Saturday, December 19, 2009

Perks tax rules replace FBT

Valuation of cars goes through a revision.

Employees will now have to pay taxes on perquisites given to them by their employers as the Central Board of Direct Taxes has notified the much-awaited rules for valuation of the benefits.
With these rules, the fringe benefit tax (FBT) being paid by employers for giving non-cash benefits, including cars and employee stock options (ESOPs), to employees will be abolished and replaced with a regime that will tax the perquisites in the hands of the employees. It could mean less take-home pay for employees.

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Sunday, November 29, 2009

Eight-step guide to financial planning

Financial planning is a matter of discipline, as a set amount has to be saved: People on their first jobs don't do much with the salary credited to their account, except spending

When you start earning, there is this rush of power you get by seeing money accumulate in your account month-on-month. And this can be quite addictive. More often than not, most people, especially those in their early twenties on their first jobs don't do much with the salary credited to their account, besides spending it.


If any money is left after the splurging, it usually lies in the account idle. This happens for two reasons: One, you don't know how to go about investing and two, you haven't really thought about investing any money as you have no need for it at the moment.
Now the latter reason is more dangerous because there is no such thing as too early when it comes to investments. The sooner you start the better. As for the former reason, here's a step-by-step guide to assist you in sorting your investment priorities.

Life, Health and Medical: That investments are a must is a given, All you have to do now is to work out how you intend to invest your money, i.e. what are your priorities, where you will invest money and how much. Now, this needn't be compulsory, but for those unsure of where to start from, insuring life and health (mediclaims) is usually a good idea. This is the most basic investment. It's one way of ensuring you don't make your family liable in case something happens to you. A mediclaim even offers cover for family, so it's security during troubled times.

Save judiciously: This is a matter of discipline. Each month, there has to be a set amount of money from your salary that is saved. It could be any amount, Rs 1,000, Rs 5,000 or Rs 10,000. The point is, each month, this amount has to be saved no matter how many birthdays or anniversaries happen. As the saying goes, A penny saved is a penny earned – so start saving!

What's your goal? You need to indentify this early. Each person has a financial goal. For some it is a three bedroom apartment in the suburbs, some others it's a car, or child's education or marriage, etc. The goals vary but these need to be identified quickly. First time earners may not really have an immediate goal, but this is where some thought is required. It's important as soon as you start earning to have some sort of an idea of what you intend to achieve with the money you make. This helps plan your finances immensely.

Prepare to invest: Once you know your financial goals, it helps to draw a basic sketch of the amount of money you will need to invest/save in order to achieve it. The investment options one chooses has a lot to do with a person's risk appetite. You need to gauge your risk-taking abilities. Some people prefer playing it safe, yet others like a bit of a gamble, if it means they can earn some quick bucks. The ideal approach is of course a balance of the two. But either way, investments are crucial. So be it, sedate and secure debt funds or aggressive and unpredictable equity funds, it's never too early to put in some money on these.

Repaying loans: It's unavoidable! At some point or the other, everyone finds themselves in some sort of debt. It could be your house, car, education or even your credit card. Whatever it is, your financial plan must include provision for paying off these debts. If you have more than one, then naturally, the priority will be the high-cost followed by the rest in that order. However, an early understanding of never spending more than you earn should ensure that you don't have to pay off bills and EMIs after the due date.

SOS provision: Emergencies don't call in before knocking on your doorstep. And while there's no guarantee of the degree of damage it brings, it is nevertheless important to have some provision for the same. Say an FD kept safe in the bank or shares of a popular stock or gold in the locker or any other investment that you can dig into if the situation calls for it. The important thing is to identify the funds you will use during emergencies.

Allocating assets: When you are making an investment plan, it's necessary to understand your money needs. Say, you will need money on hand in two years time to pay for your daughter's MBA, or money for down-payment of a car loan the next year. Identifying these needs will help you allocate your assets accordingly, such that you have liquid funds at the appropriate time. So, planning is not just about the end financial destination, it is also about accounting for the little stop-overs on the way. Your dream may be a duplex apartment, but on the way to getting there, you'll find yourself wanting a car, a vacation every year and perhaps some retirement provision as well. And your financial planning has to accordingly have assets distributed such that you can achieve those goals
 
Ask for help: This is the most important part of planning your own finances. You may have a good head for numbers, but it still doesn't mean you have to do it alone. Planning your finances, allocating assets and monitoring their performance constantly is a huge task and you will definitely need assistance. So, never shy away from looking for that help. And it's a lot easier now. All you need is a relationship manager from your bank who will supervise and monitor your investments. This person will also guide you on various investment options. You should listen closely to all the advice, but never take action on any until you've done your own research.
So, do save, make a plan and start investing now!
 
Author: Seema Hariharan
 

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Monday, November 23, 2009

Launch of Birla Sunlife Platinum Plus IV



'Highest NAV in 7 years…Guaranteed'
15 December, 2009.
Applications to participate in Platinum Plus Fund IV will be accepted until





We are pleased to inform you that Birla Sunlife Insurance Company has relaunched the "Birla Platinum Plus IV" .The product details of the new product"Birla Sunlife Platinum Plus IV" are similar to the product"Platinum plus III" which offers both Wealth & Protection by Highest NAV Guarantee and 100% liquidity after 3 years.So, in order to refresh you with the product,the details of the product are being mentioned below:

    

This product protects not only your NAV but its growth too. So participate in equity markets with highest NAV of 7 years as guaranteed on maturity coupled with a Limited Premium Paying Term of 3 years!!!




Objective:

To optimize the participation in actively managed well diversified equity portfolio of fundamentally strong Blue Chip Companies while using Debt instruments & Derivatives to lock-in capital appreciation.







Key Features:

Ø      Limited Premium Paying Term of 3 yrs.

Ø     Advantage Partial Withdrawals after 3 Policy years to curb liquidity crunch without any charge.

Ø      Full liquidity after 3 Policy years i.e 100% Fund Value.

Ø      Best of Class Investment in Platinum Plus IV Fund.



Boundary Conditions:




Policy Term

 10 years

Min/Max Age at Entry

 18 – 70 yrs



Max Age at Maturity

 80 years

Minimum SA

 5* Annual Premium  




Minimum Annual  Premium



 Rs 50,000 for Annual Mode,

 Rs 25,000 for Half – Yearly Mode,

 Rs 15,000 for Quarterly Mode,

 Rs 10,000 for Monthly Mode.

Fund Options

100% in Platinum Plus Fund IV




Premium Payment Terms

 3 yrs with Annual/Semi-annual/Quarterly/Monthly Mode

Tax Benefits

 Avail Benefits under Sec 80C and Sec 10(10D)




Maturity Benefits:

On maturity the Life insured will receive the Higher of:-

Policy Fund Value OR {Highest NAV of 7 yrs X No of Units at Maturity}.




Death Benefit:

In the event of death the nominee will receive: Higher of Fund Value or Sum Assured.




Product Pitches:



1.     A perfect solution for Fixed Income Investors :-

Give your Fixed Income Investors the cushion of Guarantee coupled with Equity Return.




2.      Get Best of both Worlds – Highest NAV in 7 years guaranteed at Maturity boosting both Wealth & Protection.




3.      Get the Best out of Life Guaranteed' – Platinum Plus IV lets you participate in Equity market with protection against downside risk through Guaranteed Maturity Unit Price (GMUP) and  Risk cover to suit your needs, its not get all this with a limited PPT.









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Sunday, November 8, 2009

Beware of insurance mis-selling at banks

Beware of insurance mis-selling at banks
 Rucha Biju Chitrodia, TNN

These days, you may walk into a bank for a fixed deposit and leave with an insurance product as well. But what if the policy turns out to be not what you had bargained for?

According to a senior banking ombudsman official, mis-selling of insurance products is known to occur at branches of some private sector banks. Consumers must know that mis-selling is not restricted to anonymous tele-banking executives , mentioned earlier in these columns.

Even regular executives at a bank branch could sell a product that may fall short of promises. Aggressive marketing is a reality in bancassurance — the official term for selling of insurance products by banks.
 
 Says the official: "We have some complaints where customers have been sold unitlinked life policies without being told that these involve more than a one-time premium . When they learn about the fact during renewal and choose to opt out, they barely recover 40% of the amount they originally paid.''

In one instance, a consumer had shelled out Rs 50,000 as premium. When, after a year, he learnt that he would have to pay the amount annually over three years, he decided to withdraw.

The consumer got just Rs 20,000. The problem, the official says, is that customers sign up for policies without reading the documents . As they have an existing relation with their banks, they enjoy a certain degree of comfort, which makes them sign up without asking too many pertinent questions.
 
 What is more unfortunate is that because the documents are signed, the banking ombudsman can do little. "The documents are signed and every form is properly filled. Also, customers are allowed a look-in period of 15 days to return the policy, but they don't. Besides, these products have the approval of IRDA. We are not in a position to help,'' the official says.

S B Mathur, secretary-general at Life Insurance Council , says a bank customer is usually well-informed , but may still be a little careless about going through the terms and conditions of a policy. "Even in the forwarding letter , if you find something wrong, you can cancel it... That's the problem, you can take the horse to the water, but cannot make it drink,'' says Mathur, admitting that there may be "aberrations' ' in the sale of unit-linked policies.
 
 "We are talking of a total of approximately 30 crore life policies as on March 31, 2009. About 5 crore policies were added only last year,'' says Mathur, adding: "this immense growth was seen in a year of economic slowdown. It cannot be ruled out that some mis-selling may have been involved. On the whole, though , the parameters indicate a positive improvement in the quality of sales process.''

The sectoral watchdog had set up a committee to draft recommendations for the bancassurance model. IRDA officials, though, refused to comment on the progress of the initiative.
 


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Demystifying insurance policies

Demystifying Insurance Polices
Vidyalaxmi, ET Bureau
 
Rajesh Sinha, a 30-year-old marketing professional had five insurance policies where he was paying a premium of Rs 50,000 against each of
the policies. With such a huge premium outgo, he was under the impression that he was more than adequately insured.

But little did he realise that his actual insurance need was 10 times his annual salary which was over a crore of rupees. Against this each of his unit-linked policies (Ulip) schemes offered protection for only Rs 2.5 lakh i.e. a total cover of Rs 12.5 lakh.

The proliferation of Ulips has taken away the focus from insurance. Buying insurance needs a staggered approach and one has to review/expand the cover as s/he assumes more responsibilities such as marriage, having children or dependent parents.

HOW TO REVIEW YOUR COVER

Today single-
income families are making way for more double-income families. But that doesn't reduce the financial responsibility for either of the spouses.

"The need for insurance emanates from the various obligations that the breadwinner is expected to fulfil such as children's education, retirement, health and savings. These change with the changing life stages and are driven by the individual's specific needs. Thus, each individual should put a rupee value to each need and thereafter conduct a self-risk assessment," Leena Dhankher Joshi, AV-P, life, accident & health profit centre, Tata AIG Life Insurance.

This may sound very complex, but is quite easy. Assume a complete discontinuation of your income and evaluate the implications of that on your family.

This self-assessment coupled with the current life stage and the responsibilities towards the family. For example, children's education, marriage, retirement plans and various liabilities such as home loans will help you asses your insurance needs. A ball-park figure is 10-15 times your salary, which should be the size of your insurance cover.

INSURE YOUR HOME LOAN

If you have a large home loan, it's a wise option to cover the liability. A borrower wouldn't want to pass on the financial burden to his spouse or dependent parents in case of an unexpected demise or even a disability and hence a job loss. Life insurance companies have designed home loan insurance covers in alliance with banks to cover this risk. However, a simple term plan could be a better back up than these home loan insurance cover, financial advisors say.

"Let us assume a borrower has opted for a home loan of Rs 30 lakh. Now, in case of a term cover, an individual of 35 years can opt for a term cover of Rs 30 lakh and pay an annual premium of around Rs 8,000. If an individual would have opted for home loan insurance, he would have had to pay an upfront amount of Rs 1.52 lakh as an insurance cover on the Rs 30 lakh home loan.

Now, this could prove to be loss to a customer if he prepays the loan within 10 years. Secondly, the insurance amount is calculated on a reducing balance basis. So the value of the cover falls with every passing year," Suresh Sadagopan a certified financial planner, Ladder 7 Financial Services.

BUY EARLY, BUY BIG

You can opt for a step-up option which increases the value of the sum assured over a period of time. This comes at a higher premium as it proves to be more cost-effective than buying multiple policies. For example, SBI Life offers a term product called Shield in three variants.

The first one is called a level cover, which is a fixed sum assured throughout the term of the policy. In the second and third options, a customer can increase the sum assured by 5% every year and 50% every five years. If 30-year old Mr Sinha opts for a 20-year level term policy, he would have paid an annual premium of Rs 2,504.

The 5% step-up option will cost Rs 3,552 and for the 50% step-up option the premium will be around Rs 4,189. But if Mr Sinha is planning to enhance the life insurance coverage to Rs 50 lakh (even half of his requirement), he would be better off investing in the 50% step-up option.

Even if Mr Sinha invests the difference amount (between level term policy and 50% step up option premium) in a fixed deposit at 6% even then he will have to dip into other reserves/savings to fund the premium of another policy after 42 years of age. The interest saving alone will not suffice.
 

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Sunday, November 1, 2009

ICICI Pru Pinnacle: Guaranteed Highest NAV

ICICI Pru Pinnacle

ICICI Pru Pinnacle is a unit linked insurance policy that offers the advantage of varying exposure to equities along with downside protection, so that your investments are protected in financially volatile times. It also offers a limited premium payment term while allowing you to enjoy insurance protection for a longer period.

ICICI Pru Pinnacle is similar to SBI Life's Smart ULIP, BSLI Platinum Plus and TATA AIG's Invest Assure apex.

All three plans guarantee the highest NAV on the maturity during the fixed term.

ICICI Pru Pinnacle guarantees highest NAV recorded on daily basis for the first seven years (from 24/10/09 to 24/10/16).

  • This policy has two distinct features.Addition of amount equal to 3% of fund value (not highest but prevailing NAV on maturity). This will enhance the return further.

  • Unlike other two plans (Smart ULIP and Invest Apex Assure), highest NAV is recorded on daily basis.

Features and benefits of ICICI Pru Pinnacle

 

Guaranteed NAV

 

With ICICI Pru Pinnacle, we guarantee the highest Net Asset Value (NAV) recorded on a daily basis, in the first 7 years of the fund, subject to a minimum of Rs.10. The guarantee will be applicable only at maturity. The period of 7 years starts from the date of launch of Pinnacle Fund and will end on the completion of 7 years (from 24/10/09 to 24/10/16).

 

At maturity, the higher of Fund Value (Units X NAV) and Guaranteed Value (Units X Guaranteed NAV) as on the maturity date shall be payable.

 

 

Scenario 1

Scenario 2

Number of Units at maturity
(A)

50,000

50,000

Guaranteed NAV
(B)

Rs.20

Rs.20

NAV on maturity date
(C)

Rs.15

Rs.25

Guaranteed Value
(A x B)

Rs 10.0 lacs

Rs 10.0 lacs

Fund Value
(A x C)

Rs 7.5 lacs

Rs.12.5 lacs

Higher of (Guaranteed Value, Fund Value)

Rs. 10.0 lacs

Rs. 12.5 lacs

 

 

Not only this, ICICI Pru Pinnacle gives a boost of additional allocation amounting to 3% of Fund Value on the day of maturity (Guaranteed NAV will not be applicable to additional allocation)

 

Premium Payment Term

 

3 years

Minimum Premium

 

Rs.50,000 per annum

Modes of Premium Payment

Half yearly/Yearly

Minimum/Maximum Entry Age

8/ 65 years

Policy Term

 

10 years

Maximum Maturity Age

 

75 years

Minimum Sum Assured

 

5 x Annual Premium

Tax Benefit

Premium and any benefit amount received under this policy will be eligible for the tax benefit as per the prevailing Income Tax laws.

 

  1. Guaranteed NAV: get the benefit of the highest NAV recorded on a daily basis, in the first 7 years of the fund, at maturity.

  2. Limited premium payment term:  pay premiums for only 3 policy years.

  3. Additional allocation: added to your fund at maturity.

  4. Death benefit: in the unfortunate event of death, the nominee receives higher of Sum Assured (reduced by partial withdrawals) and Fund Value.

  5. Partial withdrawals: ensures liquidity from the 6th policy year onwards.

  6. Tax benefits: avail tax benefits on the premiums paid and benefits received under the policy, as per the prevailing Income Tax laws.

ICICI Pru Pinnacle:  UIN 105L095V01


 
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Wednesday, October 28, 2009

RBI hikes SLR by 1%, leaves key rates unchanged

 A hawkish Reserve Bank of India (RBI), while staying away from hiking key rates like repo or reverse repo, hiked the statutory liquidity ratio (SLR) to 25% from 24%. The cash reserve ratio (CRR), the minimum amount banks need to park with the RBI, was also left unchanged.

Repo and reverse repo are rates at which the RBI lends to banks and vice versa while SLR is the minimum amount of cash, gold or bonds banks need to maintain with themselves.

 

By hiking the SLR, the RBI may be signalling its leaning towards tightening the accommodative monetary policy.

 

Late last year and during early 2009, the RBI and the government of India introduced various measures including cutting rates and releasing stimulus packages to boost lending and demand in the economy.

 

Inflation target upped

While the excess liquidity in the system may have succeeded in turning the economy back on the recovery track, it could be meet its first after-effect in the form of rising inflation soon. In fact, in the mid-term review, the RBI increased its March-end wholesale price index (WPI) inflation estimate to 6.5% with an upward bias, revised from its earlier target of 5%.

 

The estimate for FY10 gross domestic product (GDP) growth was left unchanged at 6.0% with an upward bias.

 

Also, the central bank cut its FY10 credit growth target to 18% from 20% that it had set in the July monetary policy review.

 

Stricter NPA norms

The RBI also asked banks to ensure that their total provisioning coverage ratio is not less than 70% and imposed a timeframe of September 2010 to achieve this target. The coverage ratio is a measure of the bank's ability to absorb potential losses for non-performing assets (NPAs) and is arrived at by calculating the loan loss reserve balance with the total non-performing loans.

 

Most banks will thus to significantly raise the coverage ratio.

 

Realty loans tighter

Among one of the discernible decisions that the RBI took in its review, it increased the provisioning requirement for advances to the commercial real estate sector classified as 'standard assets' from the present level of 0.40% to 1%, a move that makes lending to the sector tougher. "In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets," the RBI said.

 

RBI view

"There has been a discernible improvement in the global economic outlook since the First Quarter Review in July 2009," RBI Governor Duvvuri Subbarao said, in his review statement. "In India too, there are definitive indications of the economy reverting to the growth track. Accordingly, attention around the world, as also in India, has shifted from managing the crisis to managing the recovery."

 

Subbarao admitted that India faced a unique dilemma that developed nations did not face — that of inflation: "First, most of these countries do not face an immediate risk of inflation. Indeed, in several advanced economies, the concerns were about a possible deflation, which are just about waning. On the other hand, India is actively confronted with an upturn in inflation."

 

The governor said that, around the world, timing an exit from the stimulus packages was leading to an "active and animated" debate. "The 'exit' is a central issue in our policy matrix too. As the Reserve Bank has indicated in several public statements, our current monetary stance is not the steady state and we need to reverse the expansionary stance," he noted as he made cases for both beginning and deferring the monetary tightening.

 

Experts react

"We are very happy that the governor and the RBI have kept the main parameters of the policy intact. This is what we had hoped for," Finance Secretary Ashok Chawla said. "The composite number of inflation is expected to be about 6% by the end of March 2010. That is something, which will be kept in mind by the policymakers both here as well as the RBI as they have mentioned in their policy statement."

Reacting to the monetary policy, HDFC Bank's Chief Economist Abheek Barua said the hike in SLR would support the large borrowing programme of the Centre and states. "I see the RBI hiking the CRR in December 2009 or January 2010," he said.

 

The RBI upping the provision for lending to real estate will affect affordable housing, realty projects, HDIL said. "We will have to up prices to nullify the RBI hike," a clearly distraught HDIL said.

 

— With inputs from CNBC-TV18 and agencies
Published on Tue, Oct 27, 2009 at 11:23 , Updated at Tue, Oct 27, 2009 at 20:15
Source : Moneycontrol.com

http://www.moneycontrol.com/news/economy/rbi-hikes-slr-by-1-leaves-key-rates-unchanged_421041-0.html


 
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Sunday, October 25, 2009

Sunday Newsletter 25-10-2009

 

Sunday Newsletter for 25-10-2009

 

Weekly Change

Index 17-Oct-09 23-Oct-09 Change(Pts) Average Daily Volume (Rs.Crores) Change in Volume (% over previous week)
Sensex 17,326.01 16,810.81 -515.20 5574 4.30
Nifty 5141.8 4997.05 -144.75 17294 9.61

 

Volatility Watch

Date 11-07-07 (Base Value) 19-10-09 20-10-09 21-10-09 22-10-09 23-10-09
SENSEX 14910.62 0.00 17223.01 17009.17 16789.74 16810.81
Raghav's Picks Sensex Volatility Indicator 100.00 0.00 76.18 73.00 72.27 71.27

 

 

Indices Watch 23-10-2009

Index Previous Close Open High Low Close % Change
Sensex 16789.74 16795.66 17006.77 16765.20 16810.81 0.13
BSE - Midcap 6444.27 6506.33 6575.46 6488.06 6510.89 1.03
S&P CNX Nifty 4988.60 4986.55 5054.95 4983.25 4997.05 0.17
CNX Nifty Junior 9661.05 9695.85 9850.85 9695.85 9739.95 0.82
CNX IT 5033.60 5054.30 5163.90 5054.30 5126.15 1.84
CNX Bank Nifty 9090.10 9189.10 9261.60 9131.05 9188.40 1.08
S&P CNX 500 4089.80 4140.80 4149.65 4095.70 4104.75 0.37

 

 US$, 10 Year Bond Yield & Sensex Earnings Yield

Date Rs/$ 6.90% 2019 Bond % Sensex Earnings Yield %
22-10-2009 46.66 7.38 4.64
23-10-2009 46.45 7.47 4.65

 

 Inflation

Week ending Inflation (%)
03-10-2009 0.92%
10-10-2009 1.21%

 

 

 
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