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RETIREMENT PLANNING

WHAT IS THE NEED TO HAVE RETIREMENT INSURANCE?

  • Regular income
The basic need for retirement planning is to secure regular monthly income during retirement. As every human being wants that the source of income should continue until the person or person’s dependents are alive. Retirement Planning is important so in the old age, the standard of living is well maintained . Also, it gives him mentalpiece that he will continue to live with dignity after retirement.
  • Meet immediate financial needs on retirement and thereafter
Even though the primary need is regular income. But, there are instances that immediately at retirement people need lump sum money; to meet any of the following needs:
  1. Repayment of debt if any
  2. If the person does not possess a house till retirement than he might be willing to buy one
  3. If the person possesses house than meeting furnishing requirement etc
  4. Or, for the hospitalisation for any illness
Even if above mentioned conditions does not arise then also some liquid cash to be kept for emergency.
  • Take care of Inflation-
We have to consider the fact that the amount of money required by us at present will not be sufficient in future. As inflation will increase over a period of time. Thus, the person should well plan in advance so with increasing inflation the basic requirements should not suffer.
  • Take care of Medical Emergency
The another reason due to which it is important to get the Retirement planning done is meeting Medical emergency needs. Cost of medical expenses is one of the biggest problems faced in retirement planning. To overcome medical emergency   one needs physical support and financial support. And the cost of health care services is increasing day by day. Thus, a good retirement planning should also aim at providing regular income as well as lump sum money requirements to deal with medical emergency.

IDEAL RETIREMENT PLANNING IS DIVIDED INTO FOLLOWING PARTS-

Retirement Planning is very crucial aspect and quite a vast topic. Thus, for ideal retirement planning it is divided into the following parts:
  • Analysis of the personal information
For ideal retirement planning it is necessary to be aware of the following income factors in advance:
  • What kind of living standard is to be maintained after retirement?
  • Is there any other responsibility to be fulfilled in terms of family and dependents?
  • What is your capacity to save from regular income towards retirement planning?
  • What is the estimated life expectancy after retirement? As with improved medical facilities Life expectancy ratio has improved. Also, it will continue to keep on improving with time.
  • Is there any provision for medical emergencies like hospitalisation, accident etc. for retirement?
Based on the answers of the above questions you will get the actual picture and will be able to plan better.
  • Existing resources available
For Retirement needs calculation you are also required to know list the resources that are available to client. Such as:
  • Is there any pension benefit that you will receive?
  • What will be the amount of gratuity and Provident fund due?
  • Is there any personal saving till date?
  • What is the amount of Life Insurance policy and annuity, if any?
  • Is there any other source of retirement income? Like rental income, sale of Property etc.
Such information is quite crucial for retirement planning.
  • Product option available for Pre-retirement & Post-Retirement-
The following Product options are available for you to choose from. Based on the type of risk the person is take and the time that is left for the individual to plan for retirement. Product types are as follows:

Pre-Retirement Products-

These products help in accumulating of wealth till the time you are working.
  • EPF
  • Gratuity
  • Leave Encashment
  • NPS
  • Mutual Funds
  • Pension Plans from Life Insurance Companies
  • Government Bonds
  • Fixed Deposits
  • Postal Schemes
  • Equity shares
  • Gold funds
  • Real Estate

Post-Retirement Products-

  • Monthly Income Schemes
  • Senior Citizen Saving Schemes
  • Annuity Plans
  • Liquid & Debt Funds with monthly dividend option
  • Rental Income from Real Estate
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Diabetes Insurance

Diabetes Insurance

There are so many insurance companies in the market that offer insurance to healthy people. But, when it comes to people having diabetes then very few companies are available that offer medical cover to diabetic patients. Type 1 & Type 2 Diabetes Insurance is a kind of Insurance policy which provides medical cover to people already suffering from Type 1 & Type 2 diabetes. People suffering from Type 2 diabetes are covered under this policy. And, incase of hospitalisation the insurance company is liable to bear the entire cost of hospitalisation up to sum assured.

HOW DIABETIC INSURANCE IS DIFFERENT FROM NORMAL HEALTH INSURANCE?

POINT OF DIFFERENCE DIABETIC INSURANCE NORMAL HEATH INSURANCE
COVERAGE Covers Type 1 & Type 2 Diabetes from Day 1 Does not cover diabetes from day 1
SUM ASSURED Starts from 2Lac and goes up to 10Lac Starts from 1Lac & goes up to 1Crore
MEDICAL CHECK-UP Compulsory for all age groups Compulsory after 45years
HYPERTENSION It is also at times covered Not covered
PREMIUM High Low
CO-PAYMENT OPTION AVAILABLE Yes No
NO CLAIM BONUS (NCB) No, but companies like Apollo give Reward point facility for maintaining good health Yes

 WHAT ARE THE BENEFITS OF TAKING Type 1 & type 2 DIABETIC INSURANCE?

Before buying the Diabetic insurance one should go through following key features:
  • It covers Type 1 & Type 2 Diabetes from Day 1, few companies cover hypertension as well
  • Premium for Type 1 & Type 2 Diabetic Insurance is at least 25% higher as compared to normal plan
  • Day care procedures include those diseases for which 24 hours of hospitalisation are not required, due to technological advancement. Example cataract, dialysis etc.
  • Domiciliary Treatment cost is also covered by Insurance Company
Domiciliary treatment is that in which the patient is treated at home. As the patient is in critical situation and cannot be shifted to hospital/ if the hospital states that no beds are available
  • Pre & Post hospitalisation medical expenses are also covered up to a certain limit. Number of days vary company to company
  • If situation occurs for any organ donation then apart from the insured, donor expenses are also borne by the company
  • Diabetic plans come with an option of Co-payment. In this individual will bear a fixed percentage of hospitalisation cost and rest will be paid by Insurance company. Example 20%, 30% or higher. Benefit of taking co-payment option is that higher the percentage borne by client less will be the premium cost
  • Emergency ambulance cover is provided by Insurance up to a specific amount. Example up to INR 2000
  • Portability option is available but only to Type 1 & Type 2 diabetic plan. One cannot port diabetic policy into a comprehensive health insurance plan and vice-versa.

WHAT IS THE TAX BENEFIT OF TAKING MEDICAL INSURANCE?

Tax benefit is provided under Section 80(d). Limit for tax benefit is as follows:
  • If individual takes Insurance policy for self then the amount paid as premium will be treated as saving up to INR 25000, but if you are a senior citizen then the rebate is INR 30000
  • Also, if you take this policy for your parents then you can take rebate of INR 25000. However, if your parents are senior citizen then limit of the rebate is INR 30000 separately
However, if the policy is taken for yourself and your parents who are senior citizens then total maximum rebate available under this section is INR 55000.

 WHAT IS THE ELIGIBILITY CRITERIA FOR TAKING?

  • Type 1 & Type 2 Diabetic Insurance can be taken between 18-65 years. For Company like “Star health care” age limit is 25- 65 years
  • Type 1 & Type 2 Diabetic Insurance Covers Type 1 & Type 2 diabetes only
  • Type 1 & Type 2 Diabetic Insurance can be taken for sum assured of INR 1 Lac and goes up to 10 Lac
  • Medical test is mandatory

WHAT ARE THE EXCLUSIONS?

  • Waiting period of 30 days except any accidental injury. Although there is company like Max health insurance which provides medical cover from day 1
  • Any Pre-existing diseases/conditions (EXCEPT DIABETES OR HYPERTENSION) will not be covered from day 1. Those diseases can be covered if the company has some waiting period clause
  • 2 years exclusion for specific diseases like cataract, hernia, hysterectomy, joint replacement etc.
  • HIV or AIDS
  • Non-allopathic treatment
  • Mental disorder
  • Cosmetic surgery or weight control treatments

LIST COMPANIES AND SOME ACCEPT IT ON TEST BASIS WITH EXCLUSION

  • Apollo Munich Health insurance
  • Star Health insurance
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TAX Free Bonds

 WHAT ARE TAX-FREE BONDS? As the name suggests Tax Free Bonds are those bonds that help you get taxation benefits. Nowadays tax free bonds are quite popular as they give an option to the general public to get taxation benefits. Government-backed entities issue tax-free bonds also the interest rate earned from tax-free bonds is tax free under Section 10 (15) (iv) (h) of the Income Tax Act, 1961. Tax free bonds also help these government-backed entities to raise fund from public and in return they offer them assured rate of return which is tax free. However, to have a clear understanding on Tax Free Bonds one needs to know what Bonds are. Bonds are a kind of Investment option offered by companies, banks, government securities. The tenure of these bonds vary. People invest in bonds to earn the rate of interest.

WHAT ARE THE OTHER KEY FEATURES OF TAX-FREE BONDS?

  • People who invest in tax free bonds have the option to choose from tenure of 10 years, 15years & 20 years
  • Tax-Free bonds are listed on NSE / BSE
  • The money invested in these bonds has lock-in period but can be traded on listed exchange
  • Tax free bonds are Safe investment option
  • For investing in tax free bonds individual must have PAN Card as it is mandatory proof

WHAT ARE THE ADVANTAGES OF TAX-FREE BONDS?

  • These bonds result in Tax Free Income
  • Rate of return on tax free bonds is not only comparatively higher but also tax-free
  • Risk involved in these bonds is low, as the companies have a better credit rating
  • Since tax free bonds are listed on exchange thus they provide liquidity aswell
  • It easier for the investor to handle investment
  • These bonds are an ideal option for Individuals who comes under high tax bracket. As post-tax return compared to FD are attractive as well as guaranteed

HOW TO INVEST IN TAX-FREE BONDS?

  • Investing in a tax-free bond is quite simple. The Investor has to simply get the application form of the tax-free bond and submit it after duly signing it along with the mandatory documents required.
  • The investor also has an option to either apply in Demator Physical Mode, with required documents.

WHO CAN INVEST IN TAX-FREE BONDS?

  • Retail Individual Investors (RIIs)
  • High Net worth Individuals (HNIs)
  • Corporates/Trusts
  • Qualified Institutional Buyers (QIBs)
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NRI

NON-RESIDENT INDIAN (NRI) NRI is any person holding Indian Passport but has immigrated to some other country for the duration of 6 months or more for residence, employment purpose, and vacation circumstances that indicate intention to stay out of India for an indefinite period. Following people are also considered NRI:

  • If a person’s stay in India is less than 182 days during the preceding financial year, then also the person will be considered NRI.
  • Citizens of India who are working abroad with foreign government agencies like United Nations Organisation (UNO), affiliates, International Monetary Fund (IMF), World Bank etc. on assignment.
  • Officials of Central and State Government and Public Sector undertaking deputed abroad on temporary assignments or posted to their offices, including Indian diplomat missions, abroad.
Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens.

WHO IS A PERSON OF INDIAN ORIGIN?

For availing benefit of opening and maintaining bank account and investments in securities/shares in India: Any foreign citizen (other than a citizen of Pakistan or Bangladesh) is considered of Indian Origin, if:
  • Indian passport is held by him anytime throughout life
  • Himself or either of his parents or grand-parents was Indian citizen according to Citizenship Act as per Indian Constitution
  • A spouse( should not be a citizen of Bangladesh or Pakistan) of an Indian citizen /Indian origin if Bank account is opened or investment is made in share/securities in India provided the Bank accounts are opened or investment is made in shares or securities jointly with their spouse
For the purpose of Investment in immovable properties: Any foreign citizen (other than a citizen of Pakistan, Sri Lanka, Afghanistan, Nepal or Bangladesh) is considered of being Indian Origin, if,
  • Indian passport is held by him anytime throughout life
  • Person himself or either of his parents or grand-parents was Indian citizen according to Citizenship Act as per Indian Constitution
If any person does not fall in category of a resident or not ordinarily resident, he / she will be non-resident.

WHAT ARE THE PREREQUISITE FOR NRI FOR MAKING INVESTMENT IN INDIA?

For an NRI to make any type of investment in India needs to have Bank account from below mentioned options:
  • Non-Resident Ordinary Rupee Account (NRO) –
  • NRO account is mainly used to manage the Indian income of NRIs which can be received in India in any form of dividend, rent or pension
  • This kind of account is not useful if Indian earnings need to be transferred abroad as the limit for this account is 1 million USD.
  • Also, it needs to be certified by CA to provide tax paid certificate before repatriation.
  • Foreign funds can also be deposited in this account.
  • The interest earned from this account is taxable in India.
  • Depositing and managing the earnings in India should be the prime use of this account
  • Non-Resident External Rupee Account (NRE) –
  • In this kind of account in which foreign currency funds are converted into Indian currency
  • In this type of account, foreign currency funds are converted into Indian currency at the current rate at the time of conversion.
  • Funds in the NRE account, as well as the principal amount and interest, are completely repatriable
  • NRE account can be opened as NRE fixed deposit account, recurring or savings account.
  • In India Interest earned and the principal amount is not taxable
  • NRE account is most suitable for NRIs who wish to transfer their foreign income to Indian accounts
  • Foreign Currency Non-Resident Bank Deposits (FCNR) –
  • FCNR is a kind of fixed or term deposit account where money can be deposited in foreign currency.
  • Thus, the fluctuation can be avoided in the exchange rate. Also, you can open the account jointly with the resident of India.
  • Minimum and maximum maturity period for deposits is 1 and 5 years respectively. The principal amount is taxable whereas the interest earned is tax free

WHAT ARE THE BEST INVESTMENT OPTIONS AVAILABLE IN INDIA FOR NRI?

  • Bank Fixed Deposits-
One of the most common investment options for NRIs is opening Fixed Deposit in Indian Bank who deals in foreign exchange. NRIs are provided high-interest rate by Banks on fixed deposits. They can open any out of the mentioned term deposit accounts in India i.e. NRE account, NRO account or FCNR account (As explained in above section).
  • Mutual funds
NRIs can also invest in Mutual funds. For investment in mutual funds, NRI should have the any out of the above mentioned 3 Bank accounts i.e. NRE, NRO or FCNR. NRI also need to provide a rupee Demand draft or cheque from NRO/NRE Account. Also, investment amount should be in Indian currency and direct debit/credit can be done from NRE/NRO account.Although, according to some countries laws NRIs cannot invest in Mutual funds in India.
  • Stock Market-
Another option available to NRI for investment in India is in Stock market under RBI’s Portfolio Investment Scheme(PINS).But, for investment in PINS, the NRI needs to take permission under PINS scheme for sale/purchase of shares in India.There is a limit on the maximum investment. It cannot be more than 10% of paid-up capital of the Indian company.Demat account and brokerage account needs to be opened with SEBI registered brokerage firm by NRIs.Stock market transactions can be done via stock broker only. Therefore below mentioned are the pre-requisites for an NRI to invest in equity market:
  • NRE or NRO Bank Account
  • Trading account with SEBI authorised broker
  • Demat account for holding shares
  • PIS approval for stock market trading
  • Allowed number of account per individual is one
  • But, trading in all Indian stocks is not allowed. As NRIs, eligible list of stock is published by RBI
Apart from it below mentioned is the things that are not allowed to NRIs:
  • Intraday Trading
  • Short selling in India.
  • Real Estate Sector-
Investing in property/real estate is one of the most common and lucrative investment options for NRIs. They are eligible to invest in both commercial and residential property that too as much as they want, as there is no restriction on the number of properties owned. But below mentioned are the restrictions that NRI face while investing in real estate:
  • They cannot buy agriculture land
  • They cannot buy farm house or plantations
  • Although inheritance/gift of agriculture land is acceptable
One needs to make a note that property selling has some restrictions by FEMA (Foreign Exchange Management Act),especially for repatriation transactions.It is advisable for NRI to hire professional who can guide you with legal documentation procedure during purchase/sale.
  • Investment in Bonds/Government Securities :
NRIs can also invest in Bonds and government securities. Fixed return is earned by NRIs on these bonds/government securities. In case the purchasing of these bonds/government securities is done via NRE/FCNR accounts then the proceeds are easily repatriable to their country of residence.
  • Certificate of Deposits-
NRIs are given an option for investment on the repatriable basis on Certificate of Deposits. Certificate of Deposits is either issued as a Promissory note or in demat form. This is non-negotiable money instrument. Interest earned from these is higher than fixed deposits. Also, the maturity period is 7 days to 1 year.CDs are most suitable for NRIs having short-term financial goals.
  • National Pension scheme(NPS)
NPS is another good option of investment for NRIsbetween 18 to 60 years of age. For investment in NPS holding Indian citizenship is mandatory, in case the NRI gives up the citizenship of India the NPS account will get closed.

WHAT ARE THE POINTS TO BE KEPT IN MIND BY NRIs FOR INVESTING IN INDIA?

  • NRIs are liable to pay taxes on earned income from India.
  • Capital gains from property sale, shares and securities or salary earned in India is Taxable income
  • USA/Canada based NRI’s cannot invest in some of the mutual fund houses. Therefore this needs to be checked before investing
  • Double taxation can be avoided by NRIs but DTAA or Double Taxation Avoidance Agreement needs to be checked between the countries.
  • Certain investment options like PPF, senior Citizen scheme, NSC etc.. are not available to NRIs
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DERIVATIVES

DERIVATIVES Derivatives are considered as instruments whose value is derived from an underlying security that could be any of the following: debt instrument, shares, commodity and currency.

  • In a normal scenario, Suppose SBI share is of INR 250/share. Then,to buy 1000 shares you will have to pay INR 250000. And you will get the benefit only if the share price will go up.
  • On the other hand, in derivatives you can get the position for INR 250000 by paying almost 20% or more of the amount (called as margin money) varying stock to stock. Future & Option are two types of Derivatives which provides you flexibility to earn on the same stock on downside or upside movement.
  • Before moving to Future and Option one should have an understanding of the following common terms used in Future and Option.

FUTURE

As discussed above it is a part of derivative where a buyer and seller agreed on a particular underlying asset like the stock, commodity, currency etc.
  • A future contract buyer is bullish (expecting to go up) on the market and future contract seller is bearish (expecting to go downwards) on market.
  • Hence, the buyer makes money on the upside movement of the price and loss of the downside movement of the price. On the other hand, seller makes money on the downside movement of the price and loss on the upside movement of price. Here, Profit & Losses are unlimited.
  • This means by paying a certain percentage (at times only 20%) of the stock value you can take advantage of complete stock value.
  • Every future contract has an Expiry on last Thursday of every month. So you can buy “future contract” of the current month, next month and next to next month. The more the expiry date is far the premium is charged over and above on the current price of an asset.
  • For a buyer of “future contract”, he has to pay the premium on underlying asset of the stock price. And, for the seller of “future contract” that premium is gain (if the stock does not move till expiry)
  • Future buyer or seller can book their profit or losses before expiry otherwise it will get booked automatically on expiry. If you have chosen the expiry of current month you can roll over it to next month by paying an extra premium in case your target has not been achieved.
  • Hence, it is a kind of leverage you are taking which can work well if the direction is on your side. Otherwise, the adverse impact of future is sometimes unmanageable. Thus, you have to manage the trade with stop loss. Some smart traders also use Options strategies with future to minimise the risk.

OPTIONS

“Option” is the second type of derivative which has more choices than futures. But, it is also more complicated than futures. Options are kind of contract where buyer and seller make an agreement by paying the premium. But, here Options are divided into two categories:
  • Call Option
  • Put Option

Call Option

These are contracts where a buyer of “call option” is bullish (expecting to rise) on market and seller of “call option” is bearish (expecting to go downwards) on the market.

Put option

These are contracts where buyer of “put option” is bearish on market and seller of “put option” is bullish on the market Unlike Future contract for a buyer of Call & Put Option loss is limited to the premium whereas chances of making profit are unlimited But, for a seller of Call and Put Option, profit making is limited to premium whereas chances of making loss are unlimited.

Option contract

It expires on the last Thursday of the month chosen. Like futures the more time is left in expiry of contract more premium will be required to pay. You also have the choice to book the profit or loss from these contracts at any time.

Option Pricing

Here option pricing or premium for buyer or seller of contract is below-mentioned factors:

Strike Price

It is a price which has been decided by exchange in advance to trade. Example: In the case of SBI share trading at INR 248/share Strike price are on a difference of INR 5. Like INR 230, 235, 240, 245, 250 and so on. To understand this better we have also have to understand following terms:
  • In the money
  • At the Money
  • Out of the Money

In the money

It is the position where the current price is higher than strike price that means you have already achieved that strike price. Example: Current price of SBI is INR 248 and strike price chosen is INR 240. It means the premium of this option will be expensive.

At the money

It is a position where the current price is equal to strike price. Example: Current price of SBI is INR 240 and strike price chosen is INR 240. It means the premium of this option will be cheaper than the money option.

Out of the money

It is the position where the current price is lower than strike price Example: Current price of SBI is INR 230 and strike price chosen is INR 240. It means the premium of this option will be cheapest. Hence, for a buyer of Call & Put Option he has to pay less in out of money and at the money option but profits is unlimited. For a seller of Call & Put option in the money, option is more profitable if the direction is as per the investor. Options can also be used with Future & stocks to minimise the risk in a bigger portfolio which are meant for a longer duration. It can give you a recurring income where you are holding a future and stock for the long term but you want to earn on both side of the portfolio.

There are various Option strategies available in the market which can be tweaked to make profits with minimum risk. Strategies are as follows:

  • Long call
  • Short
  • Synthetic long
  • Long put
  • Short put
  • Covered call
  • Long combo
  • Protective call
  • Covered put
  • Long straddle
  • Short straddle
  • Long strangle
  • Short strangle
  • Collar
  • Bull call spread strategy
  • Bull put spread strategy
  • Bear call spread
  • Bear put spread strategy
  • Long call butterfly
  • Short call butterfly
  • Long call condor
  • Short call condor
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ANNUITY

HOW ANNUITIES WORK? It is an investment product popular for retirement planning. It is provided by Life insurance Companies and is popularly sold by insurance agents. It keeps on accumulating interest without making you to pay taxed till 59.5 years of age. And at this stage the principal and the interest earned is paid back in form of regular payments as per the term chosen (5 years, 10 years or lifetime)

WHAT ARE THE TYPES OF ANNUITY?

• Fixed Annuity As the name suggests it guarantees a fixed amount that is paid considering the balance of your amount. But, the interest rate is lower as compared to others because the investments are not linked with market based products • Variable Annuity Interest rate is high and so is the risk involved. In this kind of annuity you have to choose from a list of mutual funds that would be considered your personal “subaccount”. Therefore, the retirement payment is entirely based on the performance of your sub account. • Indexed Annuity It is considered as a mid-way out of the other two types of annuity options. The interest rate is slightly higher than the fixed annuity but lower than the variable annuity. You will receive a minimum guaranteed pay out but a part of your investment is linked with the performance of market.

HOW DIFFERENT TYPES OF ANNUITIES BEHAVE DURING RECESSION & GOOD ECONOMIC TIMES?

As discussed above different kind of annuities have different behaviour in different situations:

FIXED ANNUITY INDEXED ANNUITY VARIABLE ANNUITY RETURNS EARNED DURING RECESSION

Comparatively Lowest Moderate Risk Highest Risk involved

LINKED WITH MARKET BASED PRODUCTS

No Link A part of investment is linked with market Entirely market based

RETURNS DURING GOOD ECONOMIC TIMES

Returns earned is guaranteed but you may feel that it has Underperformed as compared to other two options as A part of returns is fixed and rest is linked with market thus it leads to better performance as compared to Fixed Annuity Investor is rewarded by aggressively better returns for bearing high risk

WHAT ARE THE REASONS DUE TO WHICH PEOPLE AVOID TAKING THE OPTION OF VARIABLE AND INDEXED ANNUITIES?

• These options are quite complex in nature • Buying fee of these annuities is high • Surrender charges need to be paid if you are willing to withdraw the money during the first few years of making contract

WHAT ARE THE ADVANTAGES OF ANNUITY?

• Regular Income Guaranteed It helps you in guaranteeing a regular source of income during retirement. • Account for Inflation There are annuity options available in market that considers the inflation part which means the value of money increases as per the inflation. This helps you plan in a better way for your retirement • Tax Benefit It is tax deferred which means you do not have to pay the tax at the time of earning that capital rather you pay at the end. Thus, it helps you to accumulate cash in the beginning and earn interest without paying tax also the money keeps on compounding

WHAT ARE THE DISADVANTAGES OF ANNUITY?

• Irreversible Decision It is a one-time decision that cannot be reversed thus making right choice is of high importance. Once you have signed the contract and have started receiving income it is not possible to change the provider unlike other saving options. • Hidden fee Most of the annuity plans we come across sounds quite fascinating and profitable but one should read the fine print carefully to know about the hidden fee clause as it can cut down your profits earned • Surrender Charges In Most of the annuity plans if the investor wants to withdraw the money during the early years of making the payment then they will have to bear the surrender charges. The surrender charges slightly differ for different companies • No support to the Family In case a person invests the entire pension amount in annuity then after your death the left over money will belong to annuity provider and not the deceased’ family.

WHAT ARE THE FACTORS ON WHICH TYPES OF ANNUITY PLANS DEPENDS?

It broadly depends on below mentioned two factors: • Targeted Retirement Income • Whether you want that your spouse should receive annuity after your death

WHAT ARE DIFFERENT KINDS OF ANNUITY PLANS AVAILABLE IN MARKET?

• Plans that provide fixed annuity at the interval chosen throughout the life time • Plans that provide annuity for a fixed duration, in this plan high annuity amount is paid for the fixed period. And after the fixed duration is over less amount of annuity will be paid until the death • Return of Premium annuity plan- Fixed annuity is provided until death and after the death nominee receives the premium paid either lump sum or in parts. Though fixed annuity amount is quite low in this plan • Increasing rate Annuity- This plan is considered ideal to people who consider the inflation part and believe that the cost of living increases with time.Annuity amount keeps on increasing yearly as per the plan. • Joint annuity- This is a kind of plan taken by the buyer and his spouse. In this plan buyer gets pension amount throughout his life and after his death the spouse receives same amount until the death

ANNUITY PLAN TAX BENEFITS

The annuity payment made up to INR 150000 can get deducted from your taxable income. Although the income received through annuity is entirely taxable. Example: In case your taxable income is ₹ 800,000 and annuity premium paid by you is of ₹ 100,000 every year, than the taxable income will be ₹ 700,000. However, if you start receiving annuity of ₹ 50,000 every month on retirement, this amount will be fully taxable.]]>

What is AADHAAR?

AADHAAR Aadhaar is a free service launched to provide 12 digits unique identification to Indian residents based on their biometrics i.e. thumb impression and retina scan. Objective of Aadhaar is to keep the biometric and demographic data of residents in a centralised location Other features about Aadhaar are as follows:

  • The unique number is provided without any bias of caste, creed & religion.
  • It serves as official Identity and address proof for Government and non-government official requirements
  • MNREGA workers can receive their wages directly in bank accounts
  • It can even facilitate the passport procedure
  • AAdhaar has a provision that it can be easily linked with Voter ID, Bank account and Cooking gas connection, Pension account, pension account
  • Aadhaar details can be updated online and offline

WHAT ARE THE MISCONCEPTIONS ABOUT AADHAAR?

    • Aadhaar can be applied online
    • One can have more than one Aadhaar
    • UIDAI information is accessible to others
  • It is mandatory to have Aadhaar
  • Aadhaar can replace other identity proofs
  • It is costly to get Aadhar

HOW TO APPLY FOR AADHAAR OFFLINE?

  • You need to identify the Aadhaarcenter near you (To identify the nearest center you can check online https://appointments.uidai.gov.in/easearch.aspx)
  • Visit the centre along with photograph, identity and address proof
  • Application form can be taken from the centre or it can be downloaded online
  • Application needs to be filled and submitted
  • The person responsible will enter the details and take your thumb impression and retina scan
  • After data entry you will be asked to cross check the details entered in the system
  • If the information entered is correct the person will submit the same and will hand over the enrolment slip. This slip contains complete information and the same can be used to track the status of your application that whether it has been dispatched or not
  • The information provided will be verified before the aadhaar is generated and dispatched
  • Till the time aadhaar is not mailed to your contact address you can check the status of your application online

HOW TO DOWNLOAD E-AADHAAR CARD?

  1. Visit https://eaadhaar.uidai.gov.in/
  2. Enter all the details required like enrolment number as mentioned on Acknowledgement slip, full name, Pin code etc.
  3. After filling all the boxes Click on “Get One Time Password”
  4. OTP will be received on registered mobile Number
  5. OTP needs to be entered in the box and click on “Validate and Download”
  6. Open it using the password and then take the print of the aadhaar card

HOW TO UPDATE YOUR AADHAAR DATA?

In case of change in any of the following “Name, Date of Birth, Address and Mobile Number”; individual has an option to update the same online and through post using below mentioned step: Updating information Online:
  • Visit https://ssup.uidai.gov.in/web/guest/ssup-home or https://ssup.uidai.gov.in/web/guest/update
  • Enter the details asked and click on “Get OTP”
  • Enter the text in the image and enter OTP
  • New webpage will open
  • Enter the details that need to be updated
  • Depending on the nature of change upload the supporting documents as accepted
  • You need to select the BPO Service Provide and submit yourrequest. Also, download /Print Update Request copy.
Note: You should have access to previously registered mobile number as OTP will be sent to that number. In case you have lost that number then you need to visit the nearest centre for the same. Updating information through Post: Note: It is mandatory to write Mobile Number
  • Depending on the nature of change you need to attach self-attested supporting documents
  • In case of a child whose age is less than 5 years, parent/guardian can sign document copies
  • You need to make sure that AADHAAR number is clearly mentioned on all the copies of documents attached
  • Put the complete form along with supporting documents in an envelope and mention “Aadhaar Update/Correction” on top of it
  • Post the envelope to mailing address- UIDAI Regional Office, KhanijaBhavan, No. 49, 3rd Floor, South Wing, Race Course Road, Bangalore–01
  • Once the data is successfully validated by UIDAI the communication will be done to you and you will receive updated Aadhaar card

WHAT ARE THE LIST OF DOCUMENTS REQUIRED FOR AADHAAR ?

As we are aware in order to get the Aadhaar you need to submit proof of identity and proof of address. Thus, there is a list defined for document that serves as “Proof of Identity” and “Proof of address”. It is mandatory for each individual  to carry one “Proof of Identity” and one “Proof of address” at the Aadhaar centre. However, in case of minor all you need to submit is parent’s “Proof of Identity and address” along with it proof of relation. Below mentioned is the list of “Proof of Identity” accepted:
  • Passport
  • Voter ID Card
  • Arms License
  • Ration/ PDS Photo Card
  • NREGS Job Card
  • Photo ID issued by Recognized Educational Institution
  • Address Card having Name and Photo issued by Department of Posts
  • Driving License
  • Government Photo ID Cards/ service photo identity card issued by PSU
  • Photo Bank ATM Card
  • Pensioner Photo Card
  • CGHS / ECHS Photo Card
  • PAN Card
  • Photo Credit Card
  • Kissan Photo Passbook
  • Freedom Fighter Photo Card
  • Certificate of Identity having photo issued by Gazetted Officer or Tehsildar on letterhead 18. Disability ID Card/handicapped medical certificate issued by the respective State/UT Governments/Administrations.
Below mentioned is the list of “Proof of Address” accepted:
  • Passport
  • Voter ID Card
  • Ration Card
  • Electricity Bill (not older than 3 months)
  • Water bill (not older than 3 months)
  • Property Tax Receipt (not older than 3 months)
  • Telephone Landline Bill (not older than 3 months)
  • Government Photo ID cards/ service photo identity card issued by PSU
  • Insurance Policy
  • Passport of Spouse
  • Signed Letter having Photo issued by Recognized Educational Instruction on letterhead 17. NREGS Job Card
  • Arms License
  • Pensioner Card
  • Credit Card Statement (not older than 3 months)
  • Signed Letter having Photo issued by registered Company on letterhead
  • Fighter Card
  • CGHS / ECHS Card
  • Income Tax Assessment Order
  • Signed Letter having Photo from Bank on letterhead
  • Certificate of Address having photo issued by MP or MLA or Gazetted Officer or Tehsildar on letterhead
  • Certificate of Address issued by Village Panchayat head or its equivalent authority (for rural areas)
  • Address Card having Photo issued by Department of Posts
  • Vehicle Registration Certificate
  • Caste and Domicile Certificate having Photo issued by State Govt.
  • Registered Sale / Lease / Rent Agreement
  • Kissan Passbook
  • Gas Connection Bill (not older than 3 months)
  • Passport of Parents (in case of Minor)
  • Disability ID Card/handicapped medical certificate issued by the respective State/UT Governments/Administrations
  • Driving License
  • Bank Statement/ Passbook
  • Post Office Account Statement/Passbook
Below mentioned is the list of supported Proof Of Relationship (POR)
  • PDS Card
  • MNREGA Job Card
  • CGHS/State Government/ECHS/ESIC Medical card
  • Pension Card
  • Valid Passport
  • Army Canteen Card
  • Birth Certificate issued by Registrar of Birth, Municipal Corporation and other notified local government bodies like Taluk, Tehsil etc.
  • Any other Central/State government issued family entitlement document
Below mentioned is the list of Proof of Date of Birth (DoB):
  • Passport
  • Birth Certificate
  • Certificate of Date of Birth issued by Group A Gazetted Officer on letterhead
  • SSLC Book/Certificate

HOW TO LINK YOUR AADHAR WITH OTHER DOCUMENTS?

Aadhaar can be linked with following: Bank Account
  • Aadhaarcan be linked through Net banking. However, it is not mandatory that all the banks provide this service
  • Aadhaar can be linked using SMS service. For this you need to send the aadhaar number to a number. Format and number is decided by bank and you need to ask bank for the same
  • Aadhaar can be linked offline. For this you need to visit the branch and ask them for the form to update the aadhaar number with your bank account
Voter ID
  • You need to visit http://www.electoralsearch.in/
  • Search by using Name & other details or by using EPIC Number mentioned on Voter ID
  • After pressing View Details button you can check whether details entered are correct or not
  • After detail confirmation click on “Feed Aadhaar Number” Button
  • Now desired information needs to be filled and submit is to be pressed
  • Success message will be received and your Aahaar will be linked to your Voter ID
LPG Connection Aadhaar can be linked using LPG Subsidy form
  • You need to complete the LPG Subsidy form and deposit it to the distributor
  • Aadhaarnumber and Bank account details need to be filled
  • Distributor will link the Aadhaar number with your LPG connection
Aadhaar can be linked using by sending SMS SMS needs to be sent on the number provided by the LPG Company Distributor can help you with the number Aadhaar can be linked through Phone Call You can dial Toll free number 1800 2 333 555 to get the Aadhaar linked with LPG connection Aadhaar can be linked Online
  • Visit https://rasf.uidai.gov.in/seeding/User/ResidentSelfSeedingpds.aspx
  • Fill the complete details on “Resident Self Service” using drop down
  • Information to be provided is State, District. Benefit type, Scheme Name, Distributor Name, Consumer Number (This is mentioned on the LPG booklet), Mobile number and e-mail address
  • Press Submit button
Aadhaar can be linked using Company’s website You can also directly visit the company website to get Aadhaar linked: HP Gas (HPCL) http://www.hindustanpetroleum.com/LPGHome#overlay-context=aboutus]]>

CIBIL

CIBIL stands for Credit Information Bureau Limited. It is the first company established in India for providing Credit Information for individuals & non-individuals. Basically, they collect information about credit cards and loans from banks periodically (on monthly basis) and thus determine the Credit Information Report and Credit Score.They maintain those records and then on the request by any bank or lending agencies they provides that information to them.  

WHAT IS CREDIT INFORMATION REPORT?

Credit Information Report (CIR) is a detailed report generated by the company. The report basically contains the CIBIL Score, Personal information, Contact Information, Employment Information, Account Information, and Enquiry Information along with Consumer Dispute Remarks.  

WHAT IS CREDIT SCORE?

CIBIL Score is a three-digit number assigned to the individual or non-individual based on the credit information example loans taken and repayment of those loans, Payment of timely credit card dues, how well the person is maintaining mix of secured and unsecured loans Generally, this information is useful to lending agencies and bank to analyse and ascertain whether to approve the loan or not of that individual or non-individual.  

WHAT ARE THE FACTORS THAT AFFECT THE CIBIL SCORE?

    • All the past repayments of loan are done or not
    • Repayments are done within due date or not
    • Previous loans writing offs
  • Maintaining mix of secured loans (Auto & Home loan) and unsecured loan (Personal loan &Credit Card)
  • How many loans have been taken in past
 

WHAT IS THE IMPORTANCE OF MAINTAINING GOOD CIBIL SCORE?

  • It serves as the first thing that is considered by the banks when a person applies for the loan. In other words, if your Score is high then you are likely to get you are likely to get your loan application approved as compared to people with low Score
  • Not only good Score helps in getting the loan approved. It can also help you in getting better interest rates as well.
 

WHAT ARE THE WAYS AVAILABLE TO IMPROVE YOUR CIBIL SCORE?

  • All the past repayments of loan are done
  • Repayments are done within due date
  • There should be no writing off of the loans
  • Maintaining mix of secured loans (such as Auto, Home loan) and unsecured loan (such as Personal loan, Credit Card)
  • Fewer Loans have been taken in the past

WHAT ARE THE MYTHS THAT ARE RELATED TO CIBIL SCORE?

  • CIBIL scores is only factor considered for getting loan application approved/rejected
One of the most common myths we come across is this. But we need to understand that CIR & CIBIL Score is the primary thing taken to consideration by banks. Apart from that, there are several factors that are considered example the income of the borrower, other underwriting policies etc. Thus, there can be instances that even after maintain good Score the loan application might get rejected because of some other factor.
  • Ideal Scenario is having Zero credit history
Some believe that if the person has not taken any loan/credit card in the past it will be considered ideal. But, this is not true as ideal credit history is one in which person has taken loan or credit card and has made timely payments.
  • Unable to get loans or credit card throughout life because of Low CIBIL score
This thinking is wrong as there different banks have different credit policies. Also, CIBIL Score & CIR is the primary criteria, not the only criteria. Thus, if your application got rejected in one bank it might get approved in another bank. But the interest rates could be high for low CIBIL Score individuals.
  • Low CIBIL scores ruin one’s credit reputation forever
Low CIBIL Score does not mean your credit reputation is ruined for life as CIBIL score improves if your credit history is improving. Also, the banks ask for fresh CIR & CIBIL report for fresh loan applications. Thus they get the updated information.
  • Record maintenance of defaulters by CIBIL
CIBIL does not maintain records of the defaulters rather it collates the credit history of the individuals. It provides this information to the Banks or financial institutions and they evaluate the CIR & CIBIL Score accordingly.
  • Supporting banks and financial institutions is sole purpose of CIBIL
CIR & CIBIL score not only helps banks or financial institution in analysing and approving loan applications but it also serves as the information providers to individuals about their finances. By having a look at CIR & CIBIL score they come to know about their Credit worthiness and thus can also improve it if required.
  • Making correction in credit reports is allowed to CIBIL
Making any kind of change in the CIR is not at all authorised CIBIL unless the change has been approved by the bank or financial institution.

WHAT ARE THE REASONS DUE TO WHICH THE LOAN APPLICATION CAN GET REJECTED EVEN AFTER MAINTAINING GOOD CREDIT HISTORY?

  • Guarantor of a defaulter
If the person has given guarantee for friend/family for any loan, and the person defaults the loan then this will have an impact on the guarantor’s CIR & CIBIL Score. Thus, it is important to sign the loan guarantee only if you feel the person will not end up being a loan defaulter.
  • CIBIL Report comments
Most of us only read the Score and ignore the comments mentioned in CIR. Those comments hold great significance while approving the loan. As bank read the comments/remarks mentioned by the previous lenders. At times when a person defaults loan then the banks ask them to pay less amount. Once the amount has been paid the account gets closed but this incident is reported in the remarks section as “SETTLED”. This remark gives negative impact to the current loan application.
  • Tax History
People paying regular tax are more trusted by banks.
  • Identity mistook with a defaulter
In most of the cases if the house owned by you was previously of a defaulter then there are chances that your personal information might get mistaken of a defaulter. This might result in getting the loan application rejected, even when you possess a good Score. In such a scenario, you need to inform the same to the bank and reapply.
  • Limited History
If the person has not taken any loan/credit card in the past then there are chances of loan application getting rejected. As the banks will not be able to analyse that person will be able to repay the loan or not.
  • High Credit Utilisation
At times CIR reveals that the person is in habit of taking loans though the person is repaying the loans on time. Then also the banks check the credit utilisation ratio. The more close a person is of utilising maximum credit limit less will be the CIBIL Score.

WHAT IS CIBIL SCORE RANGE?

CIBIL SCORE REASONS
NA or NH (No History) If the person has no credit history in the past 24 months or is new to credit system
1-2 If the credit history about a person is less than 6 months
350 – 550 Payment defaulting
550-650 Being fairly regular with payments
650-750 Better credit history then individual with score of 550-650
750-900 Extremely regular with credit payments and having an excellent credit history
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