Kids Academy Apps: For your young ones

While we talk about investments, kids can't be ignored as well. Kids are one of the biggest investments. It takes a lot to raise a child into a good, responsible human being.

There have never been so many options to teach your kids. With the advent of smartphones and tablets the options have been ever increasing. There are innovators in this field that have been coming with new apps almost daily. I recently came across Kids Academy, makers of learning games for kids. They are available on App Store and Android Market. 

The apps focus on the pre-schoolers, to help them read and write. They help the young kids to draw the letters, numerals and other symbols in an interactive manner. Very intuitive and easy to grasp for the young kids.The kids would be attracted to the cute pictures, the rhythms that play in the background. To keep the kids engaged, the apps present challenges such as filling the jar with fireflies.  

I downloaded the following apps from them - 

Learn To Read & Write Kid’ Puzzles, kids-puzzles-preschool-math, preschool-kindergarten-learning

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5 Things to know before taking a Home Loan

Buying a house is an important step in one's life. Remember the song "Ek Bangla Bane Nyara" by KL Sehgal? I took the plunge some time back and like most of the normal people, I took a home loan to help me in this. Today, I'll share the few things that I checked while taking the home loan - 

1. What is your eligibility?

Home loan amount depends on your income, outstanding loans, credit card dues, previous payment records. Banks like to understand how much can you spare for the EMI. You should also be clear about the amount that you are willing to pay every month as EMI. As a rule of thumb, anything more than 40-50% of your monthly income would be difficult to pay regularly. Call a few banks and check about your maximum eligibility. It usually takes your last few salary slips to know an accurate amount.

Usually banks fund 80% of the property value as loan, rest of it would come from your savings. Thus, the maximum eligibility might not be the sole thing you need to consider.

2. Know your Credit Score (CIBIL)

Check with Credit Information Bureau (India) Limited (CIBIL) to know your credit score. It gives you a credit score on the scale of between 300 and 900 points. The points are given on the basis of your credit card bill payment, bank account statement, existing loans or liabilities, loan repayments and how many times you have applied for loan till date.

People sometimes apply at multiple banks to know their maximum limit. This is considered to negatively impact your CIBIL score and your chances of getting the loan reduces.

While it is a good idea to know this number so that you can use it if needed, I was not asked about it.

3. Loan Tenure and Interest Type

There are banks who provide a Fixed Rate loan as well a Floating Rate. While many of them now just provide a Floating Rate, some of them also combine the two, a Fixed Rate for a the first few years and a Floating Rate afterwards. It helps to have a fixed EMI in the initial years when the interest outflow is high.

The EMI also depends on the tenure. Based on the amount that you plan to let go every month, you should decide the Loan Tenure. A higher tenure means more interest outgo over the complete period, so you need to strike a balance.

4. Choose your lender

Do a detailed research to find a bank or financing company for home loan. Check with at least 4 to 5 banks and companies to know their terms and conditions of offering a loan, interest rate and tenure.

While the interest rate is important, you should also look at other aspects such as the customer service, charges for early termination of the loan and more before deciding the financier. 

It is now a norm to provide the ability to prepay your loan anytime without any additional charges. This would affect you if you want to prepay the loan.

5. Extra Charges

Get complete information about the extra charges that you will have to pay to take a home loan like processing fee, service and administrative fee, etc. These charges are a percentage of your loan amount that is actually sanctioned to you, and not on what you actually take home. Making modification in any of these later may come at a cost. Some banks want you to register the loan agreement at the sub-registrar.

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How To Deliver a Killer Presentation That Will Earn You That Grade You Want

Do you want to impress the professor and make sure you get an excellent grade? Do you want to leave an impression on your new boss? You could spend hours in the library or on the net researching your topic and making sure you will have a firm grip on every fact and opinion, issues and opinions or you could just get yourself a wishy washy understanding while focusing on what really matters: the presentation. Once you learn a little and have a great presentation you will be perceived far better than someone who knows everything but has poor presentation skills. The fact of the matter is. content matters, but the execution must be eye catching. Here are some tips that will make your presentation unforgettable.

1. Bring Cookies

It might seem like pandering, and that you will be perceived as trying to buy a grade. Maybe so! That’s precisely what it does, but for reasons you will possibly not think. The point of bringing cookies, or any sort of treat, to the class, is just to acquire folks in a good and comfortable mood. You will see someone there who is a touch peckish and can consider your snack a life saver. There’ll be other people who have a sweet tooth and will also be so psyched about the treat. Even those who will look disapprovingly at you will reluctantly and gratefully take a be and treat more prepared to hear your presentation. At any rate, you will be remembered and definitely stand out from the crowd. That can only help!

2. Go Pro using the Presentation

If you’re thinking of getting away with just a few handouts or a boring old Power Point presentation, you might too write that "B" down with your grade book yourself. No-one is going to be astounded by your moving images on Power Point, and the words swooping in. We’ve all seen it and it’s boring. So, go big or go home, I say. Do what the pros get and do real presentation materials. For example, you can utilize retractable banner stands to possess your topics and themes actually swoop in (as opposed to on the pc) almost like a genuine life power point presentation. How cool will that be? These materials are pretty cheap online at places like http://thedisplayoutlet.com, and it’ll be worth the investment (and you can reuse them for next presentation! ).

3. Dress for Success

In these days of slovenly attire, most college kids get by with sweats and sports team t-shirts. You peer a mess. And that’s ok, everyone’s doing it, and when everyone’s doing it, you don’t stand out. However, when it comes time to present, you need to stand out, and there’s no better technique of doing that rather than to go old fashioned and wear a tie and suit, or nice dress if you are of the female selection of human. If he or she tries to tell themselves which they won’t be swayed, dress up and provide well - the formal attire provides you with a sense of confidence which translates to your presentation and will impress the professor, even. Works every time!


This was a sponsored post.

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Can I Outperform the Share Markets Ever?

I have been investing in the share markets for about 4 years now. When I started, the great fall of 2008 happened. I didn't have an idea on how to react. So, I did what most of us did - Stopped investing. Partially because I was afraid and partially because I didn't have money as all that I had in spare was already committed when Sensex was at 21000! 

As per this article - Why investors always underperform the market, Sensex has given 17.79% CAGR in the past 10 years. This means 1 lakh in Sensex at that time would be 5.14 Lakh now. But frankly speaking how many of us have had such returns? Not many that I know…

Why? What is it that we do wrong? Leave Outperformance, can we even go near to the returns mentioned here? The same article lists some personal traits and behavioral patterns that stop us from doing so. Here is my take –

Fear and Greed: This is a common one and I mentioned this at the start of the post as well. We all get afraid when the market goes down. I was afraid in 2008. Similarly I was greedy in 2007 and hence had invested and the “Mount Everest” levels of Sensex. This is because of the other common trait “Greed” that common men like you and I want to acquire as much wealth as possible in the smallest possible time. Both of these make it hard to follow a plan.

The above 2 traits make us follow the Herd. Following the advice of other so called experts is because of the fear and greed again. Fear of being the black sheep, the failure and greed of making fast money. This makes us buy a stock when it is over heated (at a high price) just to sell the same stock at a lower price because of the Fear of losing everything.

While Buying and selling stocks, we don’t look for bargains very unlike when we are buying vegetables.

Warren Buffet suggests that one should be greedy when others are fearful and vice-versa. 

But generally it is the other way round. The key is -

• To be patient, assume stress when the market is down.
• Don’t look at your portfolio daily when the market is down.
• Study the stock like a hawk does for his prey before catching it.
• Buy the companies that you have researched on.
• Have a plan. Follow it like you do to your religion.
• Don’t look for a certain kind of return because your neighbor is getting the same. But make sure that you are getting what will fulfill your goals.

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Few facts about LTA

Some nice to know things about the LTA component of one's salary -

1. If you do not wish to claim LTA in one particular year you can have your employer carry forward your LTA for the next year.
2. You don't need to submit a proof/bills for the travel undertaken to the employer now. This has been termed in a judgement by Supreme Court in 2009. check this out. But this doesn't mean that you need not keep the bills. The taxation department might still want them from you directly.
3. The current block of LTA is 2010-13. You can claim tax benefits twice during these 4 years.
4. The bills can be any domestic travel. You cannot show fuel bills of the personal vehicle though.
5. You and your working wife can both claim LTA but not on the same travel.
6. LTA covers only travel and not the stay, which is weird. 

You can find details in my old post on LTA here.

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Can Holiday Package be claimed as LTA?

Found this article on the above topic. Thought to spread the word. Do check out - [one mint].

The answer is - Yes, it can be as far as it is a domestic travel, another thing to be noticed is that LTA is for spouse, dependent children, dependent brothers or sisters only, so if you have taken a holiday with your extended family or children who are no longer dependent on you, then you can’t claim LTA exemption on that part of the expense.

Since LTA can be claimed only for travel – if your holiday package included hotel and sightseeing (which it normally does) – you won’t be able to take an exemption for that.

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Infrastructure Bonds - A sneak peek

The Budget for the fiscal 2010-11 introduced infrastructure bonds to facilitate financing of long gestation infrastructure projects. The government has notified an investment of up to Rs 20,000 in these bonds to be exempt from income tax over and above the Rs 1 lakh tax exemption under section 80C of the Income Tax Act.  This should result in an additional tax saving of Rs 2,000 to Rs 6,000, depending on the tax slab applicable to each investor.

Structure of Infrastructure Bonds: Amount invested in infrastructure bonds will be used to finance various infrastructure projects in the country. As per the specifications of the central government, infrastructure bonds are to be issued by IFCI, LIC, IDFC and any non-banking infrastructure finance company recognised by the Reserve Bank of India.

While IFCI has recently closed its issue of infrastructure bonds, LIC and IDFC are now set to launch their issues in coming months. The tenure for these bonds is 10 years with a lock-in period of five years. Thus, after a period of 5 years, the issuing company can buy back these bonds from investors.

Alternatively, the investor can choose to trade these bonds in stock exchanges. The issuing company shall offer two rates of interest on these bonds — one is when the investor chooses the buy-back option after the lock-in period and the other is when he chooses to hold on to the investment till maturity period.

Returns and Tax Treatment

Infrastructure bonds will carry an interest rate, which will be determined by the issuing company. The central government, however, has notified that the interest rate so payable shall not exceed the yield on 10-year government bonds. As the current yield on 10-year government bonds is around 8%, investors can expect these infrastructure bonds to offer a rate marginally lower than 8%.

IFCI, for instance, had offered investors an interest rate of 7.85% for bonds with a buyback option after 5 years and 7.95% for bonds without the buyback option and redeemable after 10 years. IDFC, whose bonds have hit the market yesterday (click here), is likely to offer an interest rate ranging from 7.5- 8%.

Investors can opt for either an annual payout of interest or allow the same to be compounded annually and payable only on maturity. Though the principal amount of investment — up to Rs 20,000 — is exempt from tax, the investor shall be liable to pay tax on the amount of interest earned from such an investment. If the investor chooses to trade these bonds in the exchanges after the lock-in period, any gains accrued thereon shall also be subject to long-term capital gains tax.

5-year Tax Saving Bank FD v/s Infrastructure Bonds

As infrastructure bonds have a lock-in period similar to that of a tax saving bank fixed deposit and are expected to offer interest rates similar to the ones being currently offered by banks on their fixed deposits, it is very natural for investors to contemplate as to which one of the two is a better tax-saving avenue.

A 5-year tax saving bank FD is part of the existing 80C basket with a maximum exemption limit of Rs 1 lakh, an investment in infrastructure bonds is an additional exemption of Rs 20,000.

Thus, in case you have already exhausted the exemption limit of Rs 1 lakh through investments in Public Provident Fund (PPF), Employee Provident Fund (EPF), LIC Premium, Repayment of Principal on housing loan etc., you have to opt for infrastructure bonds rather than bank FDs.

As far as the returns from these two instruments are concerned, let us assume an interest rate of 7.85% (as offered by IFCI) for the 5-year infrastructure bond (with buy-back option) and an interest rate of 7.5% on a 5-year tax saving bank FD — as is the prevailing interest rate being offered by most banks.

Thing to note here is that the interest in case of a bank FD is compounded quarterly, but is annual for infrastructure bonds.

Given the above interest rates, an investment of Rs 20,000 shall fetch a pre-tax interest income of Rs 8,999 in the case of the bank FD and Rs 9,183 in the case of infrastructure bonds after a period of 5 years. Thus, it is not the yield on maturity, but the benefit accruing at the time of investment that needs to be considered before making an investment decision.

Risk Element: While there is no risk as far as the underlying asset of these investments is concerned, the embedded risk lies with respect to the institution offering these bonds. It is thus important for investors to carefully scrutinise the credibility of the institution offering these bonds. Moreover, there is still an uncertainity on the future of this mode of investment since with DTC in 2012, there is no mention of these bonds.

There are various articles on internet on this -

1. Economic Times
2. Rediff.com

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Buying ULIPS will Cost Less Now

Insurance Regulatory and Development Authority (IRDA) has announced new set of guidelines for ULIPs. They will now cost lesser but have a longer lock-in period.

IRDA, on Monday, said that insurers will now be allowed to charge up to 4% on annual premium paid on Ulips for the first five years, and thereafter charges will be reduced during the tenure of the policy. For plans of 15 years and above, the charges will be restricted at 2.25% of the yearly premium.

IRDA has also increased the lock-in period for all Ulips from three years to five years now, including the top-up premiums. The decision is expected to make these products more like long-term financial instruments that can provide risk protection. Longer lock-in would also discourage those insurance buyers who often entered Ulips, which are market-linked products, for short term gains. The regulator also increased the insurance cover on such products to 10 times of the first-year premium compared to five times now.

[source]

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ICICI Prudential Pinnacle Guaranteed NAV- Review

Guaranteed return products are undoubtedly very popular among us Indians. We use at least one of these products, say, bank fixed deposits, NSC, KVP, PPF, REC Bonds, etc., to pick up a decent fixed return.  The latest offering is by ICICI Prudential which has introduced ICICI Pru Pinnacle, a guaranteed return unit-linked insurance plan (ULIP). But the question remains as whether this plan will succeed in attracting investors by offering something new or fall flat.Here I'm presenting a review of this product from RupeeTalk.com

Highlights

On maturity, the plan offers the highest NAV recorded on daily basis in its first 7 years There is an additional 3 per cent maturity bonus on the completion of term Low charges make it a cost-effective guaranteed return plan

Background
ICICI Prudential, a joint venture between ICICI Bank and the UK-based Prudential Plc., was established in Dec. 2000. Over past nine years, it has built a strong distribution network of 2,074 branches (inclusive of 1,116 offices), over 2,25,000 advisors and 7 bancassurance partners. ICICI Prudential is the first life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from the credit rating agency, Fitch ratings. As of now, the company has a paid-up capital of Rs. 4,780 cr and the total Assets under Management (AUM) over $10 bn (Rs. 47,000 cr).
Product highlights

• ‘ICICI Prudential Pinnacle’ is an open-ended, unit-linked insurance policy with an advantage of varying exposure to equity with downside risk protected.
• Limited premium-paying term (3 years) providing extended insurance protection (10 years)
• An option to increase or decrease the sum assured anytime during the policy term
• The minimum and maximum age for entry is 8 years and 65 years, respectively.
• The policy is available for 10 years.
• The minimum single premium is Rs. 50,000 per annum, with no cap on maximum limit.
• Minimum sum assured is five times the annual premium.
• The policy can be surrendered after the 3^rd year, and there are no surrender charges after the 5^th year.

Benefits of ICICI Pru Pinnacle

• ‘Guaranteed highest NAV’ as recorded on daily basis in the first seven years of the fund (from Oct. 24, 2009 to Oct. 24, 2016)

• An additional 3 per cent of fund value (prevailing NAV) received upon maturity
• Liquidity in terms of partial withdrawals allowed from the 6^th policy year
• In case of the unfortunate event of death of the insured, the nominee gets the higher of the fund value and sum assured (reduced by partial withdrawals, if any)
• 100 per cent surrender value after the 5^th policy year
• Tax benefits on the premium paid and benefits received under the policy as per the prevailing Income Tax laws.

Analysis
There are already a considerable number of guaranteed return products in the market such as SBI Life’s Smart ULIP, Tata AIG’s Invest Assure and Birla Sunlife’s Platinum Plus. All these plans have more or less the same features. However, they differ in charges like premium allocation charges, fund management charges, policy administration charges and others.
So where does ICICI Pru Pinnacle stand? This plan, too, is similar to the above-mentioned plans, but what sets it apart from them is its lower policy charges, recording of daily NAV and an additional maturity bonus of 3 per cent. The ICICI Pru Pinnacle fund guarantees the highest net asset value (NAV) recorded in its first seven years, subject to a minimum of Rs. 10. But there is a catch. This guaranteed highest NAV is applicable only at maturity. At maturity, the higher of Fund Value (units X NAV) and Guaranteed Value (units X guaranteed NAV) as on the maturity date shall be payable (refer Table 1).

As per the company’s benefit illustration, an annual premium of Rs. 3 lakh for three years for a 35-year-old healthy male with a sum assured of Rs. 15 lakh will grow to Rs. 11.63 lakh and Rs. 16.34 lakh at an interest rate of 6 per cent and 10 per cent, respectively.
Equating with other products
Here is the refrain, ‘Do not mix insurance with investment unless investment costs are very less and investment horizon is more than 20 years’. We are not comparing ICICI Pru Pinnacle with similar products like SBI Life’s Smart ULIP, Tata AIG’s Invest Assure and Birla Sunlife’s Platinum Plus, for they differ majorly in charges. Rather, we weigh it against a customised product – a combination of a mutual fund and a term insurance. Let us consider that the combo-product grows at the same 6 per cent and 10 per cent interest rate (refer Table 2).

In any circumstances, the combo-product of ELSS + term plan will outperform ICICI Pru Pinnacle by Rs. 1.11 lakh and Rs 1.45 lakh at a growth rate of 6 per cent and 10 per cent, respectively. Moreover, the death benefit in the MF investment will always be more than Rs. 15 lakh (Rs. 32.79 lakh at the 10th policy year). In terms of net returns also, the combo-product will yield 8.86 per cent and 4.43 per cent in comparison to 7.72 per cent and 3.25 per cent by ICICI Pru Pinnacle at a growth rate of 10 per cent and 6 per cent, respectively. Nevertheless, in ICICI Pru Pinnacle Fund maturity amount is guaranteed by its highest NAV recorded in the first seven years, but in ELSS maturity amount is applicable at the recorded NAV at the maturity date. So, in case the market tanks at the time of maturity, ELSS proceeds will go down, failing to provide the guaranteed return while ICICI Pru Pinnacle maturity proceeds are guaranteed at their highest NAV recorded.
Tax benefits
ICICI Prudential Pinnacle Fund provides tax benefits under Sec 80C of the Income Tax Act, where the premium paid is eligible for tax deductions up to Rs. 1 lakh. The maturity proceed is also exempt from tax under Section 10(10D).
Things to look into
• Top-up premiums are not allowed.
• Surrender benefit is limited to 30 per cent of the fund value within 3 years of policy term.
Recommendations
In India, products like ULIPs have become a push product rather than a pull product. By presenting delusive return charts to buyers and hiding the hefty charges applicable on ULIPs, insurance agents try to create a positive image for the product. ICICI Pru Pinnacle fund is no comparison to the combo-product of ELSS and term plan when it comes to tax saving and wealth creation, for the latter offers higher return. However, when compared with its peers like SBI Life’s Smart ULIP, Tata AIG’s Invest Assure and Birla Sunlife’s Platinum Plus, ICICI Pru Pinnacle Fund has an edge over the rest because of its lower policy charges and the unique feature of daily NAV, not applicable in Smart ULIP.
How to invest in the plan?
Investors can buy the plan directly from 2,074 branches (inclusive of 1,116 offices), over 225,000 advisors and 7 bancassurance partners of ICICI Prudential.
Summing it up
Innovation is the key to financial products. It is a known fact that most ULIPs face difficulty in offering guaranteed return as promised. Though fund managers try to invest as per the mood of investors based upon the economic scenario, they may not always succeed in generating desired return. ULIPs carry high risks as returns are linked directly to market performance, and thus insurers may not be able to honour their commitment of guaranteed NAV. However, the guaranteed maturity amount in ICICI Pru Pinnacle by its highest recorded NAV helps it score over a mutual fund whose returns are not guaranteed. So, it can be safely said that ICICI Pru Pinnacle is a good bet for the investors who have a low risk appetite.

[source]

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MoneyControl.com in discussion with Subhash Lakhotia on Budget 2010

In an interview with CNBC-TV18, Subhash Lakhotia, Tax Guru; Sanjay Sinha, CEO of L&T Mutual Fund and Kamesh Goyal, Country Head of Bajaj Allianz Life Insurance evaluate the Union Budget and its impact on your wallet. Below is the edited transcript of Subhash Lakhotia, Kamesh Goyal and Sanjay Sinha’s exclusive interview on CNBC-TV18. Also watch the video.
Q: Upto Rs 50,000 seems to be the benefit—more so for people who are earning above Rs 5 lakh—Rs 5 to 8 lakh and of course above Rs 8 lakh as well gets the Rs 50,000 benefit. But under Rs 5 lakh earners seem to be getting a lesser benefit?
Lakhotia: Yes, the individuals having income upto Rs 50,000 to Rs 5 lakh will save Rs 20,000 and individuals having income of Rs 8 or 10 lakh they will save nearly Rs 50,000 income tax saving. But the worst part is the common man having income Rs 25,000 per month—his saving is a big zero. Not a single rupee saving inspite of the fact we are having big rise in inflation and other things in the country—it’s still the poor man or the common man with income of Rs 25,000 per month—no income tax saving at all because the initial exemption limit has not been changed—that’s the big problem.
Q: When we were talking ahead of the Budget, you had asked for an increase in the exemption limit under 80 C. The FM has left that totally untouched.
Lakhotia: No changes made in 80 C—Rs 1 lakh continues and this Rs 20,000, which has been made is a separate section 80 CCF. That is also only in the case of infrastructure bonds. My emotions are taken away. If he would have increased from Rs 1 lakh to 2 lakh—it would have been best one but this Rs 20,000 forced to make the investment in infrastructure bonds only.
Q: Maybe somewhere the Minister had the Direct Tax Code in mind. The Direct Tax Code does talk of an exemption increase to Rs 3 lakh for instance—the draft one. The FM hasn’t moved anywhere closer to that although on the basic exemption, the FM has tried to move in that direction—very small steps compared to what the Direct Tax Code proposes—but he has tried to move.
Lakhotia: Not in the basic exemption, but in the slab rate, FM has moved and that’s pretty good. It gives a chance that yes we can expect in the DTC the tax regime of Rs 10 lakh income and 10% tax only because this time the tax slabs have been changed. They are pretty good and very ideal one for the individuals having Rs 10 lakh or so. They are going to be happy. They will be able to fight the inflation as they are facing today.
Q: Did you expect even this much from him? Were you surprised?
Lakhotia: Not surprised at all because what I expected was for the common man initial exemption limit of Rs 30,000 coupled with standard deduction for salaried employed. Salaried employed the standard deduction is completely missing in this Budget.

Q: When we were talking before the Budget, you were hopeful that while the DTC does hang on our head from next year and that might not allow the Minister to tinker around too much—are you disappointed that from an investment category point there hasn’t been an expansion of the 80 C window at all?
Sinha: Yes one would have expected because as we were discussing that the tax slabs have been tweaked and this tweaking has been to make it come a bit closer to what the DTC proposes to do. One would have expected that the same philosophy would have extended to the tax benefits that you have under the exempt-exempt and then tax category that the DTC proposes. So on that count one is little disappointed.
But if you look at the larger picture, the fact that there is larger disposable income in the hands of people who are probably in the upper income bracket, there could be a possibility of that larger income now getting directed to savings if it’s not getting consumed.
Q: Are you okay with the fact that the category of people who are going to be getting this Rs 50,000 in their wallet are likely to come and invest in financial products?
Sinha: If you look at it from one perspective, this category of income generators may not be very large savers. But the FM has is not entirely left them out of the ambit of whatever he could do because the FM has a provision of putting about Rs 1,000 into accounts by way of the New Pension Scheme for the unorganised sector. So to some extent the FM has tried to cover and there the number of people that he proposes to cover is fairly large.
Q: But that’s not taken off—the New Pension System (NPS) has been a total disaster?
Sinha: Absolutely. In fact that’s why if there is an incentive that is provided by the government by incentivising people to start by making a contribution on the behalf of the pension saver.
Q: But Rs 1,000 a year?
Sinha: In the absence of zero, I would say this is better and given the fact that the NPS right now has only few thousand accounts. The amount that has been allocated for this scheme is about Rs 100 crore, which can potentially open 1 million pension savings accounts. I think that’s a positive sign.
Q: One statement of the FM, which has come in only recently in an interview to Network18, where the Finance Minister has said that issues concerning exempt-exempt-tax (EET), which is a big issue, that the exempt-exempt-exempt (EEE) category may go an be replaced by EET. He is re-looking at that, he is taking in the suggestions of the industry. He is just said a while ago. Is that something that heartens you because otherwise from next year onwards we are perhaps now on the path to moving to a DTC regime, which actually says that the only benefits you are going to get is on long-term pension products?
Goyal: Absolutely and if you look at it logically—for a common man who is investing about Rs 20,000-25,000 a year and he moves to an EET regime where even the premium, which he is been paid each year is not getting deducted, then the entire life savings actually becomes meaningless so that is extremely useful.
Q: Like Sanjay are you disappointed that he has not expanded the 80 C window and you get nothing out of the infrastructure bond because that’s probably going to end-up banks issuing it?
Goyal: Not at all. In fact, I would say that the limit of 80 C of Rs 1 lakh—if we see it as Mr Lakhotia was saying from a common man’s perspective—I do not think a person who is earning Rs 25,000 a month can actually exhaust the limit of Rs 1 lakh. So if he had expanded the limit under 80 C then the benefit would have again gone to the people who are Rs 5 or 8 lakh income bracket in a year. I am not at all disappointed and even on the infrastructure side, my feeling is that for a life insurance companies and mutual funds, we would actually be allowed to float funds, which would invest in those bonds.
Otherwise it will be very difficult for the government to take these bonds to the common man if the life insurance and the mutual fund industry don’t take this in a big way.
Q: So are you saying this time round these infrastructure bonds will not be issued only by financial institutions and banks like in the earlier days?
Goyal: I am saying they will still do the issuance. What we can do is we can float a fund, which will exclusively invest in those instruments.
Q: Have you had talks with the government towards this because he has been quite silent on this?
Goyal: No, we haven’t actually but my feeling is I see no reason why he shouldn’t allow this because we will still be investing in the bonds issued by those entities. The idea is can we take it public?
Q: The idea is will I get the tax benefit if I go through you instead of buying the bonds?
Goyal: My feeling is they should and then we can take this as a very big development next year. I am sure if I look it from a life insurance industry, we can definitely generate close to about Rs 5,000 crore on the infrastructure if he allows life insurance companies to float funds for this purpose.
Q: Do you fear that if this doesn’t happen what Kamesh is saying that we normally are in any case a very risk averse society? Do you fear that I would rather much go and put my Rs 20,000 there and make up that Rs 1 lakh with other incentives that are thrown into it like home loan, education of my children, my standard provident fund deduction rather than going and taking advantage of a mutual fund or of a unit linked insurance policies (ULIP)?
Sinha: We will also have to see what sort of coupon those bonds will have. What sort of lock-in will they necessarily impose—whether that is acceptable to me as an investor—would also be some of the considerations that you would have. Even today you have options within that 80 C, where you have instruments, which do not give you a very attractive rate of return but then there is certain amount of security with them. For example even banks deposits give you section 80 C benefits but why doesn’t all the investments flow into that category. I guess there is a healthy appetite for a trade-off between risk and return.
Ruchira Jalandhar, Jalandhar: Impact on tax slabs for women and senior citizens?
Lakhotia: This time round there is no special mention and that’s the reason that throughout India we have been receiving lot of calls—people are thinking that the Finance Minister has made Rs 160,000 for everyone. But I would like to give the happy news to the viewers that on the explanatory memorandum of the Finance Minister—Page 2 clearly speaks about the new income tax rates as are applicable for individuals, the women taxpayers and the senior citizens. It clearly states—talking about the women taxpayers—Rs 190,000 nil income tax, income between Rs 1,90,001 to Rs 500,000 at 10% and Rs 500,000 to Rs 800,000 at 20% and over Rs 800,000 at 30%. Similarly, happy news for the senior citizens—Rs 240,000 at nil, Rs 240,001 upto Rs 500,000 at 10% and Rs 500,000 to Rs 800,000 at 20% over Rs 800,000 at 30%.
The only big problem, which I feel in the senior citizen point, is age limit continues to be 65 years. I am going to retire 60 years—I get deduction from the airlines when I am 60, railways I get the deduction at 60 but income tax—why 65. This the question people are asking, “Why the age limit is 65?”
Nitin Mittal, Mumbai: Tax liability for Rs 6 lakh taxable income and exemption available under Section 80C?
Lakhotia: Definitely it will undergo changes but the fact is that he has not kept it in cold storage. I feel it will see the light of the day and I am very much optimistic that from 1 April, 2011 it will be implemented but people expect a little more with regard to the clear-cut roadmap of EET and other things.
Talking about the query which we have got of the viewer here from Rs 6 lakh income, Rs 120,000 putting under Section 80 C and the new Section 80 CCF, I would like to tell the views both are two different Sections, one cannot take advantage in the old Section 80 C itself so Rs 120,000 goes away and the balance amount remains Rs 480,000.
On this Rs 480,000 if he has got housing loan interest also that will continue to get him deduction and on the balance amount now he will be paying income tax, flat rate 10% only because the income up to Rs 500,000 now is 10% tax only.
Narayan Singh, Udaipur: ULIPs will become cheaper?
Goyal: This should make a big impact. I personal feeling is that if we look at ULIP for a ten year term or more this could actually increase the income from a customer’s perspective by close to about 1% each year. So this benefit and along with the new changes with the regulator had brought in from 1 January will make ULIPs much more attractive from a customer’s perspective.
Q: I want you to explain the infrastructure bond deduction a bit more -- it’s a deduction, right?
Lakhotia: It is not a rebate; it has no connection with the present limit of Rs 100,000. This means if I invest the entire Rs 120,000 in the new infrastructure bond I am not going to get the deduction. This is a new Section 80 CCF wherein it is provided that Rs 20,000 exclusively de-marketed for this one single item only.
Q: You mean deduction?
Lakhotia: Deduction mean deducted from my gross income.
Q: Quite like currently I do for my health investment up to Rs 15,000?
Lakhotia: Yes, Rs 15,000 plus Rs 100,000 80 C insurance etc same way this Rs 20,000 plain deducted from the income.
Q: We have been seeing that Finance Ministers over the years are abandoning their role as being financial planner. What has he done? He has basically said, “I am giving you more money. You go decide and figure out how you want to invest it. I am not going to give you more benefit under 80 C and therefore decide for you where you should really be investing and the choice is really yours as to how you want to put this Rs 50,000 (for above 500,000) to good use.” Do you think that’s the essence of what he has announced today, “I am giving you money. I am not going to decide for you where you invest” We always been arguing that your investments should not be driven by purely tax saving.
Sinha: Absolutely because if you look at historically many people have created their savings pool in the manner in which the tax benefit was provided at the point of saving. They did not pay attention on the fact as to whether this savings pool was going to meet their financial goals. I think we are now moving more to environment where we should save the way we ought to and not the way where we get more and more tax benefits. So that’s way it’s a healthy thing that the finance ministers are choosing not to be financial planners for the entire nation.
Q: Is your only fear though that people should not go and blow-up this Rs 50,000 that they get, they would rather invest?
Sinha: I would say there would be transitional benefit of that also because even if they go and spend this there will be a multiplier effect of the economy and while as mutual fund we would like to get the larger share of every pie that the saver would have but the larger growth will happen if the markets are stable and they are moving upwards, which would be a function of how the economy grow. So therefore if they go and blow-up the entire Rs 26,500 crore of tax benefit it has a multiplier which should take the markets up and we should be happy for that too.
Q: Not so happy -- probably wanted more?
Lakhotia: The point is how I can be happy? Please remember, savings we have seen but what about the inflation? Due to the inflation out of this income tax saving of Rs 50,000, my household expenditure will be additional expenditure of Rs 30,000-40,000. THe amount available for savings will be pretty small. Petrol prices gone up now, so virtually no impact on the net saving, net take-home money surplus available for the investor to save.
Q: What you are saying is it looks nice Rs 50,000 on the face of it but given the current circumstances may not actually leave much on the table for the citizens?
Lakhotia: Correct.

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