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!”

The Loan Wolf: An Introduction

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

So, we were thinking really hard to find a topic that would be fun to write and at the same time, be appealing to our readers. To be precise, we were breaking our heads over this thought with a small glass of hot “cutting chai” and delectable “maska pav”. As if it was, my attention swayed to a young guy, who was requesting the eatery manager to spare the payment for time being, and promising to clear all the dues by month end.

EUREKA! There it was.

I got a simple and interesting topic for my next series of articles: “Credit/loans”. To think of it, the arrangement between the manager and that young guy (No, it was not someone from the Fintuned team :P) is nothing but a credit scheme, which in popular parlance is known as “Loans”. Here is a noteworthy article that discusses the history of loans, in case you are at all interested!

Loan bomb

Investing in future is expensive. Be it a home or a car, you have to go an extra mile to get that big-ticket item. And this is where loans come into the picture. If you have never borrowed, you might not know how to get a loan. Though it may seem easy, but certain factors should definitely be kept in mind before opting for loan.

So, let’s get started about the loan process from start to end. (But, we have kept it short and sweet) Continue reading “The Loan Wolf: An Introduction”

Frequently Forgotten, No More!

Contributed by Harshita, with inputs from the entire team.

We all like to get gifts, don’t we? And more so because the Valentine day just passed us by, we deserve gifts. So to keep up the tradition that many a teenage hearts have begun, I will shower you with some precious gifts that will do you well in this tax season. So, unlike the gifts that you get on the 14th Feb these gifts are meaningful and precious (Haww, Did I just say that 😛). As the previous articles on this blog, we demonstrate our love for salaried people this time as well. So, here is a list of tax-saving investment options, which you need to keep in mind.

Following is an illustrative list of tax-friendly investment options:

  • Provident Fund (PPF)
  • National saving certificate s (NSC)
  • Equity linked saving schemes (ELSS)
  • Unit linked Insurance plans (ULIP)
  • Post office saving scheme

Duhh, haven’t we covered these already? Yes, most of them in great detail.

In order to break this monotony, we conducted a small research to understand the general composition of deductions. As expected, most of the participants had their 80C sorted. Seeing that, we came up with a thought of shedding some light on the frequently forgotten/unclaimed deductions (Well, you are all champions in 80C). Continue reading “Frequently Forgotten, No More!”

Gratitude, At The Rate of 100 Percent Compounded Perennially!

This article has been contributed by our number cruncher Mr. Rohit Agarwal, with inputs from the entire team.

Do a small exercise. Just type “The importance of saying thank you” on Google. Surely, you will be amazed to see the multitude of articles that modestly unravel the significance of expressing gratitude. Wait, when did we become the philosophers of our generation?

To be honest though, these two words carry umpteen significance in our daily lives because they recognize the effort (Well, now you decide if you want to say thank you to Mr Rahul………..:P). However, I am not here to load my readers with all the mystical knowledge behind gratitude. In keeping with that notion, I will head straight to the discussion on the topic “Gratuity”.

gratuities_always_accepted_keepsake_box

Most of us have an idea (not like Abhishek Bachchan of course) that Gratuity is a retirement benefit, but are we absolutely aware of the tax implications of this benefit? If you answered that with a NO, then this post will change your answer in a few minutes.

To begin with, Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company (Saying thank you). Gratuity is a defined benefit plan and is one of the many retirement benefits offered by the employer to the employee upon leaving his job. An employee may leave his job for various reasons, such as – retirement/superannuation, for a better job elsewhere, on being retrenched or by way of voluntary retirement.

Establishments Covered Under Gratuity Act?

Well, it is extremely important to know if you are covered under the Gratuity Act or not. So, here is an overview of the establishments that are covered under the said act. [Don’t be worried about memorizing it. Just glance through ;)]

  • Every factory, mine, oil field, plantation
  • port, railways, shop & Establishments OR
  • educational institution

Employing 10 or more persons on any day of the preceding 12 months.

Eligibility

As per Sec 10 (10) of Income Tax Act, gratuity is paid when an employee completes 5 or more years of full time service with the employer (minimum 240 days a year). Please note, an employee means those who are on the company’s payroll. Trainees and interns are not eligible for this compensation.

Tax treatment of gratuity

And, here comes the real challenge.

Warning: If you are easily bored by tax laws or they perplex you every single time, then DO NOT just give it to “your CA”. Rather, prepare a good coffee and peruse through the diverse collection of Fintuned’s articles.

The gratuity so received by the employee is taxable under the head ‘Income from salary’. In case gratuity is received by the nominee/legal heirs of the employee, the same is taxable in their hands under the head ‘Income from other sources’.

The tax treatment for an employee varies as per their employers. Here’s a brief idea of the tax treatment of gratuity for each category of employees in detail.

For the purpose of calculation of exempt gratuity, employees may be divided into 3 categories –

(a) Government employees

(b) Non-government employees covered under the Payment of Gratuity Act, 1972

(c) Non-government employees not covered under the Payment of Gratuity Act, 1972

In case of government employees – they are fully exempt from tax on gratuity. So, they have the maximum tax benefit when it comes to gratuity and a good amount is credited in their bank accounts (I have no comments on their work style 😛) and not even a single piece of this pie needs to be shared with the government. (Are you thinking of a career change)

In case of non-government employees covered under the Payment of Gratuity Act, 1972 

Maximum exemption from tax is the least of the list given below:

(i) Actual gratuity received;

(ii) Rs 10,00,000;

(iii) 15 days’ salary for each completed year of service or part thereof

Note:

  • Here, salary = basic + DA + commission (if it’s a fixed % of sales turnover).
  • ‘Completed year of service or part thereof’ means: full time service of > 6 months is considered as 1 completed year of service; < 6 months is ignored.
  • Here, number of days in a month is considered as 26. Therefore, 15 days’ salary is arrived as = Salary * 15/26 (This is very very important)

In case of non-government employees not covered under the Payment of Gratuity Act, 1972 –

Maximum exemption from tax is least of the 3 below:

(i) Actual gratuity received;

(ii) Rs 10,00,000;

(iii) Half-month’s average salary for each completed year of service (no part thereof)

Note:

  • Well, the definition of salary is similar to the abovementioned one.
  • Completed year of service (no part thereof) means: full time service of > 1 year is considered as 1 completed year of service. < 1 year is ignored.
  • Average salary =10 months’ salary (immediately preceding the month of leaving the job)/10

Note: This Rs 10-lakh ceiling is a lifetime exemption limit, it will be reduced by the tax-free exemption claimed from any previous employment.

As you may have noticed, the calculation of maximum exemption seems a bit complex. However, since we are at your side, you need not be stressed. In order to resolve any doubts, we will come up with a calculated example ASAP (within a day) to give you a broader understanding on tax treatment of gratuity.

Is your coffee over?

While I am not sure of the coffee, this post is certainly over and I sincerely hope that you gained a better perspective on Gratuity. If there are any questions/doubts/comments, please reach out to fintuned.in@gmail.com. Or, litter the comments section 🙂

Cheers.

Still In Fray Over Your HRA?

Note: This idea has been contributed by our passionate intern Harshita, with inputs from the entire team.

There is no doubt in the fact that the second best moment in the world is to see the mail that says “The salary has been credited to your account”. Some of you may argue that the second position is not the right assessment, but since am the author, my opinion will prevail ;). And for me, the best moment in the world is finding a washroom when you are in dire, uncontrollable need (No, it is not creepy!)

HRA

Well, this blog is not about judging the creepiness of our jokes or deciding upon the position of several human emotions. As you might have noticed, our job is to develop your money sense (Haw, you did not know that yet 😛 ). In keeping with our noble mission, let us quickly get to the topic for this post. So, coming back to my point on salary, it is quite dear to see that mail in your inbox. However, if you would have taken the pain of glancing through your salary slip, the first thing [again, no debate on first or second please ;)] that gets your attention is House Rent Allowance or HRA. Not to stretch this any further, let me head straight to the discussion on HRA.

Before we proceed to any analysis, let us begin with the fundamentals of HRA :

HRA is defined as an allowance paid by an employer to his employee, in order to help him/her meet the rental expenses of his/her accommodation. Therefore, the HRA is an integral part of your salary and warrants proper scrutiny before acceptance of the offer/hike etc.

Time to tax your brain (A bit only)

Though the Income Tax Department might be treacherous on many occasions, it is kind enough when it comes to HRA. The Income Tax Act of India provides for deduction of HRA, while calculating income under head ‘Income from Salary’. As I mentioned above, the HRA is a part of your salary and like the other components of salary, it is taxable under the act. However, the Act allows for certain deduction under the HRA component i.e the amount you do not have to pay tax on. This particular deduction is calculated as:

MINIMUM of

(I) Actual house rent allowance received from the employer;

(II) Actual house rent paid minus 10% of basic salary

(III) 50% of your basic salary, if you live in a metro city (40% for non-metro).

Yay! So, now you have understood the quantum of deduction available (I would suggest memorizing this schedule so that, it is handy when you require it).

However, as most of the flowery things in life come with *terms and conditions*, then why not HRA. So, here are certain T&C that you need to keep in mind when it comes to HRA.

– HRA has to be received from the employer,

– Rent has to be paid (Duh, isn’t that obvious)

– Salary means basic salary plus dearness allowance,

As you would know, India is a land that loves myths and misconceptions. Again, why not with HRA. So, let me try and bust these misconceptions:

  1. HRA is available to both salaried as well as self-employed individuals.

No. There are certain benefits that are available to self-employed individuals under section 80GG of Income Tax Act, subject to fulfilment of certain conditions which may resemble HRA, but the terms cannot be used interchangeably.

    2. Claiming deduction of both HRA and home loan principal/interest payments.

Smile because it’s a YES. It is possible to effect such an arrangement with a tinge of astute tax planning skills. So, this is when you can leverage such an arrangement:

  • You can pay rent to your parents and claim HRA, while claiming for home loan principal/interest payment on the same house. However, please make sure that your parents show parallel rental income in their IT returns. Additionally, there has to be a proper rent agreement between you and your folks.
  • You can let out your own house and stay at the rented house, therefore, claim HRA for rented house and home loan principal/interest payment for the owned property. In this case, you will have to show the rental income from let-out property in your return.
  • In a genuine case, you can have a self-owned property and at the same time, stay in a rented house. Now, this is possible if both the houses are located in different cities or if in the same city, the owned house is far away from your workplace, making it difficult to commute. In the latter case, you may take a house on rent near your workplace. But beware, if you pay rent to your spouse, you may face difficulties if scrutinized (see, even the government wants couples to be at peace).

Well, give a clap to yourself. You have patiently gone through the article and that too without yawning for once (See, I drink bournvita for such confidence).

You can reach out to fintuned.in@gmail.com for any queries/clarifications/jokes etc.

Cheers.

Protection + Returns!! Want To Know More?

ULIP

You know, how as kids we always had this urge to expand abbreviations using our creativity and then showcasing it to the whole world for laughs. Well, now we aren’t kids anymore (Though on children’s day, most of the Whatsapp texts ask me to keep the child in me alive 😛 ) but still, when I asked my friend if he had any idea of ULIPs, this is what he said: Yes, I know ULIPs. They stand for Unclear lackluster investment plans. Surely, it made me laugh first, but at the same time, I took the opportunity to talk about ULIPs and their significance. It just took a few minutes out of his schedule but he walked away with good knowledge of ULIPs. So, here I am, trying to do the same for you so that you may employ your creativity better and expand some other acronym 🙂

A Unit Linked Insurance Plan (ULIP) is a financial product which offers dual benefit of protection and investment/returns. Basically, it is an insurance policy/plan that is linked to capital markets. Under such a plan, a part of your investment goes towards providing you with a life cover and the remaining portion is invested in a fund. This fund then invests the money into the capital markets (equity, debt or both as per the plan of the vendor).Till here, I have just talked English and barely any finance and therefore, I am assuming that you would have understood the concept behind a ULIP. Wow, the first step is done and now that you have understood the ULIP funda, let us proceed to know more about this product.

The more, the better 😉

If you had to pass some financial aptitude quiz then knowing this much would be enough [they ask no more 😉 ] but I believe that your objective is to invest in a ULIP some day and for that, we have to drill down deeper. Before I go on to cover the kind of charges that are involved in a ULIP, the tax treatment of a ULIP etc. let me talk briefly on why I chose ULIPs as a point of discussion for this post. Let me warn you that the next 4 lines or so might be boring as they discuss history of ULIPs [don’t we hate histories] but if you have come till here, I am sure you will do just fine.

After the 2008 financial meltdown, Indian indices also took a bad hit and during that phase, ULIPs became a maligned product owing to lower returns and other structural flaws. However, ULIPs got a good makeover in 2010 in terms of product features and regulations. Now, after the elections in May, the stock market has seemingly embarked on an incessant rally and as a result, the stock market rally plus modifications in ULIP’s structure has brought this product back.Therefore, in a way, this is the best time to know about ULIPs.

YAYYY, you have now successfully gone past the history without yawning [sarcasm intended]. So, now you know of a couple of things about ULIPs i.e the meaning and their significance/relevance. Hoping that you are somewhat convinced of investing in an ULIP [if not, just see the growth in BSE sensex and you would feel the itch to make some money], let me straightaway jump to the charges that are involved while investing in a ULIP.

In terms of charges that are involved in a ULIP, it is important to understand that certain charges which may vary according to vendor and plans and hence, it is always advisable to go through the brochure/sales pamphlet or any other document that enlists the features of a particular ULIP. Now, there are approximately 8-9 broad charges that are involved in case of a ULIP. However, I believe that it is not wise to load you with all the information at once primarily because a good number of these charges are levied only when you exercise special features. Hence, the prudent thing to do is to go through the information provided by the insurer while purchasing the policy and that too, quite thoroughly. Undermentioned are a few charges that are common and mostly levied in case of a ULIP.

a. The Allocation charges: Charged as a percentage of premium upfront, the quantum of this charge varies across vendors, with a general maximum of 2 percent. Remember that it is taken before allocation of any units under the plan and is normally highest in the first year.

b. Policy/Administration charges: Simply, a fee taken for administration of policy. However, the way it is deducted is a bit abnormal. Basically, the charge is recovered through cancellation of units rather than a money transaction.

c. Fund management fees: As with any mutual fund, the fund manager of a ULIP fund does not work for free as well. Hence, this fee is deducted before arriving at NAV of the units.

Well, this is pretty much it. Yes, there are a few other charges as well but I do not think it is necessary to burden you with all information now. I believe you are quite smart to figure out these charges, when asked to pay and in case you might have problems then, we have a 24*7 assistance portal just for you.

Something grand, in the end! (woah, so bad rhyming)

To be honest, it is not something grand but since it is the end of this post, I thought to build up some climax :P. But, yes, as I promised, here is what you need to know about taxation of ULIPs.

Any premium you pay on the ULIP qualifies for deduction u/s 80C (just remember this one section, please) and the overall limit for deductions u/s 80C is INR 150,000 for A.Y 2015-16. However, the deduction is only applicable to the extent of 10 percent of sum assured. Any amount over and above that limit, will not qualify for deduction.

In case of a ULIP, there are couple of ways in which a payout is possible. One of them is the receipt of money by nominees on the death of the policyholder. As per tax laws, the money received by nominees is TAX-FREE.

Second payout route is payment on maturity of the plan/policy. In that case as well, the receipt is treated as payment received u/s 10 (10D) [No need to remember this section] and is also TAX-FREE. In fact, it is important to note that not all life insurance policies enjoy such a benefit u/s 10 (10D). However, ULIPs do.

Well, that is about it for this post 😀

Thank you for reading through and stay tuned for upcoming post on “A comparative study of different ULIPs”,

Cheers!

Two commercials to help you manage money well!

Today, I saw a couple of advertisements in succession and come to think of it, both these ads have a profound impact on our financial life. The first ad was from a colossal retailer called “Home Shop 18” and while, I believe most of you would have watched it, I would still like to refresh it for you.

So, it shows two cats Billy and Sunny( Cute ad, isn’t it?) who are traditional business owners and throughout the advertisement focus on this one simple and known message:

“Shopping makes a person happy”

Well, the statement is definitely true and does not need any extensive description as most of us would have indulged in “retail therapy” umpteen number of times.

The second one.

Coincidentally, the story completely turned around and I was surprised to see the ad that appeared after the first one. It was from the stable of one of the biggest online marketplaces in India i.e “OLX”. The point that they tried to hammer into my head was completely opposite to the first one as for them:

“Selling makes us money and hence, selling makes us happy”.

In fact their ad message says “Turn your cell phone into a sell phone” (Quite witty, ain’t it. You decide)

Before I proceed, I just want you to close your eyes and play these ads one after the other and in case you haven’t watched any of these ads the please open your eyes and click on the links embedded in this post. [For your eyes only :P]

So, which money personality should you adopt?

Buy/Sell, do what makes you happy

To be honest, there is no perfect answer to that.

One of the basic thoughts expressed by most of personal finance advisers is : Sell items that you don’t need and get some value out of such unused assets. In fact, this point is given such thrust that eBay could easily hire all money matters advisers (including myself) to market the concept of eBay.

No, I am not criticizing this thought because it does form the basis for a very important concept in personal finance called “Passive income channels”. However, it would not be viable to include the funda of passive income in this post because I don’t want you to feel sleepy by reading brutally long posts.

Do not just be the OLX type.

It is definitely worthwhile to be of the OLX personality type i.e a person who believes in selling off things/items that might be of negligible use. But, is it just sufficient to have the OLX personality to be great at managing money.

The answer is in the negative for the sole reason that you cannot be a great money manager without having an element of the “Home Shop 18” personality. Now, I say this not because I am insane but because real money management does not only deal with saving money. In fact, a major portion of personal finance exercise involves calculated spending that ensures a qualitative life. Remember, money is just another resource and like every resource, management of money means utilization of same in the best possible way.

No confusion, great combination!!

I guess you might be quite perplexed on deciding the ideal money personality that could help you manage money better. Well, the answer to that is a proper balance of both the personality traits. Generally, it is seen that people are skewed towards either the “Home Shop 18″ or the “OLX” style of living and in order to avoid such a situation it is necessary to do a course correction every single time one feels that he/she is over indulging in retail therapy or hoarding excessive money in their wallets.

Therefore, to be good at personal finance, the essential requirement is to use money to help you lead a quality life for the entire lifetime. As such, there is no rigid rule with respect to the money personality that you should adopt. On the contrary, it is a sustained balance that comforts you and makes you happy.

Hope you had a fun time reading the post and in case you have any queries/suggestions, please use the comments section or mail us at fintuned.in@gmail.com 🙂

Cheers.

Disclaimer: This blog post and the blog do not support/endorse any of the brands mentioned above. The names of the brands have been used for educational purposes only.

Looking beyond FDs

 

According to the new Companies Act, companies looking to raise public deposits need to get themselves compulsorily rated on liquidity and ability to pay deposits on due date from a recognised credit rating agency. Such a rating will denote how risky a particular deposit is, which investors tend to overlook.  This is the reason why manufacturing and real estate companies of late have stopped accepting or renewing fixed deposits from April after the new Companies Act came into force.

So investors should start looking for alternative options to invest when their FDs mature and they get their money back.  Industry experts says investors ac look at: NBFCs, Bank FDs, NCDs, or fixed maturity plans (FMPs) of mutual funds as an alternative.  While FDs are easy to understand, other alternatives are not as liquid as FDs. So investors first must understand how the product works before putting money there in.

Availability of options

NBFCs collection has already started growing up as they come with a more secure option.  NBFCs are unaffected by the Companies Act and they can continue raising deposits. They give interest rates of 8.5 % to 10.5 % and come with an AAA or AA+ rating.  Debt investors looking for higher returns can go for non-convertible debentures (NCDs) of NBFCs. They come with tenure ranging from 400 days to 6 years. Interest rates range between 11% and 12.5%, which are 1.5-2.5% more than the rates offered by bank deposits. They also offer you the option of monthly interest, annual interest, cumulative option as well as option to double your money.

Investors can also consider FMPs. FMPs aim to generate a steady return over a fixed tenure, typically from a month to three years, and are similar to bank fixed deposits. They protect an investor from interest rate volatility by investing in fixed securities. Investors can expect a return of around 9-9.1% on a one-year and one-day FMP and 9-9.25% on a three-year FMP.

Taxation and liquidity standpoint

It is important to calculate your post-tax returns before taking an investment decision.  If you are in the higher tax brackets, FMPs would give you higher returns than NBFC deposits or bank deposits. For example, you get 10 % on a three-year corporate FD. However, your net return would be only 7% if you are in the 30% tax slab.  Compared to this, a three-year FMP would give you a return of 9%.

Liquidity is another important aspect which investors need to consider. FMPs, though listed on the Stock Exchange, are illiquid and typically the investor has to hold the investment till maturity. In contrast to a NCD, FD can’t be sold in the market. You can easily sell NCD in secondary market whenever you plan to move out.

To summarize, investors apart from alluring interest rates, should also consider investment size, credit rating, credibility, tax efficiency and liquidity aspects of the product before investing their money into it.

Any thoughts/opinions, please mention in the comments below!
Cheers 🙂

What Do The Numbers Tell Us?

It is beyond any doubt that we live in an era of numbers and it is impossible to imagine a World that believes in any hypothesis without numbers to back it up. May it be political rallies where we see to-be MPs shouting out big numbers in order to criticize the ruling government or an interview where the interviewer is grilling the candidate to test his ability, numbers play a pivotal role.

The most recent and popular target of number stories is “Apna own bollywood” as quality of movies is now gauged on the basis of box-office collection (The benchmark being Rs 100 crores).Even Sunny Leone’s latest movie Ragini MMS 2 used the strength of numbers in its tagline:

2 mai zyaada mazaa hai” (Translation: There is more fun in 2).
  [You are free to ponder upon its implications 😉 ]
Okay, before I lose you into thinking about the movie, songs, Honey Singh or Sunny Leone, let me tell you about the purpose of this article. As I mentioned, numbers are highly significant to impose any thesis on people and hence, I am here to introduce you to some numbers that could make you think more about your money. Just before we start, let me clearly point out that none of this numbers are made up. They have been taken from reliable sources. (Plus. you have Google with you to check its veracity.). So here we go:
4,866 crores is the amount of unclaimed insurance money lying with life insurance companies as at the end of 2012-13.
250% is the growth in amount of unclaimed money with life insurance companies over a period of four years starting 2009-10.
So, both of this numbers relate to unclaimed insurance money and emphasize of an extremely important point. The reason, as explained by IRDA, behind such massive amount of money lying with insurance companies is the fact that dependents are not aware of existence of a life insurance policy. So, if the husband has paid big premiums for securing the life of his spouse and the spouse is not aware of it, then the whole exercise is fruitless.
Takeaway: Let me tell you that while there are other reasons like delay in settlement of claims, complexity of claims process etc. behind that massive number, the biggest reason is failure to track finances.
In most of the households in India, financial information is kept by the breadwinner to himself/herself whereas the ideal approach is to let the family know about each and every of your investment. A lethargic attitude and other factors are responsible for the failure to maintain a log book on investments, which is must.
Hence, if you are reading this blog but do not have your investments tracked and informed to the family then my earnest request is that you do it ASAP!!
22,636 crores is the amount lying in inoperative Employee provident fund accounts as at the end of February, 2014.
We think that working people have a good idea of their money and can take adequate care of the same. Well, think again!!
As per data, the mentioned amount is linked to EPF accounts that are lying dormant for more than 36 months and have stopped earning interest. The primary reason that these accounts have become inoperative is because employees holding those accounts have moved on to new jobs but have missed transferring their EPF accounts to the new employment.
Takeaway: Again, as in the case of unclaimed insurance, the problem is failure to track your investments. For employees of big corporations, it is a tough to miss the transfer of EPF accounts since the payroll teams aware you of these accounts. However, it might not always be the case and the ideal approach is to keep a record of all your investments including the EPF accounts, lest you have a sharp memory that can remember everything.
1101 crores, the amount of unclaimed dividend lying with companies as of 2013. Once this money stays unclaimed for a period of seven years, it is transferred to Investor Education and Protection Fund (IEPF) post which no claims are entertained.
Takeaway: While there are various reasons behind unclaimed dividend, the primary reason is insignificant amount of dividend on an individual basis. The implication is that individuals hold a limited number of shares of companies and hence, the dividend due to them is quite low.
As a result, people are not highly bothered by dividend announcements and to top that. they are not quite aware of their portfolio as well because it is largely handled by stock brokers.
However, any amount of money is important and should not be forgone because of the magnitude. The ideal way to go is to keep a tab on the annual reports, dividend announcements etc. made by these companies and monitor your portfolio so as not to miss out on your income.
21% is the fall in savings rate in India since 2008. The current saving rate stands at 30.9% of GDP of which household sector is the biggest contributor. Household savings rate dropped a percent in 2012-13 to 22.8% of GDP.
Takeaway: Well, the takeaway is obvious here, isn’t it?
The need to save money is the basic principle in the skill of money management. However, I would like to make a small addition: As important it is to save money, it is equally important to channel it to productive use. Thus, it is extremely necessary that your savings are not lying idle at home but are being used to generate more money.
So, that is pretty much about the story of numbers behind “Money” in India!
Hope that these numbers would strengthen the hypothesis on “managing money”.
Any thoughts/opinions, please mention in the comments below!
Cheers

Swipe & Sign: Managing Multiple Credit Cards.

We all have childhood memories and however old we grow, they never fade (BTW, I have not grown that old). Just the other day, one of the memories came back to me related to situation that a good number of us would have encountered. As kids, the only piece of paper that frightens us is the “Report card.”
So, I will just give you the excerpt of a situation that happened a long time back:
My mother (also, my teacher then) was rebuking me for scoring below my potential (I always thought, what score should I get to justify my potential, phew!) even while the result was pretty good. And while this was happening, my dad steps in and says ” Give him a break, he has done a commendable job and presents me with a nice gift”. The consequence is that I am all cheered up and lively again.”
Sorry, if the introduction seemed a bit long but my intent is to drive home a point: Such appreciation and recognition boosts our ego and provides us with required satisfaction.

What your bank knows and does!


Now imagine this situation: You have a well-paying job and a good financial life but as always, it is not possible to understand if it is justified based on your potential and that bothers you. At that point, you get a mail from your bank saying that: “You are pre-approved for a Gold credit card with a credit limit of Rs 3 lacs.”
The first words that might come out of you could be “Wow, this is amazing.” So, your bank plays your dad and tells you. ” Hey, that is a commendable salary and you are definitely a high-earner. Therefore, we have a small gift for you : A gold credit card.”
I understand if someone might not agree with the premises of the given thesis but my point is this: Besides the convenience and other factors that make people love credit cards, the owning of a credit card is turning into a status quo these days.
Gold, Platinum or Titanium is the question that generally goes around while comparing credit cards instead of charges, rates or offers. An idea called “The Almond effect” comes into play while we apply as well as use the credit cards. Please, read this interesting analysis here.

The BIG difference between your Dad and your Bank.

Simply put, your dad offers you a gift in an attempt to cheer you up with no latent intent but with banks it is different. The primary motive behind that flowery mail is that you apply for the credit card and give the bank an opportunity to earn via interest and card charges.

Please note that I am in no way opposing the idea of having credit cards and not even demeaning the way banks convince you about the viability of cards (There are enough blogs on that).

Now, to Management of Cards.


The fact is that we like credit cards and while it offers several advantages, there are certain things you should know and follow in case you have multiple credit cards:

Well, The very first thing is to have a wallet with a good number of slots ( Haha, just kidding)

Actually, the first thing to do is learn about some of the terms that are related to credit cards. These are actually quite easy to understand and will ensure you that you are not stuck the next time you are researching on credit cards.

Interest rate: This is the price you pay to the credit card company for the privilege of borrowing their money. Now, if you are a lousy payer, then this interest rate may shoot up to double-digits and keep on accumulating. 


Trickery alert : Lately, credit card companies have come up with zero interest credit cards, which convinces people easily. However, most of the times, the zero interest rate is only valid for first few months after which the rates are as usual or even higher.

Grace period: Grace period is the time between the end of your billing cycle and the date your payment is due. The longer the grace period, the better. The Grace period is not applicable if you have any amount due on your credit card.

Note: Having a credit card is useful to build your credit score and a good credit score is highly valuable for any of the future purchases. The way you use your credit cards and repay the dues has an impact on your credit score.

Mug this up:


Multiple cards = Multiple bills = High probability of misplacing a bill or missing out on a payment. However, as I mentioned earlier, keeping multiple cards is absolutely fine if you can manage them well.

So here are some tips for that (I am sure they will help):

  1.  Dedicate certain cards for specific spending, so that you equally use the credit limit on all the cards.
  2.  Do pick the right credit card for each purchase so that allow you are able to accumulate rewards  points, cash back, or another types of incentives. Trust me, you will SAVE MONEY!
  3.  Do not retain unused credit cards. You may be paying an annual fee or charges without realizing it.
  4.  Use internet banking to pay the statements on multiple credit cards.
  5.  Set a monthly reminder on your calendar or mobile phones to make timely payments. 

Kudos, I am sure you can manage your cards well! As always, please offer your thoughts/opinions in the the comments section 🙂

Cheers.