Tag: Beginner Level

What is Systematic Transfer Plan (STP)

Posted on by Jagoinvestor

Imagine a scenario when you want to invest a big lump sum amount in stock market ? As markets are volatile and can go up or down very soon , there is always risk of loosing a big chunk of your investment (Learn about Stock Markets) . Take a case where you want to invest 10 lacs in Equity Mutual funds and suddenly market crashes for next 2 months, In this case a big chunk of your investment will be lost, on the other hand if market moves up pretty fast, you can make a good profit. Here you have to decide your main focus. If it’s minimizing risk and getting good decent returns in long-term, You should use something called Systematic Transfer Plan (STP) .

What is STP (Systematic Transfer Plan)

You should first understand SIP . SIP is way of investing in Mutual funds monthly, where a fixed amount of money goes from your Bank Account to Mutual funds, so if you do a SIP of 1,000 for 1 yr, it means that every month on a fixed date (chosen by you) 1,000 will be invested in a Fixed Mutual fund you choose. Lets understand STP now, In STP we invest a lump sum amount in some Mutual Fund and then a fixed sum is transferred  from that mutual fund to another mutual fund .

How does Systematic Transfer Plan works (STP)

For Example : If you have Rs 6 lacs lump sum to invest and you want to invest in HDFC Top 200 , The steps you will have to follow are :

  1. Choose a good Debt fund or Floating Rate Mutual Fund from HDFC , which allows STP to HDFC Top 200 .
  2. Invest all the money in the Debt Fund .
  3. Now you can start a 10k/20k/30k  per month STP from HDFC Debt fund to HDFC Top 200 .

Why and When to use STP

When will it work : STP will make sense from DEBT -> EQUITY when markets are mayvery volatile and you dont want to take risk with your money in a short span of time, If you invest through STP in markets and markets fall or have lots of volatile moves, then this situation will be better than the one time investment option. This is still better than putting money in Bank and doing a SIP, because at least you money is earning some returns on debt part in STP .

When will it not work : Incase markets are already at the end of a Bear market and markets can starts it upmove anytime, in that case STP will not deliver the best returns like SIP, one time investment is a good choice in that case. But then you never know that when will markets start go up. Given that a retail investor does not have all the tools and time to research the markets, it’s not advisable to invest lump sum in any case. It’s better to get 4-5%  less returns than to see a huge downside of your money in short time, Smart investors think about returns, Smartest one’s take care of risk first .

Understand How to time markets using Nifty PE analysis

Difference between SIP, STP and SWP

  • SIP : The way SIP works that your money is in your Bank Account and every month a fixed sum is taken away from your Bank and invested in a Mutual fund .
  • STP : The way STP works is, all your money is actually invested in a Mutual funds itself (probably Debt) and units are sold every month and its invested in another Mutual fund (probably Equity) or vice versa .
  • SWP : However If you redeem your units in mutual funds every month and get it deposited in your Bank accounts , it’s called SWP (systematic Withdrawal Plan) , which is recommended to liquidate your mutual funds corpus after you see a good bull market to protect your investment .

Difference between SIP and STP

4 advantages of STP

STP has 4 advantages and works in 4 ways for you . They are :

Works as SIP : You can invest in a Debt funds and from there you can start a STP to an Equity Fund , so it works like a systematic Investment Plan (SIP) .

Works as SWP : So STP can also work like SWP, because with some funds you can do transfer from Equity funds to Debt Funds, so when markets look risky to you, you can start a STP from Equity -> Debt funds, which will act like SWP .

Liquidity : Generally one does STP from Debt -> Equity funds, so your money is invested in Debt fund. This means you can sell it anytime if you want. Hence it works like a Emergency Fund also. Incase you need money urgently, it can act like a liquid asset (at least for the time being in the start when you have more money in Debt fund)

Growth in Money : Not to forget that your money is invested in Debt funds, so your money is also growing at debt returns , at least the part which is lying in the debt funds .

Some Helpful Tips

  • Invest in ELSS , If you want to invest in ELSS schemes and have lump sum money , better put it in a debt funds and do a STP .
  • Rebalance your portfolio, Use STP as a tool to rebalance your asset allocation, when your equity part goes up , start STP from Equity-Debt for 6 months or 1 yr, and bump up your debt part and if your Debt part goes up, do Debt -> Equity STP . Power of Asset Allocation and Portfolio Rebalancing
  • Take advantage of market condition , If markets have gone too high now and every other person on the road is talking about Stock and stock markets are more famous than “Saas Bahu” Serials, immediately start your STP from Equity to Debt (literally Rush) . On the other hand when markets are deep down and “Why don’t you buy stocks” is feels abusive and everyone face looks like some body has died at home when you mentions stock markets, know that it’s a time to start a STP from your Debt – > Equity (Literally rush again) . You don’t need to see any indicators to predict the markets, the two real life scenarios I have described here are enough, try to remember markets around 2007 End(bull market) and Jan 2009 (markets lowest point) . STP can be used as switching mechanism in ULIP , though it’s very restrictive and with less choices .
  • Using STP when an important goal is near, If you are saving for some important goal like Child Education , Buying Home or Retirement and your goal is approaching near by , don’t wait till target date , you don’t want to see your Money dip by 40-50% within 6 months or so if markets suddenly crash , start moving your money out of equity and transfer it to Debt now through STP .

Two types of STP

There are two types of STP plans , Fixed and Capital Appreciation. In Fixed Plan means a fixed sum will be transfered to the target mutual funds , on the other hand in Capital Appreciation , only the amount of capital which is appreciated gets transferred , that was the original lumpsum amount invested in the start is protected . Capital Appreciation choice is only with Growth Plan and not dividend plan . Here is the list of all the STP Plans as of now .

 

STP Information

View more presentations from The Financial Literates.

 

Important Points

  • Typically, a minimum of six such transfers are to be agreed on by investors in STP , just like SIP
  • Generally most of the mutual funds allow Debt -> Equity STP and not reverse , Only handful of Mutual Funds like Kotak allows it .
  • STP is a facility for convenience , when the transfer happens from one mutual funds to another its still considered as selling of mutual funds and then buying another one , so tax rules applies in the same way .
  • Most of the funds allow only Monthly and Quarterly STP , some allow weekly and fortnightly also .
  • There can be some minimum amount requirement for starting an STP like say at least 1,00,000 needs to be invested in Debt funds to start a STP to Equity . Some restriction like this will be there .
  • There can be additional Switching Charges for availing STP facility
  • Entry load and Entry load may still apply while buying and selling of mutual funds through STP.
  • Securities Transaction Tax @ 0.25% will be deducted on equity oriented funds at the time of redemption or switch to another scheme in STP .

Do’s & Dont’s for filing your Income Tax Returns

Posted on by Jagoinvestor

With the tax-planning season about to end, most individuals are rushing around to make investments to minimise their tax liability.

And although, the last date for filing income tax returns is just a few months away (July 31), some of us are still unaware about the procedure and guidelines. Have a look at recent changes in the Income tax slab and how it affects the common man.

Income tax return

Q. I have a Permanent Account Number (PAN). Do I still need to file my tax returns?

A. Just having a PAN number does not mean that you have to compulsorily file your tax return. As per the Income Tax Act (1961), you are required to file a “Return of Income”, if your taxable income exceeds Rs 1.60 lakh for the financial year 2009-10 (Rs1.90 lakh in case of women and Rs2.40 lakh in case of senior citizens).

However, you need to have a PAN in order to file income tax returns. Read more

Q. What are the benefits of filing income tax returns (ITR)?

A. Filing ITR is really beneficial for an individual. Apart from the legal obligation, it is mostly required for purposes like:

  • Availing any kind of loan, like home, personal or education.
  • Visa and immigration processing
  • Income proof / net worth certification
  • Refund claims (in case of excess taxes paid)
  • Applying for a higher insurance cover
  • and ultimately, “Peace of mind!”

Q. How does one plan for better investments under section 80C ?

A. Section 80C is the most important provision under the Income Tax Act (1961). Making use of the available tax deductions can go a long way in helping individuals accumulate wealth.

Benefits of tax planning (for FY 2008-09)

Income (Rs) Tax Rate (%) Maximum tax savings

after 80C deductions (Rs)

Savings invested

@ 8% pa for 20 years (Rs)

Savings invested

@ 15% pa for 20 years (Rs)Upto Rs 1.50 lakh

Nil ———Rs 1.50 lakh to Rs 3 lakh101030048008168575Rs 3 lakh to Rs 5 lakh202060096016337151Rs 5 lakh and above 3030900144024505726
The amount saved in turns can be invested in various, in order to gain maximum benefits. Prime examples:

Case in point: Consider an individual, in the highest tax bracket, with a gross total income of Rs 6 lakh. If he chooses to ignore the tax sops available under Section 80 C, his tax liability will amount to Rs 87,550 (for AY 2009-10).

Conversely, if he chooses to make eligible investments/contributions of Rs 1, 00,000 under Section 80 C, his tax liability will be Rs56,650 i.e. a saving of Rs 30,900.

Look before you leap – Tips for better and effective planning of your investments:

Every tax saving investment scheme has inherent advantages and disadvantages; & each individual has to decide his investment strategy based on:

  • Lock-in period and safety of the investment
  • Return, before Tax / Return, Post Tax / Tax Free returns
  • Whether interest will be treated as fresh investment under Income Tax Act
  • Age and risk appetite
  • Liquidity, surrender charges etc.

Some tips to plan your finances better:

  • One should by default set aside 10% of his/her income;  Start living with your 90% of salary
  • Avoid waiting to invest a lump sum, at the last minute, as most of the times we tend to run short of money, resulting in a loss of tax benefit, besides the savings and long-term capital appreciation.
  • Last minute decisions mostly result in investing in unwanted and futile schemes
  • Use ECS / Direct Debit facility offered by the bank for investments; this will help you invest, without fail, regularly.
  • Invest monthly or quarterly as it provides long term capital appreciation
  • Monthly or systematic investments also provide a check against market volatility

Watch this video to learn everything about Income tax return:

Q. Since tax is already deducted from the salary well in advance as a TDS, then why does one need to file Income Tax Return?

A. Although tax has been deducted and there is no further liability to pay tax, an employee has to compulsorily file his/her income tax return if he/she exceeds the maximum amount, not chargeable to tax.

It is, in essence, a declaration to the income tax department that you have derived only income from salary and not any other source (if you do have income from other sources, then the same needs to be incorporated).

Note. Many a times, employees do not include the interest that they receive on their savings bank account. The entire interest earned on the savings bank account is taxable.

Q. Can you please explain the complete procedure to file ITR?

Step 1: Gather all the necessary documents.

These are:

1. Form No. 16: This is issued by the employer, stating your income from salary, and tax deducted by your employer from salary income.

Form 16

2. Form No. 16A: This is received from all the payers, who have deducted tax, while making payment to you, during the year. For e.g. banks and companies.

Summary of all bank accounts operated during the year: This summary will give an idea about all the interest income earned during the year.

Details of property owned during the year: If you have bought some property during the year and put it on rent, then you will need details of rent received and receipts of municipal tax paid during the year.

In addition to this, if you have bought such property through a loan, do carry the loan details and a copy of certificate of interest paid during the year.

Sale & purchase bill/documents/contract note in respect of shares transactions during the year: You will also need purchase documents corresponding to the sales made during the year. In case of a large number of transactions, it is advisable that you prepare a statement of sale and corresponding purchase of these investments and arrive at the amount of profit or loss, before actually calculating your taxable income.

Details of tax payments made during the year: This is required only if you have made advance tax or self assessment payment during the year.

Step 2: Select the proper income tax return form i.e. ITR, which is based on the nature of income earned.

FOR INDIVIDUALS: Form No. Applicability

ITR 1 Meant for Individuals, who have

a) Income from salary
b) Interest income
c) Family pension

  • ITR 2 Individuals/HUF not having any income on account of business or profession
  • ITR 4 Individuals/HUF having income from a proprietary business or profession

Step 3: To file your tax returns:

You can file your returns either Manually or Electronically.

Electronically: The Income Tax Department has introduced a convenient way to file these returns online. The process of electronically filing your Income tax returns, through the Internet, is known as e-filing of returns. This is a really convenient facility, since it saves you the hassle of traveling all the way to the IT office.

This facility is available round the clock and returns could be filed from any place in the world. It also eliminates reduces ‘friction’ between the assessee and tax officials.

Manually: For manual/physical filing, the individual takes a print out of the respective ITR form , from the income tax site, along with the acknowledgment form, and after duly filling it, files it with the respective income tax office. Forms are available free of cost too

Q. What are the documents required, which has to be attached with returns of income?

A. Under the new procedure, be it is electronic or physical filing, individuals do not have to attach any documents or enclosures with the return of income. However, one should preserve the supporting documents as they can be called for, at a later stage by an income tax officer to check the accuracy of the claims made.

Some of the documents are:

  • Detailed calculation of taxable income and amount of tax payable/refundable
  • Form No. 16/16A (original)
  • Counterfoil of all the tax payments made during the year
  • Copy of documents, concerning sale of investments and properties
  • The Copy of bank statements
  • Copy of proof for all the deductions and exemptions claimed in the return of income

In case of a refund, the bank account details needs to be filled in accurately. In case the refund is opted to be received via ECS direct into the bank account, adequate care should be taken to correctly fill in the MICR code.

PRECAUTIONS THAT ONE NEEDS TO TAKE

Filing returns at the eleventh hour often lead to a lot of inconvenience. Also Filing online, very close to the last day, is risky, as the peak load on the servers of the e-filing website during the last few days may make the whole online filing quite frustrating, causing needless delay.

Filing return after the due date, may lead to empty the pockets of the taxpayer who have incurred losses; which he wants to carry-forward to future years. Under the tax laws, some losses are not allowed to be carried forward for being set-off against future income, unless the return has been filed by the due date, even though all the taxes have been pre-paid.

Similarly, if a paper return is filed, the acknowledgement slip should be preserved carefully.

SOME TIPS TO AVOID LAST MINUTE RUSH

  • Step 1: Select and get the appropriate forms from the Income Tax site or offices
  • Step 2: If a professional is handling your taxes, meet him and make an appointment early before your accountant’s schedule gets completely booked. If you’re preparing your own taxes, set a day aside on your calendar for preparing taxes.
  • Step 3: Review your tax documentation before  submission
  • Step 4: You can file your returns offline or online. However, before doing so, check whether you still have a tax liability. If you are still to pay taxes, do so through Internet banking or through cash/cheque at any bank along with Form 280. In both cases, you have to furnish challan details in the income tax return (ITR) form.
  • Step5: Prepare your taxes. Now that you have all of the necessary forms and documentation, you can prepare your taxes without waiting for the last minute.

PENALTY FOR FILING RETURNS LATE

For details , you should look at the article  “How to miss your tax return filing deadline and still Enjoy”

Conclusion:

A little extra care, planning & precaution on the part of taxpayers can help them avoid committing mistakes, while filing the tax return and keep away, unwelcome visits from the taxman.

It was a guest post by Rishabh Parakh, who is the director of Money Plant Consulting

https://www.jagoinvestor.com/2010/01/how-to-miss-your-income-tax-returns-itr-deadline-and-still-enjoy.html

5 Logical Tips about Credit Cards

Posted on by Jagoinvestor

Credit cards are becoming increasingly common in India, and while they come with a lot of convenience, the high interest rates and other charges mean that you have to be careful about how you use them.

In this post, we look at 5 tips on wise credit card usage, and how following them, can save you a whole lot of financial heartache. These 5 tips are pretty logical & self-evident; we have to understand that the free credit we get from a credit card is not really free. It’s actually a business for Credit card companies and hence somewhere in the whole process, they have to have a way to make money .

1. Pay your balance in full: This one is so basic, I was not going to point it out at all, but on second thought – I realized that this should really be the first point. Of all the loans you take, credit cards come with the highest interest rates. If you run a credit card balance every month, then the interest charges add up really quickly. If you have a balance on your credit card, pay it off in full before the next due date. This ensures that you don’t pay interest on your balance, which really is extra money you can keep to invest and build savings for yourself.

Curiously enough, I know of people who don’t pay off their credit card balance in full, but at the same time, put their money in low yield investments. This is really bad math. If you have a credit card balance that is charged at about 30% per annum and an investment that gives you just an 8% return – you are much better off paying the entire credit card balance before you even think of investing your money. The extra interest you pay on your outstanding balance offsets any interest income you receive from your investment. If you run a balance, realize, it normally is a strong indication that you are spending beyond your means.  This is a bad financial habit that you should get rid of as soon as possible.

2. Avoid credit cards with annual fee: Unless you have a specific benefit in mind, from the credit card, don’t get a card that has an annual fee. It is always good, to get a credit card with no annual fee, because then the only expense you have on it, is the interest payment; and if you pay off your balance in full every month – you don’t pay any interest and your credit card will, in effect, be free! Add to that, the fact, that even most free credit cards have some sort of a reward program, you can benefit from. Why pay for something when you can get it free?

The other thing to keep in mind, while evaluating the fee, is how likely you are to benefit on it, based on your usage. I reviewed the HDFC Value Plus Cash Back credit card a few months ago, which had an annual fee of Rs. 700 and up to 5% cash back. At a cursory glance, it seemed to me that Rs.700 may not be very high due to the cash back, but a deeper look at the terms and conditions told me, that the cash back will only be credited to your account if the monthly balance is over Rs.10,000. I realized the card was not meant for people like me, who aren’t likely to run up such a balance on their credit card every month.

Bottom-line: If you are going for a credit card that has an annual fee – make sure you go through the fine print and are certain it will be worth the cost to you.

Credit

3. Get a credit card that is easy to pay off: I used to have an ICICI credit card and a SBI credit card. Both of them had similar features, but the ICICI card was really easy for me to pay off, as I had an existing ICICI Bank account, and the credit card was linked to it online. All I had to do, was go online, and pay off the credit card balance, through my ICICI login. As a result, I ended up using the ICICI credit card a lot more than the SBI one. Ease of payment, means that I can pay off the balance very often, very easily, and rarely run the risk of late fees or interest charges. While thinking of which credit card to apply for – consider just how easy it is, to make a payment on it.

This might sound like a trivial thing now, but you’d kick yourself later, if you had to pay late fees just because you lost your cheque book, or were too busy with your work to go to the bank and deposit the cheque. In fact, I’d go on to suggest that you add payment reminders on your email, phone or even a little post it on your refrigerator. Life gets busy sometimes, and a little help can go a long way in saving you late fee and interest payments.


4. Keep a track of your statement: A few years ago I went through my credit card statement online and saw that there were some charges from an unknown merchant. I was pretty sure, I had not bought anything from them, and I called up customer care to know what the charges were all about. I was put on hold for a long time, and couldn’t get through. However, the next day, I noticed that the merchant had reversed the transaction, and I even had a small credit from them.

While I was lucky in this case, there is no guarantee that credit cards won’t get abused. Always keep track of your monthly statement. If you can go online and check your transactions – that is even better, because you don’t have to wait until the end of the billing period. I go online every week or so and check up on my credit card statement to make sure no unauthorized use is happening.

5. Don’t use your credit card as an ATM: By this, I don’t mean that you shouldn’t use your credit card at the ATM, (although you should really, really avoid it as far as possible). What I mean is, there’s a tendency to withdraw cash from your credit card (since it’s so convenient) and that’s pretty addictive. Treating your credit card as an easy, reliable, access to cash will not help you in the long run. For one, the interest rates on cash withdrawals are generally much higher, and if you get into this habit, – you will run up high outstanding balances pretty quickly.

The cash advance limit, is also generally, a lot less, than the overall credit limit, so it won’t get you very far, anyway. The interest will keep adding up and grow very quickly. Withdrawing cash from your credit card should really be the last option. Usually, cash withdrawals come with some sort of cash advance charges, and more than that if you regularly withdraw cash from your credit card – again, it indicates a tendency to overspend and go beyond your means. This really means, that your personal finances are going down-hill.

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Read a Customer review on Mouthshut

I have saved all my friends by sharing my horrible experiences with ICICI Credit Cards.The customer care people are polite only till the greetings other wise they behave and speak like a criminal and very sarcastically. I have been using it for 2 years. But the customer care behavior problem is consistent. Normally I have been paying them always on time and the bill is normally above RS 5000. But once (3 months back) I had to go outstation suddenly and missed the pay date for first time for a day or two. The amount this time was also very low (maybe 1500 or 1800) as compared to other months bills. I suddenly started getting calls from a HORRIBLY SPEAKING customer care lady. When I mentioned I am travelling and will not be able to pay for another 2 days as my journey is a 3 day journey she started abusing and threatening me. She even mentioned that by tomorrow morning if I will not arrange for the payment she will send some one to my home for payment, when I said this is rubbish and she should not speak like this she started shouting and said “I will send someone and can do anything if not payed by tomorrow and reminded me that if I will not pick this call after seeing her number further she will be worse”. Is this is the way a bank should treat a long time and good customer? I have stopped using the card from that day. [LINK]

Credit Card Mistakes [Video]

Conclusion

The overarching theme of these tips is, “Get the convenience of credit cards for free.” That’s what it really boils down to.

To me, credit cards make shopping convenient and that is a big benefit, but at the same time, they also tempt me to go beyond my means, and then pay extra by way of interest. The key is to get the benefit of convenience but not have to pay anything for it. The above tips will help you do both, or at the very least – strike a balance between the two. What do you think? Have I missed out any obvious tips or is there something you’d like to add, based on your experiences?

POLL

What is your Spouse’s level of Understanding and Interest in Personal Finance ?online surveys

Comments please ? Leave your comment to provide another tip 🙂 and let us know what you think about Credit cards .


This is a guest post written by Manshu from OneMint. If you liked this post, please consider subscribing to his site.

Real Story about an Investor who Fought for 9 months with ICICI Bank

Posted on by Jagoinvestor

Can you fight back ? Really ? If you were taken for granted as a customer by some Bank or any institution and you were forcibly sold some product by officials at some Organisation assuming you are a weak customer who will not raise his voice and fall in trap , What would you do ? Will you have the guts and energy for fighting back and getting what you deserve ? Here is a real life Story directly from the customer who faced lot of problems from his Bank when He wanted to shift his Home loan from One city to another . Lets see in this article in his own words and find out how Officials in these big banks take advantage of customers situation to make money for them selves . See other Force Selling Examples

How it all started

I have two home loans, one in Delhi and other one in Pune and I wanted to go for a home loan ROI switch (conversion of higher rate of interest to an existing rate of interest). My prevailing ROI was very high for both the home loans so wanted to reduce the ROI, of both, by paying the processing fees. ICICI bank has a process where-in one can go for ROI switch by paying the processing fee. First, I went to the Pune office, as I am in Pune, in March 2009 and then visited the Delhi ICICI branch in May 2009 for the loan switch.

  • March, 2009 : ICICI Bank, Shivaji Nagar, Pune – The  officials asked me to buy a ULIP of 40K for the conversion. They changed my loan account number and took all the documents again as if I am applying for a fresh loan. They also took 1 month to process my loan switch.
  • May, 2009 : ICICI Delhi – The customer care executive asked me fill an agreement on a 50 rupee stamp paper, took the switch fee and all the formalities were done in record 80 minutes. He did not ask me for any other paper and my loan ROI was switched in 2 working days.

Read the process in detail here.

The ugly truth

ICICI Pune branch has forced me to buy a ULIP and took 1 month for the switch procedure where as Delhi has taken 80 minutes. ICICI home finance Pune in collaboration with ICICI Pru is duping customers. ICICI Pru people are simply forcing their policies on ignorant home loan customers. This is how ICICI Pru executives are achieving their monthly targets.

Just imagine if I would have only one housing loan and that too in Pune, I would have been blissfully unaware of this racket. They must have done it with many home loan customers in Pune.c

The Confrontation

I sent my first complaint letter to  ICICI Pune, heard nothing for weeks. Sent many letters to all the 3 level of escalation as described on ICICI website, still no response. Finally, I complained the banking ombudsman (See How to complain to Banking Ombudsman) View the full complaint timeline Below .

The Result

Due to the Ombudsman intervention I got my 40K ULIP premium back, but ICICI evaded the answers of my other questions and no action was taken against the two officers involved. I realized that ICICI is capable of dragging this to eternity so I created this blog and uploaded all the conversation which I had/ was having with ICICI. My blog created a lot of noise and after 9+ months few senior folks from ICICI finally decided to extend the support.  Finally my queries were answered and Interest loss was credited back in my savings account. I was happy to find the answers but also sad as it took 9+ months for ICICI to respond. I have sent a letter of appreciation to ICICI in the same regard.

The Lesson Learned

  • Never trust any bank official as they have hidden agendas behind their suggestions and make it a point to read all the documents carefully.
  • Never do something which is being pushed upon, always take your time. Remember if they are rushing you and want everything today, take your sweet time and do a research.

How to avoid such scenarios

If you have been asked to buy a ULIP for any loan related process, use any of the method below to get back your money.

Option 1 :

Resolution Duration : 9+ months
Pain, mental trauma, stress and harassment : High

  1. Send ICICI a complaint mail with all the relevant docs photocopy (I maintained the correspondence on a blog which served dual purpose)
  2. Send a mail to all the three level of escalations mentioned at ICICI website – this is just a formality as u need to give a proof of ur complaint before sending a mail to Banking Ombudsman. dont expect anything from ICICI as it is a sheer waste of time but you have to do it.
  3. Now send a mail to ICICI ombudsman with all complaint letter attached. Make sure you provide the complaint in the desired format.
  4. Send a mail to ICICI Pru Bombay, thru post and online, the ICICI Pru is very fast in resolving any dispute.
  5. Keep sending stinker mails to ICICI, well they not budge but you will feel good and light

Summary : Online blog will help u maintain the flow of sequence and the best part is that u will learn how to blog :-). Keep on following and one day someone will respond, in my case it took them 9+ months…..

Option 2:

Resolution Duration : 15 days to 1 month max
Pain, mental trauma, stress and harassment : NIL

  1. Go to the bank and agree to buy the ULIP in return of you loan related process.
  2. Give them ULIP premium cheque, get a photocopy of the ULIP docs/forms and the check.
  3. Take the visiting card of all the people who were involved in ur case (this is very important, if no visiting card atleast take their name, designation and mobile no.)
  4. Ater u have agreed to their demand of ULIP now make sure you get ur work done ASAP. Don’t give them any time get ur work done at the earlier. Be firm and be rude.
  5. Wait for the ULIP welcome kit
  6. Once you receive ur ULIP welcome kit, write a strong complaint letter to ICICI Pru telling them about the forced ULIP, the names of the people involved and your request of cancelling the ULIP. In all the insurance firms there is a freelook period of 15 days to 1 month during which u can refund the policy without providing any reason (but you must cite your reason in this case).
  7. Make sure your complaint mail is very strong. ICICI don’t respond to polite mails, they simply ignore them.
  8. Your ULIP money will be refunded.

Summary : This is a very simple way of getting ur work done smartly by complying to all the stupid rules set by ICICI or any other bank for that matters. Just agree to their demands and cancel the ULIP during the free look period.

Good luck and have a safe banking .

How Much Home Loan can you afford (please vote , Data will be used for future Article)

Comments , What do you think can be done to avoid these situations ? Are you aware of any thing like this in your real life ? Lets share our views on what are the different preventive and corrective measures which can be taken to avoid these kind of situation . Dont forget to praise the efforts made by this Guest 🙂

Note : Though utmost care has been taken while taking the information , Jagoinvestor do not take any responsibility about the information provided above.

New income tax slabs and its Impact on Common Man’s financial life

Posted on by Jagoinvestor

Finance Minister Pranab Mukherjee on Friday announced revised tax slabs for individual tax payers and also said that the New tax rates would offer relief to 60 per cent of taxpayers.

But looking at the below comparison between the tax payable last year and the proposed one it seems that the so called “Aam Aadmi”, the middle class would not be gaining so much tax benefits as there are absolutely no tax savings for the person earning up to Rs. 3 lakh p.a. and those who are earning up to Rs. 4 lakh would end up saving only Rs. 10,000.

income tax slab

New tax slabs would benefit greatly to the higher middle class as compared to the Aam Aadmi, though the additional investment of Rs. 20,000/- in the infrastructure bonds would provide some relief especially to those who are interested in traditional savings tools.

Introducing Saral-2 form back is a good initiative and would make it more Saral for the tax payers to file their IT returns without hassle as the current ITR are not easy for the taxpayers to prepare & file on their own.

In order to make tax compliance process more efficient two more CPCs (Centralized Processing Centre) are proposed to be set up apart from extending “Sevottam” a pilot project at Pune, Kochi and Chandigarh to four more cities in the year. Sevottam provides a single window system for registration of all applications including those for redressal of grievances as well as paper returns.

Long awaited increase in the limits for turnover over which accounts need to be audited is also enhanced to Rs. 60 lakhs for businesses and to Rs. 15 lakhs for professionals as compared to the existing limits of Rs.40 lakh and 10 lakh respectively.

Tax Slabs for 2010-2011

The basic threshold limit for income tax exemption will remain at Rs.1.60 lakh. Under the new proposal, 10 per cent tax will be levied between Rs.1,60,001 and Rs.5,00,000, 20 per cent on incomes between Rs.5,00,001 and Rs.8,00,000 and 30 per cent above Rs.8,00,000.

Apart from this you also get Rs 20,000 additional Tax benefit if you invest in long term Infrastructure Bonds.

Tax Slabs
OLD NEW TAX RATE
Upto Rs.1.6 lakh Upto Rs.1.6 lakh NIL
Rs.1.6 – 3 lakh Rs.1.6 to 5 lakh 10%
Rs.3 – 5 lakh Rs.5 to 8 lakh 20%
ABOVE Rs.5 lakh ABOVE Rs.8 lakh 30%
Tax Slabs
OLD NEW TAX RATE
Upto Rs.1.6 lakh Upto Rs.1.6 lakh NIL
Rs.1.6-3 lakh Rs.1.6 to 5 lakh 10%
Rs.3-5 lakh Rs.5 to 8 lakh 20%
ABOVE Rs.5 lakh ABOVE Rs.8 lakh 30%
  • Exemption Limit for Women : 1.9 Lacs
  • Exemption Limit for Senior Citizen : 2.4 Lacs

How Much do you Save because of New Tax Slab?

Income

Old Slab

New Slab

Your Savings
60,000 0 0 0
3,00,000 14,000 14,000 0
4,00,000 35,020
 24,720
 10,300
5,00,000 55,620
 35,020 20,600
6,00,000
 86,520 55,620 30,900
7,00,000
 117,420
 76,220
 41,200
8,00,000
 148,320 96,820
 51,500
9,00,000 179,220 127,720
 51,500
10,00,000
 210,120 158,620
 51,500

What are your comments on New Tax Slab ? How is it going to Impact you?

This is a guest article written by Mr. Rishabh Parakh who is a Chartered Accountant and Director at MoneyPlant Consulting he had been contributing to leading newspapers like DNA & NavBharat (Money Plant Consulting is a premier outsourcing & a financial services provider which aims to offer solutions for all your financial needs and queries.)

How to Open a PPF account at SBI Bank

Posted on by Jagoinvestor

Most of us want to open a PPF account, but keep postponing it just because we don’t know the requirement of doing so? It seen that majority people open their PPF account with State Bank of India. Let us see 3 easy steps of opening a PPF account in SBI branch.  The whole process does not take more than 30-45 minutes if you prepared in advance and go with all the documents that are required and there are no road blocks in between. The biggest advantage of opening the PPF account with SBI is the online transaction facility you can use to deposit in your PPF account online and dont have to rush to the branch every now and then. Read why you should open a PPF account in SBI even if you dont need it right now.

3 Steps of Opening a PPF Account in SBI Bank

PPF account in SBI

1) Choose a SBI branch which is authorized to go government business.

Usually any ‘large’ branch with lots of customers should be able to this! Usually newer and smaller branches may not have this clearance facility. One doesn’t need to have a Saving Bank  account in that branch. Locate your nearest SBI Branch using this

2) Procure and submit PPF account opening form and Identity/address Proofs

It would only 3 minutes to fill. Choose a nominee and get a witness signature. Now you have to submit anyone of following Proofs.

  • Passport
  • Pan card
  • Driving license
  • Voter id
  • Ration card
  • Two Passport Size Photographs

Any government issued identity card or address proof should work. Keep originals for proof in hand to simplify the verification if needed. That’s it. The bank should now be able to open the account. Usually it may take about 20 minutes or so.

3) Get PPF Passbook

A pay-in slip needs to be filled and the initial subscription needs to be credited into your account. A passbook similar to a Saving Book passbook will be issued with your photo affixed and the nominee’s name stated.  PPF rules can be found on the back. This is all, your PPF account in SBI is opened now.

How to Link your Online SBI Account to SBI PPF account for Online Transaction

If you have an online SBI account, you can add the PPF account as a third party account for transferring money directly. As mentioned above the PPF account can be in any SBI branch. There are no processing charges for doing this transfer. When you do this online for the first time, go to the bank and update your PPF passbook and check if the transaction has occurred correctly. This has to be done since you cannot look at the amount in the PPF account as yet in SBI. This is a major drawback of SBI-PPF (and post office) accounts.

A standing instruction maybe issued from your online account for auto-credit to PPF. However there are two disadvantages

  • Rarely there maybe system failures and the standing instruction may not get honoured. So you need to check if it has occurred.
  • You cannot subscribe a lower amount if you need the cash for emergency use (this situation wont arise if you had an emergency fund )
  • You need to go to the bank to cancel the standing instruction .

There are only 12 credit transaction allowed per year. So take care of this before issuing a standing instruction.

How to Transfer your PPF account from One Bank to Another

  • Go to the branch where you want to transfer your PPF account and deposit an application with your PPF passbook
  • takes 10-15 minutes

How to Submit Proof for Tax

Take xerox of the PPF passbook updated with all transactions and get it attested in the branch. (not sure if the attestation is really required) [ Update 5th Feb, thanks for Mithilesh ]

Other points to Consider

Subscriptions must be made before the 5th of every month for the amount to taken into account for interest calculation for that month. If you want to open a PPF accoun in the name of a minor in addition to yours, the total PPF investment limit is Rs. 1,00,000. The total tax benefit is also the same. This is a new rule and is not yet printed in the PPF passbooks! See Here, Here and Here for more detail

Comments please. Are you going to Open a PPF accoun this year? Do you feel one should open a PPF account at Post Office?

Last moment tax planing in 30 minutes

Posted on by Jagoinvestor

Just in case you have not done your tax planning for this year and you are in a rush of doing it for providing documents proof to your employer, I will tell you how you can quickly do your tax planning at the last moment. First of all it’s not advised that you wait for last minute for your tax planning investments but now if you are late, let’s see how you should plan for your investments at the last minute to save your taxes. We will also discuss in this short article what are the things you should not do in hurry.

Don’t get mad about tax saving: If you have short term Commitments and can’t afford to lock your money for long term it’s better you do not put money in Tax saving Instruments. You should never do Investments just for tax savings. I have personally not invested for much tax saving this year apart from my company PF and Insurance. I have short term commitments and I cannot afford to lock my money for another 3 yrs. So I better pay tax on the part which I could have invested. There is no point in locking my money and then again running around for personal loan or credit from Friends and Family when need arises.

Life Insurance: Make sure you have adequate life insurance cover. If not, take a term insurance for amount of the cover your are short of. Protection is the first step of successful Financial planning. Take a Term Plan from two Insurers. Look at how to calculate your Insurance requirement. The cheapest Term plan at this moment in market is iTerm from Aegon Religare.

Planning for Long Term Goals: Make a list of goals for long term like Retirement, Child Education, Child Marriage etc (Anything thing with a target date of 5+ yrs). For these goals you can invest in Tax saving Instruments. If the goal is extremely critical and you are not a risk taker then the best thing would be Tax saving Fixed Deposits. If you can take some amount of risk, you can invest your money in ELSS Mutual funds (here is a list of good Equity Mutual funds). For goals which are 10+ yrs away, you can also put partial money in PPF. Investors who have sound knowledge of Markets movement and can spend time and efforts on switching can go for Low cost ULIP’s (see Wealthsurance and Aegon religare). Short term ULIP investing is a BIG and BOLD No No!!

Health Cover: The next thing you should target is your Health Insurance. Better take a Family Floater Plan for your Family  and  the premium will be exempted under Sec 80D up to max of 15,000.

Short Term Goals: If you have any short term goals then do not put money in any tax saving instrument, rather put money in non-tax saving instruments like Plain FD (See, how to find best FD), Debt Oriented Mutual funds, Avoid Equity as far as possible if you are not a risk taker.

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So the hierarchy of your products should be like this

  • Life Insurance
  • Health Insurance
  • Long Term Investment products like ELSS and PPF
  • Medium term Investment Products like tax saving FD

What you should not Invest in?

Another Important Point is what no to do in Hurry? So here are some of the things you need to remember

  • Do not invest in ULIPS in hurry, the last 3 months of financial year is the time when Agents will give their best performance in luring away investors. Don’t listen to their stories of India Shining and other bakwaas, if you don’t understand the product and you do not have skills to manage ULIP’s. Same applies to ULPP’s or any other market linked products.
  • Do not invest in Endowment or Money back plans for tax savings. Your Father, your Grandfather or your Uncle might push for it but investing in those policies is a long term commitment and just for saving tax this year you cant invest in those policies.
  • Evaluate your risk appetite again and then take decision. Most of the people can take risk and their situation allows them but they don’t take risk. On the other hand there are people who’s situation does not allow taking risk, but still they take the risk. They confuse between Willingness to take risk Vs Ability to take risk.

Conclusion

Tax saving should be done at the start of year always so that we dont take wrong decisions in hurry. But if you are late you can take some logical decision and still do your tax planning.

Please share your ideas about what other instruments can be used for long term tax savings. Let other know how early tax saving decision has helped you.

Till what age should you take your Life Cover ?

Posted on by Jagoinvestor

From some last some days I am getting queries that some Life Insurance Policies are not giving cover for more than 65 yrs of age or for Tenure of more than 25 or 30 yrs and why they dont want to take those policies because they want a cover till 70 or 80 yrs of age . So People are confused on which one to take. They generally want a cover which covers them till 70-80  yrs of age or sometimes whole life . Let us talk about till what age should you target your Life cover generally .

Why do we buy Life Cover ?

Now lets talk Logic and think logically , no expertise required here . What is Life Insurance and How much Life cover do you need ?  Life cover is to cover the risk of early Death of bread winner and for hedging the risk of loss of income due to the sudden unexpected death of the main earning member . So ideally Life Insurance cover should only be there till the retirement of the earning member , because anyways after that he/she wont be earning , so no one will financially dependent on that person . You only think , If you are 70 yrs old , do you need Insurance cover ? Who is dependent on you by that age , generally ? How many of you are dependent on someone who is in that age ? Are you ?

Hence if a person age is 30 and he is planning to get retired at age of 58 . He requires a policy which covers him till age 58 , not more .. See the Diagram Below …

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So what do we learn ?

Life Insurance is in other terms a replacement of your potential Future earnings. Hence, Insurance amount which your dependents gets should be a substitute of all the amount the bread winner is going to earn in his life time and provide for needs of his Family. Therefore when you are near the retirement and  if you die, your potential future income  which you were going to bring in the family will be less and hence your Insurance cover at that time should be less . We today have Level Term Insurance where we have the same level of Insurance at that time , which is ok . Note that we also have decreasing life insurance cover and Increasing Life Insurance cover also . So lets see the main points we learnt here

  • We need High Insurance cover at the start of the Career when have no Investments . Look at iTerm Term Insurance from Aegon Religare and Some Tips while taking Term Insurance
  • We need to be covered till the time we want  retirement .
  • The day we earn enough money which our dependents need even if you die , you can get rid of your Insurance and then you don’t need Insurance .
  • So there is no point in having Insurance after your Retirement , unless your intention is to get a big sum of money at the end even if it does not matter much .
  • This is the main reason why Insurance companies also give Cover till age 65 because that’s the time most of the people on earth get retired anyways .
  • Whole Life p0licies does not make any sense apart from the fact that they provide pension which is very low. See review of Jeevan Tarang Policy from LIC to understand more on this .
  • You should have sound Investment Planning so that when you reach your retirement you have grown your Huge Corpus .
  • Insurance at the end is the hedge against your risk of loosing the earning Potential , its just not a tool to make money on your death .
  • Use Insurance as Protection not for Saving , Dont just invest for Tax saving !!

Final Take Away

You have to Notice some imporant point here , Dont take the above diagram by heart and assume that your Insurance cover goes down every year , It can happen that because of other commitments you might have to increase your cover . The main takeaway from this article is that at the end of your career (your retirement life) you should have enough investments and money so that you dont need Life Insurance. Also there can be exception cases where this logic does not apply , we are talking a general case here and not a specific one 🙂 .

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Questions/Doubts ? Share your comments please

Readers Reviews of this Blog

Posted on by Jagoinvestor

Jagoinvestor is one of the simplest blogs that you can find to kick start your investing.There is such a nice variety of posts that all individuals can get benefits from it.Manish Chauhan the blogger behind it seems to spend a lot of time making his blog perfect for his readers.It is no surprise that his blog is so popular.It is a constant reference for all financial basics, explained in a very light manner.Whether you are a blogger, an investor,analyst or just someone passing by it is definitely worth spending some time here. — Sumayya Shaikh

Jagoinvestor is a great blog on investing. It is extremely rich in content, some of the posts are written extensively. The interesting part of this blog is most of the queries are answered from different posts present here itself. And by the way he’s a great cook…so you can expect a treat J — Charu Gupta

Jagoinvestor blog is an excellent one stop destination for understanding basics on a variety of topics in money management and stock markets.The content is presented in a way that is easy to grasp avoiding the complex lingo that usually scares away readers.This helps in a big way to get those crucial money matters fixed in one’s life without becoming too dependent on other advisors. — Saif Shakeel

This is one of the best blogs i have come across which explains the nuances of financial planning and investing in a way which everyone can understand.Especially the articles on financial planning, compounding power of money and endowment plans are real eye openers. This blog really help me avoid many pitfalls and I have educated my friends also.In a nutshell ,it is a one stop blog for anyone who wants to reap good harvest for their hard earned money. Keep going Manish !! — Swathi Kota

This is a great website ! Thanks for all the information. This website has provided a wealth of information for me and i really appreciate it and look forward to learning more. Now i know no agents can fool me anymore. Thanks Manish for the great job. — Anu Lopez , Dubai

Discover tips on saving money, investing smartly, managing your finances and getting the most for your hard earned money from the Smart Investor blog by Manish Chauhan. This would be the one website I would suggest to anyone who is new to investing or just starting up. — Skandhakumar

It is a must read for the people who want to plan their personal finances using a range products available in market.You would be wrong if you think it is a stock market blog .The title ‘Smart investor’ perfectly suits this blog — Sandip Naidu

I just happened to see Manish’s blog few months ago accidentally while reading other links in famous TA analyst. Manish brings out very simple but important issues on personal finance, stock market, insurance, interest rates etc. I am an Accounts Manager by profession but i never looked in to these aspects in my personal financial planning. After following his blog regularly i could review my financial planning and advise my peers. I appreciate Manish’s efforts — Venkateswara Ravi Prasad

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What happens if you stop your ULIPs before 3 years

Posted on by Jagoinvestor

Lets Discuss quickly what happens when you stop paying your premiums in ULIPs before 3 yrs. So here is an interesting question and very bad answer. Its already there in your ULIP Brochure, but you never had the time to look at it.

ULIP - Unit Linked Insurance Plan

Read What are the Most Important questions you should ask from a ULIP agent ?

One of the readers on this blog asks me

“I started investing in a sip of Lic Plan Money Plus T-193.I was assured of atleast 20% returns, but I Found  out recently that my surrender value is much lesser than what I have invested.

So I want to stop freeze this policy.But the agent says that the value of units will also freeze and I will not get the amt. as per the value of units at the time of lock in period. So when the lock in period is over(3 years), I will get amount as per the current rates of the units.

How far is it true?

Now This is True, in LIC Money Plus and some other ULIPs, If you stop paying your Premiums but then your Units will be sold that time and your money will be Kept in Money Terms which you will get back after the lock in period is over .

So for an example:

If you take policy in Jan 2008 and Stop your premiums before 3 yrs of lock in period, you will get back the amount after 3 yrs are over, but the amount will not be as per the NAV after 3 yrs, but at the time when you stopped your ULIP payments.

Note that you will get back your money only if you have paid full 1 yrs premium, If you have paid anything less than 1 yrs, then you wont get back your money if you stop it. All this information is generally never passed to Investors because of Heavy misselling in ULIPS

Now this is the rule from some of the ULIP’s, not all .. Some Ulips give you a choice of surrendering the Policy when you want, so you can tell them that you want them to sell your units or not . If you want, they will sell those and Keep it with them and then give you back after Lock in period of 3 yrs are over.

You need to check your ULIP if its a choice or a forced rule. Check your Policy Documents and Find out whats written there.. Before Buying a Product make sure if a product suits your Requirement

Other Important Rules applicable when you Stop Paying premiums before 3 yrs

  • Your Insurance Cover will immediately be Ceased, so you are not covered for any amount once you stop the Policy
  • The Death Benefit is just your Fund Value
  • Other Charges like Fund Management Charges and Yearly Expenses will still be Deducted.
  • You can revive the Policy after 3 or 5 yrs depending on the Company rule

Question : So it means that If I stop My policy (means Premium Payments) before 3 yrs, I will still get back my money after 3 years?

Answer : Yes, Many people think that They have to pay the premiums for at least 3 yrs other wise they will not get their money back, That’s not true.

Conclusion

Who is to blame here? Company or the Agent, my vote goes for the Investor Himself, Agent or Company are to be blamed, but for very less part. If you stop your Premiums before 3 yrs Its a costly Affair. So better buy your products before much thought and planning. ULIP’s are only to be bought for long term and you should be able to manage it well.

* Dont forget to check out the New Forums added in this blog