Save Namma Bengaluru

A linguistic minority passes a resolution in a local government body that it wants to merge with a neighboring state which is home to its language. A great regional language actor, who is adored by many, passes away a natural death. A religious minority takes out a protest march to condemn an event in a far off country which is followed by a procession by another community in the same localities for totally another reason. And then, a national tribunal gives its verdict on a water dispute against this regional state’s interest.

What all these events have in common is that, they happen in the same state within a span of a year and each one is followed by protests to start with, followed by ‘a bandh’, violence & arson leaving the capital city in fear, anger and sheer helplessness. Welcome to Namma Bengaluru (Our Bangalore).

We all feel frustrated, angered and sad due to many of the happenings around us. But does that mean you go out and torch a state government bus? Go out and pelt stones at people because they were trying to catch their train? Go out and break the glass windows and glass coverings of the buildings which dared to be open in spite of the bandh call? Get into people’s houses and torch their vehicles because they bear the registration mark of the state which you demise? Or worst, go on lynching people of the other religion?

First of all, all forms of violence and arson should be intolerable for any society. But the most ironic part of the story is that by calling bandhs and indulging in arson and violence, you end up punishing the very people whom you pretend to be standing up for!

By burning the state government bus, we are losing our state capital, by stopping trains, busses and making people shut shops, we are incurring a huge economic loss on our own state! And the bad publicity, image loss and fear which all this brings with it has a long lasting impact on the state’s future.

This very illogical idea of self-hurt prevails all across India, from Mumbai to Kolkata.
I sincerely appeal to all politicians, administrators, linguistic and religious groups to put our state’s interest on top. There is no point in closing out our own businesses and taking the law into our own hands as it inflicts a loss on our own people and it makes no difference to the world which looks at us as a downtrodden primitive society.
Let’s stand up to the ethics, principles and values of our mother nation. Let’s make our world a better place to live in. Lets save namma Bengaluru.

Tax Trick for an ELSS MF

There is a particular ‘extra’ Tax advantage you can derive out of a Dividend Payout option of an ELSS Mutual Fund Scheme using a simple trick.

Usually mutual fund schemes lure investors in the months preceding the financial year end into ELSS schemes to boost their assets. They also declare huge dividends and set a date for the dividend allotment. When a dividend payout happens on the prescribed date, the NAV of the fund falls by the amount of dividend paid. The dividend thus paid is totally tax free.

Suppose, you have decided that you will put in say 50,000 Rs in an ELSS this year to avail tax exemption under sec 80C. Usually anybody will just go ahead and invest the full 50,000 in the scheme and the work is done. But there is a trick you can play which can save you even more money using the same investment! Suppose you find out a particular scheme which is giving you a 100% dividend this year after 15 days. So for a scheme of face value 10/- you get Rs 10 as dividend for each unit you hold in the scheme. So, if the NAV of the scheme just before dividend payout is 50, it will fall to 40 after payment of Rs 10 as dividend. Considering an entry load of 2.25 %, this is what you can do,

By doing this, you can avail a tax exemption on Rs.59,775 by only investing Rs. 50,000!!

If you hadn’t cared about the timing of your investment, you would have anyway paid the entry load and the value of your investment immediately after the purchase would have been Rs. 48,675 at an NAV of 50. Yes, I know you have lost around Rs 220/- because you paid the entry load once on Rs. 50,000 and again on Rs.9775 but this of course is a small price to pay for what you would save by having an extra exemption of Rs 9775 without investing anything more.

You can achieve the same results by opting for the dividend reinvestment option of the scheme when you bought it initially saving you all these hassles. But again, by opting for the dividend payout option, you always have an ‘option’ to keep the money with you, tax free, if need be.

How’s that?

P.S. I owe this to my father, who had this thought first and then I validated with some spreadsheets.

Life Insurance Jugglery - II

You must have heard the terms ‘Human Life Value’ (HLV) and must have been scared to death by insurance agents about how much risk you have and how much insurance you should take. There have been very popular advertisements on TV which show how everybody needs insurance, It portrays, “I don’t need Insurance” and then the ‘don’t’ word gets dropped off due to accident, fire or something and the sentence is re-phrased to “I need Insurance”. Remember that? While the intent and idea both are brilliant and true, nobody must have ever told you, “You don’t need Insurance” and if you thought so, you would be thought of as a crazy guy without the knowledge of the present times!!

So, do you need insurance? If yes, how much? You need to ask yourself these questions really hard because it is after all your hard earned money.

Let me show you some common decisions one has to make while buying Insurance policies.

1. Getting an insurance policy for a small child.
   Now this can be seen as a very prudent step for the parents, it actually overlooks a very important fact. A child does not have financial liability. There is no loan outstanding for him/her. Nobody is financially depended on the child. In an unfortunate event of the child’s demise, there aren’t going to be financial crisis. It’s going to be a great emotional loss, but not a financial loss. This argument has just one flaw. In an Indian society, a child may be seen as a financial future as well. If that is the reason (without going into the ethical part of it), then may be the child does need insurance. But this is rarely a thought for the parents. It is more to do with love and care for the child rather than future economic benefits.
2. Lessening your cover because you tried to get a ‘return’ on your investment.
   If you take Insurance policy because of your tax consideration, you probably did not think whether the Insurance is enough for you. You thought you need say 25L Insurance but the Investment + Insurance sort of a deal costs you a whooping amount greater than 70-80K per year. So you decide to take a policy of just 5L. Did this solve your purpose? It didn’t!! A term policy would have cost much lesser.
3. Too less insurance.
   The amount you are covered for should cover your immediate liabilities as well as long term liabilities which may include all types of loans, average credit card bills, maintenance costs for your car, and house for a period of time, education costs of your children, and living expenses for people who are dependent on you etc. You need to take a call on the future value of all these liabilities and decide on an amount of cover you need. Then pay the premium for the same and forget about it. As said earlier, a term policy would be best.
4. Getting insurance at the wrong stage of life.
   Say, you and your wife both are earning, your parents are also not financially dependent on you. You do not have any big loans on yourself, you do not have children. Do you still need insurance? I don’t think so. Insurance should be there only if there is a financial liability which you have and it would be jeopardized in the case of your death. It’s as simple as that. Some people may be of an opinion that in the event of death, all future earnings extrapolated until retirement should go to my family. That is how HLV is calculated. While this is a valid enough thought, you need to think really hard whether you really support this thought. I do not.
   
   
   So, analyze, think, and decide. It’s after all, your money boss!!