Tag: Beginner Level

Merchants can’t charge 2% extra on Debit Card Payments – Says RBI

Posted on by Jagoinvestor

Have you ever faced this situation, when you were making payment through your debit card or credit card?

“Sir How are you making payment ?

Debit Card or Cash ?”

“Card”

“Sir, There will be 2% extra charges if you pay by Debit Card ? ”

“Why extra charges ? I use it at every place and no one charges any thing extra ? ”

“Sorry Sir, this is our Policy. You can take out the CASH from the nearby ATM if you want to save that extra charges”

“Huh ! .. &^#$^&*J#^&&#%$&*N”

You often face the above situation, when you buy things like jewelry, Laptops, Mobile phones etc. I faced this 2-3 times myself, but could argue well with the shopkeeper, because I knew this is just a tactic used by shopkeepers to save on the charges they need to pay from their own pocket. Hence I never paid that extra 2% or just left the shop.

Merchants Cant charge extra on debit card payments

Merchants cant charge any extra charges on Debit Card Payment – say RBI

Now yesterday, RBI has openly cracked down on this unfair trade practice and issued a notification saying that Shop Merchants can not charge any extra charges from customers, if payment is done through Debit Card. Below is the exact wordings from RBI Notification

4. Levying fees on debit card transactions by merchants – There are instances where merchant establishments levy fee as a percentage of the transaction value as charges on customers who are making payments for purchase of goods and services through debit cards. Such fee are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants and therefore calls for termination of the relationship of the bank with such establishments.

Why Shopkeepers Charge extra 2% on Debit Card payments ?

When you swipe your debit/credit card  for purchasing some item, the merchant has to pay some fees (1%-2%) to the Bank or the rental fees for the swipe machine. The charges goes out of their own pocket, as the cost of running the business and convenience of taking the payments (more customers will come, if card payment is there). If its a small payment like Rs 500 or Rs 1000, then its a charge of Rs 10 or Rs 20, which is fine. But when it becomes a payment of lets say Rs 30,000 (imagine buying laptop or iPad), then its around Rs 300-600 and to save that big charges, they discourage debit/credit card payment.

They often ask customers to pay by CASH and point them to nearby ATM. Almost always, customers could not refuse, because they have already made the buying decision, and dont want to argue for the small charge, and a lot of times, they finally believe that may be its not illegal, and finally give the CASH even if they do not want, or just allow the merchants to charge additional 2% charges.

But, as per RBI, its not a fair practice, because merchants already have agreed in the agreement with the card swiping machine bank that they will not charge anything extra from the customers. Here is one example of asking for 2% extra fees by some Geeta Ramani on rediff website

My worst experience was when I intended to purchase a Tata Sky card worth Rs 1000. The shopkeeper said 2.5% = 25 rupees extra. I told him — you give 10, I will give 15 rupees. He spoke quite roughly — hum kyon den? I told him it was because he was supposed to pay the bank, not I, and that I was doing him a favour and not the other way round. He said he did not earn anything from the transaction. Anyway, I did not give in. I didn’t purchase from him and purchased the same from Indiaplaza instead online without any transaction fee

What you should do, if Shopkeeper does not agree ?

RBI has clearly asked all the banks to break their relationship with those merchants who are practicing this. So, when any merchant asks you for extra 2% charges and even after the debate they do not agree, you can complain to the RBI about this and also complain to the bank. Each Bank has a “Merchant Services” section on their website and when you mail them or complain in personal to their branch, mention that you want to complain about Merchant Services. Example for ICICI bank is here and Axis Bank is here. But

When you take this step, at-least some merchants might fear the consequences and oblige!, but now the problem is how many people will go to this extra mile . It would require some time and effort from your end.

So next time you are asked to pay extra 2% on debit card payment, you can clearly tell them about this RBI notification. If required better take the print out of the notification and keep it with you in your wallet or as an image in your smartphone.

Have you ever faced a situation where you were asked to pay extra 2% charges on debit card payments and were pointed to a near by ATM, and what did you do in that situation, please share !

3 parameters to look at before you pick your mutual fund house !

Posted on by Jagoinvestor

There are more than 40 mutual fund houses (AMC) in India and every investor has his own favorite mutual fund house to pick. We hear about best mutual funds on various websites, hoardings and even look at their performance on valueresearchonline and then choose them for lumpsum investment or starting our SIP.

But on what parameters do you choose these mutual fund houses (not mutual fund) ? Will you pick Birla Sunlife or DSP BlackRock ? Will you choose HDFC or SBI mutual funds? Will you pick Quantum Mutual funds or PPFAS ? Or will it be Reliance Mutual Funds or ICICI Prudential ?

how to choose mutual fund-house

Image Source

In this article I want to talk about 4 parameters which were discussed by a Financial Planner – Dinesh Jain in one of the articles comments section. I am expanding them for the benefit of readers.

3 questions to ask before choosing a great fund house

1. Is asset management the core competency and passion for fund house or just another business ?

One of the things, you can look at is – “Is Asset management just another business for the fund house to make money ?”, Or is it also their passion and core competency? Will they close down the business or sell it to some other AMC, just because the revenues are down ? What kind of message do you get when you look at the fund house advertisements or their videos on internet? Take an example of Birla Sunlife mutual funds and Quantum mutual funds, do you see any difference in the way they operate or communicate ? Which fund house do you feel is more focused on asset management ? Or look at DSP BlackRock Mutual fund and Reliance mutual fund , do you get a different kind of feel in both or same ?

The first level filtering of this parameters will clean out some fund houses from your mutual fund shopping list. Note that its up-to you to decide which fund houses you think do not pass this test. You have to do your own study on this.

2. Does Fund house focus on Quality or Quantity of funds ?

The second important parameter to look at how many funds an AMC launches and for what reasons? Now, I am not saying that the fund house should not launch new funds, but do they do it, because of the demand and opportunities in market or just to cash on the market sentiments and mood ?

There are so many fund houses, who came up with new and useless NFO’s during stock market boom, just to cash on the market sentiments and named their funds in such a fancy manner that gives a feeling that the fund is so awesome ! , but when the market was bad, and they could not handle so many funds, they merged them with their other better performing funds.

So some fund houses are really an ASSET MANAGEMENT COMPANY and some are kind of ASSET GATHERING COMPANIES which just want to launch funds and their focus is on increasing the AUM, so more charges can come to them and increase their profitability. Nothing wrong in making more profits or thinking about it, but at what cost is it done is the question? Now its up to you to decide if you want to avoid these kind of fund houses or go with them.

3. How transparent and Honest is Fund House

One of the parameters you can look at is the transparency and honesty of the fund house. Look at their website, and see what kind of disclosures they have made? Do they do what they say ! , or both are different things ? Do they do their investor education program just to sell their products and schemes or genuinely they want to help investors ?

Conclusion

Picking a right mutual fund is important, but you should also do some background check on the parent fund house also before you pick your funds. Note that these 4 parameters are just for reference and it might happen that for someone these parameters does not make sense.

Can you please share what parameter you think is important one !

Rs 10,000 Income Tax Exemption on Saving Bank interest – Sec 80TTA

Posted on by Jagoinvestor

You can now save tax on an additional Rs 10,000 that you earn from savings bank interest. In the financial bill 2012, A new section called 80TTA was added to the Income Tax Act – 1961. This section allows an income tax deduction of up to Rs 10,000 to an individual or a HUF for interest earned on the savings bank account held with a Bank, Post Office or a Society.

Note that it’s not applicable on Fixed Deposits or Recurring Deposits. It’s only applicable to a normal savings bank account. The section is applicable with effect from April 01, 2013 and will apply from AY 2013-14 onwards.

Few Clarifications on 80TTA (Amendments)

  • If the interest earned out of saving bank account is more than Rs 10,000 . You will have to pay tax on the remaining amount over and above Rs 10,000
  • This tax deduction is over and above Rs 1 lac deduction under Sec 80C.
  • Rs 10,000 is the total deduction allowed by combining all the saving bank accounts interest. If you earn Rs 6,000 from each of 3 different accounts (Total Rs 18,000) , you will get deduction of Rs 10,000 and pay tax on remaining Rs 8,000.
  • The filing of income tax return would not be mandatory if your Gross Total Income is below the applicable basic exemption limit even though interest on saving accounts exceeds Rs. 10,000/ . (For example , if your saving bank interest is Rs 40,000 , but overall income is still Rs 1,60,000/year, you dont have to file income tax return)

Relief from tracking Small interest amount

The best thing I love about this tax deduction is that for tax purposes, investors will no longer have to worry about considering small amounts of interest that they earned on their savings bank account. It was a common occurrence to get a few hundred rupees as interest multiple times a year and it was a real pain to include them while computing taxable income. Almost all investors avoided including them, and thus were officially coming under the scanner as tax avoiders. With this tax deduction, they can now breathe a big sigh of relief.

Will fixed deposits give better returns ?

The answer is YES, in almost all cases, Fixed Deposits (despite being taxable) will give better returns than a normal savings bank account. However, there is a special case where Fixed Deposits are going to only marginally beat a normal savings bank account. It’s for those who come under the 30% tax slab and those whose saving bank interest rate is close to 6% (like Kotak or YES Bank).

I know this is a small percentage of investors, but if they invest some money in Fixed Deposits, the net returns are going to be very close to those of a normal savings bank account. Assuming they want to invest Rs 1 lakh or 1.5 lakhs for a year, returns on a 1 year Fixed Deposit after tax will be very close to interest earned on a savings bank account, because the latter will not be taxable. The table below explains this in more detail

saving bank fixed deposit sec 80TTA

Huge Balance in Saving bank Account ?

If you are earning 6% from your savings bank account, it takes Rs 1.66 lakhs to get Rs 10,000 interest in a year and if you are earning 4% interest, it will take 2.5 lakhs balance through the year to get the full exemption. However in our experience, we have seen a lot of our clients, as well as other investors, who keep a huge savings bank account balance – as high as 20-30 lakhs in some cases. In that case you will be earning a huge amount of interest on your savings bank account and it will all be taxable. So it is always a good practice to create a Fixed Deposit for the excess amount and only keep about 1-2 lakhs in your savings bank account.

Is your saving bank account interest more than Rs 10,000 in a year ?

The Scam called “Sample Flat” – Learn how builders trap property buyers

Posted on by Jagoinvestor

One of the biggest traps for real estate buyers are “Sample Flats”. When you visit properties sites to inquire about any under construction properties or ready for possession flats, the builder or the sales person there shows you a “Sample Flat”. The moment you look at a sample flat, something happens to you. The sample flat is so beautiful and mesmerizing that, you feel like you are in love again, some kind of beautiful music starts playing in your head and for a moment, you visualize the future with your family living within that same sample flat and how you and your loved one’s are enjoying the ambiance and premiumness the sample flat offers.

You are delighted !

But – This is trap, set by Builder

Sample Flat Example

Why you get trapped ? 

Because you are human, you have emotions and you have lots of dreams for your family and yourself. Because in this competitive society, you have to grab your share of status and show to the world, that your time has come finally! .

Builders know how to exploit the human psyche and how to manipulate your aspirations. Every person wants to give himself and his family the best housing and the most spacious and premium living conditions – a fact, well known to the builder. When they create sample flat, all these things are kept in mind and the sample flat is constructed in a manner that makes you fall in love with it at the first sight. The builder’s goal is to ensure that your emotional mind is activated and prevents your rational mind from questioning things or think hard. You should be hypnotized! . Check out this guy sharing how his builder did not fulfill his promise

Lets look at 2 important points you know should be aware about the so called sample flats, which can save you from potential disappointment some time in future when you hunt for your dream home.

Trick #1 – Sample Flats are created to look more “Spacious”

Everyone wants a big house at a lower cost. Given there are 4-6 people in family on an average and lots of belongings in home, a bigger house is always preferred than a smaller one. You should have space for all the things you have at home, without making your home look cluttered. So few tricks are used to make sure that the sample flat looks more spacious artificially! . Here are they

  • There are no doors in toilets and bathrooms, and some of the walls are merely glass partitions, which creates a visual illusion of more space.
  • There are no doors between rooms in a sample flat, which makes the flat appear more spacious than it really is.
  • The ceiling is much higher than the real flat and is just increases the volume of sample flat, thus giving a feel of space.
  • The lighting using in sample flat is suggested by interior designers, who are experts in creating optical illusions.
  • The furniture used in sample flat is kept smaller, so that in comparison the rooms and kitchen looks bigger.
  • Even the other things like bed, almira’s and dining table in kitchen are placed in such a way and are of smaller size, to give a feeling of more space.
  • The walls are much thinner in sample flat, compared to the real flat, which again gives more spacing. They are known to use gypsum boards and not the real cemented wall.

What you should do ?

Once you visit a sample flat, the first thing you should do is slow down and stop yourself from getting biased by the spacious feel of it. For a moment, consciously tell yourself that you know its not reality and a kind of trap (remember 3 idiots – “All is well, All is well”) . Visualize the furniture, bed, kitchen belongings, all the almira’s you own at home. Your Sofa, your TV, your Waching machine and Refridgerator and every thing you own and ask where will you keep it ? Also consider those new things you might buy before moving to new property ?

If you are seriously considering buying a house, then actually mark places where you will keep what and check the space it will take (mentally atleast) . Seek help from ladies at home, because they have a better understanding of minor details and can tell you, if the flat will be able to accommodate everything with higher accuracy (and in most of the cases, women are anyways more bothered for those things compared to men).

Note that rather than blaming builder on using these tactics and fooling you, I would suggest being self-reliant, as there is nothing illegal in what the builder has done. Yes, its kind of unethical and the tricks employed here, are just a way of exploiting human psychology and aspirations. But then, there is no law on all these points and anyways, the agreement will mention that the sample flat was just for demonstration purposes and the look and feel of the actual flat may be a little different. I want you to be prepared for this, rather than complaining about things.

Here is one real life experience I found on the net, which talks about the same thing we are discussing here

At the time of booking Builder shown a central park as well as a very huge green area (80% of the project), the same is also shown/mentioned in the Brochure given to me during the time of booking. He also showed a sample flat and did a sale agreement with me.

Now builder is constructing three new towers on the park area and also cutting down the green area as he is coming up with another project on the same green land – Source here

Trick #2 – Sample Flats gives the feeling of PREMIUM

Who does not want a premium and beautiful home? Everyone does!

We want our house to be better than others, we want to make sure we get the best. We aspire to live in premium homes (majority of them, if you dont). Builders do their homework properly and put all their efforts in making sure that the sample flat looks the way most of the people cant actually afford!.

I mean to say that every bit of work, furniture, finishing and material used are expensive and of very high quality and high standards. In many cases, the cost incurred in making the sample flat look premium is more than the cost of the flat itself (Imagine 50 lacs flat having 50 lacs of premium things inside it, just to make it look premium).

  • The fixtures and furnishing used are of world class quality and brand and is so premium that instantly a prospective buyer imagines him selves owning it.
  • The floor tiles used are of high quality and more beautiful than what you get in reality.
  • The view you get from Balcony and Windows is really great (lake view, greenery, beautiful mountains), but in reality your flat might be on the other side of the project, which has all the old buildings and has a crowded road (may be after some years) and you will not get the same view which you saw in sample flat. This is because the sample flat is created first and the location chosen for it is well planned and for the purpose 🙂
  • The furniture used in the sample flat is very expensive and promises high lifestyle. Imagine 5-6 lacs worth of Sofa set, whereas you will buy only 50k worth of sofa in your case.
  • The walls will have beautiful paintings which most of people want, but cant afford .

Tip – This startup called ArtSquare sells ART and Paintings at affordable price to common man. Boy! , they also have the feature which shows you, how it looks on the wall. check out this example.

Difference between Sample flat and real flat

What to do ?

Incase of under-construction property, you cant do much, you can only rely on the builder words and do some research on how truthful they are by talking to their old project buyers (actually go there, and talk to some flat owners about their experience). Before booking the flat, you need to get all information from builder on the materials going to be used, which brand they will be, what kind of wall paint , which fittings ? which wires ? what kind of tiles ? everything in detail ! .

Note that, you are going to get unfurnished flat, and then you have to put everything from fan, AC, bed, sofa and everything else you have at home. So its important to check out the unfurnished flat apart from sample flat, but its possible only when you are buying a ready to move in property. Check out this debate on Under construction property VS Ready for Possession Property if you are considering which is better than other.

Conclusion

As buying home is one time decision, its always better to be more present (physically and mentally) to reality and not take the decision in hurry. Sample flats are not reality and you have to get that. You also should control yourself and your family members emotions (a lot of real estate buyers complain that ladies fall for the beautiful looking flats and get excited by beautiful wall colors, premium kitchen and the wall texture giving wow-experience and then do not comeback to reality from the unreal world they reached after looking at sample flat. Slow down and take the right decision.

I want to hear your views now ! . Have you seen sample flats in past or recently ?

Now you can Buy all 3 Jagoinvestor Books in Ebook Format

Posted on by Jagoinvestor

Me and Nandish were deligted yesterday when we got an email from our publisher CNBC18, that all our 3 books published with them is now available in ebook format at flipkart. So all those who wanted to buy our books in digital format and read it on their smartphones, tablets and even PC , its now possible. Note that very soon the ebook version might also come on Amazon (kindle), Infibeam and other platforms, but it will take time and is only expected (no guarantee)

All our books are doing well good and readers are appreciating them a lot. You can read the reviews for all books on flipkart.

How to Buy the Book in Ebook Format ?

Step 1 – Buy the Book on Flipkart

Go to book page on flipkart and make the payment for the book. You will have to be Logged in while buying the book because the ebook gets stored in your account in “My Library” section. Below are the links for all the 3 books (Book 1 , Book 2, Book 3)

Here do our book readers say (Titles from the reviews from our 3 books) !

  • Must read for beginners to personal finance
  • A Brilliant Book To Kick-Start Your Financial Planning
  • Excellent if you want to know how to take care of your finance
  • Great Insights for achieving Financial Freedom
  • A book written in a very simple language but its results will be humongous
  • Teach a man to fish and you feed him for a lifetime!!
  • Book that not only makes you think, but also provokes you to take action instantly!!!
  • A Must have book for anyone who earns and wants to accumulate wealth
  • Awesome, must read action book on personal finance!
  • Transforming Your Relationship With Money & Achieving Financial Independence

Step 2 – Download the Flipkart eBooks App on your Phone/Tablet

Step 3 – Login to your flipkart account on your app and download the ebook

You can then log in to your flipkart account and go to “My Library” section, where you will see all your ebooks purchased and then you can download the book on your phone and start reading (Note – you can also download the ebook on some other phone where the app is installed)

Read more FAQ here

Read the Sample of the Book

You can also read the sample of all the ebooks on your app. It will give you access to some starting pages of the book which you can read and get the feel.

Why to buy the Ebook instead of Hard Copy ?

Reading a book in hard copy format has a very different experience than reading it in ebook format, both have their own pros and cons. Here are few reasons why some one might want to buy our books in ebook format.

Reason 1 – Because it stays with you all the time on the go , you can open your tab/phone and start reading it from the point where you left it last time.

Reason 2 – If you are an NRI, staying outside India, it was really a tough job to get the book in hard copy. Now with ebook version available, you can just order it and start reading it on the fly!

Reason 3 – No waiting time or delivery charges . Books less than Rs 500 worth have delivery charges of Rs 50 on flipkart. you dont have to pay that.

Let us know if you have already read our books and learned lot of things please write the review on flipkart also. Also we would like to hear from you ! . Also let us know if any questions !

How to use NEFT or RTGS facitlity even if you dont have Internet Banking

Posted on by Jagoinvestor

I have already written about NEFT and RTGS sometime back and how does it work exactly. However today, I want to share about using NEFT and RTGS transfer offline in bank branches. Even in today’s time, if some one has to send money from one account to another account, they use cheques and demand drafts. Even you can see a lot of people withdrawing cash and depositing it manually in other bank account. They are mostly people who had seen the banking era of 80’s and 90’s.

NEFT and RTGS transfer from Bank Branch

It might be your parents or uncles or anyone older !. And when you tell them they should have internet banking which has NEFT and RTGS facilities, they do not want to embrace it. But do you know that one can also use NEFT and RTGS facilities even offline by going physically to bank branches.

NEFT/RTGS are processes

NEFT and RTGS both of them are just a process/technology. Its just another fact that they are also provided as features in your internet banking account. If someone wants to transfer money from one account to another, one can always visit the branch in person and put a request to transfer money via NEFT or RTGS .

All you need is to fill up a NEFT/RTGS form (sample below) and all the details like Sender Account Details, Beneficiary Account details, amount to be transferred and IFSC code of the beneficiary branch. Then the Bank officer will punch these details on the system and the transfer will be initiated just like it happens online.

NEFT RTGS form

Incase you want to do a instant money transfer (not exactly instant, but can take 30 min to 1 hour) , you should be doing a RTGS transfer. One important point to remember here is that, if the amount is above Rs 2,00,000 , you would need to give a cheque leaf with the RTGS form, as part of the rules, but even if you don’t have cheque book with you at that moment – the bank generally arranges for a temporary cheque book in your name.

Recently I had to transfer some money from my wife account to my bank account and we asked for RTGS transfer, which was done promptly and the money was transferred in 10 min to my bank account.

The only pre-requisite for NEFT?RTGS transfer is that

  • Originating and destination bank branches should be part of the NEFT network
  • Beneficiary details such as beneficiary name, account number and account type, name and IFSC of the beneficiary bank branch should be available with the remitter

Charges for NEFT/RTGS at bank branch

RBI has not set any predefined charges, but banks are allowed to charge it as per their decision. Generally NEFT Transactions upto 1 lacs are not charges by many banks (like Central bank of India) , however some banks can charge for it. But for RTGS they generally charge anywhere from Rs 5 to Rs 50 depending on the amount. Higher the transfer amount, higher the charges.

So next time, if you meet someone who wants to transfer money by going to branch, tell them the option for NEFT and RTGS transfer via their bank branch.

Everything you should know about Breaking your Fixed Deposits before Maturity

Posted on by Jagoinvestor

Today let me share the procedure and some points regarding the premature breaking of your fixed deposits. We have seen, that due to the ease of creating fixed deposits online, more and more investors create them if they are not able to find the right purpose of their surplus money and then in case of emergencies, they have to break their fixed deposits prematurely.

are you thinking of breaking you fixed deposits before maturity? here is the procedure

Procedure for Breaking Fixed Deposit Before Maturity

Now the procedure for breaking the fixed deposit is fairly simple and much faster. However, the whole procedure can vary across PSU banks and Private banks. The procedure can also vary if you take into consideration online vs. offline

When you create a Fixed Deposit or Recurring Deposit, the bank sends you Deposit Certificate or receipt after some days of opening it (In case of many PSU banks, you need to collect it manually by going to branch). This is just a receipt or a proof of deposit. Now you can carry this deposit certificate to branch and ask the bank official to break your FD, they should be able to process your request.

However in case you do not have the deposit receipt or have lost it somewhere, you don’t have to worry much, in that case, you will have to give them a letter or fill up a premature FD breaking form available at the bank branch, read further to know about it. Read about Requirement of Fixed Deposit on Opening Lockers here

Online Procedure of Breaking Fixed/Recurring Deposits

A lot of banks allow you to open create fixed deposits online from your net banking account.  I have seen that most of the private banks allow you to break your fixed deposits online itself, all you need to do is go to “service request” section of your net banking and you will see a section where you can break the fixed deposit before maturity.

In ICICI, when you go to “service requests” section, on the right-hand side you can see “Fixed/Recurring Deposits related”, you can go to that section and choose “Premature Closure of Deposits” and then choose the FD/RD number and cancel it.

Your request will be processed in the next working day and you will get the money in your account. Check the screenshot below which shows you that.

Breaking Fixed Deposit before maturity Online

Offline Procedure of Breaking Fixed/Recurring Deposits  by visiting the Branch

A lot of PSU banks do not allow breaking your Fixed deposits or Recurring Deposits online. You will have to visit the branch itself and manually break it. Here is what you need to do

  • Step 1 – Write an Application mentioning you want to break your FD/RD, mention the Deposit Number and account number where it should get credited. At times, you have to fill the premature FD Breaking form available at the bank itself. In almost all the cases, the fixed deposit is broken instantly, the bank official must be able to do it with a click of the button.
  • Step 2 – Attach an ID proof (PAN etc). Private Banks have the Xerox machines inside the bank itself, so you just need to carry the original id proof and they will help you with the photocopy.

Below is a sample letter stating wish to break the fixed deposit or recurring deposit prematurely.
Breaking Fixed Deposit or Recurring Deposit Letter

Do I need to pay fine on Breaking Fixed Deposits before maturity?

When you break fixed deposits prematurely before maturity, you will not get the same interest rate offered originally. You will get the interest rate which is applicable for the tenure you actually ran the FD for. For example, suppose you opened the FD for 1 yr originally, and the interest rate offered was 9 %.

Now if you closed the FD in let’s say 3 months, and if the interest rate for 3 months FD was 7%, then you will get only 7% interest for the period of your fixed deposit. Also in several cases, there might be penalty charges which are nothing but another reduction in your interest rates.

Like the bank, rules can say that if your FD was opened for 1 yr, and if you break it before maturity, you will get 1% less interest than offered. Many a time, there is no penalty for short-term fixed deposits.

Best practices before you create Fixed Deposits!

  • If you already have few commitments in near future, avoid creating long-term Fixed deposits, create short-term FD’s
  • Instead of creating one large FD (example 5 lacs FD), better create 2-3 FD of small amounts like 2 lacs + 2 lacs + 1 lacs. This way if you need a partial amount (let’s say 3 lacs or 2 lacs or 1 lac), you will be able to break the FD’s partially. It won’t affect the full amount
  • You can take a loan against Fixed Deposit or overdraft against your FD.

Some Important points to know

  • There is various kind of fixed deposits products, at times there are fixed deposits which also allow you to withdraw the FD money instantly through Debit Card itself, like for example Kotak bank Flexi-Deposit.
  • Also, if your fixed deposit is under Sweep In Account, then you should be able to withdraw the money instantly without manually breaking it, read more about the sweep in accounts here.
  • For some banks fixed deposits (private banks mostly), the some FD’s get broken if you issue a NEFT/RTGS transfer to some bank account. Like if you have a 2 lac FD in Kotak Bank (Flexi deposit) and if you transfer Rs 2 lacs in another account through NEFT/RTGS/IMPS, then the transfer happens and the FD is broken.
  • In the case of companies with a current account, company seal will be required along with signatures of partners.
  • In worst cases, your Fixed deposit breakage might require some approval from the main branch, but it should not take more than 2-3 days in worst to worst cases.

Share your personal experience about breaking the Fixed Deposit in the comments section if any!

4 FAQ’s about Investors Bootcamp Answered – which might be stopping you from joining !

Posted on by Jagoinvestor

Its only 5 days left for our investors bootcamp and we got some interesting questions from some our readers regarding Investor’s Boot camp that we are starting from 12th August. It is possible that you might be having same questions in your mind and so we thought of compiling questions for all. The concept of investors boot camp is new and it is perfectly fine if you have doubts or queries.

4 FAQ’s about Investors Bootcamp (Only 5 days LEFT)

Question 1 – I am a procrastinator by nature. If only I wasn’t a procrastinator, I know I could be a STAR Investor. I’m on jagoinvestor  from many months and I also follow other blogs on personal finance, I know I should be buying adequate life cover and health cover and be more goal driven but I am failing at taking actions. Can this boot camp be of help to me as an investor. I trust you guys fully and paying 4k is not an issue for me.

Answer:  “This boot camp is designed for procrastinator and for those investors who are struggling to take actions in their financial life. As a boot camp participant we will assign you simple actions every week and you will be reporting directly to us and we wont tolerate any kind of casualness from any participants. We are going to be extremely demanding and direct with all participants and will make sure you get strong on the action part. This boot camp is an opportunity for you and so don’t miss it.”

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Question 2 – I am kind of person who will do a lot of research and always find myself in “Crossroad situation”. I am always confused as I have more than one option in front of me. I want to get out of my research mode and want to take many actions. Will this group be of help to me. Please send me details

Answer: The problem you are facing is faced by many investors. Investors are getting drunk on information on the name of investor education which is dangerous from wealth creation point of view. As boot camp participant we won’t dwell into intense intelligent discussions. We won’t over load you with more information. We will simply ask you to do X every week and you will complete X actions in your financial life. Let’s make things simple and do what is required to live a good financial life

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Question 3 – I am very new as an investor and I have no personal finance knowledge. I have bought one of your books but still have not completed reading it. I am into job from last 1 year and want to start investing. Can this boot camp help me?

Answer: This boot camp has to be seen as a strong starting point. It does not matter whether you are new or an experienced investor. The content of each week will be generic and something that will be useful to all kind of investors. We will provide you with a structure and an environment where you will start to think and act in your financial life. We will help you to plant right seeds in your financial life that will be of help to you. We look forward to serve you.

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Question 4 – I am still not clear how a boot camp can happen on a facebook group. I mean how will you guys help so many people in taking actions. The group will have people from different backgrounds and age level. I want to join and I know when you guys come-up with something it will be high on value but can you throw some light on how will you manage this boot camp. Thanks in advance

Answer: This is a very good question. The beauty of this structure is it’s simplicity. Anyone from any location can be a part of this boot camp. We have chosen facebook as most of the people have facebook account. This is new and first of it’s kind bootcamp but we will make sure that participants will create immense value. Every Monday we will upload one action sheet (Excel based) and will post weekly actions for all group members and on Saturday people will report their results.

The actions and material provided will make action taking extremely simple. We do not intend to create great investors in this boot camp but we want make better investors. Investors who are busy and want and extra helping hand in their financial life. In past we have done such groups for advisors community and we know the dynamics of how to help people move forward as a group

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Even after reading these questions you have any further doubts or questions feel free to write us. We will be more than happy to answer your queries. And if you are clear this boot camp will be of help you click here and complete your registration. We invite all the readers to be a part of this Investor’s Boot camp

Are you getting fooled and paying extra money on your restaurant Bills ?

Posted on by Jagoinvestor

Do you know that you might have lost thousands of rupees in paying extra money on restaurants bills over last few years, just because you do not understand what does service charge, service tax and VAT actually means and how are they calculated. Most of the times customers take it for granted assuming that hotel must charged it in right manner and as per rules laid down. Lets learn about these 3 concepts today so that next time you pay a hotel or restaurant bill, you exactly know what you are paying for and raise your voice if something is wrong.

When the Bill Arrives

Just before the bill arrives, I have this habit of running “guessing competition”. Whoever is with me, I ask him/her – “Guess, what would be the bill amount be around ? Give the range , whoever is close wins !” .

Almost all the time I am very close to the actual amount, but then I am not close to the final amount to pay, because I always forget to consider various tax and charges applicable, which always inflates the bill by 20-30% . Imagine you eat worth Rs 1,000 and pay Rs 1,260 finally ! . You know that feeling :).

So if you look at your bills when you eat at hotels and restaurants, you will see 3 kind of charges namely “service charge” , “service tax” and “VAT” . Lets decode them one by one and see what exactly they are

Service Tax and VAT on Restaurant Food bills

1. Service Charge

Service Charge is a charge levied by restaurant for the service provided to customers. This is generally 5%-10% of the bill and restaurant owner is free to charge whatever amount he/she wants as service charge. Its up-to you to decide if you want to eat there or not. The service charge has to be displayed in Menu, only then it can appear in the final bill. If you do not see it on Menu, it means it was not communicated to you and you cant not be charged service charge.

Service Charge at Barbeque NationActually service charges are to be distributed among waiters and staff and its kind of compulsory “tip” to be paid. So if there is service charge on the bill, you are not suppose to tip officially to any one. So don’t feel awkward not paying the tip, because you have already paid it in form of service charge, however most of the hotels and restaurants never tell you this explicitly. However one of the exceptions I know is restaurant called “Barbeque Nation”, I could clearly see it was written in their menu that “We will levy 4% service charge on the final bill, and you are not suppose to tip any one (strictly prohibited), because service charge will be shared among the staff” . The ethics quality was as high as their food quality 🙂

So if your food bill is Rs 1,000 and service charge is 10% , then your final bill will be Rs 1,100 .

2. Service Tax

The important thing, you should be aware about is how service tax is calculated! . Do you know that, Service tax is only applicable on 40% of the bill amount, not the total amount. As the service tax is around 12.36% at the moment, the final tax you need to pay is only 4.944% (12.5% X 40%) on the bill (inclusive of service charge).

The next important thing you should know is that, only AC restaurant can charge service tax. If there is no AC in restaurant (fully or partially) , they cant charge service tax at all. This service tax goes to Govt of India. The service tax is payable on the bill amount + service charge. So if Bill amount is Rs 1,000 , and service charge was Rs 100 (10%), then your sub total would be Rs 1,100 . And your service tax will be computed on Rs 1,100 (not Rs 1,000).  4.944% of Rs 1,100 will be Rs 54.38 and your total bill after service tax would be Rs 1154.38 . A lot of unprofessional and small restaurants are found to charge service tax on the full bill and most of the customer pay because they have no idea what is wrong and what is right. Here is official Note on service tax

Note – On 3rd Nov 2012 , Bar Council by mistake interpreted that service tax is to be paid only on service charge, and it starting circulating over facebook and emails. But note that it was a mistake and later clarified that service tax is to be charged on 40% of the bill amount also. So dont fall for wrong information . Even some one posted it on our jagoinvestor forum and I myself believed it to be true !, but later decided to investigate it.

3. VAT – Value Added Tax

VAT is Value added Tax collected by State Govt. VAT is only applicable to the food items which are prepared inside the restaurant, because they “added some value” and then hand it over to you. So make sure you do not pay it on packaged items which are not prepared by Restaurant like Packaged food items, water bottles etc. A lot of times you eat at restaurant and also take a lot of packaged items, in which case VAT should be applicable not on final bill, but only sub total of the food items you consumed.

VAT Charges vary from state to state, but generally lie in the range of 10% – 15% . Like in Maharashtra its 12.5% , and in Karnataka its 14.5% . VAT is to be charged only on the main bill + service charges. It CANT be charged on the amount after service tax. So in the same example we looked about, the final bill after service charge was Rs 1,100 , so VAT at 12.5% will be Rs 137.5. Now total bill amount would be

  • Food Bill – Rs 1,000
  • Service Charge – Rs 100
  • Service tax (4.944% of 1,100) – Rs 54.38
  • VAT (12.5% of 1,100) – Rs 137.5
  • Total – Rs 1,291

29% higher Bills compared to Cost

You can see how various charges and tax can increase your final bills by 25-30% . So next time you pay your bills, just make sure your check, if all the taxes and charges are computed properly and as per rules.

Any personal experiences ?

20 terms which will Super Charge your Real Estate knowledge !

Posted on by Jagoinvestor

The biggest tool an investor has is knowledge on his side. But when it comes to real estate, we can see a lot of investors do not pay a lot of attention to smaller details which can create big problems for them. Today I want to hand over to you a real estate terminologies toolkit, which will explain various things to you in most simple and shortest way. When you go out to buy your home next, you will not need anyone on your side to have conversation with the builder and you will give him the feeling that you know more than him. It should help in someway.

Real Estate Terms and Termninologies

18 terms which will super charge your Real Estate knowledge

Here are those 18 terms and terminologies.

1. Carpet Area – When you buy a flat, you actually area on which you can lay carpet is called as “carpet area”. Note that builders advertise the property based on other parameters, but as a buyer this is what you are going to actually use for next many decades. Higher the Carpet area, better space you get.

2. Built up area – Built up area is the area which covers Carpet Area and the Walls and doors . A good 15-20% of space goes into walls and doors and your super built up area is generally 20% higher than carpet area. Ideally the rate quoted by builders is based on “built up area”.

3. Super Built up Area – A lot of times you will come across a term “Super Build Up area” , which is nothing but built up area along with all the space common to all the residents of society like Corridors, staircases, parking area etc . So Super Built up area is higher than Built up area. A lot of builders also use “super built up area” to advertise the projects which gives an artificial picture of property. Never rely on that

4. Sub-Registrar Office – For Registrations of Properties, there is an official department called “sub registrar office” , you can visit it to get your properties registered and also obtain any legal documents related to properties and land. If any officer tells you to “pay for Chai Pani” there, tell him you are filing a RTI and putting his name in the application for the “request” he made to you and ideally he behave properly with you. Note that you can get sub registrar office address online. Example – for Delhi its here

5. Capital Gains – When you sell a property after 3 yrs, the amount of profit you make is called “Capital Gains” . Tax will be applied on this Capital gains after applying Indexation. Also you can avoid paying this tax if divert the profits part in another property or another way of saving tax on that amount is investing in NHAI or REC bonds.

6. Encumbrance Certificate –  Encumbrance Certificate is an evidence of free title or ownership of property. This document clearly tells you if there is any legal or monitory dues on property. So if you are going to take a home loan against a flat, bank will need Encumbrance Certificate to be sure that there is no other loan going on for the same property. You can get the Encumbrance Certificate from the Sub-Registrar Office (where registration of properties take place). You can ask for upto 30 yrs of data (if available) . It takes around 15-20 days at times to get it after you have put a request to get encumbrance certificate . Read more about Emcumbrance certificate here

7. Title Deed – A title deed is a legal document used to prove ownership of a piece of property. So if you are buying property from Mr. Manish Chauhan, make sure you check the title deed. Title deed is something which you can get from Registry office of the concerned jurisdiction. Title deed is something which one must always obtain and check if you are buying an old property, because at times land and property is owned by some one old and children claim that its in their name just to speed up the process, but at times it gets ugly later. Important Tip – Never rely on Xerox Copies of the Title Deed, get it examined in original because sometimes the seller might have taken a loan and given in the original deed to lender (and does not tell you about this) .

8. Stamp Duty – Real Estate Stamp Duty is the tax collected by Govt . The stamp duty payable differs from one state to another. In some states its 3-4% and some has it at 8% also. The Stamp duty is payable on Agreement Value. So a lot of times buyers and sellers do the property agreement at lesser value and involve black money in the transaction. Its important to factor in stamp duty cost as per of your home purchase plan, because its quite a huge amount . For a Rs 50 lacs property, it can be in range of Rs 2-3 lacs. Important point is that women in many states have to pay lesser stamp duty compared to men.  For instance, in Delhi, a women need to pay a stamp duty of 4% compared with 6% for men. Thats 2% saving and for a 50 lacs house, its a saving of Rs 1 lacs” .

9. Franking Charges – When you go for home loan, there is a small charge called as “franking charges” paid you buyer to Bank . Franking (incase of real estate transaction) is actually the activity to stamping a document which proves that the Stamp duty has been paid to govt. Its an official seal kind of thing which is to be done in sub-registrar office for a small fees (Few Hundreds), this is done by the bank and they collect those charges from buyer.

10. Registration Charges – Just like you pay Stamp Duty, you also pay Registration Charges when you register the property in your name and the charges again depends from state to state . In Maharashtra, the registration charges are 1% of property or Rs 30,000
whichever is lower.

11. Gift Deed  – Generally you “sell” the property in exchange of money. But when you have to transfer the property rights to some one without taking the money like what happens in families, then you should to pass it on as GIFT and a Gift Deed should be prepared to document the process. Note that Stamp duty is to be paid even if the property is transferred through Gift Deed. Learn more about income tax on gifts here

12. Power of Attorney – A lot of times you will find that someone is trying to sell you land or a flat, based on power of attorney, which is a legal way of transferring your rights to someone else. But Supreme court has now banned all the real estate transactions based on power of attorney. So next time someone tells you that the owner of land is outside India and hence assigned him power to sell the flat, do not get fooled, only deal with someone with clear title deed.

13. Sale Deed – A sale deed is one of the most important legal documents in a purchase or sale of a property. Once its signed by the seller and buyer only then the sale is assumed to happen legally. The registration of property and stamp duty payable is based on sale deed only. A sale deed will also contain property details , measurements and other important details.

14. Service Tax and VAT – Service tax needs to be paid only for under construction properties untill complition certificate has been obtained by builder. Because till the flat is under construction, its regarded as “service”, so service tax is applicable (3.09% at the moment). But once the construction is over and complition certificate has been obtained by Builder, then the property like “goods” , where the service tax is not applicable. In the To be Paid for Under Construction Flats. VAT again is applicable for under construction properties, but only in those states where state govt has asked for VAT. Not all states have VAT applicable.

15. Conveyance Deed – Conveyence Deed is a legal document which a builder executes in order to transfer the land title to Housing socities formed. This is generally done once all the flats are sold in a project. This step is extremelly important because if this is not done, the title of land still remains with Builder and incase in future something happens, there is unnecessary legal battles. So make sure that once the society is formed, the conveyance deed is executed.

16. Completion Certificate – Once the project is completed, the local authority visits the site and inspects the construction and various things and awards completion certificate to Builder. so Completion Certificate is kind of certificate from local authority, that now the work is complete. This is the moment a builder can officially declare about the project completion. There still can be few last minute things which might need to be addressed.
17. Possession certificate – Possession letter is issued by the Builder which is actually the official permission to take possession of property. Generally its given to those who booked property during under construction. If its a ready to move in flat, the sale deed is enough and will work just like possession certificate. Note that a builder can give possession certificate only after he has obtained completion certificate.

18. Ready Reckoner Rates or Guidelines Value – For each area, there is a official govt defined rates for property which acts like the  base price. The minimum registration and stamp duty charges has to be on those guidelines value. Builders generally charge premium over these guideline values . Read more here

19. FSI (Floor Space Index) – It is the ratio specified by local authority (generally municipal corporation or urban development authority) which governs how much area one can build over a specific plot of land. i. e. if FSI for an area is 2 and you have a 1000 sq ft plot, you can build (2 X 1000) 2000 sq ft building over it. Generally, common areas like staircase, lift, passage leading to the flat door, service ducts outside toilets and kitchens, etc. are not considered in this 2000 sq ft FSI area, which means, you can construct these areas over and above the permitted FSI area. At macro level, this magic ratio called FSI determines how much construction will come up in a city.

20 – OC (Occupancy Certificate) – Well, generally CCs (Completion Certificates) are issued by municipal corporation in stages. i. e. a 25 floors high building may be issued CC for every 5 floors depending on its design. However, building is considered to be ready-for-occupation after builder has not only completed the construction but has also made it habitable by bringing in all services like electricity, water supply, drainage connection and fire fighting facilities. The corporation, after receiving NOCs from all concerned dept. will issue OC. Ideally, builder should / can issue Possession Letter only after receiving the OC. In reality though, several (not few) buildings have OC even after years of completion and being occupied. Buildings not having OC have higher outgo towards water bill, electricity charges and property tax.

Thanks Mehul for adding last 2 points as contribution

Please add more terms

If you are aware about some other thing which you have come across or feel can be added here, please add it in comments section.

Also let us know if you feel like a “pro” now in real estate terminologies or not ?