Author: Jagoinvestor

I am Jagoinvestor Admin

Is it really worth saving small amounts like Rs 2,000 per month?

Posted on by Jagoinvestor

A lot of young investors are often confused if it’s really worth saving small chunks of money in the start of their careers?

A lot of investors don’t save enough at the start of their career and wonder if they should start saving only in the future when they are able to save a “respectable” amount like Rs 10,000 or Rs 50,000 a month?

Today I want to let you know why small savings matters!

The #1 benefit of small savings

Does it really matter in long run if you save Rs 2,000 per month for a few years? Even if you do it for 3 yrs, you will just have Rs 60,000-70,000 with you. It’s not a big amount of money.

A lot of people might be able to put a big lump sum in one go to compensate for the pain of taking the effort of saving a small sum of money each month. On top of it, if you ignore saving a small sum of money for a few years, your final wealth will not be drastically different had you saved small amounts.

What you just read above is what a lot of investors think about small saving. It’s a classic mathematical way of looking at it.

However I often tell people that it’s not about the amount, but about the HABIT OF SAVING MONEY.

Cultivate the Habit of Saving

When you start your investments and start investing per month, the bigger benefit is that you are forcing yourself to take out a chunk of your monthly income and invest it somewhere.

You are actually developing the HABIT of saving on a regular basis, which is not an easy thing to achieve.

habit of saving

Today, a lot of investors are earning good amount of money and they also have a decent surplus, but what is missing is the habit of saving. They have never done it before in life for many years, and now when suddenly they are having surplus which potentially can be invested, they are finding it tough to do that, because they are not able to control themselves with the distraction this world offers them.

Imagine two kids, one of them always saves 5% of his pocket money and spends the rest. Another one spends all his pocket money. This continues for 15 yrs of their life. You can imagine what will be the psychology of both the kids and how it will impact their future.

The same is true for investors after they start their career and earning life.

Small savings compounds and boost your wealth in the future

Small savings might not look big enough at the start, but over the period of time, they compound well and adds to your wealth creation, sometimes big and sometimes small.

So let’s imagine that your future saving scenario looks like this

[su_table responsive=”yes”]

Year The amount you will save per month
First 10 yrs Rs 2,000 for 3 yrs, then Rs 3,000 for 3 yrs, then Rs 5,000 for 4 yrs
Next 25 yrs Rs 20,000 per month (increasing with 8% per year)

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Given the scenario above, imagine two cases

  • Case 1: You invest in first 10 yrs – Small savings done
  • Case 2: You DONT invest for first 10 yrs – No small savings done

If you add up all the money which you invested from your pocket in CASE 1 and Case 2, you will find out that the difference is just 2.4%. Yes, incase 1, you will invest 1.77 cr and incase 2, it will be 1.73 cr. Hardly any difference you will say

But when you find out the difference in the wealth created at the end in both cases, it will be a gap of 16%. In the case of Case 1 you will make 7.98 cr, whereas in case 2, you will have 16% less wealth. That’s a decent amount of money.

Below you will see the wealth difference in both the cases.

Impact of small savings in long term

The above example tells us that if someone is not saving small chunks of money just because they feel it will not be worth it, it’s not the right way of looking at it, because in the long term it will surely help in boosting the wealth one will create.

Small savings also help you in dealing with emergencies

Another benefit of saving small amounts at the start and not waiting for the “right” time is that one will at least start having some amount for emergencies. In our example above, if one invests even small amounts for the first 10 yrs of life, they will have a sizeable amount of Rs 7.2 lacs at least.

This is not a small amount. It can help the investor in dealing with any kind of emergencies. One can even avoid taking loans for things like buying a car, vacation or home appliances.

If nothing happens, it will give a nice feeling to the investor and boost his confidence that it is possible for him to create wealth. Remember to create 1 crore, you need to create the first 10 lacs and to do that you need first 1 lac.

You have to start somewhere.

Don’t delay your investments, else it will cost you later

The more you delay investing, the more you will have to invest in the future to cover up the short fall. Here is a small example I want to share with you

If you invest Rs 10,000 per month for the next 30 yrs (assuming a 12% return and 7% increase in SIP per year), you will be able to create 5.36 crore in 30 yrs.

Do you what happens if you delay by just 5 yrs? In that case, you will create only Rs 2.78 crore. Yes, Only 2.78 crore against 5.36 cr.

And now if you want to reach the same corpus of 5.36 cr, you will have to start with the SIP of Rs 19,300

Cost of Delay Calculator

Below is a simple cost of delay calculator where you can try out different scenarios for yourself and see what will be the impact of delaying the investments.

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Start Small – It helps you in building the habit of saving

To conclude I would say, starting small has its own benefit. It will develop your habit of savings. If you can’t save Rs 2,000 at the salary of Rs 30,000, it will be equally tough to save Rs. 20,000 at the salary of 1,00,000.

“Investing” is more about your own behavior & not external factors.

Do let us know what you feel about this article? Do you know someone who has been delaying their investments (are you one of them?)

11 changes in Personal Finance Industry in last 10 yrs

Posted on by Jagoinvestor

We just entered 2020, and I thought let me pen down some observations of the last decade.

I had started blogging from the last 12 yrs and it’s been quite a long and amazing journey. From a small blog, we are now one of the biggest personal finance websites in India with millions of readers benefitting from our work.

We had conducted dozens of workshops, interacted with thousands of investors and provided paid services to tons of investors across India and abroad.

So I thought that I will share what changes I have seen in the last 10 yrs in the personal finance industry and what are some changes I am expecting in the coming decade.

1. People want to buy “term plan” now

Back in 2009-2010, the concept of the term plan was just launched. Aegon Religare was the first entrant in the space and very few people had heard about term plan. A lot of my time and energy went into convincing people in the comments section to buy a term plan and not a money-back plan.

Unlike today, the advertisements on TV also didn’t mention the word “term plan”.

In the last 10 yrs, term plans have become quite famous and the default choice for evolved investors for their insurance needs. Now everyone “knows” that term plan has to be bought for insurance purposes.

Same is true for Health insurance also

2. Huge awareness about “Mutual funds”

It’s been around 25 yrs when mutual funds were properly launched in India (not considering UTI-64), so even in 2009-10, mutual funds were quite old products, but even during those times, they were not very famous products. It was a big PUSH Product, which means that various advisors and distributors had to spend a lot of energy into sharing about mutual funds and the way it worked.

No TV ads ever mentioned about mutual funds. Even the use of technology was quite slow, so there was no concept of online investing, online redemptions, etc, and processing of KYC used to take months.

mutual funds sahi hai

With the “Mutual fund Sahi hai” campaign for the past few years, mutual funds have become a buzz word and everyone has at least heard about “mutual funds”. Now investors flock to online apps and are willing to invest in mutual funds. From Rs 5 lacs crore AUM in 2010, the current AUM is 27 lacs crore in mutual funds. That’s an impressive 18% CAGR growth.

3. Trust issues with ULIPS

Back in 2010, there were horror stories of ULIP misselling. I used to get so many comments about how people were missold ULIPs product and they were not getting back their money.

Somewhere in 2014-15 that episode ended and investors just stopped even touching ULIPS. Now ULIPS have made a comeback with much better structures and they are way better than what they were used to be.

Now if you buy ULIPS, they are not that bad, however, I still do not buy the argument that ULIPS are great products now (more on that later). Subra has done a wonderful write up on ULIP’s here

4. Dependence on Loans has increased

Compared to the last decade, we can clearly see the usage of credit for various things in life. Start from vacations, cars, houses, furniture, and even mobile phones. You name it and it’s all available on credit.

You can even buy a Rs 4,000 saree in Varanasi shops and pay in 6 easy installments. Bajaj finance has made sure that it’s possible now. You can clearly see the trend of over-dependence on credit in such a way that the stock prices of Bajaj finance have gone up.

bajaj finance stock price

5. Financial Planning + Goals Planning becoming famous

The buzz about “financial goals” and “financial planning” is more now. Back in 2010, financial planning was an alien word. It looked like someone is trying to cheat you and make money without providing anything valuable. But the financial planning community has made sure that the word “Financial planning” reaches more and more people.

Today’s urban investors are thinking of various goals and now to “plan” for it. It’s very common to hear people saying that they want to invest for the future education of their children” and “retirement”.

6. More Choices and confusion for investors

Compared to the last 10 yrs, now we have too many products and services, and many people claiming to work for investor’s interests. We have advanced products like Robo advisory, small case, and whatnot.

The world of personal finance has become more complex now compared to the past which also increases the chances of an investor making more mistakes and at the same time also pick better options for themselves if they have proper understanding.

7. More spending on lifestyle

I remember, in 2010 I was in Bangalore and I saved close to 60% of my income. There were very few avenues to spend and the maximum, I did watch movies in the theatre and went on treks.

Investors have also moved from the category of “savers” to “spender’s first, then savers later”. We now have online shopping, food on delivery, international vacations on EMI’s, etc ..

Literally everything is available to you if you can afford to pay the “EMI” (not the product). Do read my article 7 Incredible reasons why you spend more money each month & how you can control it related to spending.

8. Moving from Physical assets to Financial Assets

While the pace is slow now and we still have a long way to go. People are moving from physical assets (gold + real estate) to Financial assets (equity mutual funds, stocks, PPF, FD). As per a Karvy report, in 2014 around 48% of assets held by Indians were physical, but in 2018, it came down to 40%.

financial vs physical assets India

The mutual funds itself has gained from 3% to 6%, and direct equity went up from 21% to 24%, however, we still have a long way to go in this space

9. Online Wallets + Cash backs are a way of life

In the last 10 yrs, I saw the emergence of online shopping websites like Amazon and homegrown Flipkart. We saw uber and ola in our lives and are also seeing how swiggy and Zomato are changing the way we are having our food.

All these apps brought the concept of online wallets and cashback which in my opinion is doing more harm to us than helping us. It’s more of a marketing tactic and making sure that clients are always in the maze of collecting points/cash back to spend it for the next order.

Most of the websites have stopped giving “discounts” and instead give “cashbacks” which is nothing but a future discount. This means that you will have to again spend and in total, the amount of benefit for you is often less than what your mind perceives. And stop thinking that you “found” an awesome coupon, it’s actually given to you by companies to make sure you feel better while transactions. It’s just pampering!

10. Online Frauds and Scams have increased manifold

Online transactions like net banking, mobile payments, and use of debit and credit card has increased in many folds in India in the last decade. Which also gave rise to online frauds and scams. The most vulnerable were the senior citizens and those people who had very less understanding of how banks and insurance companies work.

Many people got a call in the name of RBI, IRDA and SBI bank where the fraudster tried to gain access to their OTP and other critical details and many people lost a big amount to these frauds.

I even created a video on this.

Today in 2020, the fraudsters are now using google pay to cheat people.

11. Introduction of Robo-Advisory

In last few years, there are platforms that are promoting the concept of Robo-advisory. I think delivering advice through algorithms is an idea worth trying and looks cool. There are certainly some aspects of advice that can be delivered through automation, but there will always be some aspects of advisory which would need a human element.
Here is Robo-advisor definition from Investopedia

“Robo advisors are digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision. A typical robo advisor collects information from clients about their financial situation and future goals through an online survey, and then uses the data to offer advice and/or automatically invest client assets.”

After all, investors are humans and they have feelings. We need someone to talk to, share our insecurities and also take human-advice. Robo-advisory is great in all aspects which are pure formula based, but wherever human emotions will come, you would need a human there, unless you yourself are a robot!

What do I expect in the next decade?

I am not an expert in predictions, but still, I will try it out. Here are a few things which my gut feeling says may happen in the next decade (read around 2030)

  • Rise of Professional Advice – The more we interact with people who leave their inquiry with us for financial planning, we are very convinced that people are not able to manage their own financial lives. They need professional help once they have reached a certain net worth. You might be having a Rs 10 lacs portfolio today and you might be managing it, but once it becomes Rs 1 crore portfolio, you can understand that it could have been 1.5 crores with professional help.
  • Rise of materialism – We as a country have not seen huge spendings at home and we have been traditionally savers. We are now opening up to spending and I can see we are also enjoying it. While the incomes are increasing, the avenues to spend are also going up and I can sense that we will be spending too much on brands, enjoyment, eating out, international vacations and whatnot. We will celebrate possessions more and more in the come decade. Here I am talking about the overall country as a whole.
  • Retirement Time-bomb – In my latest talk with Subra, he mentioned that the retirement crisis is right in front of us even now, not just in the future. We have a penniless parent to take care of even now, but it’s not visible because they are living with the earnings of their son/daughter and it’s not visible. With families getting more and more fragmented in the future, we will see more and more senior citizens without much of retirement savings and it will ring an alarm bell-like no before.
  • Mutual Funds will be a big thing – Mutual funds revolution has just begun in India. Even right now, the number of people who invest in equities is just 2-3% of the total population. A big part of our population has to still invest and when that happens, we will see massive growth in mutual funds (and other space too).
  • Heavy changes in Economy and Infrastructure – We are standing today at the same place, where China was in the ’90s. We have very huge potential when it comes to Infrastructure building and we are already on it, though it is not going in a smooth way as compared to China. We will see a lot more highway’s, Metro, rural infrastructure coming up and much bigger and high rise buildings all over the place. Our economy is already near the J-curve and over the next decade we will see tremendous growth as the next lot of population will enter into jobs and move from small villages/cities to bigger ones.

As of now, I could think of these 4 points – but I would like to hear from you about your opinion on what all we will see in the coming decade!

5 Major Changes in Budget 2020 (NRI Taxation Myths + New vs Old Slab)

Posted on by Jagoinvestor

Budget 2020 was a big event.

For last so many days before the budget, there was this noise and expectations around raising 80C limits, change in tax slabs, and reversal of Long term capital gains tax on equity or at least giving the benefit of Indexation in equity taxation.

However, nothing like that happened.

budget 2020 highlights

Infact, things have become more complicated for investors while I think the govt intention was to make it simple. So let me jot down all the relevant points and important news items.

Here is my audio commentary for 15 min on Budget 2020

 

 

1. New Tax Slabs vs Old Tax Slabs

A new (and optional) tax slab is introduced now which has lower tax rates compared to old one. The investor will have choice of either staying with the old slabs along with various exemptions and deductions they used to enjoy, or they can shift to new slabs without any exemptions/deductions.

New Income tax slab rates

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Tax Slab

Tax Rate
Below 2.5 Lacs No Tax
2.5 Lacs- 5.0 Lacs 5%
5.0 Lacs- 7.5 Lacs 10%
7.5 Lacs – 10.0 Lacs 15%
10.0 Lacs – 12.5 Lacs 20%
12.5 Lacs – 15.0 Lacs 25%
Above 15 Lacs 30%

[/su_table]

  • Education cess @4% on the tax amount
  • Surcharge of 10% applicable if income > 50 Lacs and 15% if income > 1 Cr

Old Income tax slab rates (for those below 60 yrs.)

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Tax Slab

Tax Rate
Below 2.5 Lacs No Tax
2.5 Lacs- 5.0 Lacs 5%
5.0 Lacs- 10 Lacs 20%
Above 10 Lacs 30%

[/su_table]

Which tax slab is better?

Basically the new tax slabs are of not much to those who take benefit of various deductions and benefits anyways, because they are able to bring down their taxable income by some decent margin. Only those who have income range of 6-9 lacs and do not take benefit of any exemption/deduction will benefit from the new slabs.

Example 1 – Let’s see an example here and calculate the tax to be paid under old and new system.

  • Income : Rs 15,00,000
  • 80C – Rs 1,50,000
  • Home Loan Interest – Rs 2,00,000
  • Medical Insurance – Rs 20,000
  • Standard Deduction – Rs 50,000

Calculation of Tax under OLD SLABS

You can see that here, the taxable income will come down by 4.2 lacs directly. So under the old slab system, the taxable income will be Rs 10.8 Lacs (15 lacs – 4.2 lacs)

Let’s see tax calculations

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Slab Slab Higher Amount Income Tax Rate Taxable Income under Slab Tax
0 – 2.5 Lacs 250000 0% 250000 0
2.5 – 5 lacs 500000 5% 250000 12500
5 – 10 Lacs 1000000 20% 500000 100000
Above 10 lacs No Limit 30% 80000 24000
Income Tax 136500
Education Cess @4% 5460
Surcharge 0
Total Tax 141960

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Calculation of Tax under NEW SLABS

In new slab, there is no way of getting any deductions/benefits , so let’s directly jump into the tax calculations

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Slab Slab Higher Amount Income Tax Rate Taxable Income under Slab Tax
0 – 2.5 lacs 250000 0% 250000 0
2.5 – 5 lacs 500000 5% 250000 12500
5 – 7.5 Lacs 750000 10% 250000 25000
7.5 – 10 lacs 1000000 15% 250000 37500
10 – 12.5 Lacs 1250000 20% 250000 50000
12.5 – 15 Lacs 1500000 25% 250000 62500
Above 15 lacs No Limit 30% 0 0
Income Tax 187500
Education Cess @4% 7500
Surcharge 0
Total Tax 195000

[/su_table]

Which tax system is better – Old or New?

  • Old slab tax is Rs. 1,41,960
  • New slab tax is Rs. 1,95,000
  • Difference of Rs. 53,040

We can clearly see that the tax is lesser in the older system, compared to the newer system.

Important Points

  • You can choose each year which tax system you want to choose from – New vs Old. However this choice is only those, who do not have a BUSINESS INCOME. For those who have any kind of business income, will not be able to switch back to the other system once they have done it.
  • Remember, that there is a tax rebate under sec 87A in both new and old tax slabs where a person earning up to Rs 5 lacs gets a tax rebate of Rs 12,500, which technically means that if someone’s taxable income is less than 5 lacs, then they will have to not pay any tax.

2. No Deductions or Exemptions under New Tax Regime

I have already mentioned this, but if one chooses the new tax regime, they will not be able to take benefit of following things

  • 80C investments (PPF, ELSS, EPF, Life Insurance Premium)
  • Medical Insurance Premium
  • Home Loan Interest
  • HRA
  • LTA
  • Standard Deduction of Rs 50,000
  • Extra 50,000 deduction for NPS (apart from 80C limit)
  • Donations under 80G
  • Education Loan Interest

Note that you can still put your money in all those 80C investment products and medical insurance etc., but you will not be able to take tax benefits (not for those who stick with old system)

However, the employer contribution to NPS and EPF is still tax free up to 7.5 lacs per year. So you can ask your employer to contribute more on your behalf in these two things.

3. NRI definition change + Taxation Rule

There was too much confusion around new rules for NRI’s for the whole day and twitter saw many people debating if many NRI’s especially from Middle east will have to pay taxes in India or not.

Here is what the new rule says –

“If a person is not resident of any country, then they are deemed to be a resident of India and they will be taxed on their global income”

Check out the official confirmation here

There are a lot of citizens of India, who stay in different countries for small period of time and technically are not resident of any country and hence don’t pay any taxes. Those investors will not have to pay the TAX in India for their global income.

This is different than those investors who are living in countries like UAE etc. where there is ZERO tax. Because they are a “tax resident” of these countries. They are just not paying tax because the law is like that. So these kinds of investors don’t have to worry at all, and nothing changes for them. Check out the video clarification from officials

Now as per the new rule, a person has to stay out of India for more than 240 days to qualify as an NRI, against the old limit of 182 days.

4. Dividends will be taxable in the hands of investors

The DDT (dividend distribution tax) is now abolished and the dividends will now be taxed in the hands of investors as per their slab rates.

Till now the DDT rates for companies was 20.35%. So every investor who got any kind of dividend took that kind of hit indirectly (even thought it was tax free in investors hands).

This is not great news for those who are in higher tax bracket, because they will pay higher tax now compared to what they paid earlier and now there will be additional headache to track and mention all dividend income while filing tax returns.

There will be TDS @10% deducted by mutual funds, if the dividend to be given is more than Rs 5,000 in a financial year to an investor.

Important Update : There was a big confusion around investors and advisors community that TDS of 10% will also be applicable on redemption from mutual funds or not? But the govt has already clarified that the TDS is only applicable on mutual funds dividend and nothing else. Any redemptions you do from mutual funds, that will not attract any TDS for residents (for NRI’s , the TDS is already there since long time)

Clarification from govt that TDS will only apply on TDS from mutual funds and not on capital gains

5. Banks Deposit Insurance raised from 1 lacs to Rs 5 lacs

The insurance on your bank deposits have gone up from Rs 1 lacs to Rs 5 lacs. This was much needed change and finally it’s done. Recently we saw the problems in PMC bank (the bank is not yet closed or shut, hence the insurance will still not apply there)

Bank deposit insurance in India vs other countries

Conclusion

As govt said, they want to simplify taxation rules in long run and I feel over next 5-6 yrs, they will slowly try to remove the old system of deductions and exemptions with lesser tax rates coming in.

However I feel, most of the investors needs that carrot of “tax saving” for investments otherwise they don’t do it.

While, its correct that one should invest anyways whether there is tax benefit or not, but when you go to ground level and see, the reality is that people need that nudge to invest. We need to trick them for their own benefit, else they will not think of investments.

From that point, it might be a bad news.

Also, for some years, we will see this confusion of old vs new tax rules and which one should we be choosing, but this can’t continue forever and eventually we will have a single tax system and you guess it right, it will be the new one.

Let me know what are your comments on this budget and how do you see it?

Arogya Sanjeevani Policy – A uniform health insurance plan (REVIEW)

Posted on by Jagoinvestor

IRDA has recently announced the launch of health insurance policy called “Arogya Sanjeevani Policy” (official link) which will have standard features which are required by a common man for his health insurance requirement.

IRDA thought of a standard policy which will be exactly same across insurers with similar features. In this review, I plan to give you details of this policy.

Arogya sanjeevani health insurance policy review

What is Arogya Sanjeevani Policy?

It’s a standard health insurance policy for a common man with standard features. It will be offered by all health insurance companies in India starting from 1st April, 2020 onwards. The name of the policy will be ‘Arogya Sanjeevani Policy – Insurance company name’. The premium, however, may be set by the insurers on their own.

The existing health insurance policies in market are quite complex at times with fancy features and differ from each other so much that a normal investor finds it very tough to choose a suitable policy. Hence IRDA came with this policy.

Who can buy the policy and for whom?

Any person whose age is between 18 and 65 yrs can take this policy. Either the person can buy an individual policy or buy the family floater option if one wants to cover other family members.

“Family” here means

  • Spouse
  • Parents
  • Parents-In-Law
  • Dependent children between 3 months to 25 years (natural or adopted)

Note that any children who are above 18 yrs and financially independent will not be eligible for family floater.

Features Arogya Sanjeevani Policy

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Feature

Explanation
Sum Assured The minimum sum assured is Rs 1 Lac and maximum sum assured is Rs 5 Lacs (in the multiple of 50,000)
Premium Payment Frequency Premiums can be paid on a monthly, quarterly, half-yearly and on a yearly basis. It will be a 1 yr policy renewable each year
Cashless Benefit Yes, there is cashless benefit under this policy
Maternity Benefit Not Available
Renewability Lifetime renewability is available in this policy.
Minimum & Maximum Age The minimum entry age for the principal insured is 18 years and the maximum entry age is 65 years.
Waiting Period 30 days of waiting period. Hence no claim will be paid in first 30 days after buying policy
Co-payment A fixed copay for 5% is applicable for all ages in this policy.
Portability Yes, the policy offers the portability option to other health insurance companies
Ambulance Charges Max Rs. 2000 per hospitalization
Pre & post Hospitalization 30 days Pre Hospitalization & 60 days Post Hospitalization expenses
Ayush Treatment Yes, it’s Available.

AYUSH means all treatments related to Ayurvedic, Yoga, and Naturopathy, Unani, Siddha, Homeopathy
Waiting Periods There are 2 types of waiting periods, 24 months and 48 months.

Most of the illness have only 24 months of waiting period, but two of them have 48 months of waiting period.
Sub Limits
  • For hospitalization expenses like room, boarding, nursing expenses up to 2% of Sum Assured or a maximum of Rs.5,000 per day.
  • ICU/ICCU expenses will also be provided up to 5% of sum assured or a maximum of Rs.10,000 per day.
  • Sub-limits of cataract surgery are equal to actual expenses i.e. 25% sum assured or Rs 4 lakhs, whichever is lower.
NCB (No Claim Bonus) NCB (No Claim Bonus) of 5% for each year up to 50% of the sum assured is covered.
Riders Not Available

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Policy Cancellation and Refunds

You can cancel the policy subject to following refund options

  • If you cancel within 30 days, you will get 75% premiums back
  • If you cancel from 31 to 90 days, then you get 50% premiums back
  • If you cancel between 3 months to 6 months, then you get 25% premiums back
  • After 6 months, you get NO refund

Is there any grace period in the policy?

Yes, For a yearly premium payment, 30 days grace period is allowed and for other modes of premium payment 15 days grace period is allowed.

Will the premium depend on my city or the zone?

No, it will be same across India. Note that some policies have zone-based premiums model

What are some exclusion of the policy.

The main exclusion is the maternity treatment expenses, but even treatments related to weight loss, change of gender, plastic surgery, hazardous adventure sports, breach of law or due to war, etc are excluded from the policy.

Good points of Arogya Sanjeevani Policy

  • All main features are available in the policy which is required by any investor
  • The policy has standard features, so no chance of getting confused when comparing the premiums of different companies
  • It’s my guess, but the premiums of this policy would not be very high as copay is there in this policy and no complicated features exist. Also there is a very large market for this policy hence all insurance companies will compete with each other to keep premiums down
  • Its a no brainer policy for someone who wants to buy a “decent policy”
  • You can buy multiple Arogya Sanjeevani Policy from different insurers

Should you buy Arogya Sanjeevani Policy?

At the end, let me answer this important question.

Health Insurance is a long term product, and if you can afford the permission, you should go for a base policy which is very strong overall. I suggest one to go for a 10-15 lacs of base cover and extend the cover using super top up policies beyond that.

Overall Arogya sanjeevani policy is decent for a common man who wants a good enough health insurance policy which works. It’s like the Jan Dhan account which has all the decent features. However there are few things which are the issues

  • 5% copay
  • Sub limits of room rent
  • Maximum Sum assured limit of Rs 5 lacs
  • 30 days of waiting period

Hence, I would suggest to explore other health insurance policies which give option to take a higher sum assured and may also not have copay limits.

We also need to wait for couple of more months to see how this policy launch turns out to be and what kind of premiums will be charged by various companies. Overall, it’s a very positive development in health insurance space and this policy will give an opportunity to people from lower sections of society to buy a good enough health insurance policy.

Learn how to save money to do what you love [PODCAST – 49 min]

Posted on by Jagoinvestor

Do you want to know how to save money to do what you love in life?

I recently did a 49 min audio podcast with Sanjay Khandelwal of The Break School. The podcast is mainly aimed at those who want to do something on their own by quitting their jobs, but they get stopped because of a lack of money & planning or fear of starting out. The podcast will also help those who want to know some of the best principles of savings and investing. Please listen to the podcast below

Here are iTunes link along with google podcast link

Here are the 11 things we discussed in the podcast?

  1. Why did you start Jago Investor ( 02 min, 48 Sec)
  2. Two biggest challenges in last 10 years in building Jago Investor ( 05 min, 43 Sec)
  3. What have been your 3 biggest learning as a personal finance coach? ( 06 min, 54 Sec)
  4. Have you come across people who wanted to quit their job and be freelancers or be on their own? What do you think holds them back?
  5. Is it just money or something more? ( 10 min, 47 Sec)
  6. What kind of habits makes people spend more and save less? ( 15 min, 11 Sec)
  7. Do e-wallets increase our propensity to spend ( 21 min, 49 Sec)?
  8. How can personal finance help? And how does it not help? ( 26 min, 11 Sec)
  9. Can you share 3 to 4 financial concepts that layperson must be aware of? (30 min, 30 Sec)
  10. How much money does one really need? (35 min, 33 Sec)Are there any misconceptions/Illusion that people have with respect to money? ( 39 min, 38 Sec)
  11. Can you suggest a basic Financial Plan for someone who wants to quit her job in two years and start a blog? What are the things that the person must look at? ( 41 min, 05 Sec)

Please share what you think about the podcast after listening to it?

What does “more money” give you in life? (shocking replies inside)

Posted on by Jagoinvestor

What does “more money” give you in life?

I asked this question on twitter a few days back and gave 3 options to choose from. Here are the results

A total of 120 people voted on the question and I got the answer somewhere on the lines of what I have always believed in.

Are Happiness and Convenience the same?

A lot of people confuse “convenience” with “happiness” and hence believe that getting ultra-rich will make them very happy in life. They don’t realize that when they will get ultra-rich, they will be able to afford everything from nice house to amazing vacations, all the gadgets they want and fancy cars.

This all will make their life super easy and they will not be worrying about anything in life which can be bought with money.

But that’s not “happiness”, its “Convenience”

Money and Happiness

There are many books written on the topic of money and happiness and there is tons of research to conclude now that an increase in happiness you get out of having more and more money keeps diminishing over time.

So may be quite unhappy when you are poor because you are frustrated and have no idea where the next meal will come from.

Going from Rs 10,000 to Rs 1,00,000 (increase of 90,000) is very different than going from Rs 1,00,000 to 2,00,000.

Your life style will not drastically change if you earn 20 lacs a month instead of 6 lacs a month. But it surely is a big change from Rs 20,000 a month to 80,000 a month.

Out of 120 people who voted on my tweet, 76% people choose “more convenience” as their answer and only 12% choose “more happiness”. I am sure people who choose “more happiness” still need to see a good salary in life

I personally think that you surely need to aim to build great wealth and aim for huge income because more money will surely be better than less money in life. At least you have one less thing to worry in life and that is MONEY.
Around 12% people also voted for “more worries” as their answer. Money can also bring trouble in life at times, especially if you are not ready to share the fruits of wealth with others and if you have no idea how to extract happiness out of your money.

There are many examples on earth where people have done suicide and gone mad while their bank accounts had millions. Remember that unhappiness can come from various sources like relationships, health, how you feel about yourself, family issues and money.

What do you think about this topic?

Please share your thoughts about “What does more money give you in life?”.

Let me make it clear that above points are my personal thoughts about money and I accept that different people have a different experience in life which shapes their relationship with money. I would love to see how people think about this topic.

10 money lessons, I would like to pass on to my Children (and yours too)

Posted on by Jagoinvestor

Jagoinvestor completed 10 yrs recently and it was a wonderful experience for these 10 yrs writing so many articles, working with thousands of investors.

While I was at my Ahmedabad office recently, I and my partner Nandish thought of an idea. We were discussing our kids (I have 1.5 yrs daughter and his son is 7 yrs old) and their future. We were wondering what kind of things we would like to teach our kids so that they can have a great financial life or life in general.

Here are those 10 lessons… Do listen to the whole talk

So we thought about why to keep things private and not share the 10 lessons we would like to pass on to our kids which can help them greatly when they start their own financial life many years in the future from now.

These 10 lessons are not those regular “start early” and “take your health insurance” kind of points. We are talking about some solid lessons which are going to impact your life overall. It’s more of a RICH mindset vs Average Mindset lessons.

Here are the topics we discussed in the video:

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1) Future is an Illusion
2) Target Financial Freedom in 10 yrs
3) Speak the language of NETWORTH
4) Focus on your Health
5) Be Coachable
6) Always think in terms of Milestones
7) Look at life in sum-total
8) Slow down to Speed up
9) Be a student of Life
10) Always tell the Truth
11) Don’t Listen to Your Inner Voice (Bonus lesson)

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Incase you have any thing to add to these 10 points, we would love to listen about your thoughts in the comments section.

We owe our success and whatever we have achieved to all our readers, our teams and our teachers.

Retirement Time Bomb (60 min video discussion)

Posted on by Jagoinvestor

Here is a 1-hour deep discussion on the topic of Retirement Planning and how India is set to have a massive problem in the coming times (and it’s still going on).

In this video, I talk with Mr. PV Subramanyam (also called as Subra) who is a retirement expert and has also authored a best selling book called “Retire Rich – Invest Rs 40 a day”

What is covered in this video talk?

Here are the discussions which are part of this 60 min talk.

  • What is Retirement (it’s not what you think)?
  • Investors attitude towards retirement
  • Retirement Time Bomb – The future of India
  • Job Opportunities which can be created if Govt address Retirement issue
  • Top mistakes investors do in their retirement planning
  • Where to invest for your Retirement?
  • Why retirement planning has become famous these days
  • How “bad retirement” puts the burden on children
  • A quick and simple way of estimating your retirement corpus
  • Early Retirement – What it means and is it possible?
  • Suggestions for someone who is already late for retirement!

It was a fun-filled talk I did in Pune, and I plan to do more of these talks with various other people in Industry. So keep a watch on it.

Do subscribe to our youtube channel, if you don’t want to miss out on the upcoming videos. Do let us know what you feel about the video and also share your views about retirement planning.

Manish

CRED App Review – Earn rewards on paying credit card bill

Posted on by Jagoinvestor

Today I want to do the review of the CRED app. I have been using it for the last 12 months already.

CRED is an app, which gives you rewards on timely payments of your credit card payment. If you are not using this app, you may be making credit card payments anyways by other online methods. All you have to do is to make payments using the CRED app, that’s all.

It’s that simple to use!

There are various brand offers and coupons from categories like dining out, food delivery apps, flight tickets, and even shopping? Here is one instance.

We get different kinds of rewards for using or raising the credit card bill amount. Like, in my case, I have a PVR credit card of Kotak bank,  for every Rs. 15,000 credit card bill, I get points to redeem against 2 PVR tickets (max. Rs. 400 for 1 ticket). Because of this, I get influenced to pay my bills mostly by credit card to reach Rs.15,000 of a bill every month.

Here is how an offer looks like

Cred app offers explaination

This is how banks influence us to use a credit cards. But, when we pay bills of credit cards we never get any discount or reward on that amount?

However, now it is possible with the help of the CRED app. This app gives you rewards for paying your credit card dues via this app.

What is CRED App?

CRED is an app on which you add your multiple credit cards and make payments by the app itself, which gets credited to your bank in few hours. The app is exclusively for those people who have a good credit score (checked automatically from Experian or CRIF) and have some history of credit card payment. This is checked when you register for the app for the first time.

It is also equipped with the cred to protect feature which is an AI (Artificial Intelligence) backed system, that keeps track of every single nuance of a credit card payment journey – right from due date reminders, spending patterns and other card usage statistics.

There are two things you can earn on CRED App

Coins – You will earn coins equivalent to your credit card bill amount every time you pay the credit card bill. So if you pay the credit card bill of Rs 40,000, you will get 40,000 coins. The coins will keep accumulating month after month. So you can keep collecting coins and later redeem it in any manner. There are some offers and benefits which requires a very large amount of coins, so it’s beneficial to collect lots of coins. I currently have around 3,50,000+ coins in my own account.

Gems – You can also earn “gems” in the CRED app. These are different kinds of currency that are required by some offers. Right now one earns 10 gems on each referral. So if your referral signs up on the CRED app, then you will earn 10 gems. If you like Jagoinvestor, please help us earn some coins by registering on the CRED app using this link.

What are coins and gems in cred app

Here is a sample of some of the offers on the CRED app

  • iXigo flight bookings – Rs. 1000 off on using 5,000 coins
  • Flo Mattress – Rs. 5,000 off on using 20,000 coins
  • Swiggy – Free delivery for 3 months on using 5000 coins
  • UrbanClap – Flat 50% off on man grooming using 25000 coins
  • Flea Bazaar cafe – Flat 20% off on total bill using 5000 coins
  • Cashback – Get Rs 1,000 cashback for 30 gems
  • Flipkart – Rs 500 gift card for 20 gems

There are various kinds of coupons and offers available under the CRED app under different categories. Depending on what offer you want, you can go into that category and explore the offers available in your city.

Various kind of coupons and offers available on cred app

3 steps to register for CRED App

You can avail of the benefits of this app only if you meet the eligibility criteria defined by the app. Which is – to have a good credit score. Following is the step-by-step process for this –

Step 1 – Download the Cred App from here

Step 2 – Register to cred using your phone number

  • Login to cred using your name and phone number registered with a credit card.
  • The app will prompt you to grant permission for phone access to verify the number and SMS (which is needed to send a reminder on your due credit card bills), just grant the permissions.
  • Cred will process this data and check your eligibility, on the basis of your credit history. Cred has a tie-up with credit bureaus like Experian and CRIF.
  • If your credit score meets the standards of cred then you will receive an OTP to proceed further

register on cred app and get your credit score

If your membership is rejected, improve your credit score and apply after a few months again. It may also happen that you are using multiple mobile numbers for banking, so try again using another number. So, if you have just got your credit card some weeks back, please wait for a couple of months before you apply.

Step 3 – Add your credit cards 

Once registration is successful on the CRED app home page all your Credit Cards would be displayed. You just need to verify these cards by entering the last 4 digits of the card. To ensure the active status of these cards, cred will instantly deposit Rs. 1 to each of the cards.

You will not be asked to enter an expiry date or CVV of your cards which ensures the safety of this app.

Once successfully getting your card verified, you can exclusively earn rewards and scratch cards on every bill payment. Master card, American Express, Diners Club, and VISA cards are presently being handled by the CRED app.

5 benefits you get in the CRED app

Coming to the main point of getting rewards and benefits from the CRED app, below are the following things

  • Cashbacks on paying bills
  • Discounts
  • Free gifts and offers
  • Spending Analysis
  • Credit Score tracking

Let’s look at each of them

Benefit #1 – Cashback on paying bills

You may earn cash back (all called #killthebill) on every transaction. At the time of payment of more than Rs. 1000, you may be notified that you have won a scratch card and you might earn some amount which will be credited back to your credit card.

rewards earned on cred

Benefit #2 – Discount Offers

Now, this is the major part of the benefits. CRED app has associated with various brands and it offers you some discount (cash discount or percentage discount) when spending a particular amount.

For example one of the offers is a “20% discount on the next 20 orders from BOX8”, so you can see that you will get 20% on the Box8 for a long time, but you still have to pay the rest amount. So even if you are getting a discount, you need to SPEND on it. So these discount offers are truly good only when you are anyways going to spend money on these brands.

Example of a discount offer on a CRED reward

Sometimes, it may happen that these offers also give you a chance to experience things which you might not have done without a discount, so technically it’s beneficial in that manner, but still, spending has to be done.

Benefit #3 –  Free Gifts and benefits

There are some rewards that are truly free for you by burning some coins or gems. You don’t have to pay anything to get the benefits. These I personally think are the real benefits in a way, because you are not spending anything out of pocket, but just availing an offer.

Below you can see an example, where you can burn 2,00,000 coins and get a pass for 2 people Bacardi NH7 weekender event and even lounge access. Apart from that, I have shown 3 more offers for complimentary benefits without paying any extra from your own pocket.

Free benefits from cred app

So you can keep collecting the coins and wait for the right offer or reward to arrive which is useful for you.

Benefit #4 – Spending Analysis

One small benefit of the CRED app is that you get some insights into your spending pattern and the history of your credit card payments in one single place. This is good for those who have multiple credit cards and want some visibility on how their spending is happening.

Spending Analysis on CRED

Benefit #5 –  Credit Score Tracking

CRED app will keep showing your credit score from time to time, so this will help you to stay motivated to make timely credit card payments and you can also keep a track of how your credit score is moving over time. Right now CRED has done a tie-up with Experian and CRIF and pulls your credit score from both places.

Credit Score from Cred app

How to make payment in the Cred app?

Paying credit card bills via the CRED app is very easy, just click on pay now, enter the amount and click proceed. Nowadays the bill amount along with the minimum due amount automatically gets pre-populated. You can make payment via debit card/net banking (NEFT/IMPS) or UPI. It may take some time to reflect on the money credited to your credit card account.

On Completion of Bill Payment of your Credit Card, you will be rewarded with CRED Coins and Kill Bill Scratch Card which you will have to redeem.

Credit card bill payment on CRED app

Is the CRED app safe?

I am sure that you must be having this question about the safety of this app because you are putting your credit card details and authorizing the app with all details.

First, this is this app is founded by Kunal Shah, the person who started Freecharge and the startup is heavily funded. The past record of the founder is intact so you can trust the company.

Next point is that the CRED app never asks you to provide the date of expiry or CVV on your credit cards, hence you are not giving any critical information to this app.

Then, you should know that when you install any other app, those apps also get various permissions like reading your SMS, making calls on your behalf, tracking your activity etc, and this app is nothing different from others.

If you want, you can deny access to emails and messages then you won’t be able to receive a notification on due dates and also you won’t get any expense analysis.

Nothing is FREE in this world

While it feels great to get great offers and benefits and freebies, remember that nothing is FREE in this world. Behind everything which looks amazing, there is a business model and the reason why you get those free rewards and offers.

You should be aware that CRED or any other coupon company does various tie-ups and associations with brands and companies and acts as a lead generation company. You are nothing but a lead to some other company and CRED is helping in growing sales for the other party.

They will mostly get something back in return and that’s the business model. Nothing wrong with it, but you as an investor should be aware of what you are getting into.

The discounts and awesome benefits you get from CRED or any other similar app are basically tempting you to spend on the pretext of a “great deal”. If you spend on something which you originally did not intend to buy then it’s an extra expense for you at the end of the day. The coupons are pure rewards only when you were anyways going to spend on something and if you get an additional discount on the deal.

So, we need to be conscious while spending and getting discounts by using CRED coins, it should not happen that you are spending on some unwanted stuff to just redeem Cred coins.

Let’s take my example, I attended two live concerts in Pune, VIP pass of Rs. 5,000 each. No doubt I just paid Rs. 4,000 (Rs. 2,000 each) instead of paying Rs. 10,000. But, if this reward would not be in the pictures so, I would have never gone to that concert and saved Rs. 4,000.

Download the Cred App from here

Who should use this app?

The app is more suitable for the below-given categories of credit card users –

  1. High credit card bill payers
  2. People living in metro cities/tier 1 or 2 cities (most of the rewards are dining out or live concerts)
  3. People who pay credit card bills before the due date (no reward on late payments)

Do let us know if you have any comments or questions regarding the app?

How NRI’s should plan their investments in India?

Posted on by Jagoinvestor

Are you one of the NRI’s who wants to know if you should invest your money in India and how to do it? Then this article is a good place to start with.

There are close to 3 crores NRI’s and PIO from India in different parts of the world, however, this post is mainly for those NRI investors who go out of India for 2-10 yrs and will mostly return back after few years of work.

Generally, there is a perception that NRI’s make a lot of money outside India as they are paid in Dollars and Dirhams! While this is true in general, one can’t deny that their expenses are also high and their life out of India is challenging as it’s a different city, culture, and environment overall.

NRI’s earn well, spend well and in most cases also “save” a decent amount of money every month. Even if one some is saving $2,000 in USA it’s close to 1.5 lacs a month after all. So the first challenge is to “save” money while you are NRI and the second one is to invest it properly and manage it well, especially if you are have limited time in your hands as an NRI.

What a person can save in India in 5 yrs, many NRIs can do that in just 1 yr – which means that if an NRI plans well – he/she can do financially very well in 8-10 yrs and come back to India semi-retired or fully retired.

In this article, we are just going to do some conversation regarding the various options available to NRI’s for investments and why they should choose India for their investment purpose. I will not cover too many technical rules or aspects related to investments in this article and will keep it quite too the point.

Which bank account to use – NRE or NRO?

A lot of NRI’s keep using their saving bank account for many years, without realizing that it’s illegal. The moment you become an NRI, one needs to convert their savings bank account to NRE or an NRO account. Or one can open a new NRE/NRO account if needed.

NRE account is a bank account where the money is full repatriable – which means that you will be able to take out all the money back from the NRE account and use it in a country where you are residing. It’s an account where you can deposit both your foreign and Indian income.

On the other hand, the NRO bank account is only partially repatriable and you can only deposit your Indian income in this account.

So depending on your situation and income type, you need to open these accounts. One can have any number of NRE/NRO accounts if required. There are too many aspects you need to consider between NRE / NRO account, which is explained in the table below

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Comparison NRE Account NRO Account
Income can be Deposited Foreign earnings and Indian Earnings Only Indian Earnings
Meaning Tax-Free Taxable
Repatriability Fully Repatriable Partial (interest fully and principle within set limits)
Joint Account Can be opened by 2 NRI’s Can be opened by an NRI along with another resident or NRI’s
Deposits and Withdrawals Can deposit in foreign currency, and withdraw in Indian currency Can deposit in foreign as well as Indian currency, and withdraw in Indian currency

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Click here to learn more about NRI investment services by Jagoinvestor

4 reasons why NRI’s should invest in India?

Should you be investing your money in the country where you are residing or in India? Does it make sense to earn and stay in the US or the Middle East, but invest all that money in India? Many NRIs are confused about this, so I will just give you 4 small points which you should be aware about.

Reason #1 – India is one the fastest growing and a stable Economy

Note that India is one of the fastest major economy and quite a stable country compared to many others where NRI’s live. It’s important to make sure that your money is invested in the country which is stable enough. On top of that, you also help in growing the foreign exchange of your country.

Reason #2 – High-Interest Rates

Compared to many developed economies, the interest rates or “returns” you can get in India is quite good. Japan has negative interest rates and the US has not more than 2-3%. Many NRI investors make the mistake of keeping too much money in the bank accounts outside India and earn very little interest rates.

Reason #3 – Because you understand the investments in India

There is a high probability that you already understand various Indian investments options and financial products. Also, you will never fear what happens to your money because there is a sense of familiarity with India’s markets and financial ecosystem.

Reason #4 – Mostly you will be back to India

A vast majority of NRIs return back to India after working for a few years outside and finally use all their investments back in India. That’s one strong reason why you should invest a major part of your money in India itself.

I don’t mean to say that no investment products outside India are better than Indian financial products. There will surely be options which can be looked at, please do that in case you feel you want to.

What options do NRI have for investments in India

Quickly, let’s see what various options are where NRI’s can put their money for short – long term. This is not a guide which will give you very detailed information, but a quick commentary of what the option is all about.

#1 – Bank NRE Deposits

Bank NRE deposits are one of the wonderful choices an NRI can make. The interest you earn on NRE deposits is tax-free and it’s a simple product that gives you decent risk-free returns. You can choose the NRE deposits for some part of your investments if you don’t want to complicate things and are investing for less than 5 yrs.

Many NRIs take a loan from the local banks at low-interest rates and invest in NRE deposits and earn the margin. See if this is a profitable thing to do in your case of not.

#2 – Real Estate

One the hot favorite for NRIs is real estate in India. Real estate investments require big-ticket investments and many NRI’s have that. Even if you are buying a flat or land on installments, it works well for NRI’s are they have a big disposable income per month. One of my close friends also invested in the Hiranandani project in Bangalore by making a down payment because they knew that the installments to be paid will be easy on the pocket with NRI income.

The only negative side is that many NRIs choose real estate just based on the limited information sitting outside India or in a hurried manner. So make sure you take your time in researching the property and take decisions slowly. As it’s a high ticket transaction, its highly recommended to hire a real estate lawyer, pay them fees and get all the work done like title search, property inquiry. If needed go with a real estate broker who can manage everything for you!.

One more thing NRI should know is that they are allowed to only buy residential or commercial real estate, but not agricultural properties.

#3 – Insurance Policies

There are many Insurance policies (which are actually investment polices) that are marketed well for NRIs. These, in my opinion, are to be carefully chosen as many traditional products can turn out to be dud investments and a very bad choice of long term investments. Some ULIP’s in the market have got reintroduced with lower charges and much better structure – so please choose them after a lot of studies and only for the long term.

I would strictly advise against traditional investment option which does not have exposure to equity in them because they are not better than normal NRE deposits.

NRI’s can and should buy the pure insurance policy (term insurance) if they require it.

#4 – Direct Equity

Direct equity is a good choice for NRI investors, provided they know the equity game and are able to pick the right stocks with proper research (either on their own or on someone’s advice). Make sure you do not over diversify your stock portfolio, because with too much money you may go on a shopping spree, which will make your portfolio very complex and with bad stocks.

If you want to do equity and want to take high risk, you can also look at PMS. If you want help in PMS, our team can help you out with that. Note that in order to invest in equity, an NRI needs a PIS permission (portfolio investment scheme). These are generally done by your broker or trading account provider and you don’t have to worry about it.

#5 – Mutual Funds

Mutual funds are quite hot these days among NRI’s and it surely is one of the best choices for investments, provided you have proper guidance about it.

In Mutual funds, you have two choices – Equity mutual funds and Debt Mutual funds.

Equity mutual funds are long term financial products that can deliver extremely good returns if managed well. Those who are ok with volatility in their portfolio and want very tax optimized inflation-beating returns for their long term goals, for those NRI’s mutual funds are a very good choice.

Even Debt mutual funds are a very good choice for those NRI’s who do not want to get into equity risk and want alternatives to bank deposits and bonds. Debt mutual funds are quite a good option even taxation wise if you are ready to invest for more than 3 yrs.

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Taxation Equity Mutual funds Debt Mutual funds
Short Term Capital Gain (STCG) (Before 1 yr) Taxable @ 15% Taxable as per Income tax slab rate
Long Term Capital Gain (LTCG) (After 1 yr) Taxable @ 10% where LTCG>1 lakh (No indexation benefit) Taxable @ 10% without indexation or 20% with indexation

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NRI’s from USA and Canada can also invest in mutual funds, but only with some limited mutual fund houses due to FATCA compliance. Here is a detailed guide on NRI’s investments in mutual funds

We at Jagoinvestor manage more than 140 NRI families’ investments in mutual funds. If you want to explore what we have to offer, please do let us know by clicking here and schedule a phone call with us.

#6 – Bonds and NCD

NRI’s can also invest in various bonds and NCD’s which are issued from time to time. These instruments have fixed interest which you can get every year credited in a bank account and you get your principle on maturity. The liquidity has to be compromised in these instruments as getting out of these before maturity becomes very tough even if these are tradable in the secondary market.

#7 – PPF

PPF is a choice for those NRI investors who already had it opened while they were in India because an NRI can’t open a fresh PPF account. Also, PPF is going to be a limited time product as one can’t be extended beyond 15 yrs.

#8 – NPS

NPS is another choice for your long term investments if one wants equity exposure in their portfolio, and pension benefits embedded into the product itself. Only NRI’s who are Indian citizens can invest in NPS. PIO and OCI are not eligible for opening the NPS account. In NPS, you get choices between equity investments, govt securities, and other fixed-income instruments.

Note that in NPS your savings get locked in till your retirement and only after that you get a part in a lump sum and rest is used for a pension. So choose NPS if you are very clear that your retirement is going to be in India.

KYC compliance and taxation For NRI’s

Note that once you become an NRI, there are lots of compliance which has to be followed by you. There are limits on where you can invest and where you can’t? Even the taxation for NRI’s is different and rules regarding TDS are different. We are not going into detail in this article regarding this as its out of scope.

How to avoid double taxation for NRI investments?

A lot of countries have DTAA agreements (double taxation avoidance agreement with India. In the case of NRIs – one can avoid paying double taxes in country of residence and India due to these agreements. You can get an equivalent deduction if DTAA exists between both countries.

Let me give you an example – In USA, a person has to pay the income tax on global income, so if an NRI has Rs 1 crore of FD in India they will pay the tax in India as well as in USA, but because of DTAA they will be avoiding it. There is paper work involved here, but you can surely save the double taxes.

When should an NRI invest outside India?

While India is a great place to invest for NRI’s overall, there may be certain life situations and some cases where investing in the country where you are working may be a good idea. There may be certain countries that might also be offering similar or better interest rates and returns compared to India. However, makes sure you consider the safety and return of your capital while you are investing along with tax to be paid.

Do let us know if you have any more questions related to NRI’s investments in India? Share your questions in the comments section.