Category: Personal Finance

How your motor insurance comes handy in case of breakdown

Personal Finance

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Two neighbours’ daily routine of watering plants leads to an interesting conversation.

Sindu: Hey, you missed the event on plant protection. It was so informative. There are so many simple hacks to grow plants.

Bindu: Oh! I so wanted to come but my car broke down and my entire morning went away in getting someone to bring a mechanic.

Sindu: What? You could have asked your insurer for RSA? Or didn’t you opt for the rider?

Bindu: I don’t even know what RSA is, to start with. So, how do I say whether I have opted for such rider?

Sindu: RSA stands for roadside assistance. It can be of great help, in the event of a breakdown of your car, like it happened yesterday, or in case of an accident. All you need to do is to call your insurer company and inform them about the problem and your location. They either offer help over the phone or send a representative (mechanic) to your location

Bindu: What if the problem isn’t resolved?

Sindu: Then, your insurer/mechanic will arrange for the car to be towed away to a nearby garage for repair. Also, as part of the RSA cover, some insurance companies arrange for your accommodation till the issue with your vehicle is resolved. Alternatively, you can avail of a taxi service to office/house. This facility is, however, provided to only one destination.

Bindu: This is great news! What are all the services that RSA covers?

Sindu: The list of services varies across insurers. But broadly the RSA should provide coverage for mechanical/electrical breakdown, towing the car, fuel delivery (you will have to bear the fuel charges though), flat tyre, minor repair services, spare keys for your car, accommodation, travel/taxi arrangement and cost of legal advisor.

Bindu: Good. If I had known about this, it could have saved me lot of trouble.

Sindu: Hold there. RSA is mostly offered as an add-on cover with your motor insurance. That means, you will have to pay additional premium to avail this rider. So unless you opted for this cover specifically, your policy will not cover you.

Bindu: Killjoy. Oh well, I wouldn’t mind it, if it comes to my rescue during an emergency.

Sindu: True. But think through a few points carefully, before you buy the rider. One, older your car, the higher will be the chances of mechanical problems. So, many insurers will not be willing to offer this cover for such cars. Two, if you use your vehicle to travel long distances frequently, it is advisable to opt for this cover. But some dealers offer RSA for new vehicles too. So, you can go for RSA with an insurer after the expiry of dealers’ services contract.

Bindu: Okay… is there any limit to the number of times I can avail this service?

Sindu: Yes, but Insurers cap the number of times, limit but the cap varies with each insurer. For instance, ICICI Lombard offers RSA for maximum of four claims.

Bindu: So, now that you have told me the positives, what are the exclusions?

Sindu: The general exclusions that apply on your motor cover, apply to this too. But specifically with respect to this rider, you shouldn’t use the vehicle for any illegal activities like motorsports. Your driving should be as per rules and regulations and the insurer should be informed about the breakdown or RSA requirement immediately. If you get repair work done without the insurer’s approval, you claim could get rejected.

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Tax query: What’s the tax liability for buying resale property using proceeds of equity investment?

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I am planning to buy a resale property using the proceeds from sale of my shares held in ICICI direct. What will be my tax liability, considering the fact the shares held in the account are one year old to seven-year old? Also, advise me on the precautions needed while buying a resale house.

Nilesh

Assuming that the shares held in ICICI direct are listed on Indian stock exchanges and are held for a period of more than 12 months, the gain/loss arising on sale of these shares shall be treated as long-term capital gain /long-term capital loss (LTCG/LTCL). As per Section 112A of the Act, LTCG in excess of ₹1,00,000 earned from sale of listed equity shares on which securities transaction tax has been paid shall be subject to income tax at the rate of 10 per cent (excluding surcharge and education cess).

Where the shares are purchased before January 31, 2018, the cost of acquisition shall be the higher of the following:

· actual cost of acquisition; or

· lower of (i) fair market value (FMV) of such share on January 31, 2018 (highest quoted price) or (ii) full value of consideration as a result of transfer.

You can explore deduction under Section 54F of the Act in case the net sale consideration arising from the sale of shares is invested in purchase of a residential house property within one year before the transfer date or within two years after the transfer date subject to specified conditions.

In regards to the purchase of immovable property, as per Section 194-IA of the Act, you will be required to deduct taxes at source (TDS) at the time of making payment of the sale consideration to the seller @ 1 per cent (assuming seller is a resident of India), where the sale consideration of the said property is equal to or exceeds ₹50 lakh. In such case, you will also be required to file a TDS return in Form 26QB and issue a Form 16B to the seller of the property.

A senior citizen engaged in businessis expected to make payment of advance tax based on his earnings. I would like to know the following: (i) if a senior citizen makes investment on equity, does he need to pay advance tax based on the quarterly earnings? (ii) if a senior citizen does trading on equity (buying and selling shares) will the same (payment of advance tax) be applicable? Please clarify while keeping in mind long- and short-term gains.

RM Ramanathan

As per Section 208 of the Income Tax Act, 1961 advance tax is applicable if the tax liability (net of taxes deducted or collected at source) on taxable income is ₹10,000 or more. As per Section 207 of the Act, liability to pay advance tax doesn’t apply to a resident senior citizen (who is aged 60 years or more), not having the income from business or profession.

Scenario I

The senior citizen doesn’t have income from business/profession:

Earnings on investment in equity could be in the form of dividend & capital gains (long term or short term, depending upon the period of holding) which are chargeable to tax under the head ‘Income from other sources & Income from Capital gains, respectively.

In view of the provision discussed above, payment of advance tax provision doesn’t apply in this scenario.

Scenario II

Senior citizen derives income from business/profession (trading of shares):

Since the senior citizen is trading in equity (which may include shares held as stock-in trade, intraday transactions etc.), it would tantamount to carrying on a business.

Accordingly, the advance tax provision of section 208 shall apply and he is required to pay advance tax if the net tax liability exceeds ₹10,000 in a FY.

The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in

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Should you go for pre-IPO investing?

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With IPO subscriptions going through the roof and the pricing in IPOs expensive in many cases, investors have an option to participate early by investing in companies through the pre-IPO market or the unlisted market. This market, in which HNIs and even retail investors have started investing, helps invest in companies that are unlisted and are expected to go for an IPO in the mid to long term.

According to Unlisted Zone (amongst top 10 unlisted share brokers), their gross transaction value in the unlisted market has gone up from ₹2.1 crore in 2018-19 to ₹19.1 crore in 2019-20. In FY21 (so far), it has been more than ₹40 crore. Also, the number of transactions earlier were 5-10 per day compared to 20 per day now.

How it works

A typical deal in the unlisted market starts with a buyer (with a demat account) getting connected to an unlisted shares dealer. The price and brokerage is agreed upon. The buyer sends money to the seller after which the share transfer is done along with a transaction proof exchange. By T+0 evening or T+1 morning, the transaction is completed with unlisted shares reflecting as ISIN numbers in the demat account of the buyer.

There are no set rules on what is the minimum and maximum investment limit under the pre-IPO investing. It usually depends on the broker you are interacting with. Earlier, the minimum size for pre-IPO deals used to be a few lakh of rupees. But with the ecosystem gaining more depth, i.e., more brokers, more buyers, more ESOP sellers, more research and start-up investing gaining traction, one can start transacting with as little as ₹25,000.

The benefit of a pre-IPO deal is that you buy the companies at an earlier stage and at a cheaper valuation, if available, compared to buying as a normal investor at the IPO. If you can identify opportunities before the market at large does, it can translate to much greater gain when the company goes for an IPO and lists its shares.

Beware the risks

Pre-IPO investing certainly does look interesting but before pushing the pedal on this instrument, understand that it involves high risk.

First, the pre-IPO market is illiquid. You may not be able to sell your shares when you want as there may not be any buyer in the market. The liquidity is low because it is a niche segment that trades over the counter and not through an exchange.

Second, the risk of IPO timeline. The IPO of the unlisted company you invested in can get delayed due to market conditions. Also, it is better to check if the management has provided any guidance on their IPO plans.

Next is the valuation at which the unlisted shares are being bought. Unless, a comprehensive valuation check with listed peers is done, you may end up buying at high valuations.

Further, there is the risk of being charged higher transaction costs by the broker you are dealing with. Investors should note that they can pay maximum 1-2 per cent premium on the cost price as brokerage. So, check prices with a few other dealers and compare before you enter a transaction.

Note that pre-IPO investing comes with a one year lock-in once the company’s shares get listed. So, one may miss the listing gains if the company makes a successful debut on the markets.

Also, if the fundamentals of the company changes and that warrants selling the stock, you may not be able to do so until one year.

Finally, one has to be cautious of frauds. Last year, a Bangalore-based prominent wealth management firm’s founder was arrested for a pre-IPO investing fraud. They took the money for the shares but never delivered the shares. Always deal with a trusted broker with a good track record.

Note that since there is no ombudsman or appointed entity for redressal, the only legal option left is to file a police complaint against the individual or directors of the company.

Taking into consideration all of the above, it becomes apparent that only investors with mid to high risk appetite should take a look at this instrument.

The writer is COO at JST Investments

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Readers’ Feedback – The Hindu BusinessLine

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This is with reference to the article titled ‘Is tax harvesting that good an idea?’ published on March 14. The story is really good. If investors can benefit from tax harvesting without facing any hitches, it will help them save ₹10,000 in taxes.

—KS Raghavendra

This is with reference to the article titled ‘Fiem Industries: Easier ride ahead’ published on March 14. Nice analysis.

––Vijay

This is with reference to the Statistalk titled ‘The rise of SPACs’ published on March 17. Let’s hope they only allow accredited investors, or have a minimum investment/net worth amount for SPACs, if they come to India.

––Mrin Agarwal

In BusinessLine Portfolio Star Track MF Ratings, currently only the growth option schemes are listed. For those who have invested in the dividend option, we are not able to track current NAV or one-, two- and three-year returns. Is it possible to add dividend option to the ratings?

––Vijaykumar Shingade

I am a regular reader of BusinessLine Portfolio. Kindly try to incorporate the 10-year trailing returns in Star Track MF Ratings, which will give a better picture for a long-term investor in mutual funds. I take this opportunity to thank the entire team of BusinessLine for continuous good reports.

––Balamurali PK

BusinessLine Research Bureau says (for the above two comments): Thank you for your feedback. We will strive to incorporate your suggestions.

I have been a regular reader of Business Line Portfolio/ Investment World since its launch. I like the ‘Taking Stock’ page. If possible, kindly publish the IPO recommendations for the forthcoming week on Sundays.

––Tarakaram Bussetti

BLRB says: Thank you for your patronage. We will strive to cover IPOs, as much as possible, in the Sunday edition itself. We are sure you will appreciate that unlike many other publications, we do a deep-dive analysis of IPO stocks. Sometimes, we may not be able publish the analysis on Sundays when the IPOs are announced at short notice, as we require a reasonable amount of time to do research and write a recommendation. Under such circumstances,we carry it on weekdays.

BusinessLine is certainly different from the rest. It’s contrarian and independent writing is the key differentiating factor. It doesn’t look to politicise or ever put things in a diplomatic way. I always look forward to reading BusinessLine.

The Portfolio edition is especially really insightful and thought-provoking. The content is unique, independently written and covers a spectrum of topics in the field of investing. Appreciate all of this. Many thanks!

––Varun Bang

As a finance faculty, I always get excited to carry BusinessLine to my class. We do a lot of analysis on various topics highlighted in BL. My students also are very much eager to read BL Portfolio on Sundays. Thank you so much for publishing BusinessLine.

––Prof Dibyendu Sundar Ray

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Are target maturity funds safer than other debt MFs?

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The credit ratings downgrade of IL&FS in 2018 followed by that of a few others such as DHFL and Yes Bank in 2019, impacted the NAVs of debt funds and brought home the point that these funds are not immune to credit risk. This year, impacted by a rise in bond yields, many longer duration debt funds have been reporting negative returns the last few months. In the past too, there have been such instances, bringing to the fore the interest rate risk involved here.

In this backdrop, target maturity funds whichoffer certainty of return (to a large extent) and a fair degree of safety are an attractive option for investors seeking an alternative to fixed income instruments such as bank fixed deposits. This is particularly so for those in the higher tax brackets. Many asset management companies such as Nippon India MF, Edelweiss MF and IDFC MF have launched open-ended target maturity debt funds recently.

The brass tacks

Target maturity funds have a defined maturity as indicated in the scheme name and passively invest in bonds of a similar maturity constituting the fund’s benchmark index. On maturity of the fund, investors are returned their investment proceeds (initial investment plus return).

These funds buy bonds such as corporate bonds, G-Secs (GOI bonds), SDLs (state government bonds) or a combination of these, in line with their benchmark index. For instance, the newly launched IDFC Gilt 2028 Index Fund will invest in the constituents of the CRISIL Gilt 2028 Index. Other debt funds, on the other hand, may sell bonds before they mature.

From a credit quality perspective, target maturity funds investing in G-Secs or SDLs, both of which enjoy sovereign (government) guarantee, carry no credit risk (risk of default) and are safe. Also, while funds investing in corporate bonds issued by public sector entities may rank a notch lower (AAA instead of sovereign rating), the government backing enjoyed by these entities lends comfort.

Return visibility

The biggest USP of target maturity funds is that they provide a certain degree of return visibility for those who stay invested until maturity. While the fund NAV gets impacted by interest rate changes in the interim, in the form of mark-to-market losses (or gains) on bonds in the portfolio, if you stay put until maturity, you will get the return indicated at the time of investing in the scheme.

For example, the indicative return (yield to maturity minus the expense ratio) for the recently launched Nippon India ETF Nifty SDL – 2026 Maturity and the IDFC Gilt 2028 Index Fund (direct plan) is 6.15-6.25 per cent and 6.24 per cent, respectively. The two funds have a tenure of around five and seven years, respectively.

Today, you can get up to 5.5 per cent, and 6.7 per cent per annum, respectively, on five-year public sector bank and Post Office (PO) fixed deposits. Floating rate savings bonds from the Central government with a seven-year lock-in offer 7.15 per cent per annum (paid half-yearly) currently. Interest income from these products is taxed at your income tax slab rate. Note that, the interest rate on PO deposits and the GOI bonds is reviewed quarterly and half-yearly, respectively. Capital gains made on target maturity funds (debt funds) held for over three years are taxed at 20 per cent with indexation benefit, making these funds an attractive post-tax option for those in the higher tax brackets.

Unlike in fixed maturity plans, in open-ended target maturity schemes, investors can enter as well as exit at any time. However, despite the inflows and outflows to and from these schemes, the possible impact on returns for those invested until maturity may be very small. According to Arun Sundaresan, Head-Product Management, Nippon Life India Asset Management, this will not impact returns, just like how equity open-ended index funds work. Interest rate movements during the tenure of the fund, however, may have a marginal impact, possibly 10-20 bps under a normal interest rate situation. “Sufficient liquidity in G-Secs ensures trades can be done seamlessly with very little impact cost,” adds Sirshendu Basu, Head-Products, IDFC AMC. Note that, this may, however, not be true for corporate bonds and SDLs to the same extent.

Stay put

Today, with economic growth recovering, the risk of inflation rising, and the gradual unwinding of the liquidity measures, no further rate cuts are expected from the RBI. As a result, you must be prepared for the possibility of capital loss (interest rate risk) as rates move up gradually, if you exit a target maturity fund prematurely. So, it’s best to choose a fund where the maturity broadly matches your investment horizon to park a portion of your investment surplus. For those in the lower tax brackets and not prepared to stay put long enough, shorter-tenure bank and PO fixed deposits may be a better alternative.

(This is a free article from the BusinessLine premium Portfolio segment. For more such content, please subscribe to The Hindu BusinessLine online.)

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Why fund houses really launch NFOs

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As the stock market soars, it’s not just the IPO market that is buzzing with a line-up of new issuers, the market for new fund offers (or NFOs) is hyper too. When an AMC makes a slick pitch for a new fund, it’s hard not to give in. But then, if an AMC has just discovered a great new money-making opportunity in international investing,

ESG or housing stocks, there’s no reason why it cannot put it to work in the dozens of schemes its already manages.

As an investor, you, should be extremely selective while buying into NFOs because AMCs have many business reasons for rolling out NFOs, that they’re not be telling you about.

Higher fee

AMCs make their revenues and profits from expenses that they charge to their schemes as a percentage of assets under management (AUM). NFOs allow AMCs to take home a larger fee for every Rupee of money managed than older and larger schemes. This is one big reason why AMCs like NFOs.

SEBI’s slab-based limits on TER ensure that the fee that an AMC charges you declines sharply as a scheme grows. Before 2019, mutual funds were subject to just four slabs on TERs. Equity schemes could charge 2.5 per cent of assets for assets upto Rs 100 crore, 2.25 per cent for the next ₹300 crore, 2 per cent for the next ₹300 crore and 1.75 per cent for all assets over and above that. Debt schemes were required to charge 0.25 per cent less in each slab.

From April 2019, SEBI decided to re-align the slabs and lower them. It capped TER for equity schemes at 2.25 per cent on the first ₹500 crore of assets, 2 per cent on assets between ₹500 and ₹750 crore, 1.75 per cent on assets beyond that up to ₹2000 crore, 1.5 per cent from ₹5000 crore to ₹10,000 crore, with further cuts beyond this.

This change has had the effect of reducing the fees that leading AMCs take home every year from their bigger and older schemes. To illustrate, a ₹5,000 crore equity fund earned roughly ₹90.5 crore in annual fees in the old structure but only ₹86.1 crore in the new one.

More important, the slab structure also makes attracting money into new schemes a much more lucrative proposition for the AMC than getting it into older funds.

Fresh inflows of ₹500 crore into an existing ₹5,000 crore equity fund now fetch an AMC just ₹7.5 crore in fees, while an NFO mopping up ₹500 crore earns it a cool ₹11.25 crore. A higher fee pads the wallets of fund managers and helps the AMC pay higher commissions to its distributors to drum up support for a NFO.

Size fatigue

Fund houses won’t readily admit it, but too much popularity can prove a dead-weight on scheme returns.

Small-cap equity funds when they amass assets beyond ₹5000 crore, for instance, can struggle to build new positions or exit old ones without impact costs. When a market correction pops up, they can struggle to find enough market liquidity to absorb their sales. While size problems are acute for small-cap funds, other equity categories face it too. A multicap fund that overshoots ₹15,000 crore in assets, for instance, can have trouble retaining its ‘multicap’ character as small-cap bets can get more difficult to make.

When a value or contra fund grows too big, it may find it tough to deploy its entire corpus in sound but cheaply valued stocks.

Large schemes therefore end up making compromises like having more index names or holding more cash, which dilutes returns. AMCs try to manage the size problem by regulating flows or completely gating them for limited periods. But beyond a point, the opportunity loss in terms of AUM and fees begins to hurt.

NFOs are a neat way to get around this. When a popular scheme becomes too big to outperform, AMCs subtly divert their loyal investors (and distributors) to a new scheme that can start out afresh and make more nimble market moves owing to its size.

NFOs with broad themes like economic revival, value or even ESG are often attempts by an AMC to make up for the flagging track record of a flagship scheme, with a new kid on the block.

Survival tactic

The Indian mutual fund industry operates on the principle of survival of the fittest. With open end funds dominating, investors have been prompt to pull out money from laggard schemes that chronically lag peers or benchmarks to invest in better performers. This has led to situation where a few AMCs that manage outperforming schemes garner the lion’s share of new inflows. With AMCs that manage middling funds or poor performers getting hardly any inflows, they’ve taken the NFO route. Rolling out an NFO that offers visions of great returns in future is after all much easier than repairing the battered track record of a bunch of older schemes.

Category curbs

If you’ve been wondering why there are hardly any plain-vanilla fund launches nowadays, with most NFOs playing esoteric themes this is thanks to SEBI’s new rules on fund categorization. In early 2018, SEBI decided that Indian AMCs were offering just too many open end funds to investors, confusing them. It therefore brought in new rulers that allowed AMCs to offer just 36 specific categories of open-ended schemes. It also decreed that every AMC could run only one scheme in each of these 36 categories. While this has forced AMCs to consolidate, merge and streamline their 800 odd open-ended schemes to fit into the new slots, it also deprived them of the opportunity to expand their AUMs further. Given that the category curbs don’t allow AMCs to offer more than one multicap, large-cap, large and mid-cap, mid-cap and small-cap equity fund to launch any more diversified equity schemes, they’re been going all out to unearth new thematic ideas that can side-step these curbs (thematic is the only category where an AMC may have multiple schemes).

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What Is NIL Return? When And Who Should File It?

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Taxes

oi-Sneha Kulkarni

|

If your gross income is less than the maximum amount excluded from tax, which is Rs 2,50,000, your tax obligation is zero, and you pay no taxes for the same. As a result, a nil return is an income tax return with a tax liability of “Zero or nil.” The term “filing a nil return” refers to notifying the tax department that a taxpayer does not have any taxable income for a given fiscal year.

Why and Who Should File NIL Return?

Income tax returns are now necessary when applying for a visa or passport. It is also critical if you wish to apply for some kind of loan. You never know when you would need a loan, so it’s always a good idea to be prepared with all the appropriate paperwork and documentation.

What Is NIL Return? When And Who Should File It?

If you’re a regular return filer, but your income this year is below the taxable cap. You should certainly file an income tax return so that you can keep track of your taxes from year to year.

If an individual’s annual income is less than Rs.2.5 lakhs, he or she is not required to file a NIL return. Even if the taxable income is less than Rs.2.5 lakhs, it is recommended that a person file a NIL return if the assessee filed an income tax return the previous year.

Even if you are not under the taxable cap, the tax may be deducted at the source, such as when a bank deducts TDS on interest income over Rs10,000. You are entitled to a refund in certain situations. The easiest way to do that is to file a NIL return.

Apart from that, any citizen who owns a foreign asset or has signing authority in a foreign account is expected to file income tax returns, even if his annual income is less than Rs.2,50,000.

When you invest in the stock market, you can use capital losses to cover capital gains at a later date. The term for this process is “carrying forward of losses.” This is only possible if you file tax returns on a yearly basis and keep track of your records.

Company

It is in the taxpayer’s best interests to file a nil return. If a zero return is filed, the taxpayer is entitled to move a loss forward to future years, minimizing future tax liability.

Regardless of the company’s operation, earnings, or sales, all companies registered in India must file an income tax return in Form ITR-6 every year. As a result, all inactive and dormant businesses are expected to file a nill return. And if a corporation is being closed down, still the income tax should be filed. In addition, if the company’s annual returns have been struck off the MCA, still they have to file returns.

Firms that operate as sole proprietorships must file an income tax return in the form of ITR-3 or ITR-4. Even if there is no business operation, a proprietorship firm that has previously filed an ITR-3 or ITR-4 form must file a NIL return.

Every year, regardless of business turnover, benefit, or operation, all Limited Liability Partnership (LLPs) registered in India must file an income tax return in Form ITR-5. A liability of Rs.5000 will be imposed if a business failed to file a NIL return under the Income Tax Act.

How to file NIL tax returns?

Filing zero tax returns are no different than filing standard income tax returns for any person. Before filing, keep all the mandatory documents handy such as Aadhar, PAN card, Bank account details, Form 16, and details of your investments. In a few easy measures, you can e-file your tax returns online.

Step 1: Log in to an e-filing

Step 2: Select the appropriate ITR form

Step 3: Enter your income details and deductions.

(Your income tax is calculated, and you will be informed that you owe no tax.)

Step 4: Submit your return to the Income Tax Department.

Step 6: Verify your ITR return using the preferred method

Benefits of filing NIL Income Tax return

1) It would be a lengthy and exhausting procedure to clarify the sources of earnings if anyone has not filed the ITR over the years. The ITR, on the other hand, would act as legal evidence of income received during the year.

2) Being self-employed prohibits you from obtaining earnings proofs such as a salary certificate from your employer or a Form 16 from the IRS. As a consequence, having an ITR on hand as evidence of income is the most convenient alternative.

3) Individuals with low earnings, whose total income is below the taxable cap, may believe they are not required to file tax returns because they do not owe any taxes. However, by filing an ITR, they would be able to obtain legal proof of income.

4) When you buy a higher life insurance policy or apply for a loan, the insurer will ask for proof of income in order to decide the amount of coverage you will receive. Bank statements or ITRs from the previous three tax years are required for this salary slip.

Conclusion

The above points have explained why, even if it is a Null return, it is always preferable to file an ITR. There are people in many families who have small incomes such as dividends, tuition fees, and small business income, who can file NIL returns to avoid any difficulties.



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5 Public & Private Sector Banks Giving ROI Up To 7.5% On 3-Year FD For Senior Citizens

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Benefits of senior citizen fixed deposits

Almost all banks provide significantly higher interest rates than those available to the general public. Some key benefits for senior citizens on FDs are as follows:

Most banks provide senior citizens FDs with terms ranging from seven days to ten years.

  • A senior citizen FD will offer them a higher interest rate of 0.25 percent to 0.75 percent than a regular FD.
  • Fixed deposits do not allow for early withdrawal, so you won’t be able to get your money until the deposit matures. Additionally, if there is an emergency, the amount can be withdrawn by accepting a penalty.
  • On term deposits, banks also offer a Sweep-in feature, which enables the account holder to link his or her savings account to a fixed deposit account. The advantage of this service is that it allows for the automatic transfer of surplus funds from a savings account to a fixed deposit account. It helps depositors to receive FD rates on their savings accounts, with the possibility to break the FD and use the funds at any time.
  • A senior citizen fixed deposit can also be used as a tax saver deposit of 5-Years, allowing for tax deductions under section 80C of the Income Tax Act.
  • Elderly people can opt from a variety of interest payout options, with interest being credited to the holder’s savings account on a monthly, quarterly, half-annual, or yearly basis.
  • Regular interest payouts will provide a stable and credible income stream for seniors in their post-retirement periods.
  • Nomination facilities are also provided on fixed deposits, allowing senior citizens to name a nominee.

TDS charged for senior citizens on fixed deposit schemes

TDS charged for senior citizens on fixed deposit schemes

Senior citizens with interest income from FDs, savings accounts, and recurring deposits can claim tax exemption up to Rs 50,000 per annum according to Section 80TTB of the Income Tax Act. The bank cannot deduct any TDS if the senior citizen’s interest income from all FDs with the bank is less than Rs 50,000 in a year. If you do not submit your PAN number to the bank, they will subtract 20% TDS from your account. As a result, double-check that you have submitted your PAN number to the bank. However, as a senior citizen, you can submit Form 15H to the bank to avoid TDS.

An important note for senior citizens

An important note for senior citizens

Finance Minister Nirmala Sitharaman introduced the Union Budget 2020 to Parliament on February 1, 2020. It approved raising deposit insurance from Rs. 1 lakh to Rs. 5 lakh for bank account holders, which was previously set at Rs. 1 lakh. The Reserve Bank of India’s Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned affiliate. Depositors’ deposits at a bank are covered by deposit insurance. Commercial public banks and small finance banks are included under this deposit insurance policy whereas deposit insurance does not cover company deposits. In a scheduled bank, whether it is a commercial or small finance bank, you are insured for up to Rs. 5 lakh which covers both principal amount as well as interest.

3 Year FD For Senior Citizens

3 Year FD For Senior Citizens

Small private banks are currently providing senior citizens interest rates as high as 7.50 percent on three-year fixed deposits. These three-year FD interest rates are higher than those provided by major private and public sector banks. Yes Bank, for example, offers 7.50 percent interest on three-year FDs for senior citizens, while DCB Bank and RBL Bank provide 7.25 percent and 7.10 percent interest on three-year FDs, respectively. On three-year FDs, pioneering private banks such as Axis Bank and Kotak Mahindra Bank give 5.9% and 5.6 percent interest, respectively. For elderly people, ICICI Bank and HDFC Bank provide 5.65% interest on three-year fixed deposits. Canara Bank and Union Bank of India provide the highest interest rate among public sector banks, currently 6% on three-year fixed deposits for senior citizens. For senior citizens, Bank of India and State Bank of India (SBI) give 5.8% interest on three-year fixed deposits. Hence, below are the top 5 public and private sector banks that are currently providing higher interest rates to senior citizens on 3 years fixed deposits.

Private Sector Banks ROI in %
Yes Bank 7.50
DCB Bank 7.25
RBL Bank 7.10
IndusInd Bank 7.00
Bandhan Bank 6.25
Public Sector Banks ROI in %
Canara Bank 6.00
Union Bank 6.00
Bank of India 5.80
State Bank of India 5.80
Punjab & Sind Bank 5.75
Source: Bank websites



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LIC’s Aadhaar Stambh Policy: Know All About This Plan Customized For Males

Personal Finance

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Investment

oi-Roshni Agarwal

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Aadhaar Stambh (Plan-943) is Life Insurance Corporation of India or LIC’s small saving schemes customized for males having aadhaar card. This policy comes with a low premium and offers death benefit to policyholders.

Details about Aadhaar Stambh LIC policy- Offers both protection and savings

LIC’s Aadhaar Stambh plan is a non-linked-with-profit endowment assurance life insurance plan offered specifically to male individuals who have an aadhaar card.

LIC's Aadhaar Stambh Policy: Know All About This Plan Customized For Males

Death benefit: And in a case if the policyholder meets an untimely death before the end of policy term, policyholder’s nominees shall be entitled to the death benefit which will offer financial security to the family in the absence of the insured.

Death benefit payable in case of death of the Life Assured before the stipulated Date of Maturity provided the policy is inforce shall be as under:

  • On death during first five years: “Sum Assured on Death”.
  • On death after completion of five policy years but before the stipulated Date of Maturity: “Sum assured on Death” along with Loyalty Addition, if any. Where “Sum Assured on Death” is defined as the higher of 7 times of annualised premium; or Basic Sum Assured.

Maturity benefit: This is payable in case the insured survives the policy term and this is paid in lump sum. Here “Sum Assured on Maturity” along with Loyalty Addition, if any, shall be payable. Where “Sum Assured on Maturity” is equal to Basic Sum Assured. Also, the policyholder can avail the maturity benefit in installments as part of the settlement option.

Rider benefits: LIC’s Accidental benefit rider shall be available under this policy and it can be opted for at anytime provided the outstanding policy term is at least 5 years.

Eligibility to buy Aadhaar Stambh policy plan:

  • Entry age: 8 years to 55 years
  • Maximum age at the time of plan maturity: Should not be over 70 years.
  • Minimum sum assured: Rs. 75000 and in multiples of Rs. 5000 thereafter
  • Maximum sum assured: Rs. 3 lakh
  • Policy term: 10-20 years
  • Returns: If an aadhaar card holding male individual purchases Aadhaar Stambh LIC Policy, he can expect to get a maturity amount of around Rs. 4 lakh (sum assured value of Rs. 3 lakh plus loyalty addition of Rs. 97500 considering 4.5% annual return on the investment) after investing for 20 years.

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Buy Now Pay Later: How To Register For Amazon Pay Later or Amazon Pay EMI

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Amazon Pay Later’s major advantages

  • The lender will make an immediate judgment on your credit cap.
  • No credit card information is required.
  • There are no cancellation or processing fees.
  • There are no pre-closure fees.
  • On Amazon, it’s a breeze to check out.
  • When you use Amazon’s Pay Later option, you’ll be able to pay later.
  • On the EMI-specific dashboard, you can keep track of your expenditures and repayments more conveniently.

Things to know

Things to know

Limit: According to RBI regulations, any entity can only lend up to Rs. 60,000 per year to anyone who has completed the Aadhaar-OTP based KYC procedure.

EMI: Amazon Pay Later already provides EMI plans for 3, 6, 9, and 12 months. Furthermore, the consumer has the option of paying at a later date the next month.

Interest: There are no interest charges if you buy now and pay next month. For others, when you choose an EMI plan, the information about the interest rate will be conveyed to you on the payment tab.

Requirements to opt for Amazon Pay Later

Requirements to opt for Amazon Pay Later

You’ll need an Amazon.in account with a checked mobile number, a valid permanent account number (PAN) card, a bank account with one of the participating banks, and one of the following officially valid documents as proof of address: driving license, voter ID card, Aadhaar, utility bills (not older than 60 days), passport. You must be at least 23 years old. Your credit bureau history and details already available with Amazon are used to determine your eligibility. The lending partner will set the Amazon Pay Later cap for you based on these and a variety of other factors. PAN numbers are needed for Know Your Customer (KYC) checks. You won’t be able to complete the registration if you don’t have a PAN, and you won’t be able to use Amazon Pay Later.

How to Register for Amazon Pay Later?

How to Register for Amazon Pay Later?

When you are registering you will have to choose from the below options. You will be shown one of the below four modes of KYC completion:

  • Existing KYC
  • OTP Based eKYC
  • Existing customer with a lending partner
  • KYC as received from CKYCR under CERSAI
  • Based on the selection of the option, your registration will vary.

Option 1: Existing KYC

Step 1: Amazon.in mobile App

Step 2: Go to Amazon Pay Later registration

Step 3: Verify Identity – Enter the 4 digits Missing PAN Number

Along with the loan agreement, our approved Amazon Pay Later limit will be shown on this screen. To complete Amazon Pay Later registration, please read and approve the agreement. Within minutes of completing the registration, this sanctioned cap will become operational.

Option 2: OTP based eKYC

Step 1: Amazon.in mobile App

Step 2: Go to Amazon Pay Later registration

Step 3: Verify Identity –

Enter your complete PAN card number and click Continue.

Enter your complete Aadhaar number and click Continue.

Step 4: Enter the OTP and click continue.

Step 5: Accept Terms and Conditions

Your profile will be evaluated after you submit your information, and an Amazon Pay Later limit will be calculated, which will be shown to you on the next screen.

Option 3: Existing KYC with a lending partner

Option 3: Existing KYC with a lending partner

Step 1: Amazon.in mobile App

Step 2: Go to Amazon Pay Later registration

Step 3: Verify Identity –

OTP will be sent on the registered mobile number with the Lending Partner

Fill in the missing 4 digits of the PAN Card you used to complete the lender’s KYC.

Step 4: Enter the OTP and click continue.

Your profile will be reviewed by the lender after you send your OTP, and an Amazon Pay Later cap will be calculated, which will be shown to you on the next screen.

Step 5: Accept Terms and Conditions

Your approved Amazon Pay Later cap, as well as the loan agreement, will be shown on this screen. To complete Amazon Pay Later registration, please read and approve the agreement. Within minutes of completing the registration, this sanctioned cap will become operational.

Option 4: CKYC

Step 1: Amazon.in mobile App

Step 2: Go to Amazon Pay Later registration

Step 3: Verify Identity –

Answer a few questions about your specific KYC knowledge and agree to the KYC data fetched from CKYCR being shown to you.

Step 4: Enter the OTP and click continue.

Your profile will be reviewed by the lender after you send your OTP, and an Amazon Pay Later cap will be calculated, which will be shown to you on the next screen.

Following the submission of your information, the lender will assess your profile and decide your Amazon Pay Later cap, which will be shown to you on the next screen.

Step 5: Accept Terms and Conditions

Your approved Amazon Pay Later cap, as well as the loan agreement, will be shown on this screen. To complete Amazon Pay Later registration, please read and approve the agreement. Within minutes of completing the registration, this sanctioned cap will become operational.

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