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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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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Do you need a Certified Financial Advisor?

In today’s world you really don’t have to be an all-rounder or be well versed with everything. The internet is always there for your rescue. But if you come across agendas where the internet also cannot be of great help, there are consultancies for various purposes. These consultancies provide you with an individual who is well versed with an area you might have difficulty with to make it a cake walk for you.

Finance is a tough nut for me that I really cannot avoid in the long run. It is not enough to earn the right amount of money alone but is also very important to plan the right kind of savings all together. Well if you happen to face the same issues, than have you heard of certified financial planner?

As the name suggests a certified financial planner is someone who is well versed with the finance scenario inside out and is certified to guide others with the same. To be more precise, he or she is a financially qualified investment professional who is trained to help individuals and organisations in achieving their financial goals. The goals could be long term or short term. They at times may even help you with defining financial goals for many.

Things that need to be taken into consideration when closing on a financial planner. It is very important to at least go across thoroughly with three financial planners before you zero upon any. The personal also needs to hold his or her set of credentials. If they are able to give you references with respect to their clientele and work profile it is nothing like it.

Since it is a service it surely comes with a bill to be paid, so completely be well aware of the fees that shall be incurred from you for the services you are experiencing from them. And lastly the many features they shall include in the amount of money you shall be paying them.

So next time you fall short of financial knowledge you know whom to refer to.

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Best Investment Policies for 2014

The new financial year is about to begin and we are already planning how to go about this year with regards to our finances. A list of investment schemes you can channelize your money in.

2014 have begun and we are on our verge to wrap the financial year and begin a fresh new chapter into our own account books. The plans have already begun and for the once who are yet pondering over how the investments should be channelized here is a list of policies you can invest in.

For 2014 in India the best investment schemes mainly comprises of PP Funds, Fix Deposits, Insurance Investments, NSC and Mutual Funds. There are some high end options as well one can make their investment in such as Real Estate, Stock and Equity investment, Gold & Silver investment and NRO fund investment.

Public Provident Funds

PPF is a good option for securing your money for future use. The major reason to opt for this scheme is for the returns it comes with especially for people who fall under the 30% tax bracket. The rate of interest for the returns is as good as 9%. However the investment tenure can be as lengthy as 15 years. But then the good returns with no major risk involved the high tenure can be overlooked upon.

Fixed Deposits

It is probably amongst the most favourite investment avenue in India. The major reason being a reasonable amount of returns with the money locked in safely. The tenure of an FD ranges from 15 days to 10 years. The rate of interest differ from the financial organisation you opt for however on an average a non-senior citizen can acquaint a rate of interest up to 10%. The rate of interest is a little higher for people who are above 60 years of age. The best part about this plan is one doesn’t need to worry about the investment made until the date of maturity. 

Insurance Policy

The best feature of this avenue is that they make you avail of profits that are completely risk free. There are a variety of types that provide different kinds of coverage. There are many insurance houses you can opt for to make the necessary purchases.

Mutual Fund

If you desire to enter the stock market but aren’t really ready to risk your investments with the fluctuations that happen in the market than mutual funds is the best option one can consider. If you create a diverse portfolio comprising of limited investments it can help you generate high returns. It also helps in reducing the risk factor and avoids complete loss with your investments.

National Saving Certificate (NSC)

With tenure of six years and the ease of Government subsidies it happens to be one of the favourite investment plans of people in India. A nominal amount of Rs 100 is even enough to get started with NSC. The rate of interest for NSC is 8% which is calculated twice in a year.

Investment in Gold & Silver

In 2014 opt for silver than gold the reason for it being the appreciation in gold returns is that in parallel with the rupee appreciation. However for the once who cannot think beyond gold for an investment should opt for about 5% to 10%.

Real Estate

It has always been the hot option for many investors. But the ever escalating price of property rates has even made it tough for the rich to give it a shot. It is therefore advisable to not venture in to real estates in the year 2014.

So get set and begin your financial year on a good note.

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How important is the latest NAV to your Investment?

Known to reduce the amount that an investor gets the fees that investors have to pay play a very important role in the amount of returns that are received. This may include different charges such as transaction fees, sales charges, account fees, etc.

Investing in mutual funds is known to be the most common form of investment that is made in the stock market.

Some of the different types of fees and expenses that are involved in the same include:

1) Sales charges

There may be a sales charge which is imposed when either purchasing or selling different securities/units of a share of a particular fund. There are different types of sales charges which may include front-end load or initial sales charge (ISC), back-end load or deferred sales charge (DSC), low load or low sales charge (LSC) or even no load.

2) Transaction fees such as switch fees or short-term trading fees.

3) Account fees such as registered plan fees or minimum account balance fees.

4) Fund expenses such as the fees or expenses that a fund contributes to be deducted from the fund’s assets before the returns are calculated or even published.

This may also include management fees, operating expenses (or even fixed administration fees), trailing commissions such as those paid from management fees, trading costs or even incentive fees.

    

Management fees as well as operating expenses (MER): All of the operating expenses or management fees are known to contribute to a fund’s management expense ratio, which is also known as MER. This can range from 1% to 3%.  These fees are known to include overseeing the fund, the hiring a portfolio manager to make the investment decisions and hiring of other company/companies to assist in the administration of the fund.

The operating expenses include expenses such as legal fees, audit fees, bookkeeping and administrative fees, audit fees and marketing costs.

These funds all have a net asset value (NAV) which refers to the market value of the fund’s holding without adding the liabilities of the fund (net liabilities). This value is computed at the end of the day. There are certain funds which are known to compute their NAV’s more than once time per day.  Their turnover rate is known to be an indication of the ‘volume’ of the particular funds securities trading. It is easy to find out the latest NAV online from the website of a particular financial company. There are plenty of trading portals which are also available online where people can perform their different trading activities.

There are many different advantages of investing in different types of mutual funds. Some of the different advantages include increased diversification, daily liquidity, professional investment management, ability to participate in investments which are available only to larger investors, convenience and service and ease of comparison.

When investing in these types of funds there is a tremendous amount of flexibility as well as funds to choose from. Some of these may include equity funds, balanced mutual funds and bond funds. 

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Finance Calculators: All Your Finances Organised

Personal finance is yet to see the day light in high school or college academic courses. It is a real tough deal to manage yourself with the world of finance in the real world out there. It is a misconception that understanding and dealing with finance is not a cup of tea to all. Well all it takes is a little in depth reading of the subject and the best part is you do not necessarily be good in maths.

Savings is an important act but it is equally important to keep a track as to how are your savings really doing. Are they yielding the right returns? There are many tools to calculate it. The financial calculators are of many types and purposes; mutual fund calculator, budget calculator, pension calculator to name a few. It’s a computerised program to calculate the instalments one might have to pay for a certain amount of principal amount over a specified time period.

However there are many types of finance calculator. It helps in giving people a better idea about their financial transactions, keen on making any sort of a financial commitment. Here is a list of some calculators with varied purpose.

Budget Calculators: This is a simple program meant to give you a better idea about your monthly expenses. The take in account your monthly expenses and define you a monthly budget. It is more commonly used to figure out the gross monthly expenditure of an individual what would be the disposable income.

Pension Calculators: People on their verge to plan retirement or invest in a pension plan, this calculator are of a lot of use. They are pre-programmed with current interest and inflation rates.

Mortgage Calculators: Specifically targeted to calculate home loans and mortgages.
They take into consideration property tax, home value and even your credit profile.

Tax Calculators: It takes care of calculating the amount of tax you will be paying in a given period of time. It takes into account your tax bracket, current tax rates, rebates and your age.

The financial calculator has become a regular feature on the websites of investment companies, credit providers, banks and other financial resources online. Some advertisements also showcase loan calculators in them. You will also come across them on weekly financial blogs. A finance calculator is very much of a helpful tool for those stuck with their office work, or simply couldn't gather the time to visit a loan consultant or other financial advisers. You may soon come to realise that it is more of a preferable option. Try out a financial calculator to see how it helps you to make your financial future more planned and organised.

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Term Insurance Plans - Best way to channelize your Investments

Ever heard of “Life is too short to have any regrets”. Well it is so true with investments. If not well planned and not well pondered upon can be a terrible decision made with no time for regrets. So it is always better to have your investments well planned and channelized.

There are no best financial products be it mutual funds or insurance. They may be best today but not yield the same results when you need of it. A few pointers for a smooth sail in term insurance plan.

·         Claim Settlement Ratio: The most important factor for selecting any insurance policy including term plan is claim settlement ratio. The main purpose of buying a life insurance is to secure our family financially with as an assured amount is expected. But for some reason if it gets denied then the whole purpose is in vain. So it is always better to have a thorough check then be sorry.

How to reduce chances of claim rejection?

There are 90% chances that you have called the agent for buying your term plan. But allow the agent to play the checker alone. Do double-check to each and every form that you fill. Do not hide about your vices, be open about the fact that you drink or smoke. Also disclose your medical history if any, even if you feel it’s small. Mention about your other insurance policies with other companies.

If you take care of the following points there is very less possibility that your claim may get denied.

·         Reputation of the company: There is no defined pattern as to decide over the reputation of a company. However it all depends on two factors being the financial health and your past experience. Therefore it is a very subjective agenda and changes time to time but still can be considered to increase your confidence. Or the other way round to think of it can be, that you have 12 companies offering good insurance policies but you aren’t sure of two of them, so you can eliminate two from your list of preference.

·         Low Premium: A lot of people think this criterion of least importance however it is of utmost importance. This should be considered once you have shortlisted policies based on the above two mentioned pointers. Online term plan have become a huge hit with insurance buyers in the past two years, with an easy access to many finance tools such as term insurancepremium calculator. It seems that every 18 minutes an online term plan is bought in the country. The seven life insurance companies that offer such term plans have issued more than 14,500 policies with a combined cover of roughly Rs 9,100 crore, over a span of six months. For an underinsured country like India the large cover offered by online plans is good news. 

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Car Loans - Making Childhood Dreams Come True

There are some things which people dream of owning from the time they are young. Ever since the day you raced cars on the kitchen floor as your mother made dinner, you have always dreamed of owning a vehicle of your own. This is something which is completely yours, from the colour of the exteriors to the awesome stereo that will blast all your favourite tunes.

However, a car with all these details and customizations could be very heavy on the pocket. Thus, it becomes important to start saving well in advance, so that one day you will be able to purchase this unbelievable asset. This being said, saving the entire cost of the vehicle will take a good amount of time.

A more reasonable option would be to save enough for a down payment of a loan. Thus, the amount to be saved will be reduced significantly, as will the waiting period. However, before applying for a loan, it is important to compare the rates available. This can be done by going through all the options in the market.

There are a number of deals which give their customers maximum benefits by making a loan offer for the purchases, which have been made. This can be very convenient and in addition to this, they offer a number of add-ons, which may seem like the cherry on top of the cake. However, it is important to compare the most basic clauses of a loan without considering the add-ons as they are not necessary.

If convenience is a major factor, you can take comfort in the fact that the process of applying for car loans has been simplified significantly. Both banks and financial institutions go out of their way to make the documentation as easy as possible. They even send representatives to your residence, to make the process as easy as possible.

The eligibility criteria, has also been stretched in order to allow more and more people to apply for the same. So much so that many financial institutions do not even need a down payment to be made in advance. In addition to this, the processing fee is also wavered if you opt for a fixable interest loan.

This option may be a little risky as the rates on to be paid as interest change, according to the market fluctuations. Hence, they can be profitable if the rates are expected to fall in the future however, it is a risk which you must be willing to take. A safer and more reliable option is the fixed rate of interest, which remains the same irrespective of market conditions.

In this manner, you can easily apply for a loan and enjoy all the joys of driving around in the city in a car which is your own.

Best Seller Cars in 2013 from pritb2

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Importance of Asset Management Companies (AMC’s)

Recently crowned as the world’s third largest economy by the Organisation for Economic Cooperation and Development (OECD) can we say that the Indian economy is already trembling? With the financial crisis in different global markets, the outlook for the Indian economy is grim and bleak. Owing to the constant volatility that is present in the market along with the fluctuating currencies it is extremely important to manage one’s finances with utmost precaution and care. Besides this, the plunge of the Indian Rupee to an all-time low against the USD is another factor why finances need to be handled well.

There are a number of asset management companies/firms (AMC’s) which invest all the pooled funds of different investors in securities as per the investment objectives. These companies mainly engage in the business of investing in as well as managing a portfolio of securities. Assets are of different divisions and they may be bonds, real estate, stocks, shares or even commodities.

There are a number of investment managers who are specialised in discretionary or advisory management on behalf of private investors (normally wealthy). This may also be referred to as portfolio management, money management and is often within the context of private banking.

These managers are responsible for all the activities that are associated with the management of the client’s portfolio. This may include the buying as well as selling of different securities on a day-to-day basis, performance measurement, portfolio monitoring, settlement of transactions, client and regulatory reporting.
These managers consider the various degrees of portfolio diversification and help to create a list of planned holdings. This particular list is extremely beneficial in determining what percentage of the fund should be invested in a particular bond or stock. In order to be effective at this, it is very important to manage the correlation between the liability returns; asset returns cross-correlations between the returns and any internal issues to the portfolio.

There are many different styles/approaches of funds management that can be employed. Some of these approaches include value, growth, market neutral, small capitalisation, etc.  Every approach has its own distinct features as well as risk characteristics.

The growth style of investing is type of investment strategy where growth investors invest only in those companies which exhibit signs of above-average growth.

Investment managers may range in size; they may be one or two people and may even go up to large multi-disciplinary asset management firms having offices in different countries. The fees that are charged are generally determined on a percentage of the client’s assets under management (AUM).

Asset management can be of different types. Some of these include financial asset management, enterprise asset management and public asset management/corporate asset management (CAM). Financial asset management refers to the management of collective investment schemes as well as segregated client accounts. Enterprise management refers to the business processes and enabling information systems which support the management of the assets of an organisation. This may include physical asset management, fixed asset management, IT asset management and digital asset management.

Asset management company (AMC) is that company which specialise in the provision of services whereby one's financial securities are managed well. The investment managers are in charge of buying as well as selling all the securities of a person's financial portfolio.

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