The following are frequently asked questions by the investors, agents and others involved in mobilization of savings and answers to these FAQs are as under:-
1.Why a person should invest in National Savings Products ?
Ans: The investment in NS Products which are the products of Ministry of Finance, Government of India, has a sovereign guarantee and therefore NS products are fully secured and safe. The rate of interest offered on NS products are quite attractive as compared to other schemes in the financial market. The important aspect is that 100% of the collections made in the state is invested in the securities floated by the state govt. as a loan by the Govt. of India on long term basis which is used by the state govt. for their developmental activities in the state.
2. What products are under the fold of NSI ?
Ans : The Ministry of Finance, Govt. of India has structured 8 products to cater the needs of different segments of the investors as given below. All the products are need based and the investors can opt for the product as per their requirement.
1) Senior Citizen’s Savings Scheme
2) Post Office Monthly Income Account
3) 15 Year Public Provident Fund Account
4) National Savings Certificate (VIII Issue)
5) 5-year Post Office Recurring Deposit Account
6) Post Office Time Deposit Account
7) Post Office Savings Account
8) Kisan Vikas Patra
3. Who formulates and introduces the schemes of National Savings?
Ans. Ministry of Finance designs the product in consultation with experts committees /National Savings Institute.
4. From where the investor can buy the National Savings products?
Ans. All products are available at Post offices. PPF and Senior Citizen Savings Scheme are also available with designated Bank’s Branches.
5. Is post Office a member of clearing house to expedite Cheque clearance as banks?
Ans. Yes. All the HPO/GPOs are the members of clearing house for the purpose of Cheque clearance.
6. Is nomination facility available in National Savings Products?
Ans. Yes. The depositor can nominate one or more persons as the nominee and also mention the share of nominee in case of more than one nominee.
7. Whether NRI(s) can invest in the National Savings Products?
Ans. NRI(s) are not authorised to make investment in National Savings Products.
8. What is the mode of payment on maturity / premature closure of National Savings Products?
Ans: On Premature Closure or maturity, the deposits accepting authorities make payment in cash upto Rs. 20,000/- and by cheque in excess thereof.
9. Whether NS products enjoy the benefit of tax concession under Income Tax Act ?
Ans : The deposit in PPF, N.S.C. VIII Issue enjoy the benefit of tax concession under I.T.Act. The deposits in PPF qualify for deduction upto maximum of Rs.70,000/- and deposits in NSC VIII Issue upto Rs.1,00,000/- under Section 80 C of Income Tax Act. The interest accrued in NSC VIII Issue for 5 years also enjoy the benefit of Sec. 80 C of I.T.Act.
The interest on PPF and POSA is tax free as per the tax provisions under Sec.10 of I.T. Act.
PRODUCTS BASED FAQs
P.O.S.A.
1. Whether Cheque facility is available in P.O.S.A.?
Ans: Yes. Cheque facility is available in Post Office Savings Account like any other Bank.
2. Is there any maximum limit of deposit in the Post Office Savings Account?
Ans: Yes. In single account maximum deposit limit is Rs. 1,00,000 and in joint account it is Rs. 2,00,000 only.
3. Can a minor open a P.O.S.A. ?
Ans: Yes. A minor who has attained the age of 10 years can open POSA Account, More over a guardian can also open a account in the name of minor.
4. Can a person open a single as well as joint account separately?
Ans: Yes. A person can open a single and/or joint account separately even in the same post office.
P.O.R.D.
1. Can a Post Office Recurring Deposit Account (PORD) be continued / extended beyond maturity period?
Ans: Yes, for a further period of 5 years by depositor at his option with or without deposits.
2. Whether premature closure of the P.O.R.D. account is permissible?
Ans: Yes. The holder of the account may prematurely close the account after three years from the date of opening and in such a case interest @ of Post Office Savings Account shall be payable.
3. Is there any provision of interest on discontinued account after maturity?
Ans: Yes. If maturity value of a discontinued account is retained by a depositor after the date of maturity, post maturity interest is allowed at P.O.S.A. rate as applicable from time to time.
4. Is there any social security benefit in PORD account?
Ans: Yes. All accounts upto maximum deposit Rs. 50/- P.M. are eligible for social security benefit subject to certain terms and conditions and maturity amount is paid to the nominee/legal heir of the depositor.
Post Office Monthly Income Scheme
1. Can a depositor open more than one P.O.M.I.S. account?
Ans: Yes. A depositor may open more than one account subject to the condition that deposits in all accounts taken together shall not exceed the prescribed limit.
2. Can joint MIS account be opened by 3 persons?
Ans : A joint MIS account can be opened by 2 and 3 persons and in such case, the share of the individual account holder will be ½ or 1/3 of the total deposits as the case may be. The maximum amount that can be deposited in a joint account opened with 2 or 3 persons will however be Rs.9,00,000/- only.
3. Whether a depositor is entitled for bonus on MIS?
Ans : No bonus shall be paid on the deposits made in the POMIS account opened on or after 13th Feb. 2006. However, bonus will be paid on all the accounts already opened before 13th Feb. 2006, on their maturity.Government of India announced bonus @ 5% on M.I.S.accounts opened on or after 8th December 2007.
4. Can a MIS account be prematurely closed?
Ans : A MIS account can be prematurely closed at any time after the expiry of a period of one year from the date of opening of such account subject to the condition that –
i) If the account is closed on or before expiry of 3 years of opening of such account, an amount equal to 2% of the deposit shall be deducted and remainder paid to him.
ii) If the account is closed after expiry of 3 years from the date of opening of such account, an amount equal to 1% of the deposit shall be deducted and remainder paid to the depositor.
KISAN VIKAS PATRA
1. Whether replacement of lost or destroyed K.V.P. is permissible?
Ans: Yes. The holder should apply for the issue of duplicate certificate and comply with the prescribed procedure..
2. Whether the K.V.P. can be encashed through messenger?
Ans: Yes. If endorsement on the back of the certificate have been signed already by the holder and accompanied by a letter of authority containing specimen signature duly attested.
POST OFFICE TIME DEPOSIT ACCOUNT
1. Whether post maturity interest is paid on Time Deposit Accounts or not?
Ans: Yes. In case payment of a deposit becomes due and the same has not been made, interest shall be allowed on the amount at the post office savings account rate for a maximum period of two years only.
2. Whether Time Deposit Account can be pledged?
Ans: Yes. An application should be made in the prescribed form by the transferors and transferee as per rules.
3. Can the interest of Time Deposit Account be credited to the Post Office Savings Bank account standing in same post office?
Ans: Yes, on request in writing from the investor.
4. Can a POTD account be prematurely closed?
Ans: Yes. After six months. If premature closure is made after six months but before 1 year, no interest will be payable. In case the premature closer is after 1 year, the depositor will be paid 2% less than the rate of interest applicable for the period of deposit remaining with the Post Office.
5. Can a POTD account be prematurely closed ?
Ans : A POTD account can be closed prematurely after six months but before one year without interest. A POTD account for 2, 3, 5 years can be closed after one year and depositor will get 2% less than the rate of interest specified for a deposit of one year, two years, or three years as the case may be.
N.S.C. VIIIth Issue
1. Can Post Office issue certificate of annual interest in respect of N.S.C.s (VIII issue) for purpose of filling of income tax returns?
Ans: Yes. Post office issues the certificate on demand by the investors.
2. Can premature encashment be made in NSC VIII th issue?
Ans: No premature investment is allowed. However, the premature encashment can be made only in three conditions i.e. on death of the holder, on forfeiture by a pledgee & when ordered by Court of Law.
PUBLIC PROVIDENT FUND ACCOUNT
1. Can PPF account be extended after 15 years and is there any time limit?
Ans: Yes. The account can be extended for one or more blocks of five years by giving option in form ‘H’ within one year from the date of maturity of the account.
2. Whether the PPF Account can be continued without further deposits after maturity?
Ans: Yes. The depositor can continue the account without deposits after completion of maturity /extended block period.
3. Can a PPF account be opened by HUF ?
Ans : A PPF account is not allowed to be opened by HUF w.e.f. 13.5.2005. However, all the accounts which were opened earlier will continue to earn interest till their maturity.
4. A PPF account where no subscription has been made in a year is treated as discontinued?
Ans : A subscriber can deposit the minimum subscription of Rs.500/- + default fee of Rs.50/- for each year of default subject to the condition that the total deposit during the year in which defaulted subscription is deposited should not exceed the maximum deposit ceiling of Rs.70,000/- and it is not treated as discontinued.
5. Whether a person is entitled for interest on the deposits made in excess of the prescribed limit i.e. Rs.70,000/- in a PPF account ?
Ans : Accountholder is not entitled for interest on any amount deposited in excess of Rs.70,000/- in a financial year in the PPF account.
6. If a person opens PPF account in the name of individual and also in the name of a minor(s), how the limit of deposit is determined?
Ans : The maximum amount of Rs.70,000/- can be deposited by a person in a financial year in a PPF account opened in his name and in the name(s) of a minor(s) taken together.
7. Whether the investment in N.S.C., KVP, POMIS, POTD earns post maturity interest?
Ans : The post maturity interest on all the above schemes will be paid up to maximum period of two years from the date of maturity at the POSA rate applicable from time to time.
8. If the investment is made in NS products by cheque, what is the date of deposit ?
Ans : In case of deposit by cheque in the NS products, except PPF and R.D., the date of deposit will be the date of realization of cheque. However, in the case of PPF and R.D., the date of deposit will be treated as date of presentation of cheque.
SENIOR CITIZEN’S SAVINGS SCHEME
1. Can a joint account be opened with any person under the Senior Citizen’s Savings Scheme?
Ans : The account can be opened jointly with the spouse only.
2. What should be the age of the spouse in the case of Joint. Account?
Ans : In the case of Joint account, the age of first applicant /depositor is the only factor to decide the eligibility to invest under this scheme. There is no age bar/limit for the 2nd applicant/joint holder (i.e. spouse).
3. What is the share of the joint account holder in the deposit in SCSS ?
Ans : The share of the joint account holder under the scheme is attributed to the first applicant/depositor only. Question of any share of the 2nd applicant/ account holder (spouse) therefore does not arise.
4. In case, the depositor does not close the account on maturity and also not extend the account for a period of three years within a period of one year, how the interest is to be calculated/paid after the maturity period ?
Ans : The account shall be treated as matured and post maturity interest at the rate applicable to the deposits under POSA from time to time shall only be admissible for the period beyond maturity in accordance with the rules. The amount of excess interest paid (at higher rate applicable to deposits under SCSS) after the maturity shall be deducted.
5. Whether TDS will be deducted on the interest paid on SCSS ?
Ans : The tax will be deducted at source in respect of interest payable under SCSS. However, senior citizen can avail the facility of furnishing the form no. 15-H under income tax rules who is a resident in India and of the age of 65 years or more.
6. Can SCSS account be transferred from one deposit office to other?
Ans : A depositor may apply enclosing the pass book thereto for transfer of his account from one deposit office to another provided that where deposit is Rs.1 lakh or above transfer fee of Rs.5/- per lakh on deposit for the first transfer and Rs.10/- per lakh of the deposit for the 2nd and subsequent transfers shall be payable by the depositor.
7.What is the period up to which post maturity interest can be given?
Ans : In case, the account is not closed on completion of the five years, maturity period and also not extended under rule 4(3), post maturity interest at the POSA rate from time to time shall be paid till the end of the month preceding the month of closure. No time limit has been prescribed.
Agency System
1. Whether the services of National Savings Agent’s are available to the investors?
Ans. Yes. Except in case of Post office savings Bank account. However investors in their own interest should either tender Cheque drawn in favour of the deposit accepting agency i.e. post office or bank to the agents or obtain proper Agent’s Receipt as a token of receipt from the agent.
2. How an individual can become agent of NSI ?
Ans: There are three types of agents operative in the National Savings Agency system namely ,
1. Standardised Agency System(SAS)
2. Mahila Pradhan Agency System(MPKBY)
3. Public Provident Fund Agency System(PPF)
The work relating to appointment, renewal and servicing of the agents has been transferred by Govt. of India to the respective State Governments and in most of the cases District Collector/Dy. Commissioner is the appointing authority in their respective area of operation. The procedure regarding appointment also varies from State to State depending on their requirements of agents and any person interested to work as agent in National Savings can approach the concerned District Magistrate / Dy. Collector/Director Small Savings of the respective state, Regional Director, NSI, of the concerned area.
3. What is the procedure for payments of commission?
Ans: Agents under National Savings are paid commissions at the rate of 1% in SAS and PPF agency system & 4% in MPKBY Agency System which is applicable in case of ladies only and they are authorized to canvass only Recurring Deposit Scheme. The payment of commission is made by the deposit accepting authorities at source. However, in case of deposit canvassed under Senior Citizen Savings Scheme, the commission is payable only 0.5% to women/men agents working under SAS agency.
Sources: National Savings Institute
http://www.nsiindia.gov.in
Friday 30 October 2009
Wednesday 28 October 2009
Interest rates set to rise
Interest rates set to rise, signals RBI
Prabhakar Sinha , TNN 28 October 2009, 01:52am IST
Interest rates are likely to start rising soon. This was clearly indicated by the second quarter review of the monetary policy, 2009-10, unveiled by RBI governor D Subbarao on Tuesday. Releasing the review, the governor said that in the light of mounting inflationary pressure, which is projected to touch 6.5% by March 2010, the monetary policy's first priority would be to contain the inflationary expectation.
The RBI left all major policy rates like repo and reverse repo rates — the rates at which it lends to and accepts money from banks respectively — and cash reserve ratio (CRR) — the percentage of deposits banks are supposed to keep with the central bank — unchanged. But it took the first step towards rolling back its easy money policies, pursued for the past year to counter the economic slowdown. It terminated special liquidity facilities like credit refinance limits extended to banks against the loans given to exporters and mutual fund companies ahead of the original March 31, 2010 expiry date.
The central bank also reversed its earlier decision to reduce the minimum required investment by banks in government securities from 25% to 24% of deposits. The statutory liquidity ratio is now once again 25%. As most banks have already invested more than 25% in government securities, this decision will not have an immediate impact on the availability of funds, but these measures clearly indicate the RBI's intent to discontinue the accommodative monetary policy.
Responding to the measures, finance minister Pranab Mukherjee said that the RBI's assessment, on the whole, is in conformity with the government's thinking on both fiscal policy and monetary policy. However, he said the government would continue with the stimulus packages till the economy is back on a firm recovery path. Mukherjee also disagreed with RBI's projection of 6% economic growth with an upward bias for 2009-10. He said he would prefer to go with the growth projection of 6.5% to 6.75% given by the prime minister's economic advisory council in its mid-year review.
In the light of inflation rising to 6.5% by March 2010, the central bank will be left with little choice but to raise the policy rates. With the rise in the inflation, the net interest rates of all the policy instruments will become negative. In that situation, Subbarao said, the central bank will use its monetary policy rates to anchor the inflationary expectations in the country. Keeping this in mind only, he said, the money supply target has been reduced by one percentage point to 17%. However, he was quick to add that exit of the easy money policy will be calibrated in such a fashion that while the recovery process is not hampered, inflation expectations remain anchored.
He further hoped that with the new prime lending benchmark system likely to be introduced soon, the lending rates would become more transparent and competitive. This would make the banks lend at lower rates with lesser margin over the cost of funds.
Global investment banker, Goldman Sachs, said that in its second quarter review statement the central bank, in fact, has reversed its priorities from the first quarter review statement made in July, when reviving the growth was the first priority.
The governor, however, maintained that inflationary pressure is mainly coming from the rise in prices of food articles due to supply constraints, which cannot be influenced much by monetary policy. But, in its policy statement, the central bank said, ``Even though the current inflationary pressure are driven by food prices, they can strengthen expectations of higher inflations and lead to generalized inflation.''
The governor also expressed his concern over rising asset prices, which could be because of surplus liquidity in the system. In the statement, he said, ``There is already some evidence of excess liquidity feeding through asset prices with potential financial stability concerns. In this background, bankers feel that the central bank will soon resort to tightening of liquidity condition. The Nomura securities said that the central bank might increase CRR to mop up surplus liquidity by December 2009.
Therefore, the second quarter review, bankers felt, is in the direction to build a ground to pursue tight money policy in time to come.
Sources: Times of India
Prabhakar Sinha , TNN 28 October 2009, 01:52am IST
Interest rates are likely to start rising soon. This was clearly indicated by the second quarter review of the monetary policy, 2009-10, unveiled by RBI governor D Subbarao on Tuesday. Releasing the review, the governor said that in the light of mounting inflationary pressure, which is projected to touch 6.5% by March 2010, the monetary policy's first priority would be to contain the inflationary expectation.
The RBI left all major policy rates like repo and reverse repo rates — the rates at which it lends to and accepts money from banks respectively — and cash reserve ratio (CRR) — the percentage of deposits banks are supposed to keep with the central bank — unchanged. But it took the first step towards rolling back its easy money policies, pursued for the past year to counter the economic slowdown. It terminated special liquidity facilities like credit refinance limits extended to banks against the loans given to exporters and mutual fund companies ahead of the original March 31, 2010 expiry date.
The central bank also reversed its earlier decision to reduce the minimum required investment by banks in government securities from 25% to 24% of deposits. The statutory liquidity ratio is now once again 25%. As most banks have already invested more than 25% in government securities, this decision will not have an immediate impact on the availability of funds, but these measures clearly indicate the RBI's intent to discontinue the accommodative monetary policy.
Responding to the measures, finance minister Pranab Mukherjee said that the RBI's assessment, on the whole, is in conformity with the government's thinking on both fiscal policy and monetary policy. However, he said the government would continue with the stimulus packages till the economy is back on a firm recovery path. Mukherjee also disagreed with RBI's projection of 6% economic growth with an upward bias for 2009-10. He said he would prefer to go with the growth projection of 6.5% to 6.75% given by the prime minister's economic advisory council in its mid-year review.
In the light of inflation rising to 6.5% by March 2010, the central bank will be left with little choice but to raise the policy rates. With the rise in the inflation, the net interest rates of all the policy instruments will become negative. In that situation, Subbarao said, the central bank will use its monetary policy rates to anchor the inflationary expectations in the country. Keeping this in mind only, he said, the money supply target has been reduced by one percentage point to 17%. However, he was quick to add that exit of the easy money policy will be calibrated in such a fashion that while the recovery process is not hampered, inflation expectations remain anchored.
He further hoped that with the new prime lending benchmark system likely to be introduced soon, the lending rates would become more transparent and competitive. This would make the banks lend at lower rates with lesser margin over the cost of funds.
Global investment banker, Goldman Sachs, said that in its second quarter review statement the central bank, in fact, has reversed its priorities from the first quarter review statement made in July, when reviving the growth was the first priority.
The governor, however, maintained that inflationary pressure is mainly coming from the rise in prices of food articles due to supply constraints, which cannot be influenced much by monetary policy. But, in its policy statement, the central bank said, ``Even though the current inflationary pressure are driven by food prices, they can strengthen expectations of higher inflations and lead to generalized inflation.''
The governor also expressed his concern over rising asset prices, which could be because of surplus liquidity in the system. In the statement, he said, ``There is already some evidence of excess liquidity feeding through asset prices with potential financial stability concerns. In this background, bankers feel that the central bank will soon resort to tightening of liquidity condition. The Nomura securities said that the central bank might increase CRR to mop up surplus liquidity by December 2009.
Therefore, the second quarter review, bankers felt, is in the direction to build a ground to pursue tight money policy in time to come.
Sources: Times of India
Monday 26 October 2009
Thursday 15 October 2009
Friday 9 October 2009
Plan for a steady source of income
Plan for a steady source of income
By: Neeti Trivedi, ET Bureau
The economy is showing signs of a turn around and the worst may be behind us, but it is not too distant in the past that we heard of pay cuts and pink slips every other day. The loss of active income source or reduction in the monthly take-home was coupled with burgeoning costs of daily necessities .
It is in such tough times that one realises the importance of having a passive source of regular income. Gone are the days when only retirees would need a steady source of passive income. Individuals today are increasingly looking for options to supplement their active income by passive incomes such as rent, interest and dividend income.
Debt investments or fixed income instruments are the key sources of generating a regular income. Coupled with the fact that debt offers diversification and safety of capital, it proves to be an excellent case for investments . There are also a couple of other options from the mutual funds stable which can provide a regular source of income.
Here are some of the options available for a steady passive income:
Post office monthly income plan (POMIS)
The post office monthly income plan (POMIS) offers a fixed monthly return in the form of interest and you can deposit a maximum of Rs 4.5 lakhs and Rs 9 lakhs for single and joint accounts respectively.
The POMIS earns interest at eight percent per annum and though there are no tax benefits and interest is taxable , no tax is deducted at source on the interest.
The tenure is fixed for six years and there is a five percent payout in the form of bonus on maturity.
The POMIS can act as a safe source of additional monthly cash flow which can be either used to meet expenses or ploughed back into investments, depending on the situation.
The post office monthly income plan (POMIS) offers a fixed monthly return in the form of interest and you can deposit a maximum of Rs 4.5 lakhs and Rs 9 lakhs for single and joint accounts respectively.
The POMIS earns interest at eight percent per annum and though there are no tax benefits and interest is taxable , no tax is deducted at source on the interest.
The tenure is fixed for six years and there is a five percent payout in the form of bonus on maturity.
The POMIS can act as a safe source of additional monthly cash flow which can be either used to meet expenses or ploughed back into investments, depending on the situation.
Bank fixed deposit
Instead of opting for a cumulative deposit, you can opt for the monthly or quarterly interest payment facility .
Bank deposits are extremely low risk and offer good flexibility in terms of tenure, but there are no tax benefits (except five year deposits that qualify under Section 80C).
The interest rates are governed by the ongoing interest rates in the economy.
Corporate fixed deposit
Companies offer fixed deposits which usually provide a higher rate than bank fixed deposits, the reason being that they are unsecured and hence the risk is higher.
There are different options for payment of interest (monthly, quarterly etc) which can provide a regular source of income.
It is prudent to invest only in deposits of reputed companies with a superior credit rating.
Debt mutual funds
There are a wide variety of debt mutual funds such as liquid funds, short-term debt funds, income funds, and gilt funds.
These are distinguished by type, credit quality, nature of securities they invest in and length of maturity of the securities. These funds come with a dividend payout option which can be weekly, monthly or quarterly.
A portion of the total debt in your overall asset allocation can be invested in these funds to serve the dual purpose of allocation to debt as well as earning regular income.
However, you should be diligent to select the right fund based on the credit quality, average maturity of the securities and interest rate environment .
Monthly income plans of mutual funds
The monthly income plans (MIPs) usually invest 15-30 percent of the corpus in equity and the remaining in debt.
These plans have an option of monthly or quarterly dividend payment, though not assured.
With the markets gaining some momentum, these plans are back on track with respect to dividend payments.
Systematic withdrawal plans of mutual funds
A lump sum investment in a fund entitles you to withdraw regular amounts monthly or quarterly.
The returns are not assured and there may a risk of withdrawing capital itself if withdrawals exceed the returns. But it is tax-efficient as the returns are treated as capital gains.
There are other incomegenerating options such as Senior Citizens' Savings Scheme and annuities from insurance companies but these are more relevant after retirement.
While one must opt for growth of capital in the early stages of life, building up a stream of income which is not dependant on job, profession or business is equally important to provide for a rainy day.
SOURCES: THE ECONOMIC TIMES
By: Neeti Trivedi, ET Bureau
The economy is showing signs of a turn around and the worst may be behind us, but it is not too distant in the past that we heard of pay cuts and pink slips every other day. The loss of active income source or reduction in the monthly take-home was coupled with burgeoning costs of daily necessities .
It is in such tough times that one realises the importance of having a passive source of regular income. Gone are the days when only retirees would need a steady source of passive income. Individuals today are increasingly looking for options to supplement their active income by passive incomes such as rent, interest and dividend income.
Debt investments or fixed income instruments are the key sources of generating a regular income. Coupled with the fact that debt offers diversification and safety of capital, it proves to be an excellent case for investments . There are also a couple of other options from the mutual funds stable which can provide a regular source of income.
Here are some of the options available for a steady passive income:
Post office monthly income plan (POMIS)
The post office monthly income plan (POMIS) offers a fixed monthly return in the form of interest and you can deposit a maximum of Rs 4.5 lakhs and Rs 9 lakhs for single and joint accounts respectively.
The POMIS earns interest at eight percent per annum and though there are no tax benefits and interest is taxable , no tax is deducted at source on the interest.
The tenure is fixed for six years and there is a five percent payout in the form of bonus on maturity.
The POMIS can act as a safe source of additional monthly cash flow which can be either used to meet expenses or ploughed back into investments, depending on the situation.
The post office monthly income plan (POMIS) offers a fixed monthly return in the form of interest and you can deposit a maximum of Rs 4.5 lakhs and Rs 9 lakhs for single and joint accounts respectively.
The POMIS earns interest at eight percent per annum and though there are no tax benefits and interest is taxable , no tax is deducted at source on the interest.
The tenure is fixed for six years and there is a five percent payout in the form of bonus on maturity.
The POMIS can act as a safe source of additional monthly cash flow which can be either used to meet expenses or ploughed back into investments, depending on the situation.
Bank fixed deposit
Instead of opting for a cumulative deposit, you can opt for the monthly or quarterly interest payment facility .
Bank deposits are extremely low risk and offer good flexibility in terms of tenure, but there are no tax benefits (except five year deposits that qualify under Section 80C).
The interest rates are governed by the ongoing interest rates in the economy.
Corporate fixed deposit
Companies offer fixed deposits which usually provide a higher rate than bank fixed deposits, the reason being that they are unsecured and hence the risk is higher.
There are different options for payment of interest (monthly, quarterly etc) which can provide a regular source of income.
It is prudent to invest only in deposits of reputed companies with a superior credit rating.
Debt mutual funds
There are a wide variety of debt mutual funds such as liquid funds, short-term debt funds, income funds, and gilt funds.
These are distinguished by type, credit quality, nature of securities they invest in and length of maturity of the securities. These funds come with a dividend payout option which can be weekly, monthly or quarterly.
A portion of the total debt in your overall asset allocation can be invested in these funds to serve the dual purpose of allocation to debt as well as earning regular income.
However, you should be diligent to select the right fund based on the credit quality, average maturity of the securities and interest rate environment .
Monthly income plans of mutual funds
The monthly income plans (MIPs) usually invest 15-30 percent of the corpus in equity and the remaining in debt.
These plans have an option of monthly or quarterly dividend payment, though not assured.
With the markets gaining some momentum, these plans are back on track with respect to dividend payments.
Systematic withdrawal plans of mutual funds
A lump sum investment in a fund entitles you to withdraw regular amounts monthly or quarterly.
The returns are not assured and there may a risk of withdrawing capital itself if withdrawals exceed the returns. But it is tax-efficient as the returns are treated as capital gains.
There are other incomegenerating options such as Senior Citizens' Savings Scheme and annuities from insurance companies but these are more relevant after retirement.
While one must opt for growth of capital in the early stages of life, building up a stream of income which is not dependant on job, profession or business is equally important to provide for a rainy day.
SOURCES: THE ECONOMIC TIMES
Tuesday 6 October 2009
Some investment avenues for the NRI in India
Some investment avenues for the NRI in India
Citizens of India who have the NRI status (Non-Resident Indian) can invest in India in almost all avenues that are open to a citizen with
Resident Status. However, there may be some limitations or requirement for approval when investing in certain avenues. This article will analyse the options for NRI investments in brief.
Basic Requirements
As an NRI there are a few additional requirements in the form of documentation that a citizen has to comply with while investing in India. As any other citizen, documents such as a PAN card, ID Proof and Address Proof (the passport will suffice to be the single document for both), a KYC certificate (Know-Your-Client Certificate) for Mutual Fund investment above Rs.50,000/- and Passport size Photographs are required.
Apart from this an NRE (Non-Resident External Account - Dollar Account), and / or an NRO (Non-Resident Ordinary Account - Rupee Account) is/are required. The difference between these accounts is that the investments made and the returns got from those investments, using the NRE account can be repatriated to other countries.
Investment in Mutual Funds
NRIs can directly invest in any mutual fund from their NRE/NRO account. For investment above Rs.50,000/- the KYC documentation is required. Investment can be in any mode - only once, regular (monthly (SIP), quarterly, etc). The NRI investment returns in Mutual funds can fully be repatriated.
To make the investment the KYC forms given at any of the "Service Points" listed on the AMFI website. This will take about 4 days. A letter is sent back to the address for communication stating that the investor is verified. A copy of this letter has to be attached will all the mutual fund investment / withdrawals above Rs.50,000/-.
The investments will require forms to be signed but can be downloaded from any of the respective Asset Management Company (Mutual Fund) websites. So the NRI could sign, fill and have the forms sent directly to the Mutual Fund Company or to a relative / friend / financial advisor who could then give it to the Fund Office.
Investment in Shares
NRIs can invest in shares using a Demat (Dematerialised Format) account. However RBI approval has to be got for each transaction. This is a cumbersome process unless the investment is large (>Rs.1 crore) and/or to acquire significant stock holding in a company. The better way is thus to use the mutual fund route for exposure to the stock market.
Investment in Real Estate
Investment in land and buildings (housing and commercial) can be done by NRIs with the same rules as for the Resident Indians. However since buying land is a long drawn process, giving a Power of Attorney to a close relative (normally the parents) for executing the purchase / sale process may be advisable.
One limitation to the investment in real estate is that only the original money invested in the land can be repatriated even if invested from the NRE account. For example if Rs.50,00,000/- was invested in a house and it was sold after 4 years for Rs.1 crore, the capital gain of Rs.50 lakhs will need to be taxed and reinvested in India itself. Only the initial investment of Rs.50 lakhs can be taken back out of the country by the NRI (if the investment was made from the NRE account).
Investment in Gold and Jewellery
Here again the investment is as per the norms for normal resident Indians. A point to note for even the resident Indians is that gains made from buying and selling gold and gold jewellery is subject to capital gains tax. So keep the receipts safely while making gold purchases.
Becoming a Partner in a Business
Here again approval from RBI has to be sought as becoming a partner is akin to buying shares in the business.
Bank Fixed Deposits
An NRI can invest in all the bank deposits. The interest is taxable and is generally subject to TDS unless a request from for not deducting tax at source is submitted.
Postal Deposits
Most or all of the postal deposits are out of bounds for the NRI. They cannot invest in the National Savings scheme, Kisan Vikas Patra, Monthly Income Scheme nor the Public Provident Fund. Typically these schemes are coming under the Small Savings Schemes and the NRIs are expected to save BIG!!!!.
However schemes that were started before one becomes an NRI can be continued till the end of the scheme. They cannot be renewed at the end of the term if the NRI status continues at that time.
Summary
This article is a primer which covers most of the common investment avenues and their investability for NRIs. All avenues but for direct investment in shares and being a business partner (which require approval for each investment); and the postal deposits (which clearly does not permit) are open for an NRI to invest based on their needs.
Source: BankBazaar.com - An online marketplace for your personal loan and home loan needs.
SOURCE: THE ECONOMIC TIMES
Citizens of India who have the NRI status (Non-Resident Indian) can invest in India in almost all avenues that are open to a citizen with
Resident Status. However, there may be some limitations or requirement for approval when investing in certain avenues. This article will analyse the options for NRI investments in brief.
Basic Requirements
As an NRI there are a few additional requirements in the form of documentation that a citizen has to comply with while investing in India. As any other citizen, documents such as a PAN card, ID Proof and Address Proof (the passport will suffice to be the single document for both), a KYC certificate (Know-Your-Client Certificate) for Mutual Fund investment above Rs.50,000/- and Passport size Photographs are required.
Apart from this an NRE (Non-Resident External Account - Dollar Account), and / or an NRO (Non-Resident Ordinary Account - Rupee Account) is/are required. The difference between these accounts is that the investments made and the returns got from those investments, using the NRE account can be repatriated to other countries.
Investment in Mutual Funds
NRIs can directly invest in any mutual fund from their NRE/NRO account. For investment above Rs.50,000/- the KYC documentation is required. Investment can be in any mode - only once, regular (monthly (SIP), quarterly, etc). The NRI investment returns in Mutual funds can fully be repatriated.
To make the investment the KYC forms given at any of the "Service Points" listed on the AMFI website. This will take about 4 days. A letter is sent back to the address for communication stating that the investor is verified. A copy of this letter has to be attached will all the mutual fund investment / withdrawals above Rs.50,000/-.
The investments will require forms to be signed but can be downloaded from any of the respective Asset Management Company (Mutual Fund) websites. So the NRI could sign, fill and have the forms sent directly to the Mutual Fund Company or to a relative / friend / financial advisor who could then give it to the Fund Office.
Investment in Shares
NRIs can invest in shares using a Demat (Dematerialised Format) account. However RBI approval has to be got for each transaction. This is a cumbersome process unless the investment is large (>Rs.1 crore) and/or to acquire significant stock holding in a company. The better way is thus to use the mutual fund route for exposure to the stock market.
Investment in Real Estate
Investment in land and buildings (housing and commercial) can be done by NRIs with the same rules as for the Resident Indians. However since buying land is a long drawn process, giving a Power of Attorney to a close relative (normally the parents) for executing the purchase / sale process may be advisable.
One limitation to the investment in real estate is that only the original money invested in the land can be repatriated even if invested from the NRE account. For example if Rs.50,00,000/- was invested in a house and it was sold after 4 years for Rs.1 crore, the capital gain of Rs.50 lakhs will need to be taxed and reinvested in India itself. Only the initial investment of Rs.50 lakhs can be taken back out of the country by the NRI (if the investment was made from the NRE account).
Investment in Gold and Jewellery
Here again the investment is as per the norms for normal resident Indians. A point to note for even the resident Indians is that gains made from buying and selling gold and gold jewellery is subject to capital gains tax. So keep the receipts safely while making gold purchases.
Becoming a Partner in a Business
Here again approval from RBI has to be sought as becoming a partner is akin to buying shares in the business.
Bank Fixed Deposits
An NRI can invest in all the bank deposits. The interest is taxable and is generally subject to TDS unless a request from for not deducting tax at source is submitted.
Postal Deposits
Most or all of the postal deposits are out of bounds for the NRI. They cannot invest in the National Savings scheme, Kisan Vikas Patra, Monthly Income Scheme nor the Public Provident Fund. Typically these schemes are coming under the Small Savings Schemes and the NRIs are expected to save BIG!!!!.
However schemes that were started before one becomes an NRI can be continued till the end of the scheme. They cannot be renewed at the end of the term if the NRI status continues at that time.
Summary
This article is a primer which covers most of the common investment avenues and their investability for NRIs. All avenues but for direct investment in shares and being a business partner (which require approval for each investment); and the postal deposits (which clearly does not permit) are open for an NRI to invest based on their needs.
Source: BankBazaar.com - An online marketplace for your personal loan and home loan needs.
SOURCE: THE ECONOMIC TIMES
Get Term Insurance at best terms
Get Term Insurance at best terms
Investor's Guide has always advised to readers to buy at least one insurance policy. Life is full of uncertainties and risks. So an insurance
policy is a must.
The primary objective of an insurance policy is to secure the needs of one's family in an unfortunate event of death of the policyholder. So the amount received has to be big enough to enable the dependents to maintain their lifestyle.
WHY TERM PLANS?
The rule of thumb in financial planning says that life cover should be worth 6-7 times of your current annual income. If your current annual income is 5 lakh then the insurance policy should provide a cover of Rs 30 lakh. This calls for a pure-risk policy, which offers an extensive cover at minimal cost. Hybrid investment products, with moiney back option cost several times more for the same amount of risk cover. A term plan is the best option when the purpose is life cover.
WHICH TERM PLAN?
The next question is which policy. The first name that comes to mind is LIC. The state-run Life Insurance Corporation of India is the oldest and largest insurer in the country and all its liabilities carry an implicit government backing. But then, there are equally credible players in the private sector. There's no harm in shopping around for the best plan available in the market.
While selecting a term policy, one should consider the cost (the amount of premium), the maximum term offered, the additional benefit in terms of different riders and the additional cost to avail these riders.
ETIG's analysis of policies offered by LIC and major private players suggests the policies offered by LIC are costlier. LIC loses against its private counterparts on account of high premium, no discount on premium paid and lack of riders. LIC's Anmol Jeevan and Amulya Jeevan are just plain vanilla traditional term insurance policies.
As it is commonly known, term plans simply cover the life of the policyholder and do not provide any maturity or survival benefits. The amount of life cover (sum assured) is payable only to the nominee in case of unfortunate demise of the insured during the policy term. Where the insurer survives the policy term, he/she is not entitled to any benefits from the insurance company. The premiums paid throughout the policy term may thus be treated as a cost to cover one's life. So it is better to minimise the cost.
LIC charges an annual premium of Rs 9,500 for Rs 25 lakh policy from a 30-year-old person while private players like SBI life, HDFC Standard Life etc, offer similar cover for an annual premium in the range of Rs 6,200-7,500. (See the table.)
Private players also offer rebate on premium for female policyholders or for high sum assured. LIC do not discriminate on this count. It has a single premium for all of age groups.
The pure term plan in its traditional form offers the benefits only in cases of natural death; the policy is considered null and void if the death is accidental or due to some critical illness, etc. This is one of the major reasons for it being unpopular amongst people.
Private insurers address this limitation by offering riders, or additional benefit, along with the policy for an additional fee.
The common riders available are accidental death benefit, critical illness benefit, accidental disability/dismemberment benefit, hospital cash benefit, etc. LIC in contrast only offers traditional products without any rider.
Despite these better offers from private insurance companies, there is higher demand for LIC's products. It is largely because hassle-free settlement of claims after the unfortunate event of death of the insured, which is very important. It is a fact that LIC has the highest claim ratio over 95% (that is 95 out of 100 claims are settled successfully) for the year ended March 08, which is very much in line with its historical record. Nevertheless, major private players have the claim ratio higher than the industry average, which is noteworthy.
CONCLUSION
The moral of the story is that one needs to do a cost benefit analysis before buying life insurance policies and not to go with the tag as the 'market leader' or the 'oldest player'.
SOURCE: THE ECONOMIC TIMES
Investor's Guide has always advised to readers to buy at least one insurance policy. Life is full of uncertainties and risks. So an insurance
policy is a must.
The primary objective of an insurance policy is to secure the needs of one's family in an unfortunate event of death of the policyholder. So the amount received has to be big enough to enable the dependents to maintain their lifestyle.
WHY TERM PLANS?
The rule of thumb in financial planning says that life cover should be worth 6-7 times of your current annual income. If your current annual income is 5 lakh then the insurance policy should provide a cover of Rs 30 lakh. This calls for a pure-risk policy, which offers an extensive cover at minimal cost. Hybrid investment products, with moiney back option cost several times more for the same amount of risk cover. A term plan is the best option when the purpose is life cover.
WHICH TERM PLAN?
The next question is which policy. The first name that comes to mind is LIC. The state-run Life Insurance Corporation of India is the oldest and largest insurer in the country and all its liabilities carry an implicit government backing. But then, there are equally credible players in the private sector. There's no harm in shopping around for the best plan available in the market.
While selecting a term policy, one should consider the cost (the amount of premium), the maximum term offered, the additional benefit in terms of different riders and the additional cost to avail these riders.
ETIG's analysis of policies offered by LIC and major private players suggests the policies offered by LIC are costlier. LIC loses against its private counterparts on account of high premium, no discount on premium paid and lack of riders. LIC's Anmol Jeevan and Amulya Jeevan are just plain vanilla traditional term insurance policies.
As it is commonly known, term plans simply cover the life of the policyholder and do not provide any maturity or survival benefits. The amount of life cover (sum assured) is payable only to the nominee in case of unfortunate demise of the insured during the policy term. Where the insurer survives the policy term, he/she is not entitled to any benefits from the insurance company. The premiums paid throughout the policy term may thus be treated as a cost to cover one's life. So it is better to minimise the cost.
LIC charges an annual premium of Rs 9,500 for Rs 25 lakh policy from a 30-year-old person while private players like SBI life, HDFC Standard Life etc, offer similar cover for an annual premium in the range of Rs 6,200-7,500. (See the table.)
Private players also offer rebate on premium for female policyholders or for high sum assured. LIC do not discriminate on this count. It has a single premium for all of age groups.
The pure term plan in its traditional form offers the benefits only in cases of natural death; the policy is considered null and void if the death is accidental or due to some critical illness, etc. This is one of the major reasons for it being unpopular amongst people.
Private insurers address this limitation by offering riders, or additional benefit, along with the policy for an additional fee.
The common riders available are accidental death benefit, critical illness benefit, accidental disability/dismemberment benefit, hospital cash benefit, etc. LIC in contrast only offers traditional products without any rider.
Despite these better offers from private insurance companies, there is higher demand for LIC's products. It is largely because hassle-free settlement of claims after the unfortunate event of death of the insured, which is very important. It is a fact that LIC has the highest claim ratio over 95% (that is 95 out of 100 claims are settled successfully) for the year ended March 08, which is very much in line with its historical record. Nevertheless, major private players have the claim ratio higher than the industry average, which is noteworthy.
CONCLUSION
The moral of the story is that one needs to do a cost benefit analysis before buying life insurance policies and not to go with the tag as the 'market leader' or the 'oldest player'.
SOURCE: THE ECONOMIC TIMES
Monday 5 October 2009
Sunday 4 October 2009
Saturday 3 October 2009
2nd October-Gandhi Jayanti, International Non-Violence Day 1,460 STUDENTS TOOK THE PLEDGE TO WORK FOR NON-VIOLENCE
2nd October-Gandhi Jayanti, International Non-Violence Day
1,460 STUDENTS TOOK THE PLEDGE TO WORK FOR NON-VIOLENCE
About 1,460 NSS Students from 76 colleges of University of took the pledge to work for peace and non-violence on the occasion of International Non-Violence Day
“I shall endeavor to resolve all differences through dialogue and constitutional means and I shall strive to establish WORLD-PEACE…”, about 1,460 students of N.S.S. Unit, from 76 colleges of University of Mumbai joined hands with the millions of people all over the world and took the PLEDGE on 2nd October - International Non-Violence Day.
To commemorate 140th Birth Anniversary of Mahatma Gandhi and the International Non-Violence Day as declared by United Nations, Bombay Sarvodaya Mandal, N.S.S. Unit of University of Mumbai and World March for Peace and Non-Violence had jointly organized the mega event at Convocation Hall, University of Mumbai, Fort Campus.
The main theme of this programme was to raise awareness of non-violence, tolerance, full respect for all human rights and fundamental freedoms for all, democracy, development, mutual understanding and respect of diversity among the young generation.
Students carrying play-cards and banners depicting slogans like ‘No More Violence, Peace is our Mission’ marched from Churchgate & CST stations and gathered at the Convocation Hall, University of Mumbai, Fort Campus.
The Programme started with Gandhi bhajans & peace songs followed by the speeches of Dr. Chandra Krishnamurthy, Hon. Ag. Vice Chancellor & Prin. K. Venkatramani, Registrar of University of Mumbai. All the invitees emphasized students for promoting peace, truth and non-violence which is the need of the hour. The programme ends with the Pledge to work for peace & non-violence taken by the entire gathering which was administrated by Dr. P. N. Pabrekar, SLO, NSS Cell, Government of Maharashtra and with National Anthem.
Friday 2 October 2009
Celebrating 140th birth anniversary of Mahatma Gandhi & International Non-Violence Day
Celebrating 140th birth anniversary of
Mahatma Gandhi &
International Non-Violence Day
Mahatma Gandhi &
International Non-Violence Day
Subscribe to:
Posts (Atom)
