Author name: Megha Goswami

History of Credit Cards

History of Credit Cards – How Credit Cards Have Evolved?

Leave a Comment / Finance / By /

History of Credit Cards: The root of the word ‘credit’ comes from the Latin word for ‘trust.’ This is as simple as selling something to someone and trusting them to pay you the money in the given time gap. In this article, we will look into credit cards, where the idea came from, how they evolved and much more.

History of Credit

The ancient civilisations of Egypt, Babylon, and Assyria were the first to use credit, and this was about 3000 years ago. This began to spread across to Europe as trade routes began to be developed, thereby putting Europeans in contact with those from the Arab areas, which meant that during the Middle Ages, the concept of credit took off.

12th Century Europe commonly saw large trading fairs with people travelling from afar to take part and buy and sell products. Credit was very important to traders as they moved from one fair to another using credit to buy a few things at one spot, and then they would get money for this by selling the goods at another spot at a profit. Trade agents were found at every large fair in Itlay, and their duty was to record the details of buying, selling, and repayment, a process that was constant.

The idea of paying in installments also gained popularity and acceptance in this area. From the 18th to the 20th century, tallymen now began to sell clothes for weekly payments. As their name suggests, they were called so because they kept a tally of what was bought on sticks of wood. One side of it showed payments and the other side debts. Before organised consumer credit came to be, the major lending sources were limited to mortgage lenders, friends and family, retailers, illegal small-loan lenders, and pawnbrokers.

Credit Cards

Let’s talk about credit cards now, as this is the credit system that is followed today. What laid the foundations for these were actually the earliest plastic credit cards. They were far from what we have today, but, as was said, they laid the foundation of what we have today. In the US, the 1920s saw the introduction of the ‘buy now, pay later’ system but could only be used in the stores that were issuing it. The Encyclopedia Britannica also states that around the same time, credit cards were originated when individual firms like hotel chains and oil companies were issuing these cards to their customers for use, but only within these firms. Western Union is one such firm that began to do so in 1921 for their frequent customers.

The ‘Charge-It’ program was invented by John Biggins of the Flatbush National Bank of Brooklyn for use between local merchants and bank customers. The Charge-Plate, as it was called, was the early predecessor to the current credit cards and was used in the 1930s and the late 1940s. This rectangle sheet metal was 2 1/2″ x 1 1/4″ was embossed with the name, city, and the state of the customer. It looked like a military dog tag too. This card was first laid in the imprinter, then a charge slip was placed on top of which, and finally, the ink ribbon was pressed on.

It was actually very similar to the current credit cards, but the purchases were limited only to being local, and the cardholders of the Charge-It needed to have an account at the Biggins’ Bank. The sales slips were deposited into the bank by merchants, and the customer who used the card was billed by the bank. New York’s Franklin National Bank was where the first bank credit card appeared in 1951, and this was for loan customers. But this too could only be used by the account holders in the bank.

The First Credit Card

Frank McNamara, in 1949, had a business dinner to attend to at the Cabin Grill in New York. Unfortunately for him, when the bill arrived, he realised he hadn’t got his wallet with him. While he managed to settle the bill, he decided that cash required an alternative. This sparked off the idea of the first credit card. The small cardboard card was then invented and was called the Diners Club Card to be mainly used for entertainment and travel. This card holds the title of the very first credit card that was used in a widespread manner.

Credit Cards

Origin of the Idea of the First Credit Card

A merger with Dine and Sign was what caused the partial creation of the Diners Club, and they produced the first charge card that they termed ‘general-purpose,’ where the entire bill had to be paid with every statement. This Diners Club card was replaced with plastic by the 1960s.

1850 saw the formation of American Express, and 1958 was when they emerged into the industry of the credit card with their own product that was a purple card charge for entertainment and travel expenses. The BankAmericard bank credit card, now known as Visa, was issued by the Bank of America in 1958. The next year, the first card made from plastic was introduced by American Express as an alternative to celluloid or cardboard.

The Interbank Card Association was formed in 1966by a number of banks. In 196, the First National Bank of Louisville, Kentucky, licensed the name Maser Charge.  The banks joined the ICA with the help of New York’s Marine Midland Bank, which is now called the HSBC Bank USA, to create the Master Charge: The Interbank Card.

Evolution of Credit Cards

At this age, it takes a few seconds barely to pay for a purchase with a card. Most of the time, there is no need to sign, and multi-layered security can be counted on to keep information safe. Let’s look at a brief timeline about how credit cards have evolved.

  • In the early 1900s to the 1940s, the cards we made from paper, cardboard, and metal only later on. These cards were issued by retail stores and oil companies to only be used there.
  • The Diners Club was started in 1950 for entertainment and travel expenses. This is where the first widely used credit card is said to have been used. A plastic entertainment and travel card was issued later on in the decade by American Express. Both cards needed the balance to be aid of f monthly.
  • The MasterCard and Visa cards joined the marker in the mid-1960s but were called general-purpose credit cards then.
  • Electronic credit card processing was introduced in 1973, allowing merchants to have access to information from the banks to make sure that the users actually had sufficient credit for the purchase. This gave consumers more places to use the credit card, along with more flexibility in using it.
  • The Discover card was launched nationally in 1986 with a television commercial that was played in the Super Bowl XX. This card aimed at the delivery of consumer-friendly services and features like no annual fee and the very first cash rewards program.
  • The EMV chip was developed and launched in the mid-1990s in Europe, giving more security. And this technology caught on to the rest of the world.
  • Today, holders of credit cards can use them across the country and also internationally. There is flexibility to pay balances each month or make monthly payments that fit their budgets. What’s moe is that these cards can be linked to smartphones, and they offer rewards for purchases.

There is constant work done to increase the security of the personal information of cardholders and security in general. The EMV chip is being adopted by merchants in the US as well. The cards with chops feature bot the traditional magnetic strip along with the chop itself, which makes them usable even if the merchant doesn’t have a reader that can support chip technology. If the card issuer and the merchant both supper this technology, the card can simply be inserted into the terminal to go through with the transactional process.

India and Credit Cards

The market for credit cards begun in India in 1981 when the cards were issued by VISA. And the pioneer of these cards in India was Andhra Bank.

History of Credit Cards – How Credit Cards Have Evolved? Read More »

Post Office Savings Bank

Post Office Savings Bank – Core Banking Solution, Internet Banking and Mobile App

Leave a Comment / Finance / By /

Post Office Savings Bank: A public facility that provides email services, including accepting parcels and letters, contributing post office boxes, and vending postage stamps, packaging, and stationery, is known as the post office. Post offices also grant additional services, which differ from country to country. These involve proffering and receiving government forms (like passport forms), processing government services and expenses (like postal savings, road tax, or bank post office). Postmaster is the chief administrator of the post office.

People opening accounts in different Post office schemes are dealing with Post offices near their house. But the Post office has become modernised. They are proposing a Core Banking Solution. The CBS (Core Banking Solution) Project brings amenities of ATM Banking, Internet Banking, Phone Banking and Mobile Banking to the Post Offices Savings Bank (POSB). Clients can make transactions 24×7 in ATMs and transfer money from their account to any bank account through National Electronic Fund Transfer (NEFT) and Real-Time Gross Settlement (RTGS). This article will inform you about the Modernisation of the Post office, its features, Apps for Banking and Postal Information and CBS in detail.

Core Banking Solution (CBS)

The networking of bank branches, which allows customers to maintain their accounts and use various banking facilities from any part of the world, is known as Core Banking Solutions. In simple terms, there is no obligation to visit the branch to do banking transactions. One can do it from any location, any time and enjoy banking services. Execution of CBS across all units helps speed up most of the everyday transactions of banks and customers. Any depositor of Savings, TD, RD, MIS, SCSS, PPF or Certificates can initiate transactions either Financial or Non-Financial at any CBS Post Office.

When the Account Holder of MIS/SCSS/TD scheme addresses CBS Post Office, the Supervisor or Postmaster inquire the Account holder that, since CBS is implemented in the office, there is no obligation for alteration of Accounts as on maturity, one can receive payment from any CBS Post Office after presenting fresh KYC documents. CBS is expected to adhere to the dynamically changing market & client requirements and develop & simplify banking processes to focus on sales & marketing stuff. In order to expand the presence of postal banking in rural and remote areas and also to improve banking speed, the core banking solutions are convenient for customers.

Post Office Savings Bank and Internet Banking

Post office savings scheme is among the many secure options for those seeking a higher interest rate than banks. Post office investment schemes such as PPF, NSC, and KVP offer a considerable rate of interest. The POSB (Post Office Savings Bank) accounts have reinvented themselves with uncertain times. One can now quickly transfer funds from the Post Office accounts using internet banking. Besides an active post office bank account, one needs an active mobile number and ensures all the KYC documents are in order; a PAN number and an e-mail ID are required for transferring information.

Details on How To Activate Internet Banking for Post Office Account

Here are complete details of how to activate Internet Banking for Your Post Office Savings Account

  • Step 1: Visit the post office branch with the internet banking form. Submit it along with required documents. Once internet banking is activated, an SMS will be sent to the given mobile number.
  • Step 2: The next step after getting the SMS is to visit https://ebanking.indiapost.gov.in and then click on ‘New User Activation’.
  • Step 3: Here, one needs to enter Customer ID, the CIF ID printed on the first page of the passbook. The account ID is the savings account number. One needs to enter the password carefully, as, after five wrong attempts, the user id will be disabled.
  • Step 4: After completing all of these steps, the internet banking account will be activated and is ready to make a fund transfer from the Post Office account. Also, you aren’t required to visit the branch to deposit money in your PPF account or the post office recurring deposit (RD) account.

Withdrawal of Money From Post Office Vs PPF

You can withdraw or encash your money from where you have enrolled for an NSC account. You will have to authorise the person with a signed letter if you send a person to withdraw the NSC on your behalf.

When it comes to PPF Withdrawal, you can get your amount credited to the bank and make a bank withdrawal (if your bank has the facility). You can also visit and download Form C or its corresponding application for cancellation on NSI India.

Mobile App for Post Office Saving Account

To complete the registration for the mobile app, one needs to visit their nearest post office, where your POSB account is present. Once the registration has been completed for mobile banking, you can use the Department of Post Mobile banking application services.

  • Firstly, download the Mobile Banking Application from the Google Play store, open the application, and click on the Activate Mobile Banking button.
  • Next, enter the Security Credentials provided by the Department of Post. The Registered Mobile number will receive an OTP. Enter the OTP and continue further.
  • Once successfully verified, you will be asked to enter a four-digit MPIN. Please enter the four-digit MPIN of your choice, and you will be activated for Mobile Banking Application.
  • The user ID and the newly generated MPIN is needs to be entered to login in the mobile app
  • In situations when one faces any difficulties or have any query, it is advised to contact the postal helpline service at their customer care 18004252440

Post Office and Small Saving Schemes

India Post, which regulates the postal chain of the country, also presents several deposit avenues for investors, generally recognised as post office saving schemes. These schemes were proposed to inject savings discipline and give investment avenues among Indians from across economic classes. Every post office provides these savings schemes to allow individuals from all over India to apply and register quickly. People funding in Small Saving Schemes in the Post office are restrained to dealing only with post offices. India has a network of 154,866 post offices across the nation. Of these, 139,040 are in rural areas. In 1947, there were only 23,344 post offices, which were in the urban areas. The department of posts collects over Rs 6 lakh crore of long-term savings under the numerous postal savings schemes. At present, there are nine postal schemes related to savings offered by the govt. Of India to the masses.

They are mentioned below.

  • Public Provident Fund (PPF)
  • National Savings Certificate (NSC)
  • Post Office Monthly Income Scheme
  • 5-Year Post Office Recurring Deposit Account
  • Post Office Time Deposit Account
  • Sukanya Samriddhi Account
  • Senior Citizen Savings Scheme
  • Post Office Savings Account
  • Kisan Vikas Patra (KVP)

Conclusion on Post Office Savings Bank

Post offices are developing. with the Core Banking Solution, the experience of a Post Office Customer has become compliant. Going to the Post office would now be minimal; submitting a KYC document or Registering for the Internet has become manageable.  The core banking solutions comprising Internet banking and the mobile app are steps in the positive direction of customer convenience and digitisation from the Indian postal service. This article gives the reader a succinct understanding of the steps and procedures involved in availing the core banking service of the post office of India.

Post Office Savings Bank – Core Banking Solution, Internet Banking and Mobile App Read More »

Understanding Form 16 - Tax on income

Understanding Form 16 – Tax on Income

Leave a Comment / Income Tax / By /

Understanding Form 16 – Tax on Income: Form 16 is like a certificate that is issued by the employer, and this Form contains all the information that one needs for preparing and filing his/her tax return. Employers must issue this Form every year on or before 15th June of the next year, which is immediately after the financial year in which the tax got deducted. Form 16 has two distinct parts which are Part A and Part B. In case a person loses his/her form 16, then he/she can apply for a duplicate one from his/her employer. Form 16 is meant for dealing with the tax on taxable salary and tax deducted at source.

Understanding Form 16 – Tax on Income Overview

Form 16 contains information that is related to the employer and employee. Information such as name and address of the employer, PAN/TAN of the deductor, name and designation of the employee and PAN information of the employee. People have to disclose their assessment year, period of employment, address of CIT (TDS) and a summary of tax deducted at source in a detailed manner in Form 16. The summary includes quarter-wise information of receipt numbers of quarterly TDS returns in Form No 24Q, amount of tax deducted, and amount of tax deposited or remitted.

Form 16 is meant to show the employee’s gross salary along with the perquisites and profit instead of salary. In the section ‘Income under Head Salaries’, the employee can report his/her income from other sources. Under section 192(2B) and Rule 26B of the Income Tax Act, when an employee is having any other income despite his/her salary (not being a loss) in the same financial year, which is chargeable under any head such as income from capital gain or income from other sources, the employee must give a statement of such income and any tax deducted thereon to the employer so that he/she can take it into consideration while deducting tax from the employee’s salary.

When other incomes are added to the income under head salaries, one can get the gross salary of the employee. Gross salary is the total salary an employee gets after adding all the allowances and benefits but before charging the taxes. This is explained in detail in form 16 – part 1.

Calculating Tax

After calculating the employee’s taxable income, the ones whose income exceeds the amount that is exempted under Income Tax Act is known as assessee. On the income of the assessee, tax is charged at a rate fixed under the finance act for the relevant assessment year. Income tax also depends on the type of assessee. There are different types of assessee such as Individual, Hindu Undivided Family (HUF), Firm, Trust etc. In the case of an individual, the tax calculation depends on:

  • Gender
  • Age
  • Residential status

For the income that is earned between 1st April 2011 and 31st March 2012, the financial year is considered as 2011-2012, and the assessment year is considered as 2012-2013.

For a resident Indian for the assessment year 2012-2013, the income tax slab is as follows:

Tax Men Women Senior Citizen (60 years – 80 years) Very Senior Citizens (More than 80 years)
Basic Exemption 180000 190000 250000 500000
10% tax 180000 – 500000 190001 – 500000 250001 – 500000
20% tax 500001 – 800000 500001 – 800000 500001 – 800000 500001 – 800000
30% tax Above 800000 Above 800000 Above 800000 Above 800000
Surcharge No surcharge is charged in the case of an individual, Hindu undivided family, Association of persons and body of individuals
Education Cess 3% on the income tax

Tax Computation for Males

Tax computation for males in India is as follows:-

Level of Income  Tax
When the total income of the employee does not exceed Rs 1,80,000 Nil
When the total income of the employee exceeds Rs 1,80,000 but does not exceed Rs 5,00,000 10 percent of the amount that exceeds the income  Rs. 1,80,000/-
When the total income of the employee exceeds Rs 5,00,000  but does not exceed Rs 8,00,000 Rs. 32,000/- plus 20 percent of the amount that exceeds the income  Rs. 5,00,000
When the total income of the employee exceeds Rs 8,00,000 Rs. 92,000/- plus 30 percent of the amount that exceeds the income  Rs. 8,00,000

After the tax is calculated, surcharge and education cess is added to it. Let’s discuss these terms in brief:

Surcharge

The surcharge is meant to be an additional charge or payment that is charged on the taxable income of an employee. It acts like an extra fee that is added to another fee or charge. For example:

  • The fuel surcharge is meant for representing additions due to jet fuel prices.
  • Sea freight charges are meant for representing additions due to oil prices.
  • The surcharge is charged when payments are made through cheque, credit or debit card.

Education Cess

It is considered to be a contribution that is made towards the Secondary and Higher Education development in the country’s economy. All taxes that are levied in India are subject to an education cess, which is fixed at 3% of the total tax payable. Please note the 3% is not charged on the income tax but on the income tax payable.

Annexure A or Annexure B

An employee also gets Annexure A or Annexure B along with Form 16 depending on the type of the employer; they are also called the Deductor type because they are the ones who deduct tax from the salary of the employee. Annexure is something which informs about the details of the tax deducted and deposited in the Central Bank account with the help of a challan.

  • Annexure A is used if the employer or deductor type is Government.
  • Annexure B is used if the employer or deductor type is others.

Relief Under Section 89

Relief under Section 89 under the Income Tax Act is considered to be one of the most important tax rebates that are offered to the employees by the Government. It deals with the taxation of the salary when the salary is believed to be paid in arrears or in advance. Government employees are the ones who get higher salaries because of these arrears.

Understanding Form 16 – Tax on Income Read More »

On Maturity of PPF Account

On Maturity of PPF Account – Closing or Extending The PPF Account

Leave a Comment / EPF / By /

On Maturity of PPF Account: Individuals, particularly those who are not salaried workers, may benefit from the Public Provident Fund as a medium for long-term savings and as a means of preparing for retirement. PPFs are long-term investments that mature 15 years after the end of the financial year in which they were first purchased. This article has a brief description of PPF and what happens when a PPF account reaches maturity.

PPF’s Maturity

The maturity of a Public Provident Fund (PPF) account is 15 years, but the calculation begins at the financial year’s end in which the account was opened. For example, if you get a PPF account opened on July 15, 2000, your 15-year term would begin on March 31, 2001, at the end of the fiscal year 2000-2001. The lock will be in place until March 31 2015, and you will be able to withdraw only after April 1, 2016.

After 15 years, you can choose between two options:

  1. Withdrawing the maturity account and then closing the account, OR
  2. Keep the current PPF account open for another 5-year block duration. After the first five years have passed, you will continue to extend the PPF account for another five years. There is no limit to the number of extensions that can be created.

Let’s say your PPF account’s term is set to expire on March 31, 2015. The account balance at the time was about Rs 10 lakh. You can now choose to keep the account open for another five years (until March 31, 2020) and continue to invest as you have been. However, you can only withdraw Rs 6 lakh (60 percent of the balance on your credit on March 31, 2015) over five years until March 2020.

E.g., if you started a PPF account in the fiscal year 1999-2000, it will mature on April 1, 2015. You have the option to either cash in your PPF balance or extend the maturity of your PPF for another five years until 2020 from April 1, 2015, to March 31, 2016. You will continue to add to your PPF account after 2020, for example, to the years 2025, 2030, and so on.

Note: Once your PPF account expires, you can open a new one, but you’ll have to start over.

Continuation of PPF

You have two options for keeping your PPF account open:

  • Keep going without making any added contributions – You can choose to receive the tax-free interest but not contribute any additional funds, OR
  • Keep going while making the added contributions – The rules for contributing to the extended account remain the same as they were during the 15-year cycle, i.e., you can demand 80C deductions on amounts invested in PPF and invest up to the maximum limit (which is 1.5 lakh (150,000) for FY 2014-15 and FY 2015-16). Form H must be completed and submitted by the investor.

Online, you can download FormH in pdf format. Please keep in mind that Form H must be completed and submitted within one year of the maturity date. So, if your PPF matured on April 1, 2012, you must fill out Form H to continue your PPF account with a subscription between April 1, 2012, and March 31, 2013. Form H must be completed and sent to the post office or bank where the account is kept. You must enter your PPF account number and the date the 15-year period ended. So, if you began your PPF account in FY 1999-2000, say in November 1999 or February 2000, and your PPF matured 15 years later on 31-Mar-2000, you could write 1-Apr-2015.

Please Note The Following

  • Filling out Form H within one year of the account’s maturity date is the only way to expand the PPF account with a subscription.
  • To renew, you must first complete Form H and then deposit for that year.
  • The choice for no more contribution is the default, which means that if you do not choose the option with a subscription within one year of the maturity period’s conclusion, the second option without a subscription will be applied automatically.
  • It is impossible to reverse a decision taken for five years.
  • The subscriber cannot switch to a with-contributions extension after an account has been continued without contribution for any year.
  • The interest gained on a PPF for a more extended period is also tax-free.

Liquidity for the Extension Period

Unlike the initial duration of the Public Provident Fund Account, when loans were only available after the third year, and partial withdrawals were only permitted after the sixth year, the extension period of the PPF is more liquid.

If the loan is extended without a contribution, that amount may be removed, but only once per year. If the balance is entirely removed, it will continue to earn interest.

If the loan is extended with contributions, you can withdraw up to 60% of the balance at the start of each extended period (block of five years).

Assume the term of your PPF account expired on April 1, 2012. The account balance at the time was about Rs 15 lakh. You can now choose to keep the account open for another five years (until March 31, 2016) and continue to invest as you have been. However, you can only withdraw Rs 9 lakh (60 percent of the balance on your credit on March 31, 2011) over five years until March 2016.

Closing or Extending The Account

Is it better to close this account and open a new one or keep it open for another five years?

I propose extending the contract for another five years. Even if you close this account and open a new one, the maturity will be delayed for another 15 years. You also gain more money if you prolong the account so there is more balance.

Non-resident Indians and Extension

The extension benefit does not apply to NRIs who opened their account before their residency status changed. Returning to PPF Basics, NRIs are unable to open a PPF account. If a resident already has a PPF account and then becomes an NRI, he will continue to invest in the PPF until the initial period (the first 15 years) expires. The PPF account will then be unable to be extended and will have to be liquidated.

The Bottom Line

After 15 years from the end of the financial year in which the initial subscription was made, you will close your Public Provident Fund account. You may also choose to extend the PPF for a 5-year block with or without a subscription.

On Maturity of PPF Account – Closing or Extending The PPF Account Read More »

Revive Lapsed Insurance Policy

Revive Lapsed Insurance Policy, LIC Revival Camp – What is a Lapsed Insurance Policy?

Leave a Comment / Finance / By /

Revive Lapsed Insurance Policy, LIC Revival Camp: Life Corporation of India (LIC) recently has come up with a new Revival Campaign which can be used for the revival of the lapse policies. This type of revival provides concession in late fees as well as relaxation of medical checkups. Many people don’t have explicit knowledge of this campaign and have certain questions in their mind such as what is Lapsed Insurance Policy, What is Revival of Insurance Policy, How to revive an Insurance Policy which has lapsed and about LIC Revival Camp. In this article, we will cover some of these areas in order to provide the readers with a better understanding of lapse policies.

What is a Lapsed Insurance Policy?

When a policyholder is unable to or fails to pay his/her premium within the grace period, then his/her life insurance policy lapses. This type of policy is termed the lapsed policy. Lapsation of policy is considered to be dangerous because, in this case, the policyholder and his/her beneficiaries might not get any benefit for which they have started the life insurance cover.

When Does a Policy Lapse?

An insurance policy is considered lapsed when the policyholder fails to pay the premium within the grace period. The grace period is considered to be 30 days in case of annual, half-yearly and quarterly renewals and 15 days for monthly renewals.

How Can You Prevent The Policy From Getting Lapsed?

Some ways to prevent lapsation of an insurance policy are as follows:

  • The policyholder must pay his/her premiums within the due date or the grace period.
  • Never wait for a premium due notice because it is only given as a courtesy from the insurance company’s side. It is the duty of the policyholder to pay the premium before the due date without waiting for the notice.
  • Never depend on a second person or an intermediate for submitting the cheque to the insurance company. They might forget to do so because it is not their responsibility. The policyholder must always make his/her own arrangements for paying the premium.
  • If the policyholder has shifted and there is a change in the address, then he/she must inform the insurance company as soon as possible.

Can One Still Have The Rights To File a Claim on a Lapsed Policy?

Policies that are less than three years old but lapses, and if something happens to the policyholder after the lapsation of the insurance policy and a claim is filed to the insurance company; the insurer is not obliged to pay anything to the policyholder. The insurance company might agree to return the premium payments the policyholder had made in the past, but they will not approve the whole insurance amount if the insurance policy has already lapsed due to non-payment of premium. Returning the premium amount is totally upon the insurer’s decision.

If the policy is more than three years old, but lapses and something happens to the policyholder, then there is some chance that the policyholder might still get the benefits promised at the time of the insurance agreement. However, the policyholder will not get the full amount, but a small part of it as decided while signing the agreement.

What If a Policyholder is  Facing A Cash Shortage and Can’t Pay The Premiums?

In this case, the policyholder must inform the insurance company about his/her issues regarding the premium payments and ask them to reduce the insurance amount; thus, the premium amount will also decrease automatically. Once the premium amount is not that huge, it will become easy for the policyholder to continue with the premium payments without any trouble.

Revive Lapsed Insurance Policy

As we all know, revival means getting something back to life; similarly, reviving a lapsed insurance policy means getting the insurance cover back. In order to revive a lapsed insurance policy, the policyholder is entitled to pay the outstanding premiums along with certain interest to the insurance company. The rate at which the policyholder will pay the interest depends on the insurer and its policies. If the policy has lapsed for more than six months, then the person whose life is insured has to go under medical tests one more.

Can an Insurance Policy Revive at Any Time?

One can revive the insurance policy at any time, but sometimes it depends on how many days have passed since the policy has lapsed. According to the insurance laws, if the policy was in force for at least three years, then the policyholder got up to two years to revive the lapsed insurance policy. Some insurers like LIC have special schemes using which one can revive his/her lapsed policy even after 5 years.

If the policyholder revives his/her lapsed insurance policy within six months, then the process might get simpler because he/she only need to pay the premium due and the interest for reviving the policy, but if the revival takes more than six months, then the process might get more complex as it involves penalty fees and interest might go up to 10% depending upon the insurer.

After Revival One’s Insurance Policy is Same?

If the policyholder had purchased the policy before 2013, when the new guidelines were issued, then the same policy will get renewed with the same terms and conditions. This is as per the contractual guidelines, which are governed by the regulator.

If the policyholder has purchased the policy after 2013, then the new premium and policy conditions of the revived lapsed insurance will depend on the periods during which the dues were not being paid, the policyholder’s age and the sum that can be revived with the policy. So if the policyholder’s age band has changed from the date his/her premium was due, then the insurer might increase the mortality rate.

LIC Revival Camp

Like always, Life Insurance Corporation of India, which holds most of the market share in the insurance industry, has come up with a new LIC Revival camp for all its customers. This campaign was started with the objective to reduce lapsation of policies and to renew the relationship with the old customers in order to increase the customer base.  Under this campaign, policyholders can revive their lapsed policies with a concession in the late fee, and they also get some relaxation in different medical requirements. The different types of revival schemes that one can find under LIC are as follows:

  • Ordinary Revival Scheme
  • Special Revival Scheme
  • Loan-cum Revival Scheme
  • Survival Benefit cum Revival Scheme
  • Revival by Installation Method

Revive Lapsed Insurance Policy, LIC Revival Camp – What is a Lapsed Insurance Policy? Read More »

Divorce Process - Mutual Consent or Contested, Fees and Documents

Divorce Process – Mutual Consent or Contested, Fees and Documents

Leave a Comment / Certificate / By /

Divorce Process: Divorce is a legal procedure of ending a marriage or matrimonial union. Divorce usually involves the cancelling or restructuring of a marriage’s legal responsibilities and duties under the rule of law of a particular country or state. A divorce is a legal action between married people to end their marriage before the spouse’s death. Divorce laws differ considerably around the world, but in most nations, divorce requires the sanction of a court or other authority in a legal process, which may involve issues of distribution of property, alimony (spousal support), child custody, child visiting/access, child support, parenting time, and division of debt. In most nations, the law expects monogamy, so divorce enables each ex-partner to marry another. It takes a minimum of six months for mutually consented divorce; however, for contested divorces, the total duration of the process could extend from 2-5 years, case-specific.

Constituents of Divorce

Divorce is the adjournment of marriage constitutionally. In India, marriage and divorce come under personal matters, and the laws are based on customs and rights of different religions discussed below. There are three significant factors to be classified at the time of divorce:

  • Property settlements, liabilities and assets: In case of a mutual consent divorce, the parties are free to choose how they wish to distribute their marital assets. However, if there is a deficit of consent in how matters are to be resolved, the court may help the parties in the same. Nevertheless, the division can be demanded only of the joint conjugal property and not of the individual self-acquired property of a spouse. A Hindu woman may assert her husband’s property after his death under the Hindu Succession Act, 1956. Section 125 of the Code of Criminal Procedure grants support to wives, and there exist maintenance provisions even under the Hindu Adoption and Maintenance Act, 1956. For this, the property and the remuneration of the husband are considered by the court.
  • Alimony: When two people are married, they have a responsibility to support each other. In 1973 under the Code of Criminal Procedure, the right of maintenance was extended to any form economically reliant on marriage. The claim of either spouse depends on the husband having adequate means. When settling the payment on the alimony, the court will take into account the earning potential of the man and his capacity to restore his fortune and liabilities.
  • Child Custody: The Guardians and Wards Act, 1890, determines custody and guardianship aspects in India. The protection of a child either be sole, where only one parent has the custody, and the other may have the visiting rights. Shared or joint custody is where both parents share the custody, and third-party custody is where neither of the parents gets the custody. Usually, the custody of children below five years of age is given to the mother. Under the Muslim Women Act, 1986, the custody of boys below two years is given to the mother and after that to the father, but the daughter’s custody remains with the mother.

Divorce Process

Types of Divorce

In some areas, the courts will surprisingly apply principles of fault but might voluntarily hold a party responsible for a breach of fiduciary responsibility to his or her spouse. A judge must order a divorce by a court of law to come into force. The courts generally set the divorce terms, though they may take into account prenuptial contracts or post-nuptial contracts or simply approve terms that the spouses may have consented to privately.

The Indian Divorce system can be divided into two separate divisions.

  • Divorce by Mutual Consent: When both mates approve of dissolving a troubled marriage, they can pursue the Indian divorce procedure with Mutual Consent. One needs to register a joint divorce request. The court will provide a six to eighteen months period to the parties, called the cooling-off phase, to adjust. If they cannot settle, then they have to go through the terms of the agreement. And also have to file a second motion, and the court announces a Decree of Divorce. Divorce by mutual consent requires a minimum of six months to settle, whereas if it takes the court route, it might take around 2-5 years, depending on the situation.
  • Contested Divorce: The divorce where the husband or the wife wants separation but the other doesn’t is known as a contested divorce. It also applies when both the partners want a divorce but cannot accept issues like alimony or the custody of the children. In a contested divorce, one has to explicate, prove and justify reasons to the court, known as grounds, for wanting to separate. Reasons to get a divorce can be desertion, cruelty, adultery, impotence, chronic diseases like leprosy, venereal disease, etc. The other party can also challenge these types of problems. This makes contested divorce procedures long, stressful and comparatively expensive. It often appears that a couple starts the divorce procedures by way of a contested divorce, but throughout the trial, they agree to separate by mutual consent. In India, the grounds of divorce are determined based on the religion of the couple.

The legal method in India is considerably repulsive, lengthy and costly. A couple can control their legal expenses if they mutually handle a financial settlement.

Indian Marriage Acts

In India, marriage and dissolution of marriage come under personal matters, and the laws are based on customs and rights of different religions such as – The Hindu Marriage Act, 1955 rules for the Hindus, Sikhs, Jains and Buddhists.  For the Muslim community, the dissolution of Muslim Marriages Act, 1939. The Parsis are administered by the Parsi Marriage and Divorce Act, 1936. The Christians are governed by the Indian Divorce Act, 1869 and all the inter-community and civil marriages are governed by the Special Marriage Act from the year 1956. Due to the presence of different religious convictions in India, the Indian Judiciary has implemented laws distinctly for couples belonging to different religions. The mutual consent divorce procedure is slightly more effortless and fast, while the contested divorce method takes longer and depends on the religions of the partners.

Cost to Get a Divorce

The Court fees for listing a divorce are cheap; the cost is essentially in the expenses you pay your attorney. Lawyers tend to credit charges for arriving in court and doing any other work. Depending on how profoundly it works, therefore, it may cost anywhere from the low ten thousand to lakhs of rupees. One can hire lawyers walking around the premises of any family court who assure a win-win situation for a lump-sum amount of money. Such advocates usually trick the clients. Different lawyers in different cities have separate fees according to their High Court or Civil Court practice. For hearings related to the Supreme court, the fee increase is proportional.

  • Mutual Consent Divorce: The complete process for the mutual consent divorce by attorneys with experience for 1 to 3 years takes around from Rs 15,000 to Rs 30,000.
  • Contested Divorce: The contested Divorce is expensive as there are arguments and cross pieces of evidence. The Prosecution cost is directly proportional to the time duration of the case. The Prosecutor with 3 to 5 years experience charges a minimum of Rs 3000-7000 per hearing. Hiring an experienced advocate can cost you about Rs 35,000 per hearing.

Documents Required for Divorce

In a divorce petition, the parties are asked to submit the following documentary proofs:

  • Address proof of husband and wife
  • Marriage certificate
  • The marriage proof in terms of four passport photos of the marriage
  • Separate residence proof for spouses living separately for more than a year
  • Evidence of failed attempts of settlement
  • Last 2-3 years income tax statements
  • Profession and present remuneration details
  • Family background Information
  • Details of assets owned by the claimant

Conclusion on Divorce Process

The personal law associated with marriage and divorce is manifested properly in India with adequate legislation and case laws on the matter. However, these laws need to evolve with the changing society, and the family courts of India have done an exceptional job in identifying the same.

Divorce Process – Mutual Consent or Contested, Fees and Documents Read More »

How to Nominate Bank Account, Mutual Funds

How to Nominate Bank Account, Mutual Funds?

Leave a Comment / Finance / By /

How to Nominate Bank Account, Mutual Funds?: Every time an individual fills up a form for an investment, whether it is a mutual fund, shares, fixed deposit, or bank account, there is a separate section to mention a nominee. The nominee is only the custodian of the investment until the legal heir claims them legally. It means that the process of nomination enables the appointed person to take care of one’s investments when he/she dies refers to the nomination. All financial institutions and banks of India have standard processes for settling death claims, where the nomination is specified clearly in the folio or account. Learn more about how to nominate, cancel or change the process of nomination in a bank account and mutual funds.

What Exactly Is the Nomination Process?

The nomination facility permits an investor in a mutual fund or a deposit account holder to nominate an individual who can claim the investment of the safe deposit locker or the earnings of the deposit account. The nominee can be anyone a person considers to be the first relative- spouse, parents, siblings, children, or other. Before nominating anyone, an individual must be familiar to:

  • Start of Investment: There is a separate column in an application form. So, a person should appoint the nominee while opening an account or during investment.
  • Multiple Nominees: Some investments like mutual funds enables a person to have multiple nominees where he/she can assign money percentage to each of them.
  • Minor Nominee: If the guardian is mentioned in the form, then a minor can be a nominee.
  • Nominee Change: One can change the nominee assigned at any time or multiple times without even notifying the earlier nominee about the change.
  • Cancellation of Nomination: One has the right to cancel the nomination at any time without even informing the individual nominated.

How To Make Nomination in Savings Bank Account?

Nomination is the right of the bank account holder to appoint one or more persons who will be allowed to receive money upon the account holder’s death. While opening the saving account in any Indian bank, an individual can apply for nomination. The opening form of every bank account has a different section for nomination.

  • Appoint the Nominee: One should fill the nomination form DA-1 to appoint a nominee for any saving account. A person can appoint a nominee while opening an account or later. If an individual did not nominate anyone during the account’s opening and wants to nominate in the future, then he/she has to visit the bank. From the bank, they will get the DA-1 nomination form. An individual should fill the form and then submit it to the bank.
  • Changing the Nominee: In case, if anyone wants to change the nominee made already, he/she has to fill the DA-3 form. One can download the DA-3 form from the official website of the bank or can obtain it by visiting the bank. The form involves the signature of two witnesses. After filling the form, one needs to submit it to the bank.
  • Nomination Cancelling: An individual has to fill the form DA-2 to cancel the nomination made already. One can get the DA-2 form from the bank or can download it from the website of the bank. The form that involves two witnesses’ signatures should get submitted to the bank once filled completely.

Making A Nomination In a Bank Account

Some points to remember while making a nomination in a bank account:

  • The facility of nomination is available for accounts opened as single or joint accounts. It is not accessible for a representative account. It is vital to note that the nomination forms either for opening, change, or cancellation should get filled up by all joint holders.
  • The account holder can add a new nominee during their lifetime. DA-1 form allows the account holder to make a nomination if he/she has not made it yet. This form requires the details of the account holder and the nominee’s information.
  • A nominee is eligible to receive the funds on the death of the account holder. In the case of joint accounts, a nominee will obtain the funds on the death of all account holders.

How to Make Nominations in Mutual Fund Investments?

Securities and Exchange Board of India (SEBI) revised its Mutual Funds Regulations in 2002. The regulations amended permit the nomination option to the unitholders of mutual funds. Since that time, Asset Management Company (AMC) offers a facility to the unitholder to choose a nominee in whom the units held by an individual shall vest if he/she dies. However, nomination asset does mean that nominee acquire title or any beneficial interest in the mutual fund.

  • Only those individuals can make nomination who are holding or applying for units on their own behalf.
  • If the unitholder is choosing a minor as a nominee, then he/she must provide the name and address of the minor nominee’s guardian.
  • Nomination is compulsory and since April 2011, different investors are applying in solo holding.
  • A non-resident Indian can become a nominee in regard to the force exchange controls from time to time.
  • Non-individuals such as trust, partnership firm, society, body, holder of Power of Attorney, corporate, and, Karta of Hindu Undivided Family can neither become a nominee nor can nominate.
  • When an individual is a nominee, KYC requirements are not necessary during that time. However, due to the death of the unitholder, when a nominee steps into the shoes of a unitholder, then he/she has to complete the KYC necessities. If the nominee is still a minor at that time, then the guardian should be KYC compliant.
  • The process of nomination is at the folio level. If an investor has various schemes in a folio, then all units get transferred to the nominee. The nomination becomes valid to the new units also if an investor makes more investment in the same folio.
  • One can select the multiple nominees for mutual funds with a percentage to be allocated to each individual mentioned. In case, if the percentage is less than 100% and there are multiple nominations, then the balance gets rebalanced to the first unit holder. However, if the percentage is more than 100%, then nomination gets forbidden.
  • The unit transfer in courtesy of a nominee would be legal discharge as per the asset management company against the legal beneficiary.
  • Individuals who hold units on their own behalf or made the original nomination hold a right to cancel the nomination. On the cancellation, the nomination should get considered as canceled. The Asset Management Company should not be any compulsion to transfer the units in the nominee’s favor. Generally, it takes 7 working days from the receipt date of filled forms in the process of change or cancellation of nomination.

Can One Make Nomination Later After Filling the Form?

While filing the form, if someone forgets to appoint a nominee, then they can do it later by filling the form for the Asset Management Company. The investor can request the registrar or transfer agent for the form or can download it from the websites of mutual funds.

Benefits of Nomination Registration

With the registration of nomination, the process of funds transferring becomes trouble-free to the nominee or nominees in the event of the investor’s demise. However, if no nomination is made, the claimant/ heir has to create different documents like a legal heir certificate, a will, or a no-objection certificate from other legal heirs to get the units transferred. Thus, a nomination facility is an efficient way to lessen the hardships of the legal heirs in claim settlement.

Conclusion

Nomination is not mandatory; however, it is advisable to nominate a person in a saving bank account or mutual fund investment. It simplifies the process of claim settlement and gives a nominee right of legal heirs of the investor. One can nominate anyone- an acquaintance, a friend, or a relative.

How to Nominate Bank Account, Mutual Funds? Read More »

How to Apply for Passport

How to Apply for Passport – Fill Form, Pay and Schedule Appointment

Leave a Comment / Certificate / By /

Steps to Apply for a Passport

The following are the steps to apply for a new passport or a reissue of an old one.

  • For the first time, go to the Passport Seva Online website and register.
  • Passport Seva Online Portal Login
  • Apply for a new passport or a passport reissue.
  • You have the option of downloading the form, filling it out, and uploading it back to the website, or simply filling out the information online.
  • Submit the Application after filling out the form, either online or offline.
  • Make a payment and make an appointment.
  • Confirmation of your appointment at the Passport Seva Kendra, with all relevant details (PSK).
  • For appointment confirmation, print the Application Receipt.
  • Bring your receipt to Passport Seva Kendra (PSK) on the day of your appointment.
  • Give your biometrics (fingerprints), have your documents checked and receive a receipt. It takes about 2-4 hours to complete.
  • After the police have checked your identity, you will receive your passport.
  • You can monitor the progress of your passport application.

ECR or ECNR

As defined by the Emigration Act of 1983, emigration is defined as an Indian citizen leaving India with the intention of seeking employment in a foreign country. Emigration Check Required stands for Emigration Check Required, while Emigration Check Not Required stands for Emigration Check Not Required. If you passed class ten, you are automatically placed in the ECNR grades.

Emigration Check Required is the complete form of ECR

  • If you have not completed class ten, your passport will be classified as ECR (Emigration Check Required). When you leave India for work in one of the countries on the list, you must obtain permission from the immigration office.
  • You do not need emigration clearance if you travel to any of the mentioned countries for reasons other than work (ex-visit, service, or any other reason).
  • You do not need emigration clearance if you are travelling to any of the other countries mentioned, regardless of whether you are qualified for ECNR or not.

If your passport status is ECR, you may need to obtain permission from the immigration office to travel to the following countries: Saudi Arabia, Qatar, Dubai, Oman, Kuwait, Afghanistan, Bahrain, Brunei, Indonesia, Malaysia, Iraq, Jordan, Lebanon, Libya, Sudan, Syria, and Yemen.

In the passport, no notation means ECR for the passport is published before January 2007.

No notation in the passport means ECNR for passports published in or after January 2007.

If an Emigration Check is required, the passport will be stamped with an ECR endorsement, i.e. The stamp would be on your passport page if you have an ECR passport. ECR Emigration Check Required is written on the stamp, as seen in the image below.

Documents to Carry During The Visit To The Passport Office On The Appointment Date

You must bring original documents as well as one self-attested duplicate copy of the following documents to the passport office:

  • Address proof is needed. Water/telephone/electricity/gas charge, income tax assessment order, election ID card, parent’s passport, etc.) Gas Connection Proof, On letterhead, a certificate from a reputable employer, Spouse’s passport copy (first and last page along with the family details), (provided the applicant’s current address matches the address mentioned in the spouse’s passport), Parent’s passport copy, if the applicant is a child (First and last page), Photo Passbook of a Working Bank Account, Aadhaar Card, Registered Rent Agreement (Scheduled Private Sector Indian Banks, Scheduled Public Sector Banks and Regional Rural Banks only)
  • Proof of birth date – Birth certificate issued by a municipal authority or any office approved by the Registrar.
  • Class Xth or the graduation certificate as a document for ECNR.

Normal passport applications from first-time applicants who include Aadhaar, Electoral Photo Identity Card (EPIC), Permanent Account Number (PAN) Card, and an affidavit in the format of Annexure will be processed on a Post-Police Verification basis, allowing for faster passport issuance without the payment of any additional fees, subject to effective online Aadhaar number validation. Additionally, if necessary, the EPIC and PAN cards can be validated from the respective databases. The Passports Act and Passports Law will refer to the general laws, legislation, and procedures relating to passport issuance.

Visiting The Passport Office On The Appointment Date

On the scheduled date, bring your application receipt, original documents, and one copy of self-attested documents to the Passport Seva Kendra. If you are applying for a passport for a minor, please bring your parents’ original passports. For a minor, only one parent is permitted. The images are from an official presentation at Passport Seva Kendra on how to apply.

Security Checks at the Passport Kendra

Arrive 15 minutes before the starting time. It’s pointless to arrive early because the guard will not let you in. To gain access, you must show the guard the Application. The picture below depicts the procedure for sending an application to the Passport, Seva Kendra. The Passport Seva Kendra has a Xerox machine and an ATM on the premises.

To submit a passport in PSK format, you must follow the steps below.

Issuing Token

Display the documents in the preprocessing section. You will be given a token and a file if all goes well. If any of the records are missing, you will be notified. You will go the next day without making an appointment.

The token number is included in Token. You must visit counters A, B, and C. You wait in the lounge area while waiting for your Token.

Enter the area where you’ll be waiting. Wait until your token number appears on the Token Display Screen, as shown below.

A Counter, B Counter, and C Counter

Within 30 minutes to an hour of arriving, one is at the counter. However, Counter B and Counter C take time because Counter A has more people than Counter B and Counter C.

Passport Save Kendra’s Waiting Area

A Counter: Your documents will be checked and uploaded into the Passport Seva System at this counter. Your picture and fingerprints will be taken. If you want to pay for SMS notification, you can do so at the counter for Rs 40 and get a receipt. The passport office will then send you warning messages, such as:

  • Received Passport application
  • Initiated Police verification
  • Police will further approach you for completing the verifications
  • There is a positive verification result
  • Passport is then printed
  • Passport then gets printed and mailed to you through the speed post with a tracking number
  • Your passport will then be delivered to you

B Counter: the officer verifies and corrects original records.

C Counter: The passport is granted after a designated officer makes a decision.

Tracking the Status Of Passport Application

Suppose you want to watch your application’s status and review it online; you can also dial 1800-258-1800 for assistance. The mPassport Seva App is available for Android, iOS, Windows, and BlackBerry. This allows for easy monitoring as well as other passport-related details.

You can log in with your information if you want to file a complaint. Your complaint can be submitted at http://www.passportindia.gov.in/AppOnlineProject/ccgm/ServiceRequestHomeAction.

Passport’s Police Verification

For Minor Passports, there is no police verification. There are three main types of police authentication, depending on whether the police verify the applicant’s identity before the passport is issued and dispatched or after the passport is issued and dispatched. On the passport website, you can find a list of frequently asked questions about police verification.

  • Pre-police verification. Carried before issuing the passport.
  • Post police verification. Carried after issuing the passport. For example, for PSU employees or the government employees submitting a NOC through Annexure M.
  • No police verification. Except in Tatkal, police verification for passport issuance should be completed in 21 days under the Right to Service Act provisions. That means a police report must be sent to the Regional Passport Office (RPO) within that time frame. Several factors determine the length of time it takes for the police to verify your identity.
  • The PSK location where you apply your Application and the address where you live
  • The condition of the police station – whether or not they have a dedicated passport verification team.
  • Length of stay at current address – police will conduct background checks at all places where you lived in the previous year.
  • You also need to provide documentary evidence.

As part of the government’s efforts to strengthen and liberalise police verification procedures for passport issuance, the Ministry of External Affairs has agreed to conduct police verification after the passport has been released. The instruction is for first-time applicants who are applying under the standard category. “Normal passport applications of all first-time applicants furnishing Aadhaar, Electoral Photo Identity Card (EPIC), Permanent Account Number (PAN), and an affidavit will now be processed on a post-police verification basis, allowing faster issuance of passport without payment of any additional fees,” the Ministry of External Affairs said in a statement.

Unless there is an inconsistency or inadequacy in the documentation you submit for police verification, it will be completed in one visit – assuming the appropriate police authority is accessible.

Receiving the Passport

Following the police verification, the recommendation report is sent to the passport office. It is either sent for further analysis or processing based on the recommendations (printing & then dispatch). Depending on your mailing address and readiness to receive it, the speed post will add 3-5 days to your delivery time.

If you live in one of the four big metro cities, the passport offices have begun a campaign to offer passports in four weeks. This can take anywhere from 4-6 weeks in other metro areas. Other bits can take anything from a month to a year.

How to Apply for Passport – Fill Form, Pay and Schedule Appointment Read More »

Premature Withdrawal or Breaking of Fixed Deposit

Premature Withdrawal or Breaking of Fixed Deposit

Leave a Comment / Finance / By /

Premature Withdrawal or Breaking of Fixed Deposit: Fixed Deposits (FD) are long-term deposits with a non-changing interest rate that gives you the accurate amount of your investment in the future. Fixed Deposits are there for a fixed period or till the maturity period. Fixed Deposits are the instruments that provide maximum safety and security and there is no risk of loss. Even if there are fluctuations in the market interest rates, it does not affect your investment. An individual/business can opt to earn the interest on his/their investment periodically. In this article, we will learn about premature withdrawal of Fixed Deposit and other topics related to premature withdrawal of Fixed Deposit.

Premature Withdrawal of Fixed Deposit

Premature withdrawal of Fixed Deposit means the withdrawal of your investment before the maturity period of the investment. This allows individuals/businesses to withdraw their money in the hour of need or if they found better investment schemes/offers somewhere else. Under the guidelines of the Reserve Bank of India(RBI), it is legal to withdraw Fixed Deposit before its maturity period.

Reasons for premature withdrawal of Fixed Deposit

An Individual or a Business may opt for premature withdrawal of a Fixed Deposit if they need money in case of an emergency or they may have found a better and higher rate of interest somewhere else. In case of market fluctuations, when/if the interest rate is higher than the prevailing rate at which the individual/business opened their recent Fixed Deposit, they may opt for premature withdrawal and then open a new Fixed Deposit to enjoy the higher interest rate returns.

Premature withdrawal of Fixed Deposit is severely discouraged by the banks and hence, they may impose a penalty on the interest rates(applicable).

Interest Rate on premature withdrawal of Fixed Deposit

In case of premature withdrawal of Fixed Deposit, interest is paid on the investment to the investor for the period between the date of deposit and the withdrawal date(before the maturity period) of the Fixed Deposit with the bank. A premature withdrawal penalty is also charged during the process.

Let us take the help of an example to understand the process thoroughly;

An individual invests in Fixed Deposits on 1st March 2014 at an 8% interest rate for 5 years. Now due to some reason, he opted for premature withdrawal of his investment after one year i.e. on 1st March 2015. Now, during this investment on Fixed Deposit kept by the bank which was withdrawn prematurely within one year, the interest applicable was 5%. Hence, he will earn only 5% per annum on his investment rather than the original rate of 8% per annum for 5 years.

In some cases, no interest is payable on the premature withdrawal of a Fixed Deposit. For instance;

The State Bank of India(SBI) states that interest of 0.50% below the applicable rate for the period with which the deposit was kept with the bank will be paid below the invested amount of 15 Lacs when there is a premature withdrawal of Fixed Deposit.

The Industrial Development Bank of India (IDBI) has a lock-in period of one year on premature withdrawal of Fixed Deposit which means no premature withdrawal of Fixed Deposit up to one year.

Premature Closure Penalty

Banks impose or charge a penalty of 0.5-1% interest on premature withdrawal of a Fixed Deposit. In case of premature withdrawal of Fixed Deposit during an emergency, few banks relinquish the penalty. The emergencies are not defined exactly by the banks and the freedom from penalty is given on a case-to-case basis. If the individual reinvests the withdrawn amount with the bank, he may get freedom from bearing the penalty.

Let us consider an example to ease up the process;

An individual invested Rs.2,00,000 in Fixed Deposit with an interest rate of 7% for 5 years. The total interest he will receive after the maturity period will be Rs.82,956. Now, the individual’s Fixed Deposit is withdrawn prematurely within 3 years and at that period, the interest rate was 5.75% per annum. Now, taking into consideration the penalty of 1%, he will earn the interest amount on the interest rate of 4.75%(5.75% prevailing rate-1%penalty) which comes to Rs.30,457. So, the total amount including the investment amount becomes Rs.2,30,457.

Penalty Rate In Different Banks On Premature Withdrawal of Fixed Deposit

The Reserve Bank of India provides the guidelines to banks through which the banks can finalize their penalty interest rates on premature withdrawal of Fixed Deposits. It is the duty of a bank to ensure and inform their depositors about the penalty rate they face on premature withdrawal of Fixed Deposit.

Penalty Charges of Some Banks are as follows;

BANK PENALTY ON PREMATURE WITHDRAWAL
HDFC Bank 1%
ICICI Bank 0.5%-1%
State Bank of India(SBI) 0%-0.5%

How to Withdraw Fixed Deposit Before Maturity?

An individual has to submit the certificate or receipt of Fixed Deposit duly signed by all the account holders at the branch for premature withdrawal of Fixed Deposit. If the individual does not hold the certificate or receipt of Fixed Deposit he/she has to fill in and submit the Fixed Deposit Liquidation form.

If the individual has booked through net banking, he/she can withdraw the Fixed Deposit prematurely through net banking and it is a quite easier process.

When is Breaking off a Fixed Deposit Helpful?

An individual should break off a Fixed Deposit after analyzing all the aspects and factors related to the Fixed Deposit at that particular time. The individual should not just go for a premature withdrawal of Fixed Deposit after noticing a higher rate of interest. Let us study 2 cases that will prove that doing the math to analyze the returns on an investment is crucial.

CASE-1 (Breaking off an older Fixed Deposit)

A person has invested Rs.20,000 to open a Fixed Deposit at a 4% rate of interest for 1 year. Compound interest of 5.25% is earned which comes to Rs.1,050. He withdraws the invested amount within 7 months when the rate of interest was 5%. So, after a penalty rate which is 1%, he will earn an interest amount on the interest rate of 4% which comes to Rs.677. The total value received including invested amount becomes Rs.20,467.

Now, the individual reinvests the amount Rs.20,467 for the remaining 5 months at a higher interest(which is exactly what he went for) rate of 7%. The interest amount he will earn is Rs.602. So, the total amount including the invested amount becomes Rs.21,069.

But, the amount which the individual would have received Rs.21,872(Rs.20,812+Rs.1,050) if he/she didn’t withdraw the Fixed Deposit before maturity. This is the sum of the total value of Fixed Deposit after one year at 4% which comes to Rs.20,812 and the compound interest earned which comes to Rs.1,050. Therefore, an individual should always do his/her math to analyze and interpret all the facts and figures before the premature withdrawal of his/her Fixed Deposit.

CASE-2 (Breaking off a new Fixed Deposit)

An individual has invested Rs.1,00,000 for 4 years at a 5% rate of interest. Now, he withdraws the invested amount within 6 months at a 7% rate of interest. The penalty rate is 1%. He will earn an interest amount on the interest rate of 6% which comes to Rs.3,000. Now, the new Fixed Deposit interest rate is 8% and the new Fixed Deposit duration will be 3.5 years. The new interest amount comes to Rs.33,279 + Rs.3,000 = Rs, 36,279. So, the total amount including the invested amount comes to Rs.1,36,279. If the premature withdrawal didn’t occur, the value of the Fixed Deposit after maturity would have been Rs.1,21,989. Therefore, the individual would have made a profit of Rs.14,290.

Conclusion After Analyzing Both The Cases

Continuation of the Fixed Deposit is the best option when the Fixed Deposit is old and near the maturity period whereas breaking off a new Fixed Deposit is considered best to earn a significant amount of profit but it is still advised to do the math for analysis before breaking off Fixed Deposit.

Alternative to Premature Withdrawal of Fixed Deposit

There is an alternative to premature withdrawal of Fixed Deposit which is taking a loan against the Fixed Deposit. An individual after taking a loan against his/her Fixed Deposit goes through the following;

  • He/She will earn the interest on his Fixed Deposit. This implies that the effective rate of interest is around 1-2% on the loan.
  • Many banks offer around 70-90% of his/her Deposit as a loan but there are some banks that may offer a higher amount. It depends on the bank and the amount of Fixed Deposit on how much loan he/she will get.
  • There is a fee involved which is charged on loan against the Fixed Deposit but only collected by private sector banks and not government banks.
  • The Fixed Deposit amount is the maximum limit of a loan tenor to get and can never exceed the Fixed Deposit amount. The individual is not allowed by most of the banks to close his/her Fixed Deposit when he/she is availing the loan. To settle the loan dues, few banks use other Fixed deposits of the individual.
  • The individual can select his/her repayment method himself/herself. He/She can payout a fixed amount monthly or as decided with the bank. Few banks even allow the individual to settle his/her loan after the maturity period of the Fixed Deposit.
  • There are almost no documents involved and the individual can visit the bank and make a request.

The individual has to pay around 1-2% rate of interest over the interest rate of the Fixed Deposit. Taking a loan against Fixed Deposit is better than the premature withdrawal of a Fixed Deposit. Premature closure penalty is imposed on premature withdrawal of Fixed Deposit which is around 0.5-1% and it is applicable for the period in which the Fixed Deposit was kept with the Bank.

Let us understand this process with the help of an example;

An individual opened a Fixed Deposit of Rs.1,50,000 at an 8% rate of interest for 2 years. He opted for premature withdrawal for some reasons within 6 months duration. The interest rate during that period was 6% and the premature penalty rate was/is 0.5%. So, he earned an interest amount on the interest rate of 5.5% which comes to Rs.4,125. The total amount earned including the invested amount comes to Rs.1,54,125.

If he had invested the Fixed Deposit for 2 years which was the maturity period he would’ve earned Rs.1,75,749 (Rs.75,749 being the amount of interest earned). Now, the individual took out a loan against his Fixed Deposit of Rs,1,00,000 at the end of 6 months on a 9.5% rate of interest and he repaid the principal amount at the end of 1.5 years, he would’ve paid Rs.15,250 as loan interest and net interest income at the end of maturity period i.e. 2 years would be Rs.5,501. So, while the principal amount remains intact, there is a profit even after paying the loan.

Premature Withdrawal or Breaking of Fixed Deposit Read More »

Shifting NPS Account Sectors in NPS, Form ISS

Shifting NPS Account Sectors in NPS, Form ISS

Leave a Comment / EPF / By /

Shifting NPS Account Sectors in NPS, Form ISS: NPS is considered a pension system meant to provide financial security to a person after his/her retirement. An employee can maintain only one NPS account on his/her entire service career irrespective of change in employers. Permanent Retirement Account Number is a unique identification number that is allotted to each NPS subscriber. PRAN or the NPS account is considered to be portable and can be moved if the employee is shifting from the government sector to the private sector. A person can have only one PRAN, just like he/she has only one PAN. This PRAN can be used in any sector, including government and private.

Changing the employer doesn’t affect the PRAN of the employees; thus, they can use the old account even if they are joining a new job. They can shift from one sector to another easily, from one state government service to another state government service, from one central government service to corporate and vice versa, etc.  So in case an employee has opened his/her PRAN account as a government employee and quits his/her job, he /she can still use this account under all citizen’s model by contributing a total of 1000/- in order to keep the account active.

Various Sectors or Models of NPS

Let’s discuss the different models or sectors of NPS. Currently, NPS and APY together have more than one crore subscribers with a total AUM (Asset Under Management) of more than 1 lakh crore.

Government Sector

  • Central Government: On 1 Jan 2004, the Government released a statement making NPS compulsory for government employees (except armed forces). The statement states that every government employee is bound to make a contribution to the National Pension Scheme.
  • State Government: NPS is applicable for all State Government employees, State Autonomous Bodies who have joined their government services after the date of notification released by their respective State Governments. Gradually, all State Governments started considering the NPS.

Corporate Sector

PFRDA (Pension Fund Regulatory Authority) launched the National Pension Scheme in December 2011. NPS is just like a Provident Fund as it is meant for securing the future of the employees. The biggest advantage of NPS is the tax benefit scheme which allows up to 10% deduction on the Basic Pay+ DA of the employer’s contribution on behalf of the employee. Even the employer can avail of tax benefit from NPS by showing this contribution as an expense in the profit and loss account. The NPS return rate for the corporate sector for the 1st year is around 13.59%.

All Citizens Sector

NPS is available for every citizen of India from 1 May 2009 on a voluntary basis. All Indian citizens who come between the age of 18 and 60 years as of the date of submission of application to the point of Presence are eligible to be a subscriber of NPS.

NPS Lite or APY or UOS( Unorganized sector)

NPS Lite or The Swavalamban Scheme was launched in order to provide retirement benefits to the unorganized sector. Under this scheme, the Government of India pledges to contribute 1000 per year; this will continue for five years for those who have a Swavalamban account, provided that the contribution states between 1000/- and 12000/- per year. The people who are forming these low-income groups are represented through an organization known as aggregators.

What is a Nodal Officer of NPS?

PFRDA has appointed NSDL (National Securities Depository Limited)  as the Central Record Keeping Agency (CRA) and entitled them with the responsibility to maintain the records of contribution and its deployment in different pension fund schemes that the employees have applied for. The records of each employee’s contribution will be recorded in an account which is known as Permanent Retirement Account. This account can be identified using PRAN.

The nodal office is responsible for interacting with the CRA on behalf of the NPS subscriber. Government offices like DTO and DDO act as nodal offices. CRA-FC is considered a facilitation center appointed by the CRA and is responsible for facilitating nodal offices to submit the application for alloting PRAN to different employees and submitting an application for change in a signature subscriber’s photograph.

  • Nodal offices which come under the Central Government include the Principal Accounts Office (PrAO), Pay and Accounts Office (PAO), and Drawing & Disbursing Office (DDO).
  • Nodal offices which come under the State Government include the Directorate of Treasuries and Accounts (DTA), District Treasury Offices (DTO), and Drawing & Disbursing Office (DDO).

Shifting NPS Using Form ISS

An NPS subscriber has the right to shift from one sector to another sector or from one office to another office with the same PRAN. When one is planning to shift his/her NPS, he/she needs to submit ISS Form in order to begin the shifting process. The steps that are involved in submitting this form is as follows:

  • One has to fill in the details regarding the shift he/she is going to make. Whether the shift is from the state government to state government or government to corporate had to be mentioned in the form.
  • The appropriate documents must get attached to the form.
  • The form with the required documents has to be submitted to the target POP-SP.
  • They will provide the subscriber with a stamped acknowledgment.
  • Once the details are verified by the authorities, the change will get notified to the subscriber.

Before going forward with the shifting, please note

  • The PRAN of the subscriber should be active.
  • Details such as PRAN number, employer information, and salary information must be recorded in a similar way as it was recorded in NPS.

Shifting NPS Form ISS (Inter Sector Shift)

The details that are to be given in the ISS Form are as follows:

  • Name and address of the subscriber, details of the PRAN, details of the existing and new POSP.
  • One must ensure that the PRAN details are correct, and he/she must attach a copy of the PRAN card also.
  • One must provide the details of the DDO/POP-SP to which the PRAN is associated.
  • The subscriber must also provide the details of the DDO/POP-SP to which the PRAN will get associated once the shifting is done.
  • The sector section for ‘Existing PRAN association’ and ‘Target PRAN association’ is considered to be the same when the subscriber is meant to shift from one state government to another state government.

Subscriber from every sector is required to fill up the declaration part in the ISS form. After successful verification of the change request form, the POP-SP accepts the declaration form, after which they will issue a 17 digit receipt number as an acknowledgment to the subscriber.

The nomenclature of the receipt is as follows:

  • First, 2 digits starting from the left – Type of request (19 for Subscriber shifting)
  • Next 7 digits – Registration Number of POP-SP e.g., 6000002
  • Next 8 digits – Running sequence number eg.00000001
  • For Example, 17 digit receipt number will be “19600000200000001

It is the duty of the POP-SP to hand over the acknowledgment receipt to the subscriber to show that they have accepted their request. The POP-SP must affix the seal, as well as the user, must sign the acknowledgment before making it available to the subscriber.

Shifting NPS Account Sectors in NPS, Form ISS Read More »

Groww for Investing in Stocks – Features, How to Use?

Leave a Comment / Finance / By /

Groww for Investing in Stocks: Stock investments are one of the most prevalent avenues of growing wealth in today’s modern world. Every country has a governing body that confirms that the share transactions are free of fraud and smooth. In India, the Securities and Exchanges Board of India has defined a process of stock transactions to ensure maximum protection to all investors. One can get the best share market investing experience through Groww. One can open a trading account in Groww with the help of an e-sign using an Aadhaar card. The platform offers stocks investing along with Gold and Mutual Funds. Readout below to know what to consider before investing in stocks, how to open an account, buy and sell stocks on Groww, and more.

Things To Consider Before Making Investment in Stocks

  • Understand the Profile of Investor: Every investor has their own rules and terms. Hence, one must confirm to invest based on the stakeholder profile. Risk tolerance, financial goals, and investment horizon are critical factors that identify the investor profile. One should determine how much instability one can handle without making wrong decisions.
  • Explore The Company: Stock investment is like a marathon in which one should invest if it seems to undergo a long journey and produce good returns. By looking at the financials of a company, one can acknowledge if it can endure any economic trouble in the future.
  • Track Investments Frequently: Investors should keep track of their investments to identify opportunities to sell and balance the portfolio again to gain profit. By selling the non-performing shares before they go down, one can rebalance the situation.

What are the Requirements for Stocks Investment?

  • PAN Account: To invest in the share market, it is essential that an individual has a PAN Card. Apart from the PAN Card, one needs other documents like the Aadhaar Card, proof of address, income proof, and photographs to begin investing in the share market.
  • Trading Account: One needs to have a trading account with a stockbroker to start making an investment in stocks. The stockbrokers register with stock exchanges. Most of the upright-quality stocks are accessible on both BSE and NSE main exchanges.
  • Demat Account: This account holds the stocks with the consumer’s name. One can open a Demat account with any depository applicant. Many banks offer the Demat account services.
  • Limited Bank Account: A person investing in stocks will need a bank account linked to the trading account. It is because stock investment leads to buying and selling the shares over time. So, a bank account linked to a trading account will ensure the flow of money in and out of the linked account flawlessly.

Stocks Investment Through Groww

Established in 2016, Groww has more than two million monthly active users in today’s time. The investment options under stocks and mutual funds are clearly mentioned on the company website. An investor can view all the necessary information about the statistics of the company such as shareholding patterns, financial performance, peer comparisons, and more.

  • One can use smart filters like top gainers and do an analysis of the stock to make a wise decision before investing in any stock.
  • The information on mutual funds involves the fund details, performance graphs for different periods, overview, a returns calculator, historical returns, and peers comparison.
  • One can find information like sector allocation graph, holding analysis, list of pros and cons on the website. The process of investing in mutual funds is simple and the user is presented with different options for the investment duration and flexibility in the amount invested.

What Forms of Orders Are Accessible on Groww?

The company supports two types of orders:

  • Limit Order: It is an order to buy/sell a share at a certain price or a less amount to buy and more to sell orders.
  • Market Order: It is an order to buy and sell a stock immediately. The execution price is exactly or near the current bid for sell orders and asks price for buy orders.

The pre-market session is from 9 AM to 9:15 AM. Normal trading hours start from 9:15 AM and continue till 3:30 PM. The post-market session is from 3:40 PM to 4:00 PM.

How to Create Demat Account on Groww?

  • The first step is to login to the Groww app, click on the ‘Stocks’ tab, and then hit on complete setup.
  • Click on the option ‘Open Stocks Account’ to continue. There are zero charges to open an account on Groww. Click on the option ‘See all charges’ for other charges. After reading all the charges, hit on the agree tab to pay applicable charges.
  • After ticking on open stocks account, a page will open in which one has to enter the details regarding occupation, income, father’s and mother’s name to finish the process.
  • Click on the ‘Next’ tab to continue and enter the trading experience. Again, hit on the ‘Next’ option.
  • The next step is to upload a signature following the instructions appearing on the screen.
  • After that, an individual has to submit their Aadhaar based e-sign.
  • After reading the Demat account opening form, one has to click on ‘Sign Now’ to continue.

It will direct to the page appearing as NSDL Electronic Signature Service. An individual has to enter their Aadhaar number or virtual ID and then hit on send OTP. Once, entered OTP, a message ‘Signed Successfully’ will appear on the screen.

How to Buy/ Sell Shares on Groww App?

  • Buying Stocks on Groww: All the vital information like Sensex and Nifty live updates appear on the home screen of the app. There are various filters and a search bar in which one can enter the name of the stock to invest in. Once an individual goes through all the necessary details and fundamentals of the company, they can place or limit orders for delivery. One has to add money to Groww balance to complete the purchase of a share in case of insufficient balance.
  • Selling Stocks on Groww: Visit the stocks dashboard on the Groww website or app and select the stock to sell. Tab on the option ‘Verify Sell’ and then on ‘Verify using TPIN’. Once verified, an individual will get redirected to the order page where they can finish the sell order.

What are the Stocks Investment Charges Over Groww?

  • Equity Delivery: The broker charges on buy orders when equity is carried in the Demat account. These charges are free on Groww.
  • Account Maintenance Charges: There is an account maintenance charge (AMC) for managing the Demat account and trading. Groww charges Rs. 25 per month plus GST charged quarterly.
  • Equity Intraday: The broker charges it when one buys or sells on the same day. Groww charges 0.01% of the order value or Rs. 20 per executed order.
  • DP Charges: Charged by DP for crediting or debiting stocks to/from Demat account. These charges are free to buy orders but cost Rs. 8 + Rs. 5.50 price per ISIN each day to sell order.
  • Transaction Charges: Groww charges 0.00325% of the order amount on NSE and 0.003% on BSE for trading.
  • Clearing Charges: The clearing corporation of NSE (NSSCL) and BSE (ICCL) controls this charge. It is free on Groww.
  • Payment Gateway Charges: It is free of cost to deposit money in Groww Balance.
  • Stamp Duty: State Government charges stamp duty for agreement note. It is different for every state.
  • SEBI Turnover Charges: Securities and Exchange Board of India handle these charges for regulating the markets. 0.0001% of charges are added through Groww.
  • GST: It is Goods and Services Tax applied 18% on charges wherever relevant.
  • STT: When an individual transacts on exchanges then the government charges Securities Transaction. 0.1% of the order sum is charged equity delivery, and 0.025% for equity intraday.

Conclusion on Groww for Investing in Stocks

Grows offers multiple options to invest money through NEFT, UPI, or net banking. The app does not recommend or advise any stocks. one should define financial goals to clarify how and which stocks are best to invest before making an investment.

Groww for Investing in Stocks – Features, How to Use? Read More »