How Gratuity Funds Work?

Gratuity is one of the least-attended or least-understood component of an employer’s salary. The following text provides you the necessary information to help you understand everything about gratuity.

What is Gratuity?

Gratuity is a token of gratitude offered by the employer to an employee for the services provided by him/her during the tenure served in the respective company. It is one of the retirement benefits received by the employee. This benefit plan is defined by the employer for the concerned employee, and is paid back to the employee upon quitting. Reasons to quit the job could be many, such as retirement, switching to another job, or being retrenched by the current employer in the form of voluntary retirement. 

Eligibility

As per the Income Tax Act 10 (10), the employee must have completed full-time service of minimum five years in the organisation and minimum 240 days in a year. 

How it Works? 

An employer may offer gratuity out of his own funds or may approach a life insurance company, such as Max Life Insurance, to purchase a group gratuity plan. If the employer chooses to go with an insurance company, then he/she has to opt for an annual contribution to the insurance company as defined by them. The employee also has the right to make contribution to the gratuity fund if he/she wishes to do so. The payment of gratuity by the insurer is based on terms and conditions of the group gratuity scheme. 

Tax Treatment of Gratuity 

The amount received from gratuity is completely tax deductible under the ‘income from salary’ bracket. Also, the gratuity, whether received by the nominee or legal heir of the employee, is always tax deductible under the ‘income from other source’ bracket. 

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Investment Planning: A Core Part of Planning your Future

In the business world, “the rear view mirror is always cleaner than the windshield.” This popular saying was said by Warren Buffet and is a direct indication of how important financial planning is for predicting the future.

Investment planning is very important for any individual so as to get the most out of the investments that they make. Investments are financial goals which people have, similar to their personal goals with the only difference being that there is a financial cost that is attached. Failure to plan for these goals efficiently would probably mean that you, as an investor would be most unlikely to accomplish the goal.

There are various investment plans that are available in the market for investors to use, whether for high-risk investments or for low-risk investments. While high risk investments are known to carry a high amount of risks with them, they also have a greater potential of earning higher returns when compared to low risk investments. Many investment plans are offered by mutual fund companies in the country. It is easy to browse through the wide variety that is available online.

These plans are directly linked to life insurance plans that people purchase to financially safeguard their future. There are many life insurance companies in India, which are known to offer life insurance plans, investment plans and savings plans; so as to help a person meet their various financial objectives and goals.

People can also compare the different plans that are offered by different providers all on a single platform to help them make a sound decision about the policy that they want to purchase.
It is important to remember that investment is always a long term game. It is very important to have a well-defined goal, before-hand. After one has their goal defined, it is easy to choose the financial instruments that need to be invested in, so as to meet the decided goal. It is always wiser to have one’s investments spread out across different assets like equity, cash & bond so as to reduce the amount of risks.

So, if you are yet hesitant about your investments, it might be a good idea to meet a financial planner who will help you plan your investments.

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Cloud Networking: Extremely Fundamental to Cloud Computing

In today's fast-paced times, where i-pads, i-phones, MacBook's (Pro and Air) are becoming extremely popular as the 'new-age' computer devices, the terminology the 'cloud' has become extremely popular. However, what is this cloud that is constantly being referred to? An abstract term, the cloud is not a physical object which can be touched or felt. It is a network of servers, where each server has a different function to perform.

 For instance, if a person takes a picture using their Smartphone then the image is stored in the phone’s internal memory. However, if a person uploads the photo on Instagram, then they are uploading it on the cloud. In short, the cloud refers to a network of servers. While there are certain servers where which provide online services such as Adobe Creative Cloud, there are others which allow a person to store and even access the data, such as Dropbox or Instagram.

In most cases, people access the cloud daily, through the Google Drive, or SkyDrive to even iCloud or Evernote whenever they want to store information without making use of the internal storage of their phones. They instead can store their information on the cloud. By making use of the cloud, it offers people a tremendous amount of convenience and reliability. People are also less likely to lose data from the cloud.

The cloud network is extremely fundamental to cloud computing. Cloud networking essentially refers to the paradigm for building and managing secure private networks over the (public) internet by making use of global cloud computing infrastructure.

Thus, in cloud networking the traditional network functions as well as services which are inclusive of security, connectivity, control and management are pushed towards the cloud and delivered as a service. There are two main categories of cloud networking.

 These include Cloud-Based Networking (CBN) and Cloud-Enabled Networking (CEN). While Cloud-Based Networking (CBN) moves all of the core networking functions such as the actual packet path and addressing into the cloud and ensures to eliminate any need for local hardware (other than that which provides for an internet connection), Cloud-Enabled Networking (CEN) refers to the management and movement of only specific (certain) aspects of control (such as policy definition) into the cloud. However, it keeps packet-mode functions such as switching, routing and security services (local and in hardware) and connectivity.

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Compare Term Insurance Plans Online

Life is the most precious gift that has been given to us and it would be impossible to put a price tag on a person. However, financial security and protection is an absolute essential in today’s time and age where there are risks waiting at each and every corner. Life insurance, one of the most common types of insurance packages are known to provide the beneficiary with a certain designated amount at the event of the death of the person who has been insured.

There are many types of life insurance products available in the market, ranging from whole life plans, endowment policies, limited payment policies, double endowment policies, etc. However, term insurance plans are the most popular ones that are availed by millions of people across the country.

So, what is term plan?

Also known as term assurance, it refers to that life protection providing a person with a coverage amount for a specific period of time (fixed tenure). After the policy expires though, the policy is of no value until it is renewed. These policies are known to offer the most value for money proposition. However, when choosing these policies, it is very important to pay attention to the claim settlement ratio. It is easy to find information regarding the various claim settlement ratios that are offered by term insurance providers, according to the IRDA (Insurance Regulatory and Development Authority) of 2014.  

Purchasing these products online has become a very popular method for people since the past few years.  People are able to compare term insurance plans that are offered by different insurance companies, all on a single platform. This helps them make a wiser decision when they decide to purchase a policy.

This is one of the most beneficial aspects of purchasing a plan online. People are able to gain a deeper insight about their prices in the market. They do not need to physically visit each company to find out the price. All they have to do is conduct a bit of research and they can compare policies.   

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Fixed Maturity Plans: Better than Fixed Deposits?

When it comes to making investments, investors have to be extremely prudent about where their funds are going to be kept. Which financial instrument would be a better option than the other for both short-term and long-term goals? Fixed deposits have been known to be the top most favourite amongst investors for long term investment. However, this is wrong!

Fixed maturity plans (FMPs), launched by various mutual funds are known to give higher and better returns than Fixed Deposits. So what are fixed maturity plans (FMPs)? Known to be closed-ended Mutual Fund schemes, which have a pre-defined maturity, these investment options have their primary objective to generate steady returns over a fixed period. This period may be from one month to even five years.

They are a mutual fund scheme that has a maturity date and the fund manager will invest in different bonds or other fixed income instruments that mature before the maturity of the scheme. It is very similar to a fixed deposit, but it is not the same. Although they don’t ensure guaranteed returns, or offer liquidity of the schemes, there is the possibility of earning tax free returns that are due to double indexation benefit (which is available for some FMPs). There is a minimum interest rate risk and credit risk, making it a preferred option for most fixed income investors.

The investments made in FMPs are known to mature before the maturity of the scheme. Therefore, there is no interest rate risk that investors have to be exposed to. The very fact that these investment options are tax-efficient automatically makes it a better option, where returns are higher.  However, premature withdrawals are not permitted as is the case for bank Fixed Deposits. Bank deposits are also known to come with deposit insurance (for a holding of up to Rs 1 lakh); there is no such similar facility for FMPs.  

FMPs are especially known to shield (protect) investors from the fluctuations in interest rates by investing in a portfolio of debt securities. Some of these include debentures, certificates of deposits and commercial papers. Their tenors have to match that of the scheme. At the end of the FMP term, these securities can be redeemed. For instance, these funds are good only if the investor will remain invested until the time of maturity. If an investor cannot do that, it might not be a better option than fixed deposits.

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