Author: Jagoinvestor

I am Jagoinvestor Admin

Care health insurance Review – 12 features explained

Posted on by Jagoinvestor

Today I am going to review features of “Care“, one of the good health insurance policies in the market. It was launched few years back and it’s really one of the most comprehensive health insurance products available in the market as on date. So what I will do is, share with you, its features one by one, so that you can know what all it covers, along with few disadvantages in the policy

I digged deeper in its policy wordings and I will explain them in detail, so that anyone who is looking forward buy a health insurance policy can take the decision in a better way by reading this Care review. Here you go..

1. High Sum assured up to 60 lacs is allowed

The sum assured offered by the policy ranges from 3 lacs to 60 lacs. Gone are the days when 2-3 lacs of sum assured was sufficient. Now it’s very common to see people buying a cover of 10-20 lacs. Many people even want to go for a cover of 30-40 lacs also and there are very less options right now if someone wants to buy a high enough health cover. Care gives you an option to buy up to 60 lacs of health cover, and the best part is the high cover comes along with added benefits which we will look very soon

2. Single Private Room (no rent limit)

If you choose the sum insured of more than 5 lacs, then you are eligible for a single private room. The wordings in the policy is of “Single private room” and not some percentage of sum assured.

Most of the policies cap the room rent limit, however this policy caps the room type. Here, if the user takes a room higher than the type eligible he still is required to pay the difference of the room rent as well as all other expenses which increase due to choosing of a higher room type

I love this point especially because room rent limit is such a critical factor while calculation of your claim amount, you can read how room rent limit affects your claim process if you choose the room with higher rent

3. Cashless treatment in network Hospitals

Care has a network of around 4,100 hospitals around the country. If your hospitalization is planned after few days, in that case, you don’t have to shell out any money from your pocket. You can choose to take cashless treatment and the bills will be settled by the health insurance company directly to the hospital.

This is not a special feature in Care. It’s present in almost all the health insurance policies these days. But I thoughts it’s a good mention in this article as we are looking at all the features. Also, note that cashless treatment is an additional benefit which helps a customer. You can always choose to not have a cashless treatment and pay the bills yourself and settle the claim later by submitting the bills. In case of emergencies, you anyways can’t choose cashless treatment.

4. FREE Health Check each year

You also get free health checkup’s facility every year for all the adult policy holder’s lifetime!. There are no terms and conditions for this. Just that the facility is there only for sum assured of more than 5 lacs. Also, the number of health checkups depends on the sum assured amount. You get more detailed checks done when your sum assured is high.

I have realized that a lot of people do not spend their own money for regular health checkup’s, so in a way it’s a great feature in the policy, due to which one will form the habit of regular checkup’s and will be informed about their health issues.

Each year you just need to contact the company and express your desire for the health checkup and they will schedule it for you in one of the centers they have tie-up with and which is also near your house. You can choose the timings and place as per your convenience. You can collect your health reports after 24 hours of the checkups. It’s a really great thing offered by any company.

Below is the health checkup list for various kind of sum assured slabs as per their brochure.

Care review - free health checkup

5. Restore of sum insured up to 100% amount

The policy has a feature called restore. In this feature, if there is a large claim in the policy due to which the sum insured is exhausted or reduced substantially, in case of a subsequent unrelated claim, if the sum insured falls short to pay the claim, the policy reinstates/restores to cover to 100%. Let me explain that in detail.

Let me give an example

Suppose you have a 10 lacs sum assured. Now due to some heart-related issue, you were hospitalized and the expenses were Rs 4 lacs. So your remaining sum assured is 6 lacs. You can utilize the 6 lacs sum assured for any purpose.

But if some another hospitalization comes up for an unrelated claim, and the expenses are more than your remaining sum assured, then your sum assured will be restored to the full amount of 10 lacs. Even your other family members can avail for the full sum assured even for the same illness. Note that in case of family floater plan, it’s highly beneficial because even the other family members can take benefit of full sum assured for the same illness.

6. No claim bonus up to 50% of sum assured

No claim bonus is a very simple concept, where you get rewarded if you don’t have any claim in a year. In Care, your sum assured gets increased by 10% of the base sum assured if you do not claim in a year and keeps increasing upto 50%. Which means that if your sum assured is Rs 10 lacs, then if you do not have any claim in a year, then next year it will increase by 10% (10% of 10 lacs) , and your sum assured will become 11 lacs . Again if you do not have any claim in the next year, it will increase to 12 lacs and so on..

So your cover of 10 lacs can go up to 15 lacs maximum if you do not claim for 5 yrs consecutive. A lot of policies (like Oriental Happy Family Floater), they reduce the premium by some percentage as no claim bonus and many people are happy about that, because that means less money going out of their pocket. But truly speaking what you need is the increase in sum assured, not a reduced premium, because every year due to inflation and rising medical costs, you need higher sum assured.

I don’t see a big benefit in saving few thousand or hundreds in premium in the name of no claim bonus.

Super No-Claim Bonus

This policy also gives an additional benefit called Super No-claim Bonus which will cost you extra premium if you wish to take it. In this super no claim bonus facility, your no claim bonus will be 50% extra each year up to the maximum of 100% of sum assured.

What that means is that if you do not have any claims, then within 1 yr, your sum assured will increase to 1.5 times and in 2 yrs, it will double. So if you have a policy of 5 lacs sum assured, then

  • Sum Assured in first year – 5 lacs
  • Sum Assured in 2nd year (assuming no claim made in previous year) – 7.5 lacs
  • Sum Assured in 3nd year (assuming no claim made in previous 2 years) – 10 lacs

And this super no claim bonus is over and above the no claim bonus which you anyways get in the policy. So truly speaking your sum assured can increase anywhere from 60% to 150% in some years if you take super no claim bonus option while purchasing the policy. At the time of applying for the policy itself you need to mention that.

Care review - super no claim bonus

7. Around 170 Daycare Treatments covered

The policy covers around 170 day care treatments (In-patient treatments) , which are mentioned in the policy document. A lot of times you don’t need to get hospitalized for many days or even 24 hours. Some treatments can be done in just few hours. You can get admitted in morning and get things done by the evening or just few hours.

Even these kind of in-patient treatments are covered in the policy. A common myth is that you need 24 hours of hospitalization to claim your health insurance benefits, but it’s not true. Many years back when health insurance was a new thing in India, it was probably true. But not anymore.

Below is a snapshot of the policy terms and conditions pdf and you can see some of the day care treatment names mentioned. There are total of 170 treatment names listed in the document.

Care day care treatments names

Please do not confuse these day care treatments with OPD. OPD treatments are not covered in any health insurance policies

8. Second Opinion and Organ Donor Cover

If there are any expenses which are incurred on the organ donor, then even those expenses (along with hospitalization expenses) will be covered in the policy. The limit for this expense ranges from Rs 50,000 to Rs 3 lacs depending on the sum assured. A lot of times, in critical cases, if there is any organ which needs to be replaced and you get any donor, then you will not have to incur the expenses from your own pocket due to this feature. While this is an extreme care, still we should appreciate that the policy takes care of this point.

Also the policy has a feature called “Second Opinion”. In this, if any of the policy-holder is diagnosed with a critical illness, then the company will arrange a free discussion with a qualified medical practitioner for you. This is great feature, because a lot of times, you want to consult another doctor before taking a big decision like surgery, operation or any hospitalization. The policy lists down the critical illnesses for which you can take second opinion. Note that the second opinion facility is only for sum assured above Rs 5 lacs.

Below are the critical illness mentioned in the policy

  1. Benign Brain Tumor
  2. Cancer
  3. End Stage Lung Failure
  4. Heart Attack
  5. Open Chest Coronary Artery Bypass Graft
  6. Heart Valve Replacement
  7. Coma
  8. End Stage Renal Failure
  9. Stroke
  10. Major Organ Transplant
  11. Paralysis
  12. Motor Neuron Disease
  13. Multiple Sclerosis
  14. Major Burns
  15. End Stage Liver Disease

Each member of the policy can avail the second opinion facility for each illness every year if required.

9 – Avail Medical Treatment anywhere in world

If you have opted for sum assured of 50+ lacs, in that case, you can avail the medical facilities through the world, where-ever you wish to , but it’s limited to only 5 major illnesses. Also, the benefit is available only on reimbursement basis only. Means you first have to spend the money from your pocket and then claim it back later. So I think this will mainly be helpful for the high net worth individuals and not to the middle class. Anyways a good feature, because some people might look forward to this.

10 – Pre and post hospitalization expenses

The policy also pays for any medical expenses related to the claim before and after getting admitted to the hospital. It covers 30 days of pre-hospitalization expenses and 60 days of post-hospitalization expenses. A lot of times a big amount is spent before and after the hospitalization in medicines, checkup’s and other things. It’s very important that a policy takes care of these facts. However, note that this is a basic feature, and almost all the policies in market gives this benefit.

11 – Domiciliary Expenses Covered

The policy covers the medical expenses incurred on the home treatment. A lot of times a patient is not in the condition to the hospital, in which case the treatment can be done at home. The policy will pay upto 10% of the sum assured in this case. The condition to avail this offer is that

  • The patient is no in condition to be moved to hospital
  • OR, there is non-availability of the room in hospital

Note that there are many illness for which the domiciliary expenses cannot be claimed, please check that list in the brochure of the policy.

12 – Lifetime renewal and no restriction on entry age

Once you buy the Care policy, you can then renew it lifetime. This is one of the most important points one should remember while buying any health insurance policy, because you buy the policy looking at a very long-term and not just for next few years. The policy should be able to help you when you are in your late years, because that’s when you really need it badly.

Also, there is no limit on the maximum age by when you can renew it. On top of it, even the entry is not restricted due to age factor, a person can buy the policy at any age, provided they fulfill the health checkups and the restrictions by the company.

Waiting period of 4 yrs for pre-existing illness

Under this policy, any pre-existing illness will be covered only after 4 yrs of taking the policy. This is a common exclusion in almost all the policies. However if you are a senior citizen, then the coverage for that particular illness might be excluded permanently, because once you cross the age of 60, the chances of you getting hospitalized due to that particular illness is high and it does not make any business sense to cover it.

This is precisely the reason why one should take their parents cover as soon as possible, especially before they cross the age of 60 yrs. Apart from the pre-existing illness, a lot of illness have their own waiting periods from 1-4 yrs, which is a standard thing in any kind of health insurance policies. Also nothing other than accidental hospitalization is covered for the first 30 days of taking the policy. I suggest you read this article which talks about exclusions in mediclaim policies in detail.

Other Points

Below are some other important points one should be aware about

  • If your sum assured is more than 5 lacs, then there is no sub-limit on the ICU charges, Doctors fees and Medical fees.
  • The policy provides ambulance expenses ranging from 1,000 to 3,000 depending on the sum assured
  • There is no age limit of buying a new policy. Anyone can buy the policy at any age, just the minimum age requirement is 91 days for family floater and 5 yrs for an individual policy.
  • Maximum 6 people can be covered in a single family floater plan
  • The policy like every other policies in market does not offer any dental care treatments
  • This plan does not cover maternity expenses, but that’s ok. Don’t over focus on this point, as it’s something you can take after yourself
  • You get 7.5% discount if you renew/buy the policy for 2 years and 10% discount of payment of 3 yrs in one-shot.

Disadvantage of Care Policy

Let me mention some the problem and disadvantages of the policy.

1. Average policy, if sum assured is less than 5 lacs

A lot of features are applicable in the policy only when the sum assured is more than 5 lacs, if you want to take a lower cover like 3 lacs or 4 lacs, in that case, Care is an average policy and not the best.

2. Room type capping

You already know that the policy caps the Room type instead of room rent. This was a good advantage also, but at the same time, this can be a disadvantage also. In this case, suppose the room type which your policy allows is unavailable, then you will have to go for some other type of room and in that case you might have to suffer the reduced claim amount. You are tied-up with a particular room type only.

Suppose there is some other policy, which caps the room rent limit at 1% of sum assured and imagine that your sum assured is 10 lacs, then you are eligible for any room with rent of up to 10,000 per day. In that case, you can choose either a single room without AC, with AC or a premium room. It’s totally your wish as far as the room rent is below 10,000. But in case of Care, if suppose you are eligible for a single private room whose rent is 6,000, and the next category of room costs Rs 9,000, then you can’t go for the Rs 9,000 room . You can surely take it, but then your claim amount will get affected. So make sure you think on this point properly before you buy the policy.

It’s totally your wish as far as the room rent is below 10,000. But in case of Care, if suppose you are eligible for a single private room whose rent is 6,000, and the next category of room costs Rs 9,000, then you can’t go for the Rs 9,000 room . You can surely take it, but then your claim amount will get affected. So make sure you think on this point properly before you buy the policy.

I suggest that you also compare Care policy with some other policies like Max bupa plans or Apollo Munich Optima Restore and then take a final decision.

3. Co-payment of 20%, if policy taken after 60 yrs of age

If at the time of entering the policy, the age of the policyholder is more than 60 yrs, then a 20% co-payment will apply. Which means that the policy holder will have to bear the 20% bill amount and only 80% will be paid by the company. But if you enter the policy before 60 yrs, its not the case.

Hence the policy becomes unattractive to senior citizens who are looking for health insurance. In comparision a policy from L&T insurance is better where 10% co-payment applies after the age of 80 yrs. The policy from Max Bupa called Heartbeat, does not even have the concept of co-payment. So the policy from Care scores low on this point.

Premium Chart for Care

Below I have listed down the premium amount 5 lacs sum assured, for various age range with two cases of a single person insurance, and another one is a family floater policy with 2 adults and 1 kid. You can check how the premiums will rise over the years when the policyholder will move to various age slabs. Note that now there is no claim based loading in the premium. Now as per new guidelines of IRDA, a policy premium increases when the policyholder moves in a different age range.

Care health insurance premium chart

An important point to note in the premium chart about is how the premium is very less in the initial years, when you are below 60 yrs and how it increases when you become a senior citizen :), which is quite natural and explanatory. Also you should not be shocked to see these high premium values in today’s time, because these are all future values, and even though today these premium values might look big to you, but when you turn 60 or 70 yrs, at that time these premium values will look very normal to you.

Snapshot of the Care benefits

Care policy features snapshot

Do you want to buy the Care policy?

If you want to buy the policy or want to enquire about it, then just fill up the form below and you will get a dedicated phone call to help you choose the policy and explain you.

I hope you have got a fair idea about the policy. Note that this Care health insurance review is mainly for educating you on various features of the policy. Please check other policies details and make sure you choose the policy which suits your requirements.

Let us know what are the points you liked best about Care and which point you didn’t like ?

EDIT : This is not a paid review. We have started d0ing review’s of various policies and we will do review other products as well. This is just a point by point explanation of each important point in the policy. Also, we have added the disadvantages of the policies, not just positive’s. Care is definitely not the best in market in all respect, but a very good policy considering most of the profiles. Please see the article more as an attempt to help a person understand what all policy provide’s its customer.

5 kind of online frauds, where investors have lost their money

Posted on by Jagoinvestor

A few months back I got a call from an NGO based in Delhi. They were trying to help a small baby, which was a critical medical condition and needed immediate medical help and they were generating the money from all over India. Even there were social media campaigns around it. The girl talking to me told me its an urgent matter and how as a citizen, my help could mean a lot to the poor child.

various types of online fraud where investors have lost there money

I told her, she can mail me the details, so that I can look at what I can do from my side. After 1 hour, when I typed the NGO name and it turned out to be a big fraud campaign, which was widespread and many people reported their complaint.

But this was just one example. There are so many areas where various kind of frauds are going on all over the country and many uneducated people who do not understand the online world fall for it and lose their money. This is worst than mis-selling at times because in mis-selling you get bad returns or your money is stuck, but in these kinds of frauds you lose all the money forever. So I want to share some tricks used by people to do online frauds and their modus operandi. Here they are –

Fraud #1 – Fake Job Offer

Millions of people are unemployed in India and that has given birth to this job offer scam. In this, you get an email offer from a reputed company which invites you for their interview. You see all kind of numbers, venue, last date etc, and then you see a line mentioning that you need to deposit a security deposit or some basic fees, which will be refunded later.

Given so much of unemployment, a lot of people fall for this trick. The emails look very genuine when you read it, as it contains the company logo, or it might be on the letterhead of the company, but when you dive deeper and check the email id from which it was sent or the website link, you can figure out that something is wrong. Below is one such mail.

Fake job offer

Remember that no company in its senses will ever ask you to deposit any kind of money with them for an interview. Below is an example of how people lose such a big amount in these kinds of fraud offers.

Cybercrime police in Bangalore, India have busted a fraudulent on-line job racket offering nurses jobs in the UK and arrested five persons including two Nigerians. The accused had cheated a nurse to the tune of Rs11 lakh by promising her a job at the Ealing Hospital there.

The nurse had responded to the email job offer at the Ealing hospital in UK by sending her CV and educational certificates. The accused subsequently got in touch with the victim on her telephone and asked her to remit money for anti-terrorism and drug trafficking safety certificates, WHO immunization insurance and skilled immigration permit certificates.

The victim remitted Rs 11,03,500 to different bank accounts as suggested provided by the accused before she realized she had been conned by the gang of fraudsters when she stopped getting responses from the accused.

Fraud #2 – Help a child in an Emergency situation

This is what I was talking about at the start of this article.

Just search for the term “relief India trust scam” and you will see how many people got a call from this so-called NGO claiming to raise money for medical treatment of some needy baby. I got a call myself 2-3 times, and every time I kept investigating the issue to understand how they work. When I enquired about their Registration number, they even gave me that, but then it’s not a big deal. You can always start an NRO with bad intention.

They were extremely pushy and didn’t have a lot of supportive information regarding their claim. There are many other scams going on in the name of helping someone. It can be on helping a poor girl education or for the treatment of a kid, who has no one in the family.

They even go to an extent of telling you that the baby is on the ventilator and the surgery is in the next 30 minutes. You often see this in train’s also where a lady comes with a pamphlet asking for help. I am seeing that same thing from last 30 yrs in sleeper class. Even I see the same thing on some buses.

Coming back to the online version of fraud Here is two such experience from this website

relief india trust scam

I don’t want to paint all the NGO’s with the same brush. There are many good NGO’s also, they are doing good work, but many NGO’s have sprouted up, only to take advantage of these kinds of situations and exploit emotions of people to make money.

Fraud #3 – I am calling from IRDA

This is a well-known scam these days. Almost every investor has some or the other kind of insurance policies, especially from LIC. So these fraudsters give a call to you and ask you about your policy and tell you that they are calling from IRDA and you are eligible for some bonus after many years and in order to get your bonus you will have to either send some money or buy some policy again.

A lot of times, they have some more details about you and your policy and they look genuine at times. And many investors fall for these scams. Here is an advertisement which cautions investor’s about it

You can also listen to some sample audio calls which was recorded by some investors. You can listen to them and see the tricks used by them to cheat and fool investors.

Fraud #4 – Verification Call from Bank using OTP

This might be a new thing for many investors. In this fraud, the target is generally uneducated investors who are not that much educated or who are very new to internet banking. The fraudster poses them as a bank verification officer and gets all the information like debit card number, expiry date, CVV number, and even OTP number while doing the online transaction parallelly.

This recently happened with one of my friend’s father who lives in Patna. His father was not that well versed with internet banking and used to do all his transactions in offline mode. So naturally, he was not aware of how the system works. One day he gets a call which goes like this

Fraudster : Hello , Mr PQR.  I am XYZ calling from SBI bank . Your name is on our records who recently got a debit card. We are seeing some suspicious activity in your account recently, so this is a verification call to make sure that the debit card is in the actual account holder name.

Friends Dad : Oh ok .. What needs to be done to secure my account ?

Fraudster : Please verify your debit card number and the expiry date . It would be written on the card.

Friends Dad : (shares the numbers)

Fraudster : If you check on the back of card, there is a 3 digit number, its called CVV number. Please share it with me. Is it printed there ?

Friends Dad : Yes, its there .. Its 645

Fraudster : Ok , I have initiated the verification, I am now sending a 6 digit code to your registered mobile number, share that with me and then delete the sms. Please dont share it with anyone else

Friends Dad : Yea, I got it just now .. its 745523

Fraudster : Ok great , you will get a sms in sometime informing you about the verification success .. I am now disconnecting the call. Thanks for your time

Friends Dad : Thanks ..

( After 30 seconds …. there comes an sms )

"Dear Customer , Your Ac XXXXXXXXX567 is debited with INR 24,500 on 27th Apr .. Your available balance is INR 34,000"

The real story?

What happened in the background, is that the fraudster tried to make an online transaction on some website, which required a debit card number, expiry, and CVV number. After that, an OTP is required, which comes to the registered mobile number. Note that the modus operandi might deviate a bit, but the point is the same.

The fraudster tries to show himself as a bank verification officer and asks for all the details. I know you and I might quickly judge that this is a fraud call, but millions of people who are from a rural background or from past generations cannot.

Because first, they don’t understand the online world and the new way of banking which has come into the picture in the last 10 yrs and they are sometimes quite afraid of making a mistake. When they are told that their account is compromised and their money is at risk, they take wrong decisions in haste. Below is another real-life example of this kind of fraud

banking fraud using otp

Hence, make sure you never share your card with anyone or share its details like CVV number of ATM pin. A lot of people do it in Restaurants and Petrol pumps. 99.9% of times, nothing happens, but we are talking about that 0.1% times when things can get nasty.

Fraud #5 – Please verify your bank details (Phishing)

It’s a very common kind of fraud in the online world. It’s called Phishing, which aims to steal your sensitive data like username, password or card details. You get an email asking you to verify your account or details, failing which your account will be closed.

When you click on the link, it takes you to the website which looks exactly similar to your bank or card company, you enter your details thinking that it’s your bank website only. But in reality, it’s a fraud website which captures your sensitive information, which later is used to do transactions and you lose the money. Below is a youtube video explaining how it works.

Here is an example of an email which I got on the name of SBI bank.

SBI fake mail

So make sure you do not fall for any kind of emails asking for your sensitive details like the password or PIN number. No bank asks for it ever.

Even I have received fraud call from a guy stating to be RBI Officer. He claimed that my bank account will be closed because it is not linked with my Aadhaar number. Fortunately, I recorded the call because I knew that he was trying to fool me so that he can know my card details. To win my trust he made his senior also talk to me.

How to prevent yourself from getting trapped in these situations? 

From the last 10 yrs, this kind of online frauds has increased because the whole world has moved to the web and all kind of transactions are now online. It’s important to be attentive to your actions and with whom are you interacting.

  1. You will never receive a phone from RBI or Other banks for reasons such an Aadhaar not linked etc.. Please be aware that if there is any recent activity such as if you have deposited some cheque then you might receive a call if bank officials want some information regarding the cheques. Otherwise, no calls from banks for any backdated activity.
  2. Never share your card number, CVV number, OTP etc.. to anyone.
  3. Download Truecaller in your phone. So if you receive a call from an unknown number who is asking your bank account details then you can check the number in Truecaller. Truecaller will tell you if this number is spam or not and if it shows to be spam then block the number.

Have you come across any other kind of online frauds other than listed above?

The dark side of becoming an Entrepreneur – 5 things no one will tell you on face

Posted on by Jagoinvestor

Have you ever dreamt of leaving your job and starting something on your own? Are you frustrated in your job and don’t see a future? If that’s the case, I am sure that, you must be excited by the thought of “being your own boss” someday. Hence, do read this article fully before you take any final decision.

Last year, when I wrote my own story of how I had quit my job and went full time working on this website, I saw that a lot of people were impressed with my story. Everyone said it was a brave decision. A lot of people could relate to my situation and said that even they are looking forward to quit their jobs sometime in future and jump into entrepreneurship.

job vs entrepreneurship

Pursuing your passion and getting out of your boring corporate job is definitely an amazing experience. It gives you a great satisfaction, sense of achievement and can be extremely rewarding, but only if things go right.

But WAIT .. you know what !!

You probably don’t have much idea of the other side, the darker side and thats what I want you to read in this article.

“Pursuing your passion” is over-hyped

Yes, you heard it right!

I have realized that the positive side of entrepreneurship is often over-hyped. Surely there are many awesome things of being your own boss, but then there are challenges and issues involved, which are buried deep down in the entrepreneurship world, not openly shared or communicated in detail.

When you meet a young entrepreneur who left his well-paying job to pursue his passion, what do you see in his life? I am sure you must be seeing the freedom he has in his life, the exponential growth prospects, no boss to report to and the satisfaction on his face. Right ?

But you never see the problems, issues, challenges and frustration which arises out of being an entrepreneur. I know it very ‘cool’ to leave your job to pursue passion and it has created such a glorious image in the eyes of people, that majority of them want to try it out someday in their life. But remember the old saying …

“The grass looks more, greener on the other side”

side effects of becoming entrepreneur

5 side-effects of being an entrepreneur

I know how amazing it feels when you leave your job to pursue your dream. It’s an awesome feeling. I have done that and been there myself. There is growth prospects, freedom and sense of satisfaction and many other great points. But today we are not going to focus on that because you already know all that. Today, I want to share the darker side. I want to share the challenges and problems which a person faces in his entrepreneurial journey.

I have also contacted few business owners and asked them for their experience and real-life issues they are facing, which you will read below. It would be a great thing to be aware of these challenges, so that in future you can take an informed decision on what to do and which side you should move. So here we go ..

#1 – Be ready with the inconsistent income

The worst nightmare for a salaried person can be an unknown number getting credited in your account every month. When you are into a job, you get a number deposited in your account each month, not less not more. You know the date, you know the amount and you are clear that its going to come for sure.

Things like rent, EMI, household expenses, bills and many other things are already defined and dependent on your salary and for most of the people, they just can’t afford any cut in their salary because their monthly structure will fall like a pack of cards

job income vs business income

When you are into your own work, a big problem is a variable income and this is more true in the starting years. Sometimes you get Rs 40,000 in a month and another month, it can be Rs 1 lac or nothing. Over time, this uncertainty goes down, as your work improves and your foundation gets strong. You slowly move to a more consistent income zone, but still the variability remains in the income.

A real life Experience

Amit Singh, who runs an IT company in Pune shared his real life experience of how he faced cash crunch at one point of time and how he felt about it

You will run out of money and unless you can handle the stress that will follow, you should not attempt to be an entrepreneur.

I will tell you my experience, in the initial days everything was as I had imagined, but then came a time when we had no projects for more then two months we run out of all our saved money, during that time the team I was counting on failed me, we had a very hard and stressful time, but it was ultimately my responsibility and blaming would not have solved the problem.
It took us six months to recover from that two months financial liabilities.

For most of us it’s long working hours and no holidays, for a long time you will not be able to take any vacation and you will be working for average 12-14 hours every day. You should also forget about work life balance, it will only be work.

#2 – You will doubt your decision many times

While a job has its own frustration, working on some venture also comes with its own set of psychological problems. You always wonder if you made the right decision or not, especially if your income is not as per your expectation or if you come across some challenge and that affects your business, you get many sleepless nights wondering if you took the right decision or not.

One of our readers, Rishikesh Sinha shared what he thinks about this point and he shared his thoughts and experience.

Sometimes when I feel low and analyse things around me in terms of monetary and relationships with people, including near and dear ones. I find, entrepreneurship is indeed tough and demanding. I don’t have enough money for disposal, to spend on things that brings happiness or comfort, though momentary it may be. Had I been an employee, atleast I could very well spend on necessary things without blinking an eyelid. But it is not in case of being an entrepreneur, a rupee spend has to be weighed upon. It seems the money I earn is not mine, it is of the customers.

This is about money. In case of relationships even, you find money plays a pivotal role.  Being a brother, being a son, being a neighbour, being a husband, being a friend even, my monetary role — someway or other way — plays its role. And I find it hard to comply with all these roles. I see around, being an employee people have done what they could do the best with themselves. They are happy with no remorse.

Here I find, had I been an employee atleast I could have kept many people happy (if not all) in terms of monetary. People would have looked at me as a successful and resourceful person. But in case of entrepreneurship, since they don’t see money coming out of my pocket, my existence doesn’t count.

One more benefit, that I see being an employee is that he or she becomes the extension of the organisation. This is a great benefit as a person. You are being defined with your organisation. In case of entrepreneurship, it is not the case. You and your business are alone. You are always vulnerable to predators.

If one month goes bad, you start feeling tremors under your feet and it’s really very disturbing fact, because then you extrapolate that one bad month into distant future, and start thinking – “What if the whole year goes like this?”. Your imagination takes you to extreme possibilities and you are devastated. Job has its own challenges and doing your own work also brings its own set of challenges. The image below depicts it quite well.

struggle in job vs business

Only after this has happened to you many times you overcome this feeling and stay relaxed.

#3 – Lack of focus in work

This point is one of my favorite. When I left job, I always thought that now, I am going to be my own boss, no one to disturb me and no one to questions me. I will focus all my energy and time in things which I love.

I was delighted and thought – “WOW – No one to monitor, no deadlines and no one to report to”

What an amazing situation it would be.

However, now after almost 4 yrs, I can assure you that my thinking was wrong. What seemed like a blessing turned out to be a curse. Because there was no one to monitor, and because there were no deadlines, things didn’t happen on time and the productivity went down. I didn’t report to someone, hence there was no one to push me to do things on time, I was my own boss and I always forgave myself for everything wrong I did.

When you are in job, you have a deadline, you have someone above you who will demand things and you are forced to focus on your work. But when you are on your own, its a big challenge to do things on time. The freedom comes at a big cost. I can start my work at 2 in afternoon and unless I have a great discipline, it affects my business. The above points are more true, if you have a home office kind of setup.

Here is what Enterpreneurship article says about this topic

When you don’t have a boss or company tracking your progress, it’s easy to lose focus. Your freedom to do whatever you decide with your time will backfire if you don’t stick to a schedule and plan. Today, things like social media notifications can lead you down time-wasting rabbit holes.

So understand that when you are not into job, its really really tough to follow a 9-5 kind of schedule because it doesn’t exist at all and sometimes you wonder, if a strict timeline and someone yelling on you to be late was a blessing in disguise.

#4 – You can still be frustrated

It’s very much possible that in reality your plans might not workout as per your expectations. You had high energy and motivation when you begin, but then somewhere in between things start settling down and after a while, your whole excitement fizzles away and you get frustrated at your work and different things you have to deal with in life.

Hence, it’s very important that you carefully choose why you want to leave your job and start something on your own. Just because you hate your current job, can’t be a strong reason to quit. I suggest you to find a more stronger reason to quit, because boredom and frustration are part of any kind of work especially if you are not innovating after few years and you get into that cycle again.

A lot of people say “I hate my job” . But that alone cant be always a reason to follow your passion. Here is a comment made by a reader on this topic

But before quitting job just make sure that you are leaving your job because you reallyy passionate abt what you REALLY want to do or start. You simply love it..

It absolutely does not make sense that I hate my current job and that’s why I want to quit it. Always think why you hate your job. It’s because you lack somewhere or you are not having proper skill to do it otherwise you like your job. If that’s the case start working on areas where you are lacking (Comm skills, technical skills etc..)

I am also in Software field and in future my plan is to go in Education field because i think i can really make a difference there but before that i would like to make sure that i am really passionate abt it and i am working on it..

Just because you hate your current job, does not qualify as the reason for doing some business on your own because if your heart is not in that, you will again start hating it. One of my friend Nooresh Merani (appears on CNBC) does exactly that. He left his IT job to become a full time stock trader, not because he hated his job, but because he loved trading 🙂 . Below is his story in his own words ..

The biggest reason for an entrepreneur to become one is to love some work/hobby/ passion for which one is ready to make a lot of sacrifices.

So when i quit an IT job it was the love for being an advisor, trainer , trader and not because i hated my job. Well i loved the 6 months in that job as i was on bench and getting paid for having fun and also run the blog. The worst way to become an entrepreneur is to hate ur prev job.

A lot of entrepreneurs will talk about how when there is no revenue no income and working so much for it was a dark period. It makes all of us feel good as we have taken the other road. There is a tough part when you are doing good business , good income you have to make many more sacrifices as you are a boss 24/7 and not an employee 9-5.

So for example 2007 was equally tough for me in hindsight. As very rarely met my friends, sports reduced , had free tickets to ipl from friends ( he even took his barber ) and i could not make it for even one of the matches. Work was 24/7. Luckily i was single :).

Learnt from that and had a lot of fun in a lean period post 2008 where markets were sideways 😉 . An entrepreneur needs a support staff in his/her family as the toll comes on them for the sacrifices. Entrepreneurship is like another marriage where your wife ( if u have one ) ur mom/dad and friends accept your second wife.

For them to change , sacrifice is tougher.

One standard example – every entrepreneur needs capital/ raw material which can be intellectual, hard cash or money , technology. Also capital requirements are needed to for further growth. What you do not have ? Are you ready to stay on rent ? Are you ready to mortgage property ? Many tough questions.

You will not even get a home loan 🙂 or a car loan easily. I could stay on rent for 8 yrs because of support from parents and then my wife and in laws 🙂 i still do for comfort but have an own flat too.

I always remember these lines even if i plan to work for someone or myself.  The monthly salary is one of the most harmful addictions and the only one which lets you live and not kill.

Nooresh has also done a nice presentation for those who love stock markets and wondering how to become a full time trader

#5 – Your work and life balance goes for a toss

When you get into your own work, the one big issue is that your work and life generally becomes one. Because now you are the boss. You sometimes work from home, you go to office sometimes, you might have few things to work on Sunday’s , early morning and round the clock few times.

Here is a real life experience of one of my entrepreneur friend Harsh Agarwal from his life.

The hardest part of being an entrepreneur is to draw a line between work and personal life. Especially those who started their journey before marriage, they will find it hard to balance the two life. Undoubtedly finding that balance is essential, as soon your personal life will start governing your professional life. Leaving the zone of being workaholic is not going to be an easy task, and here is one quote to help – “Family happiness is the ultimate reward for my hard work”

Success comes with a cost, and sometimes it’s too high. If your friends share the same vision or share the same bandwidth as yours, you will have no problem. If not, get ready to walk alone. Your friends will be supportive, will appreciate your work, but they won’t be there when you need to discuss an important idea or problem. Moreover, success begat loneliness, and when you move ahead in life, it would be harder to have new good friends.

The liberty of leaving your work as it is on friday evening, only to resume it back on monday morning is absent most of the times. You personal life gets affected due to this, because your family wants a separate time from you and they might find it frustrating that you are never completely out of your work.

Should you leave your job, even if you are earning a good enough salary ?

Given the kind of salaries some people are making these days, many a times I feel that one should work for few years even if they are not in love of their job and make some decent money and reach a milestone in their lives before plunging into entrepreneurship.

This is more true for sectors like Software, because I have seen some people making amazing salaries which is just not possible in first few years of struggle when you work on your own and given how important money has become in these times, I think its makes more sense (not always, but in most of the cases) to give some time with focus on making money only and acquire basic things in life first before you plunge to take risk

Example 

One of our clients has just returned from Australia and is around 38 yrs old. He has been making good money from many years, and wanted to open his own restaurant in Pune and this thought was in his mind from the time he started working at age of 27. But the salary was too good to ignore. So he decided that for 10 yrs, he will focus all his energy into making money only and reach a milestone first. Today he has a flat with no EMI, a respectable bank balance and now he thinks, that it’s a better time to take the decision of leaving his job to pursue what he wants.

So if in your case, you need to decide if it makes sense to work a little more years only for the reason of making some more money and reach a situation which will allow you to take the decision of quitting you job more easily. Only you can decide that.

Entrepreneurship can be a very lonely world

I asked Ronak Hindhocha, one of my professional friends to share this views on this topic and what has been his experience and below is what he says

Entrepreneurship is a very lonely world unless you have a co-founder who totally understands your business. If not, it can be very difficult to build a team that can match up to a level where they start knowing what you go through day in and day out.

A lot of times, you’d feel like quitting. You can quit from inside but you can’t show it to the world. With each passing failure (whether big or small) things only get tough. To a point where you start questioning whether you’ve made the correct decision by venturing into the unknown.

For entrepreneurs who are in a product business (which works very differently than a service business) it can be extremely painful especially for first time entrepreneurs. You come across so many unknowns and if you are lucky enough to survive the first 2-3 years you almost get used to the daily grind.

Entrepreneurship takes a toll on your personal life. And yet, you cannot survive without their active support. So, you’ve got to try really hard balancing personal and professional life.  It forces you to bring down your standard of living many notches down. While earlier you’d not think twice before going for a movie or spontaneous shopping spree you’d now find yourself defending why those unnecessary splurges no longer make sense.

Entrepreneurship makes you anti-social over period. You no longer enjoy social gatherings where pointless discussions are a norm. So there comes a point where you stop attending them. Your family/friends start wondering if you really care about them. Sure, you’ll piss of some of them. The true friends will remain but lots of them will stop worrying/caring about you. And the anti-social animal within you won’t care either.

You should also view this video below from Nadia Arain, where she talks about the Dark Side Of Entrepreneurship and her experience.

Having skills does not mean everything

Job and business needs different skills, mindset and dedication. Some people are not born to be employees and some are not born to be employers. It’s totally fine to know which side you belong to and accept that fact.

Neil Patel, one of the most famous internet entrepreneur shares his view about what is required for entrepreneur life

neil patel on entrepreneur life

Strategic vs Being Negative

I know that to some people, all what I am saying will sound a bit pessimistic. But that’s not the case, I am just trying to say that you could time your decision in a better way and with proper planning, which will increase your chances of your success with a huge margin.

There are many examples, where a person left the job to pursue the passion and it didnt work well and after 2-3 yrs of struggle, they had to come back to their jobs and that too at a lower salary, because their career went back by few years.

For example, imagine that a person with 8 yrs of experience today has a 20 lacs per year package in year 2015. The person has a choice

  • Leave your job in 2015
  • Make 1 crore more in next 5 yrs and then leave your job in 2020

There is no right choice here, but only “your choice”. You need to check which option works better for you? It should not happen that in order to chase your dreams, you create a situation where you regret it later and your loved one’s suffer so much, that its beyond repair. Take a responsible decision. Darren Rowse has written a great article on this topic

Doing a job can be equally awesome

I want to just make sure that many people who have started hating their jobs, just understand that there is always some kind of struggle involved even when you are not into jobs. You need to relook at things with different perspective and should appreciate what a job has to offer you. The world needs people who are working in jobs, just like they need entrepreneur. Not everyone can be an entrepreneur and it’s totally fine.

A job, might nor offer the equal exponential growth opportunity like a business, but thats fine. You dont need that always. You should appreciate the consistency of income, good work life balance and an atmosphere where you can grow well in life.

I still miss those days in my past company, where we had team outings, working with colleagues which was kind of another family, going to cafeteria to just waste time with my group (not my team), those free lunches and a complete two days of no work. You can always pursue your dream on the side slowly transforming it into a stronger part of your career and also create an income out of it. Take some inspiration from this example if you want to understand more on what I am saying.

Disclaimer – My intention in this article is only to showcase the side effects of being entrepreneur – and various experiences of others. In no way I am saying that one should not try it, but my only focus is that one should be clear about what all they can expect when they leave their jobs to pursue their passion. I am myself one, and very happy with my decision 🙂

I would like to hear your thoughts on this topic and anything you want to share ?

Do you know the hidden truth behind ‘Pre-approved loans’ in India

Posted on by Jagoinvestor

Have you ever received a phone call from your relationship manager telling you that, there is a pre-approved loans especially for you?

A lot of people get excited about this fact, that there is a special offer for them and that the bank is ready with the red carpet waiting top hear a – “Yes, I am interested” from them.

However, what’s happening deep down in these cases is often not known to general public. You as a customer should be fully aware of what goes behind pre-approved loans (It’s also called Instant Approval some-times). You should be aware about the reasoning behind lenders offering these type of loans.

Pre-Approved loan

 

What does “pre-approved” loan means?

Let me not reinvent the wheel here. One of the best explanation of pre-approved loans is given by wikipedia. I am quoting it here. You will understand what it means

In lending, pre-approval has two meanings:

The first is that a lender, via public or proprietary information, feels that a potential borrower is completely credit worthy enough for a certain credit product, and approaches the potential customer with a guarantee that should they want that product, they would be guaranteed to get it.

This rarely happens in the financial services industry, and when it does happen, it is usually loaded with fine print that is not immediately disclosed. Usually, what happens is pre-qualification, instead.

Although, to a typical consumer, “you’re pre-approved” means “you already passed the approval process and therefore are guaranteed to be immediately granted the loan if you apply,” the literal meaning is different. The literal meaning is “at a stage before approval.”

Thus, pre-approved creates no obligation whatsoever on the lender and no rights whatsoever to the potential borrower. “Pre-approved” is thus a popular advertising catch phrase to induce people to apply for a loan.

So, in a nutshell, when a lender says that your loan is pre-approved or you are eligible for instant approval, it means that based on your profile information like your income, your payment history till date, your debit/credits in your bank account, your cibil report status and the score and many other things – they have short-listed you and preferred you over other customers.

Few parameters about you are already known to lender and based on that information, you can now apply for the loan. However its not correct to say that the loan is already approved or any kind of guarantee that you will get it for sure.

These offers just means that the first level check is complete and you have passed that, you will most probably get the loan if you move ahead.

But, you still have to follow all procedures

You still have to follow all the procedures, produce all the documents asked and at the end, the final decision will be taken by the lender if they want to give you the loan or not.

An important point to note is that pre-approved loan comes with a time limit. If you get an offer for the loan and if you accept it, you need to close the deal within few months (generally 6 months). You will be paying a processing fees, if its applicable for the instant approved loan.

Advantages of Pre-approved loans

Note that, I don’t want to show pre-approved loans in a bad light in this article. While there are few things one should be aware about, still there are some benefits of pre-approved loans, which you should know

Benefit #1 – Better Negotiation power in your hands

If you have a pre-approved home loan on your side, then you have a better negotiation power in front of builder, you can show him that your loan is already approved and your chances of buying the house is stronger.

Builders love committed buyers and they might extend the discount of few points to you, if they can sense your position. Also you can talk to your lender about anything which is concerning you about the loan and negotiate it with them.

Benefit #2 – Less processing time

Because the loan is pre-approved. Most of the background checks is already done, your basic details are with the lender. Now its all about producing the documents asked and take it to next level. Hence the overall processing time gets reduced and things happen faster.

Benefit #3 – Possibility of Lower interest rates
Most of the times, a pre-approved loan comes with a lower interest rates. This is because of the reasons like its the bank who wants you to take the loan and they have to offer you something interesting.

And the other reason is that pre-approved loans are offered to those who have a good history of payment or who have a stable cashflow and banks don’t mind lowering interest rates to them because they are not high-risk customers.

Pre-approved loans are a tool for cross-selling and meeting of targets by banks

To understand this whole game of pre-approved loans, you just need to think like a lender. A person who already is a customer is a good candidate for other products too. Let’s take an example.

Imagine a customer who had taken a home loan from a bank, and already 1-2 yrs have passed.

Now if you think carefully, you will realise that a person of that profile, might be needed additional money for home furnishing, might want to upgrade his car, might need some money in between vacations, home renovation or might have emergencies in life and above all, this person earns well enough (because he bought a home loan).

Hence, the lender keeps bombarding with offers like car loan, personal loan and other kind offers. So the point to understand is that, these pre-approved loans are a way of cross-selling their other products to you.

Below you can see a screenshot from my mailbox and will understand what I am talking about.

personal loan pre approved loan

Apart from this fact, another thing is that banks have their internal targets to meet. Each branch of bank is given a monthly or quarterly target to meet and in that pressure, they have to find customers and sell the products.

That’s the reason you will see your relationship officer calling you from time to time to tell you about the “exciting offer” especially offered only to “premium customers” like you.

Role of Psychology in pre-approved Loan

“Supply creates its own demand”

This is the best quote of economics which explains why pre-approved loans work many a times. We live in the world, where are consuming mainly because someone wants us to consume and not because we want to consume it. If you offer something to a big group, chances are, few people from that group will come with all the reasons why they need your product.

Coming to the example of pre-approved loans, if you keep offering the loans to a big mass from time to time, Its highly probable that few of them would take it just because its available.

Consider an example:

Assume, that I have an old car (which I have in reality) and I am thinking to upgrade my car (which, I am not thinking in reality). I have some money in my bank account which can be used for making the down payment. Now at this stage, imagine I get an email or call offering me a car loan saying – “Pre-approved card loan only at 8.99% upto Rs 6 lacs”.

Imagine what will happen….

Even though I was not consciously thinking to upgrade my car, still just because an offer like that is available, I might be tempted to go for it. I will magically come up with all the reasons why I must take the loan, and how I deserve a better car .. blah blah .. The deal will give me an external push and look like a win win deal.

I might not have applied for the car loan myself if the loan offer was not there, because, it was not a lot of pain for me to actually apply for loan and upgrade my car. I will be involved in my life issues and keep postponing my wish.

However, not all examples are like this. A lot of times, people take the loans they don’t need at all. The pre-approved loans make them hungry for something their body does not need. Just because it’s available easily, a lot of people fall for it and get into the never ending cycle of debt a lot of times.

Don’t apply for pre-approved, if you don’t need it

You might be aware that any kind of loan application goes into your CIBIL report. So make sure you apply for the pre-approved loans only if you are really serious about the loan. Don’t just opt for it for the sake of it. Don’t click that “Apply now” button just to check if you are really going to get it.

At the end, I would say do not just discard the pre-approved loan, neither see them with too much of doubt. Look at it as a normal loan offer and do all the checkups and introspect if you really require it or not.

Do you have any experience of getting these kind of offers? Do you fall for them?

13 tax-free incomes in India – every investor should know

Posted on by Jagoinvestor

Paying Income tax is one thing, which most of the people do not like. Everyone tries to minimize their income tax by some or the other means. So today, I will be sharing with you the list of some income’s which are 100% tax-free in India.

Yes, you heard it right. If you earn these income’s, then you do not pay any income tax on them at all. This article is mainly for information purpose because I have seen many investors who are yet not clear on the taxation rules of a few incomes. Here we go:

Tax Free Income

1. Interest on saving bank interest – up to Rs 10,000 a year

From 2013 onwards, a new section 80 TTA is introduced under which, the interest on your saving bank account up to Rs 10,000 is not taxable. So if your saving bank interest for a year is Rs 20,000, then out of that Rs 10,000 is exempted and only the rest Rs 10,000 will be added to your taxable income.

This is a great relief for tax-payers because it was really a big headache to find out the saving bank interest from all the accounts and add them up and pay income tax because, for most of the people, it would be few hundreds or thousands of interest income. Now that is gone!

2. Interest earned in NRE account

Any interest you earn on your NRE (Non-Resident Exempt) account is 100% Tax-free in India. Here we are talking about both, the Fixed Deposit and normal saving bank interest. Both of them are tax-free for NRI. NRE deposits are a great way to earn a decent interest on the savings done by NRI.

Some of our clients even go an extent of taking a loan from the country they are working in like UAE/Singapore because they get it at 2-3% and then reinvest the same in NRE deposits here in India where they earn around 8-9%. Also because there is no tax, hence TDS is also not applicable to the NRE account deposits.

And the best part is that the money in NRE accounts is repatriable which means if you are in the US and you invest some money in India in your NRE account, the principle and interest money can be taken back to the US.

3. The share of Profits paid to partners in the firm

If a partnership firm earns some profit and instead of retaining it within the partnership firm, it has paid to the partners as a share of profits, then it is tax-free in the hands of the partner, because the tax is already paid by the firm on it.

Example – If A and B are partners in a firm. They get 5 lacs each in a year as a share in the profits earned by the firm, then it will be tax-free in their hands. But if they are receiving any salary from the firm, then its taxed in their hands.

I would like to request that as this is related to corporate tax, please consult a qualified CA on this issue.

4. Maturity or Claim amount received by Life Insurance Company

The money you get from life insurance companies on maturity, claim or surrender is 100% tax-free provided, If the premium paid does not exceed 20% of the sum assured. I am quoting new amendments which have come in recent years.

As per amendments introduced in the Finance Act, 2003, (i.e., with effect from April 1, 2003), any proceeds received on account of maturity/surrender of an insurance policy were exempt from tax only if the premium paid did not exceed 20% of the sum assured.

As an example, if the annual premium is Rs 10,000, to qualify for exemption, the minimum sum assured under the policy was required to be Rs 50,000.

If the sum assured was less than the said value, the entire maturity proceeds would be taxable. Such limit of 20% was later reduced to 10% by the Finance Act, 2012, (i.e., with effect from April 1, 2012) to increase the insurance coverage amount, i.e., the sum assured threshold was increased from a minimum of five times of annual premium to 10 times.

For policies taken on the life of a disabled person or person suffering from certain ailments, the limit was relaxed to 15% of the sum assured with effect from April 1, 2013.

5. LTA money received from Employer

Most of the companies pay LTA (Leave Travel Allowance) each year to their employees, which can be utilized for traveling purpose. This LTA is not taxable in hands of the investor provided they provide the proof of travel. So if your company is not paying you any LTA, ask them to restructure your salary and label some part as LTA, because almost everyone spends a minimum amount traveling in a year.

For example, if you are getting a salary of Rs 5 lacs and their is no LTA in your salary component, you can ask your employer to label 20k as LTA and rest 4.8 lacs as other components, this way you will be able to save tax on that 20k part at least.

6. Money got under VRS scheme up to Rs 5 Lacs

If a person takes VRS (Voluntary retirement scheme) then any amount received up to Rs 5 lacs is income tax-free. However, not everyone is eligible for it. Only employees of Public sector companies or an authority established under a Central or State govt is eligible for this.

7. Money received from your EPF account after 5 yrs

The money one gets from their EPF account is also tax-free, provided the money is taken out after 5 yrs of service. A lot of times investors change their jobs in 3-4 yrs and withdraw their EPF money only to realize that they could have timed their withdraw in a better manner and save 30% of their EPF money which went into income tax (assuming they are in 30% tax bracket).

8. Profits from shares or equity mutual funds after a year

When you earn any profits from your shares or equity mutual funds after holding it for minimum 1 yrs, it is called Long-term Capital gains, and it is 100% tax exempted as per current tax rules.

For example, if you invest Rs 1 lac in shares and after 2 yrs its worth is now Rs 2 Lacs. In this case, when you sell your shares, you will not be paying any income tax on this Rs 1 lac profit because of long-term capital gains rules.

However, it’s important to know that exemption is allowed only when Security Transaction Tax (STT) has been paid (which is paid by you when you buy on a recognized stock exchange such as BSE or NSE). But if you do an out of exchange sales, then STT might not get paid and hence in future when you sell shares, you will have to pay tax on profits.

Update : Now after budget 2018, the profits from shares or equity will be taxed at a flat rate of 10% above the threshhold limit of Rs 1,00,000 in a financial year. Before budget 2018, the profits from equity after an year was 100% tax free.

9. Dividends received from your shares or equity mutual funds

You receive dividends from your stocks or equity mutual funds (dividend option). This dividend money you get is also tax-free in your hand. However, the bad side of the story is that company anyways pays the dividend distribution tax to govt before giving the dividends to its shareholders. Hence, anyways we are getting slightly less share of profits in our hand anyway.

Update : Now after budget 2018, the dividends from equity shares or mutual funds will be taxed at a flat rate of 10% above the threshhold limit of Rs 1,00,000 in a financial year. Before budget 2018, the profits from equity after an year was 100% tax free.

10. Any amount received through WILL or Inheritance

There is no inheritance tax in India now. So anything you get in inheritance through WILL is not taxable in your hands. It becomes your property and now when you invest that money, only the interest part earned on that property will be taxed.

11. Agricultural Income –

Agricultural Income is exempted from tax. However, the income from agriculture (if earned more than Rs 5000 a year) has to be taken into consideration for calculating the tax payable.

agricultural income is exempted from tax

12. Gifts received in cash or kind –

If you get anything in cash or in kind for your marriage, that kind of gifts are 100% tax exempt. But if cash received from a relative or a friend exceeds Rs 50000 a year will be taxable. It should not happen that you get some gift after 2 yrs of marriage and you try to justify that it was a gift for your

Example #1 – If one of your friend gifts you Rs 40000 and another one gift you 10000 then there is no need to pay tax because the amount is not exceeding Rs 50,000. Let’s take another example.

Example #2 –  If one of your friend gifts you Rs 40,000 and another one gift you 20,000 then the whole 60,000 shall be taxable and the recipient has to pay tax as per his slab rate

cash as a gift received in marriage is fully exempted from tax

 

13. Scholarships and Cash Awards –

Cash Awards received from central and state government is fully exempted from tax. Any kind of scholarship granted to any deserving student to meet the cost of education is exempted from tax under Section 10(16) of the Income Tax Act of 1961. There is no cap on the maximum limit and the entire sum of money received as a scholarship gets the tax exemption treatment.

Conclusion –

Paying income tax is a moral and legal obligation of every proud citizen of the country. The Indian taxation system is designed in such a way that no unnecessary taxes become a financial burden on the taxpayer. I hope you all are clear about tax-free incomes in India.
Do let us know if we have missed any other important point in this article in the comments section.

No more sending ITR-V by post after income tax filing – Verification with aadhar card introduced

Posted on by Jagoinvestor

There is a good news to taxpayers. CBDT recently announced that taxpayers who filed their income tax returns online will no longer have to send the ITR-V paper acknowledgement by post to CPC Bangalore, if they have aadhar card which can be used for verification purpose.

Instead of manual verification, a new Electronic Verification Code has been introduced to verify the e-returns. For that one will have to mention their aadhar card number in ITR form, and tax-payer will get an OTP number on their mobile for verification, which needs to be completed on the website of tax filing.

Below is a snapshot of the new ITR form where aadhar card number is asked in case you have it.

aadhar card section in ITR form

Issues with the old system

Earlier the process was like this. Once you e-filed your tax returns, you then had to send the acknowledgement copy within 120 days to CPC Bangalore. Only those who had signatures could do verification online, but it was very rare, hence millions of tax-payers had to take the pain of manually sending the form.

However, the old system was not robust and a big number of people used to get messages that their acknowledgement has not reached tax department and other manual errors used to happen.

With the introduction of this new system, things will be simplified and even faster. Now the process will be as simple as filing the tax returns online and they will get a one time password for verification purpose on the registered mobile number, which has to be used for verification on the website of tax department. That would complete the process of verification.

efiling verification with aadhar card

But I don’t have Aadhaar Card ?

Don’t worry. You can always send the physical documents ITV-V to CPC, Bangalore like you did earlier. You can do that even if you have aadhar card. This new system of verification is just an alternative way for those who have aadhar card.

What do you think about this new system?

Write us your opinion on this in our comment section.

Attend Jagoinvestor Workshop in Mumbai on 17th May (Sunday)

Posted on by Jagoinvestor

Last week (on 12th of April) we conducted investor workshop “Design your financial life” in Pune, it was a great learning experience for participants and for us. At the end of workshop it was amazing to see how each participant’s heart got filled right kind of commitment to walk on the path of financial freedom.

Here are is the message from one of the Pune workshop participants to investors community

Hi Manish and Nandish,

First of all let me thank you for sharing very important basic concepts about INVESTMENTS…(Not SAVINGS) during this workshop. Me and my wife both enjoyed this workshop very much and in future we would like to certainly attend another one.

Let me also congratulate both of you. Two of you compliment each other nicely and form a very good team.

The workshop was very simple yet an eye opener for many of us who attended it. We never realised that we were making such huge mistakes in buying certain financial products, life insurance policies etc. which drained our hard earned money so far. We were not giving proper logical thought.

YOU MADE US THINK ABOUT HOW TO DEVELOP RELATIONSHIP WITH MONEY. This is the most important concept which I liked In this workshop. The name JAGO INVESTOR perfectly suits.

I would like to mention here that our education system does not include syllabus on money related matters which is in fact most important matter once we become graduates and start earning. I sincerely appeal to all the parents and young children to attend this workshop once. I am sure this worshop will change their views about investing the money for ever. The more early you start the more better it is.

Thank you once again. It was worth taking the pain for coming all the way from Ahmedabad to Pune to attend this workshop.

KEEP SHARING & SPREADING THE KNOWLEDGE…

Regards.
Abhay

More comments from other participants

This is really great workshop for all age groups, especially for the young students who just started their career. I would say please do come for the workshop as our school system doesn’t teach us importance of financial planing, all they teach us is that “mitochondria is the power house of the cell”. 🙂 These guys are genuinely taking efforts to financially literate the people. The workshop worth more than its fee. – Vivek Ratnaparkhi

The program is really well designed to convey the crux of the personal financial planning. It really acts as eye opener for all participants. The program introduces to basic financial planning concepts in a very easy to understand way – Vijay Kumar

The program gave me a list of actions I need to take for my financial life. It stressed the importance of written goals. Financial freedom was the best take away – Rupali Desai

It enhanced my knowledge on finance. It was an eye-opener program for me. I can manage my finance more clearly now. A small amount of saving can become a large amount in long term. Only thing is we have to put “Effort” – Supriya Singh

It was really good and my knowledge was increased about financial planning. I used to avoid the discussions related to financial life, but now I know the importance of it and can contribute towards it – Rakhi Gulmire

Here are some of the pictures from Pune Workshop

Jagoinvestor Investor pune workshop

Jagoinvestor Investor pune workshop

Jagoinvestor Investor pune workshop

Jagoinvestor Investor pune workshop

Jagoinvestor Investor pune workshop

Video Testimonials of Pune workshop Participants

Opportunity to participate in Mumbai

We invite you to block 17th of May (just one Sunday) so that you can participate in our Mumbai workshop. We are inviting you, because our workshop will add a lot of value to your existing financial life. So far, we have seen and observed that our workshop helps investors to add new and different dimensions to their financial world. In the whole process, you will learn to slow down so that you can examine what’s going on in your financial world. With our help and support, you will be able to define and adopt new set of actions and strategies to create an amazing financial life.

Why we conduct these workshops?

We do offline workshops so that we can connect with some of our readers at a deeper level, round the year we write articles, reply to thousands of comments and work with a few hundred investors one on one and in that process we learn, grow and expand as professionals. Our Workshop gives us an opportunity to share outrageously all the knowledge and experiences that we acquire round the year. The program is an opportunity to get our readers more and more action oriented.

Why you should come for this workshop?

  • You will learn how to improve your financial life with your current set of resources and income.
  • You will learn how to plan for your financial life goals
  • You will interact and learn from other’s people’s financial life
  • You will dedicate one full day to get better with money management
  • You will learn to add new dimensions to your financial life
  • To understand that personal finance can also be fun
  • To give a whole new direction to your financial life

 

Register for the Workshop in Mumbai

Single Ticket Rs 3,800 Buy Single Ticket
Couple Ticket
(Discount of Rs 500)		 Rs 7,000 Buy Couple Ticket
Venue and Timing Details9 am – 6 pm (17th May, 2015)
BEST WESTERN HOTEL SAHIL
292,Bellasis Road, Mumbai Central
Opp City Centre Mall

  • The hotel is walking Distance from Mumbai Central Station
  • Lunch and Breakfast is included in the program fees

 

What you get as a participant?

  • You get a FREE Financial Health check-up Report worth Rs 499/-
  • One day workshop with some personal finance tools like budget sheet, Mutual fund tracker etc
  • Invitation to join our inner circle

It’s time at add jagoinvestor workshop to your financial journey

It has been a few years now conducting “Design your financial life” workshop and the experience has been amazing. It is a wonderful space to be in, in which the group learns and starts to fall in love with the overall process of wealth creation. We do not teach tricks and tips to build wealth in fact we help you to discover your own personal process of wealth creation.

This time we want more and more couples to participate so that they can get on same page when it comes to personal finance. It is extremely important that husband and wife both take equal interest when it comes to money management. We are offering special discount to those who want to come with their partner. (You can even come with your parents, siblings or friends and can claim the discount)

The workshop we conduct are highly interactive, it has lots of activities and fun exercises which helps you to discover your relationship with money. The sessions are interactive and very easy to grasp for any kind of investor, beginner or advanced. In short there is something for everyone in this workshop

Listen to workshop Participants who attended in Past

 

 

 

Invitation to join and participate

From the bottom of our heart, we invite you to join and participate in pune workshop. Come alone or with your spouse or parents, siblings or friends but see that you do not miss this opportunity. Do not let time and money to get in your way and book your seat at the earliest because we will be taking only 35 participants this time and registration will close after some days.

This workshop is strictly for investors and not for advisors or finance professionals. If you have never participated in any personal finance workshop let this be your first workshop. If you have already participated in our past workshop we invite you to share the event brochure with your loved ones. If you have any questions you can write in the comments section.

You can also visit our Workshop Page to Register and Get more details

3 incredible money lessons – I would like to pass on to my Kids

Posted on by Jagoinvestor

We have worked with more than 500 investors till date one on one and we have decent understanding of how financial lives take shape over the years.

Today I am going to share few observations out of working with clients for so many years and will share some mistakes which you should avoid in your financial life. I really wish if each parent could pass it on to their kids or their siblings when they start earning money.

Mistake #1 – Don’t go with the flow

It’s often said that in life – “Go with the flow and don’t worry”. While that’s a good advice for your life in general, but I think it’s not a good advice for your financial life.

Most of the times, if you just go with the flow, you might not get desired results. It’s a shortcut which you are always tempted to take in your financial life, but often that leads to a clumsy and bad financial life.

There is another saying that – “Only dead fish goes with the flow”.

I am sure you don’t want to be a dead fish 🙂

dont go with the flow

I have observed that most of the people, who today are having a very bad financial life, have just gone with the flow and never planning out things. Nothing in their financial life happens due to their careful planning or conscious effort. Whatever comes in front of them, they take it.

  • Tax season arrives and they buy the policy because they have to submit the investment proof.
  • They take loan because its a “Interest Free loan” and not because they needed it
  • They want to buy a house soon, but then the next moment they upgrade their car !!
  • They sign the documents where the agent asks them too and complain they were cheated

I just want to make a point. You can either choose to move with the flow and let things happen to your financial life OR take charge and make things happen in your financial life as per your plan. The biggest issue today is not just less income, but how managing the money in proper manner.

Mistake #2 – Don’t get attached with past and harm your future

Almost all the investors face this. One bad experience in some area and they carry it with them all their future.

When recently, I recommended a mutual fund from ICICI Prudential to one of our client. He was taken aback and very strongly told me that he does not want any ICICI prudential mutual fund because he has had a very bad experience with them.

On further enquiry, I realised that he was sold a ULIP by an ICICI Prudential Life Insurance agent, which he was not happy with and from that day he took a vow that never in his life, he will deal with ICICI products.

dont let past harm your future

In the above example, did you see that the person had just labeled ICICI = FRAUD. There are so many good things which ICICI has to offer (and it’s true for every company) and just labeling things will only hurt your own future because you then cut down your own options.

Good and bad experience are part of life

Good and bad experience’s are part of life and it happens with everyone. You need to learn from it and move on. Take some learning’s from the incident and see how you can make your own self more strong to deal with a situation.

Like in the above example, the person could have said that – “I will now onwards read the documents and understand where I am putting my money” or “I will not buy something, which I truly don’t understand”. But instead he chose to take the extreme step.

I will give you another example

I see many people who bought a stock or mutual fund and it didn’t perform well and gave them bad returns. Now they are so scared to try out equity in their portfolio all their life, because they equate EQUITY = MONEY LOST

Note that in today’s times of high inflation and high taxes, having a good portion in equity class is not an option, but a necessity. You can’t build enough wealth without investing in equity based financial products for long term.

So coming to the conclusion, all I want to say is that don’t make mistakes of carrying a bad experience throughout your life and avoid the opportunities which exists, this is not a money lesson, but a good life lesson – which applies in all the areas of life.

If you buy a book on personal finance, and you don’t like it, it does not mean that good books on money does not exist. Or if you had a bad experience with a financial planner, it does not mean that all financial planners are bad.

Mistake #3 – Don’t just focus on earning money, but also your networth

Do you know one big difference between RICH and Middle class ? Here it is …

“Rich talk the language of Networth and middle-class talks the language of pay-package”

What have you heard your parents ask you – “Go get a good paying job?” OR “Go and build a great networth?”

Over the years, the income level has risen many folds and today its not uncommon to see income levels of 10/15/20 lacs per annum and the society label them as “doing well”. But the ground reality is very different many a times. The net worth of these high earners is still not upto the mark.

When we do workshops in various cities, we often see people who are earning 10-20 lacs per year who have spend years in their job, but they don’t have enough to show off as their networth. Many of them are empty pots whose size if big enough.

Its because they have focused and worked on their income’s, but never focused properly on building networth. Just because you earn good, does not mean you will have a lot wealth, because that needs conscious effort and mindset to build wealth. It needs actions, adoption of structures in your life which many don’t act upon.

income vs networth

Good Income is very Important

Don’t get me wrong. I am not saying don’t try for good income. In fact, if you focus on good income, you can build wealth more easily and faster, because more income generally leads to good wealth. But often its not true and it can happen only if you choose to consciously work on it.

It might happen that a person earning less than you build;s higher networth then you because he was fanatically working towards it.

We once came across a couple in Mumbai who was collectively earning around 35-40 lacs each year. I know the moment you read this, you must have thought – “Wow .. that’s a lot of money. I want to get there”

But reality is different

But their lifestyle never allowed them to save enough. Their expenses list was so huge that I was almost numb, when I saw their datasheet.

Here was a couple who was doing extremely well from “society standards”, but still their networth was pathetic compared to their income because they just focused on consumption and only consumption. Their were so many leakages in their financial life, that money never stayed in their financial life.

They could not even arrange for 10 lacs cash in emergency situation. So poor was their allocation and planning, that it was a height of mismanagement. We then worked with them for few months and redesigned their overall financial life which they approved.

We set their financial goals, helped them to define things and systematically save for each of them and suggested them how they can improve. We put right structures in their financial life, which forced then to save first and only then spend. They are doing better now.

I know this is an extreme example, but many people can relate to it at some level.

As an investor your main focus has to be on your networth and a good income is a tool for it. A higher income which does not lead to a good networth is only a short term success story.

What I have seen in last 7 yrs ?

Today’s generation is into a deep financial depression. You meet a guy, he is going to a swanky office, his package is bloody 16 lacs per annum, you envy him and you hear this guy has just bought a house (on loan). You feel you want to be like him, what an awesome feat he has achieved.

But the reality is very different. While this all looks great from a distance, deep down a big number of investors are facing a very tough situation, which is only known to them.

They are hell scared of future. Even though they are doing well today, they are still not sure what future has for them, they are depressed and fearful of expenses lined up for future. It has destroyed their peace of mind. They have good money coming into their bank accounts, but peace of mind is missing.

I am sure many readers who are reading this can relate it to their lives. What kind of suggestion would you like to give to a new investor who has just started their financial life?

How to pay Income tax online in 5 min ? Use Challan 280

Posted on by Jagoinvestor

Today I will show you, how you can pay your income tax online using challan number 280 on the income tax website. Most of the people rely on their CA and other service providers to paying income tax. Salaried class mostly don’t need to pay additional income tax most of the times at the end of the year because anyway their employers pay it on their behalf.

how to pay income tax online in 5 min with the use of challan 280?

However, one might come across a situation where they have to pay their income tax themselves in following situations like.

  • If TDS deducted is less than the actual tax liability?
  • If you have got a notice for balance tax to be paid
  • If one has any other income apart from salary

What is Challan 280?

Challan 280 is the form which is required to be filled when you want to pay your income taxes. This can be done offline at the bank, or you can also pay it online. We will see both of them

How to pay income tax offline at the bank?

One can physically go to the bank and submit the filled challan 280 form along with the money. You can download the challan 280 from Income Tax website.

How to pay income tax online?

Another way to pay the taxes is by filling up challan 280 online and making the payment through your net banking facility. I have included the steps one needs to take below. Also, you can see the video below to learn the steps.

Step 1#: Choose the option “Challan 280” from income tax website

The first step is to visit this link and click on the option “Challan 280”.

challan 280

Step 2#: Fill details on the Challan 280 form

Once you click on the challan 280 link, you will be directed to the page which will ask you various details.

How to fill challan 280

  • Choose (0021)INCOME-TAX (OTHER THAN COMPANIES), which is to be chosen by individuals
  • Choose an assessment year, which is next year for which you are paying income tax. So if you are paying income tax for the year 2013-2014, the assessment year will be 2014-2015
  • Enter your PAN Number, address, Email, Phone etc
  • For Type of Payment, you can choose “(300) SELF ASSESSMENT TAX” if you are paying the final income tax for the year, or “(100)ADVANCE TAX” if you are paying the advance tax.
  • Choose the bank name from where you are going to make the payment and finally click on the “Proceed” button which will take you to the next page for confirmation of all the details entered by you

Step 3#: Verify Details and proceed for payment

On the next page, you will be asked to verify all the details you had filled. It’s important to check that the name mentioned on this page is for the same person for whom the income tax is to be paid. It should match with the PAN card holder name, also match the assessment year, email and phone number and other details.

confirm details before paying income tax online

Step 4#: Enter your login details for the bank

On the next page, you need to enter your bank username and password, so that you can make the payment finally.

make payment income tax online
Step 5#: Fill the Income-tax payable and make payment

The next step is to enter the income tax amount and other details as applicable and then finally hit the payment button.

income tax online payment

Step 6#: Download the PDF receipt and also get it in your email

Once you make the payment, it will give you an option to download the challan receipt in PDF format. You can save it on your computer. Also, you will get the email containing the challan copy anyways.

Challan 280 Reciept

I hope you got a good idea of how to pay income tax online. In case you have any questions, please ask in the comments section below.

4 important things to complete when you Close your Home Loan

Posted on by Jagoinvestor

It’s a dream of most of the homeowners to own a house without any loan on their head. It’s a great moment in their life, when they pay the final EMI of their home loan or pre-pay the full outstanding balance and clear the home loan fully. It’s a moment of pride and happiness. It’s a great relief for someone who was paying the EMI from so many years continuously.

closing home loan

However in that excitement, a lot of people do not take all the required actions and later suffer because of small things they didn’t complete after closing their home loans. In this article, I want to share few things every home owner should complete, when they are closing their loan.

While I am focusing totally on home loan closure in this article, but whatever I am going to share also applies when one closes a car loan, education loan, personal loan or any other kind of loan.

Point #1 – Take back your original Documents from Lender

This is a no-brainer.

Make sure that whenever you close a home loan, you take back all the important document you had submitted at the time of taking the loan. Original documents are really important to collect, because in future if you want to sell the house or want to take loan against property, that time you would require all the documents. Some of the documents we are talking aboout are …

  • Original Sale Deed
  • Original Conveyance deed
  • Power of Attorney
  • Possession Letter
  • Your Payment Receipts
  • Any Cancelled Cheque’s given

Some lenders even give you a copy of letter, mentioning what all documents were submitted by you to the lender at the time of taking the loan. Below is a sample list of documents mentioned by HDFC LTD to one it’s loan takers. It clearly mentions exactly which documents were taken by the bank at the time of giving the home loan. This really helps, because there is no confusion later and lender is also accountable towards the customer.

documents list home loan

Make sure you personally go to the branch and collect all the documents yourself. Do not ask the lender to send the documents via courier or speed post. There are tons of cases where the documents were misplaced and investors had to run from pillar to post to get them back.

After getting the documents, you should also check if they are in good condition and no pages are missing from between. Also – If you can’t collect the documents yourself for some reason (like when you are out of country) then you can give an authorization letter to someone trusted, who can collect the documents on your behalf or ask bank to wait till you come back yourself and then take the documents.

Point #2 – Take NOC from the lender

NOC or No Dues certificate is a legal document provided by the lender, which certifies that you have repaid the full loan and no outstanding balance exists. The document will have the lender stamp of the lender. It’s extremely important document, which you should collect from the lender. Below you can check out the experience of one investor who had no proof of closing the loan and how he faced issue due to that.

NOC document

Usually, NOC/NDC is dispatched by the lender after the loan is fully paid. But if you do not get it by default, then you should talk to your lender. I have already written in details about the NOC and its importance

Point #3 – Remove Lien from Registrar Office, if any 

Let’s first understand what is the meaning of “Lien”?

Lien means “a right to keep possession of property belonging to another person until a debt owed by that person is discharged.”

lien meaning home loan

What is means in simple language is that, the lender will keep the right to sell the property themselves, if the loan taker is not able to pay back the loan. These days banks do not put a lien on property, because they anyways check the background of the customer properly and keep the original documents in their custody. But at times, it can happen that due to customer background or on a slight suspicion, lender wants to put a lien on property, which is done in registrar office.

So you should surely check with your lender, if they have put lien on your property or not?

And, If they have – then you should ask them to help you to remove the lien and overall process. Some people will ask – “What happens if I do not remove the lien?”

If you do not remove the lien from your house, then you will face difficulty at the time of selling the house in future, and at that time you have to visit the lender again anyways. So please make sure you complete this part as soon as your home loan is closed.

Once you clear the lien from your property, you can verify it back by applying for a new encumbrance certificate, which should mention that there is no encumbrance with the property, means no one has any legal rights in the property. You should see that its mentioned in the certificate. I was able to find a sample certificate on the internet which you can see.

encumbrance certificate sample

Even if you are planning to not sell your house in future, still make sure you don’t skip this step, Its always a good idea to make sure 100% process is followed.

Point #4 – Make sure your CIBIL report is updated with CLOSED entry

CIBIL report is one document which records each of your loan entry and all your actions of payment. Each lender checks this CIBIL report before giving any kind of loan to you (even when they give you a credit card).

Once your home loan is closed, your bank should update CIBIL, that you have closed your home loan and an entry called “DATE CLOSED” should appear on your report with the date of closure.

But many a times, banks delay this small action or completely ignore it for months and years. Your CIBIL report might not have that updated entry. So you should double check with your bank at the time of closure of loan that they will update the CIBIL very soon.

update cibil report after closing loan

So when should you check your CIBIL report again? A good practice is to check it after 60 days of closing the loan and verify if there is an entry of “DATE CLOSED” with a date on it.

Make your Home loan closure 100% full proof

I have tried to make sure that you take all the last mile steps after closing your homeloan. Even if you prepay your home loan early, still you need to take all these steps, otherwise your home loan closure will not be 100% full proof.

Let me know if you want to add some other point in this list and I would be happy to add it.