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Category Archives: Financial Planning

Investment options for year 2017

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how to make money in 2017

2017 photo

Happy new year 2017

Wishing you a very happy and prosperous new year from all of us at DivyaAdvisor.com. Apart from taking the opportunity to wish you for the new year I also wanted to take share some advice on investment for the year 2017. I hope you will all earn and pay more income tax compared to last year. Continue reading for investment options for the year 2017. Invest wisely and make most of your money.

Investment Options for the Year 2017

  • Term Plan – it is not an investment but a necessity. Investment here can also get you income tax benefits.
  • Medical Insurance – another must have. Choose from many options available. It is not an investment option for year 2017 but a necessity. Investment here can also get you income tax benefits.
  • Emergency Fund – It is not an investment option for year 2017 but a necessity. Consider having at lest 3-4 months of your monthly expense as your emergency fund.
  • Your own house – you should have one house of your own, one where you can live. I am expecting real estate rates to fall down as black money is squeezed out of the system. It is not an investment option for year 2017 but a necessity. You also get exemption on principle and interest for income tax purpose.
  • Equity – Markets down mean good rates on some premium companies. For the choice of stocks, contact your advisor unless you are a market pundit yourself. If you hold for more than a year your income is not taxed.
  • Equity mutual fund – This is best suited option for an average person. Qualified fund managers ensure they do the investment in equity on your behalf. When markets are down you are presented a good opportunity to buy some quality stocks / funds. If you hold for more than a year your income is not taxed.
  • Long term fixed deposits – Treat this as a limited time offer. Make the most of fixed deposit rates before they tumble down. it is inevitable that the interest rates will go down substantially as banks have more money than ever. Keep in mind any income on this option is taxed under your existing income tax bracket.
  • LIC of India plans – you can invest in it as a portion of your debt portfolio. LIC Jeevan Akshay can also be considered for long term assured returns as unlike Fixed Deposit rates will not change every few years. This option gives you benefit of income tax and is tax free on return.

Investment Options to avoid in the Year 2017

  • Gold – I do not see it shining this year, global market clues are suggesting a further decline in value.
  • Real Estate – expect rates to go down as black money is squeezed out of the system. Rentals are also expected to remain flat or decline as more housing units will be offered for posession this year.
  • Bonds – Expect rates to fall down further this year.

How to check KYC status for Mutual Funds?

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Compliance to KYC (Know your customer) has been a compulsory process for mutual funds. Once an individual does a KYC formality mostly at the time of buying his/her first fund, the same status will be valid across all mutual funds. There are multiple KRA (KYC Registration Agency) that are maintaining your KYC compliance status. Registering with one is enough to be a KYC complaint applicant to mutual fund purchase.

Here are the steps to check your KYC status.

Step 1: Visit KRA Website

Most KRA have a KYC status search that you can use. I will be showing you how to check KYC status using CDSL Ventures Limited (CVL) KRA.

Visit: https://www.cvlkra.com/

You can alternative visit https://camskra.com/ and use “My KYC Status” option. Remember as I said above your status

Step 2: Click on KYC Enquiry

Step 3: Fill in details

Just need to fill in PAN and Captcha as highlighted below

Step 4: Get the Results

Review your results across as KRA. Remember if you have a valid compliance status across one KRA it is valid across all mutual fund houses and you need not go through the process once again.

What if you do not find any records for your PAN?

You need to download one of the following forms from the link below, get the documents ready and call in one of mutual fund distributors like yours truly. Please note that in person verification is a mandatory process hence you will not be able to mail the forms to get a valid KYC compliance.

Click here to visit CDSL Ventures Ltd. Website to download forms

Photo by adactio

10 steps in your march towards financial freedom

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Wishing a very happy Indian independence day to all the Indians and friends of India . As India celebrates its 69th independence day on 15th August 2015 you should also look towards marching towards a financial freedom. Here are ten steps to help you march towards it.

 

10 steps in your march towards financial freedom

 1. Emergency Fund

Emergency can come knocking your door any time make sure you have at least 3 months of your expense parked as emergency fund. Liquidity is important hence in my opinion this is how you should park your emergency fund

  • Keep one month of expense as cash as your home
  • Keep one month of expense in your savings bank account
  • Keep one month of expense in a liquid debt fund. This also helps you save income tax if the holding period is longer than 3 years. After all there is no guarantee that you will have to use your emergency fund in three years.

    2. Life Insurance

  • Life is uncertain you need money so that your dependents can lead a lifestyle that you were giving them with your income
  • Experts advise that one should have a cover of 10 times your annual income.
  • Make sure your dependents knows about your life cover and the claim process. Make sure you also introduce them to your financial advisor.
  • You should also advise your dependents on how they can invest the money received from the claim to generate a regular income.

    3. Health insurance

  • Medical emergencies can cripple your finances.
  • Ensure you have adequate medical insurance for you and your dependents.
  • Aim to have a family floater plan that has no sub limits or cap on medical expense

    4. Critical Care / Accidental Insurance Plan

  • While life and medical insurance can take care of the respective needs there are times when you can be put on a bed rest leading to job loss
  • Ensure you have a critical care plan that covers loss of income that may arise out of your inability to attend your income generating job

    5. Insuring High Value assets

  • If something happens to your high value assets like your home it will be difficult to manage your finances
  • Ensure your high value assets like home, car, factory, shop are adequately ensured for theft, earthquake, fire, flood etc…
  • In case of an equipment you should consider annual maintenance plans that cover spares and labour.

    6. Appoint a financial advisor

  • Unless you are an expert in personal finance domain you should look forward to appointing an advisor
  • If you are a busy person and will not have enough time to track your investments regularly look forward to appointing an advisor who can track it for you.
  • Interview advisors and pick one that can cover you on various aspects like advise on insurance, investments and income tax

    7. Have a financial plan

  • You should have a financial plan with all goals in mind.
  • A financial goal should include inflation adjusted amount that you need for the goal and years that you need to invest to reach towards that goal.
  • Few examples of goals are retirement, money for child education, money to buy your next car etc…
  • If you cannot do it yourself ask your advisor to create a plan for you.

    8. Choose the right investment plan

  • There are multiple investment plans in the market choose the one that suits your goal
  • Choose investing in an equity mutual fund if the goal is few years away. Equity mutual fund has time and again proven that investment for a longer time in a SIP has given best returns compared to other products
  • Choose investing in a balanced fund or split your investments into equity and debt when investing in a medium term goal. Part of your money gets invested into equity that gives you better return and the other part is invested into debt products that are less risky.
  • Choose investing in a debt plan like liquid funds, fixed deposits etc. when investing for a short duration goal. A market crash can erode your investment that you may not be able to recover in few months

    9. Keep income tax in mind

  • Invest wisely. You should be aware what are you saving for and how much time you would need.
  • Understand tax implications of your investment.
  • There are plans that help you save tax at the time of investing e.g. LIC of India policies, ELSS mutual funds etc…
  • There are investments where you need to pay income tax even before maturity e.g. bank fixed deposits interest for each year is added to your income while the maturity is still further away
  • There are plans that are tax free or nearly tax free at the time of maturity e.g. Mutual funds, LIC of India policies, Tax free bonds etc…

    10. Buy a house / apartment

  • You should consider buying a house/apartment for your own living. This one house will also be you retirement home post your income generating years.
  • Did you know your retirement home can be reverse mortgaged to generate additional money for you after retirement? Reverse mortgage only applies to the house you live in after your retirement.
  • Buying multiple houses is an investment strategy but buying one is a necessity. You should study the real estate market well before buying multiple houses.

 

 Voluntary Disclosure : Author is an authorized agent of LIC of India , distributor of Mutual funds and authorized person on NSE.

Thinking of buying Gold this Akshay Tritiya? Read this before you do…

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Thinking of buying Gold this Akshay Tritiya? Read this before you do…

Akshaya Tritiya, also known as Akha Teej is being celebrated this year on 21-APR-2015. IT is considered a very auspicious day amongst Hindus and people start new ventures on this day. Since it is considered that any investment you start on this day would continue to grow many people traditionally buy gold on this day.

I am advising against buying gold this Akshaya Tritiya and here is why. Gold has not delivered in last 5 years at all. It is surprising to see that investments even in debt mutual funds returned more to the investors. Read this blog to find out if the glittery gold is the right investment this Akshay Tritiya.

NOTE: Buying gold to please ladies in your household is not covered as scope of this post

What if you have been buying gold worth Rs. 10000/ per month since April 2010?

If you had been buying gold worth Rs. 10000/- per month since 1st April 2010 you would have gold worth Rs. 638544/- as on April 17, 2015. Investment in Equity: Mid & Small Cap mutual fund could have given you a value of Rs. 1408509/- during the same period.

This is 2% annualized returns compared to 30% in the Mid & Small Cap mutual fund. A SIP in mutual funds across all categories have beaten gold in last 5 years.

See the table below that summarizes investment in gold with few of my recommended funds across categories.

 

Investment from 1-APRIL 2010 to 1-APRIL-2015
Amount Invested / Month

10000
Total Investment

610000
Category

Instrument

Value as on 17-APR-2015 in Rs.

Annualized Rate of Return
Mutual Fund: Equity: Mid & Small Cap Canara Robeco Emerging Equities Fund

1408509

30%
Mutual Fund: Equity: Tax Planning Axis Long Term Equity Fund

1307943

28%
Mutual Fund: Equity: Large & Mid Cap Franklin India Prima Plus Fund

1108494

22%
Mutual Fund: Hybrid: Equity-oriented Tata Balanced Fund – Plan A

1096775

22%
Mutual Fund: Equity: Large Cap UTI Equity Fund

1034527

20%
Mutual Fund: Hybrid: Debt-oriented Aggressive UTI CRTS 81 Fund

856987

13%
Mutual Fund: Debt: Income ICICI Prudential Long Term Fund

835360

12%
Mutual Fund: Debt: Gilt Medium & Long Term SBI Magnum Gilt Long-term

824825

12%
Mutual Fund: Debt: Liquid SBI Magnum InstaCash

766810

9%
Mutual Fund: Hybrid: Arbitrage IDFC Arbitrage Fund – Plan B

765339

9%
Physical Asset: Gold Gold

638544

2%

 

Is investment made on dependent’s name eligible for Income Tax Benefit?

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One common question that comes to mind of income tax payees is what are the scheme that allow investing on their dependents name. This blog aims to summarize that for you.

family photo

While you can invest on your dependents name not all schemes will be eligible for income tax exemption. Please go through the following table.

Is investment made on dependent’s name eligible for Income Tax Benefit?

Income Tax Section Is investment made on dependents name eligible for Tax Benefit? Comments
Medical Insurance 80D YES Allowed for Self, Spouse, Children & Parents
Medical Treatment for Handicapped Dependent 80DD YES Allowed for Self, Spouse, Children, Parents, Dependent Brothers & Sisters
Medical Treatment for Specified Disease 80DDB YES Allowed for Self, Spouse, Children, Parents, Dependent Brothers & Sisters
Interest on Education Loan 80E YES Allowed for Self, Spouse & Children
Donations to Certain Funds, Charitable Institution etc., 80G NO Only Allowed for Self
Permanent Physical Disability including Blindness 80U NO Only Allowed for Self
Pension Policy 80CCC NO Only Allowed for Self
Rajiv Gandhi Equity Savings Scheme 80CCG NO Only Allowed for Self
Provident Fund 80C NO Only Allowed for Self
Voluntary Provident Fund 80C NO Only Allowed for Self
Life Insurance Policies 80C YES Allowed for Self, Spouse & Children
PPF 80C YES Allowed for Self, Spouse & Children
NSC 80C NO Only Allowed for Self
Infrastructure Bonds 80C NO Only Allowed for Self
Tuition Fees 80C YES Only Allowed for up to 2 Children
ELSS 80C NO Only Allowed for Self
ULIP 80C YES Allowed for Self, Spouse & Children
5-Yr bank fixed deposits 80C NO Only Allowed for Self
Senior Citizen Savings Scheme 80C NO Only Allowed for Self
5-Yr post office time deposit scheme 80C NO Only Allowed for Self
NABARD rural bonds 80C NO Only Allowed for Self
NPS 80C NO Only Allowed for Self
Interest on NSC 80C NO Only Allowed for Self
Stamp Duty & Registration Charges on house 80C NO Only Allowed for Self
Home Loan Principal Repayment 80C NO Only Allowed for Self
Housing Loan on Self Occupied Property 24 NO Only Allowed for Self
Housing Loan on Let Out Property 24 NO Only Allowed for Self
Deduction on interest on home loan for first time buyers 80EE NO Only Allowed for Self
House Rent Allowance 10 (13A) NO Only Allowed for Self
Deduction in respect of Rents Paid 80GG NO Only Allowed for Self
Interest on Savings account 80TTA NO Only Allowed for Self

Photo by National Library of Ireland on The Commons

The new 2014 Kisan Vikas Patra

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 The new 2014 Kisan Vikas Patra

Union finance minister Mr. Arun Jaitley on 18 November relaunched Kisan Vikas Patra (KVP), a scheme which was discontinued few years ago in 2011. Finance minister had promised to launch it during his budget speech earlier this year. In the budget speech he had outlined launch of KVP and the rational behind it. This is what he had to say in in para 27 of his budget speech

“Kisan Vikas Patra (KVP) a very popular instrument among small savers will be reintroduced The instrument will encourage people, who may have banked and unbanked savings to invest”

Read along to find out all about the new 2014 Kisan Vikas Patra

The new 2014 Kisan Vikas Patra
The new 2014 Kisan Vikas Patra

History of Kisan Vikas Patra?

Kisan Vikas Patra (KVP) – a certificate savings scheme was originally launched by the Government of India on 1st April, 1988. The original KVP was a scheme where money doubled in 5 ½ years. It had become quite popular and in the year of its closure, the scheme secured gross collections of Rs. 7575.95 crores (April 2011 to November 2011).

All you need to know about the *NEW* 2014 Kisan Vikas Patra (KVP)

  • Money doubles in 100 months (8 years and 4 months)
  • There is no upper limit on amount you can invest in this scheme.
  • The re-launched Kisan Vikas Patra (KVP) will be available to the investors in the denomination of Rs. 1000, 5000, 10000 and 50000
  • KVP can be issued in single or joint names.
  • KVP can be transferred from one person to any other person as many times as desired.
  • KYC norms are applicable, however PAN card is not a mandatory requirement as in other post office schemes.
  • It can be transferred from one post office to another post office in India
  • Nomination facility is available.
  • Investors can liquidate their certificates after the lock-in period of 2 ½ years and thereafter in any block of six months on pre-determined maturity value.
  • It will initially be sold in post offices but government plans to rope in nationalized banks later for the sale.
  • The certificate can also be pledged as security to avail loans from the bank or other institutions.

Return on Investment on the new 2014 Kisan Vikas Patra

Money doubles in 100 months (8 years and 4 months). Effective pre-tax rate of return is 8.67%. Please read the chart below to see the income tax implication.

Return on the new 2014 Kisan Vikas Patra
Return on the new 2014 Kisan Vikas Patra

Cost of delay in Retirement Planning

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Wake up cost of delaying your plans is huge

Cost of delay in Retirement Planning

The question is not that “Do You need a retirement plan?” the question is “When are you starting to invest in a retirement plan?” We all retire someday no matter what the profession, even business owners retire someday. To have a peaceful retirement one needs to start as early as possible. You need time for your investments to grow.

Read the example below on how time helps you grow your investment.

 

Wake up cost of delaying your plans is huge
Wake Up Photo By Stuart Miles / freedigitalphotos.net

 

The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese Proverb

GOAL: Accumulate ₹ 1 Crore at the time of retirement

 

We all know starting early in investments means more time for the money to grow. This blog attempts to quantify this concept. As you can see a person aged 20 years needs to invest ₹ 2,000/- per month till retirement where as a person aged 35 needs to invest  ₹ 7,500/-

The illustrator below assumes a compounded return of 10%, compounded monthly.

 

AGE Amount Needed to Accumulate Rs. 1 Cr at Retirement (60 years)
(at 10% compounded annual return)
20 ₹        2,000
25 ₹        3,000
30 ₹        4,500
35 ₹        7,500
40 ₹       13,500
45 ₹       24,000
50 ₹       48,500
55 ₹     128,500

 

Amount Needed to Accumulate Rs. 1 Cr at Retirement (60 years)
Amount Needed to Accumulate ₹ 1 Cr at Retirement (60 years) . At 10% compounded annual return.

 

 

ABC of SIP Mutual Fund Investing

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ABC photo

ABC of SIP Mutual Fund Investing

 

A : Act early

Give your money time to grow. See the example below it is self-explanatory.

if your goal is to Save around 14 Lakh rupees for a goal which is 30 years ago. Let’s assume the rate of return is constant 12% per annum compounding. Here is what will happen if you invest today you will have to put in Rs. 2000/- per month in SIP however if you start saving 5 years later you will have to invest Rs. 4279/- to accumulate the same amount. So plan for expenses as early as possible. Expenses like retirement, child’s education/marriage etc can easily be planned in advance.

B: Back fund selection with a goal and research

Buy funds only after you have set a goal. A goalless investment may not meet your needs when you need the money. Hence do not just start a SIP of a random amount but plan the expense and invest accordingly. The choice of funds to invest would depend on multiple factors like your risk appetite and time you have in hand for your goal. Consult your financial advisor to get the details. If you are planning to do it yourself make sure you read well about the investments that fund houses make and keep reviewing your goal and investment at least once a year.

C: Continue investing even when markets crash or stay low

Market crash and low is your friend when you are in accumulation(investing) phase. When markets are low your SIP amount will fetch you more units of the mutual fund. Once you keep investing regularly you would have accumulated large amount of units that you can redeem near to your goal when markets are doing well. Remember selecting the point of exit is as important as point of entry.

 

TIP for a conservative investor: Try to exit the equity mutual fund investment 1-2 years before the date you ned money for the goal. You can park this money in debt or arbitrage funds to minimize losses of any. This way you will lose the rally if any in 1-2 years but you will still save your corpus if the market crashes.

 

 

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BSNL, MTNL merger likely by July next year

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bsnl photo

BSNL, MTNL merger likely by July next year

 

Another telecom giant in the making.

 

Link:  http://economictimes.indiatimes.com/industry/telecom/bsnl-mtnl-merger-likely-by-july-next-year/articleshow/41933897.cms

 

Conditions apply however

“The deadline of June-July 2015 has not been officially commissioned to the organisation but the merger is likely to take place in the time frame,” BSNL Director (consumer mobility) Anupam Shrivastava told PTI.

 

Refer to the story from the Economic Times

Photo by denharsh

Photo by denharsh

Steps to Financial Nirvana / Independence

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Steps to Financial Nirvana / Independence

Step 1 to Financial Nirvana / Independence: Create an Emergency Fund

  • This is needed to take care of any Financial emergency
    • Medical
    • Job Loss
  • Unwanted Travel
  • Sudden breakdown of a machinery like Car, TV etc.
  • Sudden loss of un-insured items like theft of cell phone etc…

Step 2 to Financial Nirvana / Independence : Get Insured

  • Life Insurance to take care of any unfortunate event
    • Contact your financial advisor on the amount of life insurance you need. Amount should cover all expenses and your outstanding loans.
  • Health Insurance for you and all your dependents
    • e.g a Family Floater Plan
  • Critical Care / Accidental Care Plan
    • This takes care of your dependent when you are not working and on bed rest
  • Insure your high value investments like house, car, business establishments etc.

Step 3 to Financial Nirvana / Independence : Invest Wisely

  • If you haven’t appointed a financial advisor yet please do it as soon as possible
  • Learn to differentiate between saving and investment
  • Have investment made for each of your life goals
  • Invest as per your risk profile and time to goal

Step 4 to Financial Nirvana / Independence : Miscellaneous Tips

  • Plan for at least one house (your retirement home)
    Prepare a will and keep your immediate family members informed about all your investments and insurance policies.
    Teach your dependents some money making skills so help them share your burden and be on their feet if you are gone.

Step 5 to Financial Nirvana / Independence Important to keep in Mind

  • Make sure to annually review your plan and make corrections based on your investment returns and changing goals
  • Splurge at times if your goals are on track. Who wants to live a miser life!

Step6 : Result the Financial Nirvana / Independence

  • Live a Happy and Financially independent live
  • The Nirvana!

 

Video

Pause before you invest more towards Income tax 80C deduction

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Off late I am seeing lot of spam SMS in my inbox asking me to take advantage of the enhanced income tax 80 C limit in the latest budget to Rs. 150000/- . On a recent visit to bank I was again reminded of the enhanced 80C limits by my relationship manager. Before you respond to such messages take a pause before you invest more towards Income tax 80C deduction. Why am I asking you to do this? You may just not need more investment.

Many a times people do not know all the options available under section 80C hence are easy targets for brokers in financial sector. Remember a bank employee is also a broker. So what was the pause that I was talking about? I had asked you to take a pause to fill in the table below. Once you have filled in the table sum total all your investments and see if you really need more. You may be surprised to see list of many available instruments under section 80C but that’s how it is. You have plenty of choice available to invest under section 80C, so go ahead get spoilt for a choice.

Pause before you invest more towards Income tax 80C deduction

STEP 1: Fill up the table below then sum total the total amount

* Make sure to include amount that you pay for your dependent
(spouse & child) as well
Saving Instrument

Total Amount Invested

Note
Employee Provident Fund (EPF)   Include only your contribution not employer’s contribution. While 12% of basic is a mandatory deduction, you can voluntarily contribute more towards your provident fund.
Voluntary Provident Fund (VPF)   While 12% of basic is a mandatory deduction, you can voluntarily contribute more towards your provident fund.
Public Provident Fund (PPF)    
Life Insurance Premium   Include term plan, endowment plan and ULIPs. Policy should give you 10 times life cover of the annual premium.
ELSS Mutual Fund    
Bank Tax Saving FD   This is a special product with a 5 year lock-in
5-Yr Post Office time deposit (POTD) scheme   This is a special product with a 5 year lock-in, similar to bank FD
Tuition Fees   Tuition fees to any college or school for self or dependent. Maximum of two children allowed.
Senior Citizen Savings Scheme   only for a senior citizen
Pension Funds (sec 80CCC)   For Example NPS, LIC Jeevan Nidhi, other pension plans etc.
National Savings Certificate(NSC)   Note: Not only new NSC qualify but, interest generated every year from your previous NSC is also eligible for 80C exemption.
Stamp Duty and Registration Charges paid while registering a home   Stamp duty paid at registration is also eligible under section 80C
Home Loan Principal Repayment   This is principle component of the EMI, ask your bank for breakup of principle and interest.

 

STEP 2: See if you are really falling short of Rs. 150000/- limit

  • Sum total all values in column “Total Amount Invested”
  • If you are falling short invest in a financial product depending on your life goals. Call up an advisor that you can trust to talk about multiple options.
  • If you are not falling short you do not need to invest for saving income tax under section 80C. You should still invest for other reasons, make sure you have a financial plan in place that takes care of your life goals.

Pre-Launch Flats booked but no land

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Pre-Launch Flats

The Times of India today reported a story titled Flats booked but no land in NOIDA. The managing director was arrested but in his defense he says he started selling it since he had made advance towards purchase of the land. The police in the investigations found no proof for advance made towards land purchase while the builder had collected booking advance from around 400 investors since 2011. The investors lodged a police complaint for cheating in March 2014 after seeing no construction since 3 years. The police in its investigation found out that the builder did not even had land forget the approval for selling and developing the project.

Pre-Launch Flats booked but no land

If you think this was the first case of Pre-Launch Flats booked but no land you are absolutely wrong. This is a common fraud/scam that keeps getting into media time and again. Cash-strapped builders often come out with schemes that can generate more money for them.

What are Pre-launch offers?

A pre-launch property has no physical existence and mostly exists on papers. Construction on such project is promised to start sometime in future. Before a builder starts construction the builder needs to purchase the land, get the necessary approvals and then start the construction after arranging for necessary funds required. Lawyers have often expressed concerns over legality of launching schemes before the approvals. Since these projects are not approved investors will not be able to get a bank loan for the investments made in such schemes.

Why do builders launch pre-launch schemes?

It’s all about money. A builder may need money to:

  • Builders have a fixed credit line and no bank will loan them infinite money hence they often use this route to generate money. Often secondary market lenders charge lot of interest hence this seems to be an easy route to generate cash.
  • Fund one of its other existing project.
  • Fund purchase of a new land somewhere else
  • To run its business like paying salaries.
  • Pay back loan the builder has taken from some lending institution.
  • A fraudulent builder may just launch it as a scam.
  • There are lot of reasons why a builder may launch a pre-launch project but the real underlying need is the builder needs money.

Why do investors fall for a pre-launch offers?

Investors often see a project being launched at a cheap rate. It has been seen projects being launched at a big discount of 30-40% of the market rates. Often these rates are many percentage points below the existing market rate of the property in the same area. Investors invest in greed for making most of their investments. Some investors also look at these opportunities to use their black money.

After all is it not wise to stay away from buying a home that does not even have a foundation yet?

What are the risks associated with a pre-launch offer?

  • Often these pre-launch offers are not signed as a contract It is just a written letter on a letter head, raising serious doubts on the legality of such receipts and letters that talk about intent to allot you a flat unit once the project is approved. The reason for not signing a proper legal contract is simple the project is not approved yet hence builders cannot sign a legal contract.
  • If the land is not bought yet the land may not ever be bought.
  • The timeline the builder is giving you to start the project may not hold good as approvals are beyond control of the builder and depend solely on government agencies.
  • Since layout, floor plan is not yet approved it may not even get approved or changed without any notice.
  • Since the builder has not yet got other approvals in place it may not even come or it may be considerably delayed.
  • If the builder is launching a pre-launch offer to generate money for one of its other existing projects you may face the same situation that your project will be delayed as builder does not have money to finish the project.
  • At this stage no banking institution has yet approved the project as project itself is not approved. There is no guarantee that in future the banks may offer you loan on the property.
  • If the builder has launched a pre-launch project just to raise money after exhausting all the other available credit lines the builder may just be nearing a bankruptcy.

Should you invest in a pre-launch real estate project?

NO. Unless you feel you have the required skill and time to understand points mentioned in the next section. I would recommend an average person to stay away from such schemes. After all is it not wise to stay away from buying a home that does not even have a foundation yet?

What are the skills required to understand a pre-launch offer?

  • Ability and time to recover money from the builder if you start getting a feeling that you were duped with an offer.
  • Ability to understand and interpret laws related to real estate, approvals etc…
  • Ability to read and understand the title deed of the land.
  • Ability to read and understand the approval documents for construction
  • Ability to understand the financial standing of the builder, if the builder goes bust later your money will be too difficult to recover.

What if I still want to invest in a pre-launch scheme?

Go ahead take the plunge at your own risk! Make sure you get all the necessary papers scrutinized for validity through various government agencies before making the first payment. Take legal help if required. There are lawyers near the registration office of each city that specialize in such activity for a fees that befits your project cost.

DISCLAIMER: This article is being written for the sole purpose of consumer awareness. This is not an advice on real estate or investments.

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Buying a Term insurance Plan is just half the job

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Half Baked Financial Plan

Half Baked Financial Plan

Buying-a-Term-insurance-Plan-is-just-half-the-job – Half Baked Financial Plan

So what do you find missing in the picture above. Moustache and shirt are half of what it should have been. Similar is the condition of financial plan of most of the people I meet. It is unfortunate to see that their death is necessary for the plan to succeed. With enough focus on advertisement insurers have been able to spread awareness of the importance of life insurance. However their campaigns cover just one part of the plan i.e. insurance , what about the money needed when individuals survive the term. Remember Buying a Term insurance Plan is just half the job

 Simply shopping term plans is not going to get you to your goals it needs to be backed well with a plan to generate equivalent amount at the end of the policy term.

Before you proceed further answer this simple question, which is a better situation to be in?

  1. Die early without adequate wealth for your dependants
  2. OR Living long without sufficient money for yourself and dependants

If you agree that none of the above option is a good one read along, we are on the same page.

Now sample this half baked financial plan

  • Rs. 1 Crore Life insurance GOOD
  • No plan to generate 1 Crore money if you survive the policy term BAD in fact VERY BAD actually TERRIBLE

So is your family dependent on your death to full fill their dreams? So am I not right when I say buying a Term insurance Plan is just half the job!

Think logical, think complete, think positive. Simply shopping term plans is not going to get you to your goals it needs to be backed well with a plan to generate equivalent amount at the end of the policy term.

Steps to avoid Half Baked Financial Plan

  1. Identify your life goals e.g. child’s education, child’s marriage etc…
  2. Consider the amount of money you need to full fill that goal if it was to be full filled today
  3. Arrive at an inflation adjusted amount. You can read this post to know how to arrive at the inflation adjusted amount.
  4. Buy a life insurance policy for the inflation adjusted amount, this covers financial implications should something happen to you.
  5. Now depending on your rick taking appetite invest in a plan to generate equivalent amount of money at the end of the  term.
  6. It is recommended to take a professional help in selecting insurance and financial products if you are not sure to be a expert in these things. OR if you will not be able to track progress on your investments year over year. It is important for the investment plan to be reviewed at least once a year for the progress made and making corrections if required.

Click Here to Contact for a Financial Plan

Bonus TIP: I recommend separate insurance and investment plan for each of your financial goals. This leads to a much flexible and earmarked plan for goals. Makes tracking easier doesn’t it?

Optional yet Recommended step to avoid a half baked plan

  • Understand your need for life insurance decreases as you accumulate wealth towards your goal.
  • You can split your insurance policy into few smaller ones of varying duration as per your wealth accumulation plan
    • Advantage: You can start surrendering policies as you accumulate wealth. e.g. If your life insurance need is Rs. 50 Lakhs and you have split it into 10 policies of Rs. 5 Lakh each, you can surrender a policy each time you have successfully accumulated Rs 5 Lakhs in your kitty.
    • Remember: A term life insurance plan is a waste of money when you already have enough money in your kitty and a must buy if you do not have enough. Once you have achieved your goal review and see if there is a investment plan that is not yet covered and if you can re-use it to partner that investment plan. Surrender only if you cannot find a use of continuing the term plan.

Say no to Half Baked Financial Plan and get a complete plan.

 

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Invest up to Rs. 2.35 lakh and save income tax u/s 80C and 80D

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Invest up to Rs. 2.35 lakh and save income tax u/s 80C and 80D

Section 80C (up-to Rs. 150000/-)

Life Insurance Corporation of India  (LIC of India)

  • Life insurance premiums are exempt under section 80C
  • All maturity returns are also tax free.
  • We offer all LIC of India policies

Equity Linked Savings Scheme (ELSS)

  • Investments in ELSS mutual funds are exempt under section 80C
  • There is a lock-in of three years, all returns are tax free
  • We offer all ELSS mutual funds from all Fund houses in India OFFER: ZERO Brokerage demat account when you invest through us.

Click here to contact for your Investments

Section 80CCG (up-to Rs. 50000/-)

Rajiv Gandhi Equity Savings Scheme (RGESS)

  • Aimed at first time investors who have not bought shares/equities using a demat account before
  • Maximum amount eligible for tax exemption is Rs 50000/-
  • Dividend payments are tax free
  • We offer many RGESS options.

Section 80D (up-to Rs. 35000/-)

Health Insurance for Self and Dependents

  • Invest in a health insurance policy from LIC or Star heath and claim a deduction of Rs. 15000/- (Rs. 20000/- if Sr. Citizen)
  • If you already have a company/government provided health insurance you can take a top up plan to increase the health cover. Premium for a top up plan is as low as Rs. 4300/- for a Rs. 5 Lakh deductible.
  • We offer LIC’s Jeevan Arogya and all health policies from Star Health

Health Insurance for Senior Citizen Parents

  • Invest in a health insurance policy from LIC or Star heath for your senior citizen parents and claim a deduction of Rs. 20000/-
  • This Rs 20000/- is in addition to exemption of Rs. 15000/- made for self and dependents
  • We offer LIC’s Jeevan Arogya and all health policies from Star Health
  • We offer LIC’s Jeevan Arogya and all health policies from Star Health

INCOME TAX SAVING TIPS: 

  • Investment should never be done only for tax savings, but if you have options that help money grow and save tax you should take it.
  • LIC of India, ELSS and RGESS can all be taken by breaking investments as monthly installments. Make use of it to spare the burden on cash flow in February or March.
  • A person in 30% tax slab should never let lot of money idle in your savings or fixed deposits. Mutual funds offer a much better tax efficient avenues, there are debt funds or arbitrage funds that offer much better tax saving avenues.
  • Hold on to your equity Mutual Fund for at least one year from purchase.
  • Hold on to your debt Mutual fund for at least three years.
  • Hold onto your real estate for at least 3 years. Gains can be reinvested or bonds can be purchased to save taxes on returns from real estate.
  • Invest in tax saving bonds to get a tax free returns compared to Fixed Deposits(FD) and Recurring Deposits(RD).
  • Keep in touch with your financial advisor to know more tax saving avenues on investment.

All you wanted to know about KBC scam

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KBC scam

All you wanted to know about KBC scam

Last year in 2013 Saradha scam rocked the parliament. This year another Ponzi scheme known as the KBC scam has been raised by the BJP MP Mr. Kirit Somaiya during the zero hour on 17-July-2014. The allegation was that a company called KBC Multi Trade Pvt. Ltd. / KBC Club and Resort Pvt. Ltd has duped thousands of Crores from innocent investors and has fled the nation. This article is all information that I have been able to extract out of newspapers and television news. At the time of writing at least 7 people were arrested in the connection; however the main promoters have allegedly fled to Singapore. At the center of the scam was a company with an army of field agents (mostly investors themselves). Investors were lured with high returns and were often shown big corporate office and were introduced to few people who had received their first payment. Basically it had characteristics of a typical Ponzi scheme; still many educated people also fell in the trap.

Lesson for the common Man from KBC Scam

  • Most important control your greed to get rich quick.
  • Invest only in recognized schemes. Company should be well recognized to you. Do your homework well.
  • Check your scheme at one of these places
      • SEBI maintains a list of recognized offers here
      • RBI maintains list of banks here
      • RBI maintains list of Non Banking Finance Companies (NBFC) here
      • Ministry of Corporate Affairs website maintains a list of chit fund companies; please search their website for updated list.
  • Schemes guaranteeing astronomical returns should always be seen with suspect.
  • When in doubt do not invest.
  • Understand the credentials of the agent first, if the agent offers you incentives on making more clients it is most likely another multi-level scheme that needs to be probed further.
  • If a close family or friends comes to you with a similar scheme offer them help they may be victims themselves this is how MLM frauds work. You will be introduced in the fraud through a close person and you will think many times before filing a police complaint. A fear of getting a close family member getting arrested also prevents many police complaints.
  • Last but not the least remember even recognized schemes can go bust hence be cautious and do some research on the background of the company and its financial strength.

What was the KBC Scheme?

financial fraud photo KBC scam

Benefits for Investors

  • Promise to double money before 3 years (30 month period)
  • People were asked to invest Rs. 7,200/- or Rs. 17,200/- or Rs. 57,200/- or Rs. 86,000/- Assuring a three-times return in less than three years, reports suggest the pay back were through postdated cheque to make it look credible.
  • Sample this offer:
    • Invest Rs. 86,000/- now
    • Get Rs. 86,000/- after six months
    • Get Rs. 86,000/- after eighteen months
    • Then finally get Rs. 86,000/- after thirty months. Thus giving huge three times returns in 30 months.
  • Sounds like a major customer benefiting plan isn’t it? The read benefit was in the end the organizer of the scheme who fled with the deposits.

Benefits for Agents

  • List of impressive benefits that can draw anyone to take up their agency
  • 20-30% in commissions upfront for all money brought into the scheme.
  • Make seven members and get a free trip to Mumbai
  • Make 36 members and get a free trip to Goa
  • Make 81 members and get additional Rs 5,000/- per month.
  • Make 250 members and get additional Rs. 10,000/- per month.
  • Make 12,500 members and get a bungalow worth Rs. 51 Lakhs as additional benefit.
  • Make 25,500 members and get a cash prize of Rs. 1 Crore as additional benefit.
  • The company also publically facilitated at least 100 agents who had got them deposits of more than Rs. 1 Crore.

About KBC Multitrade Pvt. Ltd / KBC Group of Companies

  • Chief promoters of the company are Bhausaheb Chavan, Aarti Chavan and Bapu Chavan. All are believed to be hiding in Singapore.
  • Bhausaheb Chavan a B.com graduate started off as a storekeeper in Nashik. He first lost some money in a multi level company but he realized the evil MLM empire he could himself build. He first founded a company called DBC multi-level marketing company pvt. Ltd. He had tasted success and this led to the establishment of KBC multi trade pvt. Ltd in year 2010.
  • Money started pouring in as investors lapped in the offer. The company then diversified its business onto many other areas like hotel business, real estate and financial services. Other group companies formed were Dombivali Fx Rich Bullion Financial Services Pvt. Ltd., KBC Club and Resorts Pvt. Ltd., KBC Ploters Pvt. Ltd etc.
  • Soon the company managed to lure thousands of investors across Maharashtra and other states.
  • Aarti Chavan is wife of Bhausaheb Chavan allegedly only studies till class 3.
  • Bapu Chavan is allegedly son of Bhausaheb Chavan

 Recommended Books On Ponzi Schemes

Watch few Video News Report on the KBC Scam

All copyright for the videos rests with the respective news channel. For some strange reason I could not find any story on the topic on YouTube by popular English news channels.

ABP News

IndiaTV

Zee News

India News

Jai Maharashtra News (Marathi Language)

Tv9 Marathi

 

Photo by DanMadia