Tag: Intermediate Level

8 unbelievable tricks real estate agents play when you visit the project

Posted on by Jagoinvestor

I recently inquired about one of the plot schemes near Pune and finally visited their project. They sent a car to pick me up. When I reached the site, the staff there sounded very professional compared to some other experiences I have had in past.

While I had a good experience interacting with the sales person on the last project I visited, I realized that often that does not happen with many people. A lot of education needs to happen on this topic, because many investors who go to meet brokers for the first time or to do site visit are lured by some tricks and fooled a lot of times.

real estate tricks by agents

So I have created a list of points, which I want to share with all the prospective home/plot buyers. Some of these points are tricks played by agents, and some points are suggestions on what you should do when you meet a builder, broker, agent or sales executive who is showing you or explaining about a project.

Here are those points one by one. Detailed description of these tricks can be seen after this table.

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Trick #1

They create artificial scarcity and try to rush you

 Trick #2

Don’t show the eagerness to buy
Trick #3

Don’t get mesmerized by Sample flat or Jazzy brochure’s

 Trick #4

Ask for the legal documents and regarding the basic amenities
Trick #5

Say that you are seeing other nearby projects as well

 Trick #6

Don’t be tempted with awesome deals and discounts, they are well designed
Trick #7

Ask which all banks have approved the project

 Trick #8

Don’t get over obsessed with the “upcoming infrastructure”

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1. They create artificial scarcity and try to rush you

An year back, I got an email from one of the builders with the list of available flats, area, price per square feet and final price of the flat. Out of 600 flats in the project, Around 90% of them were marked as “SOLD” or “BOOKED” .

Just by looking at that, I got a “left out” feeling. It appeared as if everyone in this world is owning the plots and flats and its just me, who will be left behind. A voice from inside said – “Go, book that plot NOW, else you will regret all your life”

I had no way to verify if they were really sold or booked by someone. I just had to rely on what the excel sheet told me. This created a sense of emergency. The feeling I got was – “I need to hurry, else I will lose out on the opportunity”. Almost 80% of the time, this is artificially created by the sales executives.

See the table – 

sample cost sheet builder

If a sales executive tells you that you have a week’s time, multiply it by 10. That’s the time you generally have in real life. Some of the things you will hear from sales executive will be as follows

  • Sir, All the 2 BHK are sold except 3 units. You will either have to book it in next 10 days or go for a 3 BHK (they know you don’t have the budget for 3 bhk)
  • Sir, 58 flats are booked already in the pre-launch. This price is only for this Diwali after, which it will go up by Rs 300 per sq
  • This price is only available for this exhibition because of pre-launch offer, once the “actual” launch happens, the rate would be at least Rs 100 more per sqft.

At times, you might really lose on some good opportunity in real life, but maximum number of times – its a sales trick. This is exactly the reason why they generally ask you to come along with cheque book, so that in order to not lose the opportunity, you will book the property right there and then by paying a token amount.

Note that this trick of creating emergency is a general sales trick and applies everywhere.

2. Don’t show the eagerness to buy

If you are seriously looking forward to buy the property and want to get a good deal, then do not show your eagerness to buy. Hide that over enthusiastic and needy person inside you.

Hide your temptation and do not show that you are dying to buy the property. The moment they sense, that you are already sold out in the game, it will be very hard for you to negotiate on pricing and other things, because they are very sure that you will not be stopped by minute points.

The agents/sales executives are paid commission on closing the deal and they will go to an extra mile to close the deal with you. Show them that you are not in hurry and your life does not depend on the property. Show them that you are a serious buyer who is not in hurry and if they have to win you, you will require a good incentive to invest money.

They will ask you for booking amount, token amount, they will give you “last date”. But don’t take a decision in hurry. Do all your investigation, scrutiny, and think on how you will arrange the money. Here is a nice comment from someone on the Indian real estate forum

Fully agree. Don't negotiate with fear in mind that this is your last chance, and so far nothing worked for you (frankly, if you have this fear, would suggest don't even bother to negotiate, and more so don't get into RE market). Be prepared to walk away right from the beginning. Don't buy builder claims that they are going to increase rates, all flats except one sold out, they have enough cash, etc.
Show them you are not emotionally attached and this is one of the many options. Also, don't close deal in first meeting (if you do, most probably that means you did not negotiate enough). Last but not least, you have all the negotiation power before handing over the money, once you pay them, your negotiation power is zero.
In general one who pays should be enjoying greater power, in reality we don't see that in RE market, more so in Pune RE. That was easy said than done, have tried it, and it works, key is patience.
As I said in the first point, most of the times the emergency is not real, its often the created one!. However, this does not mean that you delay things beyond limit, thinking they will come back to you all the times. If there are other leads who are ready to buy the property, you will not be contacted beyond the point. So keep a balance

3. Don’t get mesmerized by Sample flat or Jazzy brochure’s

Human visualize and fantasize about everything in life

This is the reason when you see jazzy brochure’s, the lush greenery, clean atmosphere and a world beyond reality, you visualize yourself living in the serene beautiful place which has no traffic, no tension and a all perfect life. I am yet to meet anyone with whom it has really happened 🙂

Please, do not do any booking only on the basis of the brochure, some presentation or looking at a sample flat.

Make sure you visit the actual project site and see the location, how well connected the area is city, how are the roads, what’s nearby the place and other important factors. A lot of people book properties in real estate expo and exhibition, which I don’t think is a good idea at all.

Real life example

I once met a sales representative who came to explain me about a project in WAI (near Panchgani, Maharashtra) and he sold a story which looked so amazing, that my inner self-was ready to book the property right then and there. I was so excited to take a look at the site.

However after a week, when I actually visited the site, all my excitement died because the reality was so different than what I had visualized. I must mention that it was not the sales executive fault here and he had not given any wrong information. In fact, he was a brilliant sales person and very professional.

The problem was me myself. I have over-estimated the greatness of the project and its location, because of the jazzy brochure.

jazzy real estate brochure

In case of residential flats, remember that the jazzy brochure and the sample flats are created to exploit the human imagination and sell you dreams. What you actually get in reality will not be exactly like sample flats you see.

You won’t believe, but there are professionals who are hired by builders to give mesmerizing presentations to prospective buyers, especially NRI. Presentations are arranged in 5-star hotels and bills are paid in lacs of rupees. Here is one gentlemen explaining how it happens. Please see the video below

I am not saying that brochure’s are not important. They surely play a big role in marketing and you get a very good idea of what is the project all about, but go beyond that.

Judging a property by just looking at brochure is exactly like hiring an employee by just looking at resume.

4. Ask for the legal documents and regarding the basic amenities

You are probably doing one of the biggest investment of your life-time. Right?

If your buy something which is junk, you will regret it all your life. There are millions of people in India, who are dealing with legal issues today because the land they bought is disputed, the required sanctions were not taken and many other issues. So just don’t feel shy about asking legal documents. There is no hurry in doing the agreement.

Simply ask the sales representative to provide you all the legal documents, sample agreement copy and all approval related documents. For god sake, take the documents to a property lawyer and pay Rs 10-20k fees to consult him, before you buy that 75 lacs flat!.

The lawyer will check the documents and help you understand, if the project is totally fine or has some big trouble. Then you can take the decision of moving ahead or not.

It will save you a lot of money and energy in future. It’s not a very healthy sign if the sales person is constantly avoiding the conversation regarding legal documents or if he is hesitant in providing you a copy of the agreement.

Ask about surrounding area and the development coming up

Apart from the legalities of the project, you also need to inquire in detail about the surrounding area and what all development is coming up in future. Ask things like

  • Is some flyover planned?
  • Is some college coming up?
  • What kind of markets are nearby?
  • How far is bus stand?
  • How far is the main highway
  • From where will the water connection come?
  • What about electricity connection?

While you might not be able to verify a lot of things, but at least you can know about the basic amenities. Things like water is really a cause of concern

5. Say that you are seeing other nearby projects as well

Before you go to the project site, inquire about the other projects near by. At least, go to the websites of those projects and memorize the names, location etc. If possible inquire on phone about their rates.

Then, when you are talking to sales representative, share with him about all this. Let him know that you are an informed investor and if he has to win you as customer, you should be offered a good deal.

I can assure you, there is always a possibility of Rs 25-50 per square feet discount if you ask for it 3-4 times. Tell them that you had heard about the lower rate from one of your friends or tell them that someone else from their sales team had called them and shared about the lower rate few weeks back and that’s the reason you are inquiring. The sales person always has that much margin in his hands.

The big boss always tells them – “If you see that customer will go away, offer him up to Rs 25-75 discount per sqft, but only in worst case”. There is nothing wrong in asking, the worst case is that you will not get it.

6. Don’t be tempted with awesome deals and discounts, they are well designed

So the builder is giving you are modular kitchen included in the flat? WOW .. Who is paying for it? Definitely not you! . Come on! .

It’s all included in the price. Instead of 49.5 lacs, he is charging you 50 lacs and giving away the free modular kitchen worth Rs 50,000. What’s so great about it?

Some builders in premium segment also offer a car along with the house. Book a Villa and get a car. Sadly, that means “My project is not able to sell, here is my last trick on you by offering you a bait”

Trust me, If I were a builder who is selling a 4.5 crore villa, I can also come up with such offers. Increase the price and give the car along with it. At the end, its the customer who pays the price.

offers and discounts in given by builders

Understand that whatever you are getting is funded by your money only. No one in their right mind, will give any kind of discounts or offers because they have a big heart. It’s all money game. It’s just a way to emotionally exploit you and make sure you feel great about yourself. Just because its bundled offer, it looks very good.

7. Ask which all banks have approved the project

A good way to filter a good project from a bad project is to see if its approved by many lenders or not. If all major lenders have approved the project, its a sign that the basic level checks are done by lenders and you can now trust the project more. It does not mean that you should not do your homework further, but the primary level of investigation is done.

If a project is not approved by any lender or some not so famous lender has approved it (just a single one), there is a possibility that something is fishy.

Probably some approval is not taken care of, or may be the land is disputed. You should also ask them if they have a good crisil rating. Go and check the pdf on crisil website for that project.

I lot of small time builders offer their own EMI scheme like pay 20% now and rest in EMI for 5 yrs . This happens a lot in plots especially very far from city. I am not saying that they are bad always, but you should be a bit cautious with them on legality factor.

8. Don’t get over obsessed with the “upcoming infrastructure”

There will be lots of promises (real and fake) made to you. You will listen about the lots of development projects, the ring road passing from that area, the grand temple coming up, the new wide road which is planned and many such things. Some of them might happen in reality, but not always.

real estate promises

A lot of plots schemes are sold as “Proposed NA” status (which means soon it will be approved for residential purpose) and the agents will tell you that they have put an application to convert the land from agricultural to Residential which will take just 1-2 yrs.

But don’t believe them blindly. Converting a land status is a big task and in most of the cases, it might take 10-20 yrs time or it might never happen. A lot of investors are stuck with the plots paying huge money which they cant use. Don’t take decision in hurry.

Take your decision with caution

Real estate is a complicated investment and a lot of factors decide if you are making a right investment or a wrong one. As its one of your life biggest financial decisions, make sure you do not hurry and take your time. Everyone is there to make money out of you.

I would like to hear about your experience and what you have faced in life with different real estate agents and builders. Please share your unique learning which can help someone else. I would like to keep adding more and more experiences and tricks which you will share with me here in comments section.

16 incredible money saving tips for online shopping

Posted on by Jagoinvestor

I am sure you must have shopped online very recently. In last 5 yrs, the whole dynamics of shopping has changed, We have more online for most of the things ranging from electronics, clothes, groceries and even movies ticket booking :).

We are fascinated with the discounts and offers we get online. However I am sure even if you know a lot of tips of saving money online, still you might not be exploring its full potential.

tricks for saving money when online shopping in India

Hence, I am going to list down various points and how you can save more money. Detailed description of these points is after this table.

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Tip #1

Install Buyhatke extension

 Tip #2

Go a bit extra mile in search for Coupons
Tip #3

Get cashback with specific credit cards and debit cards

 Tip #4

Wait for the special days like Diwali and New year
Tip #5

Use Comparison Websites to find the best offer

 Tip #6

Set Price Alerts
Tip #7

Leave items in your cart and wait for few days

 Tip #8

Use wallet payment methods like paytm, mobikwik and payumoney
Tip #9

Use different emails for Shopping

 Tip #10

Get extra cashback using Cashkaro.com
Tip #11

Industries like airlines and hotels give huge discount to there old customers

 Tip #12

For used products you can get huge discounts on OLX, Quikr websites
Tip #13

Check prices on website pricebaba.com to know which brand is selling at discounted price or on MRP

 Tip #14

To get the best deals keep checking the offer section of all website before you shop
Tip #15

Register on websites where users post great deals & discounts from here and there

 Tip #16

Don’t get into the trap

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1. Install Buyhatke extension

There is this website called Buyhatke.com which offers a chrome extension, which shows you the other website where you can get the best deal while you are looking at some product.

You just need to install it in your chrome as extension. This way, you will be able to see the price offered by some other website.

Below you can clearly see, when I went to Snapdeal to find the price of its one of the LED tv, the price it showed me was Rs 17,568. However, the buyhatke extension at the top showed me that the same product is available for Rs 15,990 on Flipkart.

I didn’t had to go anywhere to compare the price. The extension automatically searches the best deal and show it to me. You can also compare the prices of the product by clicking on “Compare Prices” tab on the top right.

buyhatke extention online shopping

However note that the extension does not take into consideration all the coupons and cash back. So take the decision after factoring in all those points.

Another amazing feature of this extension is the historical PRICE changes which you can see on the same page a bit below the product description (automatically it comes when you use the extension). You will be able to see how the price has changed over previous few months. You can see the maximum and minimum and judge if the current price might fall further in coming days or it can do up.

buyhatke price history chart

2. Go a bit extra mile in search for Coupons

This is the most basic thing you need to do when you are buying online. Sellers know that coupons are a great way to excite customers and make a faster sale by making buyers feel that this is the best moment to buy. Given the huge competition in the e-commerce space, every other company wants to give you a great deal somehow. Either the web site from where you are buying something may show you the coupon or you can find it on coupon sites.

On an average, I have always found some of the other kind of coupon which reduces the price by at least 5-10% . Some websites can have a variety of coupons depending on various categories (20 category = 20 different type of coupons). Something like “Buy above Rs 1,999 and get 20% discount” applicable on furniture.

coupons online shopping

Then there are websites like Ebay, which have generic coupons like “Buy above 750 and get 7.5% discount”, These coupons are easily available on the majority of the coupon websites.

I know most of the people who buy online do search for coupons, but I don’t think a lot of them go an extra mile to search for the best coupon and settle with the first one which they get. If you are buying an item with a high price, it’s worth the effort to spend extra 5 min to search for the best coupon available. You can keep applying 3-4 coupons and see which is giving you the best deal.

3. Get cashback with specific credit cards and debit cards

At times, you can get a good cashback or discount on paying from a specific bank credit or debit card. Banks tie up with the website, so that maximum payments go through their channel. This can be for marketing purpose or just to increase the sales of a particular credit or debit card.

Like Amazon may be giving a 10% cashback when you purchase by an SBI debit card or Snapdeal providing an additional 5% cashback on HDFC debit card

debit card online shopping

 

4. Wait for the special days like Diwali and New year

There are extra discounts and offers during Diwali, New year and many other Indian festivals. If you can wait and postpone your shopping, its always recommended to wait for these days, especially Diwali. Its a known fact that people in India buy high ticket items because of the auspicious festival. You might get a much better deal and cash back offers given the cut-throat competition between e-commerce companies in India.

diwali shopping online

Also, there are events like GOSF (great Indian shopping festival) where you can get good deals (not always). Last year, I made the same mistake. I upgraded my TV in the month of Aug and didn’t wait for Diwali and saw the same TV selling at 15-20% extra discount. If you can wait a bit, it’s always better to plan your purchases, especially high ticket purchases.

Another great benefit of waiting for some weeks or month is that you may realize that you actually don’t really need the product and it was a decision in haste to buy the product.

5. Use Comparison Websites to find the best offer

There are various websites like Junglee.com, mysmartprice.com and shopmania.in (and many others) where you can compare the prices of a product on various websites at one single place. You can see their shipping cost, estimated delivery time and also the rating of the seller.

It’s one window from where you can choose the website you want to buy from. At times, there is some mismatch in the main price on the website and the one shown on the comparison website. Below is how it looks like..

compare prices online on junglee

Mysmartprice gives a comprehensive comparison with various details and also the facility to set the price alert at the website level. It also gives section for price history, specification etc in a single page. Here is the snapshot

mysmartprice compare prices online

Scandid and pricebaba are some other good comparison websites you might want to try.

6. Set Price Alerts

At times, you are not in a hurry to buy some product, but you never know when the price of a product was reduced to a level where you become highly interested in purchasing the product. So in that case, you can set a price alert for a particular product and when it touches that price limit, you will be informed about it over an email

For example, if you want to buy a product which costs Rs 5,000 at the moment, but you are very sure that its price will come down to Rs 4700 and that time you would buy it, then you can set the alert and you will be informed about it.

How to set up the price alert?

  • You can use cheapass.in to set the alert. Just paste the url or the product and your email and your price alert will be set up
  • The other way is to use this google docs tool created by Amit Agarwal. It will notify you on email on any drop in prices.
  • You can find the product you want to track on Junglee.com. You will see a “Set price Alert” link just near the product name.

7. Leave items in your cart and wait for few days

This trick might be working only with few websites and not all, but it’s still worth the try. You can first add all your items in the cart and then don’t check out. Just leave the items there in the cart. This is a big issue for e-commerce websites where the customers add the products to the cart, but at the final stage do not make payment and leave.

In technical term, this is called “shopping cart abandonment” and for most of the websites, its one of the biggest pain point, because a huge amount of sales is stuck there in the abandoned cart. As per the business insider report, globally out of every Rs 100 worth of products which is added to cart 71% is abandoned, means more than 2/3rd sales which can potentially happen, do not happen.

So, various companies in order to close that pending sale, will remind you about your cart and ask you to complete the sale. And some of them will often try to lure you with some extra discount with coupons etc. In the best case, you will be able to save a bit more and in the worst case, you won’t save anything extra.

Below is a sample email from pepperfry which was sent to some customer who didn’t complete the sale.

pepperfry email left cart

(image source)

Note that this trick will mostly work for new customers who have recently created their account, because companies are in the race to acquire new customers to show it to their VC on how they are growing. So do not expect this will well know and big websites where you are already buying from many months or years.

8. Use wallet payment methods like paytm, mobikwik and payumoney

On top of your regular discounts which comes from coupons, you can also get additional discounts if you use the e-wallets these days. If not discount, you will surely get some kind of cash back. The best example, I can provide is from bookmyshow website where you get the extra discount when you use movie tickets.

Pro TIP for Bookmyshow: If you want to book X tickets and each ticket cost is as high as Rs 200-250, book 1 ticket X times, that way you get maximum cashback :). Just that you need to make sure you be fast enough to book all tickets you need.

wallet discounts

9. Use different emails for Shopping

Almost all the companies offer some kind of discounts to new users. A lot of them offer coupons codes on email when you register for the first time. You can see this clearly on Foodpanda or Ola Cabs, where you get huge discount being a new user or get a FREE benefit for the first time.

A lot of companies are now offering the bigger discount if you order things using their mobile app, but you can’t use multiple phone number’s unlike emails, so that’s not easy enough. But if you have many people at home with smartphone’s, you can take this benefit too, for some limited time.

10. Get extra cashback using Cashkaro.com

On top of all the discounts you get, you can also get some cashback if you buy things from cashkaro.com links. Its a website where you have to create an account and then use their links to visit the actual website where you want to buy things.

This way, cashkaro website gets the commission from the seller and they share a part with you and it accumulates there. You can take the money in your bank account via NEFT once it crosses a limit. Below is a simple video which shows you how it works.

You can register on CashKaro using this link

 

5 more tips when buying online (tip number 11-15)

  • There are some industries like airlines and hotels which shows dynamic pricing to their old customers based on their history and location using your cookies. So if you use Incognito mode in the browser, they will not come to know that you are an old user and treat as a new customer.
  • At times, you might want to check websites like Olx and quikr because you can get the same product at a very heavy discount, but for a used product. In some cases, it might fit your requirement and you will save a good amount
  • You might want to try out websites like pricebaba.com which can find out a better deal for you from an offline store. so you can compare prices online and then inquire for prices offline. This would work out for those products, where you are not getting any kind of discount online and its selling near its MRP.
  • You can register on the website called Desidime.com, where real users post great deals and discounts they find here and there. You can also interact, ask questions to other users.

Last and more important tip – Don’t get into the trap (16th)

Now the last and the final point. All the tips which are mentioned above would be helpful and in your interest if you don’t lose control over yourself and be a responsible buying. Only buy things which you really need. These discounts and coupons are just extra benefits.

Don’t let these coupons and discounts become the carrot for you to buy things which you just don’t need. The sad reality is that, even though you feel that coupons are benefitting you, it’s actually helping sellers more.

These coupons and discounts are often funded and sourced by the sellers only to make sure they increase their revenue’s. Yes, in some cases, it will surely benefit the customer’s, but at a higher level these are mainly the marketing tricks of the seller and nothing more than that.

Let me take an example of Foodpanda, If you had to order food from outside, then foodpanda coupons are the added discount you get. But a lot of people are now using foodpanda on those days, when they didn’t had to order from outside, but just used it because there was a discount. Can you see how these deals manipulate your behavior and your way of spending?

Don’t browse for fun

Doing time pass on e-commerce websites is not good for your wallet :). The basic principle of economics is that “Supply creates its own demand” and with the mobile apps retailers are trying to create an ecosystem where you can purchase on just one click. With discounts, they are creating an environment of instant gratification and by giving money back guarantee and replacement guarantee, they are removing the fear for online shopping.

But the at end due to all these factors, people are buying things which they just don’t need at all and creating the big pile of junk at their home. So just make sure you do not browse for fun, because you will surely come up with some reason on why you need that product you just saw.

Let me know what do you think about this article? Also share some more tips which you personally use and you think can be shared with others as well 🙂

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

Posted on by Jagoinvestor

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

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

job vs entrepreneurship

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

But WAIT .. you know what !!

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

“Pursuing your passion” is over-hyped

Yes, you heard it right!

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

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

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

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

side effects of becoming entrepreneur

5 side-effects of being an entrepreneur

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

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

#1 – Be ready with the inconsistent income

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

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

job income vs business income

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

A real life Experience

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

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

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

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

#2 – You will doubt your decision many times

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

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

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

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

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

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

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

struggle in job vs business

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

#3 – Lack of focus in work

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

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

What an amazing situation it would be.

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

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

Here is what Enterpreneurship article says about this topic

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

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

#4 – You can still be frustrated

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

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

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

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

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

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

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

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

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

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

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

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

For them to change , sacrifice is tougher.

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

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

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

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

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

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

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

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

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

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

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

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

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

Example 

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

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

Entrepreneurship can be a very lonely world

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

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

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

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

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

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

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

Having skills does not mean everything

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

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

neil patel on entrepreneur life

Strategic vs Being Negative

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

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

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

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

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

Doing a job can be equally awesome

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

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

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

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

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

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

Posted on by Jagoinvestor

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

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

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

Pre-Approved loan

 

What does “pre-approved” loan means?

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

In lending, pre-approval has two meanings:

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

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

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

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

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

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

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

But, you still have to follow all procedures

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

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

Advantages of Pre-approved loans

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

Benefit #1 – Better Negotiation power in your hands

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

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

Benefit #2 – Less processing time

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

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

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

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

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

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

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

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

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

personal loan pre approved loan

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

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

Role of Psychology in pre-approved Loan

“Supply creates its own demand”

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

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

Consider an example:

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

Imagine what will happen….

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

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

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

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

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

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

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

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

Posted on by Jagoinvestor

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

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

Tax Free Income

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

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

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

2. Interest earned in NRE account

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

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

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

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

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

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

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

4. Maturity or Claim amount received by Life Insurance Company

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

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

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

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

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

5. LTA money received from Employer

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

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

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

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

7. Money received from your EPF account after 5 yrs

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

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

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

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

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

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

9. Dividends received from your shares or equity mutual funds

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

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

10. Any amount received through WILL or Inheritance

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

11. Agricultural Income –

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

agricultural income is exempted from tax

12. Gifts received in cash or kind –

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

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

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

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

 

13. Scholarships and Cash Awards –

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

Conclusion –

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

Budget 2015 : 16 things which every investor should be aware about

Posted on by Jagoinvestor

When budget speech was over, the first thing I did, was that I created a poll asking people, if you are happy or disappointed with the overall budget. I was sure that most of the people will vote for “Disappointed” and that’s exactly what happened. Around 192 people voted for it and around 65% people said they were disappointed.

budget 2015 highlights

While, I agree that the budget didn’t offer too many benefits to common man, as they had expected, but the budget 2015 has a lot of things to offer and it’s worthwhile to look at things a little deeper. So what I am going to do is list down all the major changes for you below and explain them

1. No changes in Tax Exemption Limit or 80C limit

One of the big blow for most of the people in India was that there were no changes in the income tax exemption limits and 80C limit. At the moment, there is no income tax to be paid if taxable income is upto Rs 2.5 lacs in a year. Most of the salaried class people were expecting some relief in this area and were expecting that the limit should be changed.

However, they were disappointed heavily, when there was no change. Mr. Arun Jaitley himself had demanded raising the limits from 2 lacs to 5 lacs sometime in 2014 when BJP was not in power, but now when he is finance minister himself, he didn’t do what he “expected” from others.

income tax exemption limit budget 2015

2. Health Insurance limit increased from Rs 15,000 to Rs 25,000 per year

A big change in this budget was increase in health insurance exemption limit from Rs 15,000 per year to Rs 25,000 per year. In the same manner, for senior citizens – its raised from Rs 20,000 to Rs 30,000. This is really a good move because health insurance premiums can go up to Rs 25,000 per year in case one is paying the premium for self, spouse and children. This will encourage more and more people to buy health insurance.

So if you are paying yours and senior citizen parents health insurance premium, you can avail a maximum of Rs 55,000 under sec 80D. It’s a good time to head over to this website and leave your details if you are interesting in buying health insurance.

One more announcement was made that those senior citizens who are above 80 years in age, and are not covered by any health insurance, they can avail a deduction of Rs 30,000 towards expenditure on medical treatment.

3. No tax on Interest under Sukanya samriddhi account

When few months back Sukanya Samriddhi account was launched, that time the interest was taxable and investors complained how PPF is better than this scheme, but Arun Jaitley clarified that there won’t be any income tax on the interest part also, which makes this scheme better compared to its earliar version. However its still debatable if its good or bad compared to other alternatives like PPF or mutual funds in a long run.

4. Transport Allowance Limit increased from Rs 800 to Rs. 1600 per month

Another good thing about budget was that the transport allowance was raised from Rs 800 to Rs 1,600 per month. Transport allowance is not taxable at all.means now out of your overall income, total Rs 19,200 will be deducted

That means whatever income you earn, Rs 19,200 will be deducted on the name of transport allowance (Rs 1600 X 12) and you need to pay tax only on the balance amount, subject to other exemptions and benefits. While it’s doubled from Rs 800 to Rs 1,600, still Its not very high amount, especially for big cities where the transportation expenses are very high.

5. TDS introduced for Recurring Deposits Interest

You might not have heard this in the budget speech, but now the TDS will be cut even for the recurring deposits. Till now for so many years, TDS was deducted only in case of fixed deposit, and not in case of recurring deposits. But now this has changed. While it’s not a big issue, but anyways you need to pay the tax on recurring deposit interest earned, even if TDS is not deducted. An amendment will happen in the definition of “Term/Time Deposit” under sec 194A and recurring deposits will come under TDS.

6. Service Tax Rate Increased from 12.36% to 14%

This was a big blow for common man. The service tax rate was increased to 14% from earliar rate of 12.36%. That means whichever services you avail, you will be paying the additional 1.64% in service tax. In case of restaurants, you will be paying 0.656% more every time (restaurants are required to charge service tax only on 40% part of the bill) . So if your restaurant bill was Rs 1,000, you earlier paid Rs 49.4 as service tax, but now you will pay Rs 56 , which is Rs 6.6 more.

7. Wealth Tax act abolished and replaced with 2% surcharge for super rich

Wealth tax is now abolished. Wealth tax is the tax one used to pay for certain kind of assets worth Rs 30 lacs. The wealth tax didn’t bring a lot of wealth for govt and hence they have simplified the whole thing by removing it. Instead of it, they have introduced a 2% surcharge on the those who earn more than Rs 1 crore a year. This new move will bring in around Rs 9,000 crore in govt kitty!

What I loved about whole removal of wealth tax is that CA students were very happy about this as their syllabus is now simplified :), here is one tweet which confirms that!

wealth tax abolished

 

8. Tax-free infrastructure bonds worth Rs 20,000 crore to be introduced

Tax-Free Infrastructure bonds are back. Keeping the focus on the infrastructure development, especially for railways and roads, the finance minister announced that the bonds worth Rs 20,000 crores will be introduced. The interest on these bonds will tax-free and the maturity will be after the long term tenure of 10-15 yrs.

9. PAN Mandatory for all Transactions above Rs. 1 Lakh

Now, if there is a transaction of more than Rs 1 lac, it would be mandatory to quote the PAN Card. For example, if you are paying Rs 4 lacs for buying a car, you will have to quote your PAN number for sure. This requirement of furnishing PAN is for both purchase and sale transactions. Finance minister also mentioned that tax authorities are also making provisions to check “splitting of reportable transactions” , which means that if someone tries to split the transactions only for the sole reason of avoidance of mentioning PAN, then it would be detected.

Suppose you want to make a transaction of Rs 4 lacs into gold through your debit card, but if you make 5 payments of Rs 80,000 to avoid mentioning PAN, then there will be some mechanism to detect this and you will have to explain it to tax authorities if there is any enquiry.

The Finance Bill also includes a proposal to amend the Income-tax Act to prohibit acceptance or payment of an advance of `Rs 20,000 or more in cash for purchase of immovable property’.

10. FM to Reduce Corporate tax rate from 30 to 25% over next 4 years.

This is not directly related to common man, but its important to mention it here. Just like salaried people pay tax, even corporates (companies and firms) also pay tax and the rate was 30% till now. That will be reduced to 25% over the next 4 yrs. This is really big thing, because a lot of tax is earned by govt from big and small companies and it was a bold move to reduce the taxation rates for corporates.

11. Choice between EPF and NPS

Now employees will get an option between EPF and NPS, but this option will be available to only those employees whose monthly income is upto a limit, which is not yet shared. However the good part is that employer will still have to contribute their share into EPF, only the employee share will either be invested in NPS or EPF.

Both EPS and NPS are retirement tools by govt and I personally think that over the years, govt should keep only NPS and abolish EPF, so that the whole system is more simplified.

12. Upto 10 Year imprisonment for concealment of Income or Assets abroad

Do you have any property or income abroad ? If Yes – please understand that you need to mention and declare it in your income tax return in India. Otherwise it amounts of black money and as per this budget you can be jailed for upto 10 yrs if found guilty. So if some Indian who has or does not have income of India or not, is getting any income outside India and has any assets outside, they have to file the tax returns for it without fail. If govt finds out that you didnt follow this rule, even your assets in India might be siezed in India.

Not just that, even you will have to pay a penalty of upto 300% . Read this article which explains things in a bit more detail.

13. NPS limit raised from 1 lac to 1.5 lacs 

The limit of NPS has been increased from 1 lac per year to 1.5 lacs. NPS is a retirement benefit investment product by govt were you can invest and create your retirement corpus.

14. Pay Rs 12 a year and get 2 lacs accidental insurance

Focusing on poors who do not have any access to insurance products, it was announced that a special scheme with name “Pradhan Mantri Suraksha Bima Yojana” will be launched soon and will be connected to Pradhan Mantri Jan Dhan Yojana . By paying Rs 12/year , one would be eligible for getting accidental cover of Rs 2 lacs.

The exact details on this are yet to come and it would be interesting to read the finer points on this scheme and how it works. Because this scheme will provide 1 lac of insurance for Rs 6 , however in market when you buy any standard accidental insurance, the premium per lac can range from Rs 100 to Rs 500. Lets see more on this when the scheme details come in future.

15. Pay Rs 330/year and get 2 lacs life insurance

Under ‘Pradhan Mantri Jeevan Jyoti Bima Yojana’ one would be entitled to a life insurance of Rs 2 lacs sum assured for a premium of Rs 330/year . This would cover natural and accidental death both and any person under age range of 18-50 will be eligible to buy this policy.

The good part of this scheme is that one would be able to buy a lower sum assured of Rs 2 lacs because for people in lower income range, even a sum of Rs 2 lacs ifs good enough and it would really help them in life, but the premium of Rs 330 is not very cheap, because that turns out of be Rs 165 per 1 lac of life insurance. However in market when you shop for any pure term plan , the premiums are very much in same range. For example when a 30 yr old person buys a 1 crore term plan, he/she pays around Rs 8,000 a year, thats Rs 80 for every 1 lac of sum assured.

Anyways, its a good scheme which can benefit poors. The details are yet to come and we are not sure of the fine prints as of now.

16. Gold Bonds to be launched other measures

A special kind of gold bonds will be launched very soon, which will be alternative of buying the physical gold in market. So if you want to invest in physical gold “only” for the prices appreciation, then you can instead buy these bonds whose prices will move as per market price only. This is really good because there were almost no option to invest in pure gold other than physical gold. And the good part is that this will be from govt :).

Another good thing announced was that there would be Gold Scheme’s where one can deposit their physical gold which are in forms of bricks and coins (anything other than jewelry) and earn interest on it. While this is not very much beneficial for a common man, as they mostly have their gold in jewelry format only. So big institutions, temples, and other charitable trusts would benefit from this scheme.

Apart from this, new gold coins will be minted which will be having India ashoka chakra on it, so it will be “Indian gold coins” which didn’t exist till now and one had to buy foreign gold coins.

So overall – How was the Budget ?

The only question, a common man is asking is “How was the budget ?” . I personally think it was a balanced budget overall. For a salaried person, they might not find too many things in this budget and budget surely disappointed them and then there are some things which are good also. Lets not get into debate of “good” or “bad” because one person opinion might be wrong for someone else. Its a personal judgement overall

So you tell me, how was the budget for “you” and how do you feel about it ? What are good and bad things you find in this budget ?

 

Buying Health Insurance in India? Follow this 13 point checklist

Posted on by Jagoinvestor

A lot of changes has happened in health insurance industry over last 5 yrs. The overall health insurance industry to some level is standardized and new regulations are in place. A lot of investors have bought their mediclaim policies many years back when rules were raw and when few things were in favor of insurers, not investors.

buy health insurance in india

Given the changes, I thought, it’s the time to edit the whole article written long back and update all the points. So here you go.

Health Insurance products now have far fewer hidden bombs to surprise you now, For instance

  • All Health Insurance policies are now mandatorily issued for life-time.
  • Insurance companies cannot levy claim based loading once the policy is issued.
  • Insurers need to give a clear 3 months advance notification to existing customers before increasing premiums or terms in a policy.

What’s more, thanks to the competition brought in by specialized health insurance companies, there have been many interesting features added to the otherwise standard mediclaim products.

So now I am putting up 13 points every investor should read before they buy health insurance. These 13 points can act as the guide for someone who wishes to either buy a new health cover or wants to upgrade their health insurance cover. These points are not tips as such, but various dimensions revolving around the health insurance buying decision-making.

Point #1 – Don’t be too late in buying a health insurance policy

I have seen too many customers, especially the well-educated ones, literally trying to find a health insurance product which has all the “dream” features bundled into a single product. They want high cover, less premium, best claim settlement, no loading, OPD cover, extreme fast claim settlement, maternity and high-end benefits.

But sadly, such “dream” products do not exist in real-world. One has to understand that these health insurance products are highly complex and their premium pricing and features are linked to various parameters. You can’t get a product which has everything you wish.

At times, it happens that 8 out of 10 things required by the customer is present in the policy, but 2 out of 10 is not there, and what do customers do? They try to find some other policy which has all 10/10 things covered. This just leads to procrastination. There are millions of investors who are delaying taking health insurance from many years and this is the single biggest mistake one can make.

The risk of “No cover” in the future

The biggest problem with this approach is that, you might be denied a cover later in life, because you might have crossed that age limit, or you might have catched some illness which will not be covered now.

If there is one advice, just one advice, I would give anyone on Health Insurance. It would be this – “Never Delay. Set a deadline, buy that policy and get covered.”

Buying a good enough policy early is 10X better choice than buying “best health insurance policy” after 5 yrs. So the first thing you need to do is, be 100% clear that you are buying a health insurance product NOW. Focus on core big features which really matter, and don’t get too attached to tiny points which either do not match your requirement or are different than what you want.

Point #2 – Assess who do you want to cover and their health status

It is important to finalize the list of people you want to cover. Also, take an account their current health status. Make sure you cover most of your family members for whom you are responsible for. At times, people buy health insurance for self, spouse and kids and ignore parents.

  • If all are young and healthy, no hospitalization history, no chronic ailment detected, you are going to be spoilt for choice!
  • If you have members who are above 50 and/or have a medical history/condition then you should be prepared for some pain (more on this later) which will most probably include having certain time bound exclusions in your policy. Or you might have to pay higher premiums.

Point #3 – Assess your lifestyle

The greatest health insurance is taking care of your health. Keep a check on your own lifestyle, as well as your family’s. If you/your family is fit, following a healthy routine or regularly exercising, have healthy food habits, doesn’t smoke, has no history of excessive drinking, you’re in a good place with regards to risks and coverage required. If not, then you have a much higher risk to hedge. This, apart from inflation, needs to be taken into consideration, when deciding the sum insured.

If not, then you have a much higher risk to hedge. This, apart from inflation, needs to be taken into consideration, when deciding the sum insured. But be clear that just having good health or good lifestyle is not an excuse to ignore health insurance policy. Leading a good lifestyle just protects you from illnesses, you still don’t have much control on accidents, or some diseases which can still happen even though you have a good lifestyle.

Point #4 – Individual Covers or Family Floater?

You also need to be clear if you want to buy individual cover for each person, or a family floater policy?

Family Floaters seem to be a no-brainer, as they are very efficient. The idea is that not all family members will be hospitalized in the same year. You get a large cover shared amongst all family members for one of you to claim. The price is lower/efficient than buying individual covers.

But hold on! .

If one of your family members is older than 50, or has health issues, or lifestyle issues as discussed earlier, it would be sensible to look for an individual cover for such a member in addition to the family floater. You shouldn’t have a “high risk” member as part of your family floater, as if he/she has frequent claims, year-after-year, other members could be left without any cover, when they would need it.

individual vs family floater health insurance

If you don’t have the choice, and are getting a great deal with a family floater policies then go for a very high cover (in the range of 25-30 Lakhs). More on this in the next point for discussion.

Point #5 – Zero down on Sum Insured from Long Term perspective

The biggest mistake one makes when buying Health Insurance, is when one factors today’s costs and decides the insurance coverage, whereas in reality, you are likely to make claims around 25 years from now

Hospitalization costs today would be ranging from Rs. 50000 to Rs. 3 Lakhs. Assuming you are 30 today, at an modest average healthcare inflation of 7.5% for the next 20 years, single hospitalization bills will range (hold your breath!) at around Rs. 13 Lakhs when you are 50 years old.

What’s more, if you live even a mildly unhealthy lifestyle(as discussed earlier), you may have to bump the cover by another 25%, as you are at much higher risk, unless you take things in control and improve your lifestyle immediately. Think in terms of the long run, you may not need this policy right away, but in the future, you will most definitely benefit from having a higher cover.

OK, don’t sweat; we have smart ways on how to get a Rs. 16 Lakhs within your budget. Read on.

Point #6 – Compare Hospital Room Eligibility Capping

Now this is the big one. This single condition could depreciate the value of your health insurance with inflation. Something most agents/insurers won’t like you to know.

Many Health Insurance policies have room rent capping, which means you are eligible to claim expenses only up to a room costing below this capping. In case you opt for a room above this cap, you will have to bear the additional proportionate expenses on your own. Let me give you an example

Lets say, as per your policy you are room rent limit is Rs 4,000 per day . Now if you get hospitalized and you choose a room (for if you are forced to choose) which has room rent of Rs 10,000 . You might think that you will just get 4,000 per day for room rent from insurance company and other charges you will get as per the limit. But thats not true.

In reality, your room rent limit is 40% of the room rent chosen, hence all other expenses will be paid by 40% margin only. Means if your actual bill for ICU has been Rs 20,000 , and even if it’s in the limit, you will still be paid just 40% of 20,000 = Rs 8,000 .

If your doctors bill comes to Rs 50,000 and even if it’s in the limit , still you will be paid only 40% of that, which is Rs 20,000 . So overall you will be at a big loss only because of the room rent capping limit.

room rent capping

I hope you are now clear on the implications of the room chosen at the time of hospitalization.

Also factor in the inflation

One day rent for a Private room averages to around Rs. 4000 per day, today. At an inflation of 7.5% for next 20 years, the room rent would be in the range of Rs. 20000 per day.

Now, if you have a policy with room rent capping of Rs. 5000, and you opt for a private room with rent of Rs. 20000 per day. Insurance company is liable to pay you only 25% of all the costs claimed by you, in spite of your claim being within the sum insured limit.

Given a choice, your preference of health insurance should be in the following order:

  • Policies with Private Room eligibility.
  • Policies with No Room Rent capping.
  • Policies with Room Rent capping.

You must be surprised as to why have I suggested Private room eligibility policies above policies without room rent capping. The reason is simple, in my opinion; policies with no room rent capping have larger chances of being abused. Insurers could bear higher losses due to no control over the extravagance of a few customers. In the long run, it would be consumers who will pay for such extravagance of a few, through higher premiums or revision in the terms of the product, so that the Insurer can contain the overall losses.

As mentioned earlier, the above priority is to be kept in mind, in case you have a choice. In case you don’t (due to health conditions, age etc.) it is important to not give up and hedge your risks to the extent possible, by opting for a sum insured with the highest room rent limit. This way you will be able to contain some part of this ‘auto-depreciating’ cover!

Point #7 –  Check for any sublimit/co-pay

There are clauses like sub-limits and co-pay in most of the insurance policies. They put a sub limit on a particular expenses (like 2% of sum assured). Make sure you are very clear about them and are fine with it.

There are few Insurance products that have limits for specified surgeries also. So even if your sum assured is Rs 5 lacs, they might restrict a particular surgery expenses to 50% of your sum assured.

co-pay clause policy

Check with the products you have shortlisted. Also check for words like “limits”, “co-pay” or “deductible” in the policy. These are set deductions in claims. Ensure you have understood, and compared what these mean, before your decision to purchase is made.

Point #8 – Hospital Network is Important Parameter

While you compare the key features discussed above, you should also compare the hospital network of the shortlisted Insurance companies. You must compare these for areas you/your family is likely to be hospitalized. Though such lists are dynamic and can change anytime, it still gives you a good idea of the network that the Insurer has in place, in case you need to use it for a cashless treatment.

Check it out below to see the number of hospital and their names near your house (based on the pin code you provide them)

hospital network health insurance

While a good network of hospitals is something you should definitely look at, but it should not be your primary parameter to judge a health insurance company.

Point #9 – Finally, go through Policy Wordings

Ask your Insurance Broker/Agent to provide you with the policy wordings of the product you have liked. Ensure you go through the Customer Information Sheet yourself. This is a one-pager that summarizes all the key conditions you must be aware off. Every health insurance product needs to file this with the Government (IRDA). Ask questions till you are satisfied.

I would strongly suggest look at the policy document sheet yourself online. Just go to google and search for “<health insurance policy name here> + “brochure pdf” and you will surely get the PDF document online. go through it and read it. below you can see, how I searched for Appolo Munich Optima Plus brochure online

health insurance brochure

Point #10 – Go for Super-Topup

In order to get the 15-17 Lakhs health insurance cover that would inflation proof you for the next 20-25 years, it is very sensible to buy a Super Topup policy. Recommend, that you go with a Rs. 5 Lakhs base cover with a Super Topup cover of Rs. 15 Lakhs. This can save close to 25-30% of premium vis-a-vis buying a Rs. 20 Lakh base plan.

2 important things here

  • Ensure there is no room rent limit in your Super Topup policy.
  • Ensure you buy a Super Topup Health Insurance along with your Base health Insurance policy tenure and they have similarly timed renewal dates.

health insurance super top up

You can read how super top up works in this article .

Point #11 – What to ignore while buying a policy ?

Now that you know what you must compare and consider, you must also know what to avoid?

Features like Ambulance, Daily Hospital Cash, Domiciliary, and any other benefits that don’t get used often, have a low consequence in the overall scheme of things. Hence, in my opinion, these should be overlooked, so that you focus on the bigger covers.

So focus on the network of hospital, fees for doctor consultation, Room rent Limit, ICU charges, Check if they are paying for medicines or not and these kind of expenses which make the the major part of your overall bill.

Things like Ambulance charges are not more than Rs 2,000 , if you have to pay it from your own pocket, even that its totally fine. Why to choose a policy based on that parameter ? Its always a bonus advantage and nothing else. So learn what to ignore and what to look at.

Point #12 – Ensure you appoint a good advisor

By now, you may have realized Health Insurance is a complex product and a good amount of research has to happen (but do not over do it). It is therefore recommended that you appoint a health insurance expert to help you shortlist products, explain the terms, answer your queries etc.

You even need a post-sales services like claim assistance and helping you out in co-ordinating with the health insurance company if you are stuck. If you find yourself a policy through an Insurance Broker, if required, he/she may also be able to help you through dispute resolutions with Insurers, in the long run, if any.

Let me show you an example of a claim rejection case with Max Bupa (company was right in rejecting the claim) . One of the readers among you had bought a policy through Max Bupa (through some individual agent, not broker) and he bought two different policies for himself and wife . He wanted a maternity cover and the agent told him that its covered in the policy. It was even written in the policy document, but it was clearly written that both husband and wife have to be in a single policy (floater policy) . But agent and client both didnt pay much attention to it.

And after 4 yrs, company rejected the case based on their terms and conditions (the claim itself was not valid) . Below you can see the scanned letter which company had sent to the client. Here company was correct in rejection of claim because client wanted something which was never covered in the policy. However if had paid more attention or had a great advisor on his side, he might have been informed in a better way.

claim rejection example

Remember that unlike Life Insurance or many other policies, Health Insurance could have repeated claims through yours or your family’s lifetime. It is therefore important to have someone who can hand-hold you through the tedious paperwork and the otherwise time consuming processes of Insurance companies.

In the cases where you want to cover the family members who are above 50 and/or with pre-existing disease, it makes a lot of sense, to go through an insurance broker who deals in multiple insurance companies. Out of sheer experience, the broker will be able to help you zero down to few Insurance companies who are liberal. This will help you avoid the pain of doing medical tests with Insurance companies where chances of getting a policy are very low.

Point #13 – Review your existing policy and look at options to Port

If you have an existing policy which does meet the above mentioned 12 points, and you are still young and healthy, I would recommend you to look at porting your mediclaim policy to a better company around 2 months before your next renewal.

Unfortunately, if you have already made claims in your existing policy, or have any chronic ailment to declare for any family member, the chances of portability are very dim. I would then recommend you look at upping your cover with the same insurance company, and look for other options (like Super Topup) by which you can hedge the negatives in your existing coverage.

Buy your health insurance company NOW !

I recommend that you at least start looking at various options and take your decision quickly. That’s all folks. If you have any questions, comments, feel free scroll down to post your comments. Happy to help.

UAN – All you wanted to know about the new EPF system

Posted on by Jagoinvestor

EPFO has brought some major changes in the way it works and a new system called UAN (Unique Account Number) is in place now. This UAN is a way to simplifying the process of collecting and managing the provident fund money for employees.

Transfer EPF account online

Background – The pain of the old EPF system

Before I start explaining, Let me go back a bit to help you understand a bit of background. Earlier when a person joined a new job for the first time, he got an EPF account opened by the employer where his provident fund money was deposited. For years, this money got accumulated in that EPF account.

Now when this person left his job and joined some other organization, the new employer again assigned him a new EPF account and started depositing his provident fund money in that account.

This way, if a person changed his job 5 times, he had 5 different EPF account numbers and in case he wanted to withdraw his EPF money, he had to apply at 5 different employers or transfer then one by one to his latest EPF account and this called for a big headache

This way, if a person changed his job at 5 different places, he had 5 EPF accounts and now he had to either withdraw money from his EPF accounts one by one, or they have to transfer the old EPF money to new EPF account.

But that was a big pain!.

Transferring your old EPF money to new EPF meant filling up the forms, then EPFO department sent to your old employer to get their signatures and if they denied or didn’t exist at all (if they closed down), then things would fall apart and now you were stuck with no information, no proper status and no idea what you need to do.

Calling EPFO department or emailing them didn’t work most of the times, and a lot of people just let their old EPF account exist and didn’t do anything, because of the sheer amount of uncertainty and ambiguity. This whole system was raw, old and not friendly for the employees at all.

Things have changed now quite a bit after UAN has been introduced and most of the pain points have been addressed. Let me now share some critical points about UAN or Universal Account Number as it’s called.

What is UAN?

In simple words, UAN is a 12 digit single account number which will be linked to your provided fund money. Now you don’t need to worry about different EPF accounts and then transfer them when you join a new job. Now

each employer will just give you a member id, and all those member ids will be linked with the same UAN. Even the employee’s having EPF under private trusts will be assigned the UAN.

This is the new system and will be applicable now for your current and future employment. Any EPF account you had before this, sadly will not be handled in this system. You will have to manually deal with old EPF accounts, for anything new will now be under UAN. The image below clearly shows the situation now and then.

UAN-vs-EPF

3 Steps of obtaining and activating your UAN?

Below there are steps to be followed if you want to get your UAN and activate it.

Step 1 – Get the UAN from your Employer

The first step is to ask your employer for your UAN. EPFO department has already allotted most of the UAN (4.2 crores as the last count) and communicated it with employers. So most probably your employer must have shared your UAN number to you.

If your employer has not yet shared it with you. You can still validate if your UAN has been issued or not. For that, you need to follow the steps below

Then click on the “Check Status” button and it will show a message saying “UAN is activated” in case it’s already activated by EPFO department. Once you see that message, then check it with your employer. Below screenshot gives you an idea about how to do it.

check UAN allotment status

So like this, you can first verify if your UAN is allocated or not against your EPF. Also, note that UAN is to be allotted to only contributing members whose accounts are active. All the dormant/inactive account is going to get closed.

So if you have 3 EPF account, out of which 2 are old and dormant, please check the status using your current EPF account number which is active.

Step 2 – Activate the UAN

The next step is to activate your UAN. For that, you need to follow the steps below

  • https://uanmembers.epfoservices.in/uan_reg_form.php
  • Enter your UAN, mobile number and EPF account details
  • Get authorization PIN on your mobile
  • Submit PIN and activate your UAN
  • Then generate your login/password and registration is complete.

Activate UAN and Authorization PIN

Step 3 – Update your KYC details

After that, you should log in to UAN portal with your username and password and once you enter the portal, you will see many options like for downloading passbook, downloading UAN card, and editing your details. Apart from that, you will see an option to Edit your KYC Details.

UAN KYC update

Following are the documents which can be used for KYC. You need to upload a scanned copy of any one document

  • National Population Register
  • AADHAR Card
  • Permanent Account Number
  • Bank Account Number
  • Passport
  • Driving License
  • Election Card
  • Ration Card

Below you can see an example of how it looks when you choose PAN as an option.

KYC update UAN

Special Benefits of UAN

Let us now see some of the benefits of UAN compared to the old EPF system. Some changes in UAN were really required from last many years (even decades). Let’s see them one by one.

Benefit #1- Communication directly between employee and EPFO

The best thing about UAN is that now the communication can happen directly with EPFO and Employee. Earlier the employer was in between employee and EPFO for most of the things, especially for withdrawals and transfer of EPF.

Your employer had to sign the documents from their side, now this will not happen. The employer will now act like a depositor in your account and nothing else.

Benefit #2- UAN will remain same throughout the career

The best part is that Universal account number is going to be same throughout your whole career. Each time you change your job, all you need to do is provide your UAN to your new employer and he will tag the member id they create for you to that same UAN.

Note that your overall career moves will be recorded at one place because your UAN is nothing but a central database of all your employers and your past employment, but this will only be visible to the employee and no one else.

Benefit #3- Sms notifications when your Provident Fund is deposited

Now each month, when your employer deposits your provident fund money, you will directly get an SMS notification informing you about it. This is really great because now you know if your employer is actually depositing the money with EPFO or not.

This will be exactly like you get notifications from your bank when your account is credited with salary. This is especially nice because in past there have been cases where the employer didn’t deposit the EPF money for years and months and employee came to know about it much later and then they had to lose their hard earned money

Benefit #4- Update your KYC at one place

Now you just have one single window where you can update your address, mobile, email and other KYC details in case they change in future. A lot of issues happened in the earlier model where the same person had a different address and contact details with different employers and that created issues while withdrawal and transfers.

Benefit #5- Transfer of your Provident fund money automatically

Now the transfer of EPF is very simple. When you join a new job, you just need to furnish your UAN number to your employer and automatically within 1-2 months, your provident fund money will be transferred. In a way, it just has to get linked to your UAN

Benefit #6- Extremely friendly process for EPF withdrawal or Applying for Loan

This is still in process and can take up more than 6 months to a year, but once it’s complete, then the process for withdrawal and loan will be super fast and simple. You might not be aware that you can withdraw from your EPF for important events in life like marriage, buying a house, or medical emergency subject to some rules and restrictions.

Once UAN system is fully functional, you then just need to fill up a form and provide your fingerprint to a biometric reader and once things are matched, the amount will be transferred to your registered bank account within an hour.

This used to take months and years earlier. I am not sure if in reality, it would be as simple and fast, as they claim – but still, things are bound to get simple and fast.

Conclusion

Make sure your UAN is activated and you have uploaded the KYC document. If you have any other queries regarding UAN, please share it with us and we will try to find out the answer.

6 facts to know before you apply for credit card in India

Posted on by Jagoinvestor

So you want to apply for credit card? That’s great, but are you well versed with the world of credit card? Do you know how does bank evaluate its potential credit card customers? Are you clear about your requirements and why are you so eager to get a credit card?

Most of the people do not spend much time to check which credit card is best for their requirement, but just grab the one that is offered to them for the first time. So today, I want to make sure I give you a sneak 360 view of the world of credit card and what all things one should be looking at before they apply for a credit card in India.

1. Your Income is important parameter for Credit Card Eligibility

When you fill in the application form while applying for a credit card, the lender asks you for various information like your age, city, take home income per month and type of your employment, which all is required to decide if you qualify for getting a credit card or not.

But out of those, your income is a very important parameter because that’s the main thing which determines your repayment capacity of your dues each month.

Someone earning Rs 50,000 per month is generally more eligible than someone who earns Rs 25,000 per month, because higher income is an indication that you will be able to pay your bills on time and on a consistent basis.

You income is also an important information for bank to set your credit limit at the time of issuing the credit card to you. You can see below a snapshot of HSBC credit card page and they have mentioned that the minimum annual income of a person has to be Rs 5,00,000 to apply for these credit cards.

income criteria for credit cards

So if you are earning good enough money, only then banks will be interested to give you a credit card. Make sure you do not apply for credit card just for the sake of it without a minimum threshold income. Also, note that you would need to submit your latest ITR copy for income proof.

2. Existing relationship with bank fastens the process

If you already have a salary account or saving account with some bank, it is relatively easier to get a credit card, especially when you have handled your accounts properly, I mean not have too many overdrafts, maintaining your minimum balance over the years and having a consistent flow of money in your account.

This is because the bank can easily verify your income details and see your activity and how responsible you have been over the years.

So for example, if you want a HDFC credit card, but you have salary account in ICICI bank, it would be recommended that you apply for ICICI credit card first (assuming it does not matter much to you). You can easily apply for the card online on bank website, and even bank will ask if you are an existing account holder in the bank or not. To which you can choose YES

existing bank account for credit card

If you do not want to apply online for your card, then you can also visit the branch and meet the representative face-to-face. Bankbazaar is a good portal to compare and apply for credit cards or any other kind of loans.

3. Your past credit history matters

It also matters how was your past credit history, if you are looking for credit card. If you have taken some personal loan, education loan or home loan and now applying for credit card (generally a second credit card), your CIBIL report will be checked by the company to find out how was your credit history.

Did you make your payments on time? Did you close all your loans and outstanding without any balance or not?

You can see a snapshot by cibil.com below which shows you what all documents are required by the lender before issuing various kinds of loans and it shows that the latest credit score and CIR is mandatory.

apply for credit card document

In fact the CIBIL report is now mandatory check for any kind of loan. Make sure you surely check your credit report once before you apply for your card.

4. Be clear about the purpose of credit card

There are various kinds of credit cards available with bank. You need to understand very clearly what is the main reason you want the credit card?

If you want to use the credit card primarily for dining and shopping, then you can choose the card which gives more benefit for that. If your main spending is on fuel, then there are cards which cater to that requirement. There are tons of ways you can get rewards and cash back on credit cards. It’s important to do a bit of research on this.

Below you can see some HDFC cards examples .

hdfc credit cards

Most of the credit card companies offer cards under categories like Silver, Gold, Platinum, and Titanium and then as per categories like Diners card, Fuel Card, Cashback cards. If you look at HDFC credit card page, you can see categories and various kinds of features as below

5. FREE vs. Annual Fee credit card

There are credit cards which are totally FREE for lifetime and then there are cards which come with annual fees ranging from Rs 99 to few thousands per year. Most of the people want a lifetime free credit card, which is totally fine if your credit card usage is basic in nature.

But if you have very heavy card usage and 40-50% of your spending happens on credit card itself, then it makes sense to go for premium credit cards, which have some annual fees, because those cards offer you awesome benefits and various ways to save money.

You get higher reward points and cash back in those cards. Also, they have special tie ups with airlines, hotels, shopping stores, fuel companies etc and you get maximum benefits by being a premium member.

For example: Those who travel a lot by airlines can look at Signature Credit Card from HSBC which has special tie up with Makemytrip and comes with annual fees of Rs.3,500, but gives lots of discounts and vouchers which can be used by the cardholder. You will not get these offers if you have a normal credit card.

Signature Credit Card HSBC

If you want to learn how can you use your credit card in more efficient way, a good resource is this article written by Shabbir.

6. You can also get credit card against a fixed Deposit

Do you know that you can also get credit card against fixed deposit open with a bank ? Yes – That’s possible . There are many banks, which will offer you a credit card, if you open a fixed deposit and want a card against it as security (These are also called Instant Credit Card).

This is very much beneficial for those people who are not able to get credit card due to low credit score and banks are rejecting their credit card application. So you can apply for a credit card if you are ready to open a fixed deposit and its also one of the good ways to start improving your credit score, if its messed up.

Below is a snapshot of ICICI Bank credit card page about instant credit card

credit card against fixed deposit

Most of the banks have a minimum threshold of Rs 20,000 fixed deposit to be opened with them and your credit limit is always below that FD amount.

So if you open a Rs 40,000 FD with bank and take a credit card against that FD, then your card limit might be 20-25k per month and if you default of payments for a long time, bank will break the FD and take their dues from it, so there is no risk for bank.

This is the reason that it’s much faster to get a credit card against a fixed deposit and there is no income proof required to get credit card against a FD .

Get set Ready

I hope you are now clear on various things before you apply for credit card from any bank. It’s very important to be very clear on your expectations from the card and for what purpose why you need it.

I would be happy to know your views on this and if you can give some tips to a beginner who is looking for cards for the first time

6 money lessons every investor can learn from Pradhan Mantri Jan-Dhan Yojana Posters

Posted on by Jagoinvestor

I recently was reading about Jan Dhan Yogjna and came across some really nice posters created by their team which is used to educate public in their financial literacy camps.

On looking those posters, I was really touched by its simplicity and how powerful they are to install basic foundation lessons. There were many posters in the PDF file I saw on their website, but I picked 6 posters which I was to show you and teach you some important and foundation lessons on money.

I request you to read what I have written for each of them (don’t skip them) to benefit most from them. I know some of you might feel, these points are not for you, but trust me – many of you need them as much as others.

Lesson  #1 – Essential Expenses comes first before Non-Essential Expenses

financial literacy from Pradhan Mantri Jan-Dhan Yojana

You always have two kind of expenses, essential and nonessential and whatever income you earn should first go into expenses which are extremely essential in nature like food, house, education, Medication etc .

If you see the porter above, it shows you a pot which in its bottom has all the essential things and all the non-essential things come about it. In the similar way, when you are investing or spending your money always ask this question – “Have I taken care of the essential first ?” .

I know this looks too basic thing and its assumed that even a fool knows this, but reality is very different. You will see lots of parents who have spent 30-40 lacs on lavish wedding of their children, who are now struggling to even buy a house.

There are people who have invested their money in land, which is locked and now they are struggling to pay high education fees for their children. There are parents who are saving for their car, even before they have any money accumulated for their kid’s school fees.

Lesson  #2 – Financial Planning is extremely Easy – if you are ready

financial literacy from Pradhan Mantri Jan-Dhan Yojana

The next poster shows the simplicity of financial planning and how easy is it to implement. All you need to do is be ready beforehand and act on requirement. The above poster is created from a poor person’s perspective, but there are big things to learn .

Whatever is your future need, write it and then find out how much you need to invest on a monthly basis and then DO IT . There is no extra ordinary thing done by those investors who always meet their life goals, all they do is properly save with discipline.

Lesson  #3 – Spend, Reduce and Avoid

financial literacy from Pradhan Mantri Jan-Dhan Yojana

You always have 3 categories of expenses in your life. Needs , which needs to be taken care of no matter what you do and you have to spend on those things, no matter what, like education, food, health, medicine. You should make sure you spend on these things and don’t cut on them provided you have the money for these things. Its essentials of life and they are critical for your existence

However there is another category called Wants, which are “great to have” things in life. Things like expensive clothes, entertainment, holidays – which is something where you have to define your limits. You don’t have to cut them out of your life, but always remember how much you need to spend on those things.

You have to REDUCE your spending on these things if possible and then at last there are VICES, which are bad for you, which destroy lives in long run. Smoking, alcohol , gambling etc which give a pleasure in short-term, but should be totally cut out from your life. Most of the people in lower strata of income always remain poor mainly because of these vices.

Lesson  #4 – Debt will destroy you, if you dont handle it properly

financial literacy from Pradhan Mantri Jan-Dhan Yojana

I love this poster most because I know most of the people can relate to it more than other posters. Debt is like sugar – sweet for now, diabetes for future . Millions of people today are in debt cycle which started very small.

When their career started, they bought a bike on EMI , or they swiped their credit card because they need loan for some not so important purpose in life (and many times, very important) and then from that time, till date they are paying the EMI for some of the other purpose.

Availability of easy credit has made them addicted to loans and credit offers. One side when one has to save and grow their money, people in debt cycle are actually doing the reverse.

If you see the image above, you can see how poor people get in debt cycle, the easy availability of credit from sahukar or friend in their village makes sure that they are always in that debt cycle, because anytime they need money, they can get it (at small level) and the interest they pay does not look huge (because it’s in rupees terms) like Take Rs 1000 and give back Rs 2 every day , that is bloody 72% per year. Avoid it if you can

Lesson  #5 – Save money keeping in mind your life cycle needs

financial literacy from Pradhan Mantri Jan-Dhan Yojana

Most of the people live as if life will always be great and they will always see happy days in life just because their current situation is awesome. Bad things happen in life and you can have it too . It’s important that you save for bad days keeping in mind all phases in life.

I came across a 53 yr old person recently who has spent on everything else in life, but has Rs 0 for him today and now when he is free from other responsibilities in life, wondering how will he manage in his old days since only 7 yrs are left before he will be “senior citizen” .

You will see change of jobs, birth of child, death of someone , lowering of income and many other things which will need money that time which brings an important question – “Are you saving minimum 20-30% of your income for your future needs?” . If not , think on this .

Lesson  #6 – Borrow to undertake an activity, which enhances your income

financial literacy from Pradhan Mantri Jan-Dhan Yojana

I want you to stay grounded with that statement for a moment.

– “Borrow to undertake an activity, which enhances your income“

No statement can make it simpler than this. If you are taking loan, ask the question (unless its emergency) – “Will it be used for something which can enhance my income or build me a growing asset ?” . If the answer is YES – you can go ahead, else refrain from it.

Most of the people I came across have tons of personal loans, credit card debt, car loan which is not helping them build anything in life, it’s mainly for their consumption . To some level I am not too much against it personally, but when it’s beyond the limits – it really troubles you all the life because you never get a good enough start in your financial life in initial years.

Basic, but foundation lessons

Today’s article was a bit basic in nature, but I would say its very important one which builds foundation of every investor. Despite it looking basic, millions of investors don’t follow it and get into trouble. I want you to send this article to at least 5 people you know are starting their career, or you feel need some foundations in personal finance knowledge.

Would love to know what you think of these lessons and did you love these posters ?