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(Top 2 pics-with ma frnd @ ma room, Delhi)(Below 2 pics- ma office, me with ma reporting manager n ma colleague)

completely tried after a day long journey............!!

 

 

Insurance and Acturials - Nature of Work

This Article is taken from Mrs. Kum Kum Tandon's book After 10+2 And Beyond - Humanities & Commerce chapter No. 7 titled Finance and Accounts

Insurance is an economic activity which provides financial security against a small regular payment for uncertain financial losses. It serves as a counter balance for all kinds of risks. In India the concept of life insurance is about a century old. During the British rule Bombay Insurance Company, founded in 1793, offered life insurance only to the British. Only in 1871 the Bombay Mutual Life Insurance Society Ltd. began the insurance services for Indians. By 1912 the concept had spread to other parts in the country and several offices opened. This, however, needed close monitoring, constant vigilance and careful management. With the enactment of Insurance Act, 1950 the entire life insurance business was nationalised. In 1956 the Indian Government took over various operating firms and formed a single corporation.

There were 245 private insurance companies when life insurance was nationalised in 1956 and 106 private insurance companies when general insurance was nationalised in 1972.

The Insurance sector is mainly comprised of insurance carriers, insurers, insurance agents and brokers.

Private Insurance sector

The opening of the insurance sector had potential benefits, catering to 300 million plus market being the most prominent one. The genesis of the Indian Insurance sector opening up to private competition lies in the Malhotra Committee recommendations for substantially increasing the reach of the insurance industry and for improving the customer service. The panel recommended privatisation of the insurance industry predicting growth in premiums (the insurance premium as a percentage of GDP was 2 percent for India as compared to much higher ones for other countries).

Private insurers have come out to offer services which are both innovative and flexible e.g. the HDFC Standard Life and ICICI Prudential in the Life Insurance arena offer assurance, endowment and money back products like the one offered by state-owned company. But private insurance products entail additional benefits for situations like critical illness.

Foreign Insurers

International insurers derive their business from carrying out their operations away from their home turf and so India offers the best potential for growth. Alliances- Some alliances between the Indian and International entrants based on distribution rather than on products or technology is envisaged to be more durable.

Regulatory Authority

The role of a regulatory authority has undergone changes over the years. The Insurance Act, 1938 had made it mandatory for setting up of the Controller of Insurance which would serve as a regulatory authority. But with the insurance sector having opened up and private competition creeping in, there was a need felt for an Insurance Regulatory Authority. In April 2000, IRDA came into being. It has been carrying on its twin objectives-framing regulations and registering private insurance companies-with utmost precision. Essentially, the IRDA Act provides for the establishment of an authority to protect the interests of holders of insurance policies and also regulate and promote the orderly growth of insurance industry. As part of its mandate, IRDA has come with some riders and this includes that the companies would have to invest a minimum capital of Rs.100 cr. The lock in period would be five years and profit generation can only begin from the sixth year. Some registered Insurers for Life are -

• HDFC Standard Life Insurance Company Ltd.

• Max New York Life Insurance Company Ltd.

• ICICI Prudential Life Insurance Company Ltd.

• Om Kotak Mahindra Life Insurance Company Ltd.

• Birla Sun Life Insurance Company Limited

• Reliance Life Insurance Company Limited.

• Tata AIG Life Insurance Company Limited.

• Tata AIG General Insurance Co.Ltd.

General

• New India Assurance Company Ltd.

• United India Assurance Company Ltd.

• National Insurance Company Ltd.

• Oriental Insurance Company Ltd.

• Royal Sundaram Alliance Insurance Ltd.

• Reliance General Insurance Company Ltd.

• IFFCO-Tokyo Marine Insurance Co.Ltd.

Private competition in the insurance sector has proved beneficial in providing improved services, better insurance products, more employment opportunities and last but not the least the flow of funds in financing the infrastructure projects.

Life Insurance Corporation & General Insurance Corporation

The central office of LIC is at Mumbai. There are five zonal offices located at Mumbai, Kolkota, Delhi, Kanpur, Hyderabad, Bhopal and Chennai. LIC has offices in Fiji, Mauritius and UK. LIC has insurance joint ventures abroad in Nairobi, Kuala Lumpur and Bahrain. While the head office is responsible for formulation of policies, zonal offices coordinate with and supervise divisional offices. There are 58 divisional offices with an allotted territorial jurisdiction. There are almost 1,200 branch LIC offices. The divisional office takes care of servicing of policies and supervises branch offices. LIC Branch offices work towards procuring fresh business. In the LIC the Chief Executive is the Chairman. There are two Managing Directors who oversee the work of sixteen Departmental Chiefs.

LIC employs almost 90,000 staff working in - the development department, publicity and public relations department, the personnel department, the actuarial department, the secretarial department, group and superannuation department, servicing PHS, accounts department, legal department, investment department, audit and inspection department, mortgages department, corporate planning department, foreign department, building department, and the vigilance department. While LIC deals with insurance of life, the General Insurance Company (‘GIC') is another insurance firm concerned with every thing but life - motor, marine, personal accident and fire insurance. They also participate in financing of industrial projects through term loans and direct subscription to shares and debentures of new and existing enterprises.

Both LIC and GIC have branches all over the country. GIC has four subsidiaries - Oriental Insurance, United India Insurance, New India Assurance and National Insurance.

The insurance sector has 3 main divisions : life insurance, health insurance, property and accident insurance. Companies may specialize in one or all the three types of insurance coverage.

Nature of Work

In the Private Sector

In India with the liberalisation of the insurance sector the number of private global insurance companies setting up offices is on the rise. Insurance is becoming an essential part of every one's life. Insurance provides protection against financial losses resulting from a variety of perils. Insured individuals/business/industry, etc. can receive reimbursement for losses due to car accidents, theft of property, fire and storm damage, medical expenses and loss of income due to disability or death.

The private sector insurance industry comprises of insurance companies, their agents, insurance surveyors, actuaries and development staff. The agents market the agency's services and underwriters review applications from willing customers. Actuaries determine premium sales and lay down operating standards based an risk analysis. Development staff oversee the operations in defined territories.

In the Government sector

Each department in an Insurance Corporation performs the special task it is constituted for. However, there are four levels of employees with specific roles - Class I, II, III, IV level employees.

Administrative officer (AO) and assistant administrative officer (AAO) [Class I Officer]

Just as Probationary Officer (‘POs') are banking professionals, Administrative Officer (‘AOs') or Assistant Administrative Officers (‘AAOs') are identified with the insurance services in India.

The AAO can choose from three areas : Administration, Development or Accounts. In administration the AAO deals with registry of claims till a certain permissible financial limit. They deal with policy making, checking various clauses and details, and file official returns and statements to higher regional offices. The Development AAO deals with marketing and procurement of business, meeting prospective clients, promoting the policies and getting contracts. Accounts AAO deals with management of funds and their disbursal including staff salaries, etc.

The job begins with a probation-cum-training period of 6 months where the candidate is placed anywhere in the country in the branches of GIC and LIC for hands-on-exposure of the workings of the company.

The AAOs have a time bound promotion. After 3 years of working as AAOs they can be promoted to AOs. AOs have more authority and financial powers. The promotions and scales are thereafter regular. They get benefits like provident fund, house rent allowance, leave travel advance, and even subsidised interest loans on housing and purchase of vehicles. Essentially the job is compatible with class one government jobs. They can be posted anywhere in India.

Development officer [Class II Officer]

The Development Officer is in charge of the overall development and sale of Insurance policies in the territorial jurisdiction he is appointed. The main job the Development Officer does is to recruit and train agents for the procurement of new business and the servicing of old policies. Since it is a field job, friendly, out going persons - those who have potential for assessing the market, who can meet people to explain to them the various policies and schemes of the LIC and who have an aptitude for selling - are best suited for the job. Agents recruited by Development Officers can also earn promotion to the rank of development officers.

Class III and IV level workers

The posts in group III are those of assistants, stenographers, typists, machine operators, telephone operators and record clerks.

Agents for Insurance

An insurance agent is a person who has taken up agency for selling life insurance policies after completion of his training and has been awarded a certificate of proficiency. Insurance is sold, never bought. Therefore, insurance sales is one of the most aggressive in the world. Insurance sales workers sell one or more of the three basic types of insurance : Life insurance, property-liability and health.

Most people have their first contact with an insurance company through an insurance sales worker. These professionals help individuals or companies select the right policy for their needs. They plan for the financial security of individuals, families, and businesses, advise about insurance protection for an automobile, home, business, or other property; prepare reports and maintain records; and help a policy holder obtain settlement of an insurance claim.

Insurance agents have to undergo training. Initial stipends and pocket expenses form part of the initial packet to the agent in addition to the commission.

ICICI Prudential Life Insurance has the largest number of advisor (agent) amongst the private life Insurers from different backgrounds. A large number advisers are women, mostly housewives ; the remainder comprises fresh graduates, individuals with their own business, those from the service sector, or professionals. Many of ICICI Prudential's advisers hold advanced degrees such as an MBA, legal degrees, etc. Nevertheless the induction and training is open to anyone who is 18 years of age, or over, and has passed the standard 12 examination.

The company extensive gives in training in specific skills, product training, communication skills, domain knowledge, sales management and other financial skills.

Max New York Life offers 152 hours of training even after 100 hours of mandatory IRDA approved training to agents. The company has its own IRDA approved training institutes at each of its centres.

Surveyors of Insurance

The growth of specialised industry and engineering and the heavy finances involved in such sectors has had a positive impact on the insurance business. Every practical businessman gets his risks insured. Bigger ventures which involve loans from financial institutions like banks and other fiscal corporations, must have an insurance cover, so that in the event of any mishap, damage or loss, the sufferers can easily seek reimbursement.

For this purpose a professional insurance surveyor is needed. They are technically qualified professionals deputed for the assessment of losses according to their qualifications and experience, e.g., in the case of a motor vehicle loss, a surveyor holding a degree or diploma in Automobile engineering assesses the loss while in case of an industrial accident, a surveyor with a background in Mechanical Engineering does the assessment. The surveyor plays a vital role. He is the only specialized link between the insurers and the insured. He helps insurers by minimising and avoiding false, exaggerated claims and on the other hand helps the insured who have suffered a genuine loss by indemnification of their loss.

The work of an insurance surveyor is not always a pleasant exercise. There are irregular timings, travelling and hard work. A surveyor needs to have the eye of a detective and the balance and tact of a diplomat. The surveyor doesn't just survey - he investigates, evaluates, assesses, adjusts, determines, liability, negotiates and finally reports.

Actuary

An actuary is a business professional who analyses the financial consequences of risk. An actuary uses mathematics, statistics, and financial theory to study uncertain future events, especially those of concern to insurance, investments and pension programmes. It is a number crunching job and involves handling statistical data to device the correct pricing of insurance policies. Actuaries work in a wide number of areas in life insurance, general insurance, reinsurance, pension funds, risk management, etc.

The job profile includes product design, policy pricing, asset liability management and also certifying the financial position of the company. In the pension sector, an actuary is involved in designing a scheme of benefits for members of the pension scheme, calculating the past and future service costs and benefits, certifying to the regulator that the fund assets are sufficient to meet liabilities and that the assets are invested as per the investment pattern prescribed, calculating and certifying the pension cost on acquisitions and merger of companies and others.

With the IRDA announcing that the appointed actuary system would be adopted for the sector, there will be a huge demand for actuaries. It mandates that life insurance companies must appoint actuary and general insurance companies can meet their needs with consultants.

The Actuarial Society of India, which is also affiliated to the Institute of Actuaries, UK, conducts exams in the country. It is also considering conducting actuarial exams for foreign institutions with the Casualty Actuarial Society and the Society of Actuaries in the US.

Underwriter

Underwriting is the other specialised area which assumes prominence with privatization in the sector. An underwriter stratifies that risk of an individual on behalf of the company, in other words, he assesses the applicant and identifies the risk profile. Underwriters decide whether to issue the policy and the appropriate premium rates. If the risk is not assessed properly, the insurance company runs the risk of high claims.

Though there are no specific qualifications required for this profession, education and training are vital. Anybody can become an underwriter, but it is preferable that he has some basic medical knowledge. There are two types of underwriters-medical and non-medical. The medical underwriter is one who assesses high risk of high premium applicants, whereas the non-medical underwriter will essentially look at the simpler applications.

Brokers

Insurance Brokers, Insurance Consultants and Reinsurance Brokers are few other insurance intermediaries who work gainfully in the insurance system. Insurance Brokers are independent intermediaries who represent the client and not the insurance company, unlike the insurance agent who represents an insurance company. The job involves evaluating risks, examining available options, negotiating with different insurance companies for the best rate and coverage and also handling claims recovery. Brokers generally focus on non life commercial segments with agents focusing on the retail segment.

Personal Characteristics.

It is important that people who sell the companies policies are well versed with the same. This will help them to sell the right kind of products to the consumer. And it is equally important that the people buying such products should be clear about their needs and make their decisions accordingly. The job requires good communication skills and the ability to persuade. An amiable disposition and patience will yield the best satisfaction. Insurance Brokers must be very professional, organised and technologically savvy than other intermediaries. Training in client relations and technical knowledge is vital.

Employment Avenues

Employment Avenues are in Insurance Companies, corporate sector, stock broking firms, finance and leasing firms, shipping firms.

Insurance firms provide work opportunities in the administrative cadres, as apprentice trainees and as agents. Self employment as agents and assessors is possible. LIC across its 8 zones plans to add over 1.5-2 lakh agents over the next two years to its existing roster of 8 lakh agents.

Specialisations

Marine , aviation and transport insurance, cargo insurance, reinsurance, commercial and risk management, motor insurance, property insurance, employment benefit schemes, health insurance etc. are areas of specialization The most lucrative choices are underwriting and actuaries, surveying, marketing, distribution , software and investment.

For Actuaries the opportunities are in Life insurance, general insurance, reinsurance, pension funds, risk management etc.With the IRDA mandate life insurance sector requires over a thousand actuaries in the next few years. Actuaries also fill jobs in Government, as consultants, risk management, projects management, software development and as back office staff.

Insurance Brokers work in marketing, underwriting, technical support, client relations, IT support etc. The larger Broking firms employ post graduates and MBAs for all the functions. IT professionals with or without insurance expertise are also in demand.

Earnings

In the administrative department pay scales match those of nationalised bank employees. Employees at the clerical level start at a salary of Rs. 5,000 and that for officers grade is around Rs. 10,000.

Actuaries - 6-20 lakhs per annum, Underwriters - Rs. 6-8 lakhs per annum. Underwriters from medical and life sciences background get a good deal.

Give and You Shall Receive

It's well known that reciprocation is an important motivator for people. You are more likely to invite someone to your party if you've been invited to his. People are often persuaded to make donations when charities send them gifts. Understanding this principle can help you effectively network, build trusting relationships, and develop your ability to influence others. The first step is to give. Don't provide help with an expectation of an immediate return. Instead, highlight your assistance. Say "Happy to help — I know you would do the same for me." By positioning your help as a natural and equitable process of give and take, you increase the chances it will be reciprocated in the future

All India Common Test for Bank Jobs from 2011

Bank exams in 2011 would not be same, as public banks have decided on a common test to fill vacancies.Although such an arrangement was in the talks, a consensus has been reached now among the organizations.This common test is expected to minimize the hassles involved in bank recruitments.
Test Process: The common entrance test would be conducted, by the Institute of Banking Personnel Selection (IBPS) at all-India level.Successful candidates will be given a scorecard with a validity of 1 or 1½ yrs.Within this period, they can apply for bank job notifications & appear for Interview.The candidate has to take the test again, after the validity expires.The test is likely to happen atleast 3 - 4 times a year.
By this method, banks are expecting to complete the recruitment process in 4 months time compared to one year now(sometimes higher), as candidates would be available on demand.
SBI stays away: While explaining the above details - Dr K.Ramakrishnan,Chief Executive,Indian Bank`s Association also mentioned that 20 public sector banks have agreed on this common test proposal except State Bank of India (SBI) & its five associate banks as they have separate selection process.
Nearly 50% employees of public sector banks would retire within the next ten years, says a recent survey.Inorder to fill thisoid gradually, the proposed All-India common test for bank jobs is very much required especially when 80000 bank jobs are to be created in the next 3 years!

Indian Navy Application Form

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Last date is about Dec 20... apply soon...

All the best........!!

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Why you shoud opt for health insurance?

The most neglected is health insurance. Most often this tax saving instrument is brushed aside with the logic that after all it’s an expense (no monetary gains) and well we all save for the “rainy day”. So why incur an additional expense? The moot point – Is it truly an additional expense?

It’s soon going to be time for filing income tax returns. Most of us will be in a hurry to make the most of the tax deductions available. It’s done in haste to meet the deadlines. How many of us look at tax planning from a holistic perspective? How many of us have discussions on what would be the best tax saving instrument to utilise from a variety of perspectives- returns, coverage, benefits among others. The most neglected is Health Insurance. Most often this tax saving instrument is brushed aside with the logic that after all it’s an expense (no monetary gains) and well we all save for the “rainy day”. So why incur an additional expense? The moot point – Is it truly an additional expense?

Why should Health Insurance be given due consideration?

- Medical Inflation: Prices of medicines and treatment are constantly on the rise making it difficult to rely on savings.

- Lifestyle related issues: Increase in incidence of medical problems due to

- The stressful environment we work in

- Change in the eating habits – fast food and meals at irregular hours

- Irregular sleep patterns

- Dependents: If you have dependents and are overwhelmed with responsibility, the health insurance coverage can come to your rescue.

- Health insurance coverage will release you from the burden of worrying how much to save for the rainy day. After all how much is enough?

Case Study

Imagine a situation where due to a medical emergency Mr. X had to be admitted to a hospital for an operation and the bill comes to a whopping Rs. 1 lakh- Guess what? Mr.X does have health coverage which covers this medical emergency and is within the overall limit. Mr. X would not have to shell out a penny. Neither Mr. X nor his family will have to undergo any financial strain. Isn’t the premium more of an investment than an expense? So what if there is no claim every single year. Didn’t it help Mr. X reduce the burden of worrying on an important parameter- saving for health related emergencies? Besides, most insurance companies provide some incentive for every claim free year (5% is added to the sum assured).

Your work does not end at making the decision of buying a health insurance product, choosing the right one is equally important. There is a bouquet of products in the market offered by several public and private insurance players. Earlier only general insurance companies and pure-play health insurance companies offered health related products but now even life insurance companies have entered this domain. So in all you have almost 30 players in the market offering health insurance products- A wide basket to choose from.

Types of Health Insurance Plans: A Brief Snapshot

Individual Health Plan: These are commonly known as mediclaim policies. They mainly cover hospitalisation expenses provided it is for at least 24 hours. Usually pre-existing diseases are not covered. Claims for specific ailments may not be allowed in the first or second year. For every claim-free year, most plans add 5 per cent to the sum insured.

Family Floater Policy: As the word suggests, this is a plan that will cover members of the family. Single premium is to be paid for the entire family. The benefits of the policy are similar to the individual health plan except for the fact that the sum insured can be availed by any or all members of the family and not a single person. Thus it has an advantage over an individual plan if more than one plan is required in a family. E.g. If a one lakh policy is required person, your family will need two individual policies if there are two people. Instead, if one family floater policy is taken for the two of them, for two lakhs, the coverage for each member will be Rs. 2 lakhs unlike the individual plan where the coverage per person is one lakh.

Critical Illness Plan- Add on: This product is not a substitute for any mediclaim plan (simple traditional product); instead it is a rider that could be added to it. This rider provides coverage if the insured develops a list of ailments spelt out by the company, generally of a serious nature such as cancer, coronary heart disease, stroke among others. If critical illness occurs, the company pays the entire sum insured.

Senior Citizen Health Plan: These plans are available for people between the age of 60 and 80 years. The coverage is generally fixed and the policy can be renewed lifelong or in some instance up to the age of 90 years. Read the fine print carefully on illness covered. An add-on in the form of a critical illness plan may be required.

Unit Linked Health Plan: This is a plan that serves dual purpose- coverage and returns. Part of the premium goes towards coverage and the balance is invested in a fund that functions like a mutual fund (a mix of debt and equity instruments can be chosen)

Things that may matter

Read the fine print carefully: The devil usually lies in the details. So a careful reading would help.

Product Details: Make sure you have carefully read about the exclusion of diseases such as pre-existing illness etc. Be aware of the sub-limits in the policy for specific expense heads.

Claim Settlement: There are two ways in which settlements are made. Reimbursements and Cashless settlements. In order to avail of the cashless settlement facility, the network hospitals should be utilised. Make sure you have details on the same. Take note of the time you have at hand to notify the required party for claim. Third party administrators (TPA) handle claim settlement on most occasions. At this point, claims on health insurance are very high in India, so if you want your claim to pass through smoothly, kindly follow the rules outlined.

Documentation: For any claim settlement, proper documentation is a must. Please ensure that documents are kept safely and also keep a tab on the premium payments (monthly, quarterly, semi-annually or annually) else the policy will lapse.

Tax Advantage- An incentive

In order to encourage individuals to invest in health insurance, Section 80 D of the Income tax Act provides a deduction on health insurance premium paid

- Up to Rs. 15,000 for self, spouse and dependent children and

- Additional Rs. 15,000 for parents (Rs. 20,000 in case of senior citizens)

So pick up the phone or surf the net and set the ball rolling. Remember “Health is Wealth”. We all believe in it. It’s now time to act.

How are home loans treated for tax?

If Sunil works in Mumbai and has a purchased a home in Mumbai for which he has taken home loan. Will he still get benefit under the Act for this second home in Nagpur? The answer is ‘Yes’. Benefits under Section 80C and Section 24(b) can be taken for more than one home if all these homes satisfy the requirements of the Act. The home in Mumbai satisfies the condition of self occupancy while the home in Nagpur comes within the exception of the self occupancy rule that the city of work is different. Irrespective of the number of homes the maximum limit of Rs.1L for Section80C and Rs.1.5L for Section 24(b) still apply. Note that it does not matter if Sunil gives one home on rent. He will still be able to get the tax break.

The Income Tax Act, 1961 provides for tax benefits for assessees that have home loans. Typically a home loan is repaid to the bank / lender in monthly installments (EMIs). The installment consists of two parts – interest and principal repayment. The bank gives a detailed worksheet of the loan calculation and of the bifurcation of the EMIs paid by the borrowers. These monthly repayments are qualified for deductions from income tax. Here is the tax treatment for EMIs paid by the borrower:

Deduction under Section 80C of the Income Tax Act

The portion of the EMI paid towards repayment of principal amount of the loan can be deducted from income. The borrower can get a tax deduction for a maximum amount of Rs. 1L each year under this section irrespective of his tax bracket. The Act requires the home loan to be towards a property for self occupation. However if the assessee’s city of employment is different from the city where he has purchased a home, he is still eligible for this deduction. So if Sunil works in Mumbai but has purchased a home in his hometown Nagpur, he can still claim a deduction under this section even if he is not actually staying in this home.

Deduction under Section 24(b) of the Income Tax Act

The interest paid towards home loan is treated as an ‘expense’ under ‘Income from house property’ and is deductible under Section 24(b) from the total income of the assessee. The maximum deduction permitted under this section is Rs.1.5L per annum.

In case of partial disbursement of loan

In cases where some part of the loan is disbursed by the bank during construction stage of the property, the tax treatment is slightly different. This portion of the interest paid prior to completion of construction of property cannot be claimed as a deduction in the year in which it is paid. However, upon completion of construction, the assessee can claim deduction for this interest under Section 24(b) in 5 equal installments, i.e., 1/5th for each of the five years after the end of construction period. Note that the upper limit on deduction each year remains Rs. 1.5L. Assume Mr. Sunil purchased a home from Suraksha Developers in FY. 2005-2006.The property was still under construction and was completed only in F.Y 2008-2009. Some amount of loan was disbursed by the bank in FY2005-2006 and Sunil made interest payments of Rs. 1L between FY 2005-2006 and FY 2007-2008. Sunil can claim deduction of Rs. 0.2L for 5 years starting from FY 2008-2009.

In case of total disbursement of loan

If Sunil received the entire loan money in FY 2005-2006, and started paying EMI immediately, he would lose on the principal repayment deduction under Section 80C for the 3 years until construction of the property ends. This is because deduction under Section 80C can be availed only after getting possession of the property.

In case of more than one home loan

If Sunil works in Mumbai and has a purchased a home in Mumbai for which he has taken home loan. Will he still get benefit under the Act for this second home in Nagpur? The answer is ‘Yes’. Benefits under Section 80C and Section 24(b) can be taken for more than one home if all these homes satisfy the requirements of the Act. The home in Mumbai satisfies the condition of self occupancy while the home in Nagpur comes within the exception of the self occupancy rule that the city of work is different. Irrespective of the number of homes the maximum limit of Rs.1L for Section80C and Rs.1.5L for Section 24(b) still apply. Note that it does not matter if Sunil gives one home on rent. He will still be able to get the tax break.

In case of joint home loan

What is the tax impact if Sunil has taken the home loan jointly with his father?

In this case both Sunil and his father can claim tax deduction on their return if the home too is jointly owned by them. Tax benefit can be availed in the same proportion as the burden of EMI borne by each. If Sunil pays 80 percent of the EMI and his father contributes towards the remaining 20 percent, the tax deduction will be available in the same proportion. So if principal repaid during a year is Rs.1L then Sunil can claim Rs. 0.8L under section 80C and his father can claim Rs.0.2L under the even section. If Sunil’s father does not co-own the home, then he will not get any tax deductions for EMIs paid on such loan.

Stocks or mutual funds: What do you prefer?

Investing is the action of buying an asset with the aim of making profits and earning income. Contrary to what many people believe, investing is a long-term activity, while trading is a short-term activity. A successful investor takes a look at the fundamentals of the asset before putting down his money to buy the asset.

We all know that investing in equities is the key to build long-term wealth. The two methods of investing in equities are either directly or indirectly. Direct investment entails purchasing stocks directly, while indirect investment entails investing in mutual funds that in turn invest in stocks. So what is investing and how does the investing in stocks differ from investing in mutual fund? What are the pros and cons of both the options?

Definition of investing: Investing is the action of buying an asset with the aim of making profits and earning income. Contrary to what many people believe, investing is a long-term activity, while trading is a short-term activity. A successful investor takes a look at the fundamentals of the asset before putting down his money to buy the asset.

Differences in investing in stocks vs mutual funds: There are many differences between investing in stocks and mutual funds. Here are the major differences between them.

Stocks Mutual funds

S: Need a demat account for buying and selling

MF: No need for demat account, except for buying and selling ETFs

S: Must be traded through a broker except in case of IPO

MF: Can be traded through a financial broker or directly by approaching the fund house

S: You are the part owner of the company, making you eligible for bonus shares, voting rights etc.

MF: You don’t own shares directly, so you are not eligible for any rights due to the owner

S: You get dividend if the company makes the profit Dividend is optional and if chosen will affect the value of your investment by the amount of dividend declared.

MF: You have to keep a check on the performance of your holdings Expert fund managers take care of all the activities

S: The charges incurred here are the demat charges, and buying/selling charges (only when the transaction takes place)

MF: There is an entry load, exit load, fund management charges and buy sell spread. These charges can significantly affect the returns generated by the fund.

S:Price of a share can be very volatile.

MF: Normally the NAVs do not show a significant rise or crash

S: Need a lot of money to diversify.

MF: Diversification can be achieved with amounts as low as Rs. 5000 (or even lesser in case of ELSS).

Pros and cons of both the types of investment:

Stocks:(Pros Cons)

You are the owner of the company Higher risk since if the company closes down, you tend to lose money Can earn dividends, which may be your source of income The fortunes of even the most profitable companies can change suddenly, so you stand to lose the dividend.

You can buy/sell in the stocks at the price of your choice by using the option of stop loss Your stop loss may not be reached, making it difficult for you to trade in the stock. Suitable only for experienced investors.

Is time consuming as you need to study the fundamentals of the stock, Diversification needs a lot of money which is not possible for small investors, May not be liquid, particularly if the company is small or mid-cap.

Mutual funds: (Pros Cons)

Managed professionally You end up paying the charges for availing of this expertise

Diversification can be achieved with nominal amount of Rs 5000 You don’t have a say in deciding where your money is invested. The fund manager decides for you and he may be wrong, thus causing a loss. Very liquid You have to pay exit load if you redeem your investment before a certain time frame

Can be purchased directly thus saving you from having to pay entry load High fund management expenses can erode the returns. Unlike companies, mutual funds will not close down. Rather they would be merged into another successful fund. Tend to be mis-sold by the mutual fund advisors as well as fund houses.

While both mutual funds and stocks have their own distinct features, it is up to each individual investor to decide where to invest. For those who have time, expertise and money, direct investing can be done. For others, mutual funds are the way to go. In fact, some funds have managed to outperform their benchmark index. However one important point to be noted is that both are long-term investment options.

Planning Finances Post Marriage

One of the most precious moments in one's life is exchanging wedding vows. A time of joy, hope and excitement for the husband and wife to spend their lifetime with one another. After all the excitement and celebration comes the time to get serious about your financial planning. Most of the problems in today's life stem from the financial decisions a husband and wife make. Life after marriage changes completely and expenses increase manifold. We will analyse some of the financial planning basics, immediately after marriage, which you must undertake to secure your future financially.

Goal Setting & Starting Early

Goals are the tangible results that you seek. For example buying a diamond solitaire for your wife could be one of the goals. Experts advise making a written list of the financial goals. After identifying goals the first thing is to start saving towards that goal. You must write down the goals and the amount of money required to achieve each goal and then plan a road map of how to make right mix of investments to achieve all goals. Long term financial goals could be buying a house, planning for your kid's education and retirement planning etc. Short term goals could be buying a car, foreign vacation, etc.

Emphasizing on the need to plan Financial Expert, Sandeep Shanbaug says, "After marriage, once what were individual financial goals become mutual. Husband and wife share a life together and consequently education of children, vacations, medical expenses, marriage and eventual retirement are common goals which have to be planned for, together in advance. As the saying goes, failing to plan is planning to fail."

Creating A Budget

Don't think that budgeting means cutting down on the fun in your life or restricting yourself from doing what you want to do. It does not matter whether you live salary to salary or earn lakhs per month. A written budget would help you track your income and expenses. It will help you assess what is the monthly inflow and outflow and help you cut down on the unnecessary expenses. Budgeting would also help in reaching your financial goals in time. Experts advise to write down the expenses on the daily basis to make the estimate accurate.

It will help you figure out where you can cut down on the expenses and increase savings. Remember that this time is the accumulation phase for you when you should save as much as possible as it will help you in emergencies and also help in retirement planning.

Gaurav Mashruwala, CEO, ACE, a Mumbai based Wealth Advisory firm, cautions newly weds against not having a written budget saying that "deciding and writing down how much you spend and save would help avoid fights between the couple. Without a budget the couple would lead their financial lives as wanderers. The strategy is to stick to the budget and modify only if it is unavoidable."

Insurance

Remember that Life Insurance is not a tax saving or investment tool. It is meant to provide enough liquidity to your family in case of your unfortunate death. Mayank Bathwal, Chief Financial Officer of Birla Sun Life Insurance emphasizes on the importance of Life Insurance after getting married saying that "In an increasingly uncertain world, one needs to ensure that their family is free from any financial burden in case of any unfortunate event. Insurance would help in meeting various life cycle needs like life protection, health insurance, children's solutions - towards child education, marriage and effective retirement and wealth planning"

The earlier you buy a life insurance policy cheaper would it be. If you are one of those net savvy people, you can buy a Term Insurance policy online. For example, for a 30 year old, a Rs 50 lakh term insurance policy would cost an annual premium of only Rs 7200 including taxes. As far as Health Insurance is concerned at least Rs 4 lakh family health insurance plan is a must for a couple.

Joint Finances

In case both of you are working then you need to take a decision on how do you plan to manage the finances. Opening a joint account and managing common expenses from that would be prudent. You must assign responsibilities like who would take care of the bills, who would pay the rent, EMIs etc.

Mumbai based Certified Financial Planner, Kiran Telang says, "In case both partners are working it is best to keep income accounts separate. Expenses can be managed from a joint account which receives funds from the individual income (salary/business) accounts. Joint finances work well in cases like buying of property where combined income can result in higher loan eligibility while at the same time giving tax benefit to both the partners."

Changing Name & Nomination

Have you ever asked this question to yourself 'what will happen if I die today, does my wife knows everything about my finances?' It would make sense for the couple to sit and discuss the finances together and keep a copy of all financial documents. The wife needs to decide what name she would carry after marriage and accordingly modify her documents. Taking a marriage certificate and opening a joint account may be the first step. Husband needs to take out all documents and add/change the nominee name. The couple need to re-do or re-create the various identity and address proofs, specially the wife as she is the one who would relocate to her husband's house.

Kartik Jhaveri, Director, Transcend, a Mumbai based Wealth Advisory firm, has a valuable piece of advice for the newly weds "Wife should apply for a new PAN card if she changes her surname, the passport must be updated with new name and address, create a new bank account, depending upon the need, with the spouse as the second or joint holder, in the investments such as mutual funds add your spouse as the nominee."

The above drill howsoever tedious must be undertaken soon after marriage so as to avoid any future inconvenience.

Review Your Financial Goals

Reviewing the financial plan is as important as creating one. A hard look at your budget and your investments would help you understand if you need to make some changes in the way you save, spend or invest. The life immediately after marriage is full of uncertainties and it is only after spending few years that couple understand the importance of smart saving and diversifying their investments. Since it is a start of a new phase the excitement is high and propensity to save and reviewing the plan is less.

Founder of Dreamz Infinite Financial Planners Arvind Rao has a piece of advice for the newly wed, "The wish-list of newly weds comprises more of short-term goals than medium or long term. Buying a car, house, electronic gadgets, international / domestic holidays figure on top of their list. In view of the same, its very crucial to review their plans very closely - plan needs to be reviewed at least once in 4-5 months depending on the number of short-term goals."

It is a time for enjoyment, dreams and looking forward to a long and prosperous life. Most of the friction and tension among the young couples, in the modern times happen due to bad management of financial lives. A little effort towards setting your financial basics right would help you live a happier married life.

Don’t let anger get the better of you at work

WORKING in this job profile has brought out the worst in me. My colleagues have nicknamed me ‘Temperamental Tarun”, one colleague scowled. “It is not in my nature to get angry, but my vendors always delay the assignments and I have to look small to my clients.” He complained that losing his temper on handling delays was really causing him a personality hazard. He had become impatient and irritable not just at work but also at home. I guess when one form of behaviour continues too long, it eventually settles down as a personality trait.

Tarun’s story is quite common in the work place today. There are increasing demands, too much workload, not enough time, and not to mention the drastic imbalance of personal and professional life. Generally most people are feeling the stress of making things happen, in time. No matter what you do, there is someone who has the power to hold up your work or make it run smoothly for you. Getting work done from people can become frustrating to the point that anger management for your own sake becomes extremely crucial.

When you desire to get your work done from a colleague or a client, there are good chances that they may have other tasks or other clients to handle too, and everyone wants their work as a priority. And sometimes people tell you things you want to hear because they don’t have the ability to say no, or lose your business. Sometimes people don’t have the time or the infrastructure to cater to your needs. Or they have family pressures, which come in the way of your work and in giving into family demands; they work up your temper.

To get work done amicably without a public display of anger and causing a painful dent in your personality, it is best that you keep a close tab on your project.

1. Be curious whether your client or colleague has the ability to execute your project. “You have a hundred other titles to cater to, do you think you will have the facility to promote my book? I understand that for you it is one book in a hundred but for me it is the only book.” I clarified this with my publisher when I signed up for my publishing contract.

2. Be curious if your colleague has the time to do your task. Before I give my manager an assignment I always ask her, “Don’t you have other work to do? Don’t you have to go back home early? Will you be able to put in the extra hours with the family pressure?” And when she works her way out on how she will do the work, I assign it to her. It is no point asking her to meet deadlines and then hear the excuse: “My mother in law needed me home so I could not do the work!”

3. Be curious on how you can help. It is a good idea to offer support when people work on your assignment. “Is there any way I can contribute? Would you like me to organise your lunch?” Anything that extends your involvement or support is a good reinforcement on your project.

4. Be curious on the progress of your assignment. Follow up on regular intervals not just on the status of your assignment but also give some positive feedback and news regarding the project. “I told my boss that you were doing the assignment and he is very excited about it. How far are we on the project?” is a good follow up and reinforcement.

No one likes to get angry. No matter how much you may think that your boss derives pleasure in screaming at you, it’s not true. Have you gotten angry with someone? Does it not make you feel bad and guilty for hours afterwards? Does your anger not trickle into your work? Into your decisions? Into your relationships? The effects of anger are far more sinister and dangerous than you will ever fathom. Anger is not an emotion one enjoys and so it is crucial that anger becomes an emotion that one manages and avoids. Corporate trainer & best-selling author of ‘I Am Another You’

The Tax Poem

At first I thought this was funny...then I realized the awful truth of it.
Be sure to read all the way to the end!
Tax his land,
Tax his bed,
Tax the table
At which he's fed.
Tax his tractor,
Tax his mule,
Teach him taxes
Are the rule.
Tax his work,
Tax his pay,
He works for peanuts
Anyway!
Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.
Tax his ties,
Tax his shirt,
Tax his work,
Tax his dirt.
Tax his tobacco,
Tax his drink,
Tax him if he
Tries to think.
Tax his cigars,
Tax his beers,
If he cries
Tax his tears.
Tax his car,
Tax his gas,
Find other ways
To tax his ass.
Tax all he has
Then let him know
That you won't be done
Till he has no dough.
When he screams and hollers;
Then tax him some more,
Tax him till
He's good and sore.
Then tax his coffin,
Tax his grave,
Tax the sod in
Which he's laid.
Put these words
Upon his tomb,
'Taxes drove me
to my doom...'
When he's gone,
Do not relax,
Its time to apply
The inheritance tax.
Accounts Receivable Tax
Airline surcharge tax
Airline Fuel Tax
Airport Maintenance Tax
Building Permit Tax
Cigarette Tax
Corporate Income Tax
Death Tax
Dog License Tax
Driving Permit Tax
Excise Taxes
Federal Income Tax
Federal Unemployment (UI)
Fishing License Tax
Food License Tax
Petrol Tax ( too much per litre)
Gross Receipts Tax
Health Tax
Hunting License Tax
Hydro Tax
Inheritance Tax
Interest Tax
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Mortgage Tax
Personal Income Tax
Property Tax
Poverty Tax
Prescription Drug Tax
Property Tax
Provincial Income Tax
Real Estate Tax
Recreational Vehicle Tax
Retail Sales Tax
Service Charge Tax
School Tax
Telephone Tax
Telephone, Provincial and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Vehicle License Registration Tax
Vehicle Sales Tax
Water Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax
STILL THINK THIS IS FUNNY?
Not one of these taxes existed 100 years ago, and our nation was one of the most prosperous in the world.
We had absolutely no national debt, had a large middleclass, and Mom stayed home to raise the kids.
What in the hell happened? Can you spell 'politicians? '

Get Rid of the Negativity

Every organization, unit, or team has both good and bad. As a boss, is it your job to accentuate the positive or eliminate the negative? You should try to do both, but studies have shown that negative information, experiences, and people have a far deeper impact than positive ones. It is a better use of your time and energy to focus on clearing your organization of the negatives as much as you can. This may mean tearing down frustrating obstacles or shielding people from destructive behavior. Grumpiness, laziness, and nastiness are contagious and by reducing those types of negativity you give your people a better chance to shine.

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