Category: Personal Finance

5 Secure Investments For Retirement Planning

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Investment

oi-Vipul Das

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Everyone enjoys a relaxing and sustainable retirement time after years of intense employment. Many individuals look forward to retirement because it allows them to rest, and enjoy space with their family. In any case, financial issues are the unwanted instances that someone doesn’t want to welcome his or her personal finance space during the retirement years. Individuals nearing their retirement create uncertainty and distress by only thinking about having inadequate funds before they reach retirement age. But, retired people or senior citizens should be mindful of good investment options and ways to generate a steady income so that they can sustain their lives without putting their savings at risk. As a result, senior citizens should think about a portfolio that will provide them with a steady stream of income. For people nearing retirement, here are a few low-risk investing strategies that provide long-term security:

5 Secure Investments For Retirement Planning

Senior Citizen Savings Scheme

The Senior Citizen Savings Scheme, or SCSS, is a government scheme that provides a quarterly income to individuals who have reached the age of 60 or who have chosen to retire at the age of 55. The current interest rate is 7.4 per cent per annum which is paid on a quarterly basis. By making only one deposit with an initial amount of Rs. 1000 up to Rs 15 lakhs, a senior citizen can open an SCSS account. This small savings scheme of the post office comes with a tenure of 5 years which further can be extended to a block of 3 years. The facility of nomination is available while opening an SCSS account by submitting Form C. Under Section 80C of the Indian Tax Act, 1961, SCSS also provides a tax deduction of up to Rs.1.5 lakh.

Pradhan Mantri Vaya Vandana Yojana

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) regulated by Life Insurance Corporation (LIC) is a pension scheme for senior citizens. The scheme provides a guaranteed rate of return on investment because of the sovereign guarantee. By investing in this scheme a senior citizen can get pension benefit on a monthly, quarterly, or yearly basis. The scheme has a ten-year term for which you will get a Rs 1,000 monthly pension for an initial purchase price is Rs 1.5 lakh. It has an overall purchase price of Rs 15 lakh and comes with a Rs 10,000 monthly pension. The interest rate in PMVVY is determined by the frequency of payout, which can be monthly, quarterly, half-yearly, or yearly. Senior citizens must contribute Rs1,449,086 to earn the full annual payout of Rs1.11 lakh. Depending on the frequency of payouts, the interest rate ranges from 7.4 per cent to 7.66 per cent respectively.

Post Office Monthly Income Scheme (POMIS)

Post Office Small Savings Schemes provides a high rate of interest and are good for those who want assured returns like bank FDs. One such small savings scheme is Post Office Monthly Income Scheme and POMIS account can be opened with a minimum of Rs. 1000 and in multiple of Rs. 100 up to a limit of Rs 4.5 lakh in a single account and Rs 9 lakh in case of a joint account. For the current quarter, the interest rate on the Post Office Monthly Income Scheme is 6.6% per annum. Interest will be paid at the end of each month from the date of opening of the account, and so on before the account reaches maturity. You cannot withdraw the amount invested in a Monthly Income Scheme account before 5 years if you open one with a post office. If you withdraw your corpus before the lock-in date expires, you will be charged a penalty on the withdrawal amount, which is calculated based on the time of withdrawal. There is a 2% penalty if you redeem your investment within the first and third year, if you withdraw within the third and fifth year, you will be charged a 1% penalty.

National Pension System (NPS)

Individuals between the ages of 18 and 65 can invest in the National Pension System. The account can also be extended up to an age limit of 70 years which ensures that senior citizens can consider this scheme which is backed by the government of India. Senior citizens can also extend their tenure until they reach the age of 70. Taxpayers can deduct up to Rs.1.50 lakh in NPS contributions under Section 80C of the Income Tax Act. Individuals are also eligible for additional benefits up to Rs.50,000 under Section 80CCD. The money invested in the NPS system is allocated across equity bonds, debt bonds, or both, based on the subscriber’s preference. As a result, NPS has no fixed interest rate, and a senior citizen’s portfolio will only benefit from market-based returns. 60 per cent of the NPS corpus is tax-free as it matures. The remaining 40% of the NPS fund must be used to purchase an annuity for a monthly pension benefit. You can also choose from one of the eight NPS pension fund managers. SBI, UTI, LIC, Aditya Birla, HDFC, Kotak, ICICI Prudential, and Reliance Capital are the fund managers involved. As a result, NPS returns are related to the performance of the equity or debt market. To know more about current NPS returns, click here.

Senior Citizen Fixed Deposit Schemes

Some leading banks of India such as State Bank of India (SBI), HDFC Bank, ICICI Bank, and Bank of Baroda provide special fixed deposit (FD) schemes to elderly people. These banks are promising higher interest rates on term deposits under this scheme than they are currently providing to non-senior citizens. Senior citizens can get 100 basis points more on these deposits at Bank of Baroda (BoB). A senior citizen will get a higher rate of 6.25 per cent for depositing for a tenure of above 5 years to up to 10 years at BOB. Similarly, on these deposits, ICICI Bank gives an 80 basis point higher interest rate. The ICICI Bank Golden Years FD scheme pays a 6.30 per cent annual interest rate to senior citizens. HDFC Bank, on the other hand, pays a 75 basis point higher interest rate on these deposits. The interest rate on a fixed deposit held by a senior citizen under the HDFC Bank Senior Citizen Care FD will be 6.25 per cent. At last, the leading commercial bank of the country State Bank of India offers a special FD scheme for senior citizens that provides an interest rate that is 80 basis points (bps) higher than the general public. SBI currently offers a 5.4 per cent interest rate on five-year fixed deposits to the general public. If a senior citizen deposits money in a fixed account under the special FD scheme, then he or she will get a higher interest rate of 6.20 per cent respectively. These special FD schemes are in effect for senior citizens till 31 March 2021.



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How To Open A Fixed Deposit Account In SBI, Axis, HDFC & ICICI Bank Online?

Personal Finance

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Investment

oi-Vipul Das

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A fixed deposit is a form of investment offered by banks and non-banking financial companies (NBFC). As compared to the returns provided by a normal savings account, FDs have a higher return against the amount deposited. The word “fixed deposit” derives from the fact that it has a defined period. The FD investment period generally can vary from 7 days to 10 years. For a risk-averse investor as well as senior citizens a fixed deposit portfolio is a must bet to get high and promised returns which vary from one bank to another. Though the interest rates are guaranteed and tenure is fixed, an investor must keep in mind that he or she can withdraw the amount only after the maturity period and even premature withdrawal is open but only for some emergencies with some penalties. Investors are advised to consider interest rates, service legitimacy and other considerations before opening an account with a bank, NBFC or corporate. When it comes to open a fixed deposit account the only leading banks of India that comes to mind are SBI, ICICI, Axis and HDFC. Hence, if you want to open a fixed deposit account with any of these banks, you are in the right place. So let’s get started.

How To Open A Fixed Deposit Account In SBI, Axis, HDFC & ICICI Bank Online?

Steps to open a fixed deposit account in SBI

Customers of SBI can conveniently open an FD online by depositing a minimum amount of Rs 1000 at any time using the online facility. Simply transfer the funds from your bank account to the appropriate FD account. If you’ve opened an FD online, you can renew and close it at any time. To open an SBI FD account, follow the steps below.

  • Visit SBI Net Banking portal and click on ‘Login’
  • Now enter the required credentials in order to sign in to your net banking account.
  • Click on ‘e-TDR/e-STDR (FD)’ under the fixed deposit option, and then click on ‘Proceed’. One thing to note here is TDR stands for term deposit, and STDR stands for Special Term Deposit. The interest on an STDR deposit is incurred only at maturity, while the interest on a TDR deposit is paid at specified periods.
  • Select the type of FD account you want to open and then hit “Proceed.”
  • Now select the account from which you want to debit the money towards your FD account.
  • Select the FD principal amount and enter it in the ‘Amount’ section. If you are over 60, select the ‘Senior Citizens’ button. On FDs, senior citizens get 50 basis points more than regular customers.
  • Now choose a deposit tenure and maturity date.
  • Select your term deposit account’s maturity instruction i.e. auto renew principal and interest, auto renew principal and repay interest or repay principal and interest.
  • Now accept the ‘terms and conditions’ and click on ‘Submit’
  • The particulars of your FD (name, nominee, and so on.) will appear on the screen. Click the ‘OK’ button and you are done.
  • Please make note of the transaction number for potential use. By selecting the required alternatives, you can print or save the acknowledgement as a PDF too.

SBI FD Rates

Below are the current interest rates of SBI Fixed Deposit for a deposit amount of below Rs 2 Cr, w.e.f 8-1-2021.

Tenure ROI in % for non-senior citizens ROI in % for senior citizens
7 days to 45 days 2.9 3.4
46 days to 179 days 3.9 4.4
180 days to 210 days 4.4 4.9
211 days to less than 1 year 4.4 4.9
1 year to less than 2 year 5 5.5
2 years to less than 3 years 5.1 5.6
3 years to less than 5 years 5.3 5.8
5 years and up to 10 years 5.4 6.2

Steps to open a fixed deposit account in Axis Bank online

To open a fixed deposit account with Axis Bank online, you must deposit a minimum of Rs 5000, and if you open one in a bank branch, you must deposit a minimum of Rs 10,000. Follow the steps below to open an FD account online with Axis Bank.

Via net banking

  • Sign in to your net banking account and click on the ‘Deposit’ option
  • Now click on the ‘Create Fixed Deposit’ option
  • Now fill in all the required credentials and confirm the same.
  • The selected amount will be debited from your Savings Account upon confirmation, and your Fixed Deposit account will be generated instantly. Promptly, you will get an online receipt for the Fixed Deposit you have made. The deposit amount and interest rate will be determined by the date of application, which is the day on which the amount is debited from your savings account effectively.
  • If you have enrolled for e-statement, the Fixed Deposit acknowledgement will be forwarded to your registered e-mail ID once it has been generated. Physical advice will be submitted to your registered address if you have not registered for e-statement. After one business day of effective deposit, you will be able to download the Fixed Deposit advice via Online Banking.

Via mobile banking

  • Open the Axis Bank Mobile Banking app on your mobile phone and sign in to your account using the required credentials.
  • Now tap on ‘Open FD’ and fill in all the required credentials and confirm the same.
  • The selected amount will be debited from your Savings Account upon confirmation, and your Fixed Deposit account will be generated instantly. Promptly, you will get an online receipt for the Fixed Deposit you have made.
  • If you have enrolled for e-statement, the Fixed Deposit acknowledgement will be forwarded to your registered e-mail ID once it has been generated. Physical advice will be submitted to your registered address if you have not registered for e-statement. After one business day of effective deposit, you will be able to download the Fixed Deposit advice via Online Banking.

Axis Bank FD Rates

Below listed interest rates are for a deposit amount of below Rs 2 Cr, w.e.f 18/03/2021.

Tenure ROI in % for non-senior citizens ROI in % for senior citizens
7 days to 14 days 2.5 2.5
15 days to 29 days 2.5 2.5
30 days to 45 days 3 3
46 days to 60 days 3 3
61 days < 3 months 3 3
3 months < 4 months 3.5 3.5
4 months < 5 months 3.5 3.5
5 months < 6 months 3.5 3.5
6 months < 7 months 4.4 4.65
7 months < 8 months 4.4 4.65
8 months < 9 months 4.4 4.65
9 months < 10 months 4.4 4.65
10 months < 11 months 4.4 4.65
11 months < 11 months 25 days 4.4 4.65
11 months 25 days < 1 year 5.15 5.4
1 year < 1 year 5 days 5.15 5.8
1 year 5 days < 1 year 11 days 5.1 5.75
1 year 11 days < 1 year 25 days 5.1 5.75
1 year 25 days < 13 months 5.1 5.75
13 months < 14 months 5.1 5.75
14 months < 15 months 5.1 5.75
15 months < 16 months 5.1 5.75
16 months < 17 months 5.1 5.75
17 months < 18 months 5.1 5.75
18 Months < 2 years 5.25 5.9
2 years < 30 months 5.4 6.05
30 months < 3 years 5.4 5.9
3 years < 5 years 5.4 5.9
5 years to 10 years 5.75 6.5

Steps to open a fixed deposit account with HDFC Bank online

If you are an existing customer of HDFC Bank having an active savings account, you can conveniently open an HDFC FD account online or offline by depositing an initial amount of Rs 5,000. In case you don’t have a savings account with HDFC Bank, you will have to go through the KYC procedure to open an FD account successfully. Below are the steps you can follow to open an HDFC Bank Fixed Deposit account online:

  • Sign in to your HDFC Bank Net Banking account and under the ‘TRANSACT’ section, click on ‘Open Fixed Deposits’
  • Now select your branch, fill in the tenure and amount, name a nominee, and click ‘Confirm’ to proceed.
  • Once you are done the fixed deposit advice, which acts as a receipt for your deposit will be available to download for potential use.

HDFC Bank FD Rates

The below rated are applicable from 13th Nov 2020, for a deposit amount of less than Rs 2 Cr.

Tenure ROI in % for non-senior citizens ROI in % for senior citizens
7 – 14 days 2.50% 3.00%
15 – 29 days 2.50% 3.00%
30 – 45 days 3.00% 3.50%
46 – 60 days 3.00% 3.50%
61 – 90 days 3.00% 3.50%
91 days – 6 months 3.50% 4.00%
6 months 1 days – 9 months 4.40% 4.90%
9 months 1 day < 1 Year 4.40% 4.90%
1 Year 4.90% 5.40%
1 year 1 day – 2 years 4.90% 5.40%
2 years 1 day – 3 years 5.15% 5.65%
3 year 1 day- 5 years 5.30% 5.80%
5 years 1 day – 10 years 5.50% 6.25%

Steps to open a fixed deposit account with ICICI Bank online

One can conveniently apply for an ICICI Bank FD by depositing an initial amount of Rs 10,000 across multiple platforms such as internet banking and mobile banking. Using their debit card, mobile banking or Twitter banking services, one can also apply for an FD for a term spanning from 7 to 10 years. To open an FD account with ICICI Bank online, follow the steps below:

  • Visit the ICICI Bank Net Banking portal and sign in to your net banking account using the required credentials.
  • Now select the ‘Deposits’ option, under the ‘My Accounts’ section.
  • Now click on the ‘Open Now option and then select the ‘Fixed Deposit’ option
  • Now enter all the required details such as savings account number from which you want to get the money to be debited, type of deposit, deposit amount, tenure, PAN number (if depositing Rs 50,000 or more), and other specifics.
  • Once you’ve double-checked your details, press the “Submit” button. On the screen, a ‘Request Confirmation’ will appear, and you will get the fixed deposit advice on your registered email ID instantly.

ICICI Bank FD Rates

The below-listed interest rates are in force from Oct-21, 2020 for a deposit amount of less than Rs 2 Cr.

Tenure ROI in % for non-senior citizens ROI in % for senior citizens
7 days to 14 days 2.50% 3.00%
15 days to 29 days 2.50% 3.00%
30 days to 45 days 3.00% 3.50%
46 days to 60 days 3.00% 3.50%
61 days to 90 days 3.00% 3.50%
91 days to 120 days 3.50% 4.00%
121 days to 184 days 3.50% 4.00%
185 days to 210 days 4.40% 4.90%
211 days to 270 days 4.40% 4.90%
271 days to 289 days 4.40% 4.90%
290 days to less than 1 year 4.40% 4.90%
1 year to 389 days 4.90% 5.40%
390 days to < 18 months 4.90% 5.40%
18 months days to 2 years 5.00% 5.50%
2 years 1 day to 3 years 5.15% 5.65%
3 years 1 day to 5 years 5.35% 5.85%
5 years 1 day to 10 years 5.50% 6.30%
5 Years (80C FD) 5.35% 5.85%



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Fix systems to reduce failures, banks urge non-bank partners

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As a result, it falls to the banks to ensure the success and security of digital payment transactions.

Banks have started asking non-bank partners to upgrade their information technology (IT) systems to minimise payment failures. The move follows a high incidence of transaction failures in the latter half of 2020, and regulatory guidelines which place the onus of ensuring payment security controls on banks.

In 2020, massive on-boarding of new digital users onto payment platforms was accompanied by outages in bank systems and resultant transaction failures. Matters were complicated by the fact that a large number of transactions, especially those made through the Unified Payments Interface channel, involve multiple hops across entities. Instances of fraud and data breaches have also been reported with some entities.

Taking cognisance of a series of outages at HDFC Bank that rendered its customers incapable of completing transactions, the Reserve Bank of India (RBI) in December 2020 imposed business restrictions on the bank. In February this year, the RBI issued a master direction on digital payment controls which shall apply to scheduled commercial banks, small finance banks, payment banks and credit card-issuing non-banking financial companies. As a result, it falls to the banks to ensure the success and security of digital payment transactions.

Sameer Shetty, head, digital banking, Axis Bank, said that most reported instances of data leakages have happened with non-bank entities. Some outages, too, have originated outside banks. The lender is now extending disaster recovery exercises and the whole discussion to its partners as well.

“There is a bunch of activities we are carrying out internally, such as framing policies on the kind of vendors we work with, what data we share, how we do information checks of their systems. We have now become very aggressive in terms of doing regular audits and checks of vendors so that their security systems are of similar levels,” he said. The bank is also working to see how it can encrypt more and more data.

At the same time, the entire ecosystem involved in digital payments will have to come together to smoothen the creases. Veena Sivaramakrishnan, partner, Shardul Amarchand Mangaldas & Co., said given that outsourcing is a regulated activity for banks, it is no surprise that banks are reaching out to their partners to upgrade and match the IT requirements of the bank itself. “In addition to ensuring a smooth payment flow, this will ensure reduction in manual intervention and personnel error. These measures will ensure that the trust reposed in the banking system continues to stay strong,” she said.

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How To Select The Right Saral Jeevan Bima Term Insurance Plan?

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Personal Finance

oi-Roshni Agarwal

|

The Insurance Regulatory and Development Authority of India (Irdai) in order that individuals choose the right term insurance plan and that too without much hassle directed all life insurance companies to come up with Saral Jeevan Bima plan from January 1, 2021. Such a plan needed to incorporate simple features and standard terms and conditions.

How To Select The Right Saral Jeevan Bima Term Insurance Plan?

How To Select The Right Saral Jeevan Bima Term Insurance Plan?

Nonetheless, after quite a delay as insurers and insurance regulating entity discussed over the possibility of having flexibility with regard to maximum sum assured and the pricing factor, life insurers have begun to introduce Saral Jeevan Plan.

Minimum sum assured in Saral Jeevan Bima– Rs. 5 lakh that can be increased up to Rs. 25 lakh in multiples of Rs. 50,000

How to select the right Saral Jeevan Bima Term Plan?

Do not go just by the premium pricing of the different life insurers for the product:

Currently, a total of six life insurers including LIC are marketing the Saral Jeevan Plan and now as the features as well as the terms and conditions of the product are similar across insurers, one can go by the price differential. Experts however advise not to go by just the premium pricing as it can prove to be the biggest mistake in the process of selecting the right term insurance plan.

Consider claim settlement ratio:

The death claim settlement ratio is the percentage of insurance claims processed by an insurance company against the total number of claims received. So, in a case if this ratio is 99 percent, this implies that the insurance company has settled total 99 claims (or paid sum assured to the policy’s beneficiary or the nominee) out of every 100 claims received.

“This plan provides a higher issuance rate for the lower-income segment groups compared with the other term plans available. While the features of the Saral Jeevan Bima plan are similar across insurers, customer should look at claim settlement ratio,” Santosh Agarwal, chief business officer, life insurance, Policybazaar.com is cited as saying in a leading dailies report.

One also needs to factor the ease of on-boarding and after sales service and support of the insurance company such as for the renewals, claim settlement among others.

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Top 10 Banks Offering The Cheapest Rates On Education Loans

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Documents required to apply for an education loan

While applying for an education loan, make sure that you have kept the below-listed documents ready:

  • Statement of admission from the educational establishment
  • Marksheets from past educational experiences
  • Age proof, ID Proof, address proof of the student
  • Salary slip of the last 3 months
  • Bank account statement of the last 6 months
  • Recent passport size photographs
  • Valid VISA for students going to study abroad

Factors to consider while applying for an education loan

Factors to consider while applying for an education loan

Students who wish to finish their studies and seek further education have a wide demand for educational loans. Banks provide these loans to eligible students who need financial assistance to pursue their studies. These loans have boosted student’s careers and encouraged them to seek higher education that they otherwise would not have been able to finance. However, not everyone is suitable for a student loan. Before lending money for whatever reason, banks set certain conditions for borrowers to follow. When a bank receives an application for an educational loan, the following are the major considerations one must need to know:

  • The student’s academic experience and credentials. The track record of grades, credits, and attainments will be taken into account.
  • Accredited courses should be worthwhile to learn. They must have a high likelihood of placement and career structure in order for the borrower to be able to repay the loan.
  • The organization where the course will be administered must also have importance. The university, college, or college you want should be certified and well-known.
  • The applicant’s ability to provide collateral for the loan, which makes the bank consider the type of collateral provided as well as its value.
  • You can use the Education Loan EMI Calculator to figure out how much your monthly payments will be if you apply for an education loan and how much the overall amount of the loan will be. You will get an estimation of your equated monthly installment (EMI) by inserting a few loan-related specifics such as the loan amount, tenure, and interest rate.
  • Once you’ve settled on a bank, read all the terms & conditions as well as the specifics on the loan application form.
  • In most cases, you should select a bank that allows you to extend the repayment period in the event of a pause due to unexpected scenarios.
  • You do not receive the loan amount. At the start of each semester, it is forwarded directly to the organization where you want to study. As a result, it must comprise all the perks and services provided so that you don’t have to pay more.

Taxation

Taxation

If you have availed an education loan and are repaying it, you can subtract the interest accrued as a deduction from your net income under Section 80E. The exemption, though, is only available for the interest portion of the EMI. The principal component of the EMI is not tax-free. This is a one-time deduction that can only be claimed by an individual. It does not apply to HUFs or other types of taxpayers. The loan must be used to fund the higher education of the borrower, his or her spouse or children, or a student for whom the borrower is the legal guardian, in order to claim this deduction. This deduction is conveniently claimed by parents for loans taken for their children’s higher education. The cumulative interest component of the EMI reimbursed during the financial year is deducted. There is no upper limit on the amount that can be deducted. The entire amount of interest paid can be claimed as an exemption. This exemption is valid for up to eight years, or until the debt is paid off, whichever comes first.

Education Loan Interest Rates

Education Loan Interest Rates

Currently, public sector banks provide the most affordable loans, with rates starting from 6.8%, for a loan amount of Rs 20 lakh loan with a tenure period of 7 years. Check out the top ten public sector banks below that are currently offering the best education loan rates for the same loan amount and tenure.

Sr No. Banks ROI in %
1 Union Bank of India 6.80
2 Central Bank of India 6.85
3 Bank of India 6.85
4 Bank of Baroda 6.85
5 State Bank of India 6.85
6 Punjab National Bank 6.90
7 IDBI Bank 6.90
8 Canara Bank 6.90
9 Bank of Maharashtra 7.05
10 Indian Bank 7.15



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6 Top Performing Investments For Tax-free Income

Personal Finance

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Equity Linked Savings Schemes (ELSS)

Equity-linked savings schemes (ELSS) are a type of mutual funds with two distinct characteristics: first, the amount invested is liable for a tax benefit under Section 80C of the Income Tax Act, 1961, up to a cap of Rs 1.5 lakh per year, and second, it comes with a lock-in period of only 3 years. The asset allocation of ELSS mutual funds is mostly 65 per cent equity and equity-linked instruments. With a lock-in period of just only 3 years, ELSS has the shortest term among the tax-saving investment categories. ELSS funds are now the only tax-saving vehicle that has the ability to outperform inflation. You should be aware that ELSS funds do not provide assured returns and their success is solely contingent on the output of the respective assets. If you don’t want to take on more risk, investing through a systematic investment plan (SIP) is a good option. When you invest in a fund with a SIP, you have the option of investing in it throughout market fluctuations. The returns on ELSS are not guaranteed and are based on the success of the equity mutual funds. Furthermore, if the income under this scheme surpasses Rs. 1 lakh at the end of the three-year period, it will be termed Long Term Capital Gain (LTCG) and will be taxed at 10%. Returns of best performing ELSS are as follows for your better clarification.

5 Best ELSS Funds With 1-3 Year Returns

5 Best ELSS Funds With 1-3 Year Returns

Top performing ELSS with 1 year returns
Funds 1 Year Returns Rating
Quant Tax Plan Fund 123% 5
Mirae Asset Tax Saver Fund 78.05% 5
Canara Robeco Equity Tax Saver Fund 66.86% 5
DSP Tax Saver Fund 64.16 4
BOI AXA Tax Advantage Fund 62.67% 4
Top performing ELSS with 3 year returns
Funds 3 Year Returns Rating
Quant Tax Plan Fund 21.84% 5
Canara Robeco Equity Tax Saver Fund 19.14% 5
Mirae Asset Tax Saver Fund 18.75% 5
Axis Long Term Equity Fund 16.41% 4
Kotak Tax Saver Fund 14.81% 4
Source: Value Research

Public Provident Fund (PPF)

Public Provident Fund (PPF)

The Public Provident Fund (PPF) Scheme has remained a popular investment option for many investors for millennia and is still going strong. Above everything, the principal and tax-free income are assured by the government. PPF currently provides 7.1 per cent interest per annum for the quarter ending March 31, 2021. A minimum annual deposit of Rs 500 is required to keep the account open, whereas a cumulative deposit of Rs 1.5 lakh can be made in a financial year. PPF comes with a long maturity period of 15 years which is the longest among the tax-saving investment categories. After a term of 15 years, the account further can be extended to a block of 3 years as well. A PPF account can be opened by someone of any age and even can be transferred across banks or post offices. An individual cannot claim a tax advantage under section 80C on a deposit to a PPF account under the new tax system. In the current tax system, though, any interest earned or maturity amount gained from a PPF account stays tax-free.

Employees' Provident Fund

Employees’ Provident Fund

Employees’ Provident Fund (EPF) is another option that allows a salaried person to make voluntary contributions in order to build up a tax-free emergency fund. Each month, an employee is required to contribute 12% of his basic salary to his or her EPF account. The employee’s contributions are tax-deductible up to a cap of Rs 1.5 lakh per year under Section 80C of the Income Tax Act, 1961, apart from the employer’s contribution. Both the employee and employer contributions are eligible for tax-free interest each year. A proposal in Budget 2021 was announced to restrict the deduction on EPF return earned. According to the provision, if the total investment in VPF and EPF in a financial year exceeds Rs 2.5 lakh, the returns received on the contribution over Rs 2.5 lakh will not be tax-free. This will take effect on April 1, 2021, and will apply to the fiscal year 2021-2022. The VPF is just only an extension of the EPF where the interest earned on the EPF/VPF plan is tax-free if the employee works for five years or longer. On Thursday, March 4, the Employees’ Provident Fund Organization (EPFO) maintained the interest rate at 8.5 percent for fiscal 2020-21, steady from the previous year.

Unit Linked Insurance Plan

Unit Linked Insurance Plan

A Unit Linked Insurance Plan (ULIP) bundles insurance and investment into one product. Here the insurance provider places a portion of your deposit in life insurance and the remainder across equity, debt. In 2010, the Insurance Regulatory and Development Authority of India (IRDAI) increased the lock-in duration for ULIPs from three to five years. That being said, because insurance is a long-term asset, you may not enjoy the full advantage of the scheme until you keep it for the entire duration which can vary 15 to 20 years. That being said, the tax reform in Budget 2021 has ULIP investors concerned about this widely used tax-free investment tool. The return on your current ULIP investment will no longer be tax-free if the annual premium is higher than Rs 2.5 lakh in the potential. Only the maturity proceeds of ULIPs with an annual premium up to Rs. 2.5 lakh will be eligible for tax exemption under Section 10(10D). The income/return on the maturity of ULIPs with an annual premium above Rs 2.5 lakh will be considered as capital gain and taxed accordingly under section 112A. Though, the limit of Rs. 2.5 lakh on the annual premium of ULIPs will apply only to policies adopted on or after Feb-1, 2021.

Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana (SSY) is a small saving scheme of the post office for a girl child, that was introduced as a major aspect of the ‘Beti Bachao Beti Padhao’ initiative. With an option of tax-deductions, this scheme currently provides a higher interest rate of 7.6%. With a minimum deposit of Rs 250 up to a limit of Rs 1.5 lakh a Sukanya Samriddhi Account can be opened at any time after a girl’s birth before she turns ten years of age. The account will be active for 21 years from the date of opening or before the girl marries after she turns 18 years old. SSY is backed by the government and has the exempt-exempt-exempt (EEE) classification. The contribution is tax-deductible under Section 80C, and the maturity benefits are not. Individuals who invest in the Sukanya Samriddhi Yojana for their girl child will continue to earn tax-free interest in the account even though the tax regime changes. In addition, the payment proceeds earned from the scheme’s account will be tax-free. That being said, under the current tax regime, contributions made under this scheme will not be liable for a tax exemption under section 80C.

5-Year National Savings Certificate

5-Year National Savings Certificate

An Indian resident can purchase a National Savings Certificate (NSC) from any post office in order to get a guaranteed return and tax benefit. Since it is a fixed-income scheme, investors with a low-risk appetite those looking to diversify their investments through a fixed-return vehicle can consider NSC as a part of their personal finance space. The interest rate on the National Savings Certificate is subject to change every quarter based on announcements made by the Finance Ministry of India. For Q1 FY 2020-21 (April to June), the applicable NSC interest rate is 6.8%. NSC with a lock-in period of 5 years can easily be purchased at any post office by depositing a minimum amount of Rs. 1000 and in multiples of Rs. 100 with no upper limit. Up to Rs. 1.5 lakhs of annual tax savings are eligible under Section 80C of the Income Tax Act, 1961. The interest received annually from an NSC (for the first four years) is considered to be reinvested, making it tax-free and qualifying for a Section 80C deduction. The interest gained in the fifth year, on the other hand, is not re-invested and is not taxed at the investor’s relevant slab limit.



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Top Banks Offering Lowest Business Loan Interest Rate in India

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Factors Affecting Business Loan Interest Rates

Credit Score

In India, it is used as a qualification criterion for obtaining business loans. If the business owner’s credit score is above 700, the loan application is more likely to be accepted. Small business loans with a weak credit history, on the other hand, appear to cost more in the form of higher interest rates.

Business Experience

Your professional experience matters when you’re trying to advance in your career and your business experience matters when you’re planning to start a new company or extend an existing one.

Annual Turnover

The average earning potential of a small business is measured by its annual profits. Banks and lenders typically conduct financial statement research by reviewing the company’s sales details over a period of several years. The average revenue of a small business is measured using the same data.

Collateral

The interest rate for a business loan varies depending on whether the borrower is opting for secured or unsecured loans.

Type of Lender

Different types of lending institutions, such as banks, NBFCs, and institutions similar to NBFCs, will charge different rates of interest.

Business Loan Requirement

Business Loan Requirement

Applicants must be between the ages of 25 and 55 to be considered. Below are basic documents required for a business loan to be sanctioned. However, the list of documents varies with a bank and type of business loan.

Last 1-year Income Tax returns

Last 3 years Audited/Provisional Financials

Latest Bank Statements for the last 6 months

Current year performance and projected turnover

Sole Proprietorship Declaration or certified copy of Partnership Deed

A certified true copy of Memorandum and Articles of Association

PAN Card for company, firm or individual

Proof of ID

Proof of address

Important Things to Know About Business Loan

Important Things to Know About Business Loan

  • Individuals and businesses that take out secured loans have collateral such as inventory, property, equipment, and so on. The interest rate will be lower here.
  • Unsecured loans allow companies to borrow money without having to put up any collateral. The interest rates are high because the banks’ risk is high.
  • Business loan processing fees can vary from 2% to 6% of the sanctioned amount, depending
  • on the bank or financial institution. Some companies may also charge a set fee as a processing fee.
  • The interest rate, processing fee, preclosure fee, paperwork costs, part-payment fee, default fee, and other fees are all imposed on business loans.
  • Banks and other financial firms will not fund 100% of your business loan requirements. They seek margins ranging from 10% to 30% of the total amount of money required for the company.

List of Banks offering lowest business loan interest rates

List of Banks offering lowest business loan interest rates

Name of Bank Interest Rates
SBI 11.20%- 16.30( Linked to MCLR)
Bank of Maharashtra 14.50% onwards
HDFC Bank 15 % – 21.35%
Axis Bank 15.5% onwards
ICICI Bank 16% onwards
Kotak Bank 16.00%
Corporation Bank 13.55% onwards
Dhan Laxmi Bank 12.90% onwards
RBL Bank Business Loan Rates 16.25%
IndusInd Bank 14.00%

Conclusion

Conclusion

The interest rate on a business loan is determined by your company, the loan amount requested, and your previous relationship with the bank. Most banks charge a minimum processing fee of 2% to 3% on loans. Since many business loans are unsecured, it is a smart option to get an insurance policy in the borrower’s name. Banks usually impose prepayment or foreclosure charges, which can be as high as 5%. Check and see whether the low rate of interest you’re receiving is followed by heavy prepayment or foreclosure penalties. It’s worth noting that certain business loans can’t be repaid on time.



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Retail stress hits private banks hardest: Govt data

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“Moratorium has delayed the stress in these segments where delinquencies have not yet stabilised, and higher loan losses are expected to materialise in FY22,” the agency said in a report.

Rising financial stress among small borrowers is hitting the books of private banks the hardest, show data released by the government in response to a question in Parliament. Between March and December 2020, banks saw upto 380-basis point (bps) rise in their ratio of stressed retail advances, with more private lenders seeing a deterioration than public sector banks (PSBs).

With the exception of Punjab & Sind Bank and Bank of Baroda (BoB), most other PSBs saw their stressed retail advances ratio either declining or remaining flat during the period under review. On the other hand, seven private banks saw an increase in their ratio of stressed retail advances to all retail advances. Stressed advances include gross non-performing assets (NPAs) and restructured standard advances.

Karur Vysya Bank’s stressed retail assets ratio rose to 5% from 2.2% during the period under review, while DCB Bank’s grew to 3.7% from 1.9%. Over the same period, the ratio at HDFC Bank rose to 1.4% from 0.7%, at IDBI Bank to 2.5% from 1.3%, at IDFC First Bank to 2.3% from 1.8%, at IndusInd Bank to 4.2% from 2.5% and at Kotak Mahindra Bank to 2.6% from 2%.

Private banks typically lend to employees from the private sector and to self-employed people, all of whom have been hit harder by the Covid-19 pandemic. PSBs have a relatively smaller share in retail lending and their customers are often employed with the government or other state-owned enterprises. Also, private banks have had a stronger presence in the unsecured lending space where the credit risk is higher.

Analysts have been saying that unsecured loans and microfinance exposures could throw up nasty surprises on the asset quality front. India Ratings and Research on Tuesday said that the performance of unsecured asset classes, such as microfinance loans, unsecured business loans and consumer loans, is worsening, given the borrower’s depleted financial cushions and the nature of these loans. “Moratorium has delayed the stress in these segments where delinquencies have not yet stabilised, and higher loan losses are expected to materialise in FY22,” the agency said in a report.

Sensing the incipient stress in the retail segment, banks have been tightening their credit filters. After Axis Bank’s Q3FY21 results, chief risk officer Amit Talgeri told analysts that over 83% of incremental retail sourcing is from secured products, primarily mortgages, during the current year. “We continue to remain cautious in the unsecured segments, and sourcing is largely restricted to existing Bank customers based on tightened risk frameworks,” he said. Earlier, FE had reported that banks have been refusing loans to customers employed in Covid-hit sectors like aviation, hospitality and the media.

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IIFL Finance 10% NCD Issue To Close On March 18: Should You Invest?

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Investment

oi-Roshni Agarwal

|

On strong investor response, IIFL Finance on Saturday announced that its NCD issue aimed at aggregating up to Rs. 1000 crore will be shut for subscription on March 18 instead of March 23. Here is a complete lowdown on the issue and whether or not you should consider subscribing to the NCD issue:

IIFL Finance 10% NCD Issue To Close On March 18: Should You Invest?

IIFL Finance 10% NCD Issue To Close On March 18: Should You Invest?

NCDs or non-convertible debentures are issued by companies to raise funds and they bear fixed return as coupon rate which is paid out to their investors. Such instruments pay regular return either monthly, quarterly or annually

1. Issue details:

The IIFL Finance NCD issue opened on March 3 and will now close on March 18 as against the earlier announced closure date of March 23 as it had an option of early closure. The unsecured redeemable non-convertible debentures (NCDs) will be issued at a face value of Rs. 1000 and the issue price is Rs. 1000 per NCD. Across all categories, minimum application size is Rs. 10,000. The allotment of NCDs will be made on first-come-first-served basis.

The lead managers to the issue are Edelweiss Financial Services Limited, IIFL Securities Limited and Equirus Capital Private Limited. The NCDs will be listed on the BSE Limited and National Stock Exchange of India Limited (NSE), to provide liquidity to investors.

2. Issue objective:

The funds raised from the issuance of NCDs will be put in growing the business and capital appreciation.

3. About IIFL Finance:

IIFL Finance is one of the country’s largest retail-centric non-banking financial services company that primarily caters to the credit need of the underserved population. “IIFL has an impeccable track record of more than 25 years and all the bond issues and the debt obligations have always been paid on time”, said Rajesh Rajak, CFO, IIFL Finance. The funds raised will be used to meet the credit need of more such customers and accelerate our digital process transformation to enable a frictionless experience, added Rajak.

Its loan book stands at Rs. 42,264 crore.

3. Terms of the issue:

Series I II III
Interest payment frequency Annual Monthly At maturity
Tenure 87 months 87 months 87 months
Coupon (% per annum) 10% 9.6% NA
Effective yield ( p.a.) 10% 10.03% 10.03%

Source: IIFLwebsite

4. Credit rating:

The issue has been rated AA by CRISIL and AA+ by Brickwork. Rating agencies have reaffirmed the credit rating of IIFL Finance, indicating that the NCDs are highly safe in respect of timely servicing of financial obligations and bear very less credit risk.

5. Should you invest in 10% IIFL Finance NCD issue?

Considering coupon rate of 10% per annum, IIFL Finance NCD issue is a good bet in comparison to other debt products. In the current landscape, bank FDs of 3 year tenure fetch around 5.1%, while liquid funds offer anywhere between 2.8-3 percent. Also, IIFL Finance NCDs coupon rate is much higher than 10-year government securities which currently offer 6 percent.

Moreover as most experts see interest rate to trend lower owing to abundant liquidity in the post-Covid world for the next few years, it shall be best to lock in the high yield of 10.3%. However one major drawback with these NCDs is that these are unsecured i.e. are not secured by underlying assets of the company and can default on principal and interest payment in case of losses and hence investors should largely give the issue a miss.

GoodReturns.in



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5-Year NSC vs 5-Year Tax Saving FDs: A Comparison In The Context Of Tax Gain & Returns

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5-Year National Savings Certificate

National Savings Certificates (NSC) comes with a range of benefits. Some of them are as follows:

Rate of interest: The interest rate on NSC is currently 6.8% per annum, and it is updated quarterly by the government of India. The returns are much higher if we compare the interest rate of NSC with tax-saving FDs of SBI, ICICI, HDFC and Axis Bank.

Safety: Since NSC is backed by the government, it offers greater security than banks, which may go to bankruptcy in the potential.

Tax benefits: NSC, on the other hand, has a feature that no other fixed-income tax-saving fund has. Under Section 80C of the IT Act, interest earned annually in NSC is considered to be reinvested (for the first four years). In other terms, interest counts for a tax gain per annum up to a limit of Rs 1.5 lakh.

Premature withdrawal: In the NSC, there is no option for early withdrawal before the 5- or 10-year period is finished. NSCs can only be withdrawn early if the holder dies.

Loan against deposit facility: If you need a loan, you can use National Saving Certificates (NSC) as security. This alternative is ideal since the interest charged on loans secured by NSCs is far lower than that charged on personal loans.

Deposit limit: One can purchase NSC from any post office by depositing a minimum amount of Rs 1000 and in multiple of Rs. 100, with no upper limit.

5-year Tax Saving FDs

5-year Tax Saving FDs

You can choose either a private, public, or Small Finance Bank to get tax benefits by investing in a 5-year tax-saving fixed deposit. To learn more about tax-saving FDs, look through the details below.

Rate of interest: Interest rates on tax-saving FDs vary from bank to bank and type of depositor i.e. non-senior or senior citizen. The latest rates on tax-saving FDs are as high as 7.25 percent, which is higher than the interest rate on bank savings accounts. To know more about tax-saving FD rates, click here.

Safety: Tax saving FDs which allow tax deductions are also risk-free which means that the returns are not market-based. The amount invested is fully secured and even returns are promised.

Deposit limit: One can make deposits in tax-saving FDs with a small amount which varies from bank to bank. The maximum amount that can be invested in a financial year is set at Rs. 1.5 lakh, which is also the limit for tax-saving contributions under section 80C of the Income Tax Act.

Loan and premature withdrawal option: Premature withdrawals and loan against deposit under tax-saving deposits are not allowed.

Nomination: These FDs have a nomination facility. That being said, if the deposit is made for and maintained by or on behalf of a minor, the nomination facility is not open.

Benefit for senior citizens: Most of the banks provide senior citizens somewhat higher interest rates on Fixed Deposits compared to non-senior citizens. This interest rate gap also continues for tax-saving FDs. Senior citizens, on the other hand, are not liable for higher tax-saving FD interest rates at the post office.

TDS: Individuals must pay TDS if their gross interest received in a financial year surpasses Rs 40,000. Section 80TTB allows senior citizens to claim a deduction of up to Rs 50,000 on interest received on deposits. TDS is deducted from the interest received based on the investor’s tax slab rate. By submitting Form 15G to the bank (or Form 15H for senior citizens) to the bank one can avoid TDS.

10 Best Tax-Saving FDs

10 Best Tax-Saving FDs

Below are the top 10 banks including (small finance, public sector and private sector) which are currently providing higher returns on 5-year tax-saving fixed deposits:

Sr No. Banks ROI in % for non-senior citizens ROI in % for senior citizens
1 Suryoday Small Finance Bank 7.25 7.75
2 Jana Small Finance Bank 7 7.5
3 Utkarsh Small Finance Bank 6.75 7.25
4 Ujjivan Small Finance Bank 6.75 7.25
5 DCB Bank 6.75 7.25
6 IndusInd Bank 6.5 7
7 RBL Bank 6.25 6.75
8 AU Small Finance Bank 6.25 7
9 Union Bank of India 5.55 6.05
10 Canara Bank 5.5 6

Our take

Our take

For the financially savvy, investment as a means of creating wealth is often a lucrative concept. Although both fixed deposits and NSCs have positive investment prospects, NSCs are the clear first choice because of the higher and more stable returns they offer than what offered currently provided by some small finance banks as per the above table. Compounding is undertaken on an annual basis in NSCs and quarterly in bank FDs which is worth considering here apart from the returns only. Both are fixed-income instruments that allow tax deductions under section 80C, which means that both can be a perfect bet for a conservative or risk-averse investor. Fixed income instruments, such as FDs and NSC, are strategies for wealth generation and do not serve in the long run to achieve inflation-beating returns as NPS and ELSS do. Hence, it can be a smart move if you only after considering your income slab diversify your holdings across NSC and Tax-saving FDs to meet your potential goals on the go.



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