MoneyVedam

Investment products need to be broadly investor centric catering to the genuine needs of a wide range of small investors rather than favor a few big fish(es). Ironically, investment products rolled out are based on public policies which gets formulated based on corporate-bias (in developed world) or government-bias (in developing countries). A good example of investor centric product is PPF which is offered on an individual basis (no corporate accounts allowed) and enjoys EEE (exempt-exempt-exempt) status on all three counts - amount invested, interest earned and maturity proceeds. Several bad and notorious examples exist in the market which needs no mention. A constructive example of how public policy combined with good regulatory oversight has helped fortify the retirement nest of the working class is Chile's pension system. The insurers are tightly regulated on two fronts - costs and performance. Insurers are required to bid for managing the annuities of pensioners, thereby...

The budget has been released and as usual some benefits were given and some new taxes imposed. Some of the announcements are still in proposal stage (eg. taxation of non-equity mutual funds) and may be re-considered for clarity on implementation timelines, while others (such as raising of basic exemption to Rs.2.5Lacs) are final. It is argued that India is one of the lowest tax-to-GDP ratio countries and more needs to be done to widen the tax net. A look inside the tax revenue stats reveals some startling data points for us to ponder. Number of Tax Payers in India & their Slabs Slab            No. of assessees (in lakhs)     Percentage of taxpayers 0-5 lakh       288.44                                      89.00% 5-10 lakh     17.88    ...

When it comes to inflation, it is natural to apply it to prices of goods & services. Avid investors would be concerned as to whether their returns from investment(s) beat inflation. But the most forgotten yet important issue is whether tax exemptions and tax slabs have kept pace with inflation. In other words have the tax slabs been inflation indexed? Let us examine where inflation has taken taxes to! Nominal vs Real money value Prior to delving into the subject lets get 2 terms clear. A nominal value is the face value of money - a nominal value of Rs.100 in 2005 is Rs.100 and in 2014 is Rs.100 as well. However real value of money is one that is adjusted for inflation (based on cost inflation index). So, Rs.100 in 2005 is not Rs.100 in 2014, but its real value has dropped to Rs.48.53 in 2014 due to inflation. In other words, if you had paid Rs.100 for a good in 2005, you would have to pay nearly twice that amount, Rs.195 for the same good in 2014 (based on cost inflation index)...

In most aspects of life, black is considered a beauty and is welcome - karuvizhi (black eyes), kaarkundhal (black hair), kaarmegam (dark clouds that brings rain), karungal (black stone that keeps insides of temples cool) and the darkness of outer space! However, when it comes to financial matters, regardless of its short-burst attractiveness, black only gives a headache!! The real estate case of black money.. Most common people engage in black transaction only in real estate deals either because of a desire to evade tax or by simply following a (tax evasive) real estate system in the country where black money is demanded (during a buy) and/or pushed (during a sell). Lets take an example to see how involving black money as part of a transaction is harmful to one's financial well-being. An investor buys a plot of land in 2004 and sells it in 2014. The middle column - "buy(b), sell(b)" represents the case where by the investor buys in black and sells in black (all-blac...

KYC is an acronym for “Know your Customer”, a term used for customer identification process. It involves making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds and the nature of customer’s business. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering. Compliance with KYC is mandatory for investing in financial instruments. KYC compliance has taken many avatars prior to current state of affairs whereby you need to do a KYC with your bank and another one for investing in capital market products (Mutual funds & Stocks). The KYC done with the bank is sufficient to buy Insurance products as well. However to invest in any capital market products, you need to do a separate KYC. This KYC is valid to invest in Mutual funds (direct or through intermediaries), stock brokers and to avail portfolio management services. To do your KYC, you need to ...

A century ago, most Indians worked in farms or family trades. We produced and consumed for domestic needs (within 5-50kms) and lived well with all products that were available natively - we never had broccoli or oats, but we had several varieties of millets and keerais.  Neither did we have fiat currency (printed paper that states the value of money held / currency that is not backed by gold or silver). All that we used were produced locally and perhaps bartered from nearby locations. Wealth was real and tanglible - in essence, we were free of finance & financial needs. Through the British rule, we imported several things ranging from the english language to western culture to modern industries, a 9-to-6 job, marks-based education, rank-based-selection, a nice designation, fat pay, retirement, insurance, credit, stock market, speculative trading, wealth accumulation and capitalism. The most recent addition to this list is "Financial Freedom". From being financially free ...

What is an annuity? An annuity is a fixed stream of income for a certain defined period of time. Similar to pension, annuities provide regular income stream during retirement years. Annuitization is the process where by you pay a lumpsum accumulated from years of savings in a plan (such as NPS, deferred pension plans etc) to buy an annuity product which would pay out regular cash flows primarily during your retirement years. One who receives such a payout is called the annuitant. There are several variants of annuity plans available depending on your preference for payout tenure, increments desired, continuing payouts for spouse in case of death of annuitant etc. Types of annuity Immediate annuity - pay with lumpsum & start receiving annuity immediately (eg. LIC Jeevan Nidhi) Deferred annuity - a savings plan where you save some amount every year for 5,10,20 years & then start receiving annuity from the deferred date (eg. UTI pension); Annuity certain - receive a fixed ...