How prepared are you for these 4 bad situation in your financial life?

Are you ready for the bad phase in your life which might come anytime? How prepared are you? We should not be pessimistic in life and always look forward to thinking positive, but that does not mean, we should not be prepared for bad times. Bad things happen in life and you must have seen many bad things happening in others’ lives. We don’t prepare for these bad times, because we have somewhere believed that we are more lucky or privileged than others (if you don’t agree, ask yourself what are changing of your accident, and you will surely say, much lower than 95% of other people on earth).

are you ready in financial life urgent situations

Are you ready for these 4 situations?

When something bad happens in our life (or financial life), we suffer, our families suffer, lots of confusion arises (and many times we are not there to fix it back) and if we are alive, we regret about not preparing for small things which could have eased the situation. So let’s see how much prepared, are you? I want you to not just read, just keep asking at every point if it’s true in your financial life or not?

Situation 1 – What if you die?

Someone asked me a few months back to not use such direct words, but unless I do that, no one reads seriously. Now ask yourself

Does your family know how to take out money from your bank accounts? Do they know your ATM password? Will they be able to access everything you have in your head right now from passwords to remember how much money you need to get back from a friend, to where exactly your whole net-worth lies? Will they be able to arrange for the next 1 yrs of expenses if you are gone? What about the next 30 yrs? Have you prepared a BlackBox emergency kit for your family?

Situation 2 – If you lose the job?

I want you to imagine you lost your job right now at this moment. Now – Can you pay your next 6 months EMI? Will you have the guts to take your family out for a late-night movie and a nice dinner costing 3k Or will you tell them – “Its a flop movie, we can watch on a laptop ?”. Can you sleep well after you are rejected in your new interview ? Will you be able to say – “Sorry, I am forced to take this job because … “. What if the job does not match your liking, will you still have that power to say NO to the next job? Now your answer for all these things can be YES or NO, and its a clear indication of how well prepared are you for these situations. Its time to think about it?

Situation 3 – If you need Rs 5 lacs suddenly?

Lots of people I know cant arrange Rs 1 lac given some emergency situation, can you? If yes, then what about Rs 5 lacs? If I give you 24 hours or 1-month deadline, then can you do it? Have you been preparing for this kind of nasty situation in your life? Now, why would you need 5 lacs? There can be many things which can happen like – some medical emergency situations in the family, or because you found your dream home and have to make down-payment.

So, If you cant arrange for 5 lacs, then ask yourself how much you can? 3 lacs ? 1 lac ? Rs 50,000 ? The good news is that you don’t need 5 lacs at the moment, but the situation can come anytime? Start working on it.

Situation 4 – If you were to be hospitalized?

If you were to meet an accident and hospitalized, things would still be in control, if you are conscious, because you can guide your family on what is to be done and from where to arrange for money and where are your health insurance documents, but Imagine you are unconscious and can’t communicate to your family – Does your family know how to arrange for few thousand rupees to start with ? Do they know where is your health insurance card or how to access your emergency fund? Do they even know the name of your health insurance company, how about the TPA phone numbers? Have you ever stored an ambulance service number on their mobile or , your mobile which takes not more than 1 min exactly!?

Do you have any black box kit prepared for your family which has some useful information for them in financial life which makes their life easy? In my 2nd book – “How to be your own financial planner in 10 steps“, In the last chapter, I have discussed this matter at length and also told the importance of documentation for a stronger financial life, do order it right now, just takes few hundreds of bucks.

Are you getting ready now?

You don’t have to feel overwhelmed because you are not ready, A lot of others are also in the same position, you are lucky to realize this now and have lots of times on your side to work on it. Do not look for perfection and strive to complete 100% of what is asked, but at-least identify core issues in your financial life and situations which you feel you should be ready with?

By the way, how many months can you survive without a job? Tell me in the comments section and how you feel about it?

How Ready Reckoner rates by Govt affect real estate Prices ?

A lot of investors wonder how the real estate prices go up and down (do they?) over years. A very big role in the movement of real estate prices is played by something called “ready reckoner rates” . Ready reckoner rates for each area in the city are defined by the state govt. Let us understand this thing in detail.

what is ready reckoner rates

Ready Reckoner rates are the prices of land, residential properties, and commercial properties for any given area defined and published by govt each year. It’s revised from time to time whenever govt feels that there is a need for prices revision. Stamp duty and registration costs that are paid by a real estate buyer cant be below this ready reckoner price or the actual price of the property.

For example – Let’s say that ready reckoner rates for some location is set at Rs 4,000 per sq ft (as per state govt) and the cost of the property as per that comes at Rs 40 lacs. Now imagine that the builder is quoting the cost of the property to you at Rs 50 lacs. Now the stamp duty will be paid on Rs 50 lacs only because its higher than Rs 40 lacs. However – suppose you decide to pay Rs 20 lacs in black and only Rs 30 lacs in white money, still, your registration & stamp duty will be paid on Rs 40 lacs costs because that’s the minimum pricing set by govt itself.

Ready Reckoner rates are linked to Built-up Area

Note that the ready reckoner rates are linked to the Built-up area of the property, not carpet area or super built-up area. So if ready reckoner rate is Rs 4,000 sq/ft and builder tells you that he will also sell the property to you at Rs 4,000 sq/ft, don’t get fooled!, because builder tells you the pricing linked with super built up area and not built up area, which in most of the cases is higher, so eventually the rate charged by builder is always higher, if you convert it for the built-up area. Just for example if super built up area is 1,000 sq/ft and built up area is 800 sq/ft, then Rs 4,000 per sq/ft area quoted for super built-up area (Rs 40 lacs cost), is same as Rs 5,000 sq/ft quoted for built up area (same Rs 40 lacs) .

Just to make sure you understand the terminologies –

  • Carpet area – A Net usable area of the property (imagine you put carpet, what all part of flat, it will cover)
  • Built-up area – Carpet area + walls and doors area (imagine you remove the thick walls and all doors, then what you will be left with)
  • Super built-up area – Built-up area (which you get) + everything from the staircase, garden, gym, swimming pool and everything you use (your proportion)

How ready reckoner rates affect the prices of real estate

Now – It’s very clear, that ready reckoner price is the FAIR PRICE (which is fair value) set by govt itself. Now builders can charge the premium on that fair price depending on market condition, demand, quality and their goodwill and their exploitation power :). So the market price (the actual prices prevailing in the market), will definitely be always higher than ready reckoner prices (benchmark). Now if the benchmark itself is higher at any given point of time and also keeps increasing over years, the market price quoted by builders will also be high.

Example – Just to give you an example, in one of the areas called “Kondhwa” in Pune, the ready reckoner price set by govt is around Rs 3,700 per sq/ft, however, the builders are charging anywhere from Rs 4,500 to 6,500 per sq/ft at the moment. Imagine if this year govt increases it to 4,000, then automatically the rates will go up by that much margin because builders get a good reason to escalate the cost.

One of the largest revenue sources of any state govt is the stamp duty from property registrations and it’s always in state govt interest(from a revenue point of view) to keep the ready reckoner rates higher or increase it if there is any justification for it, live development done, roads constructed, etc…

Where to find the Ready reckoner rates for your area?

Now, you cant control the actual price you have to pay to a builder, but it’s a good idea to check out the ready reckoner rates of the area, where you are thinking of buying the property. Now there are few ways you can find out the ready reckoner rates of your area (or any area). Here are a few of them, some easy and some tough.

1. On the website of “Registration and Stamp Duty Department”

Each state govt has its own department of “Registration and Stamp Duty”. You can reach the website by searching the sentence “Registration and Stamp duty department” and adding state name along with it on google. Like if you want to find out the website for Maharashtra search for “Registration and Stamp Duty Maharashtra” (direct link) and the first link you get it “‎”. On the website, you need to search for a link – which says something like “market rates” or some equivalent in the local language of the state. If you are lucky, you might reach the final page which helps you find out the ready reckoner rates for all the cities in the state. It will help you find the rates as per city, taluka, location or survey number. I tried this trick and was able to find out the websites links for 3 states

  • Andhra Pradesh (for Hyderabad) – Direct Link

Note – The rates might be displayed in per sq yard, per sq meter etc, so better change them to per sq feet and also make sure you use IE or Firefox to access the websites because they still don’t know chrome exists!

2. Using RTI application

The second way to find out the rates is to use the RTI application against the same Registration and Stamp Duty department (many times called “revenue department” like in Delhi). All you need to do is file an RTI to the respective officer and to your jurisdiction asking for the rates in a particular city and area. You can take help of this article to understand the format and procedure

3. Office of Sub-registrar

One of the best ways would be to go to the sub-registrar office (where the properties are registered) and find out the rates from there itself. If you do not find the support of the staff there, don’t forget to mention words like RTI, CIC and “One of my friend works in Media” and they should accept doing some work for you.

4. From the newspapers

All the newspapers keep on publishing these rates from time to time. Just keep an eye on real estate section from time to time and you should be able to get some info. Below I am attaching some snapshots I got from the Internet for the revised rates in the year 2013 from 2012.

mumbai ready reckoner rates

Pune ready reckoner rates

Pimpri Chinchwad ready reckoner rates

No Ready Reckoner rates for rentals

There are ready reckoner rates for buying the properties, but there are no ready reckoner rates for rentals. It would be amazing if govt comes up with that too, it would then help us to understand which area is doing better then others and how much premium home owners are asking for over govt defined rental rates.

Overall what do you think about ready reckoner rates and does it helps the overall industry or goes against it? Please put your comments!

Tax saving investment declaration to Employer – How does it Work ?

Every year, when the new financial year starts, employers ask their employees to declare their investments and give an idea about where will they invest to save the tax. There is a page on the companies’ websites, where each employee has to declare their investments. Come of the examples of the target options are life insurance premiums, ELSS investments, Rent, Ulips and home loan-related numbers.

Investment Proofs for Tax Saving

Why do employers ask for this investment declaration?

The employer asks for this information because they want to approximate how much will be your final taxable income (after deducting the tax saved through 80C investments, HRA, Home loan and medical bills. So that they can cut a constant amount of TDS each month.

A lot of employees get a bit tensed thinking, what exactly they should mention while declaring the investments. They feel that at the end of the year, they will have to invest exactly in the same order in which they declared. However, this is not correct. All you need to do is invest the same amount declared at the start of the year into any tax-saving investments option.

For example – If you had declared that you will invest Rs 50,000 in LIC policy and Rs 30,000 in Tax saving mutual funds (ELSS). The total is Rs 80,000. Now your employer will deduct Rs 80,000 from your projected income for the year and arrive at net taxable income and find out how much is the tax you need to pay at the end of the year (projected). Now he will just divide it by 12, and find out the monthly number and start cutting that much tax each month from your salary.

Now when the month of Dec/Jan arrives, your employer asks you for investments proof. Now when you actually give it to them, they recalculate things and see if things are matching with what you declared at the start of the year or not.

How does Investment declartion for Tax saving work ?

There can be 3 scenarios here.

Case 1 – Amount Actually Invested Less than Amount declared in the start

In-case you were not able to invest up to the amount you declared, or you were not able to submit the documents to your employer on time, it means your employer will assume that you will not be able to do so, and that means that they have over estimated your tax saving and the tax paid by employer is lesser (because you owe more tax, due to less tax-saving investments) . In which case, the employer will recalculate your tax liability and now will adjust it with the next 1-2 month salary (Feb/Mar). Which means you get less salary in the last 1-2 months.

But, If you are able to finally invest for tax saving, then at the time of tax filing you need to declare it and ask for a tax refund from the IT department. It’s always a good idea if you can avoid this situation because then it takes a lot of time to get back your refund.

If for some reason, your employer does not cut the tax from your last month’s salary, then you directly owe the tax to govt. This can also happen if you have any other income source, which is not accounted for by the employer, in that case, you need to pay the tax to govt directly. You can do it online using Challan 280 on the IT department website. Then at the end of the year, you can file the returns.

Case 2 – Amount Actually Invested = Amount declared in the start

If you invest the same amount as declared at the start of the financial year, it means that your taxable income would be almost same as computed by your employer and the amount of tax you paid was equal to what you owe to the income tax department. In this case, there is nothing much you need to do. just file the ITR at the end of the year and everything should be pretty smooth unless you have income from other sources.

Case 3 – Amount Actually Invested More than Amount declared

It might happen that you declared only Rs 50,000 investments, but finally invested Rs 1,00,000 into tax-saving instruments, which means you saved more tax. However, your employer has been deducting the tax assuming your declaration for Rs 50,000 only, which means the employer was paying more tax to govt on your behalf. Now, this means you are entitled to get a tax refund and you can ask for it when you file the returns. Generally, it’s a good idea to declare the maximum possible investments in the start, let your employer assume you will do maximum tax saving (so that less tax is paid), and then make sure you actually invest the promised amount. In the worst case, if you fail to do so, better pay the tax at the end of the year or get less salary (be prepared for it)

This article from Bemoneyaware talks about this topic in much detail. Did you get clarity about investment proofs for your employer? Do you have any questions?

5 signs which proves your financial life sucks and you are screwed up

Is your financial life going well? Are you on the growth path or on the verge of disaster very soon? Your financial life might be in trouble, but maybe there is some more time left before you really take charge of your financial life and really do something about it, else it will crumble and you will be destroyed beyond recovery.

signs of bad financial life

I see lots of people who are not in agreement with the fact that their financial life sucks and they really need to take giant leaps. Somewhere they are comfortable with the whole situation and keep expecting that “somehow” their financial life will improve. So, I am giving you 5 simple indicators, which you can look at and decide if you are headed towards financial disaster or not. The more these indicators are true for your financial life, the bigger is the problem and you need to get really serious about it. If none of these indicators are true for you, then congratulations! , you are mostly in a good situation.

Sign 1 – You cant live for 3 months without a job

The first and the biggest sign of disastrous financial life is that you cant live for a few months if you do not bring money on the table through your job or business. If you have been earning for a few years now, you should at least have a year’s worth of income saved with you, but that’s not the case with many people. Their monthly expenses make sure they are left with nothing at the end of the month. Worse, many people have the negative cash-flow and they are piling up debt each month to survive. These people are mostly dependent on credit cards and keep using them whenever they are in a “crisis” situation. The credit card should be held for benefits + reward points and not because of its a survival tool for you.

Ask yourself, how many months’ salary have you drawn to date in last so many years and how many worths of salary you have saved till now? If you cant survive for more than 3 months (or 4-6 months), you are in big trouble. I asked this same question on my facebook wall a few weeks back and I got responses like “6 months”, “3 months”, “10 yrs” and all kinds of numbers. So better look at your number of months. Do not focus on income alone, because income is not the same as wealth.

How many months can you survive without the job ?

Sign 2 – You find it tough to get a higher paying job

Your job/business is the means to bring money to the table each month. Every year or in few years, ideally you should be able to move one ladder up and command a high salary because over the years you will gain experience, add new skills and would be wiser/knowledgeable. However, if you cant move upwards in your professional life, the amount of money you will bring back home will not increase and if that’s the case, you are in trouble.

Ask yourself – Do you see yourself earning 10X of your current salary someday in the future like the next 5-10-15 yrs or not? Are you dead scared of losing your job and never be able to find another? Do you feel that you have reached a level in your professional life, where if you lose your current job, you will find it tough to get the same salary job somewhere else?

If that sounds your case, you are in trouble financially because your biggest asset is your earning capability and not your this year’s pay package only? If it sounds your story, its time to find out how you can increase your skills and take better jobs in coming times, don’t wait for the last moment, it takes few years to hone your skills!.

Sign 3 – You are paying back EMI’s for depreciating assets

There is two kind of debt – good debt and bad debt. Any debt which helps you build assets and grows in value over time is better (I am not saying, go for it, but it’s just better than the bad debt). The bad debt is mainly the debt which is used for CONSUMPTION purpose. You use it and its gone. Examples are personal loans, consumer durable loans, credit card debt or even a car loan(especially the car, which you really don’t need, you can do with a two-wheeler, I am not talking about the car which is really required and can’t live without), then you are paying an outsider on a regular basis, without building any assets for yourself.

It’s like – you are doing the job to help others squeeze money out of you. If you are doing this, better stop it now and see how you can change your direction, you still might have the time to come back on track.

Sign 4 – It has been 5 yrs working, but you have nothing worth called “ASSETS”

You have worked for 5 yrs in the job, now even if you had saved 2 months’ worth of salary each year, you must have had 10 months’ worth of salary with you saved today? Is it there? You must be having some investments in Fixed Deposits, or some gold, or some mutual funds or at-least a small part of your future house down-payments which you are fantasizing about? Is it with you or you have blown up? In my 1st book – “16 personal finance principles every investor should know”, I have explained in the first chapter how the early start of your financial life can break or make the rest of your financial life. Grab it and read it.

Ask yourself, how much you can show off for the last 5 yrs of earning? Just add up all the salary you have drawn in last 5 yrs (let’s say at 4 lacs per year, its 20 lacs in total 5 yrs), how much you currently have in assets? Even if you have saved 3-5 lacs, I would say its fine. But if you are still trying to locate where has all that gone, it’s not a good sign. Remember, how do you start your financial life can be an indicator of your whole financial life. Dont neglect the first 5 yrs of your financial life because it matters a lot.

Sign 5 – You like to spend a lot of social functions!

Most of the people with the worst financial life in India are too social in nature (not vice versa). They keep spending on all the useless social functions either due to social pressure or by choice. Examples like – “How can I not celebrate my child’s 10th Birthday with a grand party, all relatives are looking forward to it” or “I have to gift something worth to this friend/relative because of reasons reasons reasons.

Social functions in India are one the largest wealth-destroying activities, which are not comparable to anything. Dont get me wrong, I know you need to celebrate marriage, birthday, anniversaries and that’s an important part of life, but when it stops being celebration and becomes showoff and obscene display of imaginary status (which others know very well that you are faking), it’s utter nonsense and destroys your financial life. Please stop it

I know the current young generation does not believe too much into showoff and useless social functions, but due to parents’ pressure and mindset, even children have to kneel down at times and cant avoid this social spending’s even if they hate it from the core of their heart. Ask those children, who are struggling to buy a house because they do not have money and their parents blew up 30 lacs on their wedding to invite 800 people (500 of them you meet the first time in your life and they eat maximum ice-cream at food counters). What a joke !. A small bold decision would have made so many lives easy.

It would be a good idea for you to write down how much % of your income to date, have you spent on social functions (which you could have avoided) in the last 5 yrs. If its more than 2 %, I am sorry for you.

I must mention that all the views are my personal based on my ideologies, If you don’t agree with some point, You are equally right and much like anyone else. The points are general in nature and might not be 100% true for every person’s case.

Take some bold step

I can tell you from my experiences – Most people have bad financial life and they do not do anything about it, because it’s not affecting them in the short term.  Every additional bad decision does not hurt their next day, the food will still be on the table, the next movie will still be watched and the small Sunday outing will still happen, but how long if you continue having these 5 signs in your financial life? In our 3rd book – “11 principles to achieve financial freedom” written by Nandish, the coach helps a guy in changing his mindset about his financial life and helping him think like a pro in his financial life, Its an amazing book I would say which no investor should miss.

You need to take some massive action, some really bold step, it has to be 20 times stronger than what you have in mind, you have to really upset few people in your life and have to embrace discomfort for few years. Just a tiny “try” will not help. Imagine you get a deadline from your employer that you can only work for the next 5 yrs and then you will not get any job in the whole world for the next 3 yrs, how will you prepare for this situation? That’s your game plan now!

8 things in Real Estate Regulations Bill which can affect Property Prices

It has been 5 yrs when the first draft of the Real Estate Regulatory Bill came and then there were many amendments in it over the years. However on 4th June 2013, it was passed by cabinet and now the next step is to table it in parliament this monsoon season and if our country people are really lucky, it will finally become an ACT of law.

real estate regulation bill

Real Estate Sector is hugely unorganized and against buyers

We all know that the real estate sector is so much unregulated and unorganized. There are no proper guidelines on any thing and builders use this to make maximum out of the situation and take buyers for the ride at every level. Builders and Politician nexus are very known and from last 10-15 yrs, the real estate prices have crossed the level that a common middle-class family would never afford their own house.

In this scenario, the real estate regulations are not just a requirement, but a big need of the industry if our economy and society need to some stability over the long term. In this article, we will discuss all the major points in real estate regulations. There are many good points in the regulation and it will help the industry, however like any other law, this bill also has many loopholes and many rules can be exploited by the builders. This bill whenever becomes the final act, will only be applicable to new real estate projects, not the ongoing and completed projects.

From the last few days, there has been a great number of discussions over various news portals and discussion forums on how these regulations will be a great thing and how it is just another failure. So let’s see major highlights of the regulations

1. Mandatory to acquire all clearances before the launch

As per the bill, it would be mandatory to acquire all the required clearances from relevant authorities and govt bodies before formally launching the project. Right now builders launch the project when there is nothing more than plain land on the site and have no permissions for anything. They give rosy pictures to investors, start taking the money from the public and then start the overall process of acquiring the land, getting approvals, and coming up with the structure. This means there will be obvious delays and lots of confusion and frustration for investors.

With this, the concept of “pre-launch” offers will vanish and you can expect the prices of the property to be high on launch. A lot of people are saying that because of this, there might be a slowdown on the supply side because right now a builder keeps launching new projects. Another requirements is that these permissions taken are to be displayed on the website of the developer.

2. Use of Photograph of actual site for advertisements

As per the bill, the builders will have to use the actual sire pictures or the actual construction work pictures for advertisements for the project. Right now builders do not use the actual pictures for promotional purpose.

It’s easy to create an illusion by using graphics and shiny pictures and that is what happens most of the time. Builders use the classic graphics image of the project site which is full of greenery and nature around it and the feeling it gives you is that its an opportunity one cant miss. However, in reality, the project site is quite different. It might happen that there are buildings around it and no trees or any natural habitat. The roads around might be bad and the elevation of the project site might be high or low than the normal.

If a builder is found to be putting up misleading or wrong advertisements, then there can be a jail term of up to three years, if it’s done repeatedly.

3. Sale of property as per prices linked with Carpet Area

The bill says that any sale proceedings should be using the prices which are linked with carpet area and not super built-up area. Generally, builders use “super built-up area” as the parameter and define the per sq ft price as per that. Carpet area is the net usable area which can be used for living purpose (imagine you lay down carpet, then how much area it will cover), however super built-up area (or salable area as called by many builders) is combination of net usable area, area covered by walls, doors, parking area, staircases, temple in side the project, gym, garden and everything you can imagine which is part of your package (divided per buyer). So super built-up area becomes high and the per sq ft price looks small, however, if you divide the whole cost by the carpet area, then you will realize how much you are paying.

You should also know that even in agreement, only the carpet area is mentioned. However, builders quote the pricing only on super built-up area.

4. State Level Regulators and central appellate tribunal to be set up

The bills also say that a central appellate tribunal should be set up as a central body and each individual states should also have state regulators. This means that there would be some central guidelines for the real estate sector and builder and each state will focus on regulating their states real estate builders. There might be few rules different from states to states. I personally feel that there might be some confusion due to this.

5. Real Agents/Dealers need to register themselves

Right now, real estate agents and dealers are not at all registered with any central/state body and hence due to highly unregulated environments, they do not have any code of conduct or service standards defined. Now they will have to register themselves and will have clear responsibilities and functions. Consumers will be able to demand their rights from agents and dealers for the amount of commissions paid to them.

6. Separate bank accounts for every project

As per the bill, A builder will have to maintain separate bank account for each and every project and up to 70% of the funds for that project has to be there in that same bank account. In the previous drafts, this number was 100% (means no money for Project A can be used in Project B) , but looks like the builders and politicians lobby has been successful in diluting the quality of the bill wordings and in new draft now the number is 70% or less. It does not serve the protection of buyers because builders will still be able to divert 30% of the funds from one project to another.

Right now, the way it works is that a builder when faces a severe cash crunch launches a new project and uses the money collected in another project to complete the old project and this cycle goes on. This creates a lot of issues for home buyers because there are huge delays at times. Firstpost did an excellent article on this topic and concluded that real estate is a kind of Ponzi scheme

7. Builders cant take more than 10% advance without a written Agreement

A builder will not be able to take more than 10% advance money from buyers without a written agreement. Right now a lot of dealings happens by paying huge advances and the agreement part is delayed by many. In many cases, agreements happen after many months or years, as lots of transactions happen on a trust basis. This might help in curtailing some part of black money transactions. However only you guys can tell some real-life cases which this clause might not help and fail.

8. Full refund with interest, if property not handed over time

As per the bill, the builder has to refund your money along with the interest, if he fails to deliver the project on time. At this moment, this point gets added in the agreement and almost all the times, builders make sure that this point is omitted in the agreement and if it’s not there, you have to file a consumer court and after a long time, you are rewarded your right. However, the bill will make it a standard rule or clause.

The Bill rules apply to project over 4,000 sq meters in size

The biggest worry about this bill is that it’s applicable only to projects which are of 4,000 sq meters and above size overall and if a project is bigger than 4,000 sq meters, the bills allow to break the whole project into different phases and see each phase as different project. Now this clause itself destroys the protection layer for consumers. Because a builder can always break the whole project into different phases and show them as a separate project. Many builders anyways run various projects under different companies’ names to save on tax. So running two or more sub projects on different names (which are actually just one project side by side).

The old draft of the bill had this number at 1,000 sq meter, but this current recent bill has it at 4,000 sq meter, so again someone has been able to influence the bill.

No Single Window Clearance for Approvals

One of the major challenges and problems builders face is about the govt clearances and various approvals. This takes a lot of time and opens up the gate for bribes and bureaucracy, the bill does not address this problem at all. It would be great if there would be a separate govt department which would have a single-window clearance. This would help in defining the project completion time with more accuracy.

Will all this reduce the property prices or not?

This is the million-dollar question which is in every body-mind, that with this bill, will the prices of real estate come down or not, which is the biggest issue common man is facing right now, compared to any other issue. Delays and consumer exploitation is all fine if prices are normal and affordable, but if prices itself are so high that its out of reach of common man, then every other problem is secondary.

Here is a copy of the Real Estate Bill which I got from Moneylife article

There are many implications of this bill and tons of factors and variables which can affect real estate prices. Some are saying that prices might go up and some are saying pricing might come down. But It would only be clear when the bill becomes a reality.

However, we would like to hear what you think about this real estate bill and how it might impact the real estate prices?

Term plan or Health Insurance ? Which is more Important if you have limited money ?

Few weeks back, I posted an interesting question on our Facebook Page asking – “Given limited money – which is more important product to buy from security point of view – Term Insurance or Health Insurance ?” .

life insurance or health insurance

Lets say there is a guy – who wants both a term plan and a health insurance for his family and he only has Rs 10,000 per annum left with him, now he can either buy a 1 crore term plan for his family or buy a 5 lacs cover for his family. But he will be able to get only one of them from this Rs 10,000 left with him, then which out of term plan and health insurance is makes sense for family and is more useful? Lets see some points, raised by our facebook fans, which will help us to think about it.

1. Death is less probable compared to hospitalization

One of the argument is that, there are far greater chances of getting hospitalized because of some reason then dying. So if you look at this problem from probability point of view, you can be almost sure that in next 5-10 yrs, you or one of your family member will be hospitalized for some or the other reason – big or small. But meeting death is very less likely in comparison. So a lot of people argued that Health insurance is much more important than term plan, if you have limited money.

2. Premiums are increasing fast in Health Insurance and its can be claim every year

Another argument in favor of health insurance over a term plan was that, its a product where you can claim every year and protects your financial life from regular attacks of money sucking illnesses and accidents and anyways premiums are increasing very fast for health insurance (or would increase in future) because of the health care inflation. However for term plan the premiums are coming down over the years (now we might be close to saturation) .

3. Hospitalization Costs can be arranged in worst case

Now some people said that term plan is more important than health insurance and the biggest reason for it was that health insurance expenses are somehow manageable in worst case. You can take a loan, swipe a credit card, ask your friends and relatives or in worst case, sell some of your home stuff.

Life will again be on track somehow. But if you ignore term plan, its a very big risk for your family future, because the amount required by your family cant be arranged by asking it from someone (just imagine you die and now your family would need their monthly expenses for lifetime , your children expenses for current and future, their whole life is at stake now). It would generally run into several lacs or few crores.

life or health insurance

High Probability – Low Impact

So its very clear that term plan has a very high impact on your financial life, but less probability of its occurrence , however health insurance has low impact on your financial life (compared to term plan) , but is high on probability and its has potential to occur multiple times in your lifetime.

Balancing both Health and Life Insurance Costs

Another workable option is to divide the money into premiums for both term plan and health insurance, but in this case you will compromise with the cover amount of both the things however small it is. This way you will have both the things in your financial life, even if its small . Do you think its a workable solution ?

What is your opinion about this question ?

How you become a loser when you pay in black for your real estate property ?

Naresh recently visited a new residential project in Pune which was ready for possession. The property cost was in his budget and he was about to finalize the deal. The total cost of property was around Rs 40 lacs. Stamp duty and Registration cost was to be paid separately which would take total cost to around 43 lacs. This was a bit heavy on Naresh pocket, so out of his regular habit, he inquired if there is any trick by which he can save some money on the deal ?

Bought house by paying in black

The builder was quick to give him a great saving advice“Sir , You have to pay 6% stamp duty and 1% registration cost on the agreement price. Which comes to 7% of 40 lacs, thats 2.8 lacs additional, thats the reason the total cost comes around 43 lacs . Now if you want to save money, what you can do is pay some part of the deal in cash to us (means pay in black) and we will reduce the agreement cost by that much, that way – we will also save our tax on the black money part and you will save 7% on that cash amount. Like if you pay us Rs 10 lacs in Cash, then we will make the agreement for Rs 30 lacs only and you will have to pay stamp duty and registration cost on only 30 lacs which will be 2.1 lacs, and it will save you Rs 70,000 without doing anything extra ! . Cool na ! .”

The offer was tempting and Naresh fell for it, how cool is saving Rs 70,000 , all you need to do is pay some part in cash and lower the agreement amount in records. But do you understand, what is your loss in long term because of this kind of deal ? Let me break some hearts today, who have already done this mistake while buying their properties.

Stamp duty and Registration Costs

First understand that stamp duty and registration costs vary from one state to other state. For example – In Maharashtra, its 6% + 1% = 7% in total , so whatever is your total agreement cost , you will have to bear additional 7% on that amount as stamp duty + registration costs. Given the huge amount involved and the financial crunch every buyer faces at the last moment of the deal and hunger of builders to save every bit of tax, makes sure that buyers fall for this trick of paying huge amount in CASH (black money) and register the property at lower price just for few thousands (actually sizable if you look at it). This looks like win-win situation to buyers and they are pretty happy about it, however truly speaking, this is a loosing deal for the buyers in a very long run (if you are going to sell the property later) and only benefits the builders and let me now explain you why is it so ?

At the time of selling – The cost of house matters

I hope you are very clear that when you sell your property in future , you pay the tax on the profits made. And the profit is decided by your COST of the house and the sell price. So lower the cost of your house, the higher the profits on paper for you in future. You might be aware of the fact that indexation is applied in case of real estate transactions and 20% tax is paid on the profit.

Now lets take this same example we are discussing and see how much you save at the time of purchase and how much you loose at the time of selling , which can be in distant future. See the working below and try to understand the whole situation

How paying black money in real estate transaction can lead to loss in long term

In the example above you can clearly see that by paying Rs 10 lacs in cash, a person is able to save Rs 70,000 instantly. However they are not able to look beyond the obvious and visualize the kind of loss they will incur in future when they decide to sell the property. The same person will pay 3.4 lacs of additional tax in future because he/she paid Rs 10 lacs in cash years back.

Now there are few points which can be debated here like there can be changes in laws in future, or one can save the tax by investing in another real estate properties (which again depends on future laws) , but the point here is to educate you on the long term implications    of this. Now if you fully understand the message of this post, you can take your decisions with full responsibility.

Whats your take on this ?

Is your Company Depositing your EPF money ? Are you Sure?

I don’t want to shock you, but there are tons of cases where employer happily deducts your EPF amount from your salary, but they do not deposit it with EPFO. This goes on for years and one day you come to know that you are stuck ! , because there is no EPF money for you. Your employer has severe cash crunch or is about to shut down and now you have to run pillar to post to claim your money. The whole situation gets ugly and you feel cheated, because your company never deposited the Employee Provident Fund amount. Now you go to Police and file a case against employer. But this all can be avoided if you are careful a bit, from starting itself.

Employer not depositing EPF money

How about making sure your employer is depositing your provided fund  money into your EPF account ? Before I tell you, how you can do that, let me first share with you some REAL LIFE cases where employer failed to deposit EPF money and employees are suffering ! . These are some of the examples shared by readers of this same blog over comments section in various of EPF related articles.

Case 1 – How Abha’s company didnt deposit EPF money for 2 yrs

Dear Manish,

Thanks for such an informative post. At last i do see some hope. Here is my situation:

Worked for this company A for almost 4 years and left them in Nov 2011 as they were downsizing…yes it’s been more than a year and half of torture they have given me thus far. Company is kind of closed now as I don’t get any proper response from them, CEO is just not bothered. Company first asked us to wait for 2 months to file the claim as it is a rule, did that patiently. Later came the story of change of PF office from one (under which it was originally registered) to another and that went on for several months

They kept saying PF offices are not coordinating among themselves, the real reason was even shocking and more disappointing, PF guys were not updating because this company didn’t not deposit our PF amount for long time (2 yrs appx), they however kept deducting the same from our salaries (was surprised how come there was no annual audit by PF office and how this company could continue doing so for this long), anyways they cleared things in January this year and said we have applied again. When filed a grievance online, PF person says we haven’t received any claim whereas this X employer says they have already applied. Don’t know what the real truth is but on the basis on experiences I have… most certainly it is the X employer at fault.

Another strange thing is, when I checked by balance online in January this year it looked fine (updated up to 2012… I do have SMS proof) but from last 2 times it saying updated up to 2010, I am worried if this employer has dome some mischief here too, is it possible for a company to take back money from an employee’s PF account or it is the issue with PF website?

I don’t want to apply for my claim via options you suggested above unless I see the balance updated. Thank you so much for reading thru my query/concern. Appreciate your feedback.


(Direct Link)

Case 2 – Balaji Company asked him to Wait till they deposit the Employee Provident Fund money

Hi Manish,

I switched jobs in August this year. Before I quit the job, I had submitted form with my previous employer for withdrawing the amount in my PF account. I had not received the amount due till December. When I called my previous employer, they told that they have not yet deposited the money and I will have to wait till March 2013.

My question is, is what my employer did legal? How frequently should the employer deposit the PF money with the EPFO? I have been working with the organisation for little more than a year now.

Thanks for clarifying.

(Direct Link)

Case 3 – Sarabjeet Kaur company not replying her because they did not deposit EPF amount

I worked in an organisation for 2 years. They have not deposited the PF amount which they used to deduct it from our account. Its been 1 year I am asking them to refund the PF. They have stopped replying to the emails and have stopped answering everybody’s call. Is there any ways I can withdraw the amount? The firm is based out in Mumbai and I used to work in Delhi Branch.

(Direct Link)

Employer can be Jailed if they do not deposit EPF money

An employer has no right to deduct the employee share from salary and not deposit it with EPF. There can be any excuse or justification for this, because its employee hard earned money. Once the employer deducts the Employee Provident Fund money from the employee salary, its their duty to deposit it with EPFO , and if they fail to do so for any reason, its a crime.

Whatever is the case, you can always complain about it with the EPFO department and the concerned officer has all the rights to proceed the legal complaint against the Employer and in the worst case, employer can also go to jail, because what they did is a criminal offence under section 405/406 of IPC .

Here is a real life case Shrikant Bangur And Ors. vs Shree Synthetics Shramik Union – where employer did not deposit the EPF money and there was legal battle going on . Here are the 3 things which you can do against your employer.

1. Complain to CVO officer – You can also email your situation and case to the CVO (chief vigilence officer) at EPFO, who is appointed by Ministry of labour for EPFO to look after these kind of irregularities. You can email them at [email protected]More at this link

2. File a Police Complaint – You can also file a criminal case, against the employer in police station which comes under the jurisdiction of your working office (not the registered one) . All you need to show them is the salary slip, which shows the EPF deducted, note that its always better to mail CVO about it anyways, so that the chances of local authorities influencing the matter will reduce.

3. Complain to  Regional Provident Fund Commissioner (RPFC) – You should also complain about the matter to the RPFC officer if under the EPFO office, which will be investigated by him/her.

How Employers Deposit your EPF contribution to EPF account ?

How exactly your EPF money gets deposited in your EPF account ? Here is what I found on this website

Employees’ PF a/cs are maintained under these two different methods are –

1) All accounts are with O/o the RPFC

Every registered employer remits the Employee Provident Fund contribution by challans to the RPFC’s Bank a/cs. which in turn gets accounted in the respective A/c No.of every such employee. And the employer submits monthly returns to the RPFC showing the details, employee wise of contribution thus remitted.

Every such money is maintained by the RPFC who in turn disburses, thro’ the employer towards refundable loans, F & F settlements together with accrued interest to the respective employees. Once in a year a ledger sheet showing the transactions of any employee for one full year is issued to the concerned. Similarly from the PF contribution pension contribution is divided and remitted to the Pension a/c. of the employees thro’ a separate A/c. code. This method is the largest.

2) The other method is called “Exempted Establishments (PF Trust)”

An employer/company who employs more 100 employees on roll is eligible to apply to the RPFC for “exemption” from maintaining the EPF under the above said (1) method. RPFC grants the “exemption orders” under certain conditions after examining various aspects. After which the Employer sets up a EPF Trust to be run by Employer (employer’s nominees & Employees’ representative (Union nominees) which manages all the contributions of employees & employer (excepting Pension Fund which is never maintained by the Trust). A set of Bye laws, in the lines of EPF Act & Rules is prepared & duly approved by the RPFC for running the Trust.

This PF Trust money is invested in the Govt.approved securities for earning the assured interest from which accrued interest to the employees’ PF a/cs is credited. The Trust once in a year prints the Employees’ PF ledger a/cs and distribute to the concerned. The Trust accounts are audited by the CA and submitted to the RPFC. RPFC also periodically inspects the Trust a/cs and oversee. Monthly, annual returns in the Forms have to be submitted. The convenience under the Trust is quick disbursement of loans, withdrawals and F & F settlements to the employees. Surplus, if any never distributed but any shortfall is made good by the employer.


How to find out if your employer is depositing your EPF contribution or not ?

Let me share with you some steps you should follow, to find out if your company is depositing your EPF contribution properly or not.

1. First thing is the do not rely on hearsay’s here and there. It might happen that you come to know from some one that your company is not depositing your EPF money, but it might not always be true . Delays happens at times .

2. Every month on 25th , your employer is suppose to send few documents to EPFO department to intimate them on

  • Form – 2 (for new member during the month)
  • Form – 5 (detail of new joinees during the month)
  • Form – 10 (detail of left employees during the month)
  • Form – 12 – (Details of money deducted from employees salary)

3. The best thing is to first contact your employer and ask them for a copy of these forms for last 2-3 months, do double check if they deposited the money or not.

4. As per my opinion, the best way for a common man and most convenient option is to file a RTI against EPFO and ask them all these questions . Mention your EPF account number, your employer Code and simply ask if your employer has been depositing your contribution or not.


Mostly the big size employers might be depositing the Employee Provident Fund money properly on time, but some of the companies which are small sized or whose owners and management teams are unethical might be into these illegal activities of not depositing employees hard earned money. Its always a good idea to spend some time to be assured, in-case you feel your company is one of those who are not depositing EPF amount with EPFO 🙂

Do you know of any case like this ? Also Please share this article with more and more people