October 2016 – Investment Locker

Tax Planning

One must look for all possible deductions available to individual according to his age and needs.

Individual should also be aware about tax slab in which they fall so as to plan for tax saving accordingly

Multiple options are available in the market through which not only individual can save money and earn interest/rewards but also save tax

DEDUCTIONS THAT HELP IN TAX SAVING

Based on different types of investments there are different sections available in law by which one can save tax to the maximum. Deductions are as follows:

Deduction under Section 80C&Section 80CCC

This section provides deduction to the individuals up to INR 1,50,000 for saving in any of the below mentioned instruments:

Post office schemes (along with sub heads)
Post Office Savings Account
5-Year Post Office Recurring Deposit Account (RD)
Post Office Time Deposit Account (TD)
Post Office Monthly Income Scheme Account (MIS)
Senior Citizen Savings Scheme (SCSS)
15 year Public Provident Fund Account (PPF)
National Savings Certificates (NSC)
KisanVikasPatra (KVP)
SukanyaSamriddhi Accounts
Life insurance policies
Tax saving Mutual funds
Tuition fees of children
Repayment of principle of housing loan
Tax saving fixed deposits (which is for 5 years or more)
Pension Plans (Comes under Section 80CCC)

Deduction under Section 80CCD
This section provides deduction to the individuals of if they make investment in Pension Scheme i.e. National Pension scheme (NPS) during a particular financial year
Maximum amount that can be deducted is INR 50,000
Option available only for Individual Investors not HUF
This Section provides additional deduction apart from Section 80C & 80CCC

Deduction under Section 80(D)

This section provides deduction to the individuals on premiums paid onmedical insurancefor himself, spouse or dependent children. And, in case of HUF it could be any family member. The maximum deduction is limited to the total premium paid by the individual.

Maximum deduction of INR 25000 for individual, spouse or dependent children
And, Maximum deduction of INR 30000 for senior citizen
Person can claim deduction of INR 5000 against the preventive health care medical check-up the for entire family in 1 financial year. This deduction is not over and above INR 25000
Also, if the parents are above 80 years of age and are not covered by any medical insurance than the amount spent on medical well-being of parents can also be used under same deduction up to INR 30,000

Deduction under Section 80DD

This section provides deduction to the individuals who incur expenses on medical disability of dependent family member.Also, money paid towards Life Insurance Premium can be deducted. Dependent family member could be any of following:

Parents
Brother or Sister
Spouse
In case of HUF any member of HUF

DISABILITY PERCENTAGE	FLAT DEDUCTION ALLOWED IRRESPECTIVE OF EXPENDITURE OCCURRED
Person having 40% Disability or more of one disability	INR 75,000 for financial year 2015-2016
Person having 80% or more of one disability	INR 1,25,000 for financial year 2015-2016

Deduction under Section 80DDB

This section provides deduction to the resident individual or HUF, for incurring expenses for medical treatment of AIDS, Cancer or Neurological diseases; for himself or dependent family member. Maximum deduction allowed on gross total income is as follows:

	A.Y. 2016-17	A.Y. 2015-16
For HUF or Individual who are below 60 years of Age	40,000	40,000
Any resident individual whose age is above 60 years but below 80 years	60,000	60,000
Resident individual whose age is above 80 year	80,000	60,000

Note: To avail max benefit one must not have taken reimbursement from any insurance company for the same or by an employer.

Deduction under Section 80E
If the individual has taken any educational loan (for self, spouse, dependent children or for a student for whom the individual is a legal guardian) and is repaying interest for the same then the amount spent as interest can be a deduction.
Claim can be made for max period of 8 years or until the time when interest is paid (whichever is earlier)
There is no maximum limit for claiming deduction under this section.
Claim can be made for educational loan for higher studies/Vocational course within or outside India
Claim can only be made for interest paid for repayment of education loan. It cannot for the principal loan amount as it

Deduction under Section 80G
This section provides deduction to the individual who make donation for social and charitable reasons or make contribution towards national relief fund
In some cases 100% of the amount donated is deduction and in some cases 50% of the amount donated is deduction

Deduction under Section 80CCG
It is also known as Rajiv Gandhi Equity Saving Scheme
The eligibility to avail tax benefit under this section is:
- Investor’s earning should be less than INR 12Lac per annum
- Investor should be first time investors in listed equity shares
Maximum upto INR 50000 can be invested in the financial year
Deductionis of 50% of the amount saved or INR 25,000 whichever is less

Deduction under Section 80U

This section provides deductionto the individual for own disability. The deduction under this section is as follows:

DISABILITY PERCENTAGE	FLAT DEDUCTION ALLOWED IRRESPECTIVE OF EXPENDITURE OCCURRED
Person having 40% Disability or more of one disability	INR 75,000 for financial year 2015-2016
Person having 80% or more of one disability	INR 1,25,000 for financial year 2015-2016

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Critical Illness Insurance

Case Study: Mr X is 30 years old. He is the sole bread earner of his family. He earns INR 40000 per month. Her sister Miss Y got married recently and all her family savings got spent in it leaving them with no backup. One fateful day he sees the doctor as part of regular health check-up and gets diagnosed with Cancer. But, thankfully he on his friend’s advice took Critical Illness Insurance for a sum assured ofRs 25 lac, 6 months ago. Thus, if the claim proves to be a genuine one then the company will pay the individual amount inn lump sum even if the hospitalisation cost is less

WHAT ARE FEATURES OF CRITICAL ILLNESS POLICY?

Pre-existing diseases are not covered by most of the companies. Although, few companies do cover pre-existing diseases at the time of taking policy. Thus, it is important to take maximum sum assured, as once the disease is diagnosed no other company/same company will issue you a new policy
Critical Illness may also result in loss of income/ change in lifestyle as such diseases require expensive treatment. And, the amount provided by Insurance company gives financial relief to family
Normally, No claim bonus is not given in Critical illness Insurance but few companies offer the same
Premium of Critical Illness Insurance is subject to change as per company rules. Normally, most companies offer fixed premium for a span of 5 years and may change according to age. But, few companies change it every year
Critical Illness Insurance can be taken as rider or a standalone plan along with any life insurance policy
We recommend you to buy it as standalone policy because it has more flexibility than if taken as a rider. If you will combine it with life insurance as rider then less number of diseases will be covered and this will be only applicable till tenure of life insurance plan

Critical Illness Insurance is highly recommended for those who do not have sufficient medical emergency fund available. As the expenses could be more than 10 Lac
The premium cost for Critical Illness Insurance will be less as compared to Traditional policy
These plans are offered by general insurance company and life insurance company as well as standalone health insurances companies
Premium under this policy is not refundable
There are few companies that offer critical illness hospitalisation in abroad also
This can be used as an add-on policy
It is a one- time benefit policy as after diagnosis comp will pay the sum assured but will not renew it further

HOW CRITICAL ILLNESS INSURANCE IS DIFFERENT FROM TRADITIONAL INSURANCE?

POINTS	CRITICAL ILLNESS INSURANCE	TRADITIONAL INSURANCE
TYPE	Can be taken by an individual only	Can be taken as Individual or Family Floater policy
RENEWAL	After disease is diagnosed no renewals are done	Can be renewed
AMOUNT PAID	At the time of diagnosis of any covered critical illness	On time of hospitalisation of more than 24 hours
SURVIVAL PERIOD	30 days survival period is mandatory	No survival period
SUPPLEMENT OR STAND ALONE POLICY	Can be used as a supplement product for specific diseases, along with main policy	Can be used for only hospitalisation expenses
WAITING PERIOD	90 days waiting period	30 days waiting period
TERMINATION	Policy gets terminated after diagnosis of first Critical Illness	Policy continues even after hospitalisation occurs

WHAT IS THE ELIGIBILITY CRITERIA FOR TAKING CRITICAL ILLNESS INSURANCE?

Critical Illness Insurance can be taken between 18-65 years
Individual can choose Sum assured which starts from 1 lac and goes up to 1 Crore
Critical illness Insurance Premium is paid annually
Critical Illness Insurance can be renewed till one is alive but there are few companies which terminate the policy in the 70s
No medical test is required up to 45 yrs of age for basic sum assured
Critical illness Insurance is portable in nature

WHAT ARE THE EXCLUSIONS OF CRITICAL ILLNESS INSURANCE?

Treatment within the first 90 days of taking the cover
Pre-existing condition may or may not be covered depending on the waiting period clause of the Insurance Company

Any critical illness in presence of HIV infection and / or any AIDS
Occupational diseases
Intentional self-injury and/or the use or misuse of intoxicating drugs and/or alcohol.

WHAT IS THE LIST OF CRITICAL ILLNESSES COVERED?

Alzheimer’s Disease
Aorta Graft Surgery
Apallic syndrome
Aplastic Anemia
Bacterial Meningitis
Benign Brain Tumour [resulting in permanent neurological symptoms]-
Blindness
Brain Surgery
Cancer of Specified Severity
Cardiomyopathy
COMA of Specified Severity
Creutzfeldt-Jakob Disease (CJD)
Deafness
Encephalitis
End Stage Liver Disease of Specified Severity
End Stage Lung Disease
First Heart Attack of Specified Severity
Good Pasture’s Syndrome
Kidney Failure requiring regular dialysis
Major Burns
Major Head Trauma
Open Chest CABG
Major Organ/Bone Marrow Transplant
Multiple Sclerosis with Persisting Symptoms
Motor Neuron Disease with Permanent Symptoms
Multiple System Atrophy
Open Heart Replacement or Repair of Heart Valve
Permanent Paralysis of Limbs
Pneumonectomy
Primary Parkinson’s Disease
Primary Pulmonary Arterial Hypertension
Progressive Scleroderma
Progressive Supranuclear Palsy
Pulmonary Artery Graft Surgery
Stroke resulting in Permanent Symptoms
Systemic Lupus Erythematosis
Total Loss of Speech

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Index

UNDERSTANDING ON NIFTY & SENSEX

Points	NIFTY	SENSEX
Number of stocks grouped together	Top 50	Top 30
Relation with NSE & BSE	Stocks related to National Stock Exchange, Delhi	Stocks related to Bombay Stock Exchange, Mumbai
Meaning of NIFTY & SENSEX rising	It means prices of major stocks listed on NSE has gone up	It means prices of major stocks listed on BSE has gone up

Some of the important indices in India are:

BSE Sensex and NSE Nifty
Sectorial indices like BSE Bankex and CNX IT
Market capitalization-based indices like the BSE Small-cap and BSE Midcap
Broad-market indices like BSE 100 and BSE 500
Mid Cap Indice for all mid cap stocks

Small Cap Indice for all small-cap stocks
Sector based Indice Example IT, Pharmacy etc.

If any index is going up then it means that the stocks from that index are also going up.

WHY DO WE NEED INDICES?

Sorting

As n number of shares are available in the market and it will get very difficult for an investor to pick stocks from the huge list. Indices group the stocks of similar category, or on basis of size etc. Thus, this sorting helps the investor to pick the stock of his/her choice easily.

Representation

NIFTY and SENSEX both are two major index in India considered as representative of the overall performance of the market.Example: IT index will represent the all IT stock companies in the market.

Comparison

Index acts as a great tool to make comparisons for the investor to compare the performance of any stock. Example- Sensex in India acts as a benchmark and investor can compare the stock price with the Sensex.

HOW ARE STOCK INDICES FORMED?

Stock indices are formed by grouping the stocks of the same industry, market capitalization, the size of the company, same sector etc. Once the decision is made in regards to the stocks, then the value of the index is calculated. In India, the free-float market capitalization is commonly used instead of prices to calculate the value of an index.Two of the common indices are:

Price-weighted
Market capitalization-weighted index

Before understanding these indices one must know “What is stock weight?” As we know tindex is created by selecting a group of stocks. But it does not mean that if there is 4% change in the price of one stock than it does not mean that other stocks will have the same impact. Therefore, index value cannot be calculated by simply adding prices of all stocks. Thus, in an index, each stock is given particular weight based on the market capitalization and price of the stock.

Market-cap weightage

It refers to the company’s market value of stock. Calculation is as follows: Total Market Value = Share Price X Number of shares floated in market As a result size and price of stock both are considered. Note- As the price of a share keeps on fluctuation so will be the market capitalization. Although,it’s a marginal change.

Price weightage

This method is used to calculate index value based on the price of stock. Higher value stocks have high weightage and low-value stocks have less weightage.]]>

National Pension System (NPS)

WHY IS THERE NEED TO TAKE THESE PENSION SCHEMES?

Pension nowadays has become an important aspect as the life expectancy age is increasing and thus, the retirement years have exceeded
These schemes provide financial stability to the individual in older age when they do not have a regular source of income
It allows the people to live with dignity and respect in the older age as they are no longer a financial burden for any one
It helps the individual to maintain their standard and lifestyle of living

WHAT ARE THE BENEFITS OF INVESTING IN NATIONAL PENSION SCHEME (NPS)?

Taking an NPS has number of benefits listed below-

Transparency

NPS Schemes provide transparency and are cost effective as they allow the investor to know the day to day investment value.

Simple

It is simple and easy to invest in NPS as it requires only an account in any nodal office. There the person investing in the NPS scheme is provided Permanent Retirement Account Number (PRAN) to track the account further.

Portable

Portability is in terms of PRAN (Permanent Retirement Account Number) as even if the insured gets transferred then also PRAN will remain same.

Regulated

NPS is a regulated system as it is regulated by Pension Fund Regulatory and Development Authority, with transparency in terms of investment norms &proper review of fund managers by NPS

WHAT ARE THE ACCOUNT OPTIONS IN NPS?

Tier I Account
For Opening Tier I Account the investor needs to contribute INR 500 during account opening and for subsequent transactions

Minimum Contribution amount during a year is INR 6000 excluding taxes

Contribution needs to be made at least once in a year

In case the minimum compulsory contribution during a year is less than INR 6000 then the account will freeze and further transactions cannot be done till it is reactivated

For Reactivation of account, the investor needs to pay the minimum contribution plus the penalty charges of INR 100 per year during which the amount was not contributed

Withdrawal facility is not available to the investor

Tier II Account
For Opening Tier II Account the investor needs to contribute INR 1000 during account opening and for minimum subsequent transactions contribution of INR 250

Minimum Contribution amount during a year is INR 2000 excluding taxes

Contribution needs to be made at least once in a year

In case the minimum compulsory contribution is not made or minimum balance is not maintained in the account then the investor is penalised of INR 100

Withdrawal facility is available in this type of account. But, the tax benefit is not provided on this type of account.

WHAT ARE THE INVESTMENT CHOICES AVAILABLE IN NPS?

The amount invested is NPS by the investor is further invested in a number of funds. There are basically two types of approach followed for investing the investor’s money: Active choice& Auto choice. NPS gives the investor the choice to choose in which type of fund they want their contribution to be invested. This kind of approach is popularly known as “Active Choice” approach. In case investor do not want to make the choice then the money is invested by “Auto choice” approach.

WHAT ARE THE TYPES OF APPROACH FOLLOWED TO INVEST THE INVESTOR’S CONTRIBUTION?

Active choice
Funds options (Asset Class E, Asset Class C, and Asset Class G)
Investor has the option to choose from any of the following options to invest the money contributed by him:
Asset Class E – Investing in instruments of equity market but not more than 50%
Asset Class C- Investing in fixed income instruments except for Government securities. It also gives the option to invest the whole amount in this class.
Asset Class G – Investing in Government securities. It also gives the option to invest the whole amount in this class.

Auto choice – Lifecycle Fund
In Auto choice approach money is invested in different funds keeping in mind the age of investor

In this approach, the money contributed is invested in life-cycle fund

The money is invested in the above mentioned three asset classes keeping in mind a pre-defined portfolio.

CONTRIBUTION IN NPS

Money can be contributed through any of the following options:
Cash
Cheque should be from any local branch as outstation cheques are not accepted
DD
Or ECS

But, if the depositor is submitting Cash more than INR 50000 then invertor needs to submit PAN Card details as well

WHAT ARE THE EXIT OPTIONS AVAILABLE IN NPS?

On attaining 60 years of age-

Maximum 60% of the amount can be withdrawn and minimum 40% of the amount is to be kept for purchasing an annuity. However, the annuity can also be purchased for more than 40%. The amount can remain invested till 70 years of age. In other words, you can withdraw the amount as per your requirement any time before 70 years of age.

Before attaining 60 years of age

Maximum 20% of the amount can be withdrawn and minimum 80% of the amount is to be kept for purchasing an annuity. However, the annuity can also be purchased for more than 80%.

Death of the investor

At the time of unfortunate death of the investor the nominee received 100% of the amount accumulated till date

WHAT IS TAX BENEFIT?

If the investor invests in NPS then they are eligible for tax benefit under sec 80CCD(1)& 80CCEand the maximum amount that can be deducted is INR 150,000. However, the maximum deduction under this section is 10% of the gross income (self-employed) per annum or salary (Salaried investor) of the investor
In addition INR 50000 deduction is allowed under section 80CCD (1B) per annum
Option available only for Individual Investors, not HUF

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POST OFFICE SAVING SCHEME

Post Office Savings Account

5-Year Post Office Recurring Deposit Account (RD)

Post Office Time Deposit Account (TD)

Post Office Monthly Income Scheme Account (MIS)-

Senior Citizen Savings Scheme (SCSS)-

15 year Public Provident Fund Account (PPF)

National Savings Certificates (NSC)

KisanVikasPatra (KVP)

SukanyaSamriddhi Accounts

Post Office Savings Account

Account opening is done by cash only
The minimum balance limit for an account in which cheque facility is not provided is INR 50
However, if cheque facility is provided that the investor needs to maintain INR 500
Interest earned from this account is tax free as long as the interest for one financial year does not exceed INR 10,000
These accounts provides the facility to nominate someone at the time of opening of account or even after the opening of account
When a minor attains the majority has to apply to get the account converted to his/her name
These accounts are transferrable from one post office to other
Account opening can be done on behalf of minor and even if the minor is 10 years and above then the minor can operate the account on its own
These accounts limits the person to open only one account in one post office
Account opening can be done by two or three adults together as joint account holders
In order to keep the account active it is necessary to make atleast one deposit transaction and one withdrawal transaction in 3 financial years
Accounts can be converted from single to joint and Vice Versa
Electronic mode Deposits and withdrawals facility is available in CBS Post offices.
ATM/Debit Cards facility is also provided to Savings Account holders of CBS Post offices

5-Year Post Office Recurring Deposit Account (RD)

Features of 5-Year Post Office Recurring Deposit Account (RD) are as follows:

Rate of interest earned on RD is 7.4% per annum (quarterly compounded)
Account opening is done by cash or cheque. But the date on cheque mentioned should be the same date when cheque is deposited
For account opening in Recurring Deposit minimum Rs 10/month. However there is no limit on maximum amount
This type of account also gives the facility of nominating someone when opening an account or even after the opening of account
These accounts are transferrable to any other post office
There is no limit on the number of accounts that can be opened by any individual
Account opening can be done on behalf of minor and even if the minor is of 10 years and above then the minor can operate the account on its own
When a minor attains the majority has to apply to get the account converted on his/her name
Account opening can be done by two adults together as joint account holders
If account is opened before 15th then the subsequent deposits can be made up to 15th day of next month. However if the account is opened after 15th then this date is till last working day of the month
If the subsequent deposit is not paid by the last date then a penalty fee is charged
The account holders enjoys the benefit of rebate if 6 instalments are paid in advance
The recurring deposit accounts can be converted from single to joint accounts and vice versa
The account holder has an option to withdraw upto 50% of the amount after 1 year

Post Office Time Deposit Account (TD)

Interest will be received yearly but compounding will be done quarterly

From 1.4.2016, interest rates are as follows:-

Period	Rate
1yr.A/c	7.1%
2yr.A/c	7.2%
3yr.A/c	7.4%
5yr.A/c	7.9%

Post Office Time Deposit Account (TD) account can be opened by an individual
Account opening is done by cash or cheque. But the realization date of cheque is treated as date of account opening
For account opening minimum Rs200 and thereafter its multiple. However there is no limit on maximum amount
This type of account also gives the facility of nominating someone when opening an account or even after the opening of account
These accounts are transferrable to any other post office
There is no limit on the number of accounts that can be opened by any individual
Account opening can be done on behalf of minor and even if the minor is of 10 years and above then the minor can operate the account on its own
When a minor attains the majority has to apply to get the account converted on his/her name
Account opening can be done by two adults together as joint account holders

Post Office Monthly Income Scheme Account (MIS)

Post Office Monthly Income Scheme Account (MIS) account can be opened by an individual
Interest rate is 7.80% per annum payable monthly
Account opening is done by cash or cheque. But the realization date of cheque is treated as date of account opening
Account opening is done in multiple of INR 1500
Maximum investment allowed is INR 4.5 Lac per individual
Even if you have sharing on other accounts as joint holder still the limit will not exceed more than INR 4.5 Lac, including the sum of all accounts
This type of account also gives the facility of nominating someone when opening an account or even after the opening of account
These accounts are transferrable to any other post office
There is no limit on the number of accounts that can be opened by any individual subject to the maximum amount that can be invested overall
Account opening can be done on behalf of minor and even if the minor is
When a minor attains the majority has to apply to get the account converted on his/her name
Account opening can be done by two or three adults together as joint account holders. And all account holders have equal share
Maturity period of these account is 5 years
You can receive the interest through ECS or standing instruction under your CBS account
If you withdraw before 3 years, 2% of the deposit will be deducted and this deduction will be 1% after 3 years
Account opened on or after8.12.07 and up to 30.11.2011 will get 5% Bonus

Senior Citizen Savings Scheme (SCSS)

Rate of interest earned is 8.6% per annum
Amount is to be deposited in multiple of Rs 1000 but it should not exceed 15 Lacs
As the name suggest people above 60 years of age can open this account
If the individual is retired or has taken Voluntary Retirement then individual can open the account after 55 years but less than 60 years within month of receipt of retirement and this should not exceed the value of retirement benefits
Maturity period of this scheme is 5 years
Account opening is done by cash for amount less than 1 Lac and by cheque for transaction more than 1 Lac
Realization date of cheque is treated as date of account opening
Recurring Deposit account opening can be done minimum Rs 10/month. However there is no limit on maximum amount
This type of account also gives the facility of nominating someone when opening an account or even after the opening of account
These accounts are transferrable to any other post office
There is no limit on the number of accounts that can be opened by any individual
Account opening can be done individually or as joint account along with spouse
Investor enjoys the benefit of opening as many accounts provided the maximum amount that can be saved in total is not exceeded
Interest can be drawn through auto credit into savings account at same post office, or through PDCs or Money Order
Quarterly interest is payable on 1st working day of the month
Account can be closed before maturity provided the investor has to pay the following penalty:
Deduction of an amount equal to1.5% of the deposit before 2 years&after 2 years 1% of the deposit
After maturity, the account can be extended for further three years within one year of the maturity by giving application in prescribed format. In such cases, account can be closed at any time after expiry of one year of extension without any deduction
If interest earned is Rs 10000 p.a. or more then tax is deducted at Investor also enjoys tax benefit under Section 80C of the Income Tax Act, 1961 from 1.4.2007.

15 year Public Provident Fund Account (PPF)

This type of account can be opened with INR 100 but INR 500 is the minimum amount that account holder needs to deposit in a financial year and the maximum amount that can be invested is INR 1,50,000/-
Interest rate is 8.10% per annum (compounded yearly)
PPF does not have the facility of Joint account
Account opening is done by cash or cheque. But the realization date of cheque is treated as date of account opening
This type of account also gives the facility of nominating someone when opening an account or even after the opening of account
These accounts are transferrable to any other post office
Subscriber can open only one account
Account opening can be done on behalf of minor but the overall limit is still 1.5 lac
Maturity period of these account is 15 years and can be extended for 5 years within 1 year of maturity
Premature closure of PPF account is not allowed before 15 years.
Deposits are eligible for tax deduction under Sec. 80C of IT Act.
Interest earned on PPF is absolutely tax-free.
Account holder can withdraw every year after the account has completed 7 years duration
The account holder is also given loan facility from the 3rd financial year.
No attachment under court decree order.
The PPF account can be opened in a Post Office or Public sector Bank

National Savings Certificates (NSC)

This type of account can be opened with INR 100 or in a multiple of INR 100, 500, 1000, 5000, 10000
Interest rate is 8.1% compounded six monthly but the amount is payable at maturity
Tenure of the Scheme is 5 years
Account opening is done by cash or cheque. But the realization date of cheque is treated as date of account opening
NSC can be taken by an adult for himself or on behalf of minor
Tax rebate is provided under Sec 80C of Income tax act
This type of account also gives the facility of nominating someone when opening an account or even after the opening of account
These accounts are transferrable to any other post office
If the certificate is transferred from one person to another, then name of old holder is rounded and new holder’s name is written on the old certificate and on the purchase application (in case of non-CBS Post offices) under dated signatures of the authorized Postmaster along with his designation stamp and date stamp of Post office.

KisanVikasPatra (KVP)

People are willing to take KisanVikasPatra as the amount invested here doubles after certain tenure (approx. 10 years).
Minimum amount to be deposited is Rs 1000 and has no limit for maximum amount which can be invested
Amount invested should be in multiple of 1000, 5000, 10000 or 50000
Kisan Vikas Patra can be purchased by an adult or on the behalf of a minor, it can also be bought as joint investment by 2 individuals
It can be purchased from any Post Office
Investment in KVP gives you an option to choose a nominee
KVP ‘s are transferrable be it from one person to other or one post office to other

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CORPORATE FIXED DEPOSIT

Rate of return on Fixed deposits is higher than the saving account

Interest rate decided, in the beginning, remains fixed for the entire tenure

Lump sum investment is to be made and interest is earned at regular intervals until maturity of the fixed deposit

Fixed deposits cannot be withdrawn before maturity. If withdrawn before maturity then you will have to bear the penalty. But penalty differs company to company

WHAT ARE CORPORATE FIXED DEPOSIT/COMPANY FIXED DEPOSITS?

As the name suggests Corporate Fixed Deposit/Company Fixed Deposits are those kinds of fixed deposits offered by corporate companies. Like any other fixed deposits, corporate fixed deposits are quite similar to regular deposits apart from few changes. Other key features of Corporate Fixed Deposit/Company Fixed Deposits are:

Rate of return earned on Corporate Fixed Deposit/Company Fixed Deposits is usually high
The risk involved is also high as there is default risk involved. It means that the company might not be able to pay at maturity if the company goes bankrupt
Applying for Corporate Fixed Deposit/Company Fixed Deposits is quite simple as application form can be taken through official website of company or from company itself
Tenure of Corporate Fixed Deposit/Company Fixed Deposits is 1-3 years

WHAT IS THE DIFFERENCE BETWEEN BANK FIXED DEPOSIT & CORPORATE FIXED DEPOSIT?

POINT OF DIFFERENCE	BANK FIXED DEPOSIT	CORPORATE FIXED DEPOSIT
Offered by	Bank	Corporate company
Rate of interest	Average	High
Application form	Can be taken from Bank or Bank website	Can be taken from Company’s official website or from company itself
Tenure period	Ranging from months to years	1- 3 years
Risk involved	Low	High
Guarantee	Amount along with interest is guaranteed to be paid on maturity	No such guarantee as if the company goes bankrupt then the amount might not get paid
Medium of investment	Certificate of deposit	Certificate of deposit

WHAT ARE THE KEY POINTS TO TAKE INTO CONSIDERATION WHILE DECIDING FOR BEST CORPORATE FIXED DEPOSIT/COMPANY FIXED DEPOSITS?

Default Risk

Generally, companies who pay higher interest rate like 14-15% are not always safe as compared to companies who pay 8-10% interest rate. Therefore, to check the health of the company it becomes compulsory for the investor as it can be a risk of loss of total capital also.

Rating agencies

Rating agencies play a vital role while choosing Corporate Fixed Deposit/Company Fixed Deposits, as they check the financial health of the company and rate them according to their financial condition. Also, if the rating agencies have given good ranking to any company, it means that the rate of interest will be low as compared to other companies whose rating is not that well. But, still, the rate of interest is greater than a fixed deposit scheme. Some of the rating agencies are:

ICRA
CRISIL
CARE; etc.

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SUKANYA SAMRIDHI SCHEME

WHA IS THE ELIGIBILITY CRITERIA FOR INVESTING IN SUKANYA SAMRIDHI SCHEME?

This scheme is available only for a Girl Child
This scheme is only available to citizens of India. NRI’s cannot invest in this scheme
Age limit is 1day-10years

Maximum up to 150000 can be invested. However, the scheme gives an option that money can be invested in the following manner:

In 1 year INR 1000 is the minimum amount that should be invested
Lump sum

Other features of SukanyaSamridhi Scheme are as follows:

Amount can be deposited by Cash, Demand Draft, Cheque or Online Payment
Account is opened in the name of the Girl Child
Account will be operated by the guardian till the girl child attains the age 10 years
This scheme also gives the option that the account can even be operated by the child itself after 10 years of age
The scheme matures 21 years after opening of account
The amount deposited cannot be withdrawn if the scheme is not matured
However, 50% of amount can be withdrawn only for the fee of higher education of the child, if she attains 18 years of age or passes 10^th

Note: The withdrawal amount can only be up to the fees payable

Termination

Scheme is terminated after 21 years from date of opening of account or when the girl child gets married whichever is earlier Account can remain open even after the marriage of the girl if the girl wants to continue but only until 21 years from date of opening Even if the amount is not withdrawn after the scheme is matured then the balance will not earn further interest

Interest- Interest rate earned on this scheme is 8.5% compounded yearly
Account Opening- Parents or guardian can open the account in the name of girl child
Any guardian is only allowed to open two accounts in the name of 2 girl child
But the guardian is given the option to open 3 accounts only if the 1^st child is girl and the second birth is of twin girl child
The account can be opened in any public sector bank or post office. Also, the after opening of account if the child moves to any other city then the account can be transferred there

REQUIRED DOCUMENTS FOR ACCOUNT OPENING:

Birth certificate of the girl whose account is to be opened
Identity proof of person depositing the money
Residence proof of person depositing the money

INTEREST INCOME

Interest income earned from this scheme will be tax-free and accumulate till maturity.

TAX IMPLICATION

You can also claim the deduction for the amount paid under this scheme up to INR 1.5 Lac u/s 80C

As interest is tax-free under this scheme of maturity there be no tax liability]]>

STOCK MARKET

Stock Market is the key component as it serves as a platform for trading of company shares and other securities online. Stocks can be traded only after listing it on Stock Exchange. Thus, it serves (NSE) as a meeting place for the stock’s buyers and sellers. They decide the stock price and buy and sell stock. Primary Stock Exchanges of India areBombay Stock Exchange (BSE) and the National Stock Exchange.

WHAT ARE STOCKS?

It is a kind of a share that stock holder gets in the ownership of the company
Buying shares of same company result in increasing stake in that company. Word “Stock” is termed differently by different people like shares, scrip, equity etc.

WHAT ARE DIFFERENT TYPES OF STOCKS AVAILABLE?

Stocks are divided into various categories:

Divided on basis of Size of market capitalization like Large-Cap Shares, Mid-Cap Shares & Small-cap shares
On the basis of different sectors like IT, Pharmacy, Banking, etc.
Divided on the basis of methods of stock issue like Preferred and Common stock

WHAT ARE DIFFERENT KINDS OF SHARE MARKETS?

There are two types of markets:

Primary Market

The primary market is that when the company lists itself on the stock exchange for the first time by launching Initial Public Offering (IPO).

Secondary Market

After new securities are sold in Primary market, then these shares are further bought and sold in secondary market
Secondary Market provides option to the investors to exit
Transactions that take place in the Secondary market is considered as the trade where investors buy and sell shares from each other through stock exchange at the price prevailing or at price of their choice.
Normally, such kind of transactions is done keeping broker as intermediary

STOCKS ON THE BASIS OF MARKET CAPITALIZATION:

Stocks are divided on the basis of market value of the company. These are:

Large-cap stocks

Large Cap stocks are stocks of large companies having large market capitalization like Infosys, Reliance etc.
The shares of these companies are also known as “Blue Chip firms”
These stocks draw you sustainable returns over a period of time and are considered safer, because these are renowned companies and are able to handle the downfall in market also there are minimal chances of going bankrupt for these companies
These shares are less risky

Mid-cap stocks

Mid-Cap Stocks are stocks of Mid-size companies that are in development phase
These stocks can earn you the high rate of return during the bull market phase. As these companies have the potential of growth. But, rate of return is more than Large Cap stocks but less than small cap stocks
The risk involved in these kinds of shares is larger than the large cap but less than small cap shares. As these companies have less potential to sustain market crash and also take a lot of time to recover from these crashes.

Small-cap stocks

Small-Cap shares are stocks of small-size companies
These stocks can earn you a very high rate of return during the bull market phase. As these companies have huge growth potential
Risk involved in these kinds of stocks is also very high
It is advisable only for people with high-risk appetite to invest in these stocks

LETS UNDERSTAND THE TERMS USED IN STOCK MARKET

Company name and symbol

Every share in stock market allocated NSE & BSE Code and instead of using the whole name instead they use a symbol which is short for. Example For Infosys term used is Infy etc.

High/low

During the time stock market is open the price of a share keep on fluctuating. This is due to the fact the more number of shares are sold the price goes up and vice-versa. This results in the fact that the share price is continuously changing. After the market is closed the lowest price of the share for that particular day is called “Day’s Low” and the highest price of the share for that particular day is considered “Day’s High”. Also, the difference between highest and lowest price lets you know about the volatility in the price of stock.

Net change

Closing price helps to ascertain the how much price of the stock has changed. Change is written in value as well as percentage. Calculation is as follows: Net Percentage Change= Previous closing price – Subtract today’s price

Closing price

Dividend

This is income for a shareholder in form of dividend where the company declares a percentage of profit to show their strength in the market. It is a reward for long term investor.

52-week high/low

It refers to the highest and lowest price on which stock has traded during last 1 year.

PE Ratio

PE Ratio stands for Price Earnings ratio of Current stock price to Earnings per share. This is an indication that how well the company is performing and how it is being rated among all its competitors.

Volume

It refers to the quantity of shares available for trading. It shows liquidity of stock where buyer and seller can exit easily and change in volume also indicates that some movement is going to happen in stock.

Bid& offer

The bid is a price when investor place to buy that particular stock and offer is a price where investor place to sell that particular stock.

Short selling

It is a process where you try to earn the profit when the price of the stock is falling. But, at the end of the day, you have to buy that stock as this facility is available only for a single day.

Squaring off

This is a process to exit from the position taken by buyer and seller.

Limit Order

It is where you have to set the price of your transaction in advance so that whenever the price comes the trade will be executed automatically.

Market Order

This is a process where you are ready to buy and the sell the stock at current market price. As when there is fluctuation in the market sometimes it is difficult to catch the price so you take this route to execute the order at any price.

Stop Loss Order Price

It is a price where at which you want to limit your losses so at the time of fluctuating market instead of catching the price it is better to set in advance. An order price is a price where you want to set the target of your trade.

DIFFERENT MODES OF BUYING AND SELLING OF STOCKS

Offline Trading

In this mode, you place an order by calling and visiting your broker where this is a useful mode if you don’t have time to watch the trade but someone on your behalf is watching your trade and execute as per your instruction.

Online Trading

In this mode, you have been allocated online access of trading website or mobile application where you yourself watch the trade and responsible for execution

Demat & Trading account

After choosing your broker you have to open Demat and trading account with that broker. Demat accounts hold your shares and trading account gives you platform for all execution of trades.]]>

CAPITAL GAIN BONDS

Before understanding Capital Gain Bonds one must have a clear understanding on Capital Gain. Capital Gains are of two types long-term capital gain and short term capital gain. For a short term, capital gain any property which will be sold before 3 years from the date when it was bought then the gain from that property comes under the category of Short-term Capital Gain. Also, Short term capital gains are totally taxable as per income tax slab rate. Long term Capital Gain any property which is held for 3 years or more,then the gain earned by the person is termed as long term capital gain.Long term Capital gains are taxable at the rate of 20%. Note- While calculating gains on the property sale, we have to consider the indexation which will be calculated as per the cost inflation index. It must be coming to your mind that if the gain earned from the property even after 3 years is taxable, then how can we make the gains tax free. To make long term capital gain tax free, the government has launched Capital Gain Bonds for general public to invest in.

WHAT ARE OTHER FEATURES OF CAPITAL GAIN BONDS?

For money to become tax free it should be invested within 6 months after selling the property
The money invested in these bonds gets locked for tenure of 3 years and after the maturity it becomes tax free
Investor not only gets the advantage of tax free money but also earns a fixed return of 6% annually from these bonds
The issuing price or face value of these bonds is INR 10000
Minimum amount that can be invested in these bonds is INR 20000
Maximum amount that can be invested in these bonds is INR 50 Lac
Interest is payable in form of Demand Drafts or at par cheques or it can be directly credited to your account
Capital Gain bonds are 100% risk free i.e. no matter what the market condition is, the amount invested remains 100% safe
These bonds are non-transferrable

WHAT ARE THE TYPES OF CAPITAL GAIN BONDS AVAILABLE IN MARKET?

Person looking to invest in Capital Gain bonds does not have much option available to them. As there are two types of Capital Gain bonds that are available in market which are as follows:

REC (Rural Electrification Corporation Limited)
NHAI (National Highways Authority of India)

WHAT ARE THE DOCUMENTS REQUIRED WHILE APPLYING FOR CAPITAL GAIN BONDS?

Self-attested address proof and PAN Card of applicant
One Cancel Cheque copy
Demand Draft or Cheque drawn in favour of the <Capital Gain bond selected>
Bonds are issued on First come First Serve Basis
Application needs to be sent to the address of the chosen Capital Gain Office or you can also have an option of submitting the application in the listed bank
Acknowledgement copy provided will be useful for your taxation purpose
Bond Certificate is issued within 2 months of the deemed allotment date
It comes under Section 54EC

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MUTUAL FUNDS

It is a kind of trust which gathers money from people having similar financial goals. They further invest the collected money in the asset classes. Investment is done with the help of professional expertise whose job is to maximise your returns with complete transparency. For consumer protection, the complete process is monitored and regulated by SEBI.

EQUITY MUTUAL FUNDS

Equity mutual funds are those Mutual Funds that invest in listed shares.
Since investment is made mainly in stocks by mutual fund companies thus they are riskier but at the same time they may yield more rate of return as compared to other saving instruments
Equity mutual funds can be categorised on the basis of company size (Large-cap, small-cap, medium-cap) or sector wise (Real estate, metals, pharma companies, bankingetc.)
By investing in Equity mutual funds you become indirect investor in the stock market which also contributes to the growth of Indian Economy
This instrument is also liquid in nature i.e. amount invested can be withdrawn as per the current market value at any time
Equity mutual fund have 1% exit load in case withdrawal is made before 1 year
Equity Mutual Funds normally charge around 2% as fund management fee. But this percentage varies fund to fund

WHY INVEST IN EQUITY MUTUAL FUNDS?

Diversification

Equity Mutual funds are diversified in nature as the money invested in the company is further invested in different sectors. By this diversification, if some of the sectors underperform or perform negatively then it does not affect the whole portfolio, as other sector performance will balance out the whole portfolio. By investing as less as INR 5000 (lump sum) and INR 500 (SIP) one can have an allocation in different stocks and if you go directly to the same market then it is difficult to buy more than 3-4 stocks for the individual.

Professional Advice

By investing in Equity Mutual Funds you are indirectly investing on the advice of professionals. These professionals have a team that continuously analyses the prospect and performance of the companies, in order to meet the scheme objectives. They also help in earning higher returns as analysing the performance is a continuous process.

Affordability

Generally, small investors are not able to invest inBlue chip stocks. But, securities are bought and sold in large volume by mutual fund companies (in which money is invested by small investors); which enables small investors to take advantage of getting benefit from small investment as well. This investment can be as small as INR 500 monthly SIP.

Transparency

Investing in Equity Mutual Funds provides transparency as the investor is able to compare between the performances of different funds. This comparison is easy and transparent because a review of performance is done by various rating agencies and publications.

Regulated

Investing in Equity Mutual funds is completely regulated. It is mandatory for all Mutual Fund companies to get registered with SEBI (Securities Exchange Board of India). And SEBI regulates all operations of these companies.

Liquidity

Equity Mutual funds (except the funds that have a locking period) are liquid in nature as they allow you to redeem/withdraw the amount invested whenever you wish. Also, the redemption process is streamlined, efficient and quick. In case a person wants to book the profit then he can keep a watch on Net Asset Value. In equity fund, it takes 3 working days to get the amount credited to your bank account.

Tax Benefit

Any gain made through equity mutual fund which has completed 1 year will be tax-free in hand. Also, it provides taxation benefit of up to INR 1.5 Lac on equity-linked saving schemes (ELSS) u/s 80C of Income Tax Act 1961.

WHAT ARE THE TYPES OF EQUITY MUTUAL FUND?

Large Cap Equity Funds

Large Cap Equity Funds are those funds which invest in companies having large market capitalization like Infosys, Reliance etc.
These fund type gives you sustainable returns over a period of time and is considered safer, because these are renowned companies and are able to handle the downfall in market also there are minimal chances of going bankrupt for these companies
Rate of return is stable but not very high as these companies are well established and chances of further growth are less
These funds are also known as “Blue Chip funds” and “Large-Cap Funds”.

Mid-Cap Equity Funds

Mid-Cap Equity Funds are those funds which invest a major portion of their investment in Mid-size companies that are in development phase such as logistics, media and consumer retail etc.
These funds can earn you a high rate of return during the bull market phase. As these companies have the potential of growth. But, rate of return is more than Large Cap funds but less than small-cap funds
Risk involved in these kinds of fund is larger than large cap but less than small-cap funds
It is advisable to calculate your risk appetite and decide the percentage you want to allocate in these funds

Small cap funds

Small-Cap Equity Funds are those funds which invest major portion of their investment in small-size companies
These funds can earn you a very high rate of return during the bull market phase. As these companies have huge growth potential
The risk involved in these kinds of the fund is also very high. As these companies are not so established to handle the volatility of market
It is advisable only for people with high-risk appetite and having long-term horizon

Multi-Cap Equity Funds

Money is invested across different sectors irrespective of their market capitalization. Thus, making them less risky as compared to other equity funds due to its diversification
Fund managers have complete liberty to invest wherever they want to depend on liquidity and market conditions and they may invest in equity and debt funds both
These funds earn more rate of return as they have the option to explore different investment opportunities

Sectorial fund

In Sectorial Fund, money is invested in a particular sector example real estate, pharmacy, banking, IT etc.
Fund manager does not have the freedom to invest in different sectors thus the fund performance is almost entirely dependent on one sector making it highly risky
These funds are suitable for those investors who have in-depth knowledge of that sector as exit timing is quite crucial for these funds

Tax savings fund

Equity Linked Saving Scheme (ELSS)
These funds save tax under section 80 C up to INR 1.5 Lac of deduction
This is the most efficient tax saving tool available in market
As compared to other tax saving instruments these funds have only 3-year lock-in.
Returns under these funds are also best in market although it has a risk in short term period but for long term investor this is the best opportunity

Rajiv Gandhi Equity Saving Scheme (RGESS)
The aim of this tax saving scheme is to encourage small investor to participate in equity market
This scheme has a Lock-in of 3 years
Maximum up to INR 50000 can be invested in the financial year
The eligibility to avail tax benefit under Section 80CCG of Income Tax Act is:
Investors earning should be less than INR 12Lac per annum
Investor should be first time investor in Mutual Fund
Tax can be exempted of 50% of money invested or INR 25000 whichever is less

Index Fund

These funds are for those investors who just want to invest in an index of a particular sector or Sensex where there is no professional advice needed. Fund manager invests only in those companies which are exactly in the Index.

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DEDUCTIONS THAT HELP IN TAX SAVING

WHAT ARE FEATURES OF CRITICAL ILLNESS POLICY?

HOW CRITICAL ILLNESS INSURANCE IS DIFFERENT FROM TRADITIONAL INSURANCE?

WHAT IS THE ELIGIBILITY CRITERIA FOR TAKING CRITICAL ILLNESS INSURANCE?

WHAT ARE THE EXCLUSIONS OF CRITICAL ILLNESS INSURANCE?

WHAT IS THE LIST OF CRITICAL ILLNESSES COVERED?

Some of the important indices in India are:

WHY DO WE NEED INDICES?

HOW ARE STOCK INDICES FORMED?

WHAT ARE THE BENEFITS OF INVESTING IN NATIONAL PENSION SCHEME (NPS)?

WHAT ARE THE ACCOUNT OPTIONS IN NPS?

WHAT ARE THE INVESTMENT CHOICES AVAILABLE IN NPS?

WHAT ARE THE TYPES OF APPROACH FOLLOWED TO INVEST THE INVESTOR’S CONTRIBUTION?

CONTRIBUTION IN NPS

WHAT ARE THE EXIT OPTIONS AVAILABLE IN NPS?

On attaining 60 years of age-

Before attaining 60 years of age

Death of the investor

WHAT IS TAX BENEFIT?

Post Office Savings Account

5-Year Post Office Recurring Deposit Account (RD)

Post Office Time Deposit Account (TD)

Post Office Monthly Income Scheme Account (MIS)

Senior Citizen Savings Scheme (SCSS)

15 year Public Provident Fund Account (PPF)

National Savings Certificates (NSC)

KisanVikasPatra (KVP)

WHAT ARE CORPORATE FIXED DEPOSIT/COMPANY FIXED DEPOSITS?

WHAT IS THE DIFFERENCE BETWEEN BANK FIXED DEPOSIT & CORPORATE FIXED DEPOSIT?

WHAT ARE THE KEY POINTS TO TAKE INTO CONSIDERATION WHILE DECIDING FOR BEST CORPORATE FIXED DEPOSIT/COMPANY FIXED DEPOSITS?

Default Risk

Rating agencies

Other features of SukanyaSamridhi Scheme are as follows:

REQUIRED DOCUMENTS FOR ACCOUNT OPENING:

INTEREST INCOME

TAX IMPLICATION

WHAT ARE STOCKS?

WHAT ARE DIFFERENT TYPES OF STOCKS AVAILABLE?

WHAT ARE DIFFERENT KINDS OF SHARE MARKETS?

Primary Market

Secondary Market

STOCKS ON THE BASIS OF MARKET CAPITALIZATION:

Large-cap stocks

Mid-cap stocks

Small-cap stocks

LETS UNDERSTAND THE TERMS USED IN STOCK MARKET

Company name and symbol

High/low

Net change

Dividend

52-week high/low

PE Ratio

Volume

Bid& offer

Short selling

Squaring off

Limit Order

Market Order

Stop Loss Order Price

DIFFERENT MODES OF BUYING AND SELLING OF STOCKS

Offline Trading

Online Trading

Demat & Trading account

WHAT ARE OTHER FEATURES OF CAPITAL GAIN BONDS?

WHAT ARE THE TYPES OF CAPITAL GAIN BONDS AVAILABLE IN MARKET?

WHAT ARE THE DOCUMENTS REQUIRED WHILE APPLYING FOR CAPITAL GAIN BONDS?

EQUITY MUTUAL FUNDS

WHY INVEST IN EQUITY MUTUAL FUNDS?

WHAT ARE THE TYPES OF EQUITY MUTUAL FUND?

Large Cap Equity Funds

Mid-Cap Equity Funds

Small cap funds

Multi-Cap Equity Funds

Sectorial fund

Tax savings fund

Index Fund

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