“Someday” Is code for “Never”

I got an interesting question in my mail box – “Can you please coach me on How can I overcome my casual approach towards my finances and live a good financial life?” 

The thing is that deep down we already know how to live a good financial life; the issue is that we are somewhere unwilling to take the required actions. Personal finance is not a rocket science; it simply has some hand full of things that you need to do. It is not about “How to” live a good financial life; it is a matter of choosing wisely and to make commitments to the actions that are required.

Someday I am going to sit with my advisor and sort out my finances, 

Someday I will go for financial planning, 

Someday I will do something with the idle cash that I have

Someday I will alter my investment style

Someday I will buy a term plan

Someday I will increase my investments

Someday I am going to buy my own house

Someday I am going to complete all my pending actions

Someday I will read all the nice articles that are starred in my inbox

Someday I am going to read entire article archive of Manish

And Someday I am going to organize my finances?

Give me two days and I will show you what I can do with my finances. This Someday syndrome always keeps you away from wealth creation in life. I re-collect a line from a famous movie Day and Knight 

“Someday. That’s a dangerous word. It’s really just a code for never” .

The code to your financial success is in your hands. Today you can choose to bring a dramatic change in the way you live your financial life. What you choose today determines the quality of your financial future. The “Someday investor” is all about hoping, wishing, desiring and wanting things to happen in his/her financial life. The truth is this really does not serve you in your financial life.

Once an old Cherokee is teaching his grandson about life -

A fight is going on inside me, he said to the boy. It is a terrible fight and it is between two wolves. One is evil – he is anger, envy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority, and ego. The other is good – he is joy, peace, love, hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, compassion, and faith.

This same fight is going on inside you – and inside every other person, too. The grandson thought about it for a minute and then asked his grandfather, which wolf will win? The old Cherokee simply replied, the one you feed.

What are you feeding your financial life? – “specific actions or someday actions”. Specific is being committed, someday is being casual. When you make a choice to be in action you gain leverage over other investors. The more specific you are in defining your actions the better your financial life gets. Keep feeding your commitments. Keep choosing. Keep taking actions. This blog is your sacred space, it is for you to add different dimensions to your financial life, if some conversations trigger new thoughts or actions than allow that action to happen and don’t forget to share your actions with us. Leave your questions in comments section and we will try to incorporate them in future articles.

Lastly 2011 is about to close its doors, why don’t we take this opportunity to lock our “someday” behind the doors of 2011 and step forward with commitment in our hearts. Wish you all a very prosperous 2012.

This post was written by Nandish and this post was taken from our finacial coaching blog where we keep on writing these kind of coaching conversations from time to time

Source : www.jagoinvestor.com

WIFE GETS 50% SHARE IN HUSBAND'S PROPERTY AFTER DIVORSE - INDIA LAW

Do you love your wife? You better do !

There were few changes made few weeks back in the marriage laws in India, which everybody should be aware about. A bill called “Marriage Law’s (Amendment) Bill 2010″ was passed in Rajya Sabha which has made some major changes in the women rights on how the properties would be divided after divorce.

The biggest change says – “As per new Divorce law, Wife share in property would be 50% in all her husband’s residential properties, no matter what and in other properties, her share will be decided as per the court decision.”

Wife share in property owned by husband would be 50%

Earlier, before this change – a women was entitled for a share in husband’s properties, but there was no quantum defined as per law, it would be any percentage depending on the case, but now with this amendment done, a women will enjoy equal sharing without any condition in all the residential properties owned by husband. But in this case, women will have to specifically apply for her share, she should be aware about this law about “50% share” .

A major change in this amendment is that this rule is applicable to all the properties of the husband acquired before and after the marriage, whereas as the earlier law made sure that the wife gets share only in those properties which are acquired by husband only after marriage. Now men stand to loose on this front, in-case things so sour with wife.

Husband & Wife joint holder’s in a residential property

You should be clear by now, what will happen in the case where a property is registered in the joint names of husband and wife. A lot of couple register a house in joint names, a lot of times both pay’s from their respective salaries, and in some cases only one party pays (generally husband). Imagine divorce happens – Who will get how much ? Women will keep her 50% part and she will also get half of her husband share in the house, so 75% wife and 25% husband.

Rights of women after divorce on other properties in India?

Apart from the mandatory 50% share in husband’s residential properties, the wife will also be entitled to get a share in other kind of properties, but the quantum is not set, as per the Bill, it will depend on “living standard of the wife”

Waiver of six months cooling period possible

As per the old Indian law which governed the division of assets for women after divorce, it was mandatory for husband and wife to spend at-least 6 months together before applying for divorce, but with this new amendment bill, there are provisions of waiving off the 6 months cool off period or lessen it, but only if both husband and wife wants it. Which means if one of the spouse wants to get divorce on an “urgent basis” , but other does not, it will not be possible. This is one of the major change in the bill and will help those couples who do not want to serve that “6 months” cool off period of living together.

Is this a anti-male law ?

A lot of groups have termed this change as anti-marriage and ant-male law and critically oppose it, they have termed it as a bill totally against males and illogical. The major issues with the amendment are as follows

·         The bill talks about only the division of Husband Properties, but not wife’s properties. So in-case women is at fault, still she will get 50% share in husband property, but her share of property will not be divided.

·         A major disappointment for men in this bill is that, even the “person at fault” can apply for getting the share of property, and the other party will have to respond to it. Generally as per old law’s when mutual consent was not there, the victim applies for the property share and the person who is the “bad person” has to respond to it. Now with his law change, wife can seek a divorce and ask for share in property.

·         If wife and husband are living apart from many years, a wife can oppose the divorce on the grounds of financial hardship, but men cannot! . This is called Irretrievable breakdown of marriage

·         There are concern’s raised like this law will encourage more divorce’s are women can get hold of property easily for sure.

Now there are some serious concerns due to these changes. If a husband has one residential properties, old parents who are financial dependent on him and there is divorce between husband and wife, the wife could take 50% share, in which case the men will be left with 50% property, this seems very unjustified. What is the women already owned 2 more properties on her name? She has nothing to worry! .

One serious drawback of this law is that some men, who are undergoing a bad phase of marriage, may convert their residential properties into immovable assets, or just transfer it on other names to save themselves from parting away with 50% share in worst case.

Conclusion

While there are cases where women are deprived of their share in wealth at the time of divorce in India and there was requirement of strong laws which focuses on rights of women in case of divorce in India, this amendment seems to have gone beyond what it wanted and has loopholes which can be exploited by women. With due respect to each gender, it would be great if there would have been some balanced law, and some thought should have gone for worst cases.

To summarize things, here are the take away’s from the changes made in marriage law’s.

·         In case of divorce, Woman will have 50% share in the residential property of a man

·          The wife will have to take the initiative of seeking her share in such cases.

·          Women and children will also have rights in the other assets of man, which will be decided by court

·          It does not matter if the property was acquired by before or after the marriage

What do you think about this amendment ? Do you also feel its too anti-male but only designed keeping women in mind ? Do you feel its correct to keep 50% share for wife in husband’s property in case of divorce as per law in India ? Note that the bill still needs to be passed in Lok Sabha

Source : Manish Chauhan - Jagoinvestor

SHOULD YOU BOOK SOME PROFIT FROM MARKET NOW

Prashant Mahesh suggests profit booking in some outperforming sectors and stocks as the market has climbed 13% in under three months

The stock market never stops surprising investors. Just when many were busy writing obituary of the equity cult, market barometer BSE Sensex moved up 2,000 points in just three months — from 15,749 in early June to 17,783, a gain of 12.91%. 

Needless to say, most investors are surprised by the sharp upward move, as both news flows and economic data have not shown any sign of improvement during this period. If anything, it got worse. Brent crude has risen to $115 a barrel from $90. The government has not been able to raise prices of administered petroleum products like diesel, LPG and kerosene and is losing . 14 on every litre of diesel sold. The fiscal situation has deteriorated, with S&P threatening to downgrade India’s rating. Policy paralysis continues with no announcement on reforms or FDI in retail and aviation. Rainfall too has been poor so far this year, with a drought-like situation in some states. 

Even on the global front, the debate continues over the exit of Greece from the Eurozone and the consequent financial implications it could have. Yet, despite these negatives, the market surged ahead. 

“Investors have expected the ECB to start buying troubled bonds and there is hope of a QE3 (quantitative easing) soon. This, along with liquidity, is driving the markets up,” says Sadanand Shetty, VP and fund manager at Taurus Mutual Fund. The most obvious question an investor would be asking: is it time to take profits? 

“Certain sectors like FMCG and pharma have seen a sharp rise in stock prices over the last one year. You can book profits selectively in these sectors and enter at lower levels,” says Madhumita Ghosh, head of research at Unicon Financial Intermediaries. 

BOOK PROFIT SELECTIVELY IN PHARMA & FMCG 

Since the rally is liquidity driven with foreign institutional investors (FIIs) pumping in more than . 13,000 crore since July 2012, experts feel the broader market will be range bound. “For the next six months the markets are likely to be range bound and the Nifty will trade between 4,750 and 5,500,” says Sandeep Raichura, business head at Castanea Wealth Management. Since the Nifty is at 5,400, it may make sense to book profits in stocks which have run up. Certain stocks in the FMCG and pharma spaces have seen a sharp runup in their prices. For example, Hindustan Unilever has moved up from . 320 to . 518, a rise of 62% over the last one year, and now quotes at a PE of 34. Similarly, Godrej Consumer Products has moved up from . 416 to . 652, a rise of 57%, and is quoting at a PE of 46. 

In the pharma space, Wockhardt has moved up from . 389 to . 1,266 a jump of 225%, while Strides Arcolab has moved up from . 288 to . 854, a jump of 195%. “It makes sense to take partial profits in cases where the stock prices have run up fast,” advises Madhumita Ghosh. 

DEPLOY CASH INTO STOCK BASKETS 

Now there are a couple of ways in which investors can utilise the cash generated from booking profits. Conservative investors could hold on to their cash and wait for declines and invest again. “Investors, who wish to remain fully invested, could invest in a basket of stocks to generate some extra returns. You could invest up to 10-15% of your equity portfolio in such baskets,” says Rajesh Cheruvu, chief investment officer, RBS Private Banking India. 

For example, in the current environment he recommends a policy reforms basket of five stocks — HPCL, IDFC, IRB Infra, Spicejet and Pantaloon Retail. Any change in policy be it in FDI in aviation or retail, hike in diesel prices or increase in infrastructure activities will benefit this basket and generate extra return for the portfolio. 

Similarly, longer-term investors can play the delisting theme basket, which will pan out over the next 12 months. “In the delisting theme, buy into those stocks which have a higher return on equity than their parents,” says Cheruvu. 

Some stocks that you can buy here are Oracle Financial Services, BOC India and Thomas Cook. Similarly, to take advantage of the currency depreciation, investors are advised to buy the Hang Seng ETF listed on the NSE. “The Hang Seng ETF is available at a steep discount to its historical average and at valuations cheaper thantheIndian Nifty, making it a good investment,” says Cheruvu.

Source : The Economic Times – 27/8/2012

HOW TO CALCULATE QUARTERLY AVERAGE BALANCE

Do you understand what is the meaning of Minimum Quarterly Average Balance in your saving account? When you say “Quarterly Average Balance of your saving bank account is Rs 10,000″ , what does it mean exactly? A lot of people feel that their balance in saving bank account should not go below Rs 10,000 on any given day, otherwise there will be penalty charges and they make sure that they have a buffer of Rs 10,000 in their saving bank account all the time. This means that their account always have that much surplus. However the way quarterly average balance is calculated is different and very simple.

Meaning of Quarterly Average Balance ?

It simply means the average of the all the closing day balance in a given quarter. So given a quarter, add up all the closing day balance and then divide it by the number of days in the quarter. If you have to put it as formula it would be

QAB = (Total of all the EOD closing balance)/(number of days in quarter)

Let me show you an example . Let us say the quarter we are talking about is Apr-June . Now your balance in the start of the quarter (Apr 1) is Rs 20,000 . You withdraw 15,000 on 15th Apr and then Deposit 8,000 on 12th June. What will be the quarterly average balance for the Apr – June Quarter ?

Learnings & Tips

·         Keeping Rs 30,000 in a bank account for 1 full month , is same as keeping 10,000 for full 3 months (30k * 30 days = 10k * 90 days)

·         If you want to keep ZERO balance in your account for most of the time, then the best thing would be to put a big amount like 90,000 for first 10 days of a quarter Q1 and then do a FD for 5 months , and then once it matures, you will be in Q2 end , and then you can put it for another 10 days , this way you will meet quarterly balance for both Q1 and Q2 .

PSU Banks vs Private Banks

A lot of PSU banks like SBI bank, Bank of India , Allahabad bank generally have a lowerQuarterly Average Balance to be maintained in saving bank account, it average limit is upto Rs 500 in most of the banks and non-Maintenance Charges are very low around Rs 50-100 only. However Private banks like ICICI Banks, HDFC bank, Axis Bank etc have quarterly balance as high as Rs 10,000 and high charges as penalty for not maintaining it , It some times can be as high as Rs 750 . Note that ICICI Bank has recently moved to Monthly Average Balance (which I came to learn when I was writing this article and thanks to everyone that I knew it as I have my account in ICICI bank only)

Did you knew how the minimum average balance is calculated ? Now will this information impact your banking in any way ? Will you keep less money in your bank account because you now understand that quarterly average balance is calculated in a different way than you thought?

Source – www.jagoinvestor.com

WHEN GROUP COVER FALLS SHORT, TRY VOLUNTARY TOP UPS

How to bridge the gap with some extra health cover when the group insurance offered by your company falls short of requirements

Voluntary top-up covers, which allow employees to add extra health cover to their group insurance policy offered by employers, are fast becoming popular. Many companies, which were forced to trim their group health benefit packages in the past three years due to rising premium costs and a slowdown in the economy, are encouraging their employees to use this route to buy adequate health cover for themselves and their family. And employees, it seems, are happy to pay the additional premium for the add-on cover. Financial experts also approve of it as they believe that the average group cover is inadequate to take care of the hospital bills of most people. 

“Almost 66% organisations have made changes to their benefit plan in the past two years to combat the rising cost of medical insurance. This trend is likely to continue. However, considering that a ‘benefit cut’ does not really lower the employees’ risks or needs; organisations have now started offering voluntary topup plans,” said Sanjay Kedia, country head and CEO of insurance broking firm Marsh India. “According to our 2011-12 survey, 67% of employees said they would like to buy such top-up plans.” 

“Top-up schemes linked to group covers are increasingly gaining prominence. We have seen good demand for such offerings and it is a viable proposition for us,” said Amit Bhandari, vice-president, health underwriting and product, ICICI Lombard General Insurance. 

According to insurance experts, the average cover of . 2-3 lakh offered by group insurance schemes may not be adequate to take care of the medical expenses of employees and their families. This will become crucial in future because medical inflation has been growing at 12-18% per year. This would surely mean that most employees won’t be able to take care of their future hospital bills if they or their family members have to undergo treatment for any major illness. This apart, group covers could come with sublimits on room rents and treatment of certain ailments. Parental coverage has also been at the receiving end in the last two years. Many companies have either scrapped or scaled down the cover offered to employees’ parents. Some companies extend cover to parents only if the employee agrees to fund the premium. 

Given the dynamics at play, it is clear that group covers fall short of employees’ requirements. This is where top-up covers can be used to bridge the gap, feel experts. 

Typically, the size of such add-on covers ranges from . 2 lakh to . 10 lakh. They kick in when the hospitalisation expenses breach the base group policy limit. The premium for the additional cover is usually deducted from the employees’ salary. It is eligible for tax deductions under Section 80D. The annual premium for a 40-year-old individual opting for a top-up of . 5-lakh may work out to around . 1,500-2,000. They can enroll for the top-up policy through employers’ existing IT infrastructure, say, the intranet platform. Usually, the insurance company provides a link that enables the employees to complete the process online. They can enter the relevant details asked for and buy the top-up cover. 

“For an employee, the advantage is that the cost is lower than that of an independent top-up plan. Moreover, they can immediately avail of the pre-existing diseases (PED) cover here, unlike individual policies that prescribe waiting periods for the same,” said Bhandari. Also, since these top-ups are offered as part of corporate policies, they will come with a wider range of benefits. 

“For specific corporate customers, we may customise the top-up cover so that all benefits that apply in the current policy can be offered on top-up basis, too,” said Amarnath Ananthanarayanan, managing director & CEO, Bharti-AXA General Insurance. 

Finally, it is always better to have an individual health cover or a family floater plan, as the group health cover ceases the moment you leave the job. Even some topup covers added to the group health cover may lapse if you leave the job. You have to check this aspect with the insurer before buying a top-up cover. 

Also, you can consider buying an independent top-up plan if you already have a health insurance cover, instead of holding multiple health insurance policies. Such add-on policies are cheaper than standard hospitalisation policies by almost 40%. “From a customer’s perspective, one has to see if he/she is able to get a significant price advantage as compared to individual top-up plans available in the market,” said TA Ramalingam, head, underwriting, at Bajaj Allianz General Insurance. 

Souce – Preeti Kulkarni – The Economic Times – 10/08/2012

I AM FROM IRDA

“I’m from Irda. You’ll get 1.8 lakh bonus if you buy a new policy”

Posing as employees of the regulator or insurance companies, fraudsters are luring policyholders with offers of bonus if they buy a new plan. Here’s how they take gullible policyholders for a ride.

    Ten seconds is all that Vijay Sharma gives a telemarketeer. But since the call was from the insurance regulator’s office, he didn’t disconnect it abruptly. Instead, he put everything else on hold and listened intently. “I am calling from the service management department of the Irda. You are losing money on your Ulips because the bonus that accrued on them has gone to the agent,” the caller explained. “If you want, it can be refunded to your account.” 

    Sharma is usually circumspect about such offers and SMS marketing. However, the caller knew his name, phone number, address and full details of the plans that the Delhi-based sales executive had bought in the past 3-4 years. So, there was very little reason to doubt his words. Besides, he had nothing to lose. 

    Or so he thought. Sharma’s suspicions were aroused when the caller spelled out the terms of the deal. “Your code has been activated and if you link your existing policies with that code, the accrued bonus will be credited to your account directly. To do that, you have to buy a policy from any company through us,” he went on.
    Sharma was lucky not to fall for the fraudster’s bait. Mumbai-based Ajit Majhi did and got

trapped. In February, he was promised a similar deal by someone posing as an official of an insurance company. “She told me that to claim the bonus amount of 84,000, I would have to take another policy of 25,000 from the company,” he said in an angry complaint to a consumer forum. 

    He bought the policy, but far from getting a bonus, his gullibility encouraged the fraudster to go for a bigger kill. She kept fobbing him off with excuses and then announced that the bonus had been enhanced to 1.85 lakh, but that he would have to buy another policy of 50,000. “I told her I couldn’t afford to buy another policy and asked her to give me only the original bonus amount of 84,000,” Majhi said. 

    The fraudster was not finished with the milking. For the original bonus too he had to buy another policy. “I told her I had no money, but she advised me to borrow from friends and repay them when I get the bonus money,” says Majhi. Eventually, he bought another policy of 25,000 in his wife’s name. 

    By doing so, he only dug a deeper hole for himself. He hasn’t got the money yet because there was no such bonus coming his way in the first place. Now he has two insurance policies he didn’t need. “Paying an annual premium of 50,000 will be a burden for me,” he says. Before Majhi fell into the trap, the fraudster was calling him 6-7 times a day. Now, her phone is constantly switched off. 

    A senior manager in the customer care department of the company says that after the first policy was sold to Majhi, the company made a welcome call and explained the features of the policy in detail. Majhi admits he was told that there was no bonus offer. “When I called the adviser, she told me that customer care would not know about the bonus details and it would be credited to my account shortly,” he says. 

    Insurance companies are now warning their customers not to fall for such frauds.

What should policyholders do?

Don’t go by verbal promises: Never believe an offer till you see it in black and white. Also, make sure that the brochure or table shown to you is authorised by the company. Agents often get promotional material printed with promises of lofty returns. 

Check credentials of agent: Make sure you see the seller in person. Check his identity card and other details. This is a litmus test: if he refuses, he is probably not authorised to sell. 

Don’t buy in a hurry: Anybody who pushes you to buy a policy within a deadline is probably mis-selling. Don’t close the deal in the first or even the second meeting with the broker. Ask for at least 7-10 days to study the plan and compare its features. 

Take a second opinion: Tell the agent you will be discussing the plan with another consultant before deciding. Fraudsters often ask the victim not to discuss the plan with anybody else. 

Use freelook period: If the policy document does not mention the promised benefits, return the policy within the 15-day freelook period. Agents try and buy time till 15 days are over.

Source : ET Wealth – 23/07/2012

OPT FOR FLEXI HOME LOANS AND EARN MORE ON SURPLUS FUNDS

How savings account-linked smart housing loans can take care of your emergency needs as well as bring down your loan liability

Home buyers in India have little say in the interest rates on their loans. A high credit score, healthy repayment record, bigger pay package and so on do not fetch any discount in interest rates. They hinge primarily on the overall interest rate scenario in the economy. That is why products with flexible interest payable are a big innovation in the home loan space. Although they are nowhere as popular as the regular home loans, banks such as SBI, Citibank, Standard Chartered, HSBC, among others, offer loans where the interest payable can be flexible. 

THE WORKINGS 

These products – called flexi or smart loans – come with some variations, but they work like ‘sweep-in, sweep-out’ deposits. Now, such deposit accounts automatically transfer funds that cross the threshold limit in your savings account into a fixed deposit. This helps you take care of your emergency needs and earn higher-than-savings-account return at the same time. ‘Flexi’ home loans use a similar mechanism, although with a slight difference. In this case, your loan is usually linked to a current account. “The loan works like an overdraft account where the interest is charged on the outstanding balance on a daily basis. You have the option of withdrawing the unused amount as per the limit sanctioned,” says VN Kulkarni, chief credit counsellor with the Bank of India-backed Abhay Credit Counselling Centre. “The broad concept used here is that of the weighted average, where your principal outstanding is adjusted for the balance kept in the linked current account,” adds Kapil Narang, COO, Ameriprise India, a financial planning firm. It could especially benefit borrowers who may have bought an under-construction property, with payments made to the builder being linked to the stage of construction. Here, you would be paying relatively small amounts in installments. If you have a flexiloan, you can withdraw funds only to the extent required and thus save on the interest outgo. Remember, however, that features could vary as per the bank you may have chosen. 

COUNT YOUR BENEFITS 

Now, say, you’ve opted for a regular home loan. In this case, your salary would be credited to a savings bank account that will fetch you a return of 4-7%. The amount required for your EMI payment would be transferred to your loan account and the balance would continue to earn the savings bank rate. “In a flexi home loan, the amount lying in your home loan account will be factored in, while interest will be charged only on the outstanding balance on a daily basis. If you have parked your entire salary on the first of the month and have not withdrawn any amount say till the 10th, you will save interest on the loan to that extent,” explains Kulkarni. “In effect, your savings will fetch interest at the rate which you are paying on your home loan. Your return will be around 10.5-11 %, depending on the rate being charged to you. This will enable you to bring down your interest cost and ultimately the repayment period.” This feature could also spur you to use your income judiciously. You can look at parking as much money as you can in the linked current account to reduce the interest burden. Consequently, your total repayment period, too, will shrink sooner. With a regular home loan, on the other hand, a tendency to splurge the amount remaining after paying EMIs sets in. 

WATCH OUT FOR THE PITFALLS 

“The rate of interest is usually higher than that of regular home loans,” points out Madan Mohan, independent loan counselor. “Also, borrowers should enquire about the processing charges on such credit facilities. There could be other services charges, too, which a regular home loan does not levy.” Therefore, study the terms and conditions carefully. This apart, you should go for this facility only if you are sure about making optimum use of its features. Remember, this facility will work to your advantage only if you diligently park your surplus funds into the account regularly.

 

GAUGE ITS SUITABILITY 

Though the concept may seem attractive, it may not fit into the requirements of all borrowers. “The scheme will be best suited for the double income category, where both husband and the wife have a sufficient disposable income,” says Kulkarni. They can make good use of their surplus money, which otherwise would have been parked in lowyielding savings bank account. “It is also suitable for those who earn certain incentives on a regular basis and can afford to park such extra income in a flexi-scheme. Likewise, all those who find that they can pay more than the stipulated EMI every month could also consider such facilities,” he adds.

Source – Preeti Kulkarni - The Economic Times – 20/07/2012

KEEP OFF PERSONAL LOANS - LOOK FOR CHEAPER LOANS

Loan against assets is a cheaper alternative to personal loans that charge you anywhere between 16% and 24%

    A personal loan is the easy way out for many individuals. Stuck with a small mismatch of funds, many people don’t think twice before applying for a personal loan. The money may be used for something big like bridging the gap for a house purchase or unproductive purposes like a vacation or a grand wedding. But the trouble with personal loans is: they are very expensive. Banks charge around 16% to 24% on these loans. That is why it is imperative that you should explore other avenues before settling for a costly personal loan. If you don’t have the option of a soft loan from friends or relatives, you should consider taking a loan against your assets. 

“Asset-backed loans such as loan against securities, loan against gold and loan against property help you cut down the cost of borrowing,” says Madan Mohan, a Mumbai-based independent financial counsellor. A loan against shares is slightly cheaper at around 12.5%, and a loan against property would be available at around 14%. 

LOAN AGAINST PROPERTY 

To begin with, banks offer a percentage of the market value of the asset as loan to you. For example, suppose you are offering your house as a security to the bank. The bank will assess the market value of the house and your loan repayment ability. If the assessed market value of the house stands at . 1 crore, the bank may consider offering a loan of up to . 60 lakh. The bank will also consider factors such as residual life of the property and the maximum tenure it can allow to repay the loan before approving you the loan. If you have bought a house using a home loan, you can still get the additional loan. Banks offer such “top-up” loans to their home loan customers. The maximum loan amount under this product is around 70% of the market value of the property less the outstanding loan and is subject to the current loan eligibility. 

Apart from the lower interest, loan against property also comes with a longer repayment tenure. A bank typically allows a maximum repayment term of five years for personal loans. Loans against property, on the other hand, come with a longer repayment tenure of up to 10 years. Banks also allow higher amount of loan under loan against assets. Personal loans are generally capped at . 20 lakh, but one can get as high as . 5 crore under loan against property. But obtaining loan against property takes time. “A loan against property involves valuation of property, legal and technical checks from bank, which consume some time. If you are in a hurry, opt for loan against movable assets such as gold and shares,” says Harsh Roongta, founder & CEO of Apnapaisa. 

LOAN AGAINST GOLD & SHARES 

Banks offer loans against gold, shares, mutual fund units and insurance policies. In case of loan against gold, you will come across banks offering as high as 70% of the gold value. NBFCs will restrict the loan amount to 60% of the value of gold. For shares and mutual fund units, banks apply a haircut of around 50% of the market value. Most of the banks will allow loans against liquid shares – read “A” group shares. If you have a single-stock portfolio, banks apply higher haircut than for a diversified portfolio. If you offer shares of only one company, banks may apply 60% haircut and you may get a loan of up to only 40% of the market value of these shares. As single stock means higher risk for the lender; so it is better to approach the bank with a diversified share portfolio or mutual fund units. In such cases, one may get up to 50-55% of the market value. 

Even in case of diversified equity portfolio, banks assess weight of each share. If one company’s share has more than 60% weight in the portfolio, the bank may prefer to cap the loan to 40% of the market value. In case of life insurance policies, you can get up to 50% of the surrender value of a policy. That means your term insurance policies with no surrender value are not eligible for loans. 

Interest rate on a loan backed by movable asset, such as gold, is generally lower by around 150 to 200 basis points compared to a loan against property. Also the interest rate depends on the loan to value ratio – the extent of market value of asset that the bank is offering as loan. “If the bank is offering higher loan against the value of the asset, it may charge higher rate of interest too, to compensate for the high risk it takes,” points out Harsh Roongta. Processing fee on a personal loan is generally around 2-3% of the loan value, whereas for a loan against property it stands at around 1%. 

The borrower has to bear the valuation expenses, stamp duty payable toward mortgage and other legal charges too, which are one-time expenses. It is better to think for a while before choosing a loan.

Source – Nikhil Walavalkar - The Economic Times – 28/6/2012

WHAT IS FORM 26AS

What is Form 26AS & how to view it online ?

Form 26AS is a consolidated statement which reflects all the advance tax paid by you personally or through TDS/TCS way. The best part about it is that you can view it online by just quoting your PAN Number. You can view your Form 26AS online or download it in PDF or Excel format, but for that you need to register on the income tax website.

Why do we need Form 26AS ?

We all check our bank accounts when some one deposits money into it . Once we see that the amount is matching, we feel at peace and confirmed that there is no issue . Now in the same way through out the year, we might pay the tax in parts . It can be in form of Advance tax cut by our companies, TDS cut by the bank on your fixed deposits , TDS cut by some third party who is making payment to us . They all pay this tax on our behalf to tax department and it is linked to our PAN card.

Now at the end of the year before filing for tax returns, we might want to check that how much tax is already paid by us through different ways and then we might want to pay additional remaining tax or ask for a refund in case we see that we paid more tax in a year.

An important point to note is, do not disclose your PAN information to someone else , otherwise it becomes a security issue . Others can also view your Form 26AS and hence find out how much tax you paid  .

How to view Form 26AS online ?

1. Go to this website : https://incometaxindiaefiling.gov.in/portal/index.do

2. Register your PAN Card and password (search for REGISTER)

3. Once you are registered , go to Login page (Search for LOGIN)

4. Go to “My Account” section (at the top) and sub section - “View Tax Credit Statement (Form 26AS)”

5. Choose assessment year , date of birth and click SUBMIT

6. It will ask you for confirmation to redirect to NSDL website to view your form 26AS

7. Click on the bottom button which says “View Form 26AS”

8. You can now see your Form 26AS

Direct link to Form 26AS in your netbanking ?

Yes, A lot of banks like ICICI , SBI etc provide a direct link to your form 26AS through internet banking. On clicking the link, You can directly see 26A.

Did you knew this information already ? Would you like to share some of your past experience when you needed form 26AS and how it was useful to you?

Source : www.jagoinvestor.com

NEW RULES OF FILING TAX RETURNS

Several changes have been made in the tax filing rules since last year. Findout what these mean for you.

A week may be a long time in politics, but when it comes to filing tax returns, some people may find that even four weeks aren’t enough. As the deadline forfiling tax returns approaches, thousands of Indians who have worked abroad will be scrambling to gather the information required to be filled in the new tax forms. This year’s budget had proposed that individuals who have assets abroad must file their tax return and mention details of their foreign assets in the forms. “This new requirement is likely to become a big nuisance. Even if you have $10 in a bank account abroad, it has to be reported in the tax form,” says Amarpal S Chadha, tax partner, Ernst & Young.

This is just one of the several changes in the tax filing rules this year. Some of these are minor and may not make a material difference. But most of them are significant and will broaden as well as deepen the information that an individual discloses in the tax returns. For the honest taxpayer, who pays his taxes and has nothing to hide, these changes should not matter. However, he will have to be a lot more disciplined in keeping records of financial transactions.

The new forms are a wake-up call for taxpayers who have not been entirely honest in paying their taxes. Nearly 5% of the respondents in an online survey conducted by ET Wealthlast week said that they have under-reported their income quite a few times. Another 10% said they have done so just once or twice. We believe there is also a large community of innocent offenders who don’t even know that they are falling foul of the tax laws.
    

These taxpayers must realise that Big Brother is watching. Earlier this year, the IT Department announced that nearly 27.5 lakh taxpayers made cash deposits of over 10 lakh in their bank accounts in 2009-10 and 2010-11. More than 6 lakh people purchased or sold property worth over 30 lakh. Over 15 lakh cardholders made payments of over 2 lakh in a year on their credit cards. All this information flows to the IT Department from banks, credit card issuers, property registration authorities, mutual funds and brokers. The department has put about 2.22 crore transactions under the scanner.
    

To ensure that your tax returns are flawless and you don’t end up on the wrong side of the law, ET Wealthreached out to experts to understand the changes in this year’s tax forms. Here is what they had to say.

E-filing for income over 10 lakh
Any individual or Hindu Undivided Family (HUF) with an annual income of 10 lakh and above will now have to compulsorily e-file the income tax return. Till now, only corporates were required to e-file their returns, whereas individuals and HUFs were free to file manual returns. The new rule might seem like a big change, but it actually affects a very thin creamy layer of taxpayers. Only 5.5% of the total 4.2 crore taxpayers have an income of over 10 lakh, and a vast majority of these taxpayers has already taken the e-filing route.
    

The government wants to nudge taxpayers to e-file because it improves tax compliance and reduces its own backoffice workload. It even lessens the chances of mistakes in the tax returns. When returns are filed physically, data entry operators manually feed the information into the system. In the process, they introduce many mistakes in the return, which leads to delays in refunds or, worse, a notice from the tax department.

Declaration of foreign assets
Resident Indians will have to declare foreign assets in their tax returns. The assets covered include bank accounts, immovable property and interest in any company. The taxpayer will have to mention the peak bank balance in his account during the year as well as the total investment in other assets at cost price. Even if you were merely the signing authority for a bank account in a foreign country, it has to be mentioned in the return. The government estimates that Indians have stashed roughly $500 billion in foreign tax havens. By introducing this change, the government intends to track the undisclosed income from these assets.

Details of tax relief claimed
The scrutiny of foreign income does not stop here. If the assessee has claimed relief for taxes paid abroad, he will have to mention details in his return. Till now, a taxpayer merely had to mention the tax relief he was claiming. Now, he will have to mention the name and code of the country visited, income earned, taxes paid, and the tax identification number in the foreign country.
    

Tax filing portal Taxspanner estimates that about 10 lakh employees of IT/ITeS companies have been abroad on projectbased assignments during the past 10-15  years. If these professionals opened bank accounts, invested in stocks or bought assets there, these details will have to be mentioned in their returns. What’s more, they have to file their returns even if they don’t come in the tax net. These will have to be filed online.

Ownership pattern of property
The new reporting requirements have also plugged a big loophole in the way income from property is reported. Till now, a taxpayer had to just mention the property and the income received as rent. Now he will have to disclose the ownership details in the tax return. If the property is jointly owned, the percentage share in the property and the details of the co-owner need to be mentioned. “This also means that the rental income will have to be proportionately divided among the joint owners,” says Ankur Sharma, co-founder and managing director of Taxspanner.com.

Deduction for donations
The taxpayers who have been generous during the year will now also have to be more careful. If they want to claim tax deduction for donations given to organisations, they must provide full details of the recipient. You are required to give the name and address of the organisation, its PAN, amount of donation and the amount eligible for deduction.
Bank details now mandatory

Till now, a taxpayer was required to mention his bank account details only if there was a tax refund due. In the new forms, you have to mention your bank account details even if there is no refund. Give the bank name, your account number and the MICR code.
    

Despite the changes, the basic rules remain the same. If you have some unpaid tax, pay it right away before you file your return. File by the due date to escape penalty. If you miss the 31 July deadline, you can always file by the end of the assessment year. You will, of course, forego some privileges enjoyed by taxpayers who file their returns by due date.
    

For instance, you will not be allowed to carry forward short-term and longterm capital losses (except from house property). This provision can be very helpful, especially if you have lost money in stocks. Also, you will not be eligible to file a revised return if you don’t file by the due date.

Source - BABAR ZAIDI – ET Wealth – 2/7/2012