Author: Jagoinvestor

How money shapes our life? An amazing “money story” of Priyanka

Posted on by Jagoinvestor

Today you are going to read “money story” of Priyanka Jadhao from Pune. She is 26 yrs of age and just started her career few months back.

She will be discussing about her life journey till date from the money perspective. I mean she will talk about her view about money, the incidents from her life which shaped her mindset about money. What she feels about money and how some incidents made her realise if money is important or not.

The special thing about her is that she is from Jagoinvestor Team 🙂

Few days back, when we were discussing on what kind of new writing we can do, we relised that we should start a series called “My money story” where a person jots down their journey of life from financial perspective and they felt about money all these years.

So I asked Priyanka to write her own money story. I think she has done an excellent job. This is the first post in the series we are going to call “My Money Story” where anyone can contribute with their stories.

Over to Priyanka from here.. I hope you will enjoy her money story.

Written by : Priyanka Jadhao, 26 yrs, Pune

My Story

I belong to a small town in Maharashtra, where most of the people are either government employees like teacher and regional officers or farmers. Other major businesses are very rare there, because most of the people have fear of taking risk, while others want to go on with the traditional ways of earning. In short, they want to play very safe game in life.

I was my parent’s first child, so it is obvious that everyone in my family had showered all their love on me. My family was not too rich, but it was financially stable enough, so I never faced any major hardships because of lack of money.

We should put limit on our needs

From my childhood, my parents taught me to put a limit on our needs, so that we can save for future. Everytime we needed something, the first thing we heard was to limit it or rethink about it before spending money on that.

This was the way of life and this had deep impact on my thinking. I slowly started beleiving that this is the absolute truth of life and it just got ingrained in my belief. Hence from childhood, I also started avoiding any extra spending, and always lived in limits.

Fortunately, I was never a spoiled child due to this mindset.

I can remember clearly, when I was a child, whatever things I needed like books or other study materials, my parents never gave me money directly in my hand. I had to ask for it and then only they used to buy those things for me.

People around me 

I have seen people from my childhood considering money as a matter of pride, because of which they keep on collecting it and putting in their bank, rather than spend it on things. The focus was on just increasing wealth in numbers and not to make use of it for their happiness.

I grew up in an atmosphere, where earning money and saving it for future was the only motive. I have seen people who earned a lot, but never spent it to complete their dreams or for their hobbies because this was considered as a stupidity.

It was the way of life for them and they all thought that this is the “Right” way to live a life. They were satisfied and had no regrets about this. But that was because they had mastered the art of “controlling the need” and live with the most basic things.

My childhood experience with money

I was a shy child then, I never asked my parents more than what I actually needed. But when I used to see my friends buying dolls or fancy frocks, I always started thinking that ‘when I will grow up, I will earn lots of money and buy so many dolls and new dresses just like that friend of mine have’.

One incident I can still remember, I was in 5th std, one of my friend had a very beautiful lead pencil (lead pencils were very rare in those days, we were “Natraj Pencil” kids 🙂 ) having a beautiful less tied with eraser and two small Ghungroo’s on its cap. I wanted it so badly, but I didn’t have the courage of asking it to my parents.

Then I realized, that my birthday was coming in 2 months and my parents will definitely buy a new dress for me. So I waited for 2 months. And when my birthday came, I asked my parents to buy me that lead pencil instead of a dress. I can still remember its price, it was Rs.12.

Parents perspective about money

Both my parents are teacher. They earned a lot and invested it for only two goals, one is my brother and second one is me. I had never seen them spending money to complete their dreams or hobbies or even their basic wishes which were within their reach.

Whenever I asked them why do they work this much hard and can’t even take some time for themselves, the only answer I got was “Because we need to earn and save money, for both of your bright future”.

One more experience I would like to share. From my childhood I was fond of traveling. But as I told you earlier both of my parents were employed, we never had a family trip till date. My father had his own passion of farming.

Every day after job he used to go our farm (even today) and returned home late night. Whenever I asked him to plan a family trip, he always had his own reasons. He never said – “NO”, but he just always used to postpone it for next vacation.

When I was in school, one day I stared asking my father to plan a trip now. I was literally annoying him. So finally he said Yes, but I knew my father very well.

So, I took a page from my notebook make it look like an agreement paper by sticking a Rs.10 note on it (because I had seen picture of Rupee on some agreement papers before) and I wrote down on that paper – “We are going on a trip this time, papa already has approved it and so papa will now sign this paper” and then I actually took my father’s signature on it.

This time I was sure that the trip is going to happen as there was a written “agreement”.

But, that trip didnt happen till date.

This may look like a very small funny incident to you, but I was kind of shaken because of this. Even after an “agreement” was there, the event didnt happen. The focus was still on making more and more money and not on the trip.

And this incident made my belief stronger that earning money is more important than everything and everyone else.

All these circumstances made my mindset that I should also go on the same path, earn a lot of money, keep it in my bank account or invest all of it into some property like land or real estate so that one day I can had over it to my kids.

My belief become more stronger during my college days

In my college days, when I was completing my post-graduation, I always had to hear one common sentence from everyone – “Study hard beta, you should get good scores otherwise you will not get job and will have to spread your hands in-front of others for money”.

I was very afraid of this statement because of my over imagination, I was actually imagining myself begging for money and only started working hard because of this.

I started relating everything with money. I started seeing everything around me though the lens of “money”.

I started realizing on every point of my life, that without money there is no life. If I wanted to live a happy life, we need money.. and it became my behavior that I actually could not live without money. Whenever the money in my wallet was approaching ZERO, I become uncomfortable. I start feeling like “Oh My God.. What should I do.. ?”

I could not see my existance without money. If money is there, I am there. If money is not there, I thought I will not be able to live life.

I started feeling like if money is this much important then how can I ask for it to anyone? Including my parents!

And this feeling increased my hesitation in asking for monthly pocket-money to my parents.

I started feeling so helpless without money. But fortunately, I never had lack of money in my bank account and was satisfied with whatever I had.

How I turned a money minded person?

I was post graduate and still jobless. I had less money compared to my friends. I want to be on par with me. I wanted to have same lifestyle like them.

So getting a high class and well paid job was my dream just like every other youngster.

Now looking at my friends who had already started working and here I am still unemployed was quiet frustrating. I started feeling awkward, while asking for pocket money to my parents and a cycle got  started in my mind asking same question repeatedly – “How to earn more and more money?”

One of the funniest moment which happened with me, is when my mother took me to a numerologist, who was suggested by my father’s friend.

That person asked for my details like date of birth, education etc. and then while predicting about my career and personal life he said – “She does not have dreams like a common girl, She is totally a money minded person and wanted to live just for earning money”.

I started smiling and thinking in my mind “Isko kaise pata chala?”

I used to get lots of free advise from people (Our uninvited financial advisers) that money is not everything, dont run after money, money is evil and things like that.

Which made me confused. If money is not everything, then why all these people are running behind it?

When I lost all my pocket money

5th September 2013, it was my first week in college – Modern college, Pune. I was new in Pune at that time and hardly knew anyone. On that day, all students including me were busy in the arrangements for the event of teacher’s day. I placed my bag on one of the bench.

Meanwhile I got a call from my mother. I went out to receive the call and came back to class finishing the conversation very shortly.

After that event and one lecture, I went to a snack center which was on my way to home to buy some food. I realized that my wallet was missing. I called a friend of mine and asked him to take me back to college, because I didn’t even have money for buying a bus ticket or for lunch.

I searched for it a lot, asked all my friends if they had seen it, but I was not able to trace the money. I couldn’t find it back.

I had a bad habit of carrying cash all the time instead of using card.

I lost all my pocket-money of that month and some other important things in one moment. But luckily my cousin was also living in Pune, so he came and helped me in that situation.

Since then, I used to carry less cash and started using card as much as possible. I learned that I should keep my money in various forms and at different places.

I started earning and my perspective changed towards money

A year after completing my PG, I started earning as a freelancer and I was little bit relaxed as I was not dependent on others for money. But my earning was not much, whatever I earned used to get spent.

Every month, money came in bank account and it just vanished in my expenses. Though, I was happy because of the feeling of independence, but still something was missing.

I wanted to earn more and more money, so that I can save for future.

Then, I joined Jagoinvestor Team

Before I joined Jagoinvestor team, I saw money as something which is to be earned and invested, and not for spending it for enjoying life.

But then my life changed and my perspective about money totally shifted. I came across various dimentions of money.

I used to hear my teammates talking to clients about their investments for their goals. At first I was completely unaware about goal based investing, which is what is practiced at Jagoinvestor (click here to get help from our team). I even created an audio related to goal based investing which you can hear below.

Only after creating that audio, I really understood why linking your money with goals is important and how it gives real meaning to your money and investments.

https://www.jagoinvestor.com/wp-content/uploads/files/goal-based-investing.mp3

I had never looked at my money from this point of view.

We started having conversations at tea time and lunch time which made my ideas more clear about money. I started looking at money with a completely new perspective and in a more healthy way..

After that, when I looked at my bank balance it was looking like meaningless money, which was just lying in my account without any purpose, because of which it just got spent here and there without any planning, this this resulted into increasing my monthly expenses.

But now I have understood that the money is to be used for my important goals and has to be spent in a meaningful way.

I decided to give a purpose to that money.

My previous perspective about money have changed and I now realize that money is not just for earning or investing for future, but also to spend it for things we love and desire. Just accumulating money into bank account without any planning is meaningless.

There has to be healthy balance between spending and investing both.

We should keep a part of it for ourselves apart from our routine expenses and savings, so that we can live the life which we dream about.

How money is related with happiness?

Last week Manish Sir, gave me a 30 min video to watch and asked me to watch it till end, as it will give some new ideas around money.

I watched this video from Mr. Nilesh Shah about money, investment and Mutual funds. In that video one statement he made which took my attention was

“Money is not important – Make this statement once you earn enough money to spend your life smoothly”.

I strongly suggest you to watch this 30 min video below.

Happiness does not come just from accumulating more and more money, but how you make use of it. If you think of it logically then you will realize that money has become an inseparable part of our life. We cannot buy happiness directly with money, but still we depend on money at some point to be happy.

Writing, traveling, designing various crafts are the things that I want to do more than anything else. It’s my passion. But if I think of following any of these things, I can’t do that without money. Also, I need to have enough money with me, so that I dont have to worry about my basic needs and desires in life, so that I can find time to do things I love.

In short, money has has its own place and value in our lives.

My current opinion about money

I saw everyone around me just earning and passing on to future generation by compromising on their desires and wishes.

I think thats not the correct way to deal with money. If everyone will pass their own wealth to next generation, then who will use it?

If I earn a lot of money just like my parents did and in future my future generation (my child) also choose to earn his own money then what will happen with my investments or savings?

I now want to save for future, but at the same time, I also want to spend it wisely so that I do not regret fulfilling my hobbies and dreams. If I earn Rs 100, I will use Rs 30 for my basic needs, spend another Rs 30 for my wishes and desires (like travelling, shopping, eating out, entertainment) and save Rs 40 for future, which can be used by me only or can be passed to my children.

How I feel after sharing my story

When I took this post to write on, at first I thought I may not be able to write much on this topic. But once I actually started writing, it became more exciting than I thought about it.

I started realizing, how different I was earlier and what have I became now. Meaning and importance of money has changed completely for me throughout all these years and I didn’t even realize it.

Now when I read this article myself,  I feel like I was completely a different person before. All these changes happened because of the experiences in different situations and the environment where we live.

This was my experience about money throughout my life.

What is your money story?

If you want to write your money story, Leave your details here and we will get in touch with you with next actions.

What do you think about my money story? Did you enjoy it? Can you share your views about money and how it changed over the years?

How is Rupay card different from Visa or Mastercard?

Posted on by Jagoinvestor

Have you heard about RUPAY cards? Today we will talk to them in detail and how they are different from Visa or MasterCard and if you should choose them or not. But before that, let’s understand the background first.

What is Visa or MasterCard?

You must be already having a debit card or credit card which must be having either VISA or MASTERCARD written on it. Visa and MasterCard are credit card networks with their own systems, rules, and processes for payments, benefits, etc.

However, Visa and MasterCard are both American companies globally accepted and widely used card networks across the world. There are some other card networks also like American Express, Amex, Citi etc, but you got the point. These are global card companies.

Now, these companies do not directly issue a debit or credit card, but various banks across the world offer their cards with payment network operators which can be VISA, MASTERCARD or others.

Rupay debit card

What is Rupay?

Rupay is just another payment network solution like VISA or MASTERCARD, but it’s our own desi version. It’s an Indian company and purely an indigenous product creates by us. Here is what Rupay website says

RuPay is India’s indigenous card scheme created by the National Payments Corporation of India. It was conceived to fulfill RBI’s vision to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments. It is made in India, for every Indian to take them towards a “less cash” society.

RuPay is the first-of-its-kind domestic Debit and Credit Card payment network of India, with wide acceptance at ATMs, POS devices and e-commerce websites across India. It is a highly secure network that protects against anti-phishing. The name, derived from the words ‘Rupee and ‘Payment’, emphasizes that it is India’s very own initiative for Debit and Credit Card payments. It is our answer to international payment networks, expressing pride over our nationality.

RuPay fulfils RBI’s vision of initiating a ‘less cash’ economy. This could be achieved only by encouraging every Indian bank and financial institution to become tech-savvy and engage in offering electronic payments.

Issuing Banks

Presently, RuPay has collaborated with almost 600 international, regional and local banks across the country. Its ten core promoter banks are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank N. A. and HSBC. It expanded its shareholding in 2016 to 56 banks to bring more banks across sectors under its umbrella.

Rupay cards usage is increasing

Online transactions are increasing day by day in India as we are moving towards a cashless economy and the usage of Rupay cards is also increasing. Here is some data on Rupay online transactions.

Rupay online transactions

Why Rupay was launched?

As we are moving towards becoming one of the major economies of the world, it was very important that we own our own payment solutions like Visa and MasterCard and hence govt started working on Rupay!.

Two more benefits of the Rupay card network are that.

  • The transaction history will not go out of the country if the transaction is within India.
  • The charges that banks have to pay quarterly or monthly to the related companies to enter into the network is very low or NIL.

The image below shows you how a Rs 2,000 transaction charges will be lower in Rupay cards compared to a visa or MasterCard.

transaction charge rupay and visa card

How does any card processing happens?

When you swipe your debit card or make an online payment, your request first goes to the debit card networking and then from there it goes to your bank. After that bank confirms your account balance and then completes the further procedure or transferring payment money to the merchant’s account.

See the image given below to know the procedure of your card.

Debit card processing

Difference between Rupay card and Visa/Master card

Now let’s talk about some differences between Rupay and visa/MasterCard companies. This will give you a fair idea of how they are different from each other on various points.
[su_table]

Rupay

Visa/MasterCard
Rupay is 100% Indian system Visa/MasterCard are international systems
Lower transaction charges compared to Visa/MasterCard It has higher transaction charges than Rupay Debit Card.
Banks don’t have to pay any fees to enter into the network Banks have to pay fees to join the network
Transaction history remains within the country. Transaction data is shared outside the country as it is an international card
All processing is done within the country so it has a high speed of transactions Here the processing happens at an international level so sometimes it has low transaction speed or errors in server
Some banks shows Rupay credit card on their website but it is not launched officially yet by NPCI. Visa/Master credit cards are available and have a strong network
The usage is very low and not widely accepted as of now Widely Accepted and Used
Can’t be used outside India as of now No restrictions like this

[/su_table]

Transactions limits of Rupay debit card

Rupay cards like any other cards also have transaction limits and ATM withdrawal limits. Here is a quick list if you want to refer them.

[su_table]

Bank Name

Limits (ATM transactions)
Central bank of India Rs 40,000 and Rs 1,00,000
Bank of India Rs 25,000 each
Bank of Baroda Rs 25,000 and Rs 50,000
Vijaya bank Rs.30,000 and Rs.25,000
Punjab national bank Ra.25,000 and Rs.60,000
Oriental bank of commerce Rs.25,000 each
Dena bank Rs.20,000 and RS.25,000
UCO bank Rs.25,000 each

[/su_table]

How to Apply for Rupay card?

If you want to apply for a Rupay debit card, then you must first check with your bank if they have them or not? All the bank accounts under Jan Dhan Yojana already provide you the Rupay card, you don’t need to mention separately in your debit card application if you open an account under this scheme.

Let us know if you need any more information about the Rupay card and we will be happy to answer them in the comments section.

5 min guide to link Aadhaar number with mutual funds online

Posted on by Jagoinvestor

Recently, the government has asked mutual fund companies (and many other financial institutions) to link Aadhaar card number of their customers with their financial investments.

This means that if you are a mutual fund investor, you are supposed to link your aadhaar numbers to your mutual fund folios.

How to link aadhaar card number with mutual funds folio online

How to link Aadhaar number with the mutual fund?

There are various online and offline options of linking your Aadhaar number with a mutual fund folios. You can do this linking process through the transfer agent’s platform like CAMS and Karvy who provides services to multiple mutual fund companies

We will mainly look at just CAMS (15 mutual funds) and Karvy (17 mutual funds) serviced mutual funds in this article.

UPDATE: How to check your Aadhaar linking status?

Now you can check your Aadhaar linking status with CAMS and Karvy online. Here are the links :

CAMS – https://adl.camsonline.com/InvestorServices/COL_AadhaarMain.aspx

Karvy – https://vas.karvymfs.com/karvysplproducts/AadhaarlinkingStatus.aspx

Link Aadhaar in Mutual Funds (from CAMS website)

CAMS services 15 mutual funds companies right now as follows. You just need to follow the process of linking your aadhaar once and it will be automatically updated in all the mutual funds. Here is the list of CAMS serviced funds.

  • HDFC Mutual Fund
  • DSPBR Mutual Fund
  • Birla Sunlife Mutual Fund
  • HSBC Mutual Fund
  • ICICI Prudential Mutual Fund
  • IDFC Mutual Fund
  • IIFL Mutual Fund
  • Kotak Mutual Fund
  • L&T Mutual Fund
  • Mahindra Mutual Fund
  • PPFAS Mutual Fund
  • SBI Mutual Fund
  • Shriram Mutual Fund
  • Tata Mutual Fund
  • Union Mutual Fund

The process to link Aadhaar number in CAMS website

We have created a short video showing the process to link aadhaar with your folios.

Here are steps are given below to link your Aadhaar number with a mutual funds portfolio.

Step 1: Visit this page on the CAMS website and enter your PAN number and select Mobile in the 2nd option and enter the mobile number (you can also select a date of birth or email in the 2nd option).

link aadhaar with mutual funds on cams list

Step 2: On the next screen it will ask for your aadhaar number, a mobile number linked with your aadhaar and email id (which is optional). Then click on submit

link aadhaar with mutual funds on cams list

Step 3: You will receive one OTP which is to be entered on the next page

Enter OTP to link aadhaar with mutual funds

So this was the process to link your uidai number with your fund folios in various AMC which are serviced by CAMS.

Link Aadhaar in Mutual Funds (from KARVY website)

Let us also see how to link aadhaar to mutual funds using the Karvy link. Below is a video explaining the process if you don’t want to look at screenshots.

Karvy is the first organization in this field of business providing service to over 90 million investor accounts. A list of the mutual funds is given below to which Karvy is providing service.

  • Axis Mutual Fund
  • Baroda Pioneer Mutual Fund
  • BOI AXA Mutual Fund
  • Canara Robeco
  • DHFL Pramerica Mutual Fund
  • IDBI Mutual Fund
  • Canara Robeco
  • INVESCO Mutual Fund
  • JM Financial Mutual Fund
  • LIC Mutual Fund
  • Mirae Asset Mutual Fund
  • Motilal Oswal Mutual Fund
  • Peerless Mutual Fund
  • Principal Mutual Fund
  • Reliance MF
  • Quantum Mutual Fund
  • Taurus Mutual Fund
  • UTI MF

Step 1: Click here to go to the Karvy platform. There you need to enter your PAN number and you will get OTP for verification. Enter that to move to the next step

How to link aadhaar number with mutual funds folios in Karvy serviced mutual funds

Step 2: On the next page, you will see all the AMC’s where you have the investment and a space to enter your aadhaar number. Make sure all the AMC’s are checked marked.

How to link aadhaar number with mutual funds folios in Karvy serviced mutual funds

Once you click on submit, you will see the final acknowledgement that the processing will take place now.

You can also update Aadhaar using the SMS facility

Linking your Aadhaar number with your portfolio using SMS service is the easiest way. You just have to send an SMS which includes ADRLNK<space>PAN number<space>Aadhaar number and send it to 9212993399 from your registered mobile number.

Karvy will do the further linking procedure by considering this as valid information.

Update Aadhaar in Franklin Templeton mutual fund

Franklin Templeton mutual fund is not serviced by CAMS or KARVY, hence you need to do the process for it separately on its website by visiting this link

You need to enter your PAN and other details to start the process.

update aadhaar Franklin mutual fund

Note that it looks like Sundaram mutual fund has still not started the process for aadhaar linking as I was not able to get any information on this. If you have invested in Sundaram funds, kindly get in touch with their customer care to complete this.

How to link aadhaar number with folios by filling up a form?

Both Karvy and cams provide an option of linking your folios with the aadhaar by filling up a form. This will be helpful for those who don’t have a mobile number and email linked with a mutual fund folio. You just need to download the forms and fill up all the relevant information and submit it to CAMS or KARVY office.

Why do we need to link Aadhaar to mutual funds?

According to PMLA i.e Prevention of Money Laundering Act SEBI has made it mandatory for each and every investor to link their Aadhaar number to the mutual fund portfolio. This step is taken forward to prevent money laundering and keep track of all the investments and transactions within the country.

If you don’t do this linking then your folios will the frozen and you will not be able to redeem the money or make any transactions unless you update the aadhaar number. So please take this on priority.

Is this applicable to NRI Investors?

No, This is not applicable for NRI investors, HUF and even non-individuals (like companies and partnership firms)

Let us know if you have any questions regarding this in the comments section or you can also read this FAQ list to get more clarity on this issue

7 sites where you can easily learn stock trading without risking your money

Posted on by Jagoinvestor

Do you want to learn stock trading, but don’t want to lose money in the process? In this article, I’m going to tell you about 7 best virtual trading websites or apps which will help you to learn stock trading without risking your money.

virtual trading

A lot of investors are excited to know about stock markets and how they can make a lot of money. They open a Demat account and start trading based on tips from various third party websites, or using their own judgment. But in the process, they lose a lot of money because of various mistakes.

However now, it’s easy to first practice stock trading. Have you heard about virtual stock practicing apps or websites? Have you ever tried using them?

How Virtual stock trading works?

Let me explain virtual stock in market India for those who are new to this

  1. You open an account on the virtual trading platform or app
  2. Then login to the account and load some virtual money in the account like 1 lacs or 10 lacs to start with
  3. You can then start buying and selling various stocks as you do in real life
  4. Like this, you can make various trades and see your profits and loss over time
  5. Over the next few weeks, you will learn how stock market trading works and you can also see how you have performed
  6. Once you are confident about your abilities, then you can open a real trading account and start stock trading with your real money

Now let’s look at some of the websites which you can use to practice stock trading.

1) Moneybhai

Moneybhai, a virtual stock trading game is a product of money control virtual trading which is popular in India. In this game you will get Rs.1 crore virtual money on your portfolio account and also the limit of Rs.1 crore intraday trading limit, which means that you can only buy and sell worth Rs 1 crore in a day.

You will have the option to invest in stocks, mutual funds, FD, bonds, etc. So here you have lots of options for investing with the imaginary brokerage charge of 0.50% in the virtual trade market. This is a great feature because here you are also paying virtual brokerage charge which you have to pay in real life when you trade with your real money, so that is taken care in this website.

Who should use this one: If you want a lot of options to invest like FD, bonds, mutual funds, stock, etc. then this game is good for you.

Moneybhai

You can start trading at any moment once you are logged in. If you feel that you have made any mistake in investing or you went wrong at any point then you can reset your portfolio back to the original corpus of Rs.1 crore and start again. I personally feel that one should not use that option of reset because then you don’t know how you are performing exactly.

2) TrakInvest

TrackInvest as the name suggests itself is an investment guide. It is build up by considering the beginner’s point of view. If you have heard of the stock market but don’t have enough basic knowledge then this website will guide you in your virtual investment.

Who should use this one : If you are an absolute beginner who has no understanding of how the stock market works and you also need tutorials to educate yourself, then you can try this.

Trakinvest

The simple interface and helpful content will ease you into the world of trading. It is more easy than it actually looks. It enables learners by giving a better understanding of the market. You can build your portfolio with zero risks and improve your market skills.

It gives the investors access to the real stock market from multiple global exchanges to trade-in. It also builds up your portfolio like an expert and tests your investment strategies and leverage analytics.

3) Dalal street

Dalal street is an investment journal that offers you Rs.1,000,000 as virtual money at the initial stage and provides an experience of real time stock trading with a virtual portfolio.

Who should use this one: One who wants to learn stock trading by using investment journals can get the advantage of this website.

Dalal street

Here you can also discuss your strategies with like-minded participants in a group. This will help you to improve your skills and strategies by other people’s experiences.

4) Wall street survivor

Here you can get the actual experience of stock trading with the virtual money because of the updated data. Wall street survivor doesn’t believe in the concept of teaching through content only. As per their opinion investment is more like fun, challenging and potentially lucrative activity rather than education.

Who should use this one: If you want practical knowledge through tutorials and improve your skills and decision making which will found new strategies then try this site.

Wall street survivor

This website also offers some courses to educate you about stock trading and tests your knowledge about investment and personal finance. They have lots of articles and videos which will keep you engage in various activities by aiming to improve your skills.

5) Investfly

Using investfly is not as hard as making money through your investment. Investfly make it easy for you to make money first virtually and then in the real stock market.

Who should use this one: If you want to trade with advance information and more trading options then you can try this site.

Investfly

This website provides you a brief summary of how to start investing. This will be of great help for the beginner investor who had never invested in the real stock market. If you are interested in learning about stocks more then this will be a great platform for you.

6) ChartMantra

ChartMantra is a free online virtual stock market trading game cum analytical platform. It is a virtual game for trading. You can learn the basics of the technical analysis in stock trading and apply it to an actual stock exchange to analyze your portfolio.

Who should use this one : This platform is for those who want to learn stock trading and also its analysis.

Chartmantra

Here you will get Rs.1 lac virtual money and the objective of this game is to make as much money as you can from it and go the top of the rank. This game will analyze your buying and selling and give you an analysis of it so that you can track your record and apply the analysis on your real trading account.

The trading will cost 0.1% brokerage which will make the trading more realistic.

7) Moneypot

Moneypot is a game of virtual trading in India which provides the platform of virtual stalk trading to students, corporate as well as investors. It aims to connect an online investment community through a social trading platform.

Signing in here just like other virtual trading sites. Once you open the website you can see the sign-up button and play game button. you can click on sign up if you are new to this site and then can play the game.

Who should use this one : This is the best virtual trading site for beginner investors or stock market learners.

Moneyspot

Advantages of Virtual trading

The advantages of virtual stock trading are as bellow:

  • For beginners it is good way of practicing because it allows the direct buying and selling the virtual stock.
  • You don’t need to invest real money.
  • As there is no real money you can take higher risk.
  • You get basic understanding and knowledge about the functioning of stock market.
  • You can learn through actual practice rather than only reading.
  • Mistakes don’t cause any loss here.

Disadvantages of Virtual trading

The disadvantages of virtual stock trading are as bellow:

  • As we said you don’t invest actual money, there is a possibility that you may not get emotionally attached with it because you are not losing anything in any case, which does not happen in real life.
  • If you don’t get emotionally attached to it you will get bored after some time and stop playing.
  • Sometime there is a possibility of getting bored because they are not getting any return in actual.
  • If you make profits in virtual trading, people tend to get very over confident about their abilities to make money

Now as you get a lot of options for virtual trade practicing you can start to learn to trade and get the real experience  of stock exchange. Leave your queries in the comment section and let us know your views regarding this article.

How to check a fake GST number online in just 30 seconds

Posted on by Jagoinvestor

Now a days various restaurants and businesses are putting fake GST number on the bills and charging extra from the customers without registering with the GST department. In this article, we will teach you how you can check the validity of the GST number and its really valid of not in just 30 seconds. It’s a simple process that can be done with 2 clicks.

GST is now a reality and almost everywhere GST is charged. You can see that suddenly those restaurants who never mentioned any taxes in their bills have also started adding 18% more on the bill on the name of CGST and SGST (more on that later)

How fake GST number on bills is creating a hole in your pocket?

GST is a big reform in the country and while govt claims that it’s a simple tax, there are lots of inherent complications to this taxation system. A common man thinks that now everything has got costly by an extra 12% or 18% (especially in smaller cities)

One of my friend in Varanasi told me that a small shop near his place is charging extra Rs 2 on a packet of biscuits now telling the poor customers that its GST tax which is now to be paid.

example of charging GST without valid number

While that’s an example of a mid-level city, many restaurants have also started putting fake GST number on the bill and have started charging extra taxes which they will never deposit to anyone.

How to verify the GST number?

Verifying the GST number online is a very simple procedure. First of all check the GST number on the receipt. It’s 100% mandatory to mention the GST number on the invoice or bill.

Example of how GST number looks like on the bill

If someone is charging GST, without mentioning the GST number, then it’s illegal. Earlier it was service tax, now it’s GST number which is mandatory to put on the invoice.

Here is how to check if GST number is real or fake?

  1. Check the GST number on the bill and note it down
  2. Visit this page of GST website and enter the GST number as shown below
  3. Enter Captcha and press Submit.
  4. You will see the business name registered, match it with the name of the business on invoice

How to check if a GST number is fake or real ?

What if I don’t have a GST number?

Some businesses still don’t have the registration number confirmed, but they have the provisional GST number with them, so you can also check the provisional GST number online and verify them. Even you can verify the business based on their PAN.

Here the steps to verify GST number in this case

Go to this link and you will be asked various details which you need to enter.

Fake GST number

 

Here you need to fill the data required correctly i.e. state, ID type (PAN number, GST number or Provisional ID), ID number and verification code. At last click on submit and then scroll down to see the details of the registered business.

How to find a fake gst number online

This is how you can verify if GST number is valid or not with the help of a provisional ID or PAN number. As of now, there is no way of finding or verifying the GST number just by entering the name of the business entity.

GST is a 15 character code

It’s an important point to know that GST number is 15 characters which are a combination of numbers and characters. These 15 digits are broken into 5 parts as follows

  • First 2 digits are state code where the business is registered
  • Next 10 digits are PAN number of the business
  • 13th digit is registration number of that store or business with same PAN number
  • 14th digit is Z by default for right now
  • And the last i.e. 15th digit is a check code

GST number structure

What is someone says “I have applied for GST number”?

Some shopkeepers and business owners are playing the trick of “I have already applied for GST number, It’s not yet approved?”. This is to give a feeling to customers that they are rightfully charging GST. But this is again a fraud.

Because when they apply for GST number, they get a provisional GST number anyways and they need to either put a GST number or provisional GST number on the invoice/bill

Don’t fall for this trap and demand to see the GST number.

Where to complain about fake GST number?

GST department has dedicated the helplines for you to complain or ask any queries regarding GST. Here are the emails and phone numbers

  • GST Complaint mail id: [email protected]
  • GST Helpline Number: 0124-4688999 or 0120-4888999

Let us know if you have more questions on how to check if the GST number is valid or fake?

Basic Services Demat Account – a no frills account for small investors

Posted on by Jagoinvestor

Do you hold a Demat account or planning to get one? Then you should know what is a Basic Service Demat Account because it can be helpful for you if you are planning to trade very less and want to save on yearly maintenance charges.

Basic Services Demat account as its name suggests is a basic version of a full-fledged Demat account that provides basic level services. It’s ideal for those whose portfolio size is quite small. We will look at the details in this article. But before that, do you know what is Demat account at the first place?

Features of BSDA Account

What is the Basic Services Demat Account?

Demat or Dematerialized Account means an electronic account that holds various financial securities (especially shares) in an electronic format securely. Demat account is a compulsory account for those who want to buy company stocks from the stock market.

Demat accounts are under the control of SEBI i.e. Security and Exchange Board of India. Now, from 27 August 2012, SEBI has brought a guideline that every Demat provider will have to provide “Basic Demat accounts” available to every beginner in the share market so that it can encourage the people to invest in trading. This will be helpful for achieving wide financial inclusion.

So all those investors, who want to trade less and have a portfolio size of small amounts can open a basic Services Demat Account (BSDA) and save on the annual maintenance charges.

Where to open a Demat account or BSDA account?

You can open your Demat account or BSDA at any bank like SBI, ICICI, HDFC, Kotak Mahindra and many other banks, or with a stock broking companies Angel broking, 5Paisa, Sherkhan, etc. directly. Opening both Demat Account and Basic Service Demat Account is free at both banks and broking companies, but again the AMC varies.

These banks and broking companies provide free services for the first year and from 2nd year onwards they may start to apply charges on the basis of transactions. So before applying for a BSDA or Demat account check for all the details on the website of that particular bank.

How are Basic Services Demat account different?

Basic services Demat Account is a Demat account which can be opened with any Demat Service provider of your choice when your holdings are expected to be below Rs.2,00,000/-.

If we are maintaining holdings of value less then Rs 50,000/- then no annual maintenance will be charged from our account. In case our holdings are between 50,000 to 2,00,000/- then the annual maintenance of Rs. 100 /- will be charged.

In case our holdings exceed 200000/- then our BSDA account will be converted into Regular Demat account. This initiative is to promote retail investment and to promote retail investors to hold securities in Demat form.

Difference between a normal demat account and basic services demat account

How is the value of holding determined?

The DP i.e. Depository Participants will keep calculating the daily closing prices of securities (stocks, mutual fundsetc.) to determine the portfolio size.

This will be calculated after every trading day and then it will be compared with the limits set for your BSDA account. The moment your portfolio value exceeds the limits, you will be charged the fees for the normal Demat account or the slab you fall into on a pro data basis.

Check the video below for more.

Services provided for Basic Service Demat account

Now you must be clear about normal Demat Account and BSDA. Generally, the Basic Service Demat Account provides all the major facilities covered in normal Demat Account. But other that those services, there are few services in BSDA which are a little bit different than normal Demat Account. These services are as given below:

1) Transaction statement:

When your BSDA account is active and balance is maintained then you will get the transaction statement of your account quarterly. But if you don’t have any transactions in a quarter and your no security balance then you will not get the transaction reports or statement.

The statements are available in two forms i.e. electronic and physical document or hard copy. Electronic statements are free of cost; you don’t need to pay any charges for that. But if you want the statement in hard copy then your first two statements will be provided for free of cost and for additional statements you will have to pay the charge which will not exceed Rs.25.

2) Annual holding statement:

One annual holding statement ho holding of the account is sent to the registered address of the account holder. These documents will be sent in physical or electronic form i.e. via e-mail as per the account holder’s choice.

3) SMS Alert:

The account holder should register his mobile number to get the facility of SMS alert. Here you will get SMS for every transaction in your account.

4) Delivery Instruction Slip (DIS):

Two delivery Instruction Slips will be provided to you for free at the time of opening the Basic Services Demat Account.

These are the services which are slightly different in the case of Basic Service Demat Account then normal Demat Account. If you want to read more details about the services and charges of BSDA then you can download the circular by SEBI.

Can I convert my current Demat account into BSDA?

Yes, if you feel you are not making much use of your Demat account or if your portfolio is of less size, you can contact your DP to get your Demat converted to basic services Demat account.

This Basic Services Demat Account is a kind of free account because you don’t need to pay any maintenance charge if your transactions are below Rs.50,000. And Rs.100 only if your transactions are between Rs.50,000 to rs.2,00,000.

I hope you get all the basic details about BSDA. Do let us know if you need more details about the Basic Service Demat Account
..

How much HRA can you claim? (with calculator and video explanation)

Posted on by Jagoinvestor

Do you get HRA as part your salary? If yes, then it’s critical for you to understand how the HRA exemption amount is calculated?

In this article, we will talk about things like what is HRA? How to calculate HRA? And various other things related to house rent allowance. You can check out the video below to quickly understand everything about HRA

What is HRA?

HRA i.e. House Rent Allowance is the amount paid as a part of salary by the employer to the employee. Employee can get tax benefit on this HRA amount if he is living in rented house and paying rent. This simply means that if your salary skip has HRA component, then you don’t have to pay income tax on this amount. However you can’t save income tax on the full amount.

There is a rule on how much HRA you can claim and save tax on it. In this article, we will look at the rules and calculations. But before we move ahead, here is one good news.

If an employee does get HRA as part his salary, but paying rent, even then he/she can claim some part of HRA for saving tax and there is separate calculation for that. We will also look at that today.

How to Calculate HRA amount?

Lets now see how the HRA is calculated, but the calculation depends whether you are getting salary component from your employer or not (it should be mentioned in your salary slip).

Case #1 – When you get HRA from employer

Actual HRA offered will be the lowest of the following 3 things:

  1. Actual HRA received.
  2. 40% (in non-metro city) or 50% (in metro city) of your salary.
  3. Actual paid rend is reduced from 10% of basic salary.

Let’s take an example of how HRA is calculated.

Example: An employee who lives in a metro city, has basic salary Rs.30,000 per month and the HRA part is Rs.15,000. The actual rent he pays is Rs.10000 per month. Then the exemption he will get is –

  • Actual HRA received = (15,000 x 12) = 1,80,000
  • Actual rent paid – 10% of basic salary = (10,000 x 12) – [(10/100) x (30,000 x 12)] = 84,000
  • 50% of basic salary = (30,000 x 12) x 50/100 = 1,80,000

Now the lowest amount in above calculation is 84,000. So the employee will get exemption of Rs.84,000.

Case #2 – When you don’t get HRA from employer

If you are living in a rental house or paying for your accommodation and do not get HRA from your employer then also you are applicable for the tax deduction in income tax return. These people can also claim for HRA exemption under section 80(GG) of IT act.

Actual HRA offered will be the lowest of the following 3 provisions:

  1. Rs.5000 per month
  2. 25% of your total income
  3. Actual paid rend is reduced from 10% of basic salary.

Though there are some conditions which should be fulfilled if you want tax deduction in this case. The criteria are as bellow:

  • You should be salaried or self-employed and paying rent for accommodation.
  • You haven’t received any HRA in the financial year in which you are claiming for HRA exemption.
  • As per HUF our spouse or minor child should not own house registered on their name.

If you do not meet any of the above criteria then you can’t claim for HRA. Here is chart which explains the same thing which we talked above.Do you get HRA?Important points regarding HRA?

  • HRA is applicable only to the salaried person and not to those who are self-employed. If a person is living in his/her own house then also he/she can’t claim for HRA benefits.
  • If the employee living in a rented house is paying more than Rs.1 lac on rent in one financial year then he has to submit PAN details of landlord along with HRA claim.
  • If a person is living in his parents’ house and paying rent to them, he is applicable for HRA claim. However he cannot claim if he states that he is paying rent to his spouse or child.

Documents required for claiming HRA

The first thing you need to know is that you don’t need to submit anything to Income tax department to claim HRA. You only need to submit the documents to your employer and your employer will verify documents and give you the exemption and then issue form 16 and include these details in that form.

If there is any enquiry by the income tax department, only in that case you need to present further documents asked by them.

So basically at the start of the year, you need to update your employer on the rent you are paying each month and based on that data the employer will deduct the TDS from your salary. Finally at the end of the year, you will have to submit following documents

  • Rent receipts or the proof of paying rent
  • Form 12BB (here is more details)
  • PAN card of landlord if the amount is above Rs.,1,00,000.
  • Some employers may ask for lease and license agreement

Also, In last few years, many tax payers were found submitting fake documents for HRA claim in many cases. This is the reason that IT department is asking for more and document while claiming for HRA exemption. If there is any scrutiny by income tax department, you might have to submit some more documents like

  • Electricity bills
  • Water supply bill
  • Agreement or a letter from housing society

Some cases when charges of IT department can make enquiry are

  • If a person has a house loan and also applying for HRA.
  • If a person living with parents without paying any rent but still apply for HRA and says that he pay rent.
  • Adding higher amount in receipt than he actually pays.

Download HRA Calculator

We have created a nice HRA calculator and analysis tool, which will help you to calculate your HRA and also help you know how much HRA are you not able to utilize and how much is it covering your rent paid.

If you look at the same example which is mentioned above in this article (salary = Rs 30,000 per month, HRA = Rs 15,000 per month, and Rent paid = Rs 10,000 per month, and living in metro) and if you do the HRA analysis , you will find out two things

  • He is only able to claim 46% of his HRA provided to him (84k our of 1,80,000)
  • He is able to cover 70% part of his rent paid through HRA (84k out of 1,20,000)

Here is a snapshot of our HRA calculator

HRA calculator

Click here to download HRA calculator

Can you claim both HRA & deduction on home loan interest?

If you have bought a house in a different city and you are doing job in different city, then in that case, you can claim HRA benefits as well as home loan interest too. However if you have the house in the same city of your job, you cannot claim the HRA benefits.

Housing.com has explained it in a nice way.

Rules regarding HRA and home loan benefits

Are you claiming HRA tax benefits? Do you follow any other process which is not part of this article? Can you share some more HRA related tricks which you have learned over part few years?

ELSS vs PPF – where to invest for your tax saving? (20 yrs data analysis)

Posted on by Jagoinvestor

Most of the people who want to do tax saving in 80C are confused if they should invest in PPF or ELSS (tax saving mutual funds). Both PPF and ELSS offer taxation benefits of up to Rs 1.5 lacs under sec 80C.

PPF vs ELSS - which one is better to invest?

ELSS vs PPF – Meaning

Let’s start with their meaning and what exactly they are.

PPF means public provident fund. Its a govt scheme which is run by the post office and its a very safe financial product. There is no risk to it because it’s guaranteed by the govt of India. Its quite famous among investors for its safety and assured returns.

On the other hand ELSS (Equity linked saving scheme) is fairly new financial product in India (from last 15 yrs). It’s mainly an equity mutual fund that gives you an income tax benefit. Equity mutual funds mainly invest in stocks of companies, which makes sure that they deliver high returns, but at the same time they are risky (actually volatile) and their returns keep going up and down.

Now, let’s compare PPF and ELSS on various parameters.

#1 – Returns

The returns in PPF change every year and it’s around 7.5-8 %. Right now its 7.8% and it keeps on changing from time to time which is notified by govt. Earlier many years back, PPF returns were in a range of 12% and then it came down to 9%. But from the last few years, it’s hovering around 8%.

In the case of ELSS, it’s linked to the market and the returns are not fixed in the short term. Some years it can be 20 %, some times it can be 50% and in some years it can be -25% also. So you can see that the returns are totally dependent on stock markets and how well they perform. However, in the long term, you can be assured that you will get a return in the range of 12-18%.  The returns are not at all guaranteed by anyone.

#2 – Lock-in Period

Your PPF investments are locked in for 15 yrs, but some partial money can be withdrawn after 7 yrs. So basically its a very long term product, and if you are investing in PPF, you should be ready to lock you money for a very long time. After 15 yrs, you can again extend your PPF for another 5 yrs (any number of times) and your money will again be locked for that 5 yrs.

On the other hand, ELSS has a lock-in for just 3 yrs. You can take out your money after 3 yrs. The important point to note here is that each investment is locked in for 3 yrs, so if you have a SIP running in an ELSS fund, then each installment is locked for 36 months.

So if you want money in 4-5 yrs, ELSS is a better choice compared to PPF from a liquidity point of view.

#3 – RISK

PPF is not at all risky because its value does not go down. PPF is also guaranteed by govt, so there are no changes in fraud. If you plot the graph of your PPF value, you will see a straight line going up. However, note that PPF has a totally different kind of risk, which is that it does not give inflation-adjusted positive returns. This means that its returns match the inflation and in the end, you do not have any net returns.

On the other hand, ELSS is volatile, which is often referred to as “RISK” . The value of ELSSS keeps going up and down depending on the stock market movements. In the short term, you might experience a downturn and loss in value, but over the longer-term, you will see good results.

As most of the investors are risk-averse and do not like to see a dip in the value of their investments, most of the investors stay away from ELSS or stocks in general and lose the chance to experience great returns at the same time.

#4 – Taxation

PPF is tax-free. There is no tax on PPF returns. Whatever returns you get in PPF is 100% tax-exempt.

Earlier ELSS was also tax-exempt after 1 yr, but with budget 2017-2018, now any gains in equity mutual funds or stocks are taxable @10% when you sell them, but you get an exemption of Rs 1 lac per yr. This means that if your profit after selling ELSS is 4 lacs, then you have to pay a 10% tax on 3 lacs. However, even after this taxation, the post-tax returns of ELSS are much better than any other investment option.

Here is an infographic that shows you a quick comparison between PPF and ELSS.

ppf vs elss - where to invest for tax saving under 80C

How to invest in PPF or ELSS?

If you want to invest in the PPF account, you can open a PPF account in a post office or any bank (generally SBI is very famous for PPF). Note that it does not matter where you are opening your PPF account, if you open with the post office, SBI, or ICICI .. at all the places you are going to get the same interest because ultimately it’s controlled by POST OFFICE only.

The banks are just a medium to invest and nothing else.

If you want to invest in ELSS, then you can choose any fund house (there are many AMC like ICICI, HDFC, SBI, Motilal Oswal etc). You can either go to their website directly or contact an advisor (You can also invest in ELSS through Jagoinvestor help)

Returns of ELSS and PPF from the last 20 years

It’s important to check how PPF and ELSS have performed in the last 20 yrs (1996 – 2016) so that you get a fair idea on their performance and which one is better from a long term point of view. So we took one of the famous ELSS (HDFC Tax Saver) as an example along with PPF and calculated how the value in both will increase over time if someone invests Rs 1 lac in both the financial product.

PPF vs ELSS - difference in returns in last 20 years

In the above table, you can see that Rs 1 lac of yearly investment for 20 yrs have accumulated to Rs 54 lacs in PPF, whereas it becomes 2.2 crores in the ELSS, which means that ELSS gave 5 times more returns than PPF.

However, this difference is more visible only after 10 yrs passed and compounding starts kicking in.

In the initial years, there was no big difference in their values. See the graph given below. You will get a clear idea of how ELSS has performed incredibly towards the end of tenure.

elss vs ppf returns in last 20 years

Important Note :

The example of HDFC Tax Saver is taken only for the illustration purpose. This is not a recommendation, and right now HDFC Tax saver is not the best option for tax saving. There are many other ELSS funds which can be chosen other than HDFC Tax saver. Kindly contact your Financial Advisor for any recommendations.

So after studying the table data and graph, I hope it becomes easier for you to know the difference between the returns from PPF and ELSS investments. If you still have any confusion or any doubt in your mind, feel free to ask us by leaving your query in our comment section.

Do you want to Retire Early in India? A detailed guide with Excel calculator

Posted on by Jagoinvestor

Today you will read one of the fascinating stories of one of our readers (Naren from SavingHabit.com) who has shared his personal journey on early retirement and also gave a step by step path on how to change your mindset about it. This is a long article, but quite deep on the topic of early retirement. I suggest you read till end.. Over to Naren

–

A few weeks back, I had shared my comments on early retirement on the “Myth of Early Retirement” article and Manish asked me to to elaborate on my comment and also do a guest post on this topic.

In this post I will go in detail on how to plan for early retirement and also share my personal early retirement journey.

Disclaimer : This article is purely the author’s personal opinion. The author is not a certified financial planner. Seek the help of a certified financial planner for your individual situation.

How to plan for early retirement - A real life study and guide for beginners

When mid-level IT employees in their 40s are being forced into early retirement anyway through layoffs, it has become a necessity for our generation to pro-actively plan for an early retirement. As early as 2011, JagoInvestor reader Ujjwal working in IT predicted this exact scenario and recommended planning for early financial freedom.

How I discovered Early Retirement?

  • I graduated in computer science straight into a recession caused by the double whammy of the dot-com bust and the 9/11 attacks. My father had recently retired from his public sector job and I did not have any job offer on hand as campus hiring dried up completely. It felt like I was being tossed around by economic forces beyond my control.
  • When I finally entered the workforce at a Big Company, I was soon frustrated by the usual job stress and job insecurity.
  • I decided to end this “working for money” problem once and for all by joining an early-stage internet startup. Joining a startup was also my dream since college and I had plans to start my own later. The idea was when the startup will sell for millions, I would strike it rich and never have to work again. Well
 6 years later when the startup was sold, my services were no longer needed. I was out of a job without striking it rich 🙂
  • Around this time, I discovered the early retirement community online that talked about focusing on the one thing I could control  : my savings rate. All along I had focused on things outside my control and failed to solve the “working for money” problem. Out of all the options available to salaried employees to achieve early financial independence, early retirement offers the highest chance of success because its success or failure is under your control: how much you save each month.

WHAT IS EARLY RETIREMENT?

Most of the Early Retirement literature online is from the U.S which is understandable because they have a longer history of regulated stock markets & mutual funds compared to India.  

In this article I’ll do my best to translate Early Retirement for Indian conditions as we have our cultural differences when it comes to money like parents paying for child’s college expenses, joint families where children take care of  parents in their old age etc and recent cultural changes mirroring the U.S  like home loan EMI, SIP, credit card spending, low savings rate etc

Let me first start with what most people think when they hear the term “Early Retirement”:  

  • It is a stage by Age 40 when you are able to meet all your expenses through passive income from investments like Real Estate (rental income), Mutual Funds, Stocks (dividends) etc.
  • So you don’t have to work anymore to meet your expenses.
  • You can easily live on only investment returns post-inflation so your corpus will last forever beating inflation
theoretically.  

While this is the “popular dream”, in reality Early Retirement simply means achieving financial independence early in life so you can focus on achieving your important goals in life. This is popularly abbreviated online as FIRE : financial independence/retiring early.   

early retirement meaning

You can be employed at this stage, but in alignment with your life goals for example:

  • To do something you love
  • To spend more time with loved ones
  • To earn money with less stress & more work-life balance
  • To lead a healthy & active lifestyle

It is possible to retire early by age 40 but only if you aggressively save at least 50% of your income starting early in your earning life instead of doing a small monthly SIP with the goal of retiring in old age at 65.

Save 50% of my income??!! I can barely meet my expenses each month

Relax! You are already saving more than you realize. You already contribute 12%  of your basic income mandatorily to your EPF and get another 12% employer match. That is a 24% savings rate on your basic income. So calm down and I’ll discuss some strategies for increasing your savings rate later in this article.

There is a reason behind the 50% savings rate

High Saving Rate

This is the simple idea behind Early Retirement before inflation & investment returns enter the picture. 50% savings rate may not be possible immediately for people whose income is low or expenses are high but early retirement is not possible unless you increase your savings rate to at least 50%

Here are some inspiring real-life people saving close to 50% :

–  1 income, EMI, 1 kid, private sector, Bengaluru. Income: 81K, Savings:43K

– Unmarried, private sector, Mumbai. Income: 65K. Savings: 30K

–  1 income, Government job, no kids, Rajasthan. Income: 70K, Savings: 42K

–  Both working, 1 kid, private sector, Mumbai. Income: 1.05L, Savings: 45K

Here is the link to the “Family Finances” section from ET Wealth magazine. Make sure to look for households who fit your profile and are saving at least 50%. Ask yourself : If people similar to me can save so much, why shouldn’t I save more than my current rate?

Let’s step back here for a minute

First, you need to be very determined to retire early.

When you truly want something you will come up with solutions rather than excuses and you’ll get inspired instead of finding faults.  Imagine in your mind’s eye for a moment all the positive reasons why you want to retire early like Family-time, Freedom, Health, Low-Stress, Travel, Security  etc.  

Now get yourself into an optimistic “can-do” frame of mind before reading further.

you can do it

(Source)

Early Retirement is an improved version of Conventional Retirement

Around 100 years back even conventional retirement at age 65 was not possible for everyone. What was once a fantasy is a reality now. Now everyone believes it is perfectly normal to retire at age 65.

Similarly, for the first time in history, due to innovations like regulated stock markets, mutual funds &  SIP, even the salaried middle-class can now retire early which was previously possible only for high-earning executives or businessmen. So if you try and understand Early Retirement you too can take advantage of it and enjoy a better quality of life.  

Be ready to take some tough decisions on what is important to YOU in life rather than just going with the flow of what everybody else is doing with their life.

Can I just retire early and never have to work ever?

The typical dream of Early Retirement is to “sit and eat” from the retirement corpus without having to work for money from age 40 to age 90 which is a long span of 50 years which no one can predict.

It is a difficult feat to pull off as Life has a habit of springing surprises especially when you have kids and elderly parents. But it is possible if key variables outside your control like the stock market returns work in your favor and there are real-life success stories like Mr.MoneyMustache.

Two big problems with this  “I never want to work again” Early Retirement thinking:

  • UNCERTAINTY:
    • If a family member has a major health expense not covered by health insurance, how will you meet that expense if you are not earning any additional income?
    • If you cannot find a tenant for your rental income house for more than a year, how will you meet household expenses if you are not earning any additional income?
    • If the stock market crashes by 15% and goes into a 5-year recession, will you have the stomach to withdraw money for monthly expenses from an already depleted corpus?
    • What if all of the above happen simultaneously in your life like the expression “When it rains, it pours” ?
  • STRESS:  you’ll replace the stress of a job with the stress of obsessing over running out of money every single day of your early retirement.

My Alternative Early Retirement Plan for Indian conditions

Stop working for “money” but don’t stop working
  • By Age 40: Finish saving up for retirement by saving at least 50% of your income in retirement SIP.
  • After Age 40: Stop your retirement SIP & switch to work that you truly enjoy in order to cover monthly expenses.
  • From Age 40: Let compounding double your retirement corpus every 6 years until age 65!

The idea is to permanently secure your comfortable lifestyle by age 40 so you can follow your dreams without fear. Even in the worst case scenario you’ll always be guaranteed to enjoy the comfortable lifestyle of your 30s.

The benefits of this alternative approach

FREEDOM: Free by Age 40 to do work you truly enjoy

While saving up for retirement your monthly budget at 50% savings rate will look like this:

Income Rs.1 lakh =  Rs. 50K Expenses + Rs.50K Retirement SIP

By age 40 once you finish saving up for retirement, you don’t need the retirement SIP anymore and your budget will look like this

Income Rs.1 lakh = Rs.50K Expenses + Rs.50K Surplus

After age 40, you can work for a 50% lesser salary at jobs that are more fulfilling and less stressful but fully pays for your monthly expenses including support for kids & elderly parents:

Income Rs.50K = Rs.50K Expenses

Most people who want to retire early simply are tired of the job stress and deep down are not averse to working if there is work-life balance and they are working on something they truly enjoy.

SECURITY: Your retirement fund is actually a 25-year emergency fund!

If you ever lose your job before age 65 like the TCS/Cognizant/Infosys mid-level managers in the headlines : you can use a small portion of your  retirement fund to fund monthly expenses for even 3-4 years while you re-skill and find another job after which you can replenish the amount you took out during the jobless period.

Instead of trying to live off the retirement fund for life from age 40, you strategically use the retirement fund to build a safety net for uncertain times and take calculated risks like starting a business or a new career.

LESS STRESS: Not having to worry about money running out

It is an open secret that even the pioneers of early retirement that I hero-worship like MMM & ERE bring in active income in their “early retirement” from working on their passions like building houses by hand or working as a quant trader/researcher leaving their retirement corpus to compound meaning they are not solely living off of their early retirement corpus themselves.

So if the early retirement gurus are bringing in active income why shouldn’t you factor in the active income from your dream-job in your early retirement plans?  Why assume that working on something you enjoy won’t cover monthly expenses even after working at it for 3-4 years?  

You’ll be sitting on a 25-year emergency fund in the form of your early retirement corpus for God’s sake!  If you are still unsure, you can start working on your dream-job as a side-project while you are still working at your day-job to give yourself enough runway and confidence that it will make money by the time you quit your day-job.

PRACTICE: Great Training for “full retirement”

Scaling down your work by 50% by age 40 is a great way to get a preview of what “full retirement” will look like at age 65. You will get a lot of wake-up calls mostly around the state of your health, investment returns , wasteful expenses and whether you really have any true passions in life or were you just lying to yourself about “dreams & passions” to mentally escape from job stress 😉 So while planning for Early Retirement also work on your passion on the side to prepare yourself for the post-40 life.

4 STRATEGIES TO INCREASE YOUR SAVINGS RATE

Strategy #1 – Lower your expenses: This is the only thing under your control so tackle this first.  Analyze your lifestyle using apps like Spendee to cut down wasteful spending without being “penny wise and pound foolish”.

For example: In our house we use the internet for entertainment so no T.V or cable expenses, we mainly eat home-cooked food so our eating-out expenses are low, we do yoga at home so no gym fees, we own high-quality phones & laptops that are expensive but we maintain them carefully for years so they work out cheaper in the long run.  

It took us almost 3 years to systematically reduce our spending without feeling deprived.  In your household, what are the top 3 categories where you could get the same value but for way less money?

Strategy #2 – Increase your income: If you’ve cut all wasteful expenses and are still not saving enough then your only option is to increase your income. Your early retirement goal gives you the clarity and urgency to do what is necessary to  get that promotion or better-paying job. It will not happen overnight but you can work towards it purposefully now that you have a time-bound reason.

Strategy #3 – Get out of Debt:   If you’ve made the mistake of buying a house on exorbitant EMI at an early age, you need to first crush your EMI or education loan before attempting early retirement.  You need to simultaneously lower expenses and increase income. Read : Is home loan EMI jeopardising your other financial goals? Here’s what to do

Strategy #4 – Work as a team with your spouse: By age 30 you are probably married and both of you are earning. Get your spouse on board and work together as a team.  If all you want is a couple of years freedom to try your hand at a new career or business, try a mini-retirement instead.

If you are debt-free and your spouse’s income can take care of expenses, you can quit your job with the safety net of your spouse’s income. If you succeed in your venture and are able to cover expenses then your spouse too can quit their job to follow their dreams. This way both of you can make money doing what you like. Even if you fail in your venture, you can re-join the workforce & try again later.

Wow! An investment of Rs.75 lakhs in SIP over 35 years has given a retirement corpus of Rs.11.7 crores

But look closer and you’ll notice that this is a bad bargain for the number of years this person has to save. Why should you take 35 years to accumulate 75 lakhs?

Let’s see what happens if you try and accumulate the same Rs.75 lakhs within 10 years and then stop your SIPs but let the Rs.75 lakhs compound untouched for another 25 years.

saving plan for 25 yrs

WHAAAAT???!!! How did you end up with Rs.12.8 crores at age 65 even though you stopped SIPs at age 40!!!

THE SECRET : Compounding really works its magic on large numbers

SIP does not do the compounding by itself…only when you finish saving up a large corpus does meaningful and substantial compounding gets started. That is why you should accumulate your retirement corpus as early as possible for compounding to start doing its job.

See here, here and here for others who’ve illustrated  how saving up early then stopping and letting the money compound untouched grows the money like crazy meeting or even exceeding your goals as compared to doing a small monthly SIP for decades.

ILLUSTRATION OF THE TWO APPROACHES VIA EXCEL CALCULATON

saving approach

Download Early Retirement Calculator

MATHEMATICAL PROOF

THE RULE OF 72  a.k.a What they did not teach you in school

Question 1: How long will it take for Rs.75 lakhs to double @ 12% annual return?

You don’t need a calculator to answer this. Use The Rule of 72.

This handy thumb-rule derived from the compound interest formula says that to find the number of years required to double your money at a given return %, you just divide 72 by the return %

So 72/12 = 6 years.

Answer: Rs.75 lakhs @ 12% annual return will double in 6 years

Question 2: How many times will Rs.75 lakhs double @12% annual return over 25 years?

Answer: 25/6 = 4 times

Rs. 75 lakhs @ 12% return will double 4 times over 25 years

Question 3: What’ll be the final value of Rs.75 lakhs after doubling 4 times at the end of 25 years?

Answer:

Doubles first after 6 years       :            Rs.75 lakhs  x 2   =  Rs.1.50 crores

Doubles again after 12 years :         Rs.1.50 crores x 2  =  Rs.3 crores

Doubles again after 18 years :               Rs.3 crores x 2  =  Rs.6 crores

Doubles again after 24 years :               Rs.6 crores x 2  =  Rs.12 crores

Total doubling : 4 times

Final corpus : Rs.12 crores

  1. Now refer back to the alternative accumulation plan’s final retirement corpus of Rs.12.8 crores to verify that the Rule of 72 produces a result remarkably accurate to the result from a lumpsum investment Calculator.
  2. Also verify using CAGR calculator  that the initial lumpsum invested and future compounded corpus works out to a 12% annual return.  

A word of caution on debt: Compounding works against you when you have outstanding debt. For example: Say you have a 36% annual interest Credit Card and an outstanding balance of Rs.1 lakh on it. If  you don’t pay back the debt for 2 years then the credit card balance will double to Rs.2 lakhs.

How? Rule of 72:  72/36 =2. So your debt will double in 2 years!

compound interest quote

(Source)

FAQ 1: If I’m saving first for my retirement what about saving for my child’s college expenses?

Use the same Early Saving strategy to save for child’s college expenses:

At the time of the child’s birth itself, invest the prevailing cost of college into mutual funds and let it compound for 18 years to beat education inflation. For example: 4-year engineering course at IIT currently costs Rs.8 lakhs. Say your kid was just born this year. If education inflation is 12% y-o-y the same course will cost Rs.60 lakhs in 18 years. To beat this education inflation: Invest prevailing cost of Rs.8 lakhs in mutual funds at the time of the child’s birth itself and let it compound over 18 years to Rs.60 lakhs @ 12% annual return by the time your child is ready to enter college. Your child can take out an education loan for any shortfall over and above your savings.

If you don’t have Rs.8 lakhs to invest in mutual funds at the time of your child’s birth:

  1. Finish saving for your retirement first by age 40 so you don’t have to worry about losing your job or sacrificing your dreams.
  2. Then start SIP for your kid’s future expenses like higher education or wedding
  3. To bridge any shortfall between your SIP savings & the education or wedding expenses, your child can take out an education loan or scholarship for college and a personal loan for their own wedding.
  4. Since you’ll be earning while your child is in college, you can help out with whatever college expenses you can afford. Your child may also earn income through internships or side-projects while still in college.

Take care of your own retirement first before you save for your child because the child has other viable options like education loans, scholarships, low-cost weddings etc.  No bank will give you any “retirement loan” if you’ve not saved enough for your retirement!!!

Plus you can be a role-model to your child by balancing your dreams & your reasonable duty towards your child. You will be giving them the inheritance of them not having to worry about your retirement also when they make their own retirement plans

Like how the air hostess tells us in the safety precautions before every flight
..

oxygen mask

Image Source

I highly recommend that you read Manish’s article on how not to stress too much about the inflation in higher education expenses.

FAQ 2 : What about buying our own house?

I recommend from personal experience: Don’t buy a house on EMI at a young age in your 20s or 30s when you don’t know where you’ll settle down permanently. We move to other cities and even countries for work these days and there is no knowing ahead of time where you will settle down in old age.

Instead save SIP in mutual funds towards buying a house until you have 100% clarity closer to retirement in your 50s or 60s and then build or buy a brand new house or flat fully in cash without EMI. The SIP returns should be able to match the real estate inflation.  Until your retirement it is cheaper to rent in India at 4% rental yield even at 10% annual rent increase instead of paying EMI at 10-12%  and also property tax, water tax, maintenance, repairs, association dues etc. only to end up with an “old flat” after 25 years!

A couple we know are doing exactly this: after traveling all over India for work & renting throughout they are now building a house in their hometown for retirement in their mid-fifties.  Subramoney also recommends the same approach: See point #9 of his article.

Recommended reading: Why large investment in property at young age could be risky

FAQ 3: But we want to do extended travel frequently. That’s why we want to retire early and stop working!

Think win-win: Once you achieve financial independence you can quit your job and travel for say a year.  After a year of travel,  you can recharge both yourself and your bank accounts by returning to the job market for a couple of years to work on something you enjoy (maybe something related to travel!).  Then travel again. Repeat the process until your 60s by which time hopefully you would have traveled everywhere you wanted to and your compounded retirement fund will be waiting for you!

My Personal Journey so far

  • Age 36. Married. No kids yet.
  • We’ve saved up 30% of our retirement target so far
  • By age 45, we’ll finish saving up 100% of our retirement target & then let it compound untouched over the next 20 years
  • Own a flat bought with savings & no EMI in a city where we don’t live 🙂  Although it gives us a modest rent that we SIP, I consider it a poor decision as we could have reached financial independence already by renting instead of owning.
  • 3 years in Big Co IT dept : paid off student loan & credit card debt so savings rate was low :  around 25%. Debt-Free so I work at Internet Startup for 6 years : Saved little over 40% of my salary!
  • 3 years back, wife and I took a calculated risk to start own business when we had a savings runway of 6-7 years. 3 years later business income now covers monthly expenses and savings rate is climbing slowly towards 50%
  • Once we reach our retirement target by age 45, I may take up a job at a non-profit working for a better India at a much lower salary but only if it fully covers our already low expenses.
  • We exercise 30 mins to 1 hour daily towards our Health SIP & maintain a healthy diet. We plan to be be fit and healthy in our 60s when no health insurance will cover us.
  • We’ll save what we can for our future child using the Rule of 72 since the child has age on their side for compounding to work until age 18. But we’ll definitely teach the child to be financially independent in their 30s itself and follow their dreams without needing money from us 🙂

This is our story in brief.  We took calculated risks and re-invented ourselves with the safety net of savings that would have lasted for only 6-7 years. Imagine how you too can work on your dreams stress-free with the safety net of savings that’ll last for 25 years.

We are a regular couple with middle-class values. If we can do it so can you. Good luck!

Special Thanks: My wife & I are forever grateful to Mr.MoneyMustache for demonstrating that you can simply save your salary to freedom 25 years ahead of schedule!

I want  to end with a well-written poem about “A Man with Savings” that makes the point much better than I ever could with all the math & personal stories.

Please share your thoughts about early retirement under comments section. I would be happy to read them and also discuss more on this topic.

Is it right to submit fake rent receipts at my office to claim HRA?

Posted on by Jagoinvestor

If you are living in a rented house and using any fake documents for HRA claim then be careful.

Because from now on there will be a big trouble for those who are using fake rent receipts to claim HRA, as Income tax department have started asking for more document.

fake rent receipt to claim HRA

Many times it is seen that people claim for HRA by submitting fake rent receipts. This also helps to get them tax benefit. But now as there is increase in the number of fraud HRA claims, IT department has started to ask for some other legal proofs.

Documents which IT department can ask in case of verification

Before you know about the documents needed for verification purpose, lets understand what is HRA (for those who are new to this)

HRA i.e. House Rent Allowance is an amount or we can say a part of salary of an employee which an employer pays if the employee lives in a rented house. It is beneficial for the employee as it lowers the tax which he/she pays on accommodation per year.

What is HRA

If you claim for HRA exemption then you need to submit some legal documents like a receipt or an agreement and ID proof of landlord. You can also claim for HRA exemption on your income tax by filling 12BB Form

If the IT department suspects that a person is providing fake receipts for HRA then they can ask for some other related documents. The list of documents which IT department can ask is as follows –

5 documents which IT department can ask in case of verification

  • Copy of leave and license agreement
  • Electricity bills
  • Water supply bill
  • Agreement or a letter from housing society
  • PAN card of landlord if the amount is above Rs.,1,00,000.

Is there any risk in submitting fake rent receipts to claim HRA?

People are asking various question related to fake rent receipt. You can see the snapshot given below…

fake rent receipts related question

The verification process is going to be more strict day by day so there is a risk in claiming for HRA exemption by providing any kind of fake documents. If a person wants to apply for HRA with fake receipt by knowing all the risks he has to prepare all the fake documents and as we know submitting each and every document fake is not that much easy.

In many cases employees asks their parents or relatives to sign the documents for HRA claim or sometimes employees shows the higher amount on their rent receipt than they actually pay so that they can get the exemption. In case IT department suspects your case as fraud, in that case you will have to go through verification

Some example where enquiry can happen

  • If a person has a house loan and also applying for HRA.
  • If a person living with parents without paying any rent but still apply for HRA and says that he pay rent.
  • Adding higher amount in receipt than he actually pays.

To know about this in detail you can watch this video..

IT department has stared cross checking the address on ITR ( Income Tax Return) form and the receipt submitted. They are also checking the records so that they can know who is the legal owner of the house to verify the Leave license agreement.

What are your thoughts on this issue? Do you know anyone who is submitting fake rent receipts?