Author: Anuradha Singh

5 changes in PPF rules which will impact you (PPF scheme 2019)

Posted on by Anuradha Singh

On 12th December, the Government of India has notified some changes to the PPF Scheme 1968. The government has replaced the earlier PPF Scheme, 1968 to the new Public Provident Fund (PPF) Scheme, 2019. You can view the following 5 min video I created on this topic.

Let us see what changes have been made –

1) Premature Closure allowed when residency status changes

OLD RULE – In 2016, the Government allowed premature closure of the PPF Account after 5 yrs, in case of account holders death, higher education of account holder, life threatening illness in family.

NEW RULE – As per new rules, two more condition is added.

Condition 1 : Now, a PPF account holder can close the PPF account after 5 yrs, in case of change in residency status (when you become an NRI or when NRI’s become resident) on the production of a copy of passport and visa or income tax return. However in that case, the account holder will earn 1% lower interest. This is great benefit to those NRI’s who are returning to India and want to redeem money from their PPF account, but they had to wait for 15 yrs lock in period.

Condition 2 : Now the PPF can be withdrawn to finance higher education of the dependent children of the account holder. For that one has to submit fees bills or confirmation of admission in a recognized institute of higher education in India or abroad

2) NRI investors might be able to open a PPF account

OLD RULE – As per old rules, it was very clear that NRI investors can’t open a fresh PPF account, however if they have an existing account they can continue holding it till maturity and then close it.

NEW RULE – However, the new PPF law is not clear on this. It does not restrict NRI investors to open the fresh account and it does mention if they have to close it on maturity. Hence looks like NRI investors can operate the PPF account in the same way the residents can. However in Form 1 (PPF account opening form) one has to give declaration that one is resident of India of not.

In that case, it’s unclear how NRI’s will be able to fillup form 1 to open a fresh PPF account. However it’s very sure that they are not required to close the PPF account on maturity and can continue it like any other investor.

3) Deposits allowed in multiple of 50 without limits

OLD RULE – Earlier as per PPF Scheme 1968, deposits were allowed in multiples of 5 with a maximum limit of 12 deposits in a 1 year.

NEW RULE – As per PPF Scheme, 2019 deposits are now allowed in multiples of ₹50 with no maximum limit on a number of total deposits that have been specified. In other words, you can make deposits to the PPF account as many times as you want, subject to the maximum limit amount.

Note – The minimum annual contribution of ₹500 and the maximum annual contribution of ₹1.5 lakh have been kept as it is.

4) PPF can’t be extended if there are no deposits made after maturity

OLD RULE – As per old rules, Once you choose to extend your PPF account on maturity with the option of “without deposits”, you could still choose to deposit the money when you renew if further after 5 yrs.

NEW RULE – However, as per new rules, once you have not made any deposits for 1 yrs after maturity, you will never be able to deposit the money after that in PPF account. All you can do is continue the PPF account and it will earn the returns till there is any balance.

Note : Once the PPF account is matured, you can renew it in the block of 5 yrs and if you want to continue depositing the money, you need to fill-up a form and mention specifically that you will continue your PPF account “with deposits”

5) Interest on Loan reduced by 1%

OLD RULE – Earlier as per PPF Scheme 1968, Interest on loan against your PPF Account was 2% per annum above the prevailing PPF interest rate. For example, if the PPF interest rate was 7%, you would have to pay an interest rate of 9% (7+2).

NEW RULE – As per PPF Scheme 2019, the interest on loan rate has been reduced to 1% per annum above the prevailing PPF interest rate. For example, if the PPF interest rate is 7%, you would have to pay a rate of 8% (7+1).

Note – In both cases, the interest is levied from the first day of the month in which the loan is taken to the last day of the month in which the last installment of the loan is paid.

Changes in the FORM of PPF

Apart from these changes above, now there will be just 5 PPF related forms which are as follows

  • Form 1 – Opening of Account form
  • Form 2 – Form for application for loan/withdrawal
  • From 3 – Form for application for closure of the account
  • Form 4 – Application for extension of account
  • Form 5 – Form for premature closure of the account

Here is a table showing how the old forms changed to new forms

[su_table responsive=”yes” alternate=”no”]

Name of the Form OLD Form NEW Form
a) Account Opening Form Form A Form 1
b) Contribution Form Form B Not specified
c) Partial withdrawals Form C Form 2
d) Account closure after maturity Form C Form 3
e) PPF Loan Form D Form 2
f) Extension Form Form H Form 4
g) Premature Closure Form N/A Form 5
h) Nomination Form Form E Form 1

[/su_table]

Conclusion –

So now you all know the updated version of the PPF Scheme. Do let us know your views on the article in the comment section. Till then keep sharing this article with your family and Friends and Happy Learning.

Is it possible to take loan against Fixed Deposit?

Posted on by Anuradha Singh

FD is one of the most popular investment option in India due to its numerous advantages like safety, fixed interest earning and easy to understand product. And now you can easily get a loan against your FD even if you don’t have a credit score or meet any income earning eligibility criteria to apply for a loan.

So, One of the main advantage of holding a Fixed Deposit (FD) is that you can secure a loan amount below your FD amount, without actually breaking it!

Can I get loan against my fixed deposits?

Eligibility criteria, documents required and how to apply?

In order to apply for Loan against FD, you will have to approach your bank manager, fill the desired form and submit the important documents. Many banks such as PNB, HDFC etc… are offering online facility for loan against FD.

Eligibility criteria for taking the loan against FD –

  • You need to have a year old active fixed deposit with the bank.
  • Applicant should be at least 21 years old
  • Applicant has to be resident citizen of India
  • Individual, sole proprietorship, societies, HUFs etc are eligible.

Documents required for taking the loan against FD –

  1. Application form
  2. Fixed Deposit receipts
  3. A cancelled cheque might be required if the loan is being taken from financial institutions other than banks
  4. Duly signed agreement letter
  5. Passport size photographs
  6. Valid photo identity proof

Let us see a video to understand it more clearly –

Interests charged on the loan amount

The interest rates charged for FD loans as compared to traditional loan interest rates are very less. It is generally around 2% to 3% more than the FD interest rate.

Example – Ram is having a FD worth Rs 10,00000. He is earning an interest rate of 6.5% on his FD; if he applies for loan against FD then here he will be charged an interest rate of 8% to 8.5% on the loan. The interest charged here is much less than the average loan interest rate that usually ranges from 9% to 15% (varies from banks to banks).

Below is an indicative chart of different banks with interest rates on overdraft of FD

what are the interest rates of different banks on loan against FD?

Is pre-payment of loan against FD allowed? If yes, how much is the penalty charged?

Yes, pre-payment of loan is allowed with no penalty charges. If you are thinking of taking loan against your FD, and you know that after few days or few months you can make pre-payment of the existing loan then you will be at profit because pre-payment is also allowed that too with no penalty charges.

How long can be the loan tenure?

The loan tenure against fixed deposits depends on the tenure of the fixed deposit. The tenure of loan will not be more than the term of fixed deposit. In most of the cases tenure of loan is 3 years.

Example – Sham wants to avail a loan on his fixed deposit (whose maturity is in 5 years). He can avail the loan only after completion of one year of FD. If he takes loan then he will have to repay the loan within the next 4 years, before the maturity of the fixed deposits.

Loan against FD vs Breaking the FD

The natural question here one will ask is, why not break the FD itself and use the money? Why one should apply for the loan??? Let us see the difference between the both and then one can take the decision.

Difference Between Loan against FD and Breaking of FD

[su_table responsive=”yes” alternate=”no”]

Features Loan Against FD Breaking of FD
Ease of getting money Money will be received after procedure of loan sanction is over  Money is received immediately either in cash or Bank
Interest Rate Interest on loan amount has to be paid No need to pay interest
Sanctioned amount Limitation on amount received (Up to 90% of FD) You get the entire amount you invested so far

[/su_table]

You can see in the table above, all points favour breaking of Fixed deposits, but one reason why you can think of taking the loan against FD is-

The human tendency, that you repay the loan in EMI form easily rather than again creating the FD. If you break the FD and use the money, there is no compulsion for you to again save money and create the FD and it might happen that you will not have wealth at later point.

However, if you take a loan against FD, then the FD exists and you will look at the loan repayment as your primary objective and forced to pay back the money.

One more reason of taking loan against FD is, IF you are asked for a financial help by some relative or friend and if you choose to get loan for them against the FD. Then, they will be more serious in repayment of EMI because then they will be knowing it well that you have facilitate them a loan which has to be repaid on time. So, it will become obligatory for them to repay.

And in the same condition if you break FD and give the money as loan, its a transaction between you and your friend/relative and there is a tendency of all human beings to not return the money on time and become very casual about it, if it is not legal obligation over some one.

That was all about the loan against FD .. Do feel free to ask any doubts in the comment section.

How does a “Householder Insurance Policy” work? Features and benefits !

Posted on by Anuradha Singh

In this article, we will see how you can protect your home structure and belongings from natural and man-made disasters. We are talking about “Home Insurance” Policies.

We all invest our hard-earned money in buying our dream home and our lives revolve around it. Unwanted natural disasters and man-made threats can threaten the security of our home and its belongings and can cause surprise monitory losses.

what is home insurance policy and what are its benefits?

We have all heard about all kinds of insurance policies like term plan, health insurance, car insurance etc, but very few people have knowledge about “Home Insurance Policy” or also called “Householder insurance policy” . Before I explain more on that, let’s see what are some of the real-life threats and real-life incidents where people have lost their homes and belongings

Example #1 – Burglary

As per this times of India report, burglars broke into 4 houses in Ghaziabad on February 27,2019 and took valuables worth Rs 20 Lacs. Among the 4 houses, one of the houses was just 500 m away from the police chowky and burglars took jewelry and cash worth Rs 500000.

burglary in India

Example #2 : Fire

As per this report, on January 4, 2018, Four people died after a fire broke out in Maimoon Building that housed residential complexes in the suburban part of Marol in Mumbai. Besides the four dead, five people were injured in the accident.

Fire destroyed lives of people in Mumbai

Example #3 : Floods

To give you a recent example of a flood disaster which took place in Kerala in August 2018. Around more than 400 people lost their lives and almost everyone lost their homes and belongings.

August 2018 flood in Kerala

Example 4 Earthquake :

Nepal Earthquake which happened in April 2015 killed almost 9000 people and injured 22000 people. Total damage of Rs 1000 crores USD (which was 50% of Nepal’s Nominal GDP).

Nepal Earthquake April 2015

Can you see from the above examples, that these threats are real and it can possible happen to anyone in real life (even though the probabilities are quite small).

What is Householder Insurance Policy?

Householder insurance policies are policies, which protects the home-owners against damage and losses that affect their property and belongings. The exact terms of coverage varies from policy to policy; however, most insurance policies cover perils like hail, thunderstorms, fire, and theft.

Many policies also offer financial assistance if a homeowner must be temporarily displaced because their home has been damaged. Look at this video below which explains it in a crisp way!

What all is covered under these policies?

The insurance for your home can be broadly divided into 2 parts :

  1. Structure Cover – This is for the structure of your home. The compensation under this cover will be paid to repair damages to the structure caused by specified natural and man-made calamities.
  2. Contents Cover – This is for the possessions you have inside your home. If these are damaged or burgled, then the insurance covers the loss you incur for the same. You can take either one of these covers individually or opt for both to make sure you are covered comprehensively.

Here are some of the companies in India, which offers these Householder Insurance Policies. (Please do not consider this as a recommendation list).

Benefits of these policies

1) Protection against earthquakes, floods.
2) Cover against terrorism.
3) Cover against fire and allied perils.
4) Protection against cyclone, storm, hurricane, etc..
5) All risk jewelry cover.
6) Additional rent for alternate accommodation.

 

What all is not covered under this policy?

  • Loss, destruction or damage caused by war, invasion, an act of foreign enemy hostilities or war like operations.
  • Loss or damage caused by the insured’s and/or insured’s domestic staff direct and/or indirect involvement in the actual or attempted burglary or theft.
  • Willful destruction of property.
  • Cash, bullion, paintings, works of art antiques, mobiles and laptops
  • Electrical/Mechanical breakdown
  • Cost of the land.
  • Co-operative societies cannot take long term policy for the entire society building.
  • Under construction property.

5 Reasons why you should buy a householder insurance policy?

Here are some of the reasons why to buy a home insurance policy.

    1. Natural Disaster can strike any-time and anywhere :
      Every year, India loses more than 9.8 billion due to various disasters. Though you can’t control natural disasters, through home insurance you can really protect your house against natural disasters or ” Act of God”, such as cyclone, earthquake and flood.
    2. Man-made risks cause a lot of damage :
      Despite the latest safety equipment’s, man-made threats like burglary, riots, terrorism, etc… are still prevalent. While not all insurers cover these losses, you can get extra protection in the form of riders.
    3. Lots of valuable items :
      Apart from its structure, this policy will cover the contents of the house such as domestic appliances, furniture, audio & visual appliances etc….
    4. You may require relocating to an alternate place :
      Relocating to an alternate house happens in case of a total loss of the property. Till the time your home is being reconstructed, your home insurer will cover your additional rent.
    5. Buying the policy for a longer period of time :
      Every year renewing your home insurance policy can become a very tedious task for you since you may be very busy with other responsibilities in life. Many insurers offer longer duration policy for 5 to 10 years straight in one go. It is a cost-effective and hassle-free way of staying insured.

Can I buy this policy If I stay in a rented house?

Both the Owner of the house and renter can buy this policy. There is just a basic difference between both. Let’s see what it is?

OWN HOME INSURANCE RENTED HOME INSURANCE
In this type of insurance, the home owner either insures the structure or contents (belongings of his home) or both. In this type of insurance the renter insures only his contents or belongings in this rented house.

The structure of the house is insured by the owner of this house

 

Example of a real-life House holder Policy along with premium break-up

Below images shows the detailed structure of the policy with the premium break-up of one of the known Home Insurance Policy. Details of the cover are as follows :

HDFC ERGO Home Insurance policy structure

HDFC ERGO Home Insurance Policy Premium details

  • Age of the property not more than 30 years
  • Type of ownership – Owned
  • Insurance required for my Flat /independent house
  • Policy Tenure – 5 yrs.
  • Risk cover for structure & content
  • Type of plan – Fixed sum insured
  • Sum insured for Structure – 50,00,000
  • Sum insured for declared content + Burglary cover for content – 15,00,000 (detailed description below).
  • Total premium payable (including 18% GST) for 5 years is Rs 34,825.

Conclusion :

I think you will agree with me, that we have almost no control of these natural & man-made disasters. The best we can do is be alert and prepare ourselves by insuring that we secure our belongings and structure of the homes.

Also, these policies should be preferred more by people who stay in an earthquake or flood sensitive zone and who do not stay in a secured society and vicinity. I understand that the chances of these risks which these policies cover are quite small, but then it’s up to you if you want to get these risks covered or not.

Do you think buying these householder insurance policies makes sense?

Please share if you feel it makes sense to purchase these policies? share in the comments section below!

ICICI “The ONE” Savings Account features and a quick review !

Posted on by Anuradha Singh

ICICI Bank has come up with a “The ONE Savings Account” which is going to benefit the high income/network investors who are looking for better and premium features.

Let us understand the features and benefits of this account.

complete details about ICIC the ONE savings account

Minimum Balance and Eligibility requirement

Any salaried or self-employed individual can apply for these accounts as per eligibility criteria. It’s not applicable for companies, Hindu Undivided Family or any other corporate body.

There are two variants to this account called Magnum and Titanium. Below are the balance requirement and more details.

here are the various features of ICICI the ONE savings account

Benefits of this account –

There are a various lifestyle, financial and banking benefits of this account. They are as follows –

  1. Zomato gold subscription of 1 year
  2. Big basket discounts
  3. Amazon prime subscription of 1 year and many more. Below are the complete details of the benefits of this account.

these are the benefits of ICICI the ONE savings account

Conclusion

Note that you need to keep a high account base in your saving bank account to be eligible for these benefits, so in a way you are also loosing on the interest part which you could have potentially earned. So keep that in mind, and then take the decision if you want to go for this or not!

What happens after the death of bank account holder?

Posted on by Anuradha Singh

What happens to the orphan bank account once the account holder dies?

Have you ever thought how your family members will be able to access and claim the money in the bank if something happens to you? Today we will discuss this aspect and see what exactly happens once a bank account holder dies and what are the steps to be taken by the family members.

account holder death

Whenever there is a sudden demise in someone’s family, there is a panic attack. There is mourning of losing loved ones and chaos in the family for few weeks, but ultimately life comes back to normal later.

A few months later, family member start collecting all the financial data like life insurance policies, locker keys, investment details, loan details etc. etc. But the most important thing is the bank account. Bank account is the key to someone’s financial life and getting access to it is critical.

Here are the steps to claim the money in bank account.

Withdrawal from ATM Card

Before one moves to the actual process, we should first look at the obvious thing. Find out if you have the access to the ATM/Debit card and if you know the PIN. Just go and withdraw the money from the ATM if possible over next few days.

If for some reason you are not able to access the ATM/Card, then it’s time to follow the process.

Step#1 – Approach the bank & Meet the bank officials

You should approach the bank and meet the bank manager and share about the account holder death. Ask him/her the procedure to claim all the asset from the bank. If possible, show them the proof that the account holder has passed away (like death certificate)

Then the bank with immediate effect will make the deceased account in a dormant state (a state in which the there is no withdrawal possible). However, the deposits are still possible, because it may happen that few payments / dividends are going to be credited in coming days

Step #2 – Submit the documents

Case #1 – Single account holder

If the bank account was in single name, then the nominee approaches the bank with the death certificate of the account holder including his own authenticity proof. Then the procedure of transferring money to the nominee starts and the account remains in the dormant state for 6 months to 12 months (differs from bank to bank).

Here are the Required documents:

  • Application, stating that the account holder has passed away,
  • Notarized death certificate
  • FIR copy (if the deceased has passed in the accident and body is missing for some time )
  • Authentic photo id proof (such as adhaar card, pan card, driving license etc…)
  • Relationship with the deceased with proof,
  • Nominee KYC documents (photo, pan card, and adhaar card)

Some additional documents if there is no nominee in bank account

Incase nominee is not mentioned, then the bank needs clarity on who is the rightful owner of the money. For that, they might need a written WILL, which will mention clearly about the owner of the bank account money.

If WILL is missing, in that case, the bank can ask you to bring succession certificate from court, which will be the legal document certifying who is the actual owner of the money.

succession certificate for the legal heir from the court

Case #2 – Joint account holder – If the 1st account holder has passed away then the 2nd account holder can inform the bank with the application stating the 1st account holder has passed away and also to make the 2nd holder the 1st holder so that he/she can have access to the money

Required documents –

  • Application stating the death of the 1st holder
  • Notarized death certificate of the 1st holder
  • FIR copy (if the 1st holder has passed in the accident and body is missing for some time)
  • Authentic photo id proof of the 2nd holder (such as Adhaar card, pan card, driving license, etc…)

What if there is a dispute among family members?

It may happen that there are many people in family, who claim to be the legal heir of the deceased. Even if nominee is mentioned in the account, still the legal heirs may be different from nominee.

In this case, one has to move to court and apply for succession certificate which we talked about before. It’s a document which will certify the legal heirs.

Make sure your family does not face any issues

How do you make sure that your family members do not have to go through the problems while claiming back the bank account? Here are few things you can do

  • Make sure your family knows the ATM PIN and net banking details
  • Convert the bank account in joint name, so that anyone can access the account
  • Make sure you mention a nominee among one of the legal heirs
  • Write a WILL and mention about the beneficiaries very clearly

Let us know if you liked the article? Leave your questions if any, in the comment section and I will try to reply to all the comments and doubts.

How to File RTI Online in 4 simple steps (screenshots + process)

Posted on by Anuradha Singh

Earlier RTI filing was too much pain, because it was very much time-consuming as it was an offline process.

A form was to be filled and then a Rs 10 stamp was to be attached and the entire form had to be sent by post to the required department of the government. The form took approximately 3 to 4 days to reach the concerned department.

So many people who wanted to file RTI refrained from doing it.

How to file RTI Online ? Steps and process explained

However now filling RTI is just a click away because we can file it online. I will tell you 4 SIMPLE and EASY steps to file RTI ONLINE without any hassle. But before that, let me explain to you in brief what is an RTI act.

What is the RTI?

The Right to Information Act 2005 commonly known as RTI is a law using which an Indian citizen can request for information from state or central government departments and offices. And such a request should be processed in a timely way as mandated by the RTI Act.

Let me now share what steps you should take to file RTI form online.

Step #1 – Create your free login or file RTI as a guest

To create a login, visit RTI website and click on sign up option.

If you do not want to create login then continue as a guest (by directly clicking to submit request button). To make it simpler I have attached the screenshot of the login page.

RTI login page where you can sign up and login to file your RTI request online

When we log in or even directly click on “submit request”, then the below image will appear and you just have to tick on “I have read and understood the guideline and click on submit button”. Below is a snapshot!

RTI guidelines

Step #2 – Fill the RTI form

The next step is to fill the main RTI form, you can access it directly by clicking here.

Filling an RTI form is a bit tricky. There are lots of things you should take care. There are dozens of govt departments and ministries which handle a different kind of work. So it’s important to know which department or ministry handles your RTI form.

Whatever is your complaint, it is important to write to the point and not hit around the bushes and also to write in bullet points because it will be very easy and eye-catching for the RTI OFFICER to understand your query and reply you even faster.

Let me make it easier for you by giving an example.

CASE STUDY – Mr. Shyam wants to file RTI for reasons for delay in roads repairs.

After the rainy season was over, Shyam noticed that the road was not at all in good shape. He also noticed that there were frequent accidents on that road and many people were losing their precious lives. He complained to the authorities, but no actions were taken and 3 months had already passed.

Shyam finally decided to file an RTI to know what is the reason behind so much delay.

How to fill online RTI form

If you are not sure which ministry you should choose while filing the RTI, then just Google search about it, and most probably you will find that information.

Step #3 – Make the fees payment

Once you click on submit, then the final step is to make the fees payment. The Fees for filing RTI is Rs 10 only. Two modes of payment are mentioned as

  1. Internet Banking (only SBI bank option in there)
  2. Credit or Debit Card / Rupay Card

how to make online payment for RTI application

Step #4 – Submit your application

The last and final step

  1. Once you have made the payment click on to the submit your application. A unique registration number is generated. (please save it for future reference).
  2. Now, wait and watch for a maximum of 30 days and you will mostly get a reply for your query.
  3. If you have not received the reply or you are not satisfied with the answer from RTI department, then you can file the first appeal, which is free of cost for the first time. Learn more about first appeal here

You can’t File RTI to State Govt departments online

Note that the facility of filing online RTI is available only for central govt departments and ministries. You can’t file RTI for State govt departments through this online portal. For that, you should follow the offline process of RTI only.

I hope this article has taught you about filing RTI online and answered most of your basic queries. Please feel free to ask any questions in the comments section below.