upload on its website such cases on the lines of the ‘Wanted’ list uploaded by other agencies like police and  CBI. And those providing leads may get rewarded if IT department is able to recover any dues from the defaulter. On a later stage defaulters names may even get publish in print media.

The target of cash collection for the I-T arrears demands during the FY 2012-13 was fixed at Rs 41,115 crores. Out of this, a cash collection of Rs 13,432 crores has been achieved. Total collection of arrears for FY 2011-2012 has reached up to Rs 22,882 crores.


Guidelines on Health Insurance (mediclaim) policies regarding claim, NCB, entry age and portability

mediclaim policies

Medical Insurance Guidelines

Some new important guidelines issued by the insurance regulator will benefit many who have taken a health insurance policy. The regulator has announced in its Health Insurance Regulations, 2013 notification that:

1.. No claim Bonus:

In an event of filing a claim, the ‘no claim bonus’ accrued in a health (mediclaim) policy should not become zero. Instead the cumulative bonus accrued may be reduced at the same rate at which was accrued. The insurers may offer cumulative bonuses on indemnity based health insurance policies, which has to be stated explicitly in the policy document. Cumulative bonus  shall not be allowed on benefit based policies.

It will also help an insured person to file a low value claim as the loss of no claim bonus will not be lost completely. At the same time, insurance companies will now be more reluctance to offer ‘No Claim Bonus’ feature in their policies.

Lets take an example. An insured has a health insurance (mediclaim) policy of Rs. 5,00,000/- for last 10 years and has never taken a claim. He is getting a 5% ‘No Claim Bonus’ every year and has accumulated an additional 50% NCB , i.e., a sum of Rs. 2,50,000/- as bonus in all these years. He gets ill in 11th year and files a claim of Rs. 50,000/-. In such case the policyholder would lose all the NCB accrued under the policy. However, as per the new guidelines, having a claim in 11th year will only reduce his NCB from 50% to 45%.

 2.. Claim in overlapping policy period:

If a claim is filed in two overlapping policy periods, it will get the benefit of available sum insured in both of those two policy periods, including the deductibles for each policy period. However, such eligible claim payable to the policyholder shall be reduced to the extent of premium to be received for the renewal of such policy in the overlapping second year.

Lets take an example. An insured has a policy with a sum insured of Rs. 5,00,000/- which is due for renewal on 16th June 2013. This insured person falls ill on 10th June, stays in hospital till 25th June and his total hospitalisation bills comes to Rs. 6,00,000/-. In such case the insured will get Rs. 5,00,000/- from the year before 15th June 2013 and Rs. 1,00,000 from the policy period starting 16th June 2013, subject to other sub-limits imposed by the contract. If the insured has not paid the premium for this new policy period, then it will be deducted from his claim amount.

3… TPA not to settle claim:

Another important guideline ensures that only insurer will settle the claim and not the TPA. Role of a TPA has been restricted to only processing of claim and not its settlement.

4.. Entry age to be not less than 65 years

All health insurance policies shall ordinarily provide for an entry age of at least up to 65 years.

5.. Renewal of policy:

A Insurer shall not deny the renewal of a health insurance policy on the ground that the insured had made a claim, except for the benefit based policies where the policy terminates following payment of benefit covered under the policy.

Further it is advised by the regulator that the insurer shall provide a mechanism to condone a delay in renewal up to 30 days from the due date of renewal without deeming such condonation as a break in the policy.

6.. Claim in 30 days:

An insurer shall settle claims, including is rejection, within 30 days of the receipt of last ‘necessary’ document.

Further it is expected that the insurer shall ensure that all the documents required for claim processing are called for at one time and shall not call for the documents in the piece meal manner.

Insurer may stipulate a period within which all necessary claim documents should be furnished by the policyholder / insured to make a claim. However, claims filed even beyond such period should be considered if there are valid reasons for any delay.

7.. Portability of health insurance policies:

A policyholder desirous of porting his policy to another insurance company shall apply to such insurance company, to port the entire policy along with all the members of the family, if any, at least 45 days before the premium renewal date of his / her existing policy. And insurer may not be liable to offer portability if policyholder fails to approach the new insurer at least 45 days before the premium renewal date.

where the outcome of the acceptance of portability is still waiting from the new insurer on the date of renewal, the existing policy shall be allowed to extend, if requested by the policyholder, for the short period by accepting a pro-rate premium for such short period, which shall be of at least one month.

And if for any reason the insured intends to continue the policy further with the existing insurer, it shall be allowed to continue by charging a regular premium and without imposing any new condition.

The portability shall be applicable to the sum insured under the previous policy and also to an enhanced sum insured, if requested by the insured, to the extent of the cumulative bonus acquired from the previous insurer. For example, if a insured had a sum insured of Rs. 2,00,000/- and an accrued bonus of Rs. 50,000/- with insurer A; when he shifts to the insurer B and the proposal is accepted, insurer B has to offer him sum insured of Rs. 2,50,000/- by charging the premium applicable for Rs. 2,50,000/-. If insured demands the sum insured of more than Rs. 2,50,000/-, portability would be available only upto Rs. 2,50,000/-.


Interest rate cuts in Public Provident Fund, National Savings Certificate, Post Office Scheme

interest rate on ppf and other schemes in 2013

Interest Rate Effective 1st April’ 2013

Government has reduce interest rates on the popular small saving schemes by 0.10 %. The new rates will be effective from 1st April’ 2013, and would applicable for fiscal year 2013-2014. From year 2012, Government had decided to link the small savings returns with the market rate. The new rates for small saving schemes are announced at the beginning of financial year.

The rate of interest on PPF (Public Provident Fund) has been cut down from the previous 8.8 % to 8.7 % now.  The other popular scheme with investors is NSC (National saving Certificates). Effective 1st April’ 2013, you will earn 8.8% on NSC with maturity period of 10 years, and 8.5% on NSC with maturity period of 5 years. Till now the rates were 8.9% and 8.6% respectively.

Rate of interest on Senior Citizens Savings Scheme (SCSS) will  be 9.2 %, down from the earlier 9.3 %.

However, rates on savings deposit schemes and on fixed deposit of up to one year run by post offices has been kept unchanged at 4 % and 8.2 %, respectively. MIS (Monthly Income Schemes) of 5 year maturity will earn an interest of 8.4 %.

The finance ministry said G-Sec (Government securities) rates have fallen more sharply than reduction in small saving instruments and the Government is still trying to protect small investors. The average yield has been 8.2 % in the 10 yr Govt Bonds.


The most commonly asked questions on PPF (Public Provident Fund)


Public Provident Fund

PPF, Public Provident Fund, is a favorite investment avenue, thanks to the tax free, risk free and a good rate of interest. Here are some of the frequently asked questions regarding Public Provident Fund.

1.. Who can open a PPF account ?

A resident Indian Individual can open a PPF account on his or her own behalf and / or on behalf of a minor of whom he / she is the guardian.

2.. Can a NRI open a new PPF account?

A NRI (Non Resident Indian) cannot open a PPF account. However if a resident who subsequently becomes an NRI during the currency of the maturity period prescribed under PPF can subscribe to his/her account till maturity but cannot extend the account.

3.. Who can not open a PPF account ?

a ) NRI as explained above.

b ) Grand parents cannot open a PPF account on behalf of their minor grand children. However, in case of death of both the father and the mother of a child, their grand parents can open a PPF account in the capacity of the guardians of the minor grand child.

c) A ‘HUF’ or an individual on behalf of  ‘Association of persons’ can not open a PPF account.

4.. Can I open more than one PPF account ?

No. Only one PPF account can be maintained by an individual, except for an account opened on behalf of a minor child.

5.. How can I apply for PPF account : 

PPF account can be opened with a post office or with a bank. To apply for the Provident Fund account, you will have to fill a PPF account opening form, and enclose the following documents as per the KYC norms :

a ) Copy of address proof such as passport, voter id, recent Electric bill etc.
b ) Copy of Photo identity proof such as PAN card, voter id card, Driving license, Passport etc.
c ) Passport size photograph (1 or 2 copies depending on the institution).

6.. What is the minimum amount required to open a PPF account ?

Minimum amount required to open a PPF account is Rs. 500. The subscription into an account can be made in a single lump sum or in installments not exceeding twelve in a financial year.

7.. What is the minimum and maximum amount allowed in a PPF account ? 

An individual on his own behalf and on behalf of a minor of whom he is the guardian can subscribe with a minimum of Rs. 500 and a maximum Rs. 1,00,000/- (at present)  in a financial year. The ceiling on deposits as provided for by the Central Government from time to time is both for individual self account and account(s) opened on behalf of minor(s) of whom he is the guardian, taken together.

8.. What happens if I fail to deposit any amount in my PPF account ?

When an investor fails to deposit the minimum amount required in any year, such account is treated as discontinued. Till the account is revived, he can not take any loan or make any partial withdrawal from such account. Also no other PPF account can be opened in addition to the discontinued account.

9.. Can I revive the discontinued PPF account ?

A PPF account, if discontinued for some reasons, can be revived by making a payment of  Rs. 50/- for each year of default, along with the arrears, ie. Rs. 500/- for each default year.

10.. Can a PPF account be transferred ? 

Transfer of a PPF account from the post office or bank “Account Office” where it is held, to another post office or other branch of the same bank, or other authorized banks, “Account Office”, can be done.

A PPF account is not transferable from one individual to another. Similarly, the nominee cannot continue the account of a deceased subscriber in his own name.

11. What is the procedure of transferring the PPF account ?

A transfer form, along with the written application for such transfer, needs to be made to the bank or post office where the individual has the PPF account. After verification, bank / post office issues a new passbook with the past credit shown as balance transfer.

12.. What is the maturity period of a PPF account ?

The period of a PPF account is 15 years from the end of the year in which the account was opened.

13.. Can a PPF account continue with deposits after maturity ? 

After the maturity of the PPF account, an individual can exercise an option to subscribe for a further block of 5 years by submitting an application before the end of first financial year after such maturity. Partial withdrawals in the block periods shall be limited to one per each financial year and can not exceed 60% of the balance outstanding at the commencement of the block period. On completion of the first block period, an individual may continue to subscribe for further such block periods.

14.. Can withdrawals be made from the PPF account ?

Withdrawals can be made from a PPF account any time after the expiry of five years from the end of the year in which the initial subscription was made. A subscriber may, if he so desires, apply with his pass book to the ‘Accounts Office’  for withdrawal an amount not exceeding 50% of the amount that stood to his credit at the end of the forth year immediately preceding the year of withdrawal or at the end of preceding year, whichever is lower, less the amount of loan, if any, drawn by him and which remains to be repaid.

15 .. How many withdrawals can be made from a PPF account ?

No more than one withdrawal is permissible during any one financial year.

16.. Can a withdrawal is allowed from a minor’s PPF account ? 

Withdrawals from a minor’s account can be made subject to guardian furnishing a certificate stating that  “the amount sought to be withdrawn is required for the use of the said minor who is alive and is still a minor.”

17.. Can a PPF account continue without deposits after maturity?

A subscriber can retain the PPF account after maturity without making any further deposits. The balance will continue to earn interest. The subscriber is allowed to make one withdrawal of any amount from the PPF account in each financial year.

18.. Can nomination be made in PPF account ?

Nomination of one or more persons can be made to receive the amount standing to the subscriber’s credit in case of death. However in the case of a minor’s account, no such nomination facility is available.

19.. Can there be a change in nominations ?

Yes, changes to previous nomination(s) are possible by applying a fresh nomination(s). Every nomination and every cancellation or variation must be registered in the ‘Accounts Office’ and shall be effective from the date of such registration, the particulars of which shall be entered in the pass book.

A minor can also be made a nominee. In such cases where nominee is a minor, the subscriber may appoint any person to receive the amount due under the account in the event of the death of the subscriber during the minority of such nominee.

20.. What happens if the subscriber or a nominee dies ?

If a subscriber to an account in respect of which a nomination is in force dies, the nominee(s) may make an application to the ‘Accounts Office’ together with proof of death. If any nominee is dead, the surviving nominee or nominees shall, in addition to the proof of death of the subscriber, also furnish proof of the death of the deceased nominee.

Where there is no nomination in force at the time of death of the subscriber, the amount standing to the credit of the deceased after making adjustment, if any, in respect of interest on loans taken by the subscriber, shall be repaid by the ‘Accounts Office’ to the legal heirs of the deceased on receipt of application in required format along with the letter of indemnity, an affidavit, a letter of disclaimer on affidavit, and a certified copy of certificate of death of such subscriber.

21. Can I take loan  from my PPF account ?

A subscriber can avail a loan on his PPF deposit any time after the expiry of one year from the end of the financial year in which the initial subscription was made but before the expiry of five years from the end of the financial year in which the initial subscription was made subject to the limit of sum not exceeding 25% of amount that stood to his credit at the end of the second year immediately preceding the year in which the loan is applied for.

22.. How can we repay the loan taken from a PPF account ?

The principal amount of the loan is to be repaid by the subscriber before the expiry of 36 months from the first day of the month following the month in which the loan is sanctioned. The repayment can be made in one lump sum or in monthly installments. After the principal amount of the loan is fully repaid, the subscriber shall pay the interest amount in not more than two monthly installments.

23.. What is the rate of interest charged on a loan taken in a PPF account ?

Rate of interest is calculated at 2% above on the principal amount for the period commencing from the first day of the month following the month in which the loan is availed up to the last day of the month in which the last installment of the loan is repaid.

24.. Can a female change her name in the PPF account after her marriage ?

In the event of her marriage, a female subscriber can submit to change her surname by submitting documentary evidence of the same.

25.. Can a NRI repatriate withdrawals from PPF account ?

NRIs can credit the withdrawal proceeds from PPF account into the NRO account. And can remit from the NRO account as per the maximum amount permissible during the given financial year. You would need to follow certain procedure, as stipulated by the RBI, for such repatriation which are applicable for that year.

26.. Can the PPF account be attached ?

Yes, the PPF account can be attached by the Income Tax and Estate Duty authorities. However, the PPF act only gives the account holder immunity against attachment under a decree / order of a court of law.

27.. How much is the interest in PPF account ?

Now the most important question on the rate of  interest in the PPF account. Currently the rate of interest on a PPF account is 8.8%. The rate of interest is notified by the Central Government in official gazette from time to time, and is calculated for calendar month on the lowest balance at credit of an account between the close of the fifth day and the end of the month and is credited to the account at the end of each year.


What is the Cost Inflation Index ?

indexation benefit

indexation benefit for long term capital gains

You can save substantial amount of Income tax on your long-term capital gains arising out of selling your immovable property if you take advantage of the Cost Inflation Index.

Cost Inflation Index  is a measure of inflation, notified by “The Central Government” for the purpose of calculating long term capital gains on sale of assets. It is not available for short-term capital gains or  losses.

Section 48 of the Income-Tax Act defines the index as what is notified by the Central Government every year, having regard to 75 per cent of average rise in the consumer price index (CPI) for urban non-manual employees for the immediately preceding previous year.

Inflation reflects an erosion in the purchasing power of money. Indexation, while calculating the long term capital gains, helps us to counter the erosion in the value of the asset over a period of time. Cost Inflation Index is notified by the Central Government every year taking 1981-82 as base year.

Calculating Long Term Capital Gain with the help of Cost Inflation Index

A) Sale Consideration                                                                         xxx


B) Expenses incurred for transfer                                                       xxx

C) Indexed Cost of Acquisition
Cost of Acquisition * CII(Year of Sale)/
CII(Year of Purchase)                                                                         xxx

D) Indexed Cost of Improvement
Cost of Improvement * CII(Year of Sale)/
CII(Year of Purchase)                                                                         xxx

E) LTCG                                                                                              xxx

Table of Cost Inflation Index

Financial Year Cost Inflation Index
2012-2013 852
2011-2012 785
2010-2011 711
2009-2010 632
2008-2009 582
2007-2008 551
2006-2007 519
2005-2006 497
2004-2005 480
2003-2004 463
2002-2003 447
2001-2002 426
2000-2001 406
1999-2000 389
1998-1999 351
1997-1998 331
1996-1997 305
1995-1996 281
1994-1995 259
1993-1994 244
1992-1993 223
1991-1992 199
1990-1991 182
1989-1990 172
1988-1989 161
1987-1988 150
1986-1987 140
1985-1986 133
1984-1985 125
1983-1984 116
1982-1983 109
1981-1982 100


Understanding capital gains, exemptions and tax implications

Capital gains tax in india

Capital Gains

If you have sold a residential property, the income of which is chargeable under the head “Income from house property”, or transferred any other capital asset, then you are liable to pay tax on the capital gains.  Let us understand how the capital gains tax works.

Capital Asset means property of any kind (Fixed, Circulating, movable, immovable, tangible or intangible) whether or not connected with business or profession, subject to the following exclusions:

  1. Stock-in-trade

  2. Personal effects of the assessee

  3. 6½% Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Bonds, 1980 issued by the Central Government

  4. Agricultural land in a rural area

  5. Special Bearer Bonds, 1991 issued by the Central Government and

  6. Gold Deposit Bonds issued under Gold Deposit Scheme 1999.

Depending on the period of holding and the asset class, the capital assets are divided into short term and long term capital assets. Both are subject to different tax rates. Lets first look at the definition of these two types of capital assets.

Short term capital asset means a capital asset held by an assessee for not more than 36 months immediately preceding the date of its transfer. However, in the following cases, an asset held for not more than twelve months, is treated as short-term capital asset :

  1. Quoted or unquoted equity or preference shares in a company

  2. Quoted Securities

  3. Quoted or unquoted Units of UTI

  4. Quoted or unquoted Units of Mutual Funds specified u/s. 10(23D)

  5. Quoted or unquoted zero coupon bonds

All other capital asset which does not fall into the above short-term capital assets are put in the category of long term capital assets.

For the tax purposes, the computation of both the capital gains are calculated on the following basis:

Computation of Short Term Capital Gains

Computation of Long Term Capital Gains

Full consideration


Full consideration


Less: Expenses on Transfer


Less: Expenses on Transfer


Net Consideration


Net Consideration


Less: Cost of Acquisition


Less: Indexed Cost of Acquisition


Less: Cost of Improvement


Less: Indexed Cost of Improvement


Short term capital gains


Long term capital gains


Less: Exemption u/s 54B/D/G


Less: Exemption u/s 54 to 54GB


Taxable Short term capital gains


Taxable Long term capital gains  NET


Indexed Cost of acquisition is calculated on the following basis:

Cost of acquisition * Cost inflation index for the financial year in which the asset is transferred / Cost inflation index for the first financial year in which the asset was held by the assessee or the year beginning on 1.4.1981, whichever is later or the year of Improvement of the asset

However, in case of Bonds, Debentures except capital indexed bonds depreciable assets, and for non-residents even if they are long term capital assets the benefit of indexation is not available.

Capital Gains Tax :

Capital asset

Transactions where STT -“Securities Transaction Tax” is paid

Transactions where STT – “Securities Transaction Tax” is not applicable / paid

Long Term

Short Term


Short Term

Without Indexation

With Indexation

Listed Equity Shares





Applicable Tax Slab

Unlisted Equity shares





Applicable Tax Slab

Listed Debentures





Applicable Tax Slab

Unlisted Debentures





Applicable Tax Slab

Equity oriented mutual funds





Applicable Tax Slab

Non – equity oriented mutual funds





Applicable Tax Slab

Immovable Property





Applicable Tax Slab


Saving Capital Gains Tax:

Short-term capital gain is necessarily taxable and cannot be avoided. On the other hand, depending upon the asset, tax on long-term capital gain can be saved by making investments in specified instruments and assets. For example, long-term gains from sale of a residential house may be saved by investing the capital gain amount in another residential property, either one year before or within two years of date of sale or  investing the capital gain amount (from any asset, whether residential house property or not) in bonds under sec. 54EC  Lets look at such available exemptions:

Exemption available for long term capital assets:

Depending upon the nature of the capital asset and the manner of utilization of the consideration received on transfer, various exemptions are available u/s 54, 54B, 54D,54EC, 54F, 54G and 54GA of the Income-tax Act. You are allowed to avail exemption from the long term capital gains as per the following provisions:

Long Term Capital Gains
u/s 54 u/s 54EC u/s 54F
i  Assessees Eligible Individual and HUF Any person Individual and HUF
ii Eligible Assets Long Term Capital Assets, being House Property used for residential purpose. This property must be held for a period of not less than 3 yrs. Long Term Capital Asset. Residential property must be held for a period of not less than 3 years. Any Long Term Capital Assets other than a residential  property. However the assesse must not own more than one residential property.
iii Investment in new assets to be made. Residential property Specified bonds of NHAI / REC Residential property
iv Condition for acquiring of the new assets Purchase of a residential property within 2 yrs from the date of transfer, Or within 1 yr prior to the date of transfer, Or construction of a residential house within 3 yrs from the date of transfer Six months from the date of transfer Purchase of a residential property within 2 yrs from the date of transfer, Or within 1 yr prior to the date of transfer, Or construction of a residential house within 3 yrs from the date of transfer
v Amount Exempted Lower of investment made in the new assets or the amount capital gain Amount of investment made in the new assets or capital gain, which ever is lower, subject to a maximum amount of Rs. 50 Lakhs in a financial year Investment in the new asset / Net sale consideration X capital gains. If cost of new house is more than the net consideration of original asset then the whole of such gains are exempted


The following points must be kept in consideration :

  1. In case the new asset is transferred before the completion of 3 yrs from the date of purchase or construction, such Capital Gains exempted earlier will become chargeable to tax in the year of transfer of new asset.

  2. In order to avail the exemption, such gains are to be reinvested, w

    ithin six months or before the due date of return (which ever is earlier). If the amount is not so reinvested, it is to be deposited on or before that date in account of specified bank/institution and it should be utilized within specified time limit for purchase/construction of new asset.

    Cost of long term specified asset, which is considered for the exemption under section 54 EC, should not be eligible for deduction u/s 80 C, i.e., investment made in such bonds u/s 54 EC is not eligible for deduction u/s 80 C.

  3. U/s 54F Capital Gains exempted earlier shall be chargeable to tax —

    a) If the assessee purchases within 2 yrs or constructs within 3 yrs any residential house other than the one in which reinvestment is made &

    b) If the new asset is transferred within a period of 3 years from the date of its purchase/construction.

Capital Gains account Scheme :

If your want to buy a new residential house property with sale proceeds of your house property sold, but  are unable to purchase it by the time you file your income tax return, you have to deposit the money in a Capital Gains Scheme Deposit Account (CGSDA), available with most of the public sector banks, in order to claim the benefits of Sec 54.

The amount deposited in a CGSDA has to be utilized for buying a new house within 3 years. If a new house is not purchased within 3 years using this amount, the entire amount is treated as long term capital gain for the previous year. And if only a part of the amount is spent in purchasing a new house, the remaining balance amount is treated as long term capital gains for the previous year.


Budget 2013 — Highlights for you

simplifying budget 2013

budget 2013

Want to know in brief about the budget 2013. Here are the highlights of the budget in simple words.

1.. Income Tax Slab : There is no change in the Tax slab. However an individual with an income of Rs. 5,00,000 will get a tax credit of Rs. 2000/-. Thus if your net tax payable is Rs 10,000, your liability will be limited to Rs 8,000 only. In other words, if your income is less than Rs. 5,00,000, your basic threshold limit for tax trigger now effectively stands at Rs. 2,20,000/-.

2.. Earning more than 1 cr. : If you are those lucky 42,800 tax payers in India, who are earning more than rupees one crore, then you will have to pay an additional one time surcharge of 10% for the FY 2013-2014. This will be in addition to the education cess paid on total income-tax.

The impact of surcharge will be contained by marginal relief, which means that the surcharge can not be in excess of income that exceeds Rs. 1 cr. Thus if your taxable income is Rs.1,00,05,000, your total tax liability will increase by Rs.5,000 only and not Rs. 2,90,000.

3.. Interest on home loan: If you take a housing loan of a maximum Rs 25 lakh this year, you can claim an additional tax break of Rs 1 lakh on interest payment. This is in over and above the current limit of Rs 1.5 lakh. But it is subject to the following conditions:

a) The amount of loan sanctioned for acquisition of the residential house property must not exceed Rs. 25 lakh.

b) The value of the residential house property must not exceed Rs. 40 lakh.

c) Loan should be obtained from bank / home finance institution and must be sanctioned during the period beginning 1st April, 2013 and ending on 31st March, 2014.

d) The assessee should not own any other residential house property on the date of sanction of the loan.

e) If the interest payable is less than Rs. 1 lakh, the balance amount can be allowed in next assessment year.

4.. Rajiv Gandhi Equity Saving Scheme (RGESS): Now an individual with an income of up to Rs. 12 lakh can invest in Rajiv Gandhi Equity Saving Scheme (RGESS). Earlier only those with income of Rs 10 lakh and less could invest in the scheme. This scheme is available to the new retail investor who acquires listed equity shares / equity oriented mutual funds in accordance with the scheme.

It is further proposed to provide deduction for three consecutive years, beginning with the year in which the listed equity shares or listed units were first acquired by the new retail investor.

5.. Tax free bonds: You can soon look forward to more tax-free bonds. The finance minister has permitted some institutions to issue tax free bonds in 2013-14 for up to Rs 50,000 cr. Some institutions are expected come with tax free bonds soon.

6.. Inflation indexed bonds: And if you are worried about the inflation eating into your savings, then their is a good news for you too. There shall be a an announcement soon on “Inflation Indexed Bonds” and “Inflation Indexed National Security Certificates”.

7.. Fewer hassles to buy life insurance: Finance minister has also made it clear that ‘know your client’ (KYC) requirement once fulfilled for a bank, are enough to buy an insurance policy. Such a KYC compliant individual need not go through another such process conducted by insurance company.

Banks are also allowed to act as an insurance broker. Now banks can sell insurance of multiple insurance companies, instead of just one company. This further increases number of options for customers and help them move ahead in the financial world.

8.. TDS on transfer of immovable properties:  FM has proposed that every transferee / purchaser, at the time of making payment or crediting of any sum as consideration for transfer of immovable property (other than agricultural land) to a resident seller, shall deduct tax, at the rate of 1% of such sum. This amendment will take effect from 1st June’ 2013

9.. Securities transaction tax: It has been proposed to reduce Securities Transaction Tax (STT) for certain transactions such as equity futures on recognized stock exchanges (from 0.017% to 0.01%), redemption of equity-oriented mutual fund units (from 0.25% to 0.001%) and sale of equity-oriented mutual fund units on recognized stock exchanges (from 0.1% to 0.001%). STT of 0.1% levied on the purchaser of equity-oriented mutual fund units on stock exchange is also abolished.

And if you are a derivative trader in commodities market, you have to pay CTT at the same rate applicable to equity futures. There was no CTT earlier.

10.. Custom duty on luxury Cars: Basic customs duty on new passenger cars and other motor vehicles (high-end cars) costing more than US $ 40,000 and / or engine capacity exceeding 3,000 cc for petrol run vehicles and exceeding 2500 cc for diesel run vehicles has been hiked to 100 % from 75 % earlier.

Import duty on motorcycles above 800 cc will also go up from 60% to 75%. Duty on sports utility vehicles has also been increased from 27 % to 30 %, excluding those used for commercial purposes. Likewise, duty on yachts and similar vessels has also been raised to 25 % from 10 % earlier.

11.. Importing Gold:  Duty-free limit on imported jewellery raised to Rs 50,000 in the case of a male passenger and Rs 100,000 in the case of a female passenger.

12.. DDT on mutual funds: FM has proposed to increase dividend distribution tax (DDT) on debt fund investments for retail investors from 12.5% to 25%.
DDT is the tax that debt mutual funds pay on the dividend income that has to be distributed to its investors. Liquid funds now pay a DDT of 25% (exclusive of surcharge and cess). All other types of debt funds pay 12.5% (exclusive of surcharge and cess) on income distributed to retail investors.
According to the budget proposals for the year starting 1 April, DDT paid by all types of debt funds (liquid funds and other debt MFs) to retail investors will be 25%.

13.. Bank for women: India will start its first bank exclusively for women by October 2013. The government will provide initial capital of Rs.1,000 crore to get the venture going. It will lend mostly to women entrepreneurs, women self-help groups. and will employ predominantly women.

14.. Others:

a) Mobiles costing more than Rs. 2000 will get slightly expensive as the duty has been increased from 1% to 6%.
b) Increase on tax of payments by way of royalty from 10 % to 25 %.
c) Concessional rate of tax at 15 % for an Indian company on income received from its foreign subsidiary.
d) Increase in specific excise duty on cigarettes, cigars will make them a little costlier.
e) Set top boxes – Import duty increased – 5% to 10%.
f) Service tax will not be levied on A/C restaurants that do not serve liquor.
g) Investor with stake of 10 % or less will be treated as FII; any stake more than 10 % will be treated as FDI.
h) Fiscal deficit for current fiscal estimated at 5.2%.
i) GDP growth for 2013-14 seen at 4.8%.
J) Increased allocation in defence to Rs 2.03 lakh crore in FY 14.


Measuring performance, risk / reward associated with an investment / portfolio

how to invest

tracking performance of an investment

Before you make an investment, besides other things, you must also measure the performance and risk / reward associated with it. For example, if your investment is giving higher returns, but is too volatile and is not in tune with objective of your investments, than you must stay away from it because of the risk associated with such investments.

There are many factors to keep in mind, but lets start with some statistical indicators. Some of the standard  tools to measure risk associated with investments such as mutual funds and stocks, form part of Modern Portfolio Theory. These include standard deviation, r-squared, alpha, beta, and Sharpe ratios. These ratios help us measure the historical behavior of investment risk and volatility.

1.. Standard Deviation

“High standard deviation denotes high volatility”.

Standard deviation is applied to the annual rate of return of an investment to measure its volatility (risk). It measures the dispersion of data from its mean. In simple words, the more that data is spread apart, the higher the difference is from the norm. It lets you understand that based on its historical performance, how much the return on an instrument is deviating from the expected returns.

2.. R-Squared

Another statistical measure that represents the percentage of a fund portfolio’s and can be explained by movements in a benchmark index is known as R-squared. Its values range from 0 to 100. A mutual fund / stock with an R-squared value between 85 and 100 denotes that the performance of the fund is closely correlated with that of the benchmark index (of same class). And performance of an instrument that has a rating of 70 or less is less correlated with that of benchmark index.

However higher the R square in case of mutual fund, means either the fund is an index fund or is close to being the index fund. These let you take a decision on whether you invest in a ETF or another diversified fund, depending on your objective of investment.

3.. Alpha

Another tool to judge performance of a fund / portfolio is to measure its “Alpha”.

Alpha measures performance on a risk-adjusted basis. Alpha ratio takes the price risk (volatility) of a mutual fund / portfolio and compares its risk-adjusted performance to a given benchmark index. The return an investment generates in excess of the investment relative to the return of the benchmark index is its “alpha.”

In other words, more the alpha, the better it is. A positive alpha of 1 means the investment has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an under performance of 1%.

4.. Beta

Beta measures the systematic risk / volatility of a portfolio in comparison to the market as a whole. Beta denotes how a fund , stock or portfolio performance would swing in response to any swing in the market. By definition, the market has a beta of 1.0.

A beta of 1.0 indicates that the investment’s price will move exactly in accordance with the behavior of market. A beta of more than 1.0 indicates that the investment will be more volatile than the market. Thus, if a fund portfolio’s / stock beta is 1.2, it is said to be 20% more volatile than the market. Similarly, a beta of less than 1.0 indicates that the investment’s price will be less volatile than the market. If you want to play safe, not take much risk and is looking more to preserve capital, you must focus on fund portfolios with low beta. Similarly if you are an aggressive investor and foresee market performing well in coming times, you must invest in portfolio with a high beta.

5.. Sharpe Ratio

Last, but not the least is “Sharpe ratio” — another important way to measure performance of a fund / portfolio.

The Sharpe ratio tells investors whether an investment’s returns are due to result of excess risk taken by the fund manager or is it because of the smart decisions taken to manage the fund.

This measurement is very useful because although one portfolio can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The higher the Sharpe ratio of a portfolio, the better its risk adjusted performance.

There are some other measures also to evaluate performance, risk/reward associated with an investment. Do keep in mind that the ratios may mislead you if other parameters are also not considered.


Now it becomes easier for retail investors to invets in gold/silver at wholesale prices

If you are looking to invest in physical Gold and Silver this festive season in small quantities, you can now take advantage of wholesale prices and invest online with an ease while sitting at comfort of your home.

Finkurve Bullion, promoted by NCDEX Spot Exchange Ltd (NSPOT), RiddiSiddhi BullionsL and Finkurve Financial Services Ltd (FFSL) has made available an online platform, called Bullion India, to investors in India. It enables you to buy and sell gold and silver or even store with them. One can buy as low as 0.1 gm of gold or 1 gm of silver. Gold bars are available in 1gm, 5gms and 10gms of 24 karat 99.5 percent purity and silver bars in 10gms, 20gms, 50gms and 100 gms of 24 karat 99.9 percent purity.

Bullion India also promises to ensure purity of 24 cts with only ‘in the loop’ imported bars approved under London Good Delivery Rules are purchased. Though their is no brokerage charged for buying, selling and redeeming at any given point of time, there are some small delivery charges and are fully insured.

Prithviraj Kothari, director of RiddiSiddhi Bullion in a statement said “People across the country wants to buy physical gold and silver and put them to use when the time is right. Bullion India is the medium that enables a retail client to purchase gold and silver as if they were buying shares and still use them physically whenever they need them. With such price advantage, retail investors can take the opportunity to add gold and silver to their portfolio”.


House price index (HPI) jumps 77% in last 3 years among metro cities

property index

property prices

According to a report published by RBI, the house prices have gone up by 77 per cent across metros in the country in the last 3 years ending September 2012, even though the economy is not doing very well.

The All-India House Price Index (HPI) of the RBI has gone up from 100 in 2008-09 to 141.7 in 2010-11 and 176.9 in 2011-12, clearly indicates a pattern of strong demand for houses.

The year-on-year rise in house prices in the fourth quarter of 2011-12 was 24.8%, the highest increase in the last nine quarters.

Assuming a customer had invested Rs 1 crore in a house in 2008-09, the present value of same would be around Rs 2.24 cr. in Mumbai, and if he had invested the same amount in Delhi, the same would be around 1.95 cr.

Mumbai has recorded the maximum rise of 124.7% during the period, followed by Delhi which saw a jump of 95.3%. Delhi also led the house price rally in 2011-12 as the HPI in Delhi rose by 44.45% to 195.3%.

Ahmedabad and Lucknow came next, while Chennai saw only 17%, lowest among the metro cities. In the cities like Bengaluru, Ahmedabad and Lucknow, house prices grew at a relativity lesser pace during 2010-11, which picked up in 2011-12. Kolkata, Chennai, Jaipur and Kanpur saw some moderation in 2011-12 compared to 2010-11.

Equity markets have risen by around 13% during the same period, giving a CAGR of around 4%.

Starting with the base as 100 from the fourth quarter of FY 2008-09, the Reserve Bank of India has been compiling quarterly house price indices for nine major cites viz. Delhi, Mumbai, Kolkata, Bengaluru, Chennai, Jaipur, Ahmedabad, Kanpur and Lucknow, as well as their aggregate at the all-India level. The data is collected from the registration authorities of the respective state governments. Overall trends in the house price index are regularly disseminated in the Reserve Bank’s Quarterly Review of Macroeconomic and Monetary Developments.

However RBI further added that HPI based on registration prices has some limitations. Since in most of the cities, the registration amount on papers at times is mention lower than that of actual market price, may not give the actual figure. Also, the differences in the time gaps between the actual transaction and registration do not always follow the same pattern across different states, and thus may not give the accurate figure in a given period.


Should I invest in Gold ?

gold prices

should i invest in gold

Does investment in gold at this time makes sense? Is this the best time to invest in Gold? This is the question which everybody is asking now a days. Gold has touched Rs. 32000/gm. And analyst are predicting gold hitting Rs. 35000 in another three months. The spectacular appreciation of gold in last four years, and the fact that equity markets are not performing well, have made many people rush to buy gold as investment even at these levels.

There are many factors that have contributed towards the rise in the gold prices, the major ones are the lack of trust and faith of investors in Governments and their Central banks and choppy equity markets. As banks continue to print money, investors are forced to opt for a safer “gold”. One can witness another rally in the short run if US goes for another round of Quantitative easing.

There are two theories on whether Gold will continue its rally in the medium to long run also. The first is that gold has rallied very fast in the last 3-4 years and hence is due for a correction. Speculative buying has pushed the gold into a bubble which is poised to burst anytime in the coming year. The other theory is that till the time investor’s confidence in Governments does not return back to normal and till the time financial markets do not start yielding decent returns, gold will continue to rise. And this might take some time.

Thus whether one should invest in Gold depends on the theory of relative comparison with other investment options available. Equity markets are at their 2 year low and still far away from their peak of January 2008. While Gold in last one year alone has given close to 35% returns. Thus stocks in medium to long term offer relatively better chance of bigger returns than gold. One must also keep in mind that in last 100 years, equity markets have outperformed gold perhaps 8/9 to 1 as an investment. Further if you have sufficient funds then investing in property also looks like a decent option.

Assuming that an average Indian already has a fairly large amount of gold in their portfolio, and might have invested more in the last 1-2 years, one must consider investing in other asset classes instead of adding more gold to their pool of investments.


Buying Diamond Jewellery… Check whether you are paying right price

Many consumers, whether they are a first-time diamond buyer or a routine customer, are never sure of whether they have paid a right price for their diamonds. And if you are among these consumers who are not sure of whether the price you are paying for your diamonds is justified, then ask your jeweller for the DRB chart. Diamond Retail Benchmark (DRB) is an initiative taken by All-India Gems and Jewellery Trade Federation along with Israel-based IDEX Online.

The DRB represents a recommendation of the retail price for a diamond based on the important 4Cs – Carat, Color, Cut and Clarity. Applicable for diamonds of all sizes, qualities and grades, based on the scientifically researched and analysed data bank, in a simple to read format the DRB is published every Quarter. Consumers can verify diamond rates offered by retailers across India as the DRB is circulated to the member jewellers. Though DRB shall act as a reference point only and the retailers are free to price their diamonds, you shall be able to buy diamonds knowing that whether you have paid a fair price or not.


Now you can check your monthly EPF balance at EPFO website

provident fund

provident fund status

Now the EPFO (Employee Provident Fund Organisation) subscribers can get their statement of accounts at the EPFO website. Though this facility of obtaining e-passbook will be available only to the members who have active accounts with EPFO, and is not available to accounts that are either not operative or accounts that have already been settled, nor to the exempted provident fund trusts regulated by the EPFO.

If you are a active subscriber, all you need is to register yourself on the EPFO website,, by furnishing your account details. Soon the subscribers will also be able to settle their accounts online. Over 5 crore subscribers are expected to benefit from the initiatives taken by EPFO.


Prepayment penalty on floating rate / dual rate home loans

home loans made easy

prepayment penalty on home loans

In a major relief to home loan borrowers who have taken dual rate home loans which have fixed rate component in initial years and then converted to floating interest rate, also known as teaser loans, the NHB (National Housing Board) has waived off penalty on prepayment of such home loans.

This came after RBI early this week had issued a circular (DBOD. No. Dir. BC. 107 / 13.03.00/ 2011-12) titled ‘Home Loans – Levy of foreclosure charges/prepayment penalty’ prohibiting the prepayment charges on floating rate home loans.

A RTI was filed with RBI asking whether dual rate home loans at any stage of the loan tenure fall within the definition of home loans with floating rates. It further clarified that as per extant instructions in case of dual rate/special rate home loans, the provisions of this circular will be applicable from the date the rate of interest on the loan becomes floating.

RBI and NHB last year had already issued directives to bank and housing finance companies instructing them not to levy any penalty on prepayment of home loans in case of floating rates. Now they shall be forced to withdraw prepayment charges on both floating rate and dual rate home loans. However such penalty will continue on home loans taken on fixed rate. A home loan will classify as fixed rate loan if the loan remains fixed for the entire period.


Last date for filing Income Tax returns extended to Aug 31′ 2012

The government has extended the last date for filing of income tax returns for 2011-12 by a month. The Central Board of Direct Taxes (CBDT) has extended the ‘due date’ of filing of all returns for the Assessment Year 2012-13 to August 31, 2012. The last date of filing of returns was July 31,2012.

The board has also relaxed the compulsory e-filing of returns for representative assessees of non-residents and in the case of private discretionary trusts, if the total income exceeds Rs. 10 lakh. Considering the difficulties faced by agents of non-residents in electronically furnishing the returns, due to more than one agent for different transactions or a person in India may be an agent of more than one non-resident, now e-filing is no more mandatory for this category.

Salaried employees earning up to Rs 5 lakh a year need not file income tax returns from this year provided the total income of the employee does not exceed Rs 5 lakh and also the annual interest earned from savings bank account must be less than Rs 10,000. But in case one wishes to claim the tax refund then filing of return is necessary. The e-filing of returns for Hindu Undivided Family (HUF) has been made mandatory.


Salaried employees with an annual income of up to Rs 5 lakh are now exempted from filing income tax returns for FY 2011-1

In a statement issued by the Govt. this week, Salaried employees with an annual income of up to Rs 5 lakh are now exempted from filing income tax returns for FY 2011-12 provided they don’t have any other income.

Individuals having interest earnings from savings bank deposits are also exempted from filing returns if the interest component is less than Rs 10,000 a year. The total income of Rs 5 lakh means gross income of an employee after deductions. The exemption has been made conditional to an employee having provided his PAN to his employer and all interest income from savings account reported before Form 16 is generated.

Exemption to file returns also applies to those whose tax liability has been taken care of by the employer and deposited to the government through Tax Deducted at Source deposits. In case an employee has tax refund claim, he will need to file returns. The exemption will also not apply to those to whom the tax authorities have issued notice to file I-T returns.


How a foreigner can invest in India

investment opportunities in indiA

investment procedure in india

Now the foreign nationals and business entities, called Qualified Foreign Investors, can invest in India without any hassles. The Government of India last year opened a new window for a new class, QFIs, to invest directly into Indian mutual funds and stocks in the listed companies. In order to attract foreign funds, the Reserve Bank has further allowed QFIs to invest up to $ 1 billion in corporate bond market and debt schemes of mutual funds without any lock-in period. Earlier only FIIs, their sub-accounts and NRIs were allowed to directly invest in Indian markets. Thus now a large number diversified individual foreign nationals and corporate who are desirous of investing in Indian Equity market can invest on fully repatriable basis in:

Equity Secondary Market – Exchange Traded Securities
Mutual Funds
Equity Primary Market – IPO and FPO

QFIs can buy up to 5% of the paid-up capital of a company, with the overall limit capped at 10% in a company. And these investment limits are separate or over and above that for FIIs and NRIs.

Are QFIs a separate class of foreign investors compared to FIIs?

QFI will be distinct from FII and non-resident Indians (NRI). A QFI can, for instance, be a foreign individual investor in Japan or any other country, who can buy into stocks of any listed company in India. All a QFI needs is fulfill a few requirements like the Know Your Customer (KYC) norms. While an FII is required to go through some more complicated route of approvals and SEBI registration and has to pay the registration fee as well, for QFI the procedure is very simple and there are no extra registration charges, except for the QDP and broker charges.

A FII is generally a High net worth Individual, large corporate and institutional investor whereas a QFI can be a retail middle income group investor.

How QFI can invest in Indian Equity Market

SEBI has prescribed the requirements and procedure for account opening by QFI along with manner of operations thereof. QFIs shall transact only on delivery based transactions and each transaction shall be cleared & settled on gross basis and they are not allowed to issue any offshore derivatives instruments/ participatory Notes.

In case QFI wish to buy equity shares of the companies in the caution list without obtaining prior approval of depositories then, stock exchanges shall develop a separate segment for intra QFI transactions.


QFI shall mean a person who fulfils the following criteria:

(i) Resident in a country that is a member of Financial Action Task Force (FATF) or a member of a group which is a member of FATF; and

(ii) Resident in a country that is a signatory to IOSCO’s or a signatory of a bilateral MOU with SEBI, Provided that the person is not resident in a country listed in the public statements issued by FATF from time to time on-(i) jurisdictions having a strategic Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) deficiencies to which counter measures apply, (ii) jurisdictions that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies and further provided that such person is not resident in India and that such person is not registered with SEBI as Foreign Institutional
Investor or Sub-account or Foreign Venture Capital Investor.

Some of the prominent countries whose citizens are allowed to invest are: Australia, USA, Canada, France, Germany, UK, Japan, Russia, Qatar, UAE, Kuwait and Saudi Arabia, besides many more.

Though NRIs can for all practical purposes can invest in India as QFI, but there are no advantages of coming through this route in India.


A QFI has to comply with KYC (Know your customer) norms and has apply for a Permanent Account Number. The document required are:

Copy of passport of the Individual.
Registration certificate for Non Individual
Copy of PAN Card (Permanent Account Number, which is essentially a tax registration number, shall be applied in India with the help of QDP)
Bank statement

Mode of payment / repatriation

A QFI shall open a single non-interest bearing Rupee Account with an AD Category- I bank in India, for routing the receipt and payment for transactions relating to purchase and sale of eligible securities subject to the conditions as may be prescribed by RBI from time to time. The QDP will purchase equity at the instruction of the respective QFIs within five working days.

The sale proceeds of the equity shares shall be repatriated to the designated bank account of the QFI within five working days. Within these five working days, the sale proceeds of the existing investment can be also utilized for fresh purchases of equity shares under this scheme, if so instructed by the QFI.

Dividend payments on equity shares held by QFIs can either be directly remitted to the designated overseas bank accounts of the QFIs or credited to the single rupee pool bank account. In case dividend payments are credited to the single rupee pool bank account they shall be remitted to the designated overseas bank accounts of the QFIs within five working days (including the day of credit of such funds to the single rupee pool bank account). Within these five working days, the dividend payments can be also utilized for fresh purchases of equity shares under this scheme, if so instructed by the QFI.

QFIs can remit foreign inward remittance through normal banking channel in any permitted currency (freely convertible).

Demat account

QFIs would be allowed to open a dedicated demat account with only one QDP (Qualified Depository Participant) in India. The QFIs would however not be allowed to open any bank account in India, though they can open more than one trading accounts and trade with one or more SEBI registered stock brokers. QDPs play the major role. QDP obtain all necessary documents of QFI for obtaining the PAN as well as KYC, ensure compliance of provisions of Anti Money Laundering Act and also ensure necessary deduction of taxes. QFIs are required to inform any direct/ indirect change in structure or beneficial ownership to DP and to make reporting as may be required.

Further responsibilities are placed upon QDPs to maintain investor related records of QFI and is further required to ensure shares held by QFIs to be free from all encumbrances at all times and to notify any penalty, litigation or proceeding etc. by overseas regulator against DP or QFIs to SEBI, Depositories and Stock Exchanges. For any change in account from one DP to another, the QFI is required to close the earlier account and to furnish all necessary details to the new QDP.

Tax Implications

Since this category has just been introduced in India, at present, unlike for FIIs, there are no specific provisions relating to QFI. Meanwhile one can apply the normal provisions. If the QFI is entitled for the benefit of Double Tax Avoidance Agreement (DTAA), then the QFI is entitled to take recourse to the provisions of DTAA or the domestic law, which ever is more beneficial. As per the domestic Indian tax law, the taxation of the income earned by a QFI would be as under:

1.. Income distributed by mutual funds or their units:

Income distributed by the mutual funds and received by the unit holders is exempt in the hand of latter (section 10(35) of Income tax act).

2.. Income from the dividend declared by the Indian companies:

Dividend distributed by the Indian companies and received by the shareholders is exempt in the latter’s hand (section 10(34) of the ITA).

3.. Income arising on redemption of units:

When the unit holder its units back to the mutual fund for redemption, a transfer takes place within the meaning contained in the income tax act. Consequently this transfer will result in some profit or loss. This profit or loss will be chargeable to tax either as capital gain/loss or as business profit/loss depending on case to case.

Currently there is no tax on the long term capital gains on the redemption of units of equity oriented funds (subject to STT is paid), ie, if the units are held for a period of more than one year. However for short term capital gains, where the units of equity oriented funds (subject to STT is paid), are held for a period of less than one year by an individual, the tax rate is 15.45%.

For long term capital gains tax on redemption of units of non equity oriented funds, where the units are held for a period of more than one year by an individual, the tax rate is 20.60% if the investor chooses to avail the benefit of indexation of cost of acquisition. If the investor chooses not to go for indexation benefit, the tax rate is 10.3%. For short term capital gains tax on redemption of units of non equity oriented funds, where the units are held for a period of less than one year by an individual, the tax rate is according to the applicable tax slab of the individual.

4.. Income from sale of shares of Indian companies:

When the shareholder sells his shares, a transfer takes place within the meaning contained in the income tax act. Consequently this transfer will result in some profit or loss. This profit or loss will be chargeable to tax either as capital gain/loss or as business profit/loss depending on case to case. Currently there is no tax on the long term capital gains, ie, if the shares are held for a period of more than one year. However for short term capital gains, where the shares are held for a period of less than one year by an individual, the tax rate is 15.45%.

In the event that the profit / loss is treated as business income/loss, the taxation would be 40% in the normal course for a foreign company. For individuals the tax rate will be according to the applicable tax slab.

For those cases where the benefit of DTAA can be availed of, the taxation would differ and depend on the merits of each case. One need to look closely on all such cases before arriving on any conclusion.

The QFI must keep a track of all such transaction, and file annual tax returns.

Investment opportunities for Qualified Foreign investors (QFIs)

1.. India is a prominent emerging market. A QFI can encash the opportunity of becoming the part of Indian economic growth.

2.. A QFI can directly invest in Indian market with ease.

3.. India GDP growth is higher than many other countries including USA, UK, Japan. Thus India and Indian stocks offer some very good high yielding stocks and provides an opportunity to invest in some of the finest global companies directly.

4.. India offer better returns on the debt products as compared to many other countries.

5.. If units in equity oriented mutual funds or shares in listed companies are held for more than a year, currently there is no tax on the income (subject to STT being paid).


How to survive in these uncertain times

uncertain financial markets

how to survive in these uncertain times

Everyone is worried about their money and wondering what to do with their money and investments in these uncertain times when there are inflationary pressures, economic gloom and choppy equity markets. Global markets are hostage to political actions (remember Greece) as well as facing its own structural headwinds from deleveraging. Sensex is down on concerns about global growth, rising local debt, fiscal and current account deficits, high inflation ranging 8-9% and slowing GDP. Policy paralysis at the government level is now talk of the town and, more recently, the INR has declined and is now trading at its historical lows. High salaries are becoming hard to justify and Job promotions are held up. And now Fitch Ratings cut its credit outlook for India to negative from stable, nearly two months after rival Standard & Poor’s made a similar call, citing risks that India’s growth outlook could deteriorate.

Concerns are genuine, but we must ensure that we do not panic and survive these times. We need to review our portfolio, revisit our strategies and plan our future course of action.

Lets look at the areas where your money is parked right now and how you can prevent loosing it.

1.. Equity based mutual funds

Investment in Equity and Mutual Funds must always be for the long time. The markets at this juncture could loose another 20% or gain another 20% in 2012-2013. Stick with funds that have high Sharpe ratio. Avoid sector funds. It is advisable to invest in diversified large cap. Mid cap will be more volatile in next one year and might take more beating if the markets fall. Though they are also the one who might get you better returns if the market rise from here, yet might want to wait for some time to get into these.

One common mistake investors do is to invest in mutual funds that were on the top last year. Getting a couple of percentage points more last year is not much of a consolation if the gains of the last three to 5 years get are not up to the mark. Look at the consistent performers, even if they are not on the top always.

Investors who are investing through SIP should continue with it. That allows them to buy more units at lower NAV and thus average out their purchase price. If you do not want to take any risk than invest in an income fund and regularly transfer a fixed smaller amount to an equity fund.

2.. Debt funds

You are loosing money here also. With high inflation the real rate of returns in some cases is even negative. And now fund houses such as SBI, JP Morgan and Principal have either introduced or have increased exit loads ranging between 0.15 – 0.5% on early exits on fixed income funds.

Study the type of debt fund you have. It is likely to be primarily based on the time duration where you have ultra short term funds, short term funds, income funds (for long duration) or the dynamic bond funds, which can go across duration. While investment in equities are advisable for the long time, you must choose investment in debt funds as per the time horizon and underlying objective.

Funds holding a portfolio of bonds with longer maturities see more price fluctuations due to the change in interest rates with the underlying portfolio suffering the most on mark-to-market valuation. This can be seen in the performance of debt funds wherein long-term debt and gilt funds have shown relative underperformance compared with their short-term counterparts.

The rising interest rates augured well for debt investments that offered fixed maturities, considering these are held until maturity and do not bear any mark-to-market risk. That was the reason fixed maturity plans have been in the reckoning of late due to their investment in fixed-income instruments such as certificates of deposit, the rate on which has moved up to almost 10% from 5% last year. Since these funds invest into deposits maturing in line with the investment horizon of the fund, there is no mark-to-market risk involved.

We can expect the benchmark rates to gradually start coming down, thus the market rates will also come down. That will have an impact more on the short term interest rates than the long term rates. So the strategy should be to stay invested, have a short term kind of scheme maturing in the next two to three years rather than a long term scheme of say 6-10 years.

3.. Equity Market

Indian markets have performed badly compared to its peer in Asia and emerging markets. S&P and Fitch have cut down Indian ratings and GDP estimates, inflation is still a concern and IIP data is disappointing, FY11-12 Q4 results were moderate with continuing weak margins. Rupee has depreciated and FIIs have sold heavily. The elections in Greece came in favour of the markets, but the renewed fears over Spain’s increasing borrowing costs due to the rise in the bond yield is again keeping the markets worried

Looking at sectors, banks are under pressure because of falttish rate environment, steady margins, poor asset quality and rising credit costs. IT industry though looking positive in long term is unlikely to spark in 2012. Though unlikely, if the inflation falls at a fast rate and rates are lowered than expected this year, it might have a positive impact on infrastructure, auto and construction sector.

All these will ensure that the markets will remain volatile for some time now. However, there is silver lining here. The current market conditions give ample opportunity to stack up bluechip companies with strong fundamentals and attractive valuations. Do not look at timing the market. Start picking up stocks value at current levels. Sell those stocks which has management issues or where the competition, with in the industry, is performing well but this particular company has continuing difficulty in keeping up with the competition.

4.. Bank FD and other Fixed Income

Due to high inflation real rate of return in some cases was either very poor or was in negative. The steady increase of rates has been halted. We might see some rate cut in the coming months, if not sooner as indicated by the RBI. Thus stay invested if you have invested at the higher rates because you might not get these rates soon.

If you have no exposure to these instruments, start looking for the best rates available and park some funds for longer duration. Avoid callable bonds and NCDs as once interest rates fall, they wont give you the returns that you are enjoying today. Also avoid floating rate bonds where again the interest rates are likely to come down in the coming year.

5.. Unit Linked Insurance policies (ULIP)

Insurance are for a long time. Even though your agent told you about how you can withdraw your money in 3 to 5 years, it is never advisable. Most ULIPs have a load structure where charges are deducted in the first 2-3 years of the policy and it takes a little while before you can see the value of your fund going up. Treat these ULIPs as your friend for life. Keep investing for the entire period with an objective of using this money as Retirement Fund and marriage or education fund for your children. Besides the insurance cover that you are getting. But do not withdraw or surrender your policy, even if the agent ask you to do so repeatedly. If your policy has a feature of systematic transfer plan (STP), then utilize the same.

If you are thinking of buying a fresh ULIP for you or your kid, then look at online term plans. They come real cheap and get you bigger insurance cover at a low price, while invest the amount systematically into other various asset class to build up a target corpus.

6.. Precious Metal

Trading at almost Rs. 30,400 per 10 gm, Gold has broken its previous records in the Indian Market. After hitting Rs. 75,000, silver has been trading in the range of Rs. 53,000 to Rs. 55,000 for quiet some time now. European crisis, choppy market and depreciating rupee has made investors run towards Gold. It is a good asset class, especially when there are uncertainties in the market.

It is advisable that you continue holding on to Gold and Silver. But in case you wish to invest further into it than invest only if you are looking at only one year horizon or if you do not have sufficient investments in the Gold. Silver has always been volatile, but is looking attractive at these levels. Invest in Silver only if you can withstand the volatility and stay invested for a long time. If you are concerned about the purity, ease of buying/selling and safety of holding gold in physical form then you can look at investment in the e-gold from National Spot Exchange (NSEL) or a Gold ETF.

7.. Real Estate

You have been waiting for the loan rates to come down before you invest in the property, whereas property prices at most places are steadily moving upward. If you have been delaying your decision than it was of worth no use.

Invest in property before it reaches out of your current budget. There will never be a right time or the best price. Even at today’s rate you will find that you had invested at a good value. The properties prices are unlikely to come down, unless we see real worse economic situation. Look at smaller or even studio apartments if you have budget constraints. Go for home loan. But see your monthly income and expenses before deciding on your loan amount. It must not put unnecessary burden on you. Loan will save you taxes on principal as well as on interest payment. Look at the builders and projects which have the track record of delivering in promised time.

8.. Loans

If you have surplus or can manage for a little while than go for repayment of loan. Even partial repayment of loan shall do. After a little while you will find the RBI softening the rates. Consider migrating to the lender who will offer you loans at lower rate at that time. If you are buying a car, evaluate leasing as an alternate option. Though the decision to lease or buy will always depend on your personal circumstances. If your objective is to get rid of annoying little car payments and you actually want to take ownership, buying a car may be the best option. However, if your goal is to have a new car every few years and also minimize your monthly costs, then leasing a car may be a good option.

Lessons to be learnt

Firstly never panic. And must not take any decision in haste. Study your investments well before signing on the dotted lines. Understand the risks associated with the asset class. There must also be enough flexibility so as to move in and out of the same, in case you have to. Have some buffer, especially if the goals are short term.

Always have a balanced portfolio. Look at your risk appetite. And spread your risk over various class of assets. Even in the same asset class never put your entire eggs in one basket. Revisit your portfolio at regular intervals. Exit those investments that have gone wrong or are not in sync with market or your goals. For example, if you are invested in equities and have a long term goal, stay invested even if the markets are down for some time, subject to the companies you are invested in are fundamentally strong. Rather than selling or waiting for markets to move up, invest when the markets are down.

Encash the opportunities. Explore the cheaper or better options available and migrate from the existing ones. Like if the FD rates are high switch from the older ones. And when rates soften, migrate from the higher loans.


Are you a HNI and lost your money because of your RM

Where should a hni invest

are you a HNI and loosing money because of your relationship manager

HNIs are the most sought after by private bankers, wealth managers and stock brokers as they offer an average of more than Rs. 5 crores of fund. Portfolio management services (PMS) offered by brokers aim to give returns which are generally 4-5% higher than the benchmark. Wealth managers or private bankers promise to invest across asset classes. Often they package their schemes with fancy named structured products.

Take a typical example that you see quiet often. A presentation is made to you by a smart executive. You are convinced that your money is going to a big name in the market. Forms are signed. Power of attorney (POA), that allows the company to go ahead and invest on behalf of you and not wait for your approval, are given. When the going is good everybody makes money. You are treated to lavish dinners and cocktail parties. As the trust shapes up, profits are made, more and more cheques are signed. Meanwhile you are sold a big insurance policy and are persuaded for investment in a upcoming real estate project as well. And before you know you have already made huge investments.

And suddenly the market crashes. Your Wealth manager or Relationship manager calls you up and ask you not to worry. You are convinced somehow that you are in safe hands. The first loss happens and it seems to be big. More than by how much the market has crashed. You pick up the statement and realize that most of your money was either in the small and mid cap, or even worse, was being used in futures and options.

Well you thought its time to wake up and confront your RM. He comes and tell you that you will still make profit as now they will adopt another strategy which exploits the arbitrage opportunities in market or may be another strategy called straddle, that allows them to cover positions at both ends i.e. if the market goes down or goes up. You have no option but to say yes, go ahead but keep you informed regularly.

You make a little profit two months and suddenly suffer another loss in subsequent months. The answer to the loss this time is the market was very volatile and moved suddenly beyond the range. Or a new hi tech software in the market did not let them encash enough arbitrage opportunities. You tell your RM to stop trading. And he comes with yet new strategy. Invest in Gold. He called it gold-linked debentures.

The objective again is to match the performance of physical gold but keep your money safe of any downside. You tell yourself gold is the safest option. Let’s go ahead with this. Almost 80% of the money is invested in a fixed income product in such a way that on maturity the invested part, let us say 80%, and the plus they get on the interest equals that of the principal. That makes your money safe. The rest 20% or so is put in gold. But not in physical gold. It goes again in derivatives. This time it is gold future. And you realize later this again is a sham.

By now you know that these structured products are nothing but different strategies, often so complex that you do not even think of knowing how it actually works, and what if the market does not perform up to the expectations, which is more often than not. Promises that were made to you, that your capital is always protected and there is no way you can suffer any loss, was nothing but a plain lie.

You close your account with this company or bank. You are sad with your losses running into a few lakhs or maybe even a few crores, but you can manage. Your RM moves on. He / She is still getting his or her salary along with the bonuses that were made by playing your money in these products. Infact your RM even got a job promotion because of you. Its time you learn from your mistakes. Remember the following points:

1.. You must not just sign any paper or POA before reading it yourself. We agree time is more important to you. But the money you will save will be the money you earn.

2.. Understand the risks, capital protection, charges. Do not rely only on the RM. Call for a meeting with more than two senior managers and directors. Ask for past records of products and schemes in writing. After all you are giving away your hard earned money and big money!!

3.. Cross check about the management and the products with their competition. You are most likely to get more insight into the product.

4.. Subscribe to sms alerts of all the transactions, even if they disturb you daily. You can check them while visiting loo.

5.. Re-look at the privileges. The more they are. The more dinners you are taken out. The more it is going to cost you, without you knowing it. Remember, there are no free lunches.

6.. Learn from the mistakes of others as well. As it happened with Citibank where one of its employee produced an alleged SEBI endorsement of an investment product to win over clients. No regulatory body endorses any individual scheme or these kind of structured product. One can simply check at their website.

7.. These schemes or fancy structured products are more riskier than any of the conventional way of investing. Know your risk profile. Work out the time frame. Have a well balanced asset allocation. Diversify your portfolio and review it regularly.


Plan your Retirement Pension Fund

After you retire from your normal work life, the regular flow of income stops. But the expenses drop marginally. With inflation hovering at an average of 8% and the cost of basic essentials increasing every other day, your savings as of today might not be sufficient to take care of all your expenses after you retire. It is therefore important that you start saving early and in a planned manner and determine your goal for the retirement corpus at an early stage.

Structure your own pension plan and take control of your retirement planning. All you need is to remember the following points while making your own pension plan:

Pension Amount

Determine the amount you shall be comfortable as on today. Then calculate the future value of such amount on the day you want your pension to start. The future value shall take into account a reasonable inflation rate and a room of error. For example if you are age 35, plan to retire at an age 60, wants a pension of Rs. 50,000 at today’s value and assuming the average inflation to be in the range of 8%, then you require a pension amount of Rs. 3,42,425 at the start of your retirement period. Of course you need to further take care of the inflation at that time as well, and keep on increasing your pension amount every year.

Corpus Amount

On the basis of the above calculation, you need to arrive at the corpus you need at the time of your retirement from which you shall take out your pension at a regular period. Arrive at a real rate of return, that shall take care of the inflation and the return on investments, for the period you expect a normal healthy person may live.

Investment Amount

In order to reach your target corpus amount, you need to plan your investments wisely and assume a realistic rate of return on such investments. Assuming you need a corpus of Rs. 2 crore as a corpus amount at the time of your retirement after 25 years, and you further assume a rate of return at 14% on your investments, then you need to invest around Rs. 1,10,000 every year to achieve the target corpus.

Plan Investments

Plan your investments and diversify your portfolio according to your risk appetite. Use an optimal combination of Debt, large and mid cap equity and mutual funds, liquid funds and precious metal. NPS is one option you may include in overall strategy of your retirement planning. The optimal mix of investment depends on person to person, their risk appetite and age. It is recommended that you must include a higher percentage of large and mid cap equity in your portfolio if you are young and have 20-25 years before you retire.

For debt, you can look at long term debt funds, that stand to gain if the rates go down. Besides you can look at long term bank FD’s, recurring deposits and PPF. If you can, you must increase your voluntary contribution towards provident fund.

For equity have a right mix of bluechip companies, large cap mutual funds and mid cap mutual funds.

Remember Taxes and limitations

Remember that returns on your regular pension plan will be taxable. Thus you will get lesser than what you expect. Similarly pure debt funds also attract the tax liability, while profit in pure equity funds held over a year will be tax free. Also, you shall be able to withdraw only 1/3rd tax free from your regular pension policy at the time of its maturity and rest has to be necessarily converted into taxable annuity.

Review periodically

Revisit your portfolio at regular intervals. See if you are achieving the desired results from your investments and whether you need to recalculate desired annuity and target corpus. Explore the options of switching to products that are giving better yields in the same risk category. As you grow older you can reduce the exposure towards equity, especially mid cap. You may reduce equity exposure by 2 or more every year depending on your age, but do not completely remove equities from your portfolio even in the retirement age.

Be persistent

Do not stop investing. Have ECS mandate for your SIPs. Opt for voluntary provident fund deduction. Do not loose hope if your equity investments yield negative returns in a given year as you are invested for a long time and worked on an average rate of return for a set number of years.

Remember discipline is the key to any successful investment and in particular the retirement planning as it involves a longer than normal period.


Filing Tax Return… Remember these points

It is important to pay your taxes properly or the income tax department will come back knocking on your doors with a penalty that may range from 100% to 300%, not to forget the monthly interest @1.5%. Kindly make sure that you include income from not only your salary, but other income like, winning of lotteries, gifts, rental income, any business income, capital gains and even income earned in the hands of your children. Lets look at such incomes which you often miss out:


You can receive tax free gifts of up to Rs. 50,000 from strangers. Any amount received over this Rs. 50,000 has to be included in your total income. These include gifts other than cash. Gifts received on your wedding and any inheritance is exempted from tax.

Capital gains

Any profit arising by way of sale of property, including gold, comes under capital gains. However the tax liability depends on whether the capital gains arising out of such transactions are short term or long term. For example sale of equity based mutual funds held for a period of more than 1 year falls under long term capital gains and enjoy 100% tax exemption. If there are any short term capital losses, the same can be set off against short term as well as long term capital gains and can be carried forward to the next 8 years, subject to filing of income tax before the due date which is 31st July.

Interest Income

The interest income earned on your saving bank account, NSC and bank fixed deposits have to be included in your total income. This includes interest income from such deposits in the name of your minor children. However, you can claim exemption of up to Rs 1500 per child in a year (max 2 children)

Income from property

If you own a more than one house , and even if one is lying vacant, you are liable to pay tax on the notional rent.

Gratuity Income

Any amount received as gratuity before his retirement or death is taxable. If the employee receives the gratuity amount after retirement, it is exempted upto Rs. 10,00000

While you are required to include all other incomes, you can save taxes by way of careful planning and investments. Some of the ways to effective tax planning are:

1.. Invest in a home by taking a home loan. You can avail tax benefit on repayment of principal for up to Rs. 1,00,000 and Rs 1.5 lakh on the amount paid towards interest on housing loan annually

2.. As a salaried individual if you are getting House Rent Allowances (HRA) from your employer and also taken loan to buy a home, then you can get the deduction of both HRA as well as housing loan repayment & interest.

3.. Subject to some conditions, deduction under sec 80GG can be claimed on the rent free furnished or unfurnished accommodation provided by the employer at concessional rent.

4.. Create HUF. It doesn’t cost more than a couple hundred rupees.

5.. Payments made towards tuition fees for children to any school or college or university or similar institution can be claimed for deduction under 80 C. (Maximum for 2 children).

6.. Utilize more such benefits and exemptions u/s 80 C (up to Rs. 1,00,000), 80 D for health insurance (mediclaim policies), 80G for donations made, expenditure for the treatment of your handicapped dependent u/s 80DD, 80DDB, 80U for individuals with disability.

7.. Under the newly introduced Rajiv Gandhi Equity Savings Scheme, a new investor in equity will be able to claim 50% of his investment in direct equity as deduction, subject to maximum investment of Rs. 50,000, and provided his taxable income is below Rs. 10,00,000. This investment is subject to a lock in period of 3 years.

8.. Learn from this year. Start planning for next year right now. If you wait for the last minute, you might not get sufficient time to research the competitive products. Estimate how much shall be tax this year and how you can minimize it.


Need for a Will (estate planning)

A large number of people die “intestate”, i.e without a Will. When that happens “others” decide fore us how our estate will be distributed. Many families end up fighting legal battle to get what they assume is their rightful share in the property left behind by the deceased.

It is noted often that people assume that writing a will is very difficult, expensive and is required by only those few who have large amount of assets and families. The truth is entirely different. You can write a will on a simple piece of paper and need not even register it. Secondly even if you have small family or not too many assets, if you die intestate, and their is no clear nomination or even if there is any small rift in the family on who shall get what share in your property, your loved ones will end up making another difficult time , besides loosing you , to claim such properties from the court. And then their is a cost to it. In the absence of Will your heirs need to apply for the succession certificate from the court and pay up to 3% of the value of the assets.

Writing a will ensures that those who may need your money after you have gone, and who have the right of inheritance to it, will have access to it as soon as possible, thereby avoiding possible hardship. By writing a will, you are also tidying up your affairs and showing clear consideration and love for those you leave behind.

Some of the key points to note before you draft a Will are:

1.. You can write a Will on the plain paper in legible writing. Though not mandatory, it is advisable to use stamp paper and get the Will registered so as to put the stamp of authenticity.

2.. A will cannot override the natural succession of ancestral wealth. In case of inherited property one can pass on only his share to anybody he wants, but the remaining property can be Willed only to the legal heirs. For example, a Hindu individual inherits 1 million from his father and if he has three legal heirs, then he has only a 25% share in that amount. Rest belongs to the three heirs.

3.. If you want to bequeath assets to people other than the natural legal heirs, it is suggested to mention reasons for doing so. This will ensure no legal problems by the legal heirs on the intentions and ingenuity of such wish.

4.. Who shall be your Executors? Executors are responsible for exercising your estate in accordance with your instructions after you have died.

5.. Who shall be your Trustees? Trustees will be responsible for managing and investing money, or looking after property until it passes to the beneficiaries. Make sure the trustee is still young enough so they don’t die before you do.

6.. Do you have children under 18? If so then you need to appoint a guardians who shall take care of the property until your children reach age 18. You can specify the roles and limitation of accessing the assets by the guardians.

7.. Who shall be your beneficiaries and the assets they inherit from you. It is advisable to list down the detail of all the assets and who shall inherit the same. You may also mention who shall get the assets you shall acquire after writing the will and during your lifetime.

8.. You may also specify the way your last rites are executed.

9.. Make sure it is signed and is witnessed by at least two witnesses. It is advisable that you must choose these witnesses carefully as in case of any question on the authenticity of your Will, the witnesses are available to testify in the court of law.

10.. It is also advisable to make an audio visual of this Will to add more authenticity.

11.. Store your Will in a safe place. Inform the executors you have mentioned in your will on the place where the will is kept.


Know what type of investor are you

Are you a successful investor or are the one who is being hit like a shuttle cock every now and then by the market as well as the friendly broker or advisor, or are the one who is sitting on the fence hoping to find the “golden ticket” to success.

Chances are either you are sitting on the fence or are unhappy with your investments, while your agent and broker are making money at the cost of your investments.

You might also have the following typical characteristics and behavior associated with investing:

The Ignorant

You are the key to survive for your Relationship manager and agent. The moment your agent and relationship manager has to fulfill his branch target or win a trip to Bangkok, he / she start “planning” on how to take out some business from you. Mind you the “Planning” is on how to take money out of you in the guise of “Planning” an investment for you.

He will talk big of Indian GDP growth, and then how you can make a killing in investing into infrastructure funds. One day he will talk about the land bank of one big builder and then another day on why is it safe to invest in Gold only. Then he will also convince you easily that one particular unit linked plan is the best in the market and it will double your money in the shortest possible time.

And you fall prey to all this. He will take out the form, get your signatures and fill it later. Because if he spends a lot of time filling up the form in front of you, there is a possibility of you changing your mind.

The Speculator

If you are a speculator, you want to make much higher returns and knowingly or unknowingly take extra risks of not diversifying their portfolio in various asset class or invest in few within the same asset class. You tend to choose taking control of your investments. You generally get a hot stock tip from your friend, broker or the business channel, and try to cash on it.

You are not scared to throw some money in Futures and Options, or are ready to buy a flat from a builder in a suburb without even investigating it enough. For you its all about now to take a chance on getting rich.

You are more of a gambler and doesn’t always invest smart. While sometimes you are lucky in winning lottery, you can never expect it to win every time.

The Spectator

You are the investor who is always busy in something and have no time to look at your investments. You will find a million answers on not investing. Stock market to you look risky. And by the time you take a decision on investing in a particular stock or mutual fund, it looks like market is headed for a crash. You have no knowledge in the real estate sector and no time to visit a site either. You cannot park your funds in Fixed deposits because what if you might need your funds tomorrow. And the investments you have made, if any under pressure of your friend, you have no time to review it or look at its performance.

Is it because you fear loosing your money or have no knowledge on where to start ? You are likely to make some money with your investments and not loose any money. But if you keep delaying the investments to tomorrow, you certainly are going to loose the value of cash in your hand (inflation is at an average of 8%) and also delay in accomplishing your goal of having a bigger / better house or car.

The Know all

You know everything. Yes ! This is what you believe !! You are the one who flips through Economic times quiet often. Enjoy watching Business Channels. And remembers that once the analyst had recommended a particular company to buy insurance. Or that Mid cap segment had a good run in a particular year.

But what about now. Has the micro and macro scenario changed. While you are now going for that particular insurance product, have you studied that IRDA (You know IRDA right!!) has brought in new regulatory changes and that product is no longer the best any more. Or that a large cap fund will deliver better returns in a particular cycle of market volatility.

The chances are that you were busy more in your work (in which you are good, probably best) and missed out on the other changes in the micro and macro environment. While having a discussion with your colleague or friend it is ok to show off that you know all but you can you risk taking major investment decisions for your self ?

The Saver

You are busy saving your hard earned money. You are likely to have a PPF account, some Bank FD’s, Mutual Funds, NSC’s and some Insurance policies. You are the one who will buy “Everything” that comes to you. It all started with saving taxes. Now it is more of a habit as you have spare money. Your portfolio might have everything, but most are impulsive decisions to invest rather than a clear , well thought of strategy to make your money optimally diversified and careful study of competitive products. You also are less likely to review your portfolio at a regular interval.

In our opinion most successful investors go through stages of investing before they become successful. Some take a longer and painful journey, while others are lucky to hit growth faster. And some learn from others mistake.


Investing in Foreign Companies

Yes, Indian citizens can buy shares of foreign companies, And become the shareholder of some of the most successful companies all over the world.

The actual trading of stocks is done by a licensed foreign broker, but you need a local broker who will coordinate this for you. The local broker will ask you to submit the documents such as Photo id proof, Address Proof and Photograph under latest KYC guidelines. You also need to mention the currency in which you want to settle your transactions. In order to remit funds to the bank account as requested by the foreign broker, you need fill out Form A2 available with your bank. This is all you required to start trading in the foreign companies.

One needs to have a good knowledge of the companies, countries they are listed in, exchange rate fluctuations and the tax treatment on gains of such tradings as the gains are not treated as Long term capital gains the way they are treated in case of domestic companies.


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