Finance

Digital India Programme: India is one of the top countries shifting to the digital market and e-commerce. Almost 10 million users are active internet users daily. India’s almost 60% population is internet users. On 1st July 2015, the ‘Digital India’ program was launched by the Prime Minister of India Narendra Modi. Digital India was launched with the initiative of improving digital knowledge and connecting rural areas with internet networks. This program was initiated with the vision for growth in infrastructure, electronic products and services, and job opportunities. Some of the facilities provided under the Digital India program are Aadhaar eKYC, e-sign-paperless for PAN, eNPS, mutual funds, and insurance. Let’s study these facilities in more depth.

Aadhaar Card

An aadhaar card is a card issued for the residents of India based on their demographic and biometric data. It is a 12-digit number that gives us the unique identity of a citizen. Unique Identification Authority of India(UIDAI) collects the data under the guidelines and jurisdiction of the Ministry of Electronics and Information Technology. An Aadhaar card is also considered proof of citizenship, date of birth, and address.

Aadhaar eKYC

KYC or Know Your Customer/Client guidelines understand what laws and regulations require of a person and keep criminals out of their businesses.

Aadhaar eKYC is a crucial service provided by the UIDAI to establish the positive and true identity of their customers. This service helps to validate the name address and other information concerning their biometric identity.

Some features of Aadhaar eKYC service are:

• Paperless and completely electronic service
• Consent based
• Getting rid of document forgery
• Secure
• Non- renouncing
• Low cost
• Regulation friendly
• Machine-readable
• Instantaneous

Electronic Signature (e-sign)

An electronic signature or e-sign verifies the document’s origin and contents attached to an email or other electronic document in a digital format. An e-sign verifies documents through its encryption and decryption algorithms. E-signs are also known as biometric signatures.

Paperless PAN Card

A Permanent Account Number or PAN card is issued by the income tax department of India which gives a unique identity to the individual who applied to obtain a PAN card. It is a 10-digit alphanumeric code that is used to pool all the transactions. Nowadays, obtaining a PAN card is a 10minutes process which is easier and called e-PAN.

Some features of e-PAN are as follows:-

• e-PANs have QR codes that provide all the accurate details and give no chance for the cardholder to meddle with the information.
• The biometric signature and photograph of an individual in a PAN card are read easily and cannot be changed.
• Demographics of an individual like name, date of birth, and other details are stated in a PAN card.

Electronic News Production System (eNPS)

An electronic news production system or eNPS is a software made to be used for organizing, editing, timing, producing, and running news broadcasts. eNPS was designed by the Associated Press’s Broadcast Technology division. It is a flexible system that can handle any local from a small-market station to large organizations. Scripts, wire feeds, device controls, and production information in a server environment are integrated by the eNPS. eNPS runs an identical backup server at all times as a fail-safe known as a ‘buddy.’

Electronic National Pension System (eNPS)

The National Pension System is a social welfare scheme for distributing pensions to employees after their retirement. NPS includes both government sector employees and private sector employees. The National Securities Depository Limited (NSDL) offers eNPS facility on its website for various NPS online services.

Services provided by eNPS are:-

• eNPS allows new subscribers to make their first NPS contribution to their account. eNPS gives authorization to the subscribers to make monthly and even yearly NPS contributions.
• eNPS helps the subscribers with all their queries through its web portal. Subscribers can log in to the portal and state their queries.
• eNPS also provides the subscribers with an NPS calculator which helps in calculating and estimating the pension scheme returns after a certain period of time. It gives the accurate amount of pension.

Mutual Funds

Mutual funds are those types of investment funds that are pooled together from various investors to purchase securities. The Securities and Exchange Board of India(SEBI) is the regulatory body for mutual funds under the guidelines of the Government of India.

Distribution of Mutual Funds

The distribution of mutual funds is done in mainly two ways:-

1. Online – customers can buy or invest in mutual funds online via a licensed broker or asset management company’s website. It is much easier and convenient.
2. The offline – offline distribution network is provided by most of the companies asset management based. They mainly deal with the sale of regular mutual funds intending to earn commission on it.

Insurance

Insurance is a contract that aims to provide security to an individual or a business from uncertainties. In this contract, when an individual or a business bears a loss either by accident or fire or any other uncertainty, reimbursement is provided by the insurance provider after all paperwork and inspection. Life Insurance Corporation of India (LIC), Housing Development Finance Corporation (HDFC), Industrial Credit and Investment Corporation of India (ICICI), and State Bank of India (SBI) are the largest insurance providers in India.

E-Insurance Policy

E- insurance policy stores, provides, and manages life insurance, health insurance, and other insurance policies in one place. E- insurance is easier with less paperwork and provides safeguards against loss or theft. With E-insurance, an individual can access his/her policy anytime and anywhere and save his/her time.

Some features of an E-insurance account are

• A customer can only have one E-insurance account in his/her name.
• A customer can include all of these policies including pension, life, health, and other policies in the same account.
• A unique number provided for every E-insurance account that can be used to access all.
• Ease in purchasing a policy with the given unique E-insurance account number.
• No KYC needed.
• A unique login ID and password are provided to each and every customer/user for securing his/her account.
• Ease in paying a premium and convenient to use.

Third-Party Fund Transfer by NEFT and RTGS: In the banking industry, a third party transfer involves making out and depositing payment in the account of one party apart from the individual or the entity who received the payment. It is the type of activity that has become common in the banking industry for many years.

People can manage it manually or by electronic transfer technology as well. A third-party transfer involves the issuance of third-party checks as well. Many online third-party transfer protocols manage the tasks such as paying bills, recharging, etc., with the help of a fund transfer.

People in the previous decade approached this type of transfer with checks. In such a case, a check can is a payment that a buyer issues to the seller. Instead of depositing that check into the seller’s account directly, the seller could choose to endorse the check over to another third party and possibly settle an outstanding debt. The bank or the third party could therefore accept the statement by using the endorsement as an authority.

More recently, people have started to manage bill payments by having the same third-party transfer made electronically. Hence, a bank customer can provide a bank with a written application to request a price from a specific creditor when or as required.

Sometimes, it is not an unusual practice for the creditor to use another third-party agency to manage the financial transactions on behalf of the creditor upon interaction with the bank to complete the transfer of funds from one account to another.

Therefore, the creditor can present the bill electronically to the bank and make the payment process without delay. People use it to manage everything ranging from paying monthly utility bills to mortgage and car payments. They can even schedule other recurring expenses, such as the payment of life insurance premium policies.

• Types of Electronic Fund Transfers Available
• Importance of Electronic Fund Transfers
• Necessary Terms Users Should be Familiar With for Third-Party Fund Transfers
• Registration for Third Party Fund Transfer

Types of Electronic Fund Transfers Available

As mentioned earlier, there are multiple fund transfer services through internet banking with your account, such as

• If you wish to transfer funds into your account, for example, from your savings account or current account to your PPF account, you can select the Fund Transfer option.
• If you require to transfer funds to a third-party account in the same bank, in the same branch or a different branch, you can select the option Fund Transfer within the same bank.
• If you require to make a transaction to another bank in a different account, you can select Interbank Transfer for fund transfer to a creditor who has an account in India. People carry out such interbank transfer through NEFT transfer or RTGS transfer.
• People can pay their credit card bills online.

Even if you want to select a transaction type as above, there still can be some confusion since different banks have different terms in their net banking sites. For example, SBI says Third Party Transfer as Transfer fund to third party account in the same bank. But, fund transfer to other banks means that you have to select the NEFT or RTGS transfer option.

Importance of Electronic Fund Transfers

Many are not used to net banking processes and wish to stick to the old method of transfer via visiting banks. But, electronic fund transfers are a secure procedure. It is also a relatively fast and cheaper way of transferring money (since you do not have to travel to and from the bank).

• No one has time to stand in a queue and wait to transfer money to someone in modern times. It is inefficient to visit the bank. But through electronic fund transfers by NEFT and RTGS, people can save much time and effort. For example, a cheque usually takes two or three days to clear, and if it is an outstanding cheque, it requires one more day. In a contrasting situation, people use electronic transfers to transfer money directly to a beneficiary with instant confirmatory updates for you and the receiver.
• The RTGS and NEFT processes cost less than issuing a cheque or a DD since the bank has to bear fewer charges.

Necessary Terms Users Should be Familiar With for Third-Party Fund Transfers

When it comes to NEFT or RTGS, there are specific terms associated with each of them. Knowing these can be helpful to make a successful transaction on the very first attempt. The words are as follows.

• Beneficiary Account: The account to which one makes a deposit or fund transfer is called the beneficiary account. Hence, the person who credits from the transaction is the beneficiary.
• Remitter: If someone sends a payment to a beneficiary through Third Party Fund Transfer, then they are called a remitter.
• RTGS: Real-Time Gross Settlement is the transfer where the beneficiary bank has to credit the beneficiary account within two hours of receiving the fund transfer message.
• NEFT: National Electronic Funds Transfer is the transfer on a net basis. Here, the bank clubs the transactions together, and the net amount is transferred.

Registration for Third Party Fund Transfer

Though each bank has its own policy that people need to follow to register for third-party transactions, the introductory details are the same. The steps you can follow to register are as follows.

1. Log in to Net Banking using the required details, i.e. customer ID, customer name and IPIN.
2. Some banks then send an OTP, which you have to input to log in to the site.
3. Click on the Third Party Transfer option, and there will be instructions present which you can follow.
4. If you are registering a new beneficiary’s account number for the first time, then you will first receive an OTP for approval. After that, there will be a short period of delay that is required to activate the new beneficiary.
5. You will receive a one-time password or OTP to your registered mobile number for confirmation.

The key with a third-party transfer is that you have the authorization to manage the transaction by introducing a third party. The account holder can seamlessly transfer funds to the beneficiary in no time, and they will receive a confirmation after completion of the successful transaction or otherwise. People who are new to this can read the instructions carefully and contact the branch for further assistance.

Since this type of transaction has proper documentation without requiring any extra time, it is becoming an increasingly common aspect of fund transfer for business enterprises and individual account holders who prefer the intelligent way of paying bills with minimum effort and time.

Cheques and Demand Drafts: Cheques and demand drafts gradually lose favour as payment instruments, as most people now use the RTGS, NEFT, and IMPS systems. However, demand drafts, rather than cheques, are still needed for many work applications, examinations, admissions, facilities, large-ticket transactions, and so on. Demand Drafts cannot be dishonoured, unlike cheques, which can be dishonoured due to insufficient funds.

This article explains how to make a Demand Draft both offline and online by filling out a form. What is a Demand Draft, and What is a Banker’s Check. What happens when a Demand Draft expires and how to get it cancelled. What makes a Demand Draft different from a check or a banker’s check?

What is meant by a Demand Draft?

The Demand Draft is a pre-paid Negotiable Instrument in which the drawee bank agrees to make full payment when the instrument is submitted for payment by the payee. The demand draft is payable to a specific bank branch at a specific location. Cheques are rarely allowed in many transactions because the drawer and payee are uncertain, and there is a credit risk if the check bounces. In such situations, a demand draft is approved as long as the money transfer is assured. The demand draft is valid for three months.

• One can pay a demand draft on-demand/ request
• One cannot pay a demand draft to a bearer. To obtain the payments, the beneficiary must either provide the instrument to the concerned bank branch directly or have it collected by the bank through the clearing process.
• The NI Act (Negotiable Instruments Act) 1881 discusses the demand draft in section 85(A).

Making Changes to a Demand Draft

While the RBI called for reasonable service charges for demand drafts as early as February 2007, no clear thresholds or metrics of reasonableness were set. As a result, each bank has its rates for issuing demand drafts.

For example, SBI DD charges 5 INR per 1000 or part thereof for greater than 10,000 INR but less than 1,000,000 INR.

• Therefore, for calculating, find the charges per 100 as 5/1000 = .005
• Use this for multiplying with the total amount.
• For example, for a DD of amount 12,000 INR, the DD charges are calculated as 12,000 * .005 = 60 INR.
• If you have a salary account, you will not be charged for demand drafts up to a specific limit. For example, bank demand drafts up to 1 lakh are free per day for HDFC salary accounts.

Charges of Demand Drafts ICICI Bank and SBI Bank

Charges	SBI	ICICI Bank
Issuing DD	Up to 5,000 INR – 25 INR (incl. ST) Above 5,000 INR up to 10,000 – 50 INR(incl. ST) Above 10,000 INR up to 1,00,000 INR – 5 INR (incl. ST) per 1,000 INR or part thereof (Min. 55 INR incl.ST) Above 1,00,000 INR – 4 INR (incl. ST) per 1,000 INR or part thereof Min. 505 INR incl.ST Max. 15,000 INR incl. ST	50 INR per D.D. up to 10,000 INR 3 INR per 1,000 INR or part thereof for DD of more than 10,000 INR; subject to a minimum of 75 INR and maximum of 15,000 INR
Issuing DD by cash deposit	No added Cash Handling fee is levied apart from the charges as above for issuance of IOI (Bankers’ cheque or demand draft) for the cash-based transaction	4 INR per 1,000 INR or part thereof, subject to a minimum of 100 INR and a maximum of 15000 INR
Cancellation / Duplicate / Revalidation of DD	100 INR + ST	For Instrument value up to 200 INR – Nil charge For Instrument value above 200 INR – 100 INR
Issuing PO	Up to 5,000 INR – 25 INR (incl. ST) Above 5,000 INR up to 10,000 – 50 INR(incl. ST) Above 10,000 INR up to 1,00,000 INR – 5 INR (incl. ST) per 1,000 INR or part thereof (Min. 55 INR incl.ST) Above 1,00,000 INR – 4 INR (incl. ST) per 1,000 INR or part thereof Min. 505 INR incl.ST Max. 15,000 INR incl. ST	50 INR for PO of up to Rs.10,000, For PO of more than 10,000 INR – 2.50 INR per 1,000 INR or a part thereof; subject to minimum 75 INR and maximum 15,000 INR.   For the students, senior citizens, and rural areas: For the amount of up to 10,000 INR – 40 INR; For amounts above 10,000 INR and till 50,000 INR – 60 INR; for amounts above 50,000 INR – 2,50 INR per 1,000 INR or a part thereof subject to maximum 15,000 INR.
Issuing PO by cash	No added Cash Handling fee is levied apart from the charges as above for issuance of IOI (Bankers’ cheque or demand draft) for the cash-based transaction	150 INR per PO for the amount up to 50,000 INR, for PO exceeding 50,000 INR – 4 INR per 1,000 INR or a part thereof, subject to minimum 150 INR and max. 15,000 INR.
Issuing PO by cash	100 INR + ST	For Instrument value up to 200 INR – Nil charge For Instrument value above 200 INR – 100 INR

A Step-by-Step Guide to Creating a Demand Draft

You can obtain a Demand Draft by going to the bank. If you have a bank account, you can pay with a check. Otherwise, you must pay in cash. You may also make a Demand Draft via the internet. If you visit the bank to make a demand draft, you will receive it within 30 minutes. However, it will arrive in a few days and be sent to your correspondence address if you order it online.

When you receive the Demand Draft, you are advised to:

1. Check all the details, including amount, payable, etc., before you leave the bank.
2. You must keep a photocopy or a scanned copy of the DD.

Steps of Making the DD

1. Fill out the form – Request a demand draft application form from any bank or fill out the form online.
2.  Form Information – Fill in the form’s details, such as whether you want to pay in cash or a check drawn on your account. Also, fill in the beneficiary of the DD, the sum, the location where the DD will be cashed, the check number, your bank account number, your signature, etc.
3. Demand draft charges – Once you submit the form, along with the money/cheque and the demand draft charges, the bank will issue the demand draft. The fees differ from one bank to the next.
4. PAN card details – If the sum exceeds Rs 50,000 and you pay by cheque, you must submit your PAN card details.

Making DD by Filling The Form Online

You may fill out your information online and choose to pick it up in person from your branch or have it delivered by courier. It could take 2-5 days if you send it by courier. It’s possible that you’ll be paying for postal services.

Many banks allow demand drafts to be sent to an Indian beneficiary address. For instance, HDFC claims that all Demand Draft requests will be processed the following business day. Within 3 to 5 working days, DDs will be couriered to the mailing address/provided beneficiary address.

Is it Possible to Make a Demand Draft with Cash?

Yes, indeed. A DD could be purchased with cash. If the sum of the DD exceeds Rs.50,000, the issuing bank can request identification and address evidence, as well as a PAN card. The DD commission for DDs purchased with cash could be higher than for DDs purchased with a cheque.

Demand Draft Cancellation

The sum will be deducted from your account directly after you make a (Demand Draft) DD. If you want to cancel the DD and get the money deducted back into your account for some excuse, you must go to the bank. There is no online option to cancel a DD in any Indian bank.

There are two possibilities if you already have an initial DD.

1. You paid cash for the DD- If you paid cash for the DD, you must provide both the initial DD and the cash payment receipt. The balance will be refunded to you in cash as soon as possible, with some deductions (around Rs 100-150).
2. If you paid the DD sum from your account, you need to provide the original DD along with the completed cancellation form. With a cancellation fee of about Rs 150, the sum will be credited back into your account.

If you don’t have your original DD (you might have misplaced it at home, or it may have been lost in the mail), the method of refunding or cancelling the DD would be complicated.

If you don’t have the original DD with you, you’ll need to sign an indemnity bond on stamp paper for the bank to cancel it. After that, most banks refund the money after a short period, such as one week, but some banks can take longer, up to the DD’s expiration date.

If a Demand Draft Expires

A demand draft in India is valid for three months from the date of issue. The Demand draft will be invalid if it is not submitted within three months, but money will not be immediately refunded. The purchaser of the draft should then go to the bank branch that issued the draft and request for the draft to be revalidated. Please note that the payee (the individual mentioned in the draft) or someone else cannot contact the bank to revalidate the draft.

After checking their original documents, the bank branch will revalidate the draft, which will increase the

validity period by three months from the date of revalidation. A draft that has already been revalidated cannot be revalidated again, so you must present the draft to the bank within the revalidation period.

Banker’s Cheque

Paper payment methods include currency, checks, demand drafts, banker’s cheques, Payment orders, and Payable ‘At Par’ cheques (Interest/Dividend warrants, refund orders, gift cheques, and so on). The Negotiable Instruments Act of 1881 provides the legal foundation for these instruments. This is covered in the following RBI document: India’s Payment Instruments.

A written text that can be delivered is referred to as a Negotiable Instrument. A negotiable instrument is a contract that guarantees the payment of a certain sum of money, either on-demand or at a predetermined time, to the payer listed on the document and that it cannot be transferred from the holder or named party to another. Crossed cheques, Bank Drafts, Bills of Exchange, and Promissory Notes are examples of negotiable instruments.

NEFT, RTGS, IMPS, UPI, Mobile Banking, Digital Wallets, and other non-paper payment methods include NEFT, RTGS, IMPS, UPI, Mobile Banking, and Digital Wallets.

What Exactly Is A Banker’s Check? What Is The Difference Between A Banker’s Check And A Demand Draught?

A banker’s cheque is a payment method that is identical to a demand draft. A Banker’s Cheque is used to move money within the local area, while a Demand Draft is used to transfer money between two locations. Bankers cheques can be cleared in any branch of the custom as long as it is located within the local jurisdiction, while Demand Drafts can be cleared in any branch of the same bank regardless of location.

If you live in Bangalore and need to pay a Demand Draft, you will be given a Banker’s Cheque.

Comparison basis	BANKER’S CHEQUE	DEMAND DRAFT
Meaning	A banker’s cheque, also known as a payment order, is a cheque used to make payments within the same city.	A demand draft is a negotiable instrument used to move funds from one individual in some city to another in another city.
Validation Period	The validity of a banker’s cheque is three months from the date of issue.	The validity of a demand draft is also three months from the date of issue.
Special feature	The words “NOT NEGOTIABLE” are pre-printed on all banker’s checks.	A demand draft for 20,000 INR or more should be crossed “A/c payee.”
Clearance	It can be cleared in any of the city’s branches.	It can be cleared at any of the bank’s branches.

 

What is a Bank Locker?: Customers are given access to a bank locker to secure valued items such as gold jewelry, jewels, and other essential documents and certificates such as a will or property documents at the Bank. The bank lockers are safe and trustworthy for the items which are dear to you.

Bank lockers are often stored in an ample space at the Bank, guarded with solid steel doors.

This service is not free of cost and provided in return for a nominal charge. The rent of each locker differs based on size. For instance, in SBI, it ranges from Rs.1500 per year (small locker rural branch) to Rs 8000 annually (extra-large locker in urban unit).

Lockers are not available at every branch of a bank. It is, therefore, best to opt for a bank with a locker near your house.

RBI Rules and Regulations

• A bank has a provision that entitles it to request a locker hirer an FD equal to three years’ rent plus a sum for breaking the locker as a last resort due to inevitable circumstances (the interest on the FD pays the rent).
• A bank cannot request an FD from current lock hirers. Furthermore, no bank links locker recruiting to FD or spending in a sum more significant than a fair amount.
• Banks should continue to include locker facilities while keeping economic viability under check and considerations. Customers who apply to rent a locker at a bank should be placed on a waiting list. Per applicant will be allocated a waitlist number.
• The hirer must mandatorily give proof in the form of a hard copy of the agreement contract between the Bank and the hirer.
• After determining the risk connected with the hirer, banks essentially conduct KYC checks. The Bank must follow this for new and as well as pre-existing clients.
• In case the client has not been operating the locker in recent times, the risk is considered medium for a period of more than three years and higher in the case of more than one year.

In this scenario, the Bank must contact the locker hirer to either operate the locker or surrender it, despite the fact that the locker hirer has effectively paid the rent.

The Bank should request a written response to know the explanations behind the locker not being managed.

If there is no response and the locker is not being used, the Bank can open the vault persuasively in the wake of giving formal notification to the hirer. If the locker is to be opened forcefully, a point-by-point protocol must be followed by the bank authorities.

• The Bank should devise a plan for coercively opening the locker.
• Keys should be stamped with the bank/branch id code to help to recognize the proprietor of keys.
• The Bank will take every necessary safety precaution to guard the bank locker and ensure that top security norms are adopted.

Laws and Criteria as Prescribed for Nominations

Banks are required to develop policies based on the accompanying laws:

1. Banking Nomination guidelines as of 1985
2. Section 45 ZC to 45 ZF of the banking regulation act of 1949

The guidelines under the Banking Nomination rules 1985 are:

• A single person may only be chosen.
• During the time that the locker is under hire, nominations may be withdrawn or renewed.
• In case of choosing a minor, another guarantee needs to be affirmed to help a minor.
• There are various ways and different categories of nominations.
• SL1
• SL1A
• SL2
• SL3
• SL3A

The guidelines under Section 45ZE of the banking regulation act 1949 are:

• In the event of the locker hirer’s demise, a person may be named by the locker hirer to unlock the locker and retrieve the contents and the documents.
• When the vault is hired jointly and can only be run together if one of the locker hirers dies, the candidate and the remaining joint hirer can reach and delete the locker’s contents.
• Prior to actually withdrawing the belongings, the claimant or the nominee and the remaining locker hirer must organize and confirm a catalogue of the locker content material.
• The Bank bears no accountability following the candidate’s withdrawal of locker individual components.

Section 45 ZF of Banking Regulation Act Guidelines

Except for a competent jurisdiction judge, no one other than the hirer or hirer can see a bank for claiming locker contents. In that case, the Bank should take such a pronouncement into consideration.

Safe deposit lockers must meet the following requirements:

The locker facility is also called ‘safe custody’, and to hire this locker with a bank in India, a client must follow these guidelines-

• The applicant has to be greater than equal to 18 years of age.
• Certain banks demand the individual to have an account with them in order to utilize this assistance.
• The lockers available come in various sizes, and a customer can determine the extent of his locker as per their needs.
• In the beginning, the customer may likewise be required to deposit some money as security. This may incorporate rent for a locker for a set period (say, three years) and an amount for crises where the Bank has to break open the locker (say, if the customer has lost the key).
• Nomination and/or shared possession of a locker has become an obligatory need while employing a locker. The Bank indicates the conditions where the client recruiting the storage will be given a choice to name a replacement for their locker.
• On the off chance that there are joint holders, each joint holder must expressly state the type of ownership arrangement they are entering into (like either survivor, former or survivor, etc.).
• If a security deposit is placed while the locker is employed, the client will receive a confirmation.
• The Bank also includes a guide in which the Bank expresses the subtleties of the vault apportioned to clients. This paper is known as the “memorandum of letting”. It is delivered to the customer when the locker is employed.

Who Will Take Accountability for Bank Locker Theft?

As per the rules distributed by RBI, banks are not at risk for the resources in the Bank if the vault is undermined because of civil war, theft, or other unforeseen situations.

Customers are responsible for storing valuables in the locker in their danger.

Locker Key Details

Regardless of whether the locker is taken in joint name, banks give simply one key to the locker hirer. The key must be kept very cautiously by the hirer because it is an essential part of the locker contract.

If the key is missing, the bank will break the locker, and the customer will have to pay for the entire process. To retrieve the missing key, several legal procedures must be followed.

A new lock is placed on the locker, and consumers will be given a new key.

There are some Do’s and Don’ts for Bank Lockers that a Client should be aware of

• A locker should not be located in a deserted region, neither should it be placed in a region with a dense population, such as a bus stop, taxi stand, train station, and so on. You don’t want to transport your valuable items over town, and they should be conveniently near to your home.
• You likewise need to keep a documented list of your contents in the locker. If there should arise an occurrence of robbery, at any rate, you will realize what was taken.
• In the event that you are holding certificates and other important documents in the locker, it is astute to get them laminated for better protection.
• It also makes perfect sense to run lockers in a joint-holding or nomination-based format. This guarantees that one can in any case run the locker and hand it over to the legitimate beneficiaries if there should arise an occurrence of death of the individual.

Valid Grounds That Might Be Considered for Locker Breaking

On the occasion of any of the subsequent emergencies, the locker can be broken open

At the behest of the hirer, if the key is lost

If the client misplaces the key, it is advised to notify the bank authorities right away without any delay. Typically, a well-documented application siting valid reason is addressed to the Branch Manager.

The client in question will be held liable for all the expenses of unlocking the locker, replacing the lost key, and getting the lock fixed. Some banks include the fee in the initial security deposit, while other banks charge it separately.

Failing to pay locker rent charge

Non-compliance with rental arrangement contract terms at the Bank’s disposal, including not using a locker for like a year.

Size of the Locker Opted for

Safe Deposit Lockers are accessible in various sizes. In light of the requirements, a client can pick the size of the locker needed.

• Locker dimensions are quite often categorized as Small, Medium, and Large in simpler terms. Strictly speaking, the sizes of the lockers are defined by the letters A and B. Most banks have several locker sizes, including A1, A2, and so forth.
• The locker sizes commence with small ones, frequently known as A-class, with dimensions in inches generally range from 4.5 X 5.875 X 20.75.
• As the size increases chronologically, the L/K class is typically the biggest.
• The measurements of an L-size locker are roughly 15.5 X 19.9375 X 20.875.
• The rent increases in sync with the size of the locker, i.e., the rent is directionally proportional to the size of the vault for which the rent is being paid.

What is the Difference Between Leasing a Locker and Surrendering a Locker?

• Locker services in a bank are usually reserved for a period of one or three years. This renting is referred to as the leasing of a locker.
• As the locker’s lease period comes to an end, the locker’s hirer may either get the lease renewed for a further period of one / three years or may surrender/vacate the locker. The situation in which the bank authorities vacate the vault by the hirer before the lease period’s expiry is termed as the Surrendering of the Locker.

Points to Bear In Mind Before Surrendering Over The Locker

The hirer(s) can forfeit the locker at any point whenever during the contract term.

They will just have to forfeit it if they decide to transfer their locker from one branch to another or swap banks in which they avail the locker services.

The hirers may likewise close it on the off chance that they need to consolidate their lockers. Indeed, even the bank can demand to forgive up by offering a prior formal notification.

• Clearing the contents of the locker: The hirer should guarantee that the components of the locker are taken out prior to starting the procedures for surrendering the locker.
• The surrender program is a well-documented application: The hirer should send a letter to the division manager where the locker is stored. The concerned client must refer to the storage number and individual subtleties, like name, address and telephone number. The letter must be signed by the locker possessor, i.e., the client.
• Returning the key of the recently had locker: The hirer is essentially and solely responsible for returning the locker key to the branch manager. Under the circumstances that the key has been lost, the bank engages in a protocol for issuing duplicate keys and any penalties before proceeding with the process of shutting the locker services.
• Acknowledgment note subsequent to surrendering the locker: Following the finishing of every one of the conventions, the branch manager of the bank will give an acknowledgment, acknowledging that the locker has been effectively surrendered. Further considerations which should be dealt with:
  • Both holders must sign applications for the closing of mutually-owned lockers.
  • At the point when the locker is returned at the request of the hirer, the charges for the unutilized period, assuming any, are discounted for the excess complete quarters as it were.

Making Use of a Bank’s Locker Facilities

Caretakers are officers assigned from each division to control Safe Deposit Lockers. To unlock the locker, a key pair is necessary, one which is possessed by the bank (commonly the Custodian) and the other with the client.

To unlock the locker, the client must use all keys simultaneously.

A few banks, as IDBI, have now begun offering 24×7 locker access benefits at select branches; however, this service is not free.

• Lockers should be used at times defined at the branches. One needs to visit the bank with a locker key during the official opening hours of the bank.
• The applicant for the locker has to meet the Custodian and carry out the required paperwork and documentation.
• In case when there is no locker vacant at the given time, the applicant is expected to wait for their number in the waiting list to arrive.
• The locker holder, along with the Custodian, visits the deposit vault. After the Custodian inserts the bank key, the consumer inserts their key, and the locker unlocks after a perfect match without any discrepancy. The Custodian exits the deposit area leaving the customer with utmost secrecy. The customer then carries out the required work in the locker. After completion of the work, the customer left the place.
• It is advised to check for any extra fees which the bank can levy. Some banks can charge a fee if the client uses the locker more than a certain amount of times per year; for example, SBI charges a fee if the locker is used more than 12 times a year.
• The customer must unlock the lockers at least once half-yearly. If the locker is not used for more than a year, the user may be given a note for doing so. If the customer does not respond, the bank has the legal right to bust open the locker in police presence. In case the client fails to pay the locker rent charge, in the same way, the bank has all the right to break open the locker.

The client must use the locker with caution and discretion, and before shutting it, it is always a good practice to take a look around to ensure that nothing significant has been left out.

To carry out the checking, a client should carry along with them a list containing all the objects kept by them in the locker.

Often, no one should be allowed inside the locker when the client is working with it since there are many valuable personal belongings of the client in question.

In reality, going to the locker with near family members such as a son, daughter, partner, or wife is usually a smart idea, as long as the vault also contains their name.

Rent Charges for Renting a Locker in the Bank

• Like paying the rent charges while residing in a rented house, a hirer of the locker services must pay the amount.
• Locker fees differ between banks and divisions based on demographics (metropolis or semi-urban environment, busy business area, etc.). The lending rates of public and private sector banks vary significantly.
• For example, the rental costs for medium-sized storage (F class) in a private bank may go up to Rs 20,000 every year, whereas the same can be availed in a government bank at almost one-sixth the rate.
• The rate likewise relies upon the kind of record you have with the Bank. For example, HDFC Bank will forgo half of the lease on the off chance that you are an exemplary client; that is, with an average quarterly balance of Rs 1 lakh,
• The cheapest lockers are the smaller ones, also identified as A-class. The size expansions in sequential requests, so the L/K class are usually the biggest and the costliest storage spaces.
• It is necessary and read the fine print to prevent expensive errors. For example, numerous banks require a base record equilibrium to be kept up, which can be a costly recommendation on the off chance that you select a bank where the breaking point is set at Rs 25,000-50,000 a quarter.
• It is likewise pivotal to realize how your Bank characterizes a year while ascertaining the rate of locker rentals. Most banks consider the day of the contract to be the baseline, and the corresponding annual rent is due on that day. Be that as it may, a few banks have a predefined timetable as per the scheduled year or financial year. It is vital to realize the example in order to pay the rent on time.

Name In Pan Card, Passport, Aadhaar, Indian Naming System: A name provides a person with a unique identity and differentiates him/her from others. The famous play writer William Shakespear, in his play Romeo and Juliet, had said, “What is in a Name?”. But today, a name is the only identity that a person can be recognised with. For the official records, one’s name has to be correct and properly filled in.

Most of the time, it is seen that people find it difficult to fill their names in the forms of Aadhaar, PAN card, and Passport. They often commit mistakes in filling their names which are later incorrectly printed on PAN, Passport, or Aadhaar, and they go through a lot of hassle to correct that name.

People with initials in their names often find it difficult to fill their first, middle, and last names in the forms. Here in this article, we will discuss the procedure to fill forms of various documents, such as Aadhaar, PAN card, etc.

Filling Form for Permanent Account Number

A permanent Account Number, commonly known as PAN, is a 10 digit alphanumeric code given to each taxpayer registered with the Income Tax department. It is a unique identification allotted to the taxpayers by the Income Tax Department. All the financial transactions carried out by a person is recorded with the Income Tax Department with the help of PAN. The Income Tax department is responsible for issuing the PAN to each taxpayer. The PAN’s front-end operations are carried out partly by the UTI Infrastructure Technology and Service Limited and the National Securities Depository Limited since 2003.

To get your PAN card, you can either apply online on the IT department portal or get it offline by going to the income tax office. To apply for the PAN card, one has to fill the application form for PAN, and the following are the points that one should adhere to while filling the name for PAN.

• While filling in your details in the PAN application form, always remember not to use abbreviations for the First name and Last Name or Surname.
• When you fill the PAN application form, there are precisely 25 boxes for Name to be filled. So, it can be said that the PAN cannot have a Name that exceeds 25 characters.
• Filling the names of parents is mandatory in the PAN application form. Father’s name has to be filled by every individual. Married women will also have to fill in their father’s name and not their husband’s. Mother’s name is optional for PAN application.
• One should check in the appropriate box as to whose name to be printed on the PAN card, father’s or mothers. If no box is checked, then the father’s name will be printed.
• If you want to get your PAN card with a single name, that means without middle name or surname. You have to fill your name in the place of surname, leaving the first name and middle name blank.

Filling Application for Passport

A passport is an official document, which proves the citizenship of a person. An Indian Passport is an official document provided by the Government of India to each of its citizens to facilitate their travel abroad. The passport allows the people of India to travel Internationally and provide proof of Indian citizenship. Before applying for a passport, here are some of the points you need to focus on. Here are the instructions to be followed to fill name in the application form for a passport.

• The Name in a Passport can have up to 75 characters, unlike PAN. A name having 75 characters can be printed on a passport.
• Always keep in mind that the name on a passport cannot contain initials. They have to be written in expanded form.
• A person should not enter honorific titles awarded to him/her. Titles such as Doctor, CA, or Major are not allowed on a Passport.
• A person can ad two words in his/her surname on a passport. For example, a person having the surname Roy Choudhary can add both their surnames on a passport.
• Some people in the country do not have a surname; in such a case, the person can enter only the first name leaving the space for surname blank. Not having a surname on a passport can invite problems for persons travelling abroad, as some countries emphasise surname for issuance of VISA.

Filling Application for Aadhaar

Aadhaar has emerged as one of the essential identification documents in the past years. It is almost needed in every document verification process across India. Aadhaar is a 12 digit identification number provided to every individual of India. This identification number serves as the proof of identity and address of the bearer. The Unique Identification Authority of India or UIDAI is the department that issues the Aadhaar card to the residents of India. Any person, irrespective of age and gender, who satisfies the verification process of UIDAI can enrol himself/herself for Aadhaar. Before filling the application form for Aadhaar, here are some of the instructions that one needs to pay attention to.

• A person can use the initial in his/her name for the Aadhaar card. All one requires is to provide the document which proves his/her identity.

Documents Serve as Proof for Aadhaar

The documents that serve as proof for Aadhaar enrollment are:

• Passport
• PAN
• Voter ID card
• Driving License
• Identity cards issued by PSUs
• Arms License
• Photo Identity card issued by recognised educational institute
• Kissan Photo Identity
• Freedom Fighter Photo Identity
• Pensioner Photo Identity
• Ration card

Naming System In Different Regions of India

In India, the naming system varies from region to region, depending on various naming conventions. Names in India are influenced mainly by caste, religion, and other beliefs. The naming system in India creates many issues while filling forms for official documents across the country. Let’s have a look at the different naming styles in the different regions of our country.

Naming System In Northern Region

In the Northern families, the children are named in a typical manner where their family name or surname follows their first name. In states like Delhi, Uttar Pradesh, and Punjab, people name their children with given names followed by their family name or surname.

Naming System In Western Region

People belonging to western states, like Maharashtra and Gujrat, have the custom to take up their Father’s name in addition to their first name. For example, Jethalal, who belongs to a Gujrati family and his father’s name is Champaklal, His name on official documents will appear as Jethalal Champaklal Mehta. Mehta being his family name or surname.

Naming System In Southern Region

Most people living in the southern part of India have abbreviated forms of their name. In the southern state of Tamil Nadu, it is expected that a family name or surname comes before the first name. For example, the name Kumbham Nagarjuna Rao would be written as K.N. Rao. Here, Kumbham is the family name, and Nagarjuna Rao is the given name.

Naming System In Eastern Region

It is common in the eastern states like West Bengal and Odisha to address name in the following order, First name, Middle name, and Surname. In States like West Bengal, the middle name is not the father’s name. For example, Subhas Chandra Bose, Here Chandra, the middle name is not father’s name.

Conclusion on Name In Pan Card, Passport, Aadhaar, Indian Naming System

A name provides an identity to a person and proves him/her as a country’s resident. It is essential to have a common name across all the official documents to avoid any confusion. If a person has both first name and surname, then it’s easy and straightforward, but a person with initials of name or only first name has a hard time applying for official documents.

How To Open Saving Bank Account With SBI? State Bank of India is the leading and the largest bank of India. It is a public sector bank and financial institution, which has its headquarters in Mumbai, India. SBI is the 43rd largest bank globally and listed 221st in the Fortune Global 500 list of the world’s largest organisations of 2020, being the only Indian bank on the table. State Bank of India’s market share in terms of assets is 23% and its loan and deposits market is around 25%. SBI provides various financial services, including loans, SME banking, and savings accounts, through its vast network of branches in India and abroad. It is invariably beneficial to have a nationalised bank account. This article will acquaint us with opening a Saving Bank account with the State Bank of India. It will also provide an overview of the process to open a Saving Bank account.

Types of SBI Saving Account

SBI offers a series of savings bank accounts covering basic accounts to premium ones, accounts for children, youngsters, etc. The different kinds of savings accounts presented by SBI are listed below.

1. Yuva Savings Account: This SBI savings account is specifically designed for children between the age of 18 and 30 years. The savings account will continue even after the account holder has attained the age of 30 years. The account’s debit card has complimentary and concessionary facilities that are provided free of cost.
2. Basic Savings Account: This account allows the common man to access basic banking facilities. A basic savings account cannot be initiated if the person already has a savings account. If the person holds a savings account, it must be closed within 30 days of initiating this basic account. A basic ATM/Debit card is provided free of cost, subjected to a maximum of 4 withdrawals per month, after which the regular service charge is applicable.
3. Small Account With SBI: A small account is catered to people who cannot meet the KYC (Know your customer) specifications. The account is operational only for 12 months. If the account holder can present their proof of application for any authorised valid document, then the account can be extended for another 12 months. All credits in the financial year should not surpass Rs. 1 Lakh Withdrawals and the transfers in a month should not surpass Rs 10,000.
4. SBI Savings Account for Minor: Minors below the age of 10 years can avail of the PehlaKadam scheme, requiring the parents/guardian to open and operate the account jointly. This type of account aims to expose minors to banking and the current features like mobile and Internet banking so that they are acquainted with modern-day banking and understand the importance of savings and personal finance. The Pehli Udaan scheme is also under the savings account for minors here; children above ten years of age who can uniformly sign can open the account.
5. SBI Savings Plus Account: This type of account is connected to Multi Option Deposit (MOD), where exceeded funds spanning the upper limit of the savings bank account is automatically shifted to Term Deposits. This scheme retains a minimum of Rs. 25,000 in the savings account. The term deposits can be started with a minimum of Rs 10000 and can be further increased in multiples of 1000. The account holder can pick the tenure of the deposit of 1 to 5 years.

Eligibility Criteria To Open SBI Savings Account

To open an SBI Savings Account, the eligibility criteria is given below :

• Should be an Indian Resident above 18 years of age and should not have any existing connection with the bank.
• One should have a valid Aadhaar Number and a Permanent Account Number.
• You can only hold one Insta Savings Account and no other accounts at a provided time.

How to Open SBI Savings Account?

For opening an account, one needs to provide the following information:

• KYC (Know Your Customer) information
• Information about the Savings Bank account you wish to open and the amenities you would need in the account.
• Form 60, if you do not have a Permanent Account Number (PAN) of Income Tax.
• Form DA-1 is optional if you want to make a nomination (recommended).

Step 1: Fill the Customer Information Section

Step 2: Fill the Account Information Section

• In both the sections Step 1 and Step 2, first, fill Part A with the necessary details.
• Once Part A is filled, save the information, then a TCRN (Temporary Customer Reference Number) will be generated. You will need it later to edit the form if you desire and link the customer in the Account Opening Form. It will also be sent to your mobile number given in the form.

The Yono Mobile App can also open the SBI savings account online. One can also visit the Yono online portal and open a savings account online in a few minutes.

KYC or Know Your Customer for SBI Savings Account

KYC is the short form for Know your Customer or Know your client. It directs proper diligence activities that financial institutes and other managed companies must accomplish to determine important information from their clients to do business with them. There are two aspects of Customer Identification: Identity Proof and Address Proof. The Identity Proof includes the passport, PAN card, driving license, ration card (as per organisations expectation), and the Address proof includes driving license, PAN card, passport, bills of utilities like phone, LPG, electricity, etc., bank statement, ration card. If you are a student, then a Letter issued by the institution. Though Proof of Identity documents carry the customer’s residential address, it may not be the present address. Therefore, to establish the present address of the customer and Proof of Identity, the institution asks for address proof.

Steps to Find Branch Number of SBI

The branch number to open the SBI savings account is important while filling the online Application Form. Though the website offers a button to Find the branch number. Here are a few steps to find the number

• Visit the website https://www.sbi.co.in and the SBI branch locator
• Search on Pincode or district, Then click on Search In
• Then select “Condition”, which has the following ‘Contains’ ‘is Equal to’, ‘Begins With’, and ‘Ends with.’
• Enter the text given in the image, also known as a captcha, then click Search.

Documents Required for Opening SBI Savings Account

One needs to provide a photocopy of all the documents (with their originals) and are expected to be present when submitting the account opening form. The documents required for the SBI savings account are given below.

• Proof of identity: Voter ID card, Driving License, Passport, and PAN Card
• Proof of Address (any of the following): Income/Wealth Tax Assessment Order, Electricity Bill, Telephone Bill, Credit Card Statement, Salary slip, Bank account statement, Letter from a reputed organisation, Letter from any verified public authority or Ration Card.

Advantage of Opening a Savings Account

SBI offers various savings bank accounts varying from premium to basic accounts, including accounts for children and youth. Any individual can open a Savings Bank account with SBI above 18 years old. One should also have an account with SBI while applying for Govt affiliated educational institutions or jobs; they expect Demand Draft from Nationalised Banks only. Opening a PPF account, Sukanya Samriddhi account or NPS is also accessible while having an SBI savings account. SBI customer service is considered to be one of its USP, despite being a Public Sector Bank. The broad network of offices across the country makes it considerably easy to transact with SBI.

Some other advantages of having an SBI savings bank account are :

• It has mobile, Internet, and Branch Banking
• Multicity cheques
• Dexterity to link savings account to a multi-option deposit account (MOD account)
• Inter-bank account transfer without changing the account number
• No minimum balance needed unless stipulated. The minimum required balance for Savings Plus Account is Rs 5000, and for the Premium Savings Account is Rs 25000.
• SBI savings account interest rate Up to Rs. 1 lakh and above Rs 1 lakh is 2.70%

Steps to Download the Saving Bank account Application Form

To download the Application Form after filling and submitting the Saving Bank Account with State Bank of India, go to the official online Account opening page. Click on “Download Completed Application Form”. A dialogue box appears on the screen, asking for the Applicant Temporary Account Reference Number and Date of Birth and then submitting the application online. After the details are entered, click on Download, the pdf file gets downloaded. Take the printout of the form before going to the SBI branch.

Conclusion on How To Open Saving Bank Account With SBI?

State Bank of India is the largest bank in India  and therefore it has its inherent pros and cons. However, having a savings account in this bank can be a benefit under many circumstances. Therefore, any individual wishing to open a savings account with SBI can read through this article and have a step by step understanding of the procedures involved. Also, this article covers the How to as well as the what and what if’s of opening a savings account with SBI.

IFSC, MICR, SWIFT Code: IFSC code is responsible for transferring electronic money between banks within India, for example, NEFT, RTGS and IMPS. MICR is considered to be Magnetic Ink Recognition Technology which is used for making cheque processing faster and simpler. The SWIFT code is introduced for the purpose of transferring money between banks; this is especially used for international wire transfers and can also be used for exchanging various messages between banks. In this article, we will have a detailed discussion about the topics IFSC, MICR, SWIFT code, Difference between IFSC and MICR, IFSC and SWIFT so that one can understand these terms more clearly without any confusions.

IFSC Code

IFSC, which is also known as the Indian Financial System Code, is considered to be a special 11 digit code that has been allotted to every bank branch that is available in India. For example, the IFSC code for the SBI branch that is located in Kolkata is considered to be SBIN0000001. When a payer has initiated a fund transfer, be it NEFT, RTGS or IMPS, he/she has to provide the bank details of the payee, for example, bank name, branch, account number and the IFSC code. Once the payer has successfully provided all the details of the payee’s bank account, then the fund will get transferred to the payee’s account without any delay with the help of the IFSC code.  The number of errors in this process is zero. Fund transfer by the payer to the payee using the IFSC code is secure and convenient than the other methods of fund transfer. The transfer is done within seconds.

The IFSC code is an 11 digit number with

• The first four characters belong to the abbreviation of the bank.
• In the fifth place, there is the control character.
• The last six characters will represent the Code of a particular branch.

MICR Code

The MICR code is considered to be a 9 digit numeric code that was introduced to uniquely identify a bank branch that has been participating in the ECS Credit scheme. MICR is considered to be the acronym for Magnetic Ink Character Recognition.

ECS Credit is something that is used by different institutions for affording credit to a large number of beneficiaries ( for example, employees, investors, etc.) who have accounts in various bank branches at various locations within the area of an ECS centre. This gets executed by raising a single debit to the bank account of the user’s institution. ECS Credit is known for enabling payment of amounts for dividend distribution, interest, pension, salary, etc., of the user institution.

MICR code is a 9 digit code that helps in identifying the location of a particular bank branch. The MICR code which gets allotted to a particular bank branch gets printed on the MICR band of cheques that have been issued by the bank branches.

SWIFT Code

The SWIFT code is considered to be an 8 or 11 digit alphanumeric code that is responsible for uniquely identifying financial institutions. A SWIFT Code is considered the universal way of identifying banks all over the world. SWIFT Code is considered to be the acronym of the Society for Worldwide Interbank Financial Telecommunication code. It is considered to be the standard format for Bank Identifier Codes (BIC); this is approved by the International Standard Organization (ISO) and is responsible for representing a particular bank or bank branch. These codes were introduced to the public with the purpose of transferring money between banks, especially in the case of international wire transfers, and can also be used for exchanging other messages between banks.

The SWIFT Code consists of 8 to 11 digits. The Code is formatted as below:-

• First four characters – Bank code.
• Next two characters – Country Code
• Next two characters – Location code
• Last three characters – Branch code

Difference Between IFSC Code and MICR Code

IFSC Code	MICR Code
This Code is used for facilitating the electronic transfer of funds between banks and various individuals in India.	MICR Code was introduced in order to make cheque processing simpler and efficient than before.
IFSC code is considered to be 11 digits alphanumeric Code.	MICR Code is considered to be a 9 digit code.
The first four characters in the Code are there for indicating the name of the bank.	The first three characters of the Code are there for indicating the city in which the bank branch is situated.
The last six digits of the Code are there to indicate the branch location.	The last three digits refer to the Code of the bank branch.

Difference Between Swift Code And IFSC Code

SWIFT Code	IFSC Code
SWIFT code is considered to be the acronym for ‘Society for Worldwide Interbank Financial Telecommunication.’	IFSC Code stands for ‘Indian Financial System Code’.
This is responsible for international money transfers.	This is responsible for domestic money transfers ( within the boundaries of India).
This Code is developed by International Standard Organization (ISO).	This Code is developed by the Reserve Bank Of India.
This Code has a total of 8 or 11 characters.	This Code contains a total of 11 characters.

Conclusion on IFSC, MICR, SWIFT Code

From the above article, one can easily understand the purposes for which the codes were introduced to the public. The sole objective of each Code was to make things simpler and more efficient so that everyone who uses it can get satisfied wholly.

Fair Market Value and CII: For assets sold after April 1, 2017, the cost inflation index numbers available from the financial year 2001-2002 must be used to measure the long-term capital gain on the selling of land. Many people who have bought or inherited property before 2001 wonder how to calculate the indexed cost of acquisition. The adjustment in the CII base year from 1981 to 2001 would have a significant impact on the property’s final capital gains number. If the property was purchased before April 1, 2001, the original owner must determine the property’s fair market value as of April 1, 2001, before selling it.

This article discusses what Fair Market Value is, how to calculate it, why the base year was adjusted from 1981 to 2001, and how it affects tax savings on assets acquired before 2001. It then goes on to discuss Registered Valuers and how they calculate FMV.

Fair Market Value

From the financial year 2016 to 2018, the changes in the measurement of long-term capital gains for the property are as follows:

• The holding period to apply for long-term gains has been shortened from three to two years.
• From 1981 to 2001, the base year for calculating indexed cost has been updated.

For properties purchased before April 1, 2001, the most recent cost inflation figures began on April 1, 2001, one must first determine the property’s Fair Market Value (FMV) as of April 1, 2001.

FMV responds to the question, “How much will a property purchased in 1997 be worth on April 1, 2001?” If the assessing officer (AO) has a different opinion or uncertainty about the stated value, calculating the capital gain based on any arbitrary FMV can get an assessee in trouble.

When you want to buy a property or need it for Sale and Purchase, Refinancing, Legal purposes, Loan intent, Stamp duty collection, Portfolio Management, Family Law/Matrimonial, or Market Valuation, you’ll need Fair Market Value or FMV. FMV aids in determining the reasonable purchase price. It protects you from overcharging. You get actual value for your money. Consider a different scenario if you’re looking for a home loan. You will be unable to obtain a loan from a bank if the property is not accurately priced.

According to the 2009 Income Tax Guidelines for Immovable Assets

Market value is the amount that a willing buyer will pay a willing seller for a property, taking into account all of the property’s current conditions, as well as all of its existing advantages and future possibilities when set out most advantageously.

According to the valuation officer, fair market value is the approximate price that any asset will fetch if sold in the open market on the valuation date.

The terms “Market Value” and “Fair Market Value” are interchangeable, with the exception that “Fair” adds a hypothetical market feature. The phrase “if sold” does not refer to actual sales or market conditions. The term “open market” does not refer to a strictly hypothetical market that is not subject to legal restrictions. The fair market value does not include sentimental value, brokerage, stamp duty, commission, and other costs that may impact the selling transaction.

What is Fair Market Value, and How to Calculate it?

According to the Income-tax Act of 1961, the FMV of a property is the greater of the cost of purchase or the price that the property would typically sell for if sold on the open market. There is no set formula for calculating a property’s FMV. The strategies for calculating FMV are outlined below. Keep in mind that Fair Market Value must be genuinely fair!

• Find out the average selling price of similar properties that sold in the same neighborhood in 2001.
• It’s a very rudimentary form of estimation. It may or may not provide you with accurate data. Given that real estate is heterogeneous.
• market in which properties can differ significantly even within the same neighborhood, determining the FMV of a specific apartment or house, particularly for a date many years ago, is difficult.
• Take a look at the circle rates and the Guidance Value. The minimum cost of property prescribed for a specific region is referred to as “circle prices.” The state government or the local development authority set the circle prices. It becomes a benchmark for calculating stamp duty and registration fees. The authorities adjust the rates regularly to keep up with changing circumstances.
• The circle rate usually is less than the current market value.
• In Bihar, the definition of circle rates was introduced in 1999. It was adopted in other cities, such as Delhi, in 2007.
• Real estate indices, such as the National Housing Bank’s (NHB’s) Residex, and two Reserve Bank of India (RBI) indices—Housing Price Index (HPI) and Residential Property Price Index (RPPI), can also be considered. These indices provide insight into current price patterns in different cities. The indices are updated quarterly using transaction data from the revenue department. However, the usefulness of these indices is minimal.
• Use the services of a licenced appraiser. It is highly recommended.
• Valuers that have been licenced by the government follow a standard procedure and provide a comprehensive report.
• They measure the property’s actual value in exchange for a small charge. They usually consider things like the property’s dimensions, whether it’s freehold or leasehold, restrictive covenants (if any), and whether it’s insured or not.
• The income tax department will consider the value reported in the valuation report from a registered valuer in the event of an inquiry.

What was the Reasoning Bhind Changing the Base year from 1981 to 2001?

The previous year used as a baseline was 1981.

• The determination of this fair value has been difficult because it is based on a timeline that spans more than three decades.
• As opposed to the CII or inflation, property prices increased faster between 1981 and 2001.

The owners of properties acquired before 2001 would benefit from substantial tax savings, which are summarised below.

Example of Long-Term Capital Gains Calculation for Property Purchased Before 2001

Let’s say you purchased a house for 1 lakh in 1975 and sold it for 1.5 crores in 2017. Fair Market would be about 2.31 lakhs in 1981, and its indexed cost would be 26,02,193; in 2001, it would be 37.85 lakhs, and its indexed cost would be 99,97,389. Moving the base year from 1981 to 2001 saves more than 15 lakhs in capital gains revenue.

Description	1981	2001
Fair Market Value	2,31,306	37,85,678
Acquisition’s Indexed Cost	26,02,193	99,97,389
Selling price	1,50,00,000	1,50,00,000
Long Term Capital Gains in INR	1,23,97,807	50,02,611
Long Term Capital Gain Tax (20.6%)	25,53,948	10,30,538

Determine FMV or Property’s Fair Market Value using Registered Valuer

It is advisable to have the property appraised by a licenced appraiser. The income tax department will not accept any assumptions to determine worth. In the event of a query, the department will take the value reported in the valuation report from a registered valuer into account. A valuer usually spends 3 to 4 days preparing a valuation report.

Valuers that have been licenced by the government follow a standard procedure and provide a comprehensive report. A valuer considers the area and dimensions of the property, whether it is freehold or leasehold, whether there is any restrictive covenant about the use of the property, protection of the land and property, and whether the land falls under any government development plan when determining the FMV of a property.

To act as a recognised valuer of the income tax department, a valuer must be registered under section 34AB of the Wealth Tax Act, 1957. The department issues each valuer with a licence to work as a valuer. The Act also specifies the fees that a valuer can charge, determined by the asset’s value. For example,

• a fee of 0.50 percent of the asset value will be charged for the first Rs5 lakh.
• It will be 0.20 percent for the next Rs10 lakh
• 0.10 percent for the next Rs40 lakh,
• 0.05 percent further.

If the Income Tax Assessing Officer (AO) has any questions about the study, the valuer must respond, and if necessary, the valuer can also visit the AO for clarification.

The valuation report and all other records related to capital gains should be held for at least eight years after the applicable assessment year.

Finding Registered Valuers

Typically, it’s by word of mouth or a Google search. Many firms, such as governmentapprovedvaluers.com in Delhi and ZippServ in Bangalore and Pune, provide this service.

Below is an excerpt from a sample report of a property valuation. This is an excerpt from a ZippServ sample article.

Ex-Showroom Price and On-Road Price: Whenever you go to a car or two-wheeler showroom and enquire about the price, you would see two quoted prices. One of them would be an Ex-showroom price, and another would be an On-road price. The price that you pay while purchasing the automobile is called the On-road price. The On-road price is always approximately 10% more than that of the Ex-showroom price. While making the budget for purchasing a vehicle, one should always look at the vehicle’s On-Road Price.

Most people don’t know the difference between the prices and assume the Ex-showroom price as the final price of the vehicle and get confused. The On-road price of a vehicle differs from its Ex-showroom price depending on the model of the vehicle.

Here in this article, we will discuss the Ex-showroom price and On-road price of a vehicle and the other charges associated with the cost of the vehicle.

Prices Associated With Vehicles

It is prevalent that automobile and vehicle prices vary from one state to another in India. Various factors or charges contribute to this variation. Some of the common factors that contribute to the price change are the Ex-factory price of a car, the Ex-showroom price of a car, and the On-road price of the car or motorbike.

Ex-Factory Price: Ex-Factory price can be defined as that price, which a car or bike dealer pays to the manufacturer to lift the vehicle from them. In simple words, it is the price that the showroom or dealer pays for the vehicle to the manufacturer. This price is not for the public as it is primarily an exchange between the dealer and the manufacturer.

Ex-Showroom Price: The ex-Showroom price can be defined as the price at which a car or motorbike dealer sells the vehicle to the customers. The Ex-showroom price is made up of different charges, such as dealer’s margin, transportation cost, applicable excise, State taxes, and Octroi charges. The Ex-showroom Price of any vehicle is called its base price and excludes registration, insurance, and loading charges.

On-Road Price: The On-Road price of a vehicle is the actual and the final price that a customer pays for acquiring the vehicle. It is also called the Invoice value of the vehicle. It includes certain other charges such as State Registration charges, Lifetime road tax payment, Mandatory insurance and the dealer’s handling or logistics charges. Apart from all these compulsory charges, the On-Road price of a vehicle also includes some optional charges. The option charges that are included are Accessories cost and additional warranty coverage. If a dealer is providing discounts, it will be shown and deducted while calculating the net On-Road price of the vehicle.

More About Ex-Showroom Price

In a more straightforward sense, the Ex-Showroom price is the price that the dealer charges from the customer for procuring the vehicle from the manufacturer and the tax that it pays on procurement. The Ex-showroom price is also known as the supply price of a vehicle. The Ex-showroom price of a vehicle includes State taxes, Octroi, Transportation, and Handling charges. The Ex-showroom price of a particular vehicle differs from state to state, depending upon the laws and cost of transportation. For example, the Ex-showroom price in Mumbai is higher than that of Delhi.

More About On-Road Price

When the Ex-showroom price is added to certain other charges, it constitutes the vehicle’s On-Road price. Apart from the Ex-Showroom price, the extra charges that make up the On-Road are, Registration fees, Lifetime road tax, Vehicle Insurance, and Handling charges of the dealer. Below, we have mentioned the complete details of all the charges that make up the On-Road Price.

Registration Fees

Every new vehicle has to be registered with the Regional Transport Office, and this registration provides the car or motorbike with a unique identity. Registration charge is the amount charged by the Regional Transport Office for the registration of a Vehicle.

All the vehicles are tagged with a licence plate or registration number to provide them with a unique identity. This licence number is issued by the district-level Regional Transport Office in every state. The licence plates in India consist of three parts:

• The first two letters of the licence plate indicate the state in which the vehicle is registered.
• The following two digits indicate the district number where the vehicle is registered.
• The last four digits indicate the unique number given to the vehicle. Due to heavy registrations, these digits are combined with letters at times.

For example, a vehicle registered in West Bengal can have the following format of a licence plate: WB-01-BB-1234.

The licence plate of private vehicles is designed with black letters and numbers on white background. In comparison, commercial vehicles have a yellow background with black text on them.

The Registration charge in a state can differ from another, depending on the cost and type of vehicle.

Lifetime Road Tax: Lifetime Road Tax is the amount of tax that has to be paid by the vehicle owner before using the vehicle on public roads. The Government charges road tax to improve roads and construction of new and better transport systems. Road tax is always subjected to state rules and traffic regulations, so it differs from state to state. When you purchase a vehicle, you pay the road tax for a lifetime in the state in which your vehicle is registered. But, if you shift from one state to another, you have to re-register your vehicle again in that state and pay lifetime road tax once again.

Vehicle Insurance: Vehicle insurance is one of the significant components added to get the on-road price of a vehicle. Vehicular insurance provides financial protection to cars, motorbikes, and other types of vehicles. The vehicle insurance provides financial protection against any physical damage resulting from an accident or fire breakout. It also provides financial assistance against theft of the vehicle. Different insurance providers have different insurance rates depending on the type of vehicle.

Dealer Handling Charges: The dealer claims handling charges from the customers to compensate for its cost of handling the vehicle till the point of delivery. The handling charge includes transportation from the warehouse to the showroom, basic fuel charge, number plate charge, cleaning charge, and other sundry expenses. The handling charge differs for different segments of vehicles and even from dealer to dealer.

Which Price Does A Bank Take Into Account

Now that we have discussed in detail the Ex-showroom price and On-road price. The big question is if a person wants to buy a vehicle through bank finance, which price will the bank consider while sanctioning a loan?

So, if you are purchasing a vehicle on finance, the price considered depends on which bank you select. For instance, if you finance your vehicle from a private bank, you will get loans of up to 85% of the Ex-Showroom price. Private Banks consider Ex-Showroom prices for the calculation of loans. If you finance your vehicle through a Government-owned bank, you can get loans up to 85% of the On-Road price. However, the percentage of loans may differ from bank to bank.

In The End

When you plan to purchase a vehicle, it is essential to look for the On-Road price of the vehicle, as in the end, it would the final price you will pay to acquire the asset. Knowing the On-Road price of a vehicle will help you to plan your finances efficiently.