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EDLI Scheme 2021: Features & Benefits

The scheme of the name EDLI or Employee Deposit Linked Insurance is not one that many are familiar with. It is a Life Insurance of Rs.2.5 lakh that is built into your EPF Life Insurance of 7 Lakh.

Earlier the maximum ceiling was Rs.6 lakh, Government increased the maximum limit to Rs.7 lakh with effect from 28th April 2021.

Features of EDLI Scheme 2021

  • All employees who are members of EPF are automatically eligible for EDLI.
  • This Life Insurance coverage is irrespective of whether the death occurred during working hours or non-working hours.
  • It covers the death of an employee, irrespective of the cause of death.
  • There are no exclusions under this plan.
  • Coverage and premium will be purely based on your salary but not on age or gender.
  • Earlier there was a condition that one must complete a year to be eligible for EDLI. Recently they removed such restrictions. Hence, you are covered from the first day itself.
  • There is no maximum age set for this insurance.
  • You no need to add nominees separately. Your EPF nomination itself is considered for this scheme.
  • Your Employers can also set up a separate insurance scheme for their employees with approvals from the EPFO if they find that the current coverage is low.
  • You get covered even if you shift jobs and work for another employer covered by the EDLI scheme before you complete one year of service. Earlier, 12 months’ service was applicable under one establishment.


EDLI Scheme 2021 – EPF Life Insurance of Rs. 7 Lakh

Under new changes, now EPF offers Life Insurance of Rs.2.5 lakh to Rs.7 lakh. The employee will not contribute to EDLI. Only your employer will contribute to it. It is 0.5% of Rs.15,000 or Rs.75 per month to the maximum (based on your actual Basic+DA). The maximum amount payable by the employer is Rs.75.

How is Employees’ Deposit-Linked Insurance (EDLI) calculated?

The average monthly salary (Basic+DA) drawn (subject to a maximum of Rs 15,000), during the last 12 months preceding the month in which the employee dies, is first multiplied by 35 times (Earlier it was 30 times). This is added to 50% of the average balance in the account of the deceased in the provident fund during the preceding 12 months or during the period of his membership subject to a ceiling limit of Rs.1.75 lakh (previously it was Rs.1.5 lakh), is also paid to the beneficiary family. 

Note that Rs.15,000 is the ceiling under the EDLI scheme for the purpose of this calculation even if your basic salary exceeds this amount.

The minimum payable will now be Rs 2.5 lakh while the maximum will be Rs 6 lakh.

Let us assume that Mr.A’s salary (Basic+DA) at the time of death is Rs.10,000. Then assume his last 12 months’ average salary was Rs.10,000. Then we have to multiply this by 35. This will be Rs.3,50,000.

Now we have to add 50% of the average balance in the account of Mr.A during the preceding 12 months. Assume his EPF balance for the last 12 months is Rs.1 lakh. Then 50% of this is Rs.50,000. However, the maximum ceiling is Rs.1.75 lakh. Hence, his nominee will receive Rs.50,000 as a bonus but not Rs.1.75 lakh.

So in total, his nominee will receive Rs.3,50,000+Rs.50,000=Rs.4,00,000.

Now let us assume a simple calculation like one’s salary is Rs.15,000, then 35 times of Rs.15,000 is Rs.5,25,000 and the bonus added to the maximum is Rs.1,75,000. Hence, the total maximum benefit under the EDLI is Rs.7,00,000. The benefit will not go beyond this amount.

How to claim the EDLI Benefit?

  • A nominee can claim the amount.
  • In case there is no nomination, then the legal heir can claim the amount.
  • If the nominee or legal heir is a minor, then a guardian of the minor nominee can claim the amount.
  • You have to fill the forms like Form 20 (for EDLI), Form 10D/10C (for claiming the Provident Fund dues and Pension/Withdrawal Benefit as applicable).
  • All details should be in BLOCK LETTERS.
  • Provide bank details (better to attach a cancelled cheque copy for accuracy of bank details).
    Attach the death certificate of a deceased employee.
  • Guardianship certificate (If the claim is on behalf of a minor family member/nominee/legal heir is by other than the natural guardian.)
  • Succession certificate (in case of a claim by the legal heir).
  • In case the members were last employed under an establishment exempted under the EPF Scheme 1952, the employer of such establishment should furnish the PF details of the last 12 months under the Certificate part and also send an attested copy of the Member’s Nomination Form.
  • You have to send such a filled application to the EPFO Commissioner through the employer.
    In case the company closed or they are not cooperating for a claim, then you have to get the claim form to be attested by any one of the following officials-Magistrate, A Gazetted Officer, Post/Sub-Post Master, President of the Village Panchayat, where there is not Union Board, Chairman/Secretary/Member of Municipal/District Local Board, MLA or MP, Member of CBT/Regional Committee EPF, Manager of the Bank in which the Bank Account is maintained or Head of any recognized educational institution.
  • A claim must be settled with 30 days of such submission.
    However, if there is any fault in filling the form or processing, then you will receive the letter from EPFO for the same and that too within 30 days.
  • If EPFO does not settle the claim within 30 days, then EPFO Commissioner will be liable to pay the 12% per annum interest on such claim amount from the date of the set period for claim settlement.

Conclusion: For some, this Rs.2.5 lakh to Rs.7 lakh insurance may be a small amount. However, for many families, in case of the sudden demise of an employee, this amount would help a lot.

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How To Get Your Kids Started On Managing Finances

Hi there!

We have always firmly believed that money is a habit best developed as a child. Some concepts like Savings, spending smartly, and not borrowing for unnecessary things is best inculcated in our formative years.

For kids of ages 3 to 5

They've probably started collecting some decent pocket money from birthdays, holidays, or a small weekly allowance. This is when we can start to teach them the three basic things we can do with money: save it, spend it, and give it. You might set up three jars for them so they can more easily divide up their money into the save, spend, and give categories.

We’re not talking about a lot of money here, so as long as they’re putting something into each jar. Maybe the “spend” jar gets used to buy a candy bar in the grocery store or snacks for themselves. The “save” can be used for a special toy they want to splurge on. And the “give” money can be pulled out to give gifts to their parents/grandparents, buy something for your house help.

Introducing the idea of saving, spending, and giving money now, in its most basic form, will lay the foundation for how you talk to them about money in the years to come.

For kids of ages 6 to 10

By this age, kids are starting to develop a deeper understanding of how money works. They understand that grown-ups have jobs to make money and that much of what they see around them—their home, the car, their Friday night pizza dinner—is paid for with money. You can start to explain to them the difference between using cash, a debit card (cash that you keep at the bank and the bank then sends to the store), and a credit card (you borrowed that money and will have to pay it back to the bank later).

This is a good age to start letting them attempt to make their own simple purchases in a store. They’ll need your help with counting out the correct amount or with prompting when it’s the right time to hand over the money, but it’s good practice that will build their confidence about how the process works each time they do it.

If they don’t already have a bank account of their own, this is a great age to open one up. They may have some money they keep at home in their jars or piggy bank, but it’s also good for them to get accustomed to the idea of stashing some money away safely and watching it grow as they add to it over time. Take them to the actual bank to open the account (they will feel very grown up), and take them back, if you can, each time they want to make a deposit. (Actually depositing the money themselves really drives home the idea that they are adding to their own little pile of savings.)

For kids of ages 10 - 13

At this age, you should start talking to your kids about how you decide what you spend money on. “Being able to afford it” and “choosing to spend money on it” are two totally different things, and it’s at this age that kids can really start to grasp why you prioritize spending in one area over another. For their next birthday shopping trip, take them shopping with you and keep a fixed budget, let them decide if they want to buy that toy, or have a party.

This is also a good age to introduce the concept of long-term savings for bigger items. 

For kids of ages 13+

This is the perfect age to help them develop some different long-term savings goals, whether it be saving for a new gaming system, smartphone, computer, or even their first car. You should also be talking about what you can (or are willing) to pay for when it comes to college, so they’ll know what part they’ll need to plan for.

Eventually, our kids are going to graduate with debit cards and credit cards, but I’d suggest you keep them using cold, hard cash for as long as possible. They are more likely to develop good money habits if they feel that little bit of pain when they hand over all that hard cash for a pair of sneakers. You feel a purchase more when this type of exchange happens—I give you money, you give me shoes—and their wallet feels a bit slimmer afterward.

On the other hand, when you pay with a card—I give you a card, you give me shoes, and you give me the card back—the immediate impact isn’t felt, so the impulse purchases may soar.

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Teaching your children about money at any stage is going to take time on your part. But introducing them to money and imparting money management skills in these small ways mentioned above can go a long way in their future.

Kids will follow your lead. Remember kids are always observing adult behaviour and building their habits and worldview around your actions. Therefore, be slightly mindful about your relationship with money around your children so that you can set them up for financial wins and not woes.

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

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10 Financial Lessons That You Must Know

These are basically the gospel truths of personal finance. It is a quick 3 min read but will definitely have more information than some long-form articles:

1. Time is a Scarcer resource than money - Invest in a way that you can have more control over your time.

2. Get rich quick and get poor quick are two sides of the same coin. As we always say: High Risk = High Returns and low Risk = Low Returns. Every time you look at returns, be prepared for the risk that comes with it.

3. A house that you live in is your consumption, not an investment. Your second house can be considered an investment.

4. Don’t pay interest to acquire something that loses value - Car & personal loans for weddings & travels must be avoided.

5. A rise in income shouldn’t mean a rise in lifestyle. Well as we reach the new financial year, many of us would be looking at bonuses and appraisals, plan to invest a part of it before we plan our expenses.

6. A penny saved is more than a penny earned. Save before you spend

7. Invest in your mind and skills first.

8. You don’t have to be rich to invest, but you have to invest to be rich.

9. Market corrections come more regularly than birthdays expect them. For those who have been investing from April 2020, be careful there is more to markets than just going up.

10. There is an inverse relationship between investment performance and time spent watching financial news. Only watching the news will not help you get high returns.

11. The more complicated the investment advice the less useful it is. Go for simple advice which can actually help you apply it.

12. Admire people who earn more money than you, not people who spend more money than you. Yes please, people who look rich are not always rich.
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We have our youtube videos live, where we are sharing highlights on investing in Equity this week - do check the videos to learn more here

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

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8 Easy Ways To Reduce Your Expenses

Spend less than you earn. That’s the mantra of personal finance success. Every week, month, and year that you spend less than you earn, the more you save and the better your financial situation will be.

A big part of that solution is cutting back on spending, and for many people, the thought of cutting back on spending seems unpleasant. Losing out on the things that bring you pleasure in life seems like a pretty steep price to pay for a little financial success.

The secret is to intentionally target spending on the things you don’t care about and rarely use while holding steady on the things you do care about.

Scale back on entertainment costs
1. Cut cable: These days, streaming services and free over-the-air television provide more content than any one person could ever watch. Take advantage of the variety by eliminating cable service.
2. Focus your interests on finishing rather than collecting: Rather than collecting physical or digital items in a media collection, focus on actually finishing those things or enjoying them to completion. For example, instead of buying yet more books that go unread, aim instead to build a long list of books you have read. Make doing the center of your hobby, not buying. After all, isn’t that what you really love?
3. Don’t treat shopping as entertainment: It’s fine to go out in the town to be entertained but keep to a simple rule: don’t go into a store unless it’s for the purpose of buying something you’ve already decided you need before going in. Don’t go to stores just to browse for entertainment, as they’re designed to convince you to buy things you don’t need or even really want, but just react on impulse. Find other places to be entertained.

Reduce your food costs
4. Use a meal plan and make a grocery list: Instead of going to the grocery store whenever you feel like you need food, get into a routine of making a meal plan once a week, then constructing a grocery list from that plan. The time invested in making that plan is more than saved by spending less time in the store and having a list to stick to saves a ton of money on grocery store impulse buys that just sit in your pantry.
5. Learn how to cook: Cooking for yourself doesn’t have to involve three-course meals or Gordon Ramsey-level skills. Start by identifying things you enjoy eating, then look for how to easily prepare it from scratch and with basic ingredients.
6. Buy in bulk: The big bulk packages might seem like they have a high price, but they’re usually quite a bit cheaper per use, meaning you get more value for your dollar. If you frequently buy something at the store, look at the big bulk versions and save up for them. You’ll save over the long run. It's basically what our parents or grandparents did - buy - store and use efficiently.
Cut your monthly bills
7. Go through your bills: Sit down with every regular bill you have and go through it line by line, making sure you understand everything you’re being charged for. If something isn’t clear, Google it. If it doesn’t seem like something you should be charged for or is a service you don’t want, call the bill issuer and get it removed from future bills.
8. Cut your subscriptions down to just the things you actually use: If you have a subscription or membership that you haven’t used in the last month, cancel it. Turn off any auto-renew you have with that service and allow it to expire. You can always renew it in the future if you decide you have a need for it again.

What you should do with the money saved from trimming your budget?
The key to making frugal living tips really work for you is to not simply spend that money on something else fun. Keep your “fun” spending at the same level and use the money you save when you cut down your monthly budget on something smarter.  Cut un-fun things like your energy bill for something financially useful that can build a bright future for you.

One great option is to open an account and use your savings to create your emergency fund or you could save it up for your next trip. Whatever excites to reduce your unnecessary spending. These are just some of our suggestions. Do let us know what you had like to read and learn more about and we shall share more content on that.

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.

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Mistakes To Avoid Before Making Tax Saving Investments

We have entered March 2021 and soon we will be celebrating our 1 year lockdown anniversary. It Maybe not so much of a celebration but still, we have survived 1 year of COVID with some gains and some losses, and lots of learnings. Another reason to look forward to March 2021, is the last month to make all your tax-saving investments!

Choosing tax regime without comparing liability The finance ministry in the previous financial year 2020 had introduced a new tax regime that gives individual taxpayers the option to pay income tax at a concessional rate.
Read more about old regime vs new regime

Notably, if you opt for the new tax regime with lower tax rates, you will have to forego the deductions and exemptions including the standard deduction, deduction under Section 80C, interest paid on housing loan, etc. This can be helpful if you do not want to lock-in your funds for a longer period in tax-saving instruments such as Tax Saving Bank FD, Provident Fund, etc.

Comparing liability under the existing and the new tax regime while helping you to decide on the most suitable option depending on your income and expenses and customize your investment preferences accordingly.

1. Failing to ascertain actual taxable income 

When computing the taxable income, it is important to take into account all sources of income. Besides the income from salary, you may have income from a business, rental income from property, interest from bank/post office deposits, capital gains from assets, or any other source.

Determining the taxable income is an important step in streamlining your tax planning exercise which will help you to correctly estimate the amount of tax-saving investment to be made for reducing your tax liability.

2. Taking the wrong approach to insurance

The primary purpose of a life insurance policy is to provide financial protection to dependents in case of the untimely demise of the insured person. Simply opting for a policy because it offers a tax deduction under Section 80C of the Income Tax Act, 1961 is an imprudent approach.

There is a possibility that you may end up investing in investment cum insurance policies such as endowment policies, money back plans, or ULIPs that provide tax-saving components along with life cover in a bid to meet tax-saving requirements. However, you must know that these products will neither provide adequate cover nor generate optimal returns. A simple-term plan is enough to take care of your life insurance requirement at a very reasonable premium. Read this article to compute how much cover should you have

3. Not aligning your Investments as per your goals and investment objective

Ensure that you are not investing in 80C investment options only for tax savings purposes. Check how it fits into your debt - equity allocation which is determined based on your risk profile. Further, these investments should be made to achieve your goals not just for the purpose of tax savings. Align them to your requirements. Do not just invest in 80C investment options, if you have already exhausted this limit, you can explore options beyond Section 80C. Besides, certain payments that are eligible for deductions such as payment of house rent, expenses towards children's school tuition fee, interest payment on the home loan.

Read these articles to  know more about your tax planning before March 2021
1. How to save taxes before you invest your money.  
2. Ways to save taxes under various sections of the Income-tax Act.
3. Mutual Fund taxation
4. How to save taxes on health insurance

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.



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Should You Buy A House Using EPF?

Buying a house is one of the biggest/most expensive purchases for most of us. 
In very rare situations do home buyers purchase a flat by paying the entire amount upfront? Many lack the funds required to make a purchase even as property prices remain stable or fall.
The need for capital to fund their home makes the home buyers opt for home loans for which lenders seek a 20 percent down payment. Arranging this money can be a tough ask for many. Some even consider withdrawing money from their employee provident fund (EPF) accounts for this downpayment.

Is funding your house using EPF a good idea? Let's discuss it


Basics of EPF and withdrawal rules

For beginners, an employee who has been associated with EPF for at least three years and has at least Rs 20,000 account balance is eligible for this. One can withdraw up to 90% of the balance to buy a home subject to other conditions laid out by authorities.

Since the EPFO is going to pay the society or the developer of the property, such withdrawal of money can be used to pay for the entire house — down payment or home loan EMI. You can also avail the interest payment subsidy on Pradhan Mantri Awas Yojana (PMAY) on the payments made through EPF for home buying. Looking at the benefits, this becomes a ‘go to’ option for many salaried individuals when they want to buy their dream home. 


Does this make sense from your entire financial planning perspective?

EPF helps salaried individuals to accumulate funds while they are working. The corpus is meant for the period when one retires and there is no regular income. Hence, it is not supposed to be withdrawn before its maturity as this could jeopardize your retirement. By spending your money meant for your retirement today on your home you are exposing yourself to the risk of leaving no funds for your retired life. Remember, no one will give you a loan for your retirement. 

EPF is an opportunity to accumulate money for the post-retirement period. You keep contributing a small fraction of your salary to the EPF and your employer matches your contribution. As the salary increases, the contributions do go up. That makes a large corpus in your hand when you retire, provided you do not withdraw it for any other purpose. You let the magic of compounding work for you by investing regularly and consistently in your EPF corpus.

House is a necessity and in the Indian context ‘owned house’ is a social and psychological need for many of us. But short-term thinking’ focussed on immediate gratification must be avoided at any cost. 


How to arrange for the downpayment of your house?

It is better to make a plan for home buying. Start saving money to accumulate the down payment amount over three to five years. If the home prices go up or your investments yield less than expected, you may want to delay the home buying by a year or two. Avail of the home loan after you make the down payment but do not touch your EPF money.


Compare the returns

It is better to compare the cost of funds (rate of a home loan) and the rate of return offered on the EPF before taking the funding decision. The repayment of home loan principal and interest both attract tax benefits. Depending on the tax slab of the individual the cost of a home loan stands reduced to the extent of the tax exemption availed. In most cases, the cost of a home loan is lower than the rate of return receivable on the EPF, which makes the home loan better means to pay for your home.

Wealth Cafe  Advice- Do not break your one goal to achieve another. Especially when it is the retirement goal. Do not break your EPF for home buying, unless you have other means to secure your retirement.

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.



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Leave Travel Concession Cash Voucher – new ways to claim your LTA

Hello fellow investors,

It is that time of the year where we all start planning to submit your tax proofs to claim tax deductions. One such claim is the Leave travel allowance. Given that, none of us are really venturing into travel, a new component of leave travel concession - a cash voucher was introduced for salaried individuals.
 
This leave travel allowance (cash voucher) scheme initially announced for central government employees has now been extended to all other employees with riders to boost consumption during the festive season and also help you get tax deduction. The government has announced that all non-central government employees will be eligible for income tax exemption for the entire leave travel concession amount up to Rs 36,000 per person without producing travel bills. However, such employees will have to spend three times the amount for purchasing goods or services on which GST of 12% or higher is levied, said a press release from the Central Board of Direct Taxes.
 
Employees will have to make purchases through digital payment mode and submit the invoices to avail of the benefit.
 
What’s LTC For Private Sector? 
 
Unlike government employees, their private-sector peers have a part of their salary or cost to the company, structured as leave travel concession. This is done to save tax on the total income of the employee. By showing travel expenses, the employee can avail of the income tax exemption on the travel amount. Those who haven’t availed of this benefit during 2018-21 would be eligible for the tax exemption.
 
Points to Note:
  • The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the current block (the year 2018-21); 
  •  The employee spends a sum equal to three times the value of the deemed LTC fare on purchase of goods/services which carry a Goods and Services Tax (GST) rate of at least 12% from GST registered vendors/service providers through digital mode; 
  • The expense is made between 12 October 2020 and 31 March 2021; and 
  • The employee obtains the voucher indicating the GST number and the amount of GST paid.  
 
What Government Is Offering An employee?
 

An Employee who has not availed LTC during 2018-21 would be eligible to avail of the tax exemption subject to the condition that the person spends three times that amount on goods or services with GST of 12% and above.

 

Those who spend less than three times the fare amount will get proportionate income tax exemption. For example, if the LTC fare is Rs 20,000, and is claimed for a family of four, then the employee would get Rs 80,000 (20,000 x 4). The amount that the employee will have to spend would be Rs 2,40,000 (Rs 80,000 x 3). However, if the employee ends up spending only Rs 1,80,000, the person would get  tax exemption of Rs 60,000 (75% of 80,000 or 1/3 of 1,80,000).
 
Thus, this income tax benefit may actually be considered as a discount on expenditure, which the employee has already planned to incur, instead of a reason to incur expenditure. On the other hand, income tax foregone by the Government may be offset by the additional GST revenue on expenditure incurred by the employees.
 
It is advisable to check with your HR department and your employer to see if the policy is modified to include the leave travel concession component and how you can claim this benefit for yourself. It was initiated to encourage people to shop more and take tax benefits on the same, so don't rush to buy new items but if you are buying anything, ensure you have GST documents of the same to claim tax benefits under LTC.  



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Digital Gold: Have you pocketed everything you need to know?

Hello fellow investors

Digital Gold is considered as one of the best and most convenient ways to invest in gold for us gold love-stuck Indians. In the past one year, every other payment app like Paytm, Google Pay and now even Amazon Pay has joined the players who offer Digital Gold. Even many stockbrokers have joined the offering to cater to the Indians' love for Gold.

The increasing gold prices and higher returns in the past 1 year have only further affirmed this love. Is this digital gold all that glittery for real?  Have you looked at the fees, cost structure, and the regulations behind buying digital gold? Read this article to understand the various nuances of digital gold and things to consider before buying digital gold (only for convenience)


Digital Gold – Have you pocketed everything you need to know?

The entire mantra of Digital India has been pushed to gold as well and now an investor can purchase gold using payment apps like Paytm, Phone Pe, Google Pay, Amazon Pay, etc.

As investors, it is important to be aware of how Digital Gold functions; where is the money eventually going, and how cost-effective this investment is. Here we will break down these concepts for you and help you have a well-informed discussion about digital gold and it will offer you insights if you should go for it or not.



What is Digital Gold?

Digital Gold is a way to invest in physical gold ‘digitally’. It is offered by 3 main vendors in India – Augmont Gold; MMTC-PAMP India Pvt. Ltd (a joint venture between state-run MMTC Ltd and Swiss firm MKS PAMP) and Digital Gold India Pvt. Ltd with its Safe Gold brand. Various payment apps such as – Paytm (Safe Gold), Google Pay (MMTC-PAMP), Amazon Pay (Safe Gold), and investment platforms such as – Kuvera, Groww, and stockbrokers bring to you this digital gold in partnership with one of the three vendors. There are many new financial service providers who are adding digital gold to their bouquet of services.

So how does this work? When an investor buys gold via these apps, physical gold equivalent to that amount is kept safely in a vault under the security of the vendors. The investor can then choose to sell the gold at any time using the same app or convert it into gold coins (after reaching a certain limit).

Digital gold enables an investor to buy, sell, and accumulate pure gold of finesse 99.99 (24K gold) infractions anytime, anywhere. Thus, even with a minuscule monetary investment of INR 1, an investor can buy gold (even if it’s a minuscule quantity of it) at their convenience regardless of the time and place. What’s more, is that one can do so without worrying about the purity of gold.



Is this product really all gold?

To dig deeper into the digital gold framework and its working, we checked the buying & selling prices on various apps and compared the same to MCX gold prices.

MCX Price on 18 September was INR 51,210

As you can see from the table above, there is a clear difference between the buy and sell price of digital gold. Also, the prices on these apps are much higher than the MCX price for gold.

The gold price is higher on the platforms as they charge convenience fees, gold handling charges, trustee fees, storage charges which are all included in the gold price but there is no breakup of these charges mentioned anywhere. Additionally, a GST of 3% is also payable on the gold price.

Meanwhile, the selling price is substantially lower than the buying price and on top of it, some platforms also charge a convenience fee when you sell the gold.

Making & delivery charges – An investor can take physical delivery of gold in the form of gold coins and jewellery (Paytm has tie-ups with Kalyan Jewellers). While converting to coins, making charges and delivery charges are payable. On the Paytm app, the minimum quantity of 0.5 grams of gold is required to convert to gold coins and the charges vary from 384 for 1 gram gold coin to 944 for 10 gram gold coin (these charges and specifications varies across each app)

Apart from the additional cost, the risk of investing in digital gold is that there is no regulator for the product. When digital gold is bought, the vendor purchases gold of an equivalent amount in the investor's name. Generally, a trustee is appointed to see if the quantity and purity of gold is maintained in line with the gold purchased by the investor. However, currently, there is no regulator to oversee if the trustee is doing the work properly. This is a point of concern because even the apps which help one to buy digital gold are only a medium to buy it. Ultimately gold is stored with the vendors.

In light of the lack of regulatory framework coupled with the high cost of digital gold, other investment options of gold such as sovereign gold bonds & Gold ETF appear more viable when investing larger amounts of money and for longer periods.

On the other hand, digital gold helps us, gold love-struck Indians, to accumulate gold in smaller quantities as investing in large amounts may be out of bounds for a large section of the population. And this can be seen in the high volume of transactions seen by platforms like Paytm in a short span of time.

If you want to know more about the basics of Digital Gold, do check out our video on the same through the following link:
https://www.youtube.com/watch?v=kNnyBJw6sm4&t=2s&ab_channel=WealthCafeFinancial

 

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.



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Indian Stock Market timings

Indian Stock Market Timings

Trade in the stock market can only be undertaken during a specific time interval in India. Retail customers have to perform such transactions through a brokerage agency between 9.15 a.m. to 3.30 p.m. on weekdays. Most investors undertake the purchase/sale of securities listed on the major stock exchanges in India – Bombay stock exchange (BSE) and National Stock exchange (NSE). Indian stock market timings are the same for both these major stock exchanges.

 

Indian stock market timings for trade is divided into three segments:

Pre-opening Timing

This session lasts from 9.00 a.m. to 9.15 a.m. Orders to purchase or sell any securities can be placed during this time. It can be further classified into three sessions:

  • 9:00 a.m. – 9.08 a.m.

During this stock market opening time in India, orders for any transaction can be placed. The order entry is given preference when actual trading begins, as these orders are cleared off in the beginning. Any requests placed during this time can be changed or canceled according to need, which is beneficial to investors, and no orders can be placed after this period of 8 minutes during the pre-opening session.

  • 9:08 a.m. – 9.12 a.m.

This segment of Indian share market timing is responsible for the price determination of security. Price matching order is done by corresponding demand and supply prices to ensure accurate transactions among investors who want to purchase or sell a security, respectively Determination of final prices at which trading will begin during normal Indian stock market timing is done through a multilateral order matching system.

Price matching order plays a vital role in determining the price at which the security is transacted during a normal session of Indian stock market timing.

However, the benefits of modification of any order already placed in not available during this session.

 

  • 9:12 a.m. – 9.15 a.m.

This time acts as a transition period between preopening and normal Indian share market timing. No additional orders for transactions can be placed during this time. Also, existing bets already placed from 9.08 a.m. – 9.12 a.m. cannot be revoked as well.

Normal Session 

This is the primary Indian share market timing lasting from 9.15 a.m. to 3.30 p.m. Any transactions made during this time follow a bilateral order matching system, wherein price determination is done through demand and supply forces. The bilateral order matching system is volatile, thereby inducing several market fluctuations which are ultimately reflected in security prices. To control this volatility, the multi-order system was formulated for the pre-opening session and was incorporated in Indian stock market timings.

Post-closing Session 

Stock market closing time in India is marked at 3.30 p.m. No exchange takes place after this period. However, the determination of closing price is done during this time, which has a significant effect on the following day’s opening security price.

Stock market closing time in India can be divided into two sessions –

  • 3:00 p.m. – 3.40 p.m.

The closing price is calculated using a weighted average of prices at securities trading from 3 p.m. – 3.30 p.m. in a stock exchange. For determining the closing prices of benchmark and sector indices such as Nifty, Sensex, S&P Auto, etc. weighted average prices of listed securities are considered.

  • 3:40 p.m. – 4 p.m.

This period is post stock market closing time when bids for the following day’s trade can be placed. Bids placed during this time are confirmed, provided adequate buyers and sellers are present in the market. These transactions are completed at a stipulated price, irrespective of changes in opening market price.

Thus, capital gains can be realized if the opening price exceeds the closing price by an investor who has already placed their bids. In case closing price exceeds opening share price, bids can be canceled during the narrow window of 9.00 a.m. – 9.08 a.m.

The overall stock market operating time in India can be demonstrated by the following table:

S. No. NameTime 
1.Pre-opening session9.00 a.m. – 9.15 a.m.
2.Normal session9.15 a.m. – 3.30 p.m.
3.Closing session3.30 p.m. – 4.00 p.m.

Aftermarket Orders

Post this time frame. No transactions can take place. However, investors can place aftermarket orders, for securities of chosen companies, which would be allocated at opening market price the following day.

Muhurat’ Trading 

Indian stock market is generally closed for any transactions on Diwali, as it is a religious festival celebrated all across the country. However, a one-hour trading session is conducted from 5.30 p.m. to 6.40 pm as it is considered to be auspicious.

 



Income tax Feature Image

Income-Tax Relief For Home Buyers

Hello fellow investors
 
As a part of various relief measures taken by the Government in response to the economic slowdown post-COVID-19, the Finance Minister (FM) has announced a very attractive income tax relief for home buyers (new residential properties of value up to Rs 2 crore). Here is what you need to know.  
 
Income Tax relief for home buyers 

In case the declared purchase consideration of the land/building is less than the stamp value (circle rate) by up to 20%, there will be no additional tax outgo for both the seller and the purchaser for the period 12th November 2020 to 30th June 2021. Earlier, the acceptable difference was 5% which was to be enhanced to 10% with effect from 01 st April 2021.

This move will also help developers in selling off their unsold inventory at up to 20% below the circle rate and the buyers in getting cheaper homes without any additional tax burden on either party. Let’s look at the relevant provisions of the Income Tax Act to understand the applicable tax relief.

Section 43CA of the Income-tax Act - for the seller

This section provided for deeming of the stamp duty value (circle rate) as sale consideration for the transfer of real estate inventory in the case the circle rate exceeded the declared consideration. The circle rate is the minimum rate per unit area fixed by the state governments for the sale of land or property and is
aimed at reducing stamp duty evasion by declaring lower sale values in the sale-purchase deeds.

Thus, even if the real estate was sold at a price below the circle rate, the circle rate was considered as the sale value for the calculation of the business profits of the seller. For example, if a house is sold by a developer for Rs 80 lakh but its value as per the circle rate is Rs 96 lakh, the developer is supposed to take Rs 96 lakh as the sale value for
calculating his profit.

Through Finance Act 2018, a difference of 5% between the two rates was declared to be acceptable. This was increased to 10% through Finance Act 2020. Now, the FM has raised this acceptable difference to 20%. Thus, in the above case, the difference is exactly 20% as seen below and the developer can consider Rs 80 lakh for calculating his profits from the sale. 

Section 56(2)(x) of the Income-tax Act for the buyer

This section is applicable to the buyer and provides for stamp duty value to be deemed as purchase consideration even if the purchase was made at a lower price. As per the above example, the buyer is deemed to have received Rs 16 lakh (the difference between the stamp value and the sale consideration) and was supposed to declare this amount as ‘Income from other sources and pay tax on the same. Now, he will not have to pay any tax if the difference is up to 20% as is the case in the above example.

 

In summary, this announcement by the FM comes as a major relief to real estate developers who were struggling to offload their inventory due to lower demand in the market. The benefit is applicable, however, only for the primary sale of residential properties and not for commercial and secondary sales.





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