General Anti Avoidance Rules (GAAR) India

What is GAAR ?


GAAR abbreviation stands for general-anti-avoidance rules and it has been introduced in India due to VODAFONE case ruling in favour of this company by the Supreme Court. The new rules were supposed to come into effect from 01 April, 2012 have been deferred.


GAAR Implications in India


Indian Government is trying to give powers to income tax authorities as implementation of GAAR provides tremendous powers to deny tax benefit to an entity if a transaction has been carried with the sole intention of tax avoidance. Due to powers in the hand of taxmen, now innocents may be harassed by them.

FII & FDI money coming to India through Mauritius route will now become taxable.

Increased litigations.

GAAR – Worst Scenario


The onus lies on the assesse to prove that there is no tax benefit and the transaction is not an avoidance transaction.


GAAR – Example


To make it easier to understand GAAR; we can say that suppose a person or a company is setting up business in Gulf Country and its clear intention is to claim exemption from capital gains tax, in such a scenario Indian govt has the right to deny the legitimate claim for exemption provided under DTAA as it falls under tax avoidance and Indian govt is trying to plug the loopholes.

5 steps to finding the best savings account

Follow our expert tips to find the best savings account for you:

Step 1: Find the best account and switch 

Switching to a Best Rate savings account can earn you considerably more interest. Just because your savings account paid a good rate when you opened it, don’t rely on your provider to still be giving you a good deal. To find out what rate of interest you’re getting at the moment, and to see how much better off you could be, use our new Savings Rates Booster.

Once you've switched to a Best Rate account, keep an eye on your rate and be prepared to switch again if it starts to fall. If you’d rather not have to switch regularly, go for one of our savings accounts which are Best for Consistency.

Step 2: Use your tax-free cash Isa allowance

The interest you earn in a savings account is taxable, so it makes sense to use your annual £5,640 tax-free cash Isa allowance before putting any money into a savings account if you want to get the best return on your money. In an ordinary savings account, any interest you earn will be taxed at 20% if you're a basic rate taxpayer and 40% if you're a higher-rate taxpayer, so not using your Isa allowance means you are giving away interest to the taxman. To get the best return on your money, make sure you choose a Best Rate cash Isa.

Step 3: Decide how and when you want to access the account

If you're after the best interest for your savings, the chances are you will have to bank online, as the majority of the Best Rate savings accounts are internet-only. If you've got your heart set on a branch-based account, then you will probably have to settle for a slightly lower interest rate.

You also need to decide whether you want easy access to your money, or whether you're happy to give some notice. Traditionally notice accounts paid higher rates than easy access savings accounts, although today this is no longer the case, so there’s usually no need to tie your money up unless you particularly want to. If you want a notice account, our Best Rate notice accounts are the best available.

Step 4: Fixed rate or variable? 

You need to decide whether you want to receive a fixed rate of interest, or whether you’re happy for it to change, usually when the base rate changes. Variable rate account interest rates go up and down, broadly in line with the Bank of England base rate, and are often tiered to pay more interest the higher your balance. Some variable rate accounts are actually tied to the Base Rat.

Fixed rate accounts usually pay a favourable rate of interest for a fixed period of time, but in return you have to tie your money up for the same length of time – for example 1,2 or 3 years. Generally speaking, the longer you are willing to tie your money up for, the higher the rate of interest you’ll get. However, you have to be sure you won’t need to get your hands on your money, and you take the risk that if interest rates start to go up you won’t be able to benefit. 

Use our Best Rate tables to find the best fixed rate accounts available, no matter how long you want to tie your money up for. 

Step 5: Decide whether you want to invest a lump sum, or a regular monthly amount 

Regular savings accounts often offer attractive rates of interest and can be a good bet if you want to save a regular monthly amount, but are not an option if you have a lump sum. Because they have a maximum monthly investment, there is a limit to how much interest you can earn. They also usually only offer the good rate for a fixed period of time, so you need to make sure you know when the interest rate drops.

Types of Market Structures

There are four basic market structures: perfect competition, monopoly, monopolistic competition and oligopoly.

In a perfect competition market structure several firms are present who all produce identical products and are all sold at market price. The entry barriers to this market are low and the only factor determining sales is price. Since no one producer can affect prices, the demand curve for such a market is horizontal i.e. perfectly elastic. An example of this could be onions produced from a certain region.

On the other end of the spectrum is the monopoly market structure. In such a market there is usually just one seller. The entry barrier is very high to this kind of market. The cost of investment, copyright or holds over resources are some examples of high entry barrier. The railway network of any country is an example of a monopoly.

When it makes natural sense to have one firm produce a product it is called a natural monopoly. Public utilities, electronic defense equipment are government sponsored natural monopolies.

Covering the middle ground of market structure in one form is monopolistic competition. In this scenario firms do not produce identical products. There exist in the products difference in features, price, branding and so on. The shampoo market demonstrates this. Despite the same end use, i.e., cleaning hair and scalp, the firms producing them market their differences. Removal of dandruff, stopping hair fall, more luster are some of the differentiators they advertise. Consumers are loath to shift unless there is a very high (>10%) increase in price.

In an oligopoly market there are a few players who need to keep an eye on each other’s strategy. The cement industry or airline manufacturing industry are good examples. In both these industries the economies of scale are very high making entry barriers in these segments high. The different firms differentiate on the basis of some features, their offerings being good substitutes to each other. In this market structure demand elasticity is more than that of a monopoly.

The following table highlights and compares the features of these four types of market structures.

Source

Tax Strategy To Save Money

1. Term insurance: If we invest in long term investment plans from insurance companies like ULIPs or endowment plans it is likely that if the DTC is introduced our premiums due next year will not be tax deductible if it does not meet the criterion. Premature withdrawals and lapsed policies are punished very severely by the charges on these policies. A term policy on the other hand will always be tax deductible and will do enough to protect you. 

2. Equity Linked Savings Scheme (ELSS): Even though we might only have the ELSS for one more year, it is still the best tax-saving equity investment available to us. Several viewers have expressed concern about redemption pressure these funds might face after the DTC comes in. But remember, money invested in ELSS has a 3-year lock-in which means it won’t be possible for investors to pull all their money out at once. So pick a well managed fund, with a good track record this year and invest in spurts over the next 2 months. 

3. Infrastructure Bonds: With an assured return of 9% over 10 years these bonds make a very strong case, work in the added tax deduction and there is little reason for us to skip this option. 

4. Health Insurance: For example your dad just had a knee replacement surgery that billed for over Rs 5 lakh. Irrespective of the tax deduction, there is no excuse for not having enough health insurance, especially for the senior citizens in your families. 

5. Home Loans: Our home loan principal repayment might not be tax deductible under the DTC, but that is not going to stop us from buying and owning homes. If you have a running loan this year make the most of it.

15 Things You Must Know About Your Money

1. You think too much about your money. Stop doing that because your money doesn't think about you.
2. You are not your money and your money is not you but you best look after each other anyway. You might be together for a while.
3. You’ll never have more money to save and invest than you do right now, so find a way to save and invest more of what you've got.
4. You don’t have aIl-have-less-money issue. It’s a how-you-manage-your-money issue.
5. You’ll never be perfect with managing your money, so aim for getting better.
6. You’ll never live in the future or the past, so find a way to be happy with your money in the now.
7. Your financial life doesn't get better, you do. Life is life – it will happen to you. It’s your job to get better in the middle of it all.
8. Your ‘average’ financial position is not the problem. It’s the consequence.
9. Even though you might not feel it, think it, believe it or hear it, you are good enough with your money than most experts would have your believe.
10. Your happiness works from the inside-out. Money really can’t buy you more happiness.
11. Your money is your responsibility, not anyone else’s. So stop blaming others when things go wrong.
12. Master your fear of not having enough money in the future, and you’ll master your life.
13. Real success is not about what you earn, own, achieve or win but who you become along the way. So work towards ‘becoming’, not towards ‘having’.
14. If you’re in the luckiest 1 per cent of humanity that has money, you owe it to the rest of humanity to think about the other 99 per cent.
15. Money just brings out the basic traits in you. If you were a jerk before you had money, you are simply a jerk with a billion rupees.

The Basics of Buying Your First Home

Buying a first home is perhaps one of the most important decisions most of us will ever make. It ranks up there with choosing a college degree, career, marriage, and children.

Fortunately, saving for a home can be within everyone’s reach, because you can get there by working smarter — not harder — at some things you already do today. Learn about down payments, costs, reserve funds and other things to get your dream home.

But that’s not to say it’s going to be easy, given the high costs involved in buying a house today. The general rule of thumb is that you can afford to buy a house that’s three times your annual household income. With that in mind, here are some general costs you can expect to incur when buying a house:

Down Payment: The down payment will be the most onerous and significant expense by far. Down payments can vary from no down to all down, but 20% of the purchase price is what you’ll generally need to get the most favorable mortgage terms and avoid the purchase of mortgage insurance.

Closing Costs: Closing costs are all the fees required to complete the home sale, including local government fees, title insurance, appraisals, points, and tax escrows. These typically vary between 2-3% of the purchase price.

Reserve Funds: Saving at least three months of housing payments will provide you with some peace of mind after your home purchase — especially if you decide to pay property tax separately from your mortgage payment. This also lets you avoid having to dip into credit card debt.

Now that you know roughly what you’re going to need to save, you’re ready to get started on the road to home ownership. Mint sees that road as having three distinct phases: Cleaning, Foundational, and Building.

Getting your Financial House in Order:

Even before you begin saving for your first home, there are a couple of critical short-term goals you’ll want to meet.

1. Pay off your debts and avoid carrying any balance on your credit cards. The finance charges alone are a virtual wall between you and your ability to make a large investment like a new home.

2. Improve your credit report and score. A good credit score can help you quality for a loan with the best deal in terms of points and rates. Check out FreeCreditReport.com for a free credit report and credit score.

Lay a Strong Foundation:

1. Determine how much you need and by what date.

* Assume 15-25% of the home price will be needed up front for your down payment and closing costs

* Estimate three months of mortgage payments using tools like this payment calculator from Yahoo.

* Remember, if you’re already paying rent today, you’ll need to save only the difference between your monthly rent and your estimated monthly mortgage.

2. Open a separate, high-interest savings account, money market account or a certificate of deposit (CD) that serves as your New-Home Fund.

3. Calculate what you’ll need to save monthly to get to your goal by your target date. 

4. Lastly, setup direct deposit with your employer so that a portion of your paycheck is automatically transferred into a separate “home fund.” You’ll barely feel a thing, and before you know it, you’ll be glad you did.

Start Building:

1. Make some decisions on where you’re going to save. By the way, it makes sense to include the entire family in this part of the process. It’s always easier to make sacrifices when everyone is shooting for the same goal.

2. Track your spending and saving regularly. 

Financial Tips For Young Adults

Unfortunately, personal finance has not yet become a required subject in high school or college, so you might be fairly clueless about how to manage your money when you're out in the real world for the first time. If you think that understanding personal finance is way above your head, though, you're wrong. All it takes to get started on the right path is the willingness to do a little reading - you don't even need to be particularly good at math. 

To help you get started, we'll take a look at some of the most important things to understand about money if you want to live a comfortable and prosperous life.

Learn Self Control

If you're lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you'll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it's better to wait until you've actually saved up the money.

Take Control of Your Own Financial Future

If you don't learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they're doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.

Know Where Your Money Goes

Once you've gone through a few personal finance books, you'll realize how important it is to make sure your expenses aren't exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you'll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise. In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time.

Start an Emergency Fund 

One of personal finance's oft-repeated mantras is "pay yourself first". No matter how much you owe in student loans or credit card debt and no matter how low your salary may seem, it's wise to find some amount - any amount - of money in your budget to save in an emergency fund every month.

Start Saving for Retirement Now 

Just as you headed off to kindergarten with your parents' hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you'll have to invest to end up with the amount you need to retire and the sooner you'll be able to call working an "option" rather than a "necessity".

Guard Your Health 

If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you're uninsured, don't wait another day to apply for health insurance; it's easier than you think to wind up in a car accident or trip down the stairs. You can save money by getting quotes from different insurance providers to find the lowest rates.

Have you started with your personal financing?

General Car Financing Tips

In this article we are going to look at car financing tips to help you determine, which is your best option when buying a new car. There are many options that you have regarding car financing and the most common is always the loan. The loan is often easier for many to obtain over a lease option. So we will concentrate on loans for the general car financing tips.

When buying a car you need to know what your credit scores and history say. Sometimes a bank or loan office is going to try and offer you a worse deal than what your credit scores really reflect in order to make more money. They may fudge the credit score numbers to make it seem probable that you are more of a risk. Knowing what your credit scores are can help you determine if the loan company is on the up and up. You have two options for car financing. You can go through the dealership for financing or you can seek financing on your own. In either case know your credit score and history. Make sure there are no surprises.

If you are refused a loan because your credit is not sterling enough you will need to wait for a few months until your scores are in a place that you can obtain a loan. Don't try to find multiple loans when your credit has already been rejected chances are the other financing will refuse you and make your credit score worse.

When searching for a loan for car financing you are going to want to make sure you have researched the current market. You will want to know what the current car loan interest rates are for someone with sterling credit as well as someone with little credit or bad credit. If you know where the numbers are on average you can negotiate for a better loan. This will help in the long run. Remember you don't have to take any loan that seems fishy or just isn't what you hoped for. You have the right of refusal.

Keep in mind that a down payment towards a new car is going to help you with the loan. A car dealership is going to hope that they can get a little money from you up front and the car financing will appreciate this. It will lower the overall amount you need to borrow and make your payments more affordable.

Keep in mind that you can also trade in another vehicle. If the trade in value is a fair price you can also have the down payment to partially pay off the car. This will again lower the financing you need to obtain. You can also just trade in a vehicle without the down payment if that is what you would like to do.

There are many options and tips regarding car financing and overall using common sense and knowing where you stand financially is going to save you a lot of hassle and get you what you want.

Tips for teens to manage money

Teens can follow mentioned tips to save a lot of money and utilize it for their future spending.

1. Try to save half of what you receive. Or, if possible, ALL of what you receive.

2. Try to start saving young.

3. Don't touch it til you are old enough to drive. This can really aid in getting a decent car instead of a jalopy that you'll end up junking within a few months.

4. Or, if your parents buy your car, you can have that money saved up for possible shop work on that car.

5. If you know you cannot handle large amounts of pocket money, do the safe and honest thing and deposit most of that money. Even if you are fiscally responsible, continue to make deposits, and remember to keep only as much money as you could reasonably need on your person.

6. Use debit cards insted of credit cards!

Which methods do you use to save money?

Sharing banking details online fraught with risks

Most individuals would have encountered a situation where there are emails and messages sent to them asking for personal information and they constitute an effort to commit a fraud. While many routes can be clearly identified as belonging to this category, often the situation is such that the position is not clearly distinguishable.

In many cases there is a fear created in the mind of the individual and they results in giving up some details that proves to be a costly mistake. Here is a way in which this happens and ways to tackle this effectively.

Tax department route: While there are various routes by which the individual is asked for personal information, one common way is to lure them with the promise of a prize or large sums of money. This makes various people greedy to get the amount, and hence, they give information about their bank details. In many cases they also end up transferring money to the people asking for the information as an initial payment to release the so-called prize.

Having heard a lot of such cases, people now know that this is something that is to be avoided. Now another route that is being used is to make it seem as if the information requirement is coming from the income tax department. On hearing the details of the income tax department, there is a fear that spreads through many people and they readily part with the asked information.

No information asked: One of the things that have to be understood is that there is never any personal information that is asked by the income tax department through emails and phone messages. Many people say that the received email asked for their bank information for transferring refunds.

It has to be known that the details about the refund are taken at the time of the filing of the income tax returns. There is space in the income tax return form where all the details about the bank have to be given, and hence, same information is never required again.

Overall policy: One way in which this situation can be avoided is by ensuring that you do not share any sensitive information with anyone. Once it is decided that there will not be any information given, there has to be a study of what is being required and who is actually asking for the information. When this is done, it will be seen that the email from which the information is being desired is not an email ID of the tax department but one that actually makes it look like that.

The other thing to see is that the income tax website specifically warns that they do not ask for any information, and hence, any such details required are actually a fraud that is being perpetuated.

Intimation: There are several incidents when the authorities ask the individuals to give them details about some specific activities so that they can take action on the same. This is usually done in the form of a written communication sent to their home address or address mentioned in the income tax records.

This is a part of the income tax assessment process and meant to be submitted to the tax department for enabling them to complete their work. This has to be considered separately from the financial records that are demanded. Being clear on this point and by undertaking adequate due diligence, it will also clear the situation as to which of the requirements is genuine and which needs to be avoided.

### Do you share any such information online? ###

Source: FPA media articles

How to make Financial Planning work for you?

You are the focus of the Financial Planning process. As such, the results you get from working with a Financial Planner are as much your responsibility as they are those of the Planner. To achieve the best results from your Financial Planning engagement, you will need to be prepared to avoid some of the common mistakes shown above by considering the following advice:

Set measurable goals:

Set specific targets of what you want to achieve and when you want to achieve results. For example, instead of saying you want to be 'comfortable' when you retire or that you want your children to attend 'good' schools, you need to quantify what 'comfortable' and 'good' mean so that you'll know when you've reached your goals.

 

Understand the effect of each financial decision:

Each financial decision you make can affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child's education may affect when and how you meet your retirement goals. Remember that all of your financial decisions are interrelated.

 

Re-evaluate your financial situation periodically:

Financial Planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your Financial Plan as time goes by to reflect these changes so that you stay on track with your long-term goals.

 

Start planning as soon as you can:

Don't delay your Financial Planning. People, who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life. Similarly, by developing good Financial Planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies.

 

Be realistic in your expectations:

Financial Planning is a common sense disciplined approach to managing your finances to reach life goals. It cannot change your situation overnight; it is a life long process. Remember that events beyond your control such as inflation or changes in the stock market or interest rates will affect your Financial Planning results.

 

Realize that you are in charge:

If you're working with a Financial Planner, be sure you understand the Financial Planning process and what the Planner should be doing. Provide the Planner with all of the relevant information about financial status. Ask questions about the recommendations offered to you and play an active role in decision-making.

Is A Career In Financial Planning In Your Future?

The job goes by a lot of names, including financial planner, financial advisor and personal financial consultant, but it's rarely called what it typically is: financial products sales. Financial planners earn a living by helping people sort through and choose investments, insurance and other financial products. They do retirement planning, college funding, and estate planning and general investment analysis.

Obtaining New Business

Finding clients who need those services and building a customer base is crucial to experiencing success as a financial planner, because referrals from satisfied clients are an important source of new business. Whether you find new clients by giving seminars or lectures, through social or business contacts or simply by cold calling, find them you must.

Having a broad social network is one reason that many successful financial planners enter the field after working in a related occupation such as accountant, auditor, insurance sales agent, lawyer or securities, commodities and financial services sales agent.

What Education Will Lead to Employment?

Financial planning employers look for candidates with a bachelor's degree in accounting, finance, economics, business, mathematics or law. Courses in investments, taxes, estate planning and risk management are also helpful. Programs in financial planning are becoming more widely available in colleges and universities.

Financial analysts may also seek the Certified Financial Planner (CFP), the Chartered Financial Analyst (CFA) and the Chartered Financial Consultant (ChFC) designations.

Where do Advisers Work?

More than half of all financial advisers work for finance and insurance companies, including securities and commodity brokers, banks, insurance carriers and financial investment firms. However, four out of 10 personal financial advisers are self-employed, operating small investment advisory firms, usually in urban areas.

Be one of them, Join Financial Planning Academy! Free Career Consultation !

Careers in Financial Planning and Wealth Management

Financial planners and wealth managers help individuals plan their financial futures.

How are you going to cover your retirement needs? What do you have to do today to put your children through college? This work can be personally and financially rewarding and requires excellent interpersonal skills. A good financial planner understands investments, taxes, estate planning issues and knows how to listen. This work can be done within a company such as IDS Financial Services or by yourself, as a sole proprietorship. Most planners go solo or work within smaller practices. It's essential then that you have a certain amount of entrepreneurship given that you will be running your own business.

The work pays well and is rewarding if you like to help people. Increasingly, it pays to obtain the CertifiedFinancial Planner (CFP) designation. An alternative designation popular outside of the United States is the Chartered Wealth Manager. The job outlook for this profession is considered to be good and it is expected that career opportunities and salaries will grow substantially in the next decade.

Be one of them and Join Financial Planning Academy !

Leave Queries at http://bit.ly/wq1CKl

E-learning - How is it beneficial?

E-learning from end to end the web world has opened up a lot of opportunities for the people. There are more than a few benefits associated with e-learning. For students it acts as boon in getting knack of easier said than done topics as well as saving time. For teachers e-learning helps in learning the right skill required to teach students. Many schools nowadays are turning up the web world and teaching students online which has changed the entire spectrum of teaching methods.

The Education/Tools that e-learning provides surpass all other forms of learning methods. This medium of e-learning has made studying very easy. One can study at their own set time and place. There is no limitation of time in addition to people can even learn while on move. The mobile devices help in learning while traveling to places. It is acting as a boon to people who cannot attend classroom lectures to hectic work schedule. In many institutions and colleges good attendance is the first criterion to sit for exams.

The online medium has eliminated all these issues of attendance due to the flexibility of choosing one’s own desired time to study online. The online Teaching methods are unique and help in understanding the texts easily. Many schools are adopting this method of education/tools to make learning fun among children. E-learning thus has made it easy for people to pursue studies while working. Further the online learning is economical and one learns while they earn. Any one can pursue studies with the online methods of learning. There are no hard and fast rules of learning through online medium. These are truly convenient and help teachers, students and all other people who use e-learning of education.

Financial Planning Academy (FPA) demonstrates and supports a professional commitment to education in the field of Financial Planning. We want candidates to be thoroughly prepared for the CERTIFIED FINANCIAL PLANNER^CM (CFP^CM) exams and clear them with the highest grades and in good time.

Through i-LEARN you can pursue the CERTIFIED FINANCIAL PLANNER^CM (CFP^CM) course studying at home, your work place or even at a coffee shop!

Just log on and access the topics for all 6 modules, practice your concepts with the question bank, discuss your queries with other students, CFPs and Professors and evaluate yourself by attempting the real time exams.

We wish you all the best!

Visit Financial Planning Academy

Life Insurance Plans - Term v/s The Rest

When a financial planner suggests you to buy life insurance, it usually means buying a term plan. Any other endowment plans or ULIP plans are to be stayed away from, no matter how much money they offer at the end of the term period. However, why do we consider a term plan to be the right choice for you as opposed to several other plans which offer maturity returns and other attractive features? Even With the recently announced Budget, the laws have been changed to promote term & high risk cover plans.  We at Fpguru.com will give you a clear understanding of the same by comparing the several kinds of plans with a term plan.

Efficient coverage at low premium - A term plan is the most simple and the most effective way to insure your family against any financial difficulties in the event of an early demise. It provides you a fixed cover for a fixed term for a minimal amount of premium. However in the event of outliving the term, you receive nothing. Since your main aim of purchasing an insurance policy is to provide a cover for your family to replace the lost income, a term plan provides you with adequate cover at a very nominal amount of premium.

There are several other complex plans which offer you a fixed cover upon death along with a certain sum of money paid to you at the end of term. This is possible because the premium paid by you is directed towards two ends. A small part goes for the insurance cover. The rest is invested. On the invested amount there are charges as well. That is why these plans like ULIP’s & Endowments charge a very high rate of premium and correspondingly provide inadequate coverage or returns.

Simplicity vs Complications – A term plan is simple and easy to understand. A fixed premium, a fixed duration and a fixed coverage! You cannot go wrong. The many other plans available in the market are a mixture of one or more plans put together making them very complex. Avoid complexities because, in finance, simplicity rules! What you can understand, is what you must go for!

Returns – A term plan provides nil returns in the event of an individual surviving the policy term, whereas an endowment plan provides you a maturity value & a ULIP gives you market linked returns.  However, you must not forget the amount of premium you pay each year in order to achieve these returns.

E.g. In order to buy an endowment plan of Rs 2,00,000/- the yearly premium can amount to nearly Rs 16,000/- whereas you can purchase a term plan of Rs 25,00,000/- for just around Rs 8,500/-appx.

We believe that insurance and investment must strictly be kept aside. Instead of paying a higher premium, for earning nominal returns, purchasing a term plan for your insurance needs and subsequently investing the remaining amount of money can earn you better returns. Hence, if you purchase a term plan with premium amount of just Rs 8000/- or so, you can avail a cover of Rs 25, 00,000/- and also invest the amount of funds that you have saved by not purchasing an endowment plan, i.e. nearly Rs 8000/- to earn a higher rate of return in the market.

Tax Benefit – According to the existing rules, you can avail a tax benefit on the sum assured received, provided the sum assured is 5 times the premium amount. However, with the new Budget the rule changed to ‘the sum assured being 10 times the annual premium paid’. This has made many investment cum insurance plans taxable. Money back policies especially have lost their tax-saving sheen.

Ease of purchase – A term plan is very easy to purchase as it is easy to understand. It can now be bought at the click of a button on the internet.

However, do make sure your family is aware of your online purchase of a plan as it can help save them trouble at an unexpected future date.

Ease of functioning – A term plan is easy to operate. You pay your premium amounts each year and you receive coverage for another year. Owing to the nominal amounts of premium payable, it makes it easy to maintain a term plan as opposed to other expensive plans. In the event of an individual losing his source of income, he may still be able to continue paying his premium and avoid losing his insurance coverage.

A term plan is also easy to discontinue. In an unexpected turn of event, wherein an individual feels, he does not need life insurance anymore; he can simply stop paying the premium amounts to discontinue his policy, thereby offering complete ease of functioning. A term plan is simple and sticks to the basic purpose of insurance that is providing adequate cover for a nominal amount. Hence we strongly suggest a term plan for all your insurance needs. It simply cannot be replaced!

Source: fpguru.com

Financial Planning Academy secures the 2nd position as an Education Provider

It gives us great pleasure to inform you all that FPA has been able to secure the 2nd position as an Education Provider, across India, for the month of February, 2012. 

Link http://on.fb.me/GFc8KU

Benefits of CFP certification:

• You earn money by increasing your product offering to your client.
• Your expertise and creditability as a Financial Planner is instantly communicated.
• Your career and professional development opportunities are enhanced.
• You become a coach and problem solver.
• Your clients are more satisfied.
• Your professional standards reflect your enhanced social status.

Financial Planning Academy - CFP Course Program

What will be costlier and cheaper - Budget 2012 is out

Yesterday (16th March 2012) budget was declared for many of the items and activities. Following is a list of what will be costlier and which ones will be cheaper following the Budget 2012-13.

Items and activities became Costlier are as follows: 

>Two-wheelers, cars, commercial vehicles. 

> Refrigerators, air-conditioners, washing machines, watches. 

> Soaps, cosmetics, homecare items. 

> Cigarettes and bidis. 

> Packaged food items. 

> Pan masala and chewing tobacco. 

> Unbranded precious metal jewellery. 

> Imported luxury vehicles. 

> Imported bicycles and bicycle parts. 

> Imported digital still cameras. 

> Imported gold bars and coins of certain categories, platinum. 

> Imported cut and polished coloured gem stones. 

> Air travel, eating out at restaurants and hotel stays. 

Not all the items became costlier as the Budget has also made some items and activities cheaper. 

Cheaper: 

> Mobile phone parts. 

> Branded silver jewellery. 

> Branded garments. 

> Imported LCD and LED TV panels of over 20 inch. 

> Matches. 

> Footwear below Rs 500. 

> Adult diapers. 

> Soya protein food products. 

> Probiotics. 

> Writing instruments. 

> Imported medical equipment.

Management Tip: Measure the money you're making

1) Growth

Growth in sales is usuall, but not always, a positive sign. Look for year over year growth but remember that it has to be profitable and sustainable.

2) Cash generation

Cash allows companies to stay in business. Cash generation is the difference between all the cash that flows into the business and all the cash that flows out. Investigate where the cash is generated, how it's used, and whether enough is coming in.

3) Return on assets

A company's return on assets is its net profit divided by the average value of its assets during a given period of time. This measure shows you how well your company is using its assets to make money.

Do you measure the money you are making?

How to deal with a fund manager's exit

When a highly regarded and influential person at the helm of a company's affairs leaves, it no doubt creates a flutter among its stakeholders. Having steered the ship for so long, his departure rings alarm bells and raises questions regarding the future of the company. Similarly, the exit of a reputed manager of a mutual fund is bound to raise some eyebrows.

When the person who has consistently created wealth for your fund leaves, seeds of doubt will surely get planted in your mind: How much of an impact will it have on the fund's performance? Will the new fund manager be able to carry on his predecessor's good work?

Over the past couple of months, at least seven different fund houses have effected changes in the stewardship of their respective mutual fund schemes (see graphic New managers take over the reins). While some have merely reshuffled responsibilities among team members, others have seen their fund managers vacate their post, requiring them to be replaced by another.

These include UTI Mutual Fund, Fidelity Mutual Fund, ICICI Prudential Mutual Fund, Taurus Mutual Fund, IDBI Mutual Fund, Tata Mutual Fund, Principal Mutual Fund and Escorts Mutual Fund. Is there a cause for worry if you are invested in any of these schemes or can you safely ignore this development? If you find that your trusted fund manager is moving on, here is how you should tackle the situation.

Do not jump ship - Though many of us rely on the reputation and brand of the fund house when selecting a particular fund, there are some who assign more importance to the individual behind the fund. Have you invested in the fund based on the fund manager's track record?

In such a case, seeing your fund manager leave will probably make you question your investment. Some of you may be considering an exit from the fund.

Actively managed funds are usually more dependent on the fund manager's ability to execute key decisions at the right time. However, there is no need to press the panic button simply because a star fund manager has left.

While there have been instances when a fund manager's exit has caused a dip in the fund's performance, there is enough evidence to the contrary also. The question investors need to ask is, how crucial is the fund manager to the fund's performance?

Contrary to beliefs, mutual fund schemes are often run by teams and not merely by an individual. There are usually processes in place which remain constant throughout the life of the fund, that is, the core philosophy remains unchanged.

So, when a particular fund manager leaves, the next in line can simply fill his shoes without requiring any change in the security selection processes. This ensures that the fund performance doesn't get affected. The fund house pedigree matters more than the individual. 

How to get the best deal when home loan rates begin to fall

With three banks, Union Bank of India, Central Bank of India and Bank of Maharashtra announcing their decision to lower home loan rates, it is almost certain that we are heading towards softening of interest rates. Some more banks may soon announce rate cuts, while some may wait for the Reserve Bank of India to slash its policy rates, before taking a final call.

The disparate rates, in the meanwhile, are going to cause a lot of confusion among home loan customers. If you have been waiting to switch over to the lender with lower rates at the first opportunity, it may be time to act in the next few weeks. Meanwhile, you can pore over your existing loan agreement to understand the clauses to avoid complications later. Follow the same exercise with the new lender too. Here are a few points that can guide you through the maze.

Some banks have completely done away with the fixed-rate schemes. However, some of them did offer fixed home loans in the past with interest rate as low as 7.5-8%.

The catch, of course, was that these rates would be reset every three years and subsequently linked to the rates prevailing at that time. If you have taken such a loan a few years ago, your EMI must have zoomed to unmanageable levels by now.