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Banking

A Complete Guide On Bank Account Opening

Imagine a life without a bank account! It will be so tough to manage your money and keep it safe. Also, you may not be able to save them or keep track of your expenses. Thus, having a bank account these days is a must and is one of the best ways to ensure the security of your money. Also, you can earn interest on your deposits, which is a great way to grow your money over time. Due to the boost of cashless and digital banking in India, having a bank account has become a must. You can open a bank account at any number of banks. Your needs and bank account features should guide your choice. This post will discuss in detail everything you need to know while opening your bank account. [B-01] How to open a bank account in India? In India, users need to meet specific criteria to open a savings account. You must be an Indian citizen. You must be at least 18 years old. For a minor, both parents or guardians must give consent. You must have ID proof. You must deposit money into the bank account. Documents Needed These documents are needed by all Indian banks when opening a bank account: An ID proof (passport, driver’s licence, etc.) An address proof. Two recent images in passport size. Reasons to open a bank account Bank accounts help you collect and save your money. It keeps your money safe, and you can use it anytime. These days, bank accounts offer several perks and features to the account holders, like net banking, mobile banking, ATMs, and credit card perks, making them more popular among people. It is a vital and useful way of saving money and keeping track of the same. Different Types Of Banks In India There are various types of banks made for multiple classes of people in India, giving huge perks to them. These banks try to meet the needs of people from all walks of life in India so that they can use banking services easily and comfortably. Bank customers in India can choose where they wish to have an account as per their needs and the perks offered by the bank. This section briefly discusses the types of banks in India. Central Bank Co-operative Bank Commercial Banka. Tier 1 (State Level): State Co-operative Banksb. Tier 2 (District Level): Central or District Co-operative Banks c. Tier 3 (Village Level): Primary Agriculture Co-operative Banks Public sector banks Private sector banks Foreign Banks Local area banks Payments Banks Different Types of Bank Accounts in India The six types of bank accounts are given below: Savings Account The most widely used bank account in India is a savings account, which lets you deposit funds and usually earns a moderate interest rate. It is one of the safest ways to keep your money in a bank and make more money. The easiest way to earn interest on money lying in banks without being used is through savings accounts. You can deposit, transfer, take loans, or fix your money from a savings bank account. Current Account A current account is a business bank account that transfers funds across several business bank accounts. These accounts are best suited for the day-to-day operations of businesses and their owners. You can overdraw your account with one of these types of accounts. Salary Account Companies with a large staff often request this service from banks so they may pay their workers online. Each worker can quickly get a salary account where their employer deposits their monthly salary. Anyone who has a job can apply for a salary account. It works just like a savings account, and you can receive funds in this account from other sources as well. Also, you can transfer money to other accounts, like a savings account. NRI Account Non-resident Indians who wish to have a bank account here can do so by getting one of these accounts. The three types of NRI accounts are as follows: (A) Non-Residential Ordinary Account (NRO) (B) Non-Residential External Account (NRE) (C) Foreign Currency Non-Residential Account (FCNR) Recurring Deposit (RD) Accounts Users who want a safe place to deposit funds and earn interest use these accounts. These accounts are a very simple method to grow your wealth beyond what a savings account will provide. One can easily open an RD and deposit money there for six months to 10 years, during which the money will earn interest. Fixed Deposit (FD) Accounts Deposits can collect interest in these accounts until they reach maturity. A fixed deposit is one of the most secure methods to save money and earn interest. FDs are safe investments with above-average returns. Most banks in India offer a higher interest rate on fixed deposits than savings accounts and recurring deposits (RDs) because of the fixed duration benefit the bank obtains in the case of FDs. [B-02] Conclusion You should first decide what type of bank account (savings, checking, recurring deposit, or fixed deposit) you want to open before moving further with the bank account opening process. A bank account can be opened in two main ways: online or in person. To open a new bank account, one can either visit a local branch and submit an application in person with all the required documents or go to the bank’s website and start the process there. Piramal Finance is an online platform that allows you to learn everything you need to know about bank accounts. For other facts about personal loans, credit cards, and financial management, check out more blogs on their website!

08-11-2023

Other

Reduce Your EMI Payments by Consolidating Your Debts

Have you had enough of having to pay money to creditors? Loans are no longer only used to pay for expensive items like a home or a child’s education. Customers are taking out loans in huge numbers. Some want to cover lifestyle costs, and some want to pay for basic consumer goods. So, because EMIs are getting more expensive, there isn’t much money left over for emergency funds or other important financial goals. [B-01] Debt consolidation and its potential impact on EMI debt What is debt consolidation? Debating many financial duties into a single new loan is called debt consolidation. This new consolidated loan has more favourable terms, such as a reduced interest rate, a longer tenure, etc. In this scenario, the funds obtained from the new loan are used to pay off the existing debts. Consolidating debt can be a useful way to deal with various debts. The loans that can be merged include credit cards, student loans, and other such obligations. Therefore, debt consolidation is linking many financial accounts into a single charge. This account is a merger of loans, making dealing with one’s debt burden much simpler. Various Forms of Debt Consolidation Student loan consolidation: Students who have taken out loans are often stressed about paying them back. Merging various student debts into one loan with a low interest rate can reduce stress and ease loan repayment. It is a good way to save money on EMI or interest. Borrowers with existing high-interest private student loans are the ones who can consider this option. Debt consolidation loans: A loanee with many debts who wants to merge them into one large, easy-to-manage existing loan can apply for one of these. Most loan providers do not restrict how the money from the loan can be spent. Therefore, you must use the loan profits to pay the outstanding balances on the credit cards and loans you want to merge. Also, you can start paying the new lender monthly for the loan term. If you seek a more easy way to make payments, think of this option. Equity loans on the home: The equity that is built up in your property can be put to use through the use of a home equity loan, which is also commonly known as a second mortgage. Most home equity loans come with five- to thirty-year repayment terms. Since your property is collateral for the existing loan, the interest rates on home equity loans will be far lower than those on credit cards and personal loans. The issue is that if you do not repay the loan to the bank as agreed, the bank can seize your home. If you have a regular source of income and a good amount of home equity, you may be a good candidate for this type of loan. Credit cards: Merging many credit cards into a single card changes the interest rate applied to the new card. It is by far the most popular method of consolidating financial obligations. Consider this option if you have the money to pay off your credit cards quickly. Consolidating Debt: A Guide Obtain a pre-qualification. You can check with many banks or lenders to see what they might offer you about your existing loan. You will not have to worry about your credit score going up or down just because you did so. After doing some quick research and making a list of loan programs, you can get prequalified by going to the websites of many banks or lenders. Compare various financing options. When you have at least three different loan offers, you can compare them to choose the best one. You must keep in mind that a lower interest rate might not be the best value offer if the lender also charges you a lot in processing costs. Compile the required paperwork. If you want your application to process quickly, be sure to have everything the lender might need before you submit it. Recent bank statements, pay stubs, or tax returns (if self-employed) are usually required. Also, you may have to upload these files to the online application portal. Make a proper application. Always keep in mind to fill out the loan application completely. Double-check your data for typos to ensure it agrees with your submitted supporting paperwork. It is a good idea to be ready to answer questions about your employment, income, and related details, apart from the papers used to confirm your identity. Settle any outstanding debts. Debt consolidation can begin once you have been approved and have received the funds. Get in touch with your bank, creditors, and loan companies, or have the lender do it for you if that is an option they have. [B-02] Conclusion If you have a good credit score and your spending is under control, you may be able to qualify for a low-interest rate through debt consolidation. Many banks and financial organisations in India offer personal loans for debt reduction. These loan companies have fair interest rates and very easy repayment plans that make it simple to pay back the money you borrow. A debt consolidation loan can make your money management easy and hassle-free. At Piramal Finance, we can help you get over any last worries you have about taking out a new personal loan.

08-11-2023

Banking

Which Is The Best Bank For Opening An Account In India?

Money kept in a jar only rots. It doesn’t grow. However, despite a bank account being stationary and pretty much a pot, it puts your money to good use by letting you earn interest and being a secret safe for your hard-earned money. In the Gen-Z world, where everything is digitalised and working with technology is also being shifted online, it has become reasonably necessary to work only through bank accounts. Also, the government’s policies favouring citizens opening bank accounts make it all the more critical for you to have a bank account. You can open your bank account after filling in all the requirements for opening a bank account. Let’s look at the best banks where you can open your bank account to keep your finances safe. [B-01] Personal finance and tax savings: how to manage? Working hard at your job and then losing that hard-earned money to undetermined causes is demoralizing. Hence, receiving money directly from your bank account is worth the challenge. These are some banks where you can open bank accounts. State Bank of India (SBI) SBI is the banking giant of India and an Indian public sector bank with operations in several countries. They have been offering banking services in India for more than 200 years; it is one of the oldest banks offering the best banking services. SBI Bank Current Account All you need to do is verify your KYC documents, and you are eligible to open your current account with a minimum balance of INR 5,000. SBI Bank Savings Account There is no minimum balance requirement, and the rate of interest on savings accounts is 2.70%. Canara Bank The process is swift and easy at Canara. In 1969, 14 banks were nationalised by Indira Gandhi. Canara Bank was one of them. Canara Bank prioritises its customers, and one can certainly call it a “financial conglomerate.” Currently, it has almost ten subsidiaries and many joint ventures. Canara Bank also provides credit card facilities to farmers. It even provides an intercity ATM facility for its users. Canara Bank Current Account This account is basically for organisations, and the main feature of this account is maintaining a minimum balance of INR 5,000 for overdraft facilities for businesses. Canara Bank Savings Account The process is fast and offers a 2.90%–3.20% current interest rate. You would have to maintain a minimum of INR 1000 as a balance. However, there is no cap on the maximum compensation in any Canara Bank account. Canara Bank Fixed Deposit Account This account ranges from 7 days to 10 years, with the minimum investment for opening being INR 1000, which also offers tax savings through deduction under Section 80C. The interest rate is higher than the savings account, which ranges from 2.95% to 5.50%. Punjab National Bank (PNB) Founded in Lahore way back in 1894, with nine banks merging, PNB is the second-largest bank in India, owned by the Ministry of Finance. PNB Bank Current Account To open the current account, you must maintain INR 5,000 as a minimum balance and verify your KYC documents. PNB Bank Savings Account There is no requirement to maintain a minimum balance, and an interest rate of around 3% is offered. However, the minimum and maximum amounts also depend on the customer. PNB Bank Fixed Deposit Account The tenure varies from 7 days to 10 years, and the interest rate ranges from 3% to 5.25%. You would require a minimum investment of INR 100, and tax deductions are also included. HDFC Bank The largest private sector bank, HDFC, plays a crucial role in transforming the way that financial services are provided. HDFC Bank Current Account You should maintain a minimum balance of at least INR 5,000, which also meets all the requirements for an organisational service. HDFC Bank Savings Account The minimum balance varies depending on the type of savings account, with a 3% interest rate. There is also no cap on the maximum amount of money. HDFC Bank Fixed Deposit Account You can choose fixed deposits with terms ranging from 7 days to 10 years, interest rates ranging from 2.50% to 5.50%, and a minimum deposit of INR 5,000 to start the account. Under Section 80C, you can also get a tax break of up to INR 1.5 million if you invest in HDFC. ICICI Bank Established in 1994 and the first bank listed on the New York Stock Exchange, ICICI is one of the leading private sector banks that provides a diversified portfolio and serves retail, SME, and corporate clients. ICICI Bank Current Account ICICI Bank has a current account with a minimum balance of INR 25,000 and an overdraft facility, both of which are designed to meet customer needs. ICICI Bank Savings Account You can open this account online with the condition that you maintain a minimum balance of INR 10,000 and an interest rate of 3.00 %. There is no cap on the maximum amount, and it contains a lot of attractive benefits. ICICI Bank Fixed Deposit Account Ranging from 7 days to 10 years, the minimum investment for opening is INR 10,000, which contains an interest rate ranging from 2.50% to 5.50%, and the minimum investment is INR 10,000. [B-02] Conclusion After looking through the best banks where you can open bank accounts, you must be clear about what you need a bank to do for you as an earner. Bank accounts are the perfect way to keep your money safe and secure, more so in an age where you can go with the times. However, if, in any case, you aren’t able to figure it out with just this article, then contact and consult financial expert Piramal Finance. It has been created with you as an ordinary individual in mind, where they can provide expert solutions on personal loans, credit cards, and other financial services and products.

08-11-2023

Other

Tips on How to Boost a Slow-Moving Business

If you’re a small business owner struggling to keep your company moving forward, you’ve probably tried everything to get the ball rolling. You pour your soul and heart into your business, so it can be disheartening to see it move more slowly than expected. Maybe you’ve hired more employees or invested more money in your company, but no matter what you do, the wheels just aren’t turning fast enough. But what if there’s another option that could help turn things around? A business loan may be what you need to get your business back on track and running at full speed again. Most business owners hesitate to take loans and try to fit their needs into available resources. But it is not enough to run your business smoothly. Sometimes, a small business loan can take your company to the next level, and it is never hard to repay debts in such conditions. Here are the things that can help boost a slow-moving business: [B-01] Figure out what’s holding your business back Are you not marketing enough? Do you need to improve your product or service? Sometimes the answer is not obvious. In most cases, lack of funds is a common issue to boost the business. If you don’t have sufficient money to invest in your enterprise, making progress will be challenging. In this case, it may be helpful to talk to a business consultant or coach who can help you identify the problem areas and explore your business financing options. Revamp Your Marketing Plan A sound marketing plan should include strategies, objectives, and tactics for reaching your target market. It should also have a budget for implementation and timelines to adhere to. If your plan lacks any of these elements, it’s time to revamp it. You can use different marketing channels to find and reach your target audiences. Some popular channels include social media, email marketing, content marketing, and paid advertising. Determine which channels will work best for your company and create a plan for how to use them effectively. Focus on Quality over Quantity One mistake slow-moving businesses make is trying to appeal to everyone. They think someone will be interested if they can get their product or service in front of as many buyers as possible. However, this approach rarely works. So, focus on a smaller group of people and give them what they want. This may mean creating a niche product or service and using business financing to fund it, but the results will be worth it in the long run. Not only will you attract more of your target market, but you’ll also build up a loyal following for your enterprise. Create a Reward Programme Your customers should be at the centre of everything you do. And reward programmes are a great way to get your customers motivated and excited about your brand. These programmes are also an easy way to boost sales, especially if you have a slow-moving business that doesn’t generate much revenue. You can create a reward programme by giving out points or coupons when customers purchase something from your store. This gives them something they can use later, like free shipping on their next order or free samples of their favourite product. You can also offer incentives like free product samples or discounts on future orders as part of the reward program. Fund these initiatives with your working capital or apply for a small business loan to arrange money. Plan a Giveaway Boost your business by giving away some of your products! A giveaway can help you build brand loyalty and increase sales. Use a giveaway as an opportunity to build brand loyalty and increase sales. Giveaways can be used to create buzz around your brand by giving away free samples, coupons, or other items that have value to customers. Ensure that the items you give away are valuable, increasing their perceived value and making them more appealing to customers. Boost Your Revenues with a Pop-up Sale Organising a pop-up sale can help boost a slow-moving business. A pop-up store is a temporary store where you set up shop for a short period of time, typically for three to five days. Your goal is to gain visibility and exposure to sell more products and reach out to new customers. Create an online presence so people know where they can find your products. Ensure your website has all the information people need about the products you sell (brand name, size and colour options, etc.) and photos of each item (so customers know what they’re getting). Get Involved in Your Community A strong brand is critical for any business, but it’s essential if you’re trying to boost a slow-moving one. Your brand sets you apart from the competition and makes you recognisable to your audience. Get more involved in your locality and its events. This could mean donating to a local charity, sponsoring something important, or hosting a community meetup at your business. When you show that you’re invested in your community, people will be more likely to support your business. Apply for a Business Loan Finally, a small business loan can offer you the financial boost you need to grow your business. Whether you’re looking to expand your business operations or stock up on inventory, a business loan can help. Many types of loans are available, so you can find one that’s right for your needs. Just make sure to do your homework before shopping around before you apply. [B-02] Conclusion If your business is struggling, don’t give up. There are many things you can do to boost a slow-moving business. You can attract attention and grow your business by focusing on your target market, investing in good customer service, and building a solid brand. And if you need a little extra financial help, consider applying for a business loan. You may contact the financial experts at Piramal Finance, who are equipped to help you with all kinds of loans, including personal loans and business loans. They will guide you through the process of applying for and securing business financing to boost your enterprise and move it in the right direction.

08-11-2023

Other

What are Compound Interest and Simple Interest, and How to calculate it?

We’ve all heard of compound interest and simple interest somewhere. Starting from school, everyone is taught about simple and compound interest. These two types of interests play a big role in an individual’s budgetary planning. So, let’s take a quick walk down memory lane and understand what exactly is simple and compound interest and how one can calculate them. [B-01] What is Simple Interest? Simple interest refers to the rate of interest that is charged on a loan for a given period. In simple interest, the principal amount remains the same. For instance, the interest rate may be 10% on loan of ₹20,000 for 6 months. Banks use simple interest to charge interest rates for loans. It is a quick and easy way of calculating the amount of interest that can be charged on a loan, i.e. the principal amount. It is usually applied for automobile loans or loans that are short-term. Some other loans may also use simple interest. Importance of Simple Interest Simple interest loans are helpful to the borrower in the following ways: a. Easy to calculate Simple interest is easy to calculate. It can be calculated only with the principal amount and the period for which it is taken, i.e. the loan tenure. b. Less amount of interest When taking a loan, it is best to get one on simple interest as the interest amount may be low. This is because no interest is charged on the interest, which is not the case with compound interest. c. No extra interest Simple interest is calculated with the principal amount and tenure of the loan. But, compound interest includes interest on interest. d. Good for loans In a loan with simple interest, the interest amount can be less if the principal amount is paid earlier than it has to be paid. How to Calculate Simple Interest? Simple interest is calculated using the following formula: Simple Interest = P × I × N where, P= Principal amount I= Daily interest rate N= Number of days between payments Simple interest is usually paid or received at a fixed percentage over the principal amount for a specific period. For example, assume an individual takes a simple interest loan on the principal amount of ₹18,000 for one year at a 6% annual rate of interest. The simple interest, in this case, will be as follows: Simple Interest = P x I x N = 18,000 x 0.06 x 3 = ₹3240 So, the total amount that needs to be paid by the individual would be: Total= Principal amount + Simple interest = 18,000 + 3240 = ₹21,240 What is Compound Interest? Compound interest is defined as “interest paid on interest”. Compound interest is sometimes also referred to as compounding interest. It is the interest that comes with a loan or a particular deposit. The interest earned and the principal amount are both used to calculate compound interest. Compound interest grows faster than simple interest. How fast this growth occurs depends on its frequency. In simpler words, the longer the period, the higher the compound interest. Why is Compound Interest Important? Compound interest is a quick and easy way to grow one’s wealth. The money that is invested is known as the principal amount. Compound Interest helps one earn returns on it. By the end of a specific period, one may have even doubled the previous amount invested. This is even more helpful for the youth that aims to grow their wealth in a small time. Reaching one’s goals becomes easier with compound interest. When one opens an account that bears interest and saves up enough money, they enjoy compound interest. With the help of compound interest, people have security. They can face factors such as high prices that may affect a country’s wealth. How to Calculate Compound Interest? Compound Interest can be calculated using the following formula: A = P (1 + [r / n]) ^ nt where, A = The amount of money after n years (this includes the interest) P = The principal amount deposited or borrowed r = The annual rate of interest (in decimals) n = The number of times the interest is compounded per year t = The number of years (time) the amount is deposited for Let’s look at an example. Assume that a person deposits ₹5,000 in their savings account, which pays a 5% interest for 10 years. So, A = P (1 + [r / n]) ^ nt A = 5,000 (1 + [.05 / 12]) ^ (12 * 10) A = 5,000 (1.00417) ^ (120) A = 5,000 (1.64767) A = 8,238.35 So, in 10 years, the individual would have ₹8,238 in their savings accounts. This means that along with the deposit of ₹5000, the individual has received interest of ₹3,238. Simple Interest vs Compound Interest Simple and compound interests are beneficial depending on the individual’s choices. Simple interest makes use of only the principal amount. Compound interest also uses the interest tenure along with the principal amount. Simple interest remains constant while compound interest grows over a while. So, it is beneficial for one’s loans and debts to be calculated with simple interest. But, investments and savings should be calculated using compound interest. [B-02] Final Thoughts By the end of this article, the reader will have gained a deeper understanding of compound and simple interests. When investing, it is best to opt for compound interest on one’s account. But, it is best to have simple interest rates when taking a loan. If used well, compound interest can help one generate wealth. In case of doubts, consult the financial experts at Piramal Finance. It will help you know their products and services, especially credit cards and personal loans.

08-11-2023

Banking

What is Net Banking, and What are its Types?

The internet has made everything around us very easy and convenient. We use it in our daily lives, and almost everything we do is somehow related to the internet. Net banking, which is also called e-banking or online banking, is a way to access many banking services through the internet. It eases the work of both the banks and the customers. It is vital for bank account holders to get hold of their bank accounts and control them as per their needs, and net banking has been aiding in doing it efficiently. Everything from money transfers to balance inquiries can now be done through the internet. You can apply for loans or invest in financial schemes on the net banking apps. All thanks to net banking, your banks are now just a tap away! In this article, we shall discuss net banking, its benefits, and the several types of internet banking available for bank account holders. [B-01] Features of Net Banking The several features of internet banking are discussed as follows: Safe & Secure: Net banking is way safer than manual banking. You can quickly transfer money from your account to another bank account without the burden of carrying the cash manually. It is secured with a personal net banking ID and password, which only you can access. Very Easy: Almost all banks have their mobile banking apps now. These apps have a very easy user interface that anyone can operate. No Restrictions: Net banking can be done at any time and anywhere. Unlike manual banking, where the banks shut around 5 pm and does not work on weekends, net banking is available 24×7. Various Facilities: All banking facilities, like NEFT, RTGS, IMPS, fixed deposits, recurring deposits, loans, EMIs, debit or credit card control, etc., can be done and managed through net banking. Card Login: Users can also access their net banking accounts by card login. You must enter your credit or debit card number in the login input and enter the OTP received on your mobile number. You are advised not to share your card number, CVV, or OTP with anyone to avoid banking fraud. How to Register for Net Banking? The banks provide net banking right after you open a bank account with them. Just in case your bank has not activated your net banking after your account opening, follow the steps given below to register: Fill out a net banking application form at your home bank branch. Also, provide the documents, like a passbook, an Aadhar card, etc., with the form to the bank authorities. The bank will issue you an ID and a password for net banking. Visit the official website of your bank and click on the net banking option. Input your ID and password, and access your account. Types of Net Banking The several types of net banking available for the users are as follows: National Electronic Fund Transfer (NEFT): This online banking system allows you to send money from one person to another. You can quickly transfer money from your bank account to any other bank account online by paying a small fee. All you need to have are the bank account details of the beneficiary. Real Time Gross Settlement (RTGS): In this online money transfer method, the funds are transferred from one bank account to another in “real time,” i.e., without any waiting period. It is a quicker fund transfer method than NEFT. Immediate Payment Services (IMPS): It is an instant inter-bank fund transfer method that can be done online and is available 24×7. You can even transfer money from your banking apps through IMPS. The Unified Payments Interface, or UPI, is based on the infrastructure of IMPS. Debit card or credit card: Thanks to credit and debit cards, we can all go cashless now. You can withdraw money using these cards from any ATM, anytime, anywhere. You can even use these cards to pay online by providing your card details. Electronic Clearing System: Through this online payment method, you can pay your electricity, phone, utility bills, etc., quickly without manually paying them. Advantages of Net Banking The several perks of net banking are discussed below: No time restrictions: You can access net banking anytime; it is available 24×7. Most banking services are available around the clock; you only need internet access, and your bank is just a tap away. Quick and easy: Net banking saves much of your time by quickly transferring funds. All other services are also very easily accessible, and you do not have to take time for them. Safe and Organised: Since net banking is secured with personal customer IDs and passwords, it is a safe way to carry out transactions. Also, the apps or interfaces you use for net banking are pretty organised and keep a record of all your transactions. You can check your transactions at any time. Eco-friendly: Net banking cuts a lot of paper usage. Since you can fill out all the forms online, use online passbooks, and carry out other banking processes which need paper, online you use the least paper, thus, helping nature. [B-02] Conclusion Through net banking, you can easily track your financial activities and manage them without any issues. It is a secure payment system for users and aids in avoiding cash loss and theft. However, it is dependent on a smooth internet facility. Thus, not all classes of people can have access to it. But still, this virtual way of banking is a huge benefit to the country’s banking sector and would help in the nation’s overall growth. Read more related blogs on the Piramal Finance website to explore our financial products and services, especially those on personal loans, credit cards, and financial calculators.

08-11-2023

Tax Slabs

What are Tax-Free Bonds?

Ever wondered about safe ways of investing money? Does the stock market scare you? Are you confused about the best way to invest without worrying about liquidity? Do you want a tax-free income from your investments? Do you want low-risk investments? Investing in Tax-free bonds might be the way to go! Let’s learn more about them. [B-01] How do tax-free bonds work? In simple words, tax-free bonds are government-issued bonds. Under Section 10 of the Income Tax Act, they are issued to collect funds for different causes. These bonds offer a fixed interest rate. They are similar to fixed deposits; you are offered a fixed, tax-free interest rate for a lump sum of money. Since the interest rate is set, it is a low-risk investment with guaranteed returns. Often, the breakdown of liquidity makes certain investments risky. You don’t have to worry about liquidity while investing in tax-free bonds. The best part of tax-free bonds is that there is no risk involved. In addition, it allows you to earn a regular annual income without interest rates. Tax-free bonds usually have a long-term maturity. Investing in these bonds can earn tax-free returns for up to 20 years. Also, tax-free bonds’ interest rate is much higher than other investments. You can also sell these bonds upon maturity. The National Stock Exchange enlists the price for these bonds. Types of Bonds: Where to invest? Government-issued tax-free bonds are one of the safest investment options. However, there are two types of such bonds – tax-free and tax-saving. Tax-Free Government Bonds: Such bonds have zero tax on interest income. You can invest up to INR 5 lakh. Tax-free bonds offer higher interest than tax-saving bonds. They come with maturity periods ranging from 10 to 20 years. Also, only Indian nationals and Unified Hindu families are allowed to invest in these bonds. Tax-Saving Bonds: These bonds provide an initial tax exemption under Section 80CCF of the Income Tax Act. You can avail of tax exemption against an investment of Rs 20,000 per financial year. These bonds have a buyback clause that allows investors to redeem investments after 5 or 7 years. So, tax-saving bonds are a good option if you want short-term investments. Tax-Free Bonds: Features and Benefits Tax-free bonds are favoured because of the following features: Liquidity: Tax-free bonds might be a good choice if you hesitate to invest because of liquidity. These bonds can be traded or sold according to the ongoing market price. However, you must pay taxes for any profit you earn by selling these bonds.Another selling point is that tax-free bonds are form-flexible. They can be held in physical or dematerialized bonds. Therefore, you can buy them directly or use your Demat account. Interest: The central government decides these bonds’ interest rates. You will receive the interest amount annually. Whatever amount is earned from interest is tax-free. Tenure: Tax-free bonds serve as long-term investments. Based on your interest, you can invest in these for up to 15 or 20 years. Tax exemption is not the only benefit of these bonds. Tax-free government bonds assure many other benefits, like: The government of India supports these bonds. Therefore they’re a very safe investment. You don’t have to worry about your money even if the company goes bankrupt. In such cases, company assets are liquidated, and investments are returned to bondholders. Apart from the principal amount returned on maturity, you can earn guaranteed interest from these bonds every year. There is no upper limit to investment in Tax-free government bonds. The higher the tax bracket, the more profit you can earn. Therefore, they are a great investment option if you fall in the 30% or above tax bracket. The price of these bonds is listed in the stock market. So, you can easily sell your bonds when their value appreciates. Furthermore, fixed deposits offer interest rates ranging from 4.5 to 5% in the short term. Tax-free bonds offer interest rates of up to 6%. How to invest in tax-free bonds? If you are interested in investing in tax-free bonds, you can buy these bonds when the government initiates a subscription. These bonds are available for very short durations. You can apply to the issuing company when the subscription for investment starts. You must submit KYC and PAN details online and offline to receive these bonds. Currently, there are no tax-free government bonds available in the primary market. But previously issued bonds can be bought on the stock exchange. You can buy or trade these bonds like equities in the secondary market through your Demat accounts. NABARD, HUDCO, NHAI, PFC, REC and IFC are popular bonds among investors. How to redeem tax-free bonds? You can redeem your investment upon maturity once the bond’s tenure is completed. Since tax-free bonds are considered long-term investments with tenures of 10-20 years, they cannot be redeemed before maturity. However, if you do not wish to hold these bonds any longer, you can trade them in the stock market. Moreover, the proceedings are credited to your bank account if you sell these bonds in exchange. If you sell your bonds within a year of purchase, you are liable to pay taxes. However, if you retain the bonds for more than a year, tax payment on returns is 10% without indexation. [B-02] Conclusion If you qualify for the higher tax brackets or wish to make long-term investments, tax-free government bonds are ideal. These bonds offer a good maturity period and greater interest rates than fixed deposits. They are also very safe investments since the government backs them. You can hold these bonds long-term or trade them like equity in the secondary market. Since the government determines these bonds’ prices, you don’t have to worry about market fluctuations. Furthermore, you can earn guaranteed interest returns annually. A financial expert like Piramal Finance offers you accurate and authentic information on personal loans, tax-free bonds and other investment options. We also offer consultancy services. Visit now!

08-11-2023

Complete Guide on How to Calculate FD Interest

A fixed deposit is an investment option that is risk-free, simple, and needs only a single initial payment. You can leave a sum of money known at the bank for a fixed time. During this time, interest will be accrued on the deposit. After it all, your initial deposit will be returned to you, along with interest. Do you have questions about how much interest you’ll be getting on your fixed deposit? You will be able to learn how to compute FD interest using an FD interest calculator by reading this article. Understanding how interest on FDs is calculated might help you make the most of your investment. Even though many people find calculations very difficult, we are here to make things as easy as possible. [B-01] How is FD Interest Calculated? Fixed deposit interest calculators use two separate formulas to compute interest on FDs. Why two? This is due to two fixed deposit accounts: simple interest and compound interest. The formulas used to compute the fixed deposit manually are presented below. Simple Interest Formula SI = PRT/100 In the formula, ‘SI’ stands for Simple Interest. ‘P’ stands for the principal amount, which is the amount of money that you put into the FD. ‘R’ refers to the rate of interest that is accrued on the principal. And ‘T’ refers to the length of time that the principal is locked in. Let us consider one example: Calculate the amount of simple interest that a person can receive on Rs. 8,200 over a 2-year, 6-month period at a rate of 17.5% p.a. S.I. = (8200 x2.5x 17.5)/100 = Rs. 3587.50 Compound Interest Formula CI = A – P In the equation you just looked at, the letters ‘CI’ stand for compound interest. The value denoted by ‘P’ is the principal amount. And ‘A’ is the amount that will have been accrued when the loan is paid off. The value of ‘A’ can be derived by using the formula that is given below: A=P (1+r/n) ^ (n*t) In this formula, ‘A’ is the maturity amount. ‘P’ is the Principal amount,’r’ is the rate of interest, ‘t’ is the time, and ‘n’ is the compound interest frequency. What is an FD Calculator? The maturity amount that the investor should get after the tenure of the FD at the applicable interest rate can be obtained using a fixed deposit calculator. Before investing money in an FD, you can calculate the interest income using an FD calculator. Why Use an Online FD Interest Calculator? To know about the interest you will get when your fixed deposit matures, you can now easily use an online fixed deposit interest calculator. ● The calculations always give accurate results: Because it is an entirely automated process, there is no room for human error, making the results accurate. ● Helps you to know the risks: If you calculate the interest you will get on the maturity of the FD, you will have an idea of what returns you may get on your fixed money. This will also help you to know more about the risks so that you can choose whether the risk with the FD is worth the potential return. ● You will save both time and effort: If you use an online FD interest calculator rather than making the calculations yourself, it goes without saying that this option is considerably simpler and more efficient. In addition to the fact that the results will be displayed in a couple of minutes, the amount of effort necessary for it is also very low. How Does an FD Calculator Work? Below are the steps to use the fixed deposit calculator: Step 1: Collect all the information about the fixed deposit, such as the principal amount to be invested, the tenure you want to fix your money, and the interest rate that the bank provides. Step 2: Launch the FD calculator and insert the variables into the boxes on the interface. Step 3: The FD interest calculator will quickly show you how much money you will get back when your fixed deposit account matures. Benefits of using the FD Calculator ● An easy and smart approach to budgeting ● It allows you a repeated use to compare the results of investments ● You have to pay no fee for using the FD calculator. ● It also gives you a schedule for the payment of interest on a very consistent basis. [B-02] Conclusion Returns on a fixed deposit are certain. The interest rate offered by the bank when you open an FD will not change till the maturity of your FD. It does not matter whether the interest rates rise or fall; your FD will remain unaffected. Using an FD calculator, you may see the returns you will get after a given amount of time. With the help of Piramal Finance’s user-friendly FD interest calculator, you can quickly choose whether or not a fixed deposit will result in a profit for you in the long run. If you need help with finances, you can always take the help of experts such as Piramal Finance to guide you through your personal finance woes.

08-11-2023

Other

Everything you need to know about a cancelled cheque

A cheque is a financial instrument used by banks. It instructs the bank to pay the amount stated on the paper from the drawer’s account. But digital transactions are becoming mainstream. You can now handle tasks like money transfers and withdrawals online. A cancelled cheque is a validation that you have an account with that specific bank. The document can be necessary when applying for loans, investing in mutual funds, or buying high-end products on EMI. The article will examine a cancelled cheque, its purpose, and how to write one. [B-01] What is a cancelled cheque? A cheque with two parallel lines across its body with the word ‘cancelled’ between those lines is a cancelled cheque. You don’t have to write anything or sign this type of cheque. Every leaf in your chequebook has details like: Bank name Branch details Account number IFSC code MICR code Cheque number If any financial institution, employer, or business wants to verify your bank details, they can ask to see a cancelled cheque. But, giving out a blank cheque is not a wise decision. This is because there are chances of cheque misuse. So, how do you safely share your banking information? Cancelling your cheque is the answer to this question. Once a cheque has “cancelled” written on it with two parallel lines on either side of the word, no one can use it for any other purpose. But the details available on the cheque are valid. So, any third party can use the same cheque to carry on with their verification process. Why do you need a cancelled cheque? The primary purpose of a cancelled cheque is to verify if you have an account with that particular bank. One can use it to check details like account numbers and IFSC codes. There can be several instances where a third party might ask for such a cheque. Let us look at them in detail below. Know Your Customer (KYC) KYC is a mandatory verification process to be carried out by financial institutions. The aim is to verify a customer’s identity. It also aims to prevent illegal activities like financial fraud, identity theft and money laundering. The Reserve Bank of India has made KYC necessary for individuals wanting to take part in financial transactions. Examples include opening a bank account or trading stocks. A cancelled cheque can help verify your details, establish your customer identity, and complete the KYC process. Open a Demat Account If you want to invest in mutual funds, trade stocks, or buy bonds, you first need a Demat account. The account holds your securities, like stocks, in an electronic format. The benefit of owning a Demat account is that it handles the risks of paper-based certificates. You can lose these certificates; they can be stolen or tampered with. The account helps to store your shares and funds in one place securely. It also makes the transfer a seamless process. So under the KYC guidelines, a cancelled cheque is required to verify your details before opening a Demat account. Equated Monthly Installments (EMI) EMI is a type of payment method. You will make regular payments to the lender to repay a loan within a specific time frame. For example, you can make EMI payments to buy a high-value product, make credit card bill payments, or repay a personal, education, or home loan. As the company lets you have a high-value product or the financial institution is lending you a big amount, they need to verify your details. And again, a cancelled cheque is one of the documents the company and bank can use for verification. Electronic Clearance Service (ECS) An ECS facilitates electronic money transfers from one bank account to another. Organisations or individuals can use ECS. In the case of organisations, ECS can be used to pay salaries, pensions, or dividends. For individuals, ECS can be used to make bill payments, EMIs, or periodic SIP investments. When you use your bank account for ECS, the set amount will be debited from your account periodically. So, to set up this process, the bank will need a cancelled cheque from you. Employee Provident Fund (EPF) Withdrawal EPF is a scheme where one accumulates retirement benefits. The Employees’ Provident Fund Organization (EPFO) offers this scheme. You can withdraw money from EPF once you reach retirement age. Or it could be for other reasons like home loans, job loss, marriage, and investment in Varishta Bima Yojna, among others. EPF withdrawal has become hassle-free as the process is now available online. When raising a withdrawal request, you must upload a cancelled cheque with your name printed. The cheque is used for verification as the money will be transferred to that particular account. Insurance Policies There are various types of insurance policies available in India. For example, you can buy life, health, car, or property insurance. Depending on the policy terms and provider, you could make a one-time payment or opt for a monthly, quarterly, or annual premium payment. For these periodic payments, you need to provide bank details. So, the provider might ask for a cancelled cheque to verify the account details from which you will make payments. How to write a cancelled cheque? Now that you know the reason behind cancelling a cheque, let us look at the right way to cancel a cheque. Take a fresh cheque leaf from the chequebook. Draw two parallel lines across the layout of the cheque. In the space between the two lines, write “CANCELLED” in capital letters. Make sure you do not draw or write over details like account numbers, branch addresses, or IFSC codes. There’s no need to sign the cheque or write anything extra on it. [B-02] Conclusion To summarise, a cheque with two parallel lines on its body with ‘cancelled’ written between the lines is a cancelled cheque. The purpose of such a cheque is to verify if you have an account with that particular bank. It also verifies the bank name, branch address, account number, IFSC code, and MICR code. You will have to provide a cancelled cheque if you want to invest in mutual funds and stocks or buy insurance policies. Other applications include opening a bank account, withdrawing money from EPF, or opting for EMI or ECS. The most important use of a cancelled cheque is the secure sharing of bank details with third parties. If you are looking for a personal loan or a home loan, you can connect with the experts at Piramal Finance to learn more.

08-11-2023