Monday, March 31, 2008

Jonathon Porritt & The Free Lunch

This pioneering environmentalist has just endorsed the book The Free Lunch – Fairness with Freedom. He says: ‘I have indeed enjoyed this book…it makes a really important contribution to a much neglected area of debate within the broader sustainable development terrain... contains very fresh thinking.’

Jonathon Porritt is particularly in agreement about the idea of land value tax which Henry George campaigned for over 100 years ago. Had this radical reform of taxation been taken on then, it would have inevitably resulted in a more sustainable future for the earth and for our free society than we are facing now. Our appallingly backward tax system unfairly burdens the poorest, but there is a fairer way. Economists recognize that taxation based on natural resources such as land would not only encourage the more sustainable use of the resources of the planet but also result in a more prosperous and fairer society.

Political ideas of the future are contained within this book. Anyone hoping for the well-being of the planet must also wonder how the important issues of fair shares for all, as well as the need for a freer society will be resolved. The book explores it all.


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How Share price goes up in stock markets

Once upon a time in a village a man appeared who announced to the villagers that he would buy monkeys for Rs. 10. The villagers seeing that there were many monkeys went out in the forest and started catching them. The man bought thousands at 10 and as supply started to diminish and villagers started to stop their effort he announced that now he would buy at 20 rupees. This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms. The offer rate increased to 25 and the supply of monkeys became so that it was an effort to even see a monkey let alone catch it.The man now announced that he would buy monkeys at 50! However, since he had to go to the city on some business his assistant would now buy on behalf of the man.

In the absence of the man, the assistant told the villagers "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at 35 and when the man comes back you can sell it to him for 50".The villagers queued up with all their saving to buy the monkeys.Phir no woh aadmi mila na us ka assistant.........Sirf bandar hee bandar.........This is the story repeated in Stock Market as well.

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Analysis of some important sectors in short

1. IT Sector: Due to strong rupee, earnings growth of IT companies has slowed down and hence, leading IT scripts have been underperforming. Since, rupee is unlikely to weaken in near future, IT companies will not report outstanding growth

2. Automobile sector: This sector is already witnessing slowdown in growth. Further, rising metal prices will not allow big profit growth and hence, valuations of this sector are not compelling anymore. Further, no sharp growth is expected in this sector for next 1-2 years at least

3. Textile Industry: This sector is passing through one of the worst times. Even if Govt doles out any benefits, it won’t lead to significant improvement in its dire position. In fact, textile industry may post dismal results for next 2-3 quarters

4. Fertilizer sector: Share price of many fertilizer stocks had been ramped up brazenly although this sector has always underperformed. Even Govt is coming with some new policy for this industry; fertilizer industry should not expect any path-breaking changes and fortunes/profits of fertilizer companies may change only in a minor way.

5. Power sector: This sector has witnessed never-before (and i pray never-again) hype which led to mindless valuations

6. Telecom sector: Yes this sector continues to exhibit big growth. But companies at PE Ratio of 40-60 are not screaming buy

7. Power equipment industry: Valuations of this sector still appear to be attractive (comparatively)

8. Metals: Prices of various metals have already risen steeply and further rise may be very slow and in fact, there can be even reaction in metal prices. Hind zinc has already reported huge decline in its profits.

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Selecting the Right Home Loan Lender

How to select the “Right” home loan lender for you

As with any other financial product today, there are plenty of home loan products which are available. Your choice of the lender will be determined by your personal requirements of :

  • Total amount of loan you want to avail of – this is decided both on the basis of the property that you choose and your income.
  • Payment terms you are comfortable with
  • Interest Rate being offered to you
  • Other charges that might affect the cost of the loan to you.

These factors are discussed in detail below:

a. How much loan are they willing to extend to you based on your income ?

Lenders have different norms with regards to the amount of loan that they are willing to sanction to you. All lenders will not extend the same amount of loan to you.

The home loan lender calculates how much EMI you would be able to bear comfortably over the lifetime of the loan. This is done through ratios like Fixed Obligation to Income Ratio (FOIR) and Installment to Income Ratio (IIR).

  • Generally, expressed as a % . FOIR ratio includes all your fixed obligations that you pay every month including all loan EMI paid every month.
  • The IIR ratio denotes the portion of your monthly installment on your Home Loan to your income. Typically, the lender does not sanction any loan amount where the IIR ratio exceeds 55%.
  • Both these ratios can vary on the basis of actual salary details, years of experience, professional qualifications like IIM and IIT degrees, stability of income, future career prospects and sources of other income.

If you are not getting the amount that you need, consider the following ways which your lender can use to increase the eligible loan amount.

  • Check the entire income is being considered including annual components like annual bonus which do not appear on the monthly payslip.
  • Check whether the lender allows combining of incomes other than spouse such as parents, son/daughter.
  • Check whether the bank is open to increasing the loan tenure beyond 20 years to increase eligibility.
  • Consider banks that give you better eligibility based on your disclosed income.
  • If you are self employed and incomes are spread over many entities, look for a bank that will consider all these entities.

b. How much loan are they willing to extend to you based on the property that you have chosen ?

All properties are not financed by all lenders. Lenders have qualifications in terms of the locality that you have chosen to buy the property, the type of property and the builder. You also need to have a clear understanding of the breakdown between cash component and the cheque component before applying for the loan.
Lenders typically have a maximum loan to value of 80% -85% of value/cost of property. This might further go down to 70% to 80% in case of land or in cases where the cash component is very high.

The rest needs to be put in as margin money by you.
(The valuation of the property is based on the lender's study of the market prices. You might need to put in more money if the agreed price is more than the lender's valuation) Some of the key points that you might need to check here are :

  • Is the property acceptable to the lender for financing ?
  • Is the valuation done by the lender acceptable to you ?
  • How much loan are they willing to extend to you vis-a-vis the cost of the property ?
  • If you enter into an amenities agreement will that affect your loan eligibility?
  • Will you be able to arrange all the documents and No Objection Certificates in the format needed by the bank?
  • If it is an under construction property check that on the approval status of the project,the stage of construction and payment terms being offered by the bank.

c. Rates being offered

After the approval of the loan, you need to choose whether you want to take a fixed rate loan or a floating rate loan. This is a critical decision that can affect your payments over the tenure of the loan.

  • In a floating rate loan, the interest rate on the loan depends on a benchmark rate fixed by the home loan lender. This benchmark rate varies as per the market. This change can happen as frequently as once in three or six months. You must choose a floating rate loan, if you are anticipating the interest rates to decrease in the future.
  • However, even within these categories of floating and fixed rate loans there are terms which differentiate one loan from another. Below are a set of key questions that you must ask your lender to know these differences, and then make an informed choice thereafter.
  • In a fixed rate loan, the interest rate on the loan is fixed at the beginning itself for the entire duration of the loan. This rate is usually about 1.0% to 1.5% higher than the prevailing floating rate. You must choose a fixed rate loan, if you are anticipating the interest rates to increase in the future.
  1. Fixed Rate Loans

    - Is it the rate fixed for the entire tenure of the loan or just for the initial three or five years?
  2. Floating Rate Loans

    - Are the reset dates for the loan properly defined ?
    - What is the underlying benchmark index? Is the contract properly worded with a clear linkage to a specific index?
    - Is the variation process properly defined by way of increase/decrease of EMI or increase/decrease of balance tenure.

d. Charges

As a home loan is typically of a large amount and a long duration even the smallest of charges levied turn out to be a huge amounts to be paid. Hence, its very essential to understand the other charges that are applicable to you. Some of the key questions to ask your lender are:

  • Are there any technical/valuation charges?
  • Are there any legal charges? What are the prepayment penalties and related charges ?
  • Are there any annual maintenance charges?
  • Will the bank recover stamp duty payable on memorandum of entry while handing over the title deeds to them?
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Personal Loans Buying Guide

I. How to Buy in 7 Easy Steps

  1. You need to determine the amount that you need to borrow through a personal loan. You should use this loan only as a last resort after you have utilized your other sources of money.
  2. Choose the kind of personal loan you want – unsecured , or loan against securities, loan against gold etc.
  3. Shop for the best rate at and shortlist the best 3 providers
  4. Visit the branches of these 3 providers or call reputed DSAs of these providers and read the fine print of the terms.
  5. Decide on the provider based on the loan amount that they are willing to sanction you as well as the charges and interest rate.
  6. Provide the required papers for approval of loan
  7. Post approval, take disbursement by cheque into your account.

II. Who can buy ?

Personal Loans are provided only to resident individuals. Further criteria to decide eligibility are detailed below:

  1. Age – Minimum age of 25 and maximum age of 65. Used to judge whether the person would be working and earning during the duration of the loan
  2. Minimum Salary Requirements- Used to estimate capacity of a person to repay
  3. Years in current profession/job – Check stability of a person in his profession and earnings
  4. Years in Current Residence- Stability and intention of the person to stay in the same city

Please note that IT Professionals or the people in similar professions who travel abroad very frequently can also get personal loans but they may be required to furnish a guarantor for the same.

III. Buyer’s Checklist

The banks need to verify three major criteria before sanctioning you a loan

Who you are - your identity and where you live- your address

How old are you – your age

Whether you can repay the loan that you have availed – your income

The following documents can be used as proofs for the same:

Identity Proof (You can provide anyone of the following)

  • Passport (Can also be used as proof of address)
  • Defence Identity card
  • Driving License
  • Government identity card
  • Photo PAN card
  • Voter's identity card
  • Ration card with photograph
  • You will also need passport size photographs to complete the identification requirements.

Address Proof (You can provide anyone of the following)

  • Passport (Can also be used as proof of identity)
  • Telephone (land/mobile) bill
  • Driving licence
  • Voter's identity card
  • Ration card
  • Electricity bill
  • Society outgoing bill
  • Life Insurance Premium receipt
  • Proof of Office for Self Employed (any one) Lease deed / Utility bill / Municipal Tax receipt / title deed

Age Proof

  • Secondary School Leaving Certificate (Class 10)
  • Photo Ration Card
  • Voters Identity Card
  • LIC Policy or Premium receipt clearly indicating the applicant's age
  • Pension Payment Order
  • Birth Certificate issued by the competent authority
  • Passport / Defence ID Card / Govt ID Card (Provided they have the cardholder's photo,signature and date of birth)

Income Documents

  • Salaried Individuals
  • Latest salary slip showing statutory deductions
  • Proof of continuity of employment - Form 16 (Declaration from employer giving details of income and deductions) or appointment letter
  • Latest acknowledged IT return
  • Bank statements for the last 3 months

Self Employed Individuals

  • Computation of income for the last 2 years certified by a C.A. OR
  • P&L and balance sheet for the last 2 years certified by a C.A. AND
  • Copies of acknowledged IT returns for the last 2 years AND
  • Bank statements for the last 6 months

IV Questions You Must Ask – before availing a personal loan.

Is a personal loan the right option ?

Personal loans are expensive. Therefore, only consider this loan as the last option. Other loans to consider are taking a loan from friends or relatives, or a loan against deposits or ecurities.

Am I taking the loan for the right tenure?

Match the tenure to your requirement – do not end up making extra repayment commitments that might effect your daily expenses. The earlier might not necessarily be better.

Am I taking advantage of all the discounts/benefits that I am eligible for ?

Many lenders such as banks/NBFCs offer discounts to various groups. Such as:
Relationship discount to existing customers
Women's discount in case of many PSU banks

Does the repayment schedule reflect my needs ?

Based on your need you can choose to take step up EMIs (making larger payments later) or step down EMIs (making larger payments upfront). There are further repayment options available depending on the bank or NBFC in question.

V. How to Compare Products – How to Select the Best Product for Yourself

The primary comparison parameters are :

  • Amount of loan being sanctioned
  • Rate of interest
  • Other charges levied by the lender

Using these parameters you can calculate the overall cost of the loan being charged to you. You can use iTrust to get the best rates from the leading lenders in India

VI. Now That You Own the Product

Avoid default at all costs !
With the credit history being shared across banks– it will become increasingly difficult for you raise another loan.
Ensure that you make the repayments on time.
Delayed payments or non payments attracts very strong penalties taking up the cost of the loan.

VII. Know Your Rights as a Consumer- understand the fine print.

In case, you feel that the bank/NBFC has been levying charges without telling you.
In case your loan provider is a bank, you can report this to the Banking Ombudsman of your state as appointed by the Reserve Bank of India.
The following link gives you the names and addresses of the Banking Ombudsman across India:

In case your loan provider is a NBFC (Non Banking Finance Company), you can report this to the Department of Non Banking Supervision at the local Reserve Bank of India office.
Any source

Health Insurance Buying Guide

I. How to Buy Health Insurance in 5 Easy Steps

  1. Decide on the family members that you want to cover through health insurance
  2. Decide on the amount of coverage needed, based on your estimate of health costs and your existing coverage from employer provided insurance etc.
  3. Compare the options of taking individual policies vis-a-vis a floater policy, or critical illness or other specialized policies based on your requirements.
  4. Compare the offerings of various insurance providers using the comparator function at
  5. Contact an agent/broker to purchase the health insurance product

II. Buyer’s Checklist

For buying a health insurance policy you do not need any documents apart from the cheque or bank draft that you need to pay your premium with. However buyers aged more than 45 years, might need to undergo a medical checkup and certain diagnostic tests like blood tests. At the time of making a claim, your health insurer might require you to show your ID proof ,medical documents and bills.

III. Where to Buy

You can buy health insurance either directly from any general insurance provider or from authorized intermediaries like insurance agents or insurance brokers. Please check that these intermediaries are IRDA certified and are able to understand your unique needs and answer your queries.

Trust has trained Relationship Managers who can help you in buying a health insurance policy. iTrust has also partnered with Reliance General Insurance to sell the leading health insurance product Reliance “Healthwise” to its customers.

IV. Questions You Must Ask – What You Need to Consider Before Buying

Buying an individual health insurance policy is more than just looking at the premium amount.You will need to consider many factors before purchasing your health insurance policy.

Check whether the insurer facilitates cashless settlement of claims

You might have a preference for a specific doctor or hospital where you might have been seeking treatment in the past or have a preexisting relationship .This doctor or hospital should ideally be a part of the insurer's network of hospitals for cashless settlement of expenses.

Its essential to know the ailments that will not be covered in the initial years of the policy and what pre-existing conditions that would affect coverage. As you will be open to these risks in the initial years of the policy. Also of importance are the permanent exclusions like AIDS, cosmetic surgery and dental surgery that are currently not being covered under an individual health insurance policy. Its important to check with the health insurer about the coverage before going in for an expensive treatment.

Check all the details of the expenses that will be reimbursed e.g. diagnostic and medication costs might not be covered under all health insurance policies.

Due to rising costs of health care many insurers have enforced sub-limits for various kinds of expenses. So, check whether there is a maximum amount each plan will pay for a specific expense and if there are any sub limits on specific kinds of expenses.

Check whether expenses arising for treatment due to war, riots or a terrorist attack are covered

V. Selecting the Best Health Insurance Product for Yourself

As you might be indisposed when you need to utilize your health insurance, select a policy that you and your family members will find easy to use. After all, you or your family should not be running around to take care of paperwork when your immediate priority is to get medical care. When selecting a health plan, check the following features:

Check if cashless hospitalization is included. What is the number of hospitals where this facility can be availed ? Where are these hospitals located ?

Many plans also have inbuilt features of disability insurance and personal accident insurance. Check whether these are part of the plan you are choosing.

Check whether the plan has any specific coverage for critical illness.

In case the medical insurance policy is for dependents like parents, check the maximum entry age and the maximum renewal age. You do not want to end up selecting a policy just for a year when your actual requirement is for 5 years.

Check whether special conditions like diabetes can be covered under the plan.

VI. Now That You Own Health Insurance – Whats Next

Annual Renewal

Most health insurance plans are available only on an annual basis - timely renewal of your health insurance policy is of utmost importance. Just like car insurance needs to be renewed annually, health insurance also needs to be renewed annually. It is not a one time buy but an annual expense that you must budget for. And like you do not leave your car without an insurance cover even for a day – you certainly cannot afford to be without health insurance for a single day.

In India as of now, the track records of consumers are not transferable across companies hence its important to choose a suitable policy the first time around and renew the same year on year and not switch the insurance provider. Also every insurer provides discounts or bonuses for customers who have a claim free year. Understand these features and take full advantage of them.

Review your coverage amount periodically

As time passes your needs will change. Therefore, you must also review the coverage amount every year keeping in mind the relative health of the family members and any birth or death in the family.

Some best practices

  • Understand the process of making a claim

Please read the fine print and understand the process of making a claim thoroughly from your agent or broker. Ensure that your family members also understand the same in case you are the one who is afflicted with any ailment.

  • Keep all your medical records in one place

Ensure that all your medical records and support documents including Health Insurance cards are kept safely in an easily accessible place known to all your family members.

  • Build awareness of network hospitals

Ensure that everyone in the family knows the network hospitals near your home covered under the health insurance policy. Storing their phone numbers on your mobile emergency call list might be very helpful for the same.

  • Keep some cash aside for medical emergencies

Always keep some cash aside for medical emergencies as health insurance might not cover 100% of the costs. In many cases you might end up seeking the costs as reimbursements.

Making a claim

You must follow the insurer's norms while making a health insurance claim otherwise you will face delays in processing of the claim. Please go through the following to avoid commonly made mistakes:

a) Be prepared with the correct documentation:

Every insurer specifies the documents to be submitted while making a claim they include providing the original documents like

  • original final bill with detailed break up of various billing heads
  • original and complete discharge card mentioning duration of ailment
  • original investigation reports with corresponding prescription /request
  • pharmacy bills along with the signed claim forms.

b) Making the claim in time:

In order to get reimbursement, usually the documents would have to be submitted within 30 days after the patient's discharge. To avoid delays, please submit your claim in a timely manner.

c) Norms for cashless settlement are different

When you buy a cashless medical policy from an insurer, you will be issued an identity card with the name of a third party administrator (TPA). The TPA helps you in the processing of a claim and ensure fair billing at the hospital.

There may be two scenarios of hospitalization - planned hospitalization and emergencies.

In the case of a planned hospitalization; like in case of planned surgeries, you will have to inform the TPA at least 72 hours before being hospitalized. Thereafter, the insurance company will issue a letter of authorization and you will be able to avail of the cashless service.

In case of emergencies, the TPA must be informed within 48 hours of hospitalization.

(Note : The above time limits may vary by TPA/Insurer)

VII. Understand the Fine Print and Know Your Rights as a Consumer

Like any other insurance policy a health insurance policy is a contract between you the buyer and the insurer. It is essential to understand all the terms specified in the policy document. Please remember that an insurance contract is a contract issued in good faith. And if you fail to make any disclosures required by the insurer at the time of the issual of the policy then the policy will not be in force.

For example, many insurers ask you questions about your present health before issual of a policy. If you suffer from heart disease and do not disclose this to the insurer. Your insurer might not cover any expenses you incur for treating your heart condition.

Please read all the exclusions and the applicable expense reimbursements before deciding on the course of treatment that you plan to get reimbursed through health insurance.

In case your claim is not being accepted or being delayed inordinately you can approach the Grievance Redressal Cell of the Insurance Regulatory and Development Authority (IRDA). This cell has been specifically set up to look into complaints from policyholders.

VIII. Additional Resources

You can consult the following websites of health insurance providers for more information about health insurance policies:

Reliance General Insurance

ICICI Lombard

Star Health & Allied Insurance

Oriental Insurance

Cholamandalam MS

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Fixed Deposits Buying Guide

I. How to Buy in 4 Easy Steps

  • You need to determine the amount that you can set aside to invest in a Fixed Deposit. This is to ensure that the investment is tax efficient as well as does not attract any undue penalties.
  • Shop around for the best rate, refer to online sites, magazines etc.
  • Visit the branch and read the fine print of the terms
  • Provide the required papers and the cheque/draft for the deposit.

II. Buyer’s Checklist

For opening a fixed deposit where you do not have an existing banking relationship you would need to provide all the documents as needed for opening a new account. These documents for a resident individual include:

Identity Proof (You can provide anyone of the following)

  • Original letter of introduction from existing bank along with KYC cheque of the same Bank
  • Driving License
  • Voter Identity Card with KYC cheque for operating accounts.
  • Employee Identity Card
  • PAN Card
  • Defence Dependent's card
  • Ex-Service Man Card
  • Bar Council/Indian Medical Association Card/Senior Citizen Card

Proof of Address quoted for communication (You can provide anyone of the following)

  • Introduction by an existing and satisfactory customer of the bank
  • Latest Electricity Bill
  • Certificate from the postal office confirming address of applicant
  • Original Letter from Employer certifying the residential address of applicant. Signature of the employee has to be attested on the letter.
  • Telephone bills from any telephone service providers
  • Consumer gas connection card/book/Pipe Gas bill (same as electricity bill)
  • Certificate from the ward/equivalent rank officer, maintaining election roll, certifying address of the applicant

The following documents are usually accepted as proof of both identity and address:

  • Passport
  • Freedom fighter's pass issued by Ministry of Home affairs, Government of India with photograph of applicant
  • Pension payment order/book/Card issued by State/Central Government of India.
  • Printed Ration Card with Photograph of applicant.
  • Bank Pass Book with photograph issued by SBI and its subsidiaries or Nationalised Banks
  • Arms License issued by State/Central Government of India authorities

Age Proof (if a senior citizen)

  • Secondary School Leaving Certificate (Class 10)
  • LIC Policy
  • Voters Identity Card
  • Pension Payment Order
  • Birth Certificate issued by the competent authority
  • Passport / Defence ID Card / Govt ID Card (Provided they have the cardholder's photo,signature and date of birth)
  • PSU issued ID Cards
  • Senior Citizen Cards
  • Passport Size photographs

Documents needed for a Non Resident Indian(NRI) or Person of Indian Origin (PIO)are :

  • Copy of passport and valid visa or work permit
  • Identity Proof (Same proofs as Resident Individual)
  • Address Proof of Indian Address (Same proofs as Resident Individual)
  • Address Proof of Foreign Address

Utility Bill, i.e, Electricity Bill, Landline Telephone Bill, Gas connection Bill, Water connection Bill

  1. Overseas/Indian Bank statement (Bank Passbook will not be considered as valid address proof)
  2. Rent Receipt issued in last 6 months along with duly stamped/registered lease deed. Lease deed should be valid as on date of account opening.
  3. Address on Passport
  4. Letter from existing banker, this letter should clearly specify that the mentioned address is the customers communication address and period of relationship with the bank which should be more than 3 months.
  5. Residence Permit (Government issued Identity Card)
  6. Letter from Government postal authorities issued in last 6 months
  7. Driving License (Only if issued by US & UK authorities)
  8. Letter from the employer duly notarized issued in last 6 months mentioning your name and address.
  • Passport Size photographs
  • Attestation might be required for all these documents
  • Sometimes, a cheque drawn on an existing banker in India or on your bank account abroad or an original cheque issued by you and paid by your banker outside India might be required to confirm banking relationship.

III Questions You Must Ask – What You Need to Consider Before Buying

Before opening a fixed deposit account, choose the tenure and amount that you are comfortable with and would not need to make a premature withdrawal from the same.

And ask the bank representative to explain the rate and the interest income that you will be earning both pre and post income tax.
Get to know the charges for premature withdrawal or any other charges that might be levied on the deposit.
Choose the interest income payout frequency that suits your needs.

IV. How to Compare Products – How to Select the Best Product for Yourself

If you are not looking for any additional benefits like ATM card against a deposit or no penalties for premature withdrawals, the rate or the net yield that you will be earning on the deposit is the primary comparison parameter. You can use iTrust to get the best rates from the leading banks in India across product categories like NRI Deposits, Senior Citizen deposits and Tax Saving Deposits.

V. Now That You Own the Product

A Fixed deposit is a reasonably low maintenance product, you just need to take care that the fixed deposit needs to be either renewed or withdrawn on maturity to avoid loss of interest in the interim period.
For a recurring deposit, regular payments need to be made as per the frequency chosen by you to ensure no loss in interest income.

VI. Understand the Fine Print and Know Your Rights as a Consumer

In case, you feel that the bank has been delaying the repayment post maturity or levying charges without telling you. You can report this to the Banking Ombudsman of your state as appointed by the Reserve Bank of India.
The following link gives you the names and addresses of the Banking Ombudsman across India:
Any source

5 Vital Tips on Home Loans

  1. To increase your loan eligibility, combine your income with that of your spouse, children or parents
  2. Always negotiate - the first interest rate quoted is never the final rate
  3. Before paying the loan processing fee request lender for preliminary check on the property
  4. Buy Loan Protector Life Insurance - ensure your family can use the house if you are not alive
  5. Immediate disbursement get best rates – talk to lenders when you are close to finalizing your property
Any source

5 Vital Tips on Health Insurance

1. Define your requirements of health coverage

Define what you want to cover yourself against – is it just critical illness, or injuries resulting from an accident, hospitalization expenses or OPD expenses as well. There are different kind of policies available depending on your requirement and your budget.

2. Decide which members of your family need to be part of the health insurance policy – you might find splitting policies to be beneficial.

When buying for a family check multiple options. Sometimes its beneficial from a cost perspective for the oldest member of the family to have a separate policy. Usually all insurance companies offer policies for coverage of you or spouse; and up to three children under one policy. Some policies also give coverage for dependent parents in the same policy.

3. Decide the total amount of health coverage needed.

The total amount of coverage needs to be determined by the number of people that you want the policy to cover, your estimate of the health care costs and the existing coverage that you might have from other sources like employee provided group insurance.

4. Read through the list of exclusions of the health insurance policy – both permanent and first year.

Exclusions define the ailments and the conditions under which the health insurance coverage will not be valid. For example a common permanent exclusion is cosmetic surgery. Such surgery is discretionary and usually not life threatening and performed at the insistence of the patient. A common first year exclusion is cataract; cataract surgery is covered from the second year onwards. This is to avoid moral hazard.

5. Check the network coverage of the Third Party Administrator (TPA) being employed by the health insurance company.

Ensure that the hospitals near your residence which might be used in case of an emergency as well as the hospital where you seek regular or specialist treatment is part of the TPA (Third Party Administrator) network.
Any source

5 Vital Tips on Personal Loans

1. Combine incomes to increase eligibility

Combine your income with the income of your spouse or your parents to increase the amount of loan that you can get.

2. Be aware of the charges levied on every step.

Do not look at interest alone to determine the cost of the loan. Also look at the charges that the lender has. Sometimes a slightly higher rate might be better for you. Some of the common charges are processing fees, prepayment fees and non payment penalties and cheque bounce charges. Based on your need, e.g. you might feel that you might be able to pay the loan earlier than the tenure than you should be comparing the prepayment fees across all loans.

3. Use existing relationships to take advantage of discounts on lending rate

If you have an existing banking or a loan relationship with a bank or a NBFC, use it to negotiate discounts on the lending rate. The bank/NBFC would consider your proven track record of repayment or healthy balances in your savings account or fixed deposit in determining that you are a person with sound financial standing.

4. Match the repayment period of the loan to your needs

You must choose a repayment period and schedule that matches your needs. Choose a smaller repayment period if you are expecting an inflow of money in the short run. For instance, if you need a loan today but are expected to receive a large sum of money a year from now, then choose a lender who gives you the option of repaying the entire amount in a year.

5. Buy Loan Protector Insurance

Most banks and NBFCs provide group life insurance as loan protector insurance (or payment protection insurance). Buying this insurance ensures that the insurance company pays the lender in case you meet with any unfortunate incident. This is an affordable way of protecting your dependants from your liabilities.

Any source

5 Vital Tips on Fixed Deposits

1. Check the premature withdrawal penalty before investing.

Try and invest the money in a tenure within which you will not need the money. But definitely check on the charges applicable in case you need to withdraw in an emergency.

2. Check the frequency of compounding of the deposit, when comparing two deposit offerings.

A rate which might seem higher upfront might have a lower return if it is not compounded as frequently. For example; Bank X offers a one year deposit at the rate of 9% compounded half yearly – which results in an yield of 9.2%. While Bank Y offers a one year deposit at the same rate of 9% but compounded quarterly – which results in an yield of 9.3%. You will earn more at Bank Y because your return is compounded annually.

3. Split your Fixed Deposit investments to avoid TDS deduction.

If the interest earned is more than Rs. 10,000 in a single branch in one calendar year then TDS would be deducted. By splitting your deposits across various banks or branches you can avoid this deduction.

4. Always appoint a nominee.

When you open a fixed deposit appoint a nominee. It is essential for a quick and hassle free transfer of accounts. The nomination facility enables the bank to release the deposit amount to the nominee without insistence on a succession certificate or probate of the will from your legal heirs.

5. Take interest payouts based on your requirements

Most banks have many interest payout options, choose the one which suits your requirements best for example if you are retired person you could go in for monthly payments of interest.

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Tax Planning

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How can I save Taxes this year?

Some of the Sections of Income Tax Act, 1961 are detailed below which detail few exemptions and categories of exempt income that you can take advantage of:

Section 80C: Investment in specified instruments and expenses
Section 80C gives every income tax payer up to a maximum of Rs. 1,00,000 tax free income in a year if they invest in or buy the following instruments. Please not that this is a combined total of Rs. 1,00,000 and not an individual figure for every instrument:

1. Premium for Life Insurance or ULIP

2. Provident Fund (PF) contribution

3. Public Provident Fund (PPF) - only up to Rs. 70,000 in a year

4. Repayment of home loan principal

5. Equity Linked Savings Schemes (ELSS) of Mutual Fund Companies

6. Infrastructure Bonds

7. National Savings Certificates (NSC)

8. Tax Saving Fixed Deposits with Banks

9. Tuition Fees of children

Comparison of 80C Investment Avenues

Type of 80C Instrument

Lock In Period



Taxation of Returns

Equity Linked Savings Scheme (Mutual Fund)

3 years

Market Linked


No tax

Life Insurance Premium

2 years



No tax

ULIP Premium 1

3 years

Market Linked


No tax

PPF (fixed returns)

15 years


Low 2

No tax

Home Loan Repayment

5 years




Infrastructure Bonds
(fixed returns)

3 years (min)


Risk Free

Interest is taxed

NSC (fixed returns)

6 years


Risk Free

Interest is taxed

Tax Saving Fixed Deposits
(fixed returns)

5 years


Risk Free

Interest is taxed

ULIP premium needs to be at least 1/5th of the sum assured to qualify under Section 80C
: PPF returns are set by the Government of India and can be revised either upwards or downwards in any year.

Section 80D: Health Insurance Premium
You can take advantage of an annual deduction of Rs. 15,000 from taxable income for payment of Health Insurance premium for self and dependants. For senior citizens, this deduction is Rs. 20,000.

Section 80E: Interest paid on educational loans

You can claim a deduction on the interest paid on loans taken for higher education for yourself, your spouse and children. There is no limit on the amount of deduction you can claim.
The only thing to keep in mind is that the program for which the loan is taken should be a graduate or post-graduate program in engineering, medicine or management or a post-graduate course in the pure or applied sciences.

Section 80G: Donations to Charitable institutions

You can claim a deduction for any donation that you might have made to a charitable fund or institution. However, please note that these donations should be made only to specified institutions. And a proper proof of payment must be provided for the same. Based on the classification of the charity , you can claim either 100% or 50% of the donated amount as deduction. The deduction might also be subject to a certain limit again based on the type of charity that you are donating money

Section 24: Interest paid on housing loan

Under Section 24, a maximum of Rs 1,50,000 can be deducted from your taxable income as interest repayment for a self occupied house. Please note that this deduction is not available if you the house is still under construction and you do not have occupation of the house.

Provisions that you should take advantage of if you are a salaried employee:

Section 10(13A) : House Rent Allowance

You can take advantage of the provisions under this section if you are renting an accommodation. These provisions will not be available to you if you stay in a rent-free accommodation or live with your family or in your own house.

Under Section 10(13A), HRA is exempt to the least of the following: i) 50/40 per cent of basic salary= Dearness Allowance (if, applicable), ii) excess of rent paid over 10 per cent of basic salary; and iii) actual HRA received.
Lets illustrate this calculation with an example:


HRA per month = Rs 15,000
Basic monthly salary = Rs 30,000
Monthly rent = Rs 14,000
Rental accommodation is in Delhi.


The HRA exemption would be the least of the following:

1. Actual amount of HRA: Rs 15,000
2. 50% of salary (basic component + dearness allowance) = 50% x (30,000 + 0) = Rs 15,000
3. Actual rent paid - 10% of salary (basic component + dearness allowance)= Rs 14,000 - [10% of (30,000 + 0)] = 14,000 – 3,000 = Rs 11,000
Rs 11,000 being the least of the three amounts will be the exemption from HRA.
The balance HRA of Rs 4,000 (15,000-11,000) would be taxable.
Please note that HRA exemptions are only available on submission of rent receipts or the rent agreement.

Paying Rent to parents or relatives
If you want to pay rent to your parents or any relatives (like uncle/cousin) whom you are staying with. You will need to treat them as landlords. And request the owner of the house (which will be one of your parents) to declare it in his/ her personal income tax return. This will prevent any litigation in the future.

Section 10 (14) Rule 2BB(10) : Transport Allowance
Transport allowance granted for commuting between your residence and place of work is exempt up to Rs. 800 a month. You can take advantage of this provision to get a tax exemption of Rs 9600 annually by providing your employer with bills or a self declaration.

Section 17(2) : Medical Reimbursement
You can claim exemption up to Rs 15,000 annually on actual expenditure incurred on your medical treatment or for treatment of any of your dependants. Moreover, there is no restriction of approved hospitals or clinic for the same. This is exempt only on provision of actual bills.
However, if the amount is paid out as an allowance not a reimbursement then it would be fully taxable.

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Top Misconceptions about Taxes

Do I need to file my tax returns? How do I file them?

Misconception 1:

  • My employer has deducted tax at source from my paycheck and thus I don't have to worry about filing tax returns. Just because taxes have been paid on your behalf does not mean that filing a tax return is not required. If your combined annual income from all sources is above the amount that is exempt from income tax you are required to file your returns. Your employer gives to you a statement called Form 16 at the end of the financial year that shows the amount of tax that has been deducted at source. You will need to put the tax deduction amount shown on the Form 16 on your tax return form. Therefore, it is important to ensure that you obtain this statement from your employer on time.

Misconception 2:

  • Filing tax returns is a complex and cumbersome process. I need a Chartered Accountant to help me file my tax returns. Contrary to popular belief preparing and filing a tax return is actually quite simple. In fact if you have a digital signature you can accomplish the entire process sitting at home on your computer thanks to the e-filing facility available on the tax department website ( Alternatively, you can submit the returns online, print a one-page receipt, sign it and drop it off at the income tax office within fifteen days of submitting the returns. No documents are required to be submitted with the receipt. If you so desire, you can fill out the forms on your own. However, if you want professional help there are many third party service providers who offer tax preparation and filing services for as low as Rs.200.

Housing and tax

Misconception 3:

  • he interest I pay on a home loan is deductible from my income from house property up to a maximum of Rs. 1,50,000 per year. This is true if you have taken a home loan for a single house and it is self-occupied. However, if you take a home loan on a second house, the entire interest paid on the loan can be claimed as a deduction from your income on house property. If you are planning to invest in real estate with the expectation that the property would appreciate in value over time, you could take advantage of the above rule. Thus a smart investment strategy would be to take a home loan on a second house, rent out the house and claim interest paid on the loan as a deduction from the rental income, thereby reducing your borrowing costs significantly.

Misconception 4:

  • I receive tax exemption on the actual rent I pay for my rented home. his is not entirely accurate. Section 13 A of the Income Tax Act states that the maximum amount that is exempt from tax is the lower of the following amounts: (i) the House Rent Allowance given by the employer, (ii) 50% of your basic salary if you live in a metro, (iii) or, actual rent paid minus 10% of your basic salary. Thus if actual rent paid is lower than 10% of your basic salary you receive no exemption. The other key point is that you cannot claim any exemption under this section if you live in your own home or if you are not paying rent to anyone.

The magical 80’s

Misconception 5:

  • Section 80C benefits are available only on making an investment or saving or paying a premium on insurance. You can claim a deduction for the school or university tuition fees you pay for your children (maximum of two) as long as they are enrolled in a full time program at any institute in India. In addition you can claim a deduction for the repayment of principal on any home loan that you may have taken. Both these deductions have to of course be within the overall annual Section 80C cap of Rs.1lakh.

Misconception 6:

  • If I avail of tax free medical reimbursement from my employer up to Rs.15,000, I cannot claim deduction on health insurance premium paid. Tax free medical reimbursement by your employer up to an amount of Rs.15,000 per year for your family’s medical expenditure is separate from the Rs.15,000 deduction available under Section 80D for the premium you pay on buying health insurance. Both these exemptions are covered under different sections of the Income Tax Act and you can enjoy benefits from both. The former covers costs for your daily medical needs and outpatient treatment (OPD), while the latter protects you from expenditure for hospitalization.

Misconception 7:

  • My friends tell me that the only interest payment I can claim an exemption for is the interest paid on home loans. There is a section of the Income Tax Act called 80E that permits deduction on interest paid on loans taken for higher education for self, spouse and children. There is no limit on the amount of deduction you can claim. The only thing to keep in mind is that the program for which the loan is taken should be a graduate or post-graduate program in engineering, medicine or management or a post-graduate course in the pure or applied sciences.

Interest income and others

Misconception 8:

  • Interest I earn on my savings account balance is exempt from income tax.After the removal of Section 80L of the Income Tax Act, interest income from any source including savings account balance, is subject to income tax. What you may be referring to is the rule around tax deducted at source for the interest payments you receive on your savings account. As per existing rules, as long as the combined interest income that you earn, on any savings accounts or fixed deposits, at a single bank branch, is less than Rs.10,000 there will be no tax deducted at source. If you want to better manage your cash flow and do not want tax to be deducted at source you could consider spreading your deposits across multiple bank branches, even if they are of the same banking company.

Misconception 9:

  • I have to pay taxes on interest received from my fixed deposits only on maturity. Your tax liability on interest income from your fixed deposit is calculated on an accrual basis. Let’s say that you have made a fixed deposit for three years and have elected not to receive any regular interest payouts and instead have decided to receive a lump sum payout on maturity after three years. That does not mean that you are not liable to pay income tax annually on the interest that is credited to your fixed deposit account every year, even though you do not have access to that interest income.

Misconception 10:

  • I received cash as a gift from a close friend. I do not have to pay any tax. You are right as long as the amount was less than Rs.50,000 during the financial year. The applicable rules for gift tax state that any cash gifts, without any upper limit, received from specified relatives are exempt from income tax. However, if you receive a cash gift from a friend, which exceeds Rs.50,000 in one financial year, you are liable to pay income tax on the excess amount. However, the good news is that cash gifts received during your marriage, of any amount, and from anyone are totally free from income tax.
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