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Difference Between a Fixed Deposit and a Debt Mutual Fund

For decades, fixed deposits have been the go-to for Indians. However, recently, the popularity of debt mutual funds has increased. If you are a new investor, you might wonder which option is better. Read more to understand what fixed deposits and debt mutual funds are and the difference between them. [B-01] Understanding Fixed Deposits A fixed deposit is one way to invest. Here, you invest a sum of money in a bank for a fixed period. You are guaranteed to get this sum back at the end of the term (maturity period), along with interest. The rate of interest is chosen at the beginning. You are lending money to the banks, which use this sum to grant loans to others. A part of the interest they receive from these loans is given to you. You can invest in fixed deposits or term deposits for a short-term or long-term, ranging from 7 days to 10 years. You can only make one type of deposit with FDs. You must pay the penalty if you wish to withdraw money from your FD before maturity. Types of Fixed Deposits Non-cumulative FDs Here, the banks will give you interest at fixed intervals of your choice. It can be monthly, quarterly, half-yearly, or annually. Thus, you will have a regular income from the FD. Cumulative FDs You can choose to reinvest the interest every year. Here, you do not have the provision to get regular payouts. Instead, the total interest, along with the principle, is returned at maturity. You can earn a higher profit due to compounding. The interest for the following year will be calculated based on the principle plus the interest from the previous year. Features and Benefits of Fixed Deposits Easy to liquidate In an emergency, you can easily liquidate your FD and obtain funds. However, withdrawing from an FD before maturity is better avoided as it significantly reduces returns. Minimal risk and assured returns Once the amount has been deposited at a specific interest rate, it is unaffected by any changes in interest rates or market fluctuations. Thus, the returns are assured. Low minimum investment If you want to try investing but don’t have a large amount, FDs are a good option. This is because investment amounts can start as low as Rs. 500. Easy to invest FDs are easy to invest in, both offline and online, either through net banking or mobile banking. Senior citizen benefits People over 60 are offered a higher interest rate on fixed deposits and have a tax benefit. If the source is less than ₹50,000 per year, their interests are not tax-deductible at the source. Other benefits There are several other benefits, like loans against FD. You can avail yourself of loans of up to 90% of the deposit in your FD at very low-interest rates. You can get tax deductions by investing in tax-saving fixed deposits. Understanding Debt Mutual Fund In debt mutual funds, the asset management company invests your funds in fixed-income debt instruments. You are giving loans to governments (as bonds or treasury bills), corporations (as bonds or commercial papers), or financial institutions (as certificates of deposit or debentures). They are also known as fixed-income funds or bond funds. These entities promise to pay back the principal after some time, along with interest. However, the ability to uphold this promise varies from company to company, resulting in a credit risk associated with the investment. The risk you have depends on the type of borrower and the lending duration. Sources of Income A debt fund has 2 sources of income: Interest Returns You get interest from the bond holdings, called coupon income. Capital Gains You can trade debt instruments. If the bond price increases, selling the bond will result in a profit. The bond’s price changes when the bond’s interest rate changes. This results in a gain or loss of capital. If the bond’s interest rate decreases after you buy it, your bond with a higher interest rate becomes more valuable. With this, your bond price increases. Thus, bond prices move in the opposite direction of interest rates. The type of bonds determines the income a mutual debt fund earns through capital gains and interest. When market yields drop, the price of long-term bonds inflates more than that of short-term bonds, and when market yields climb, long-term funds lose more value. So long-term bonds are more likely to make capital gains or losses. For short-term bonds, the income is mainly from interest, as capital gains and losses don’t impact it much. Features and Benefits Access to market returns and professional expertise Investing in a debt fund gives you two possible sources of income: interest and capital gains. It also allows retail investors to access wholesale debt markets or money markets. These are segments where they cannot directly invest. Balances your portfolio Debt funds have less risk. It helps with portfolio diversification. Variety of investment options There are many different types of debt funds available along the entire spectrum of maturity and credit risk to match your needs. You can invest in debt funds for as little as one day or for as long as three years. Liquidity You can easily cash debt funds, usually within one or two working days. There are usually no penalties involved when a mutual fund investment is withdrawn prematurely. Low-Cost Investment As per SEBI norms, the total expense ratio of a mutual debt fund cannot surpass 2% of assets under management. Difference between FD and Debt fund Fixed DepositsDebt Mutual FundsYou make a one-time deposit to a bank or NBFC for a fixed period. The rate of interest is predetermined.Debt funds are invested in debt instruments like bonds. The entities that issue the debt securities promise to pay their investors a periodic interest for the money invested. There is only one source of income, which is interest.There are two sources of income: interest returns and capital gains.The bank is the borrower, and you are the investor. Here, you earn interest.Debt funds are the investors. Here, the debt funds earn the interest.Fixed deposits have assured returns. They are 100% safe. Periodic interest payments to fixed-income mutual debt funds can be variable or fixed. There is no guarantee. There is always some risk involved.Low net gainsBetter for short-term investments compared to FDs as they offer a higher net return.Less tax efficient and thus less post-tax returnsMore tax efficient and thus earn better post-tax returnsFewer investment optionsWide range of investment options [B-02] Conclusion Fixed deposits and mutual debt funds are two ways to invest. Although they operate similarly, there are differences between them. Before investing, decide on the risk you are willing to take, the investment period, and your financial goals. Go through the various FD or mutual debt fund schemes and select the ones that match your needs. Visit Piramal Finance to know more.

08-11-2023

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What Are the Benefits That You Can Get from a PMS?

You can’t wait to handle all your properties as a property owner or manager. Everyone wants it without needing to deal with stress or go the extra mile. You might have heard about the property management system, but you’re not sure what it is. Then you should see the good things that come with it. You should get a property management system early. [B-01] What exactly is a PMS system? A property management system is a system that allows you to maintain your property. These systems are usually tech-related. You can make it in various forms. It can suit your needs and those of your property or properties. The goal is to take away the stress of property management. The goal also includes making it easy to do the most work. If you are unaware of the advantages of PMS, consider the following. You can expect to get these things from an ideal system: Benefits of a Property Management System Ease A property management system will make things easier for you in many ways. A good property management system helps you manage your assets. Buildings, renters, and finances are examples of such assets. Real estate management doesn’t take much time or work. You also don’t always have to be there. To assist you, speak with a property management company. Get a property management system. You can profit from a good property management system, whether new or experienced. Obtainable An outsider must often enter or inspect a property. Install a management system to manage your property. It’s accessible from almost any location on the planet. You have access to information about open positions, required maintenance, and rent payments. If the urge strikes, you don’t have to leave the bed to check each rental unit. The accessibility makes for the most convenience. Talking Using property management software can also help you bridge distance-based communication gaps. You can always contact your renters, a repairman, or a company offering any other services. A property management system lessens the stress of constant conversation. You might give your property management company specific instructions. This can change how renters and management interact. Save and restore A property management system enables you to carry out several tasks. These include maintaining information, records, and details as opposed to the previous paper-based method. You are unlikely to lose any of your important data in a fire or flood. The backed-up data can be transferred to a new device. For as long as you think is necessary, your data will be kept secure. Less or No Paperwork Required Using the property management system requires a technological approach to property management. Using paper works is thereby rendered unnecessary. A digital copy of an agreement signed and returned is as valid as a hard copy. You can store more work without putting in extra effort to transport them. Using property management software has an extra advantage. Accounting and Financial Planning Services Have you ever made accounting mistakes when managing a property? If so, you need to set up a property management system immediately. It covers every aspect of accounting and even offers practical financial guidance. The system for managing properties can be used to process payments. You will receive an alert to approve pending payments, such as rent or the plumber’s bill. Safety Almost anyone can get their hands on private information if it’s written down. But, using a property management system allows for secrecy. Your tenants and customers or clients can feel secure in your care. You can add locks to guarantee that only you have access to vital property management data. Easy access control is a breeze. Lower Prices A property management system also helps you save money and reduce wasteful spending. If you can get your finances in order. You can save on transportation and other expenses. The property management software won’t come for free, but it won’t be as expensive as other options. Easy-to-Navigate Interface Worried you won’t be able to handle the system’s administration on your own? Don’t worry; a property management system is very easy to use. So you can find your way around and do tasks with little training. You can customise property management software according to your needs. So you can choose which features you want or don’t want. [B-02] Conclusion Buying a system for managing properties is best for you and your business. With it, you can gain much more and do more than if you run your business the way everyone else does. There are a lot of other benefits to the property management system that is easy to enjoy. Contact property management right away to talk about your property. It is the best approach to managing it. Piramal Finance is a great option for you for such finance-related content. Visit their website to learn more about the products and services they offer.

08-11-2023

Business Loan

How can you Avail of Government Loan Schemes for Your New Business?

Want to find out more about the government loan scheme? How does the government start loans? How to take advantage of government loan programmes? MSMEs are the key to a country’s economic growth (Micro, Small and Medium Enterprises). MSMEs can always find a way to solve big economic problems like poverty, unemployment, income inequality, and imbalances between regions. Its most important job is to make sure that everyone has the same amount of money and that local development is fair. This industry employs a lot of people in our country and makes use of local talent, both of which are important parts of the country’s GDP. At the moment, about 11.10 crore jobs in India are provided by the MSME sector. This is why this sector is also called the growth engine of India. MSMEs make up 8% of the country’s total GDP, 40% of its total exports, and 45% of its manufacturing output. Both the organised and unorganised sectors have MSMEs. [B-01] Government Loans to Businesses The MSME sector is the most important part of the Indian economy. People know that this sector makes up almost 30% of India’s GDP and creates most jobs there. The government of India offers different credit programmes to help the MSME sector grow. It is important for India’s growth and plays a role in it. Government loans can help small and medium-sized businesses get the right amount of money they need. The Indian government’s start-up business loan programme makes it easy to get the money to turn good business ideas into profitable businesses. MSME Loan Government loan scheme programme, which is also called “PSB Loan in 59 minutes,” was started by the government of India. It set up a quick business government loan scheme portal for people who want to grow their businesses. Under this programme, public and private sector banks and NBFCs can lend INR 1 lakh to INR 5 crores to MSMEs. You can get the money you need in the time you need it. Which business can get a loan through this programme? Some things decide if a business is allowed. Income/revenue. The ability of the borrower to pay back the loan. Credit facilities are already in place. Other things that the lender of the money decides. There are also other good things about this plan; The whole process of getting a loan should be super fast and only require a few papers. The government scheme loan is processed without any help from a person when the loan is approved. So, it is called a scheme for Advanced Technology Backed Loans. When someone applies for a loan, their information needs to be kept safe and secure at the highest level of security. The Micro Units Development and Refinancing Agency Ltd. It is in charge of the Pradhan Mantri MUDRA Yojana. Under this scheme, MUDRA helps banks and NBFCs refinance their loans to micro units that need loans of up to INR 10 lakhs. Under PMMY, MUDRA divided the loan into three categories called “Shishu,” “Kishore,” and “Tarun” to show the stage of growth or development. A plan to help small and medium-sized businesses get loans with guarantees. The Government of India started the CGTMSE business loan programme. The MSME sector could get credit without putting up collateral. It includes both new and existing businesses. The CGTMSE scheme is run by a trust called Credit Guarantee Fund Trust for Micro and Small Enterprises. It was set up by the Ministry of MSMEs and the Small Industries Development Bank of India (SIDBI). Under this funding programme, MSMEs can get loans of up to INR 200 lakhs, and eligible women get priority. The Guarantee Cover can cover up to 85% of the amount of the credit facility that has been approved. The trust funds charge a fee of 1% of the amount approved each year. 0.75 per cent for loans up to Rs. 5 lakh, 0.85 per cent for loans over Rs. 5 lakh but up to Rs. 100 lakh. According to the eligibility criteria, this scheme is for businesses that do the following, whether they’ve been around for a while or just started up. The National Small Business Administration (NSIC): NSIC is an Indian government business that is ISO-certified and works with MSMEs. It works to help and encourage the growth of micro, small, and medium-sized enterprises (MSMEs) by providing combined support services in finance, marketing, technology, and other related services all over the country. To help MSMEs grow, NSIC offers several programmes. Marketing Support Scheme: Help with marketing is important for the growth of any business. It is especially important for the growth of MSMEs in today’s highly competitive market. To help these kinds of businesses, NSIC came up with programmes like Consortia and Tender Marketing. NSIC puts together groups of MSMEs that work on their behalf to make things easier for them. These groups are called “Consortia of MSMEs.” NSIC also sets up “Marketing Intelligence Cells” to spread the word about different programmes for MSMEs. Credit Support Scheme: Under this scheme, NSIC helps MSMEs get the money they need to buy raw materials, do marketing, and spread the word about their products. The Credit-Linked Capital Subsidy government loan scheme (CLCSS): CLCSS is a new credit programme started by the Ministry of MSMEs. Its main goal is to help MSMEs, especially in rural and semi-urban areas, improve their technology. Under this plan, businesses can get a 15% subsidy if they buy machinery that meets certain requirements. But there is a limit on how much the subsidy can be, which is INR 1 crore. [B-02] Conclusion India has about 40 million registered and unregistered Micro Small and Medium Enterprises (MSMEs). Both the organised sector and the unorganised sector include MSMEs. About 40% of India’s GDP comes from these MSMEs, and they continue to be an important source of jobs. The MSMEs help solves important problems in the country, such as poverty, unemployment, etc. Small and medium-sized businesses (MSMEs) are run by entrepreneurs who can get a loan from any of the schemes that fit their needs. Investment Reliable does not offer financial advice, but we do provide unbiased information and evaluations on trading, investing, and finance. Users ought to always carry out their research. Also visit, Piramal Finance has more in-depth, educational articles.

08-11-2023

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Flat vs. Reducing Interest Rate: Which is Better?

If you are looking for a loan, then it is vital to know about the types of interest rates. Banks and NBFCs offer different loans, and each one has its own way of calculating the EMI. For example, if you take a loan from a bank at a 10% flat rate for five years with an initial amount of Rs 1 lakh, your monthly EMI will be Rs 3,041. However, instead of taking out a fixed-rate loan, consider the reduced-interest rate option instead. This can help reduce costs over a longer period by lowering the interest cost. Under the lower rate, your interest cost also reduces as you repay the loan. This makes it easier for you to finish the loan without stressing your finances. Keep reading to learn more. This will enhance your skill set. [B-01] The Flat Interest Rate and its Various Disciplines Flat interest rates are easier to understand Flat interest rates are more transparent and easy to understand. A flat interest rate is the sum of all payments over a period. This makes it easier to understand than lowering interest rates. But it is misleading in the long term. This is due to various issues associated with it. These issues can only be understood if you understand this concept. Reducing your debt may seem like an attractive option at first glance, as you will save money on interest payments. After you figure out how much money each payment would cost you in total if you were paying off your debts with a reduction in their principal. Then you will learn that there aren’t as many savings involved as you may think! The idea behind the concept of flat interest rates As the name suggests, a flat interest rate is calculated as a uniform percentage of the loan amount. On the other hand, a reducing interest rate is based on the remaining principal each month. The flat interest rate is permanent over the loan tenure. Hence, it is better for people who want a stable interest option for their loans. You can plan for repayment In contrast to decreasing interest rates, flat interest rates are stable in nature. Hence, one can plan ahead about the repayments and invest the money in other ventures as well. This is something that is not possible with reduced interest rates. Formula to calculate Interest per month = principal amount × tenure of the loan×interest rate per annum / total no of months you have to pay A flat interest rate will have a higher EMI With a flat interest rate, you will have a higher EMI than if you reduced your balance. So if you can afford to pay more for your loan, then only go for a flat interest rate. However, if you have to buy a new car or want to invest in a property. Advantages of reducing rate over flat interest rate Reducing interest rates are more affordable If the interest cost on a loan is decreasing after each payment, the principal will be paid sooner. By paying off your debt sooner, you can save money in the long run. This is the case with reducing rates. Herein, the interest is calculated on the remaining principal every month. As you pay the EMIs, the interest cost will also be lower. Hence, you will be able to pay off the loan sooner. There will be less stress on your finances as well. Being an affordable option on the list makes it a much more attractive option. Reducing interest rate is a little hard to understand Reducing the rate is not easier to understand. You need to know about the concept of reducing interest rates before you can opt for it. Once you learn the key aspects of reducing interest rates, you will be well-equipped to use it as an option. Flat rates are easy to learn about and thus can cater to a much larger group of people. Formula to calculate The interest = total loaned amount × interest (changing) per month Both of them are equally important One thing that someone needs to understand is that both flat interest rates and reducing interest rates are equally important. They were not introduced to cater to the needs of a particular genre. The main reason behind the introduction is to give people options depending on what type of loan and term they choose. Some people don’t like the idea of reducing rates as it is harder to understand, and if you are not well aware of the financial process, there is a huge chance you will run into issues after some time. Although this problem can be avoided with flat interest rates, it doesn’t provide the benefits of reducing rates. So the only way to swim through them is to understand them carefully before you dive into any of them. You can take the help of online articles, and there are many financial advisors who will thoroughly explain them and help you make a sound decision. [B-02] Conclusion We discussed how flat interest rates and decreasing interest rates are both important, as well as the benefits of each. It is crucial for any person to understand the terms of the loans they are agreeing to and will have to pay for a long time, and you must learn more about interest rate options before you opt for one. Any mistake here can increase the cost of the loan for you. This can make it harder for you to pay back the loan on time. If you would like to learn more about how to manage your finances and make the most of your money, visit Piramal Finance. There are many articles and blogs here that will help you learn various financial concepts easily.

08-11-2023

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What is Derivatives Trading? Types, Advantages, and Disadvantages

Derivatives meaning: derivatives are financial contracts that derive their value from an underlying asset. They can be bought, sold, or traded on any market. They represent a type of financial instrument. Trading derivatives involves risk and should be used wisely by investors and traders. Understanding derivatives’ meaning is vital before starting to trade derivatives. Read on to learn more. [B-01] Basics of Derivative Trading A derivative is a financial contract with a value that is derived from an underlying entity. The value of derivatives can be affected by changes in the price of their underlying instruments. This includes commodities, precious metals, and currencies, to name just a few. Derivatives can also be used for investments that aim to profit from changes in market prices. That, too, without any ownership rights to the asset being traded. Derivatives are often used by banks, hedge funds, and other large investors. They want to increase their exposure to specific markets. But without having to take on significant credit risk themselves (i.e., lending money). Common examples of underlying entities can include commodities, precious metals, currency, bonds, and stocks. Now we will look at the types of derivatives. Types of Derivative Contracts After understanding the derivative definition, now it’s time to learn their different types. There are many different types of derivative contracts. They all fall into one of two categories: long-term contracts and short-term contracts. Long-term contracts will have a specific date when the contract expires, or “matures.” These are generally long-term contracts that last between 3 and 5 years. Short-term contracts have no set ending date and expire at a specific rate. For example, a contract may state that a rate of interest of 12% will be applied to the contract if it isn’t closed before a specified date. Limiting Risk with Long-Term Contracts Long-term contracts, such as forward and futures contracts, are generally used for managing risk. These types of derivative contracts will allow a company to lock in a certain rate for a certain amount of time. For example, a company might use a forward contract to lock in a rate for a certain amount of widgets that it will purchase in the future. If the market rate goes up and the widget company wants to buy the widgets for less, it can close the contract and be refunded the difference. Hedging with Short-Term Contracts Short-term contracts are generally used for hedging against risk. Hedging is when an individual or business locks in a rate by buying a derivative contract. Businesses will often hedge against rate fluctuations. This will ensure that they can recover the money they’ve invested in the project. For example, a construction company may hedge against interest rate fluctuations by purchasing a contract that has a specified rate. Advantages of Derivatives Trading Derivatives are traded in the over-the-counter (OTC) market. Derivatives are traded in the over-the-counter (OTC) market. This is a market for financial instruments that are not listed on an exchange, but instead trade privately between two parties. In this way, derivatives can be bought and sold without going through a broker or other intermediary. Why is trading in derivatives essential? Trading in derivatives is used to gain exposure to that particular underlying asset without actually owning it. This is done by trading contracts that are based on the performance of an underlying asset, such as shares or commodities. You can trade derivatives without owning the underlying asset by buying a contract for difference (CFD). You do not have to buy any physical assets or go through the hassle of setting up a company and hiring employees if you want to trade CFDs instead. The price of the derivatives The price of a derivative is derived from the price of the underlying asset. It does not always imply the same thing; for example, if you bought a call option on Apple stock, you would expect its value to rise in tandem with Apple’s share price. If it did not, then your investment would be worth less than what you paid in. To trade derivatives successfully, traders must understand how and why they work, as well as the risks associated with them. Disadvantages A derivative contract has a fixed expiry date, after which one needs to enter into another contract for further speculation on that underlying asset’s price movement. For example, if you purchase a stock option that expires in three months and do not want to sell your shares before then, you can purchase another option that expires at the same time as your original option or at some point before its expiration date. This is called replicating an existing position—in this case, buying another option on the same underlying asset (i.e., buying two options with different strikes). Derivatives trading is riskier than trading in physical assets as these contracts involve leverage. You only have to deposit a small amount and borrow from your broker the rest of the money needed to buy the contract. You can lose more than your initial investment and lose all your money. This is why understanding derivatives and the types of derivatives is important before investing. Risks associated with derivatives trading Trading derivatives involves risk and should be used wisely by investors and traders. Diversification is the key to success. However, it is crucial to remember that not all investments are created equal. Some assets produce large returns but also carry high risks. Then there are others who don’t have any upside potential at all (and may even lose money). [B-02] Conclusion The derivatives market is an extremely complex field. But there are some basic rules that you should follow if you want to make money with them. First and foremost: never invest more than you can afford to lose! Don’t risk more than 10% of your savings or retirement accounts on any single trade. If something goes wrong (and it will), it will take years before they even begin recovering from the damage done by investing. Working with major finance firms like Piramal Finance will help you understand the procedure inside and out. They also have many blogs and articles on these topics to help you acquire key financial skills.

08-11-2023

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Everything You Need To Know About Pension Scheme In India

Getting old is a sure-to-come phase in every individual’s life, and there is no stopping it. However, it is up to you to plan your retirement so that you can enjoy your retired life and live stress-free by being financially independent. Rising nuclear families and children migrating to other countries for better career opportunities often leave their parents alone in the later stages of their lives. A pension plan is exactly what is needed in this scenario. Pension schemes such as the National Pension Scheme (NPS) help them to be independent when it comes to their finances so that they do not have to depend on their children for their every need. The best pension scheme is designed to meet your post-retirement needs without having to rely on others for financial support of any kind. Right from your small day-to-day bills to the big medical bills, you can pretty much take care of it all provided you have started a pension scheme and saved towards the same from a very early age itself. [B-01] Understanding the National Pension Scheme in India The NPS, or National Pension Scheme, is an investment instrument that is available to all employees from the public, private, and unorganised sectors, apart from those in the Armed Forces. Under the purview of this pension scheme, those who subscribe to it can invest a nominal sum, which can be a minimum of Rs 6,000 annually. This amount can be invested as a one-time premium or be disbursed into staggered monthly instalments, which can go as low as Rs 500. Under NPS benefits, the contributions made by investors for market-linked instruments such as debt equities and their returns are dependent on the performance of the investments in the long run. Currently, the rate of interest offered under this pension scheme is between 8 and 10%. An Indian citizen who is above the age of 18 can open a National Pension Scheme account. Managed by the Pension Fund Regulatory and Development Authority, the National Pension Scheme is tailor-made to offer pension and investment solutions at an older age. In a default setting, the funds are used to invest in different assets such as bonds, government securities, and equity on behalf of the investor, but they can choose to make the investment choices themselves as well. They are tax-free under Section 80 CCD (1b). Knowing the Benefits of the National Pension Scheme Some significant benefits of the National Pension Scheme are: Return on investment A portion of the invested amount in the pension scheme is allocated towards investing in market-linked equities, which are known for offering high returns when compared to a general investment plan. This pension scheme’s interest rates are also significantly higher than those of other market investment instruments. Currently, this pension scheme offers 9%–12% interest rates. This rate of return on investments highlights the national pension scheme’s benefits even further. Tax Benefits For investments made under the National Pension Scheme, the tax benefits are one of the more lucrative features of this investment plan. NPS tax benefits [1] allow an investor to avail of up to Rs 1,50,000 in tax exemptions under Section 80C of the Income Tax Act of 1961. Additionally, the tax benefits from this pension scheme also allow the employer’s and employee’s contributions to be eligible for tax exemption. For employer contributions, the maximum tax exemption amount is limited to the lowest of the three: NPS Contribution Amount by Employer 10% of the Basic Wages and Dearness Allowance Gross Taxable Income This provision under NPS tax benefits does not apply to self-employed professionals. One can also claim an additional sum of Rs 50,000 as a self-contribution sum under Section 80CCD (1B) as a tax benefit. Exit Clauses The National Pension Scheme offers benefits later in life when you need a financial resource pool the most. NPS schemes mature at the age of 60; therefore, one must continue to invest until one reaches maturity age. Partial withdrawals are also allowed after a minimum of three years have transpired in the NPS scheme window, and only 25% of the investments made can be withdrawn. If an investor requires liquid funds to meet a financial obligation, they can withdraw three times during the five-year tenure of the NPS scheme. Equity Setting The investor in the National Pension Scheme has the option to choose. As per the equity allocation rules; one can only invest 50% of their investment in equities. Risk Margins The risk margins for this pension scheme, despite being market-linked, are relatively low. Equity exposures for investors turning 50 will be reduced by 2.5% every year to curb any investment losses. This ensures fund security with the added benefit of high returns. Understanding The National Pension Scheme Eligibility[2] To avail of the benefits of this pension scheme, along with the tax benefits that aid investment and fund growth, one must fulfil the following criteria: Should be an Indian citizen and taxpayer. Should be between the ages of 18 and 65. An NPS scheme matures at age 60; hence, the higher limit is closer to the age of retirement. Should comply with KYC guidelines. Should not have an existing NPS account. Start Planning Your Retirement At The Earliest Like in the case of most financial planning, you need to start thinking about your retirement corpus and picking out a pension plan to begin investing while you are still working. Understanding the importance of retirement planning and saving towards your pension scheme is very vital, right from the time you start earning. If you want to maintain your standard of living post-retirement and be financially independent while you are at it, then saving a large chunk of your current salary is the key. [B-02] To read more such articles about smart financial management, visit the Piramal Finance website. You will also find a host of other financial tools here, such as personal and home loans. So, what’s the wait? Get started on securing your financial future now!

08-11-2023

Investment

Benefits of Investing in the EPF

Although people’s motivations for investing money vary, most begin saving with the objective of retiring comfortably, providing for their family, and maintaining their standard of living. There are many financial assets, but the Employee Provident Fund (EPF) is the only one that meets all of the above needs and many more. [B-01] We attempt to simplify investing in EPF and how it might protect your future in this article. What is EPF? The Employee Provident Fund, or EPF, is a way for all salaried workers in the country to save for their retirement. The government backs this plan, which has a fixed rate of interest. The Employees Provident Fund Organization (EPFO) is a legal body run by the Ministry of Labour and Employment. It is in charge of the fund and makes sure it is run properly. The EPFO also controls both the employer’s and employee’s contributions to the EPF. Government-managed plans like the Employee Pension Scheme (EPS) and the Employee Deposit Linked Insurance Scheme (EDLIS) are all rolled into one umbrella programme called the EPF Scheme (EDLI). The salaried class can build up a large retirement fund through these plans by making monthly payments while they are working. Together, the employer and employee are responsible for putting away 12% of the employee’s monthly salary into the fund, for a total of 24% of each paycheck. How do I know if I’m qualified to join EPF India? The EPFO is open to all workers in both the government sector and the private sector. Companies with more than 20 members are required to offer EPF to their workers. Features of the Employee Provident Fund (EPF) The list below shows some of the most important parts of EPF: In a health or financial emergency, an employee can take money out of the fund before it is fully grown. Anyone in the employee’s family can be nominated. The nominee can claim the saved money when the employee dies. If the employee quits their job, they have two months to withdraw funds from the EPF account. Employees also get a life insurance policy with their EPF. When the employee dies, the nominee can file a claim with the insurance company. According to the rules of the Volunteer Provident Fund, employees can contribute more than the minimum of 12% of their basic salary to the EPF. Tax on EPF Contributions and interest from Employee Provident Funds were not taxed until 2020. If your total contributions to your EPF and VPF in a given fiscal year are more than Rs. 2.5 lakh, the interest you earn on the contributions beyond Rs. 2.5 lakh will be subject to taxation, as revealed in the Budget 2021. If the employer doesn’t put any money into the EPF account, the interest on the account is tax-free up to Rs. 5 lakh in any given financial year. What happens to an EPF account that is not being used? In some cases, the employee can’t put money into the EPF account for a long time, so the account stays dormant. The Employees’ Provident Fund Organization implemented a new policy in 2011–12 that eliminated interest payments on inactive accounts older than three years and thirty-six months. Even though this was done to keep PF members from ignoring their EPF accounts, it was taken away in November 2016 after a lot of pushback. So, even if your account hasn’t been used in more than 3 years, it will still earn interest until you turn 58. Returns from EPFs Every year, the EPFO proposes and approves the EPF interest rate. In the 1990s, the EPF rate of interest shot up to almost 12%, which was a very high number. Since then, it has gone down to a more reasonable (but still high) 8.5% for the fiscal year 2020-2021. Advantages of Investing in EPF Workers can get a lot of benefits from investing in EPF. However, neither the company nor the employee does much to help the employee achieve financial security and independence after retirement. EPF is supposed to make them feel safe about the future instead. The Employee Provident Fund gives these benefits: Funds for Old Age The EPF plan requires employees to put away 12% of their basic pay. The amount that the employee builds this way will help them when they retire. The retired worker may relax and enjoy life without financial worries. Corpus EPF helps people deal with unplanned situations like health and money problems. When things like this happen, they can use the money in their EPF account. Early Withdrawal Getting money out of the EPF is easy and doesn’t cause any trouble. In case of an emergency, employees can take money out of the fund before it matures. Employees can also make incomplete withdrawals in case of an emergency. Saves Taxes Any interest or earnings made via EPF are not taxed. Withdrawals made after the fund have reached their end date and are not taxed. Any money an employee puts into the EPF qualifies as a tax deduction thanks to Section 80C of the Income Tax Act. Also, after completing five years of service, you don’t have to pay taxes or TDS on any money you take out. [B-02] Conclusion To grow your portfolio, it is always a good idea to think about different ways to invest. This lowers your risk. And it can help you get the most out of your gains. Investing in EPF offers several advantages, as discussed in the article. You can check out more blogs about choosing the best investment vehicle at Piramal Finance.

08-11-2023

Know More

All About EPF and UAN

Who doesn’t wish to have a sizable sum to lead a lifestyle of their choice after retirement? If you are a full-time employee in India, an EPF account gives you a golden opportunity to make this wish come true. This government programme requires a financial contribution from both your employer and yourself. A certain amount gets deducted monthly from your salary, and your employer also contributes some amount as per EPF rules. [B-01] Keep reading ahead to learn more about this scheme and how you can benefit from it. Understanding EPF (Employee Provident Fund) The Employees’ Provident Fund is a government-backed employee retirement scheme. It falls under the purview of social security government schemes governed by the Employees’ Provident Funds and Miscellaneous Provisions Act of 1952. A statutory body, EPFO (Employees Provident Fund Organization), controls the EPF scheme. All companies with 20 or more employees can take advantage of PF or EPF accounts. It is to be noted that EPF is a combination of three different schemes with unique objectives. These are the following: EPF (Employee Provident Fund): Saves your retirement benefits. EPS (Employee Pension Scheme): EPS generates pension amounts for those aged 58 or over. EDLI (Employee Deposit Linked Insurance Scheme): It serves as a life insurance cover for employees in scenarios of death during the service period. As per the scheme, employees and their employers make an EPF contribution (12% of salary). This amount is deducted every month throughout the service period. At the time of retirement, employees receive a lump sum along with interest. You don’t have to pay any income tax on the received amount and the interest. Here’s how to check your EPF balance via the EPFO portal: Go to the EPFO portal. Select Member Passbook. Log in with your UAN and account password. You will see closing and opening balances, PF transfers, and earned PF interest. Understanding UAN ( Universal Account Number) UAN is a unique 12-digit number that each EPF member is allocated by EPFO. You can use UAN to sign in to your EPFO membership portal to check or withdraw your EPF balance. Note that your UAN number remains exactly the same even after you switch jobs. However, the member ID will change, and you will be provided with a new ID linked with the UAN. To avail of these online services, each employee needs to activate their UAN first. Here’s how you can activate your UAN via the UAN portal: Go to the EPFO Member Portal Tap on the option: Activate UAN Fill in the requested details (Member ID, full name, Aadhar number, mobile number, and DOB). Enter the captcha code Tap on the option: Get Authorization PIN You will receive an authorization PIN at your registered phone number with EPFO. If your employer has not provided you with a UAN, you can get one from the UAN portal. Use your member ID to enter the portal and get your allocated UAN. Who Can Apply for an EPF Account? Employees from both the private and public sectors can open their EPF accounts in India. The following criteria must be met to become an active member of the programme and avail of EPF, pension, and insurance benefits: You must work for an establishment with 20 or more employees. Such companies are liable to provide EPF benefits to their employees. On the other hand, employees working for organisations with fewer than 20 employees can join the programme voluntarily. You must have a monthly salary of less than 15,000 INR to register your EPF account. People earning over 15,000 INR can also register their accounts if the Assistant PF Commissioner approves. Except for Jammu and Kashmir, EPF provisions apply throughout India. EPF Calculations Employee and Employer EPF contributions. As an EPF member, you have to contribute 12% of your salary to the programme each month. Your employer is liable to match that 12%, which gets divided into 3 parts: 8.33% goes to the EPS (Employee Pension Scheme). 3.67% goes to the EPF (Employee Provident Fund). 0.50% goes to EDLIS (Employees Deposit Link Insurance Scheme). 0.01% goes into the EDLIS regulation fee and 1.10% into the EPF regulation fee. Let’s take an example: Suppose your salary is 18,000/month 12% of your salary goes to the EPF account each month: 18,000*12% = 2160. And your employer’s contribution will be: EPF scheme: 18,000*3.67% = 660.6 INR EPS scheme: 18,000*8.33% = 1499 INR EDIS scheme: 90 INR At the time of retirement, the beneficiary receives the entire principal amount and the interest. EPF Interest rate. For the 2022–2023 financial year, the pre-fixed EPF interest rate is 8.1%. The interest rate is calculated each month using the following formula: Interest rate p.a./12 Thus, if the present EPF interest rate is 8.1% p.a., the monthly rate would be 8.1/12 = 0.675%. The payable interest is applied to employees’ EPF accounts who have a long time left to retire. The interest rate is taxed based on the tax slab of an EPF scheme member, which does not involve any applied tax on the Employee Pension Scheme. The EPF amount is then calculated depending on the total of your basic income, retaining allowance, and dearness allowance. The monthly interest rate gets credited to each EPF account at the end of the financial year. Note: An online EPF calculator is available for employees’ convenience. Steps to Apply for an EPF Account To generate your EPF account, you need to go through your employer. Only organisations registered under EPF Act Schedule I can enrol their employees in the scheme. The basic KYC details you will need to open your EPF account are as follows: Passport/Aadhar Pan details Electricity bills or house papers for proof of residence Benefits of Having an EPF Account You get the following advantages from the EPF program: The amount can be used in an emergency. PF account is eligible for tax exemption under Section 80C of the Indian Income Tax Act up to a limit of 1.5L. Members are eligible to process a partial withdrawal to pursue their current personal financial needs. EPF rewards at the account’s maturity increase overall employee funds and enhance capital appreciation. [B-02] Conclusion All Indian employees who meet the criteria for the EPF scheme can avail themselves of all its benefits. The same is not applicable to those belonging to Jammu and Kashmir. It is due to some administrative laws. Having an EPF account leaves you stress-free about saving or investing throughout your working life. A sizable sum is automatically deposited into your PF account. To gain detailed insights on more such financial solutions, visit Piramal Finance. Check out several loans offered by the company that ensure amazing returns along with flexible payment options.

08-11-2023

GST

What are the Effects of GST on AC in the Festive Season?

During the festive season, many retailers and e-commerce platforms offer discounts, but due to the heavy GST on electronic devices, you can’t buy an AC as you have other expenses. And on top of it, you have to figure out what the GST is on the AC; do the installation, and other services fall under the final amount? Also, if you are a small business owner, can you claim ITC? While you do your research on this, the discount season has passed! This article covers all your issues to save you valuable time and resources. What is the GST on AC? What is included in the final price? Most importantly, how can you buy AC if you need more cash? As you might know, almost all electronic goods have the GST tax applicable to them. Let’s first understand what GST is. [B-01] What is GST? The Goods and Services Tax is a destination-based tax on consumer goods and services. What we mean by the destination-based tax is that the tax burden is to be borne by the final consumer, the person buying the AC for their consumption. It might be for your personal use, home, apartment, office, or workshop. As long as you are the final consumer, you must pay GST. GST Rates GST tax rates are divided into four segments: 5% GST for essential goods 12% for standard goods 18% for standard goods 28% for luxury goods ACs are considered luxury goods, which means they are purchased for lavish use, so they have a 28% GST rate. According to HSN Code 8415 of CBIC, Air conditioners with motor fans, refrigerator units, and split air conditioners are also covered under the 28% slab. Installation and Other Charges When you buy AC during this festive season, keep in mind that installation charges are also included in the final price of the AC. So if the seller is trying to sell the AC without the installation services, please ensure that they are added. The Maharashtra GST Advance Appellate Authority has clarified this point in the Nikhil Comforts case. The court has ordered that the “supply of goods and services is connected and interdependent.” This means that the unit and installation are inextricably linked. After all, you can’t possibly use AC just by purchasing it; you have to install it, which is the seller’s job. Price of AC Before the implementation of GST, the VAT-era tax rate on ACs was around 12-14.5 per cent. After the GST, the prices of ACs have significantly increased. This is both true and false. Consider this: while tax rates have risen since the implementation of GST, the manufacturer can now claim the Input tax credit on the raw materials of ACs, which has stabilised their prices. During the VAT era, there were hidden variables that fluctuated prices. Ways to Buy AC When You Have a Cash Crunch Now, if you are among those who wish to take advantage of the discounts offered on ACs during this festive season but cannot spend a massive chunk from their pockets, Piramal Finance offers multiple easy-payment loan options. Personal Use AC If you buy AC for personal use at your house or apartment, you can take a quick loan from Piramal Finance. This loan has no prepayment penalties, so there is no need for a down payment. Also, you don’t have to worry about the documentation, as the company executives will do most of the work, and you can get a loan quickly. Professional Use AC It will be a significant expense if you are an entrepreneur or a small-business owner and need to purchase multiple AC units for your company. A small business sometimes cannot bear this burden. In this case, you can also get a business loan or professional loan from Piramal Finance, depending on the nature of the business or your needs. These are non-collateral loans, so you don’t have to worry about the collateral. Who Can Apply for a Personal Loan for an AC? Salaried employees If you are an employee that gets paid regularly, whether weekly, biweekly, or monthly, working in any of the following institutions: private sector public sector or enterprise MNCs proprietorship or partnership social sectors like NGOs Then you can apply for a personal loan to purchase an air conditioner during the holiday season. Self-employed individuals You are considered self-employed if you run a private practice as a lawyer, CA, or architect. If you have your business enterprise or a partnership firm, and want to buy heavy electronics like an AC for your personal use, then this festive season, you can take a personal loan for an AC. Who Can Apply for a Business Loan? If you are a self-employed professional like a doctor or CA, or a non-professional like a business owner, and wish to install an AC for your professional use, such as a doctor for his clinic or a pharmaceutical shop owner for her shop, AC in such conditions is considered a business requirement. You can apply for a business loan. To be eligible for the business loan, your business or practice must be at least four years old and have one property registered in your name: your house, a shop, or office space. You can find more details here if you’d like. [B-02] It is no secret that today there are many loan-related frauds. So, you should take your loans from trustworthy finance aggregators like Piramal Finance. Piramal Finance is a well-known, reliable aggregator legally registered, has a dedicated workforce, and promotes financial empowerment.

08-11-2023