The Downside of Mutual Funds

I remember the day vividly. It was 2 years ago when I received my first paycheck and despite spending more money in a month than I ever spent in my entire college life, I still had a significant amount of money left in my bank account.

And it was the constant pressure of this very unused and unutilized money lying fruitlessly in my bank account that compelled me to finally ask myself the billion dollar question that every lazy and financially challenged (read: ignorant) person avoids asking himself-

“Where should I invest my savings?”

The choices, like always, were all myriad and unappealing. After all, banks had such low-interest rates, investing in fixed deposits hampered my prized liquidity and PPFs with their 15 years of lock-in period? Don’t even talk about it! What about the stock market? Come on, I was a beginner dude. 

This was until I came across my saviour (Or so I thought) – our very own-Mutual funds! 

No wonder they are so popular.

My money would be managed by professionals with diversified portfolios. I don’t have to care about tracking those complex and cumbersome movements of the stock market.

Continue reading “The Downside of Mutual Funds”

An Investment Structure For Infrastructure

Decoding Investment Infrastructure Trusts and enabling investors to leverage this interesting avenue and play the infrastructure sector.

Before I begin with the core idea behind this post, let me go ahead and unequivocally mention that it is neither strange nor embarrassing to admit that it is difficult to comprehend everything mentioned in our good ole’ business dailies like ET, Business Standard, Mint etc.

Well, I may be wrong about most of my readers (and that’s a wonderful thing) but I often realize the utmost significance of drugs like Saridon because of these dailies.

Couldn’t it all be simpler? Don’t you direly wish that some of the significant concepts can be understood without taking a Saridon?.We hear you and have already acted upon it. As a first, Fintuned has already picked up a novel concept that has been doing media rounds frequently now. Our attempt is to pick up complex concepts (at least by our judgement) and try to decode them in the simplest manner possible. So, any guesses on what’s on the table today!

Continue reading “An Investment Structure For Infrastructure”

Know what Credit Score means in Daily Life

Credit Score’-sounds like a heavy technical finance word. (I often use it to impress my non-finance friends. Trust me, it works like a charm! 😉 )

But hey! -Why are we even talking about it here?

Well, what if I tell you that these two words have a considerable and far-reaching impact on your life?

That they can shatter your humble dream of buying that 2 BHK near your crush’s apartment, of showing off your swag in the latest sedan or finally beginning your own start-up (even if it is a revolutionary idea) to pieces.

Really? How?  You would ask me.

Really!

It is because banks check your credit score before granting you any loans whether it is home, car, personal or business loan.

But it’s not just banks who may take your credit score into account – surveys have found your credit score can affect everything from whether you’re able to rent an apartment to who may be willing to date you.

  • Insurance companies – check your credit score before giving you any insurance policies. The higher your score, the better your insurance rates may be.
  • Credit Card companies –check your credit score before handing over that exclusive Platinum card to you.
  • Utility companies – electricity, phone, and cable – check your credit score as part of the application process. Yep, cell phone companies check your credit too! Want to buy the latest I phone 7 (On EMI of course). Guess what you need? A good credit score!
  • Certain jobs – especially those in upper management or the finance industry, require you to have a good credit history. They want to see if their cash and assets are in safe hands.
  • Landlords, property managers, and rental agencies – review potential tenants’ credit reports. They look for a pattern of missed payments or other negative information which may require you to pay a larger deposit.

(I know you suddenly have the urge to check your credit score. We will come to that soon!)

Firstly, what exactly do these two words mean?

A credit score is actually a numeric summary of your credit history. It can range from 300 to 900. Generally, the higher the number, the more trustworthy you appear to lenders. The lower your score, the more difficulty you will face.

Credit history comprises the number of times you paid your loans on time, your credit card bills on time, the percentage of total credit limit that you are using, the age of your credit cards and loan accounts (the older, the better).

In India, there are four credit information companies licensed by Reserve Bank of India (RBI) –

  • Credit Information Bureau India Ltd. (CIBIL)
  • Equifax Credit Information Services
  • Experian Credit Information
  • High Mark Credit Information Services.

The most popular one is the CIBIL credit score. This score ranges from 300 to 900, with 900 being the best score.

Living within your means, using debt wisely and paying all bills—including credit card minimum payment on time, are some of the smart financial moves to help you improve your credit score. It reduces the amount you pay for the borrowed money and put more money in your pocket to save and invest.

However, a lousy credit score doesn’t either mean you’re a bad person — it might just mean you put some unexpected bills on a credit card and had trouble paying, or that you missed a car payment when you lost your job. See below what can give you a bad score

  • Paying credit card bills late
  • Not paying credit card bills at all
  • Defaulting on a loan
  • High credit card balances
  • Having an account charged off

 

 

 

 

 

And now the one you had been waiting for – How to check your credit score?

Official CIBIL website- You can get your credit score by filling the ‘CIBIL Online Credit Score Request Form’ and paying a nominal price for the report. You will be asked your PAN number, DOB etc. to complete this form.

https://www.cibil.com/creditscore/

  • Websites like paisabazaar.com and bankbazaar.com – actually provide you with a detailed report on your credit score absolutely FREE!! You can know your chances of getting a loan approval easily.

Now the time for good news!

The RBI had mandated every credit information company in the country to release one free full credit report to every individual from January 1, 2017. It is supposed to be a detailed report carrying the records of your credit history, including repayment track record of all your credit card bills and any current or previous loans. You can apply for it once a year between January and December from one of the credit information companies.

So what are you waiting for? Go and quickly find out your credit score. Or better still, go and impress your IT friends with some finance jargon! 😉

 

Red Pill or Blue Pill – The Dawn of Financial Matrix in India

This post has been contributed by Vidit Dugar from Fintuned Team.

We live in times where Automation & Artificial intelligence have become buzz words and to be honest, these concepts come out to be super exciting. Taking the risk of making it a little too melodramatic, whenever I hear these words, moves like Robocop, IRobot, Matrix series etc., quickly flash through my head and then I end up using my time [you can call it wasting if you wish ;)] in watching some adrenaline pumping snippets from these movies on Youtube. However, this article is not about my day-dreaming trips and therefore, let’s leave it at bay 🙂

Recently the International Advisory Board (IAB) suggested SEBI to study fee based model for robo-advisories in the investment sector bringing the recent automation of the financial advisory sector into limelight. The marriage of automation and finance is an interesting move in the Indian financial ecosystem and while countries like US and UK have moved at light speed in this domain, the recent move suggests India is ready.

If the words robo-advisory model make you imagine Skynet taking over the world or think of a robot like Baymax (From Big Hero 6) framing your investment plans, then you are mistaken because Jetsons age is not here yet.

Continue reading “Red Pill or Blue Pill – The Dawn of Financial Matrix in India”

Crowdsourcing Content

When we started Fintuned, we always had a vision to make Fintuned a portal that not only distributes financial wisdom but also becomes a venue where everyone can share their financial stories/wisdom/ideas/tools and any other thing I missed out on 🙂

Do you know why? Because:

we believe that best learning stems from healthy experiences

we believe that best learning stems from diverse ideas

we believe that best learning stems from sharing stories

Basically, we believe that the best way to know is to seek answers in stories that are all around you! Think about your life and your learning and you will realize that we aren’t wrong.

So, to get this into effect, we are doing something that will add immense value to Fintuned’s patrons.

We are inviting everyone of you to share your stories/wisdom/ideas/tools with every single one of Fintuned’s patrons and if you wish, we will keep it anonymous. You can rendezvous with us in more ways than one:

Email: fintuned.net@gmail.com ; Facebook; Twitter

Albert Einstein

Cheers,

Mihir

Learning, Like Investing, Is Ongoing

An informative piece on establishing the significance of MOOCs and how to leverage them optimally.

Hey Folks,

Hope you are doing great as always and spending some quality time with your friends and family.

Before I jump into narrating my thoughts and drawing up my ideas, let me mention an extremely significant message carried in the title of the post itself. A few years back, when I started with my first investment, a courteous gentleman told me “Learning, like investing, is ongoing” and that thought has stayed me ever since because of the loud and clear message it conveys.

In these last few years, a particular trend in the education space has come out to be a wonderful surprise. Growing up in India (no culture appropriation trash here please), I have always been insistent on the importance of securing a degree/certificate, whatever you call it. However, the emergence of MOOCs i.e. Massive Open Online Courses has brought about a tectonic shift in the way we used to learn and believe me, this change is definitely for the better.

moocs

Websites like Coursera (pioneer in this space), Khan Academy, Code academy, Udemy, Udacity, edX, Skillshare and desi website Apnacourse are doing some great work in making education affordable, accessible and diverse. To give you my own example, I am currently pursuing a wonderful, interactive course on HTML and CSS from Udemy and that too for $10 only. It may sound absolutely unbelievable but the potential unlocked by these online courses websites is immense and the sad part is that a lot of people are simply unaware about the same.

If you are thinking that I will enlist the catalog of courses on these websites, show samples etc. then you are completely wrong. In this post, my idea is to give you some amazing facts (even though they are more of experiences but because of the associated veracity, let me just call them facts) which will compel you to look through the above-mentioned names. So, here we go:

Fact #1: Courses on these websites are unimaginably inexpensive. While Khan academy is a free portal, integrated courses can cost as low as $10 on other web properties.

Fact #2: Most of these courses have lifetime access. So, don’t worry if you are way too busy for days, weeks or even months.

Fact #3: They are mostly courses with certification. Too hell-bent on getting some document? That’s solved.

Fact #4: Take the names of world’s best educational institutions and you will find it present on the MOOC model.

Fact #5: Because most of these guys have mobile applications, accessibility becomes a non-issue.

To be honest, I can go on and on but you get the point! The intent behind this post is to make you aware of the myriad possibilities with the concept of MOOC. It is worth a shot.

“Learn. Unlearn. Relearn”, said Nikesh Arora, at a sales conference when I used to be a Googler. Undoubtedly, he knows what he says.

Let me leave you with this thought and as a bonus here is a link that you should surely visit – www.moocs.com

Cheers,

Mihir

3 Important Money Lessons To Learn From Vasan’s Story

Vicarious learning is a notable method to avoid making similar mistakes others have made. This post gives you three important lessons from a story that surprised everyone.

Hey folks,

Hope every one of you is doing simply phenomenal and making money money money 😉

I have not been able to communicate with you since last few days (believe me, that’s a lot) because of all the running around I have been doing for work and marriages (well, it is the season). That being said, I wish to share some very interesting insights I gathered after reading the wonderful coverage of Vasan Healthcare’s story on Livemint. Leaving the political controversies aside for this post, allow me to focus strongly on significant takeaways from this entire episode. Agreeably, the story carries a lot of meat for early-stage ventures to learn from but if we think about it harder, there are some absolutely forthright money management lessons that standout in the saga. For your convenience and without further ado, here are 3 most important money lessons to learn from Vasan Healthcare’s story:

Vasan Healthcare Image

*Let thy step be slow and steady, thou shall stumble not: Almost on a daily basis, I come across buzzwords like instant gratification, super-normal growth, wide presence etc., implying the urgency of growing and reaping benefits instantaneously. In case of Vasan as well, the entrepreneur’s insatiable hunger to grow and grow fast brought about a dangerous climax. Even though the brand grew to around 200 centers in a short time frame, the entire model started becoming unsustainable and finally gave away under tremendous pressure from stakeholders.

In case of money management as well, we have often seen cases where people plan and try to reach the zenith as quickly as possible. In our opinion, it is equivalent to digging a grave for yourself. If you initiate the wealth creation exercise with the mindset of making a quick buck (time the markets, eh?), you are going to end up in a dismal state sooner than later.

*Lack of documentation becomes a problem for acceptance: True enough, the moment we stop keeping a track/record of significant activities, the results of those activities go out of control. If you read the Vasan story carefully, it doesn’t take long to realize that a grave error committed by the entrepreneur was to overlook the need of keeping a proper Balance Sheet for the company. As a result, both him and his stakeholders could never understand the intricacies of Vasan’s operations.

It goes without saying that a similar principle needs to be implemented in the money management exercise. You may be earning 18 percent plus returns from equity, invested money on a project with 20 percent IRR etc., but without reasonable record, it only becomes a mess at the end of the day.

*Have a mentor/coach and pay heed to him/her: Oh, this is the most critical learning I had after reading how the Vasan story played out. While the entrepreneur had scored the support of eminent personalities as mentors on board, the entire arrangement failed to produce result because of entrepreneur’s inattentiveness to their advice.

In order to manage money astutely, the presence of a great, experienced mentor is indispensable. However, the buck doesn’t stop at just having a mentor. The important thing is to understand, appreciate and evaluate his/her advice in the most legitimate possible. Mentors not only ease your path to success but also make sure that you go farther than you imagined!

While there may be more takeaways from the Vasan saga, I believe that these three are the most important lessons for me. I strongly recommend that you read all the literature available on the episode before making any conclusions. If you have any additions/suggestions to make, feel free to put it in the comments section.

Cheers,

Mihir

Everything There Is To Know About HRA

An exhaustive FAQ with respect to HRA that everyone needs to keep handy.

  1. What is HRA?

HRA or House Rent Allowance is a grant provided by employer to employee to meet the cost of living in a rented house at the employer’s work location. Such HRA forms parts of the salary that employee receives from employer every month.

  1. What is the tax exemption available in relation to HRA?

Least of the following is exempted:

  •  Actual HRA received from the employer
  •  Rent paid – 10% of the salary
  •  50% of Salary, in case the employee resides in metro cities, otherwise 40% of salary
  1. I stay with my parents/relatives. Can I take HRA benefit?

Of course, you can! However, this is only possible if you have entered into an agreement with them and actually make the payment every month, preferably by cheque.

*Quick tip*: Avoid claiming tax benefits on rent payments made to the spouse as the arrangement can be characterized as a sham transaction, say experts.

  1. Can I pay rent by cash?

Yes, you can. However, it is advisable to make bank transfers or cheque payments for future references.

  1. How does HRA flow back to the owner/parents?

Owner/Parent will taxed for the rental income after a 30% deduction.  If they are retired and do not derive any significant taxable income, the rent would be tax free in their hands.

*Quick tip*: It gets better if the property is jointly owned by both parents. Then you can divide the rent two-ways so that the tax liability gets split between the two individuals.

*Quick tip*: If their income exceeds the basic exemption limit, you can help them save tax by investing in their name under Section 80C options

  1. Can I claim HRA and Home loan deduction at the same time?

Yes, only where you are staying and paying rent as well. One of the cases this is frequently seen is where home is bought are in 2 different cities.

  1. I am a self-employed person, Can I claim HRA?

No, as you are not receiving a formal salary. However, you can claim a deduction under section 80GG of the Income Tax Act for the rent incurred on the residence.

  1. What is considered as an evidence that I am paying rent?

Rent agreement or rent receipts is the proof. Please note that you will have to submit copies of rent receipts or rent agreement, depending on what your organisation stipulates.

  1. Is there any role of PAN card number here?

Yes, if rent paid by you is more than Rs. 1 lac per year, you need to submit pan card details of the owner. In case the owner do not have Pan Card, a declaration will do.

  1. Is there any particular format for rent receipt?

No particular format for rent receipt has been specified, but please ensure it mentions the following relevant information:

  • Amount of rent paid
  • Period/month
  • Mode of payment (Cheque/Cash)
  • Your name
  • Landlord’s name
  • Landlord’s signature
  • Residential address
  • Date & Place
  • A revenue stamp of Rs 1 for payment (both cash/cheque) exceeding Rs 5,000

If there are any further doubts that you may have, please reach out to us.

Cheers,

Mihir

There Is No Free Lunch, Is It?

This article has been contributed by Riddhi Kharkia, with inputs from the entire team.

Okay, so there is an ad that has been playing for long and if you are a big cricket buff (read: IPL devotee), you surely couldn’t have missed it (okay, have you made your guesses). Let me give it away to you because this post wouldn’t begin without the name of the brand behind these advertisements. The ad that I am talking about is “Freecharge”. To be honest, the series of ads conceptualized by Freecharge have brilliantly summarized the significance of this service/brand.

Now, you must be definitely wondering—how on Earth is the Freecharge ad related to money management or this blog. Since it is no quiz and unfortunately you would not be getting points for figuring out the connect, let me give this away as well. Basically, seeing this ad, I thought of citing the incomes that are “free” of “charge” by the Government of India. So, you know what we mean by Freecharge 😉

Coming straight to it, tax is payable on all incomes earned in India by an Indian resident. However, there are some exceptions to this rule and certain categories of income have been specifically exempted from tax. Such incomes are known as Tax-free incomes.

Here, we are presenting the most common tax-free incomes that every tax payer should be aware of. The joy of tax-free income is beyond measure.

  Income Details
1. Interest on Savings Bank Account –   Tax free up to Rs. 10,000
2. Long-term Capital Gain on Sale of Shares/Mutual Funds – Wholly exempted from tax- Shares/Mutual Funds should be held for minimum 12 months

– Security transaction Tax (STT) must be paid while purchasing

3. Interest  or any payment received on PPF/PF –   Wholly exempted from tax
4. Dividends from Shares /Income from Mutual Funds –   Wholly exempted from tax-   Dividend must be received from Domestic company only
5. Educational Scholarships –   Wholly exempt from tax, in the hands of the person who receives it-   Not necessarily a government-financed scholarship
6. Amount received through Will or Inheritance –   Wholly exempted  from tax-   But when the amount is invested, only the income earned on that amount is taxable
7. Amounts received by way of Gift on Marriage –   Wholly exempted  from tax-   Gift can be anything and from any person
8. Money received from your EPF account –   Wholly exempted from tax, provided money is taken out after 5 years of continuous service
9. Money got under Voluntary retirement Scheme (VRS) –   Tax free up to Rs, 5,00,000-   Employees of Public sector companies or an authority established under a Central or State govt are also eligible
10. Leave Travel Allowance (LTA) received from the employer – Tax free up to the amount of bills of travelling provided
11.  Maturity or Claim or Surrender amount received by Life Insurance Company – 100% tax-free provided the premium paid did not exceed 20% of the sum assured.

Well this is it!

If you are aware of some income that we might have missed out in the list, then please mail us/comment on this article and we promise to make the change.

Thank you for your patience.

Cheers.

Income Tax Returns: An Assurance Of Your Financial Health!

Just the other day, I got a rather usual message from a teenage cousin. It was a troll message on the famous Alia Bhatt ( now you know why its rather usual :P). This is how the message goes (pardon me if you have already heard this one, because it is undoubtedly naïve)

Alia Bhatt: Dad, what is your plan for the weekend?

Mahesh Bhatt: Income tax returns!!

Alia: When did the first one release? 😛

To be honest, I know it is a poor joke. However, the only reason I put it here is to highlight the significance of filing Income Tax Returns [(Even Mahesh Bhatt files it ;)]. Also, the aim of this post is to assert the importance of filing returns when your taxable income is below the prescribed threshold.

Individuals, whose total income without allowing any deductions exceed the basic exemption limits are mandatorily required to file Income Tax Return (ITR).

So, what does total income, without allowing deductions mean?

For this, you first need to know the existing exemption limits, beyond which you are liable to pay tax.

For Assessment year 2015-2016, the basic exemption limits are the following:

  • Individuals below the age of 60, the exemption limit is INR 2,50,000
  • For senior citizens, whose age is between 60 to 80 years, the exemption limit is INR 3,00,000
  • For super senior citizens, whose age is more than 80 years, the exemption limit is INR 5,00,000

Let’s say, Mr. X has an income of INR 2,80,000 and his deductions under section 80C come to INR 50,000 for A.Y. 2015-2016. Hence, taxable income is INR 2,30,000 (INR 2,80,000 – INR 50,000). Now, since this amount is below the thresholds mentioned above, the tax payable is nil.

However, here the striking point is – Mr. X is required to file his returns because his Gross Total Income (total income before allowing deductions) is above the exemption limit of INR 2,50,000 (assuming he is not a senior citizen).

Now, the question is “Why should one file the return when his/her income is below taxable limit?”

Filing income tax return does not necessarily means paying taxes. There are a number of benefits that will ease your life and future plans if you file tax return. ITR acts as a credential of your financial well-being and serves as an evidence of your income. Additionally, it makes you a good law abiding citizen (like how Mr. Modi says).

Continue reading “Income Tax Returns: An Assurance Of Your Financial Health!”