Sector Update: Insurance

Sector Update: Insurance

After 7 years wait, Indian parliament has approved long pending insurance bill. According to insurance bill, now FDI has been raised to 49% from 26% with Indian ownership control. Penalty for non compliance raised to 25 crore. It is Modi govt’s first major reform sign. Industry expert hopes that this insurance bill help bring in over Rs 50,000 crore in fresh capital which will stimulate the insurance sector.

From 1st April 2015, the premium rates for third party motor insurance cover has been raised after issuing new draft by IRDA. IRDA is also planning new investment norms for general insurance companies. According to new norms, investment limit in securities other than those approved would be now 10% earlier it was 25% of total premium collected in a fiscal. It may reduce the earning of general insurance companies.

The Bombay High Court has asked to IRDA to ensure that insurance companies should not involve TPA in the claim settlement. As per ruling of health insurance, allowing or rejecting claim should decide by insurance companies not by the TPA.

According to British Medical Journal, India’s private healthcare sector treating patients as revenue generators. Doctors get Rs 30,000 to 40,000 to refer patients for angioplasty. Unnecessary tests are being carried out and fabricated reports were generated. Large sums were paid for the same only to fill the pockets of referring doctors and pathologists. There is serious need for stringent, transparent and mandatory regulation.

IRDA said that insurance companies can appoint individual agents on their own from 1st April 2015. As per current practice, IRDA grants license to a person to become an agent of insurance company. After the new norms, whole licensing systems will go.

To bring more transparency, IRDA is planning to treat health insurance as a stand alone segment. As per current rule health insurance come under non life insurance category. Now, separate regulation will be made by IRDA for medical insurance.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

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SUKANYA SAMRIDDHI YOJNA

SUKANYA SAMRIDDHI YOJNA

Modi government has launched campaign ‘Beti Bachao Beti Padao’. Under this scheme the government has launched Sukanya Samriddhi Yojna Account. It is a small saving deposit scheme for the girl child to support her education and marriage. This account can be opened in the name of girl child from the time she is born till she becomes 10 year old. It can be opened in a post office or any public sector bank.

It can be opened with a minimum amount of Rs 1000 and maximum of Rs 1.5 lakh. The money can be deposited till 14 year from the date of account opening by parents or guardians. The interest rate will be decided by government every year. For FY 2014-15, the interest rate is 9.1% and it is compounded annually. The interest will be tax free. You can avail section 80C tax benefit, the amount deposit in this account till Rs 1.5 lakh in each financial year.

The account will mature after 21 years from the date of account opening. 50% fund can be withdrawn after the girl turns 18 year old. The premature closure of account is allowed in the case of death of girl child. If you do not deposit any amount in a whole year, a penalty of Rs 50 charged. One family can open only 2 accounts even if there are more than 2 girl child in family. Only 1 account per girl child is allowed. You cannot operate account online.

This scheme is better than post office schemes and fix deposit schemes or RD schemes. It will give the same tax benefit as PPF. It is good plan for your child because at least the government will try to meet the inflation rate at least. Interest rate will be announced every year. It is illiquid investment so invest in planned manner. Birth certificate of girl child, address proof and photo identity proof of girl child and parents/ guardian are required documents for opening the account.

It is less risky investment option and it will not give return like mutual funds or share market. As an asset allocation plan for debt investment, one can consider it. In my personal opinion, if you invest for 21 year then it is not much good option. A good mutual fund will give much better return if you compare between mutual fund and this scheme. I have still not opened this account for my daughter as I already invest in mutual fund.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

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Union Budget 2015-16: An Overview

Union Budget 2015-16: An Overview and Analysis

An Overview on Budget 2015-16:

1.     GDP growth estimated between 8.0 – 8.5%.

2.   Fiscal deficit target relaxed to 3.9% of GDP in FY 2015-16      with increased focused on public investment in infrastructure  and also proposed to fiscal deficit target 3% within 3 financial  years.

3.    Net market borrowing  to be Rs 4.56 lakh crores.

4.  No change in personal income tax slab and rate of tax for companies in respect of income earned in the financial year 2015-16.

5.  Proposal to reduce corporate tax from 30% to 25% over next 4 years, starting from next financial year

6. Wealth tax abolished, additional surcharge 2% imposed on individuals having income more than Rs 1 crores.

7.  Excise duty on cigarettes is being increased by 15% to 25%.

8.  Service tax is being increased from 12% plus education cess  to 14%.

9. Online and mobile advertising, radio taxis or radio cabs, services provided byair-conditioned contract carriages are now under service tax.

10.Total subsidies limited at 1.7% of GDP in FY16 against 2.1% of GDP in FY15 due to fall in fuel subsidies.

Banking and Financial services:

Announcement of autonomous bank Board Bureau and Holding company structure for PSU banks in 2015-16 is positive for PSU banks in long term. Reduce in corporate tax is positive for banking and financial services companies as most of them pay full tax rates. Overall budget impact is positive.

Oil & Gas Sector:

The impact of budget on this sector is neutral. The subsidy for FY16 is 30,000 crore marginally negative for oil companies. Focus on DBT (Direct Benefit Transfer) to curb subsidy leakages is positive for entire sector.

Infrastructure / Capital Goods Sector:

Road development allocation has been increased to 85,565 Cr(this budget) from 37,845 Cr(last budget) in this budget. NHAI target has to complete 8,500 KM road development. It is positive for all road developers. Infra investment trusts to be set up to securitizes infra project assets. Announcement of  National Investment and Infrastructure Fund (NIIF) and infuse Rs 20,000 Cr every year in this fund has been positive for all infra companies.

Power Sector:

Announcement of 5 new Ultra Mega Power Projects of 4000 MW, in the plug and pay mode is positive for new investments in this sector. Focus on renewable energy by increasing the capacity is positive for long term.

FMCG Sector:

Increase in service tax and from 12.36% to 14% can hit the consumer demand and will impact negative for this sector.

Retail Sector:

Excise duty on leather footwear having more than Rs 1000 is being reduced to 6% from 12%. It is positive for footwear companies. Gold Monetisation Scheme is positive for jewellers and consumer both.

Travel Sector:

Facility of Visa on arrival to be extended from 43 countries to 150 countries is positive for tourism economy. Development in heritage sites in India is also positive for this sector.

The budget has been positive for agriculture sector, logistic sector, real estate. Housing for all is big positive for housing development companies. For cement and metal sector this budget has been neutral. 

While the budget cleared most of the issues related to FII, it failed to meet general expectations about reduction of MAT in SEZ, reduction in STT and CTT and reduction of custom duty on gold. Increase in service tax may discourage the consumption. The revival of investment in near term is limited but the good result will come in next 3-4 years not in immediate future.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

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Short Review of Railway Budget 2015-16

Review of Railway Budget 2015-16

This railway budget seems to focus on improve passenger’s commuting experience and at the same time gives a signal for investments thrust. It proposes an annual plan of Rs 1 lakh crore with support from central government of budget allocation, market borrowing, internal resources and institutional investments. The highlights of railway budget are given below:

(A) There is no hike in passenger’s fares this time. The railway minister’s statements range from additional wagons to accommodate more passengers to improving security with equal importance of cleanliness indicates the government’s intention to improve the commuting experience. Only time will tell whether these promises fulfilled or get blocked due to lack of funds investment.

(B) The revised operating ratio for this year was 91.8%. Railway Minister Suresh Prabhu has set an ambitious operating ratio of 88.5% for the financial year 2015-16. The operating ratio is the amount that the railway has to spend to earn Rs 100. A lower operating ratio helps to improve passenger amenities and creating long term assets. The proposed operating ratio will be the best in the last nine years. Lower diesel prices will certainly help to keep lower the operational ratio.

(C) The government has proposed to hike the freight rate with effect of 1st April 2015. It will increase freight earnings by 13.6% in FY 2015-16.

(D) The focus on expansion of railway’s capacity over the next five years by increasing in daily passenger carrying capacity from 21mn to30mn, increase in track length by 20% from 1,14,000 Km to 1,38,000 Km and also the rise in freight-carrying capacity 1bn to 1.5bn ton.

(E)  There are much attention to modernization of infrastructure at railway stations, signaling and electrification works, coaches and wagons. A great attention has given to dedicated freight corridor projects which can benefit many railway equipment suppliers.

(F)   ABB, BHEL, KEC International, L&T, BEML, SIEMENS, Kalindee Rail Nirman, Texmaco and Titagarh Wagons may get benefited from this year budget proposals.

Overall, the railway budget for 2015-16 showed its thrust towards investments.

 If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

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Expectation from UNION BUDGET 2015-16

Expectation from Coming Union Budget for 2015-16

Everyone in India is waiting for 28 February. Last year in May 2015, modi government came in full majority with great expectation of citizen. People wanted change and that is the main reason behind that spectacular electoral victory. In July 2015 this government had passed the budget but that budget was not reflecting the government’s intention truly. Now after completing 9 months the government is ready with its full budget. Not only the people of India are waiting for this event but also foreign media also looking it very carefully.

Prime minister is very well known for hard working and fully focused man towards goal. Overall feeling across the country since the formation of the government has been that the government is working for only big industries and the expectation of poor and middle class have been ignored by this government. Recently the Delhi election result is showing the emotions of nation. This budget of Modi government is an opportunity for showing the path of “ACHHE DIN” means inclusive growth of overall.

Everyone have some expectation from the budget. I am not an exception and I have also some expectation. Agriculture and rural development should get proper attention. The fact is that our agriculture production has declined and there are need to take some steps for farmers and rural families.

The funding for social sector schemes like public health, education, senior citizens, handicapped people should not be cut. Potable drinking water for all should also get special attention in this budget. Rain water harvesting should be encouraged. With highly pitched ‘Make in India’ program there are need to develop a self-sustaining economy that can fulfill the job thrust of our country. Within high targeted GDP figure there are need to develop SMEs and skill development program. Corruption has been the root cause of all backwardness in this country and there should be scheme implementation should be in more transparent manner. There should be no scope of corruption. It means zero tolerance of corruption cases across the country without any partiality.

Inclusive growth means SABKA VIKAS. 70% rural and village BHARAT should not be ignored in the name of technology, FDI and industrial growth. Without growing agriculture one cannot think about strong India. There are many other sector like police modernization, defense sector, e-governance and to ensure the delivery of public service need proper budgetary allocation. There should be increase in tax-exemptions limit with simple tax structure.

Overall I expect this budget will have good provision for the development of agriculture, job creation, health reform, education, security and infra sector. The budget should be come with intention of inclusive growth as they promised in election SABKA SAATH, SABKA VIKAS.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

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Have you done your tax planning?

I am sure most of you have done your investment to save the taxes but still some people will wait for the last moment and will make fatal decision in hurry as the result of last rush. Many insurance advisors are very active in these days to trap the investors in the name of insurance with the false promise of sky rocketing return. Poor investors also do not care of investment as they want only trust not return. I wonder sometime when I meet such investors who are very happy to invest in endowment, money back or ULIP and still don’t know about their insurance cover and expected return.

They easily ignore the biggest threat of their investment. Do you know what is the biggest threat return your investment? It is Inflation. Due to this inflation most of time your real return become negative also. Please before any investment be very clear about the inflation concept. You should ask some question to yourself. How inflation and taxes eats your return? What will be real rate of return after adjust inflation and taxes?

Section 80C is very popular section among investors and for the financial year 2014-15 the investment limit has also increased till 1.5 lakh under section 80C. First calculate your other investment under section 80C like PF, PPF, home loan repayment, insurance premium etc. After consider all other available provision under this section determine your shortfall to complete 1.5 lakh limit.

During January to March there are many companies come with attractive and catchy advertisement. They show the high possible numerical figure in the name of save tax. In most of cases, these companies assume that investor is in 30% tax bracket and will investment full available amount 1.5 lakh available under section 80C. Due to this confusing advertisement people who are in 10% or 20% or nil tax bracket get misguided and make the wrong decision.

According to me if your investment horizon more than 8 year then ELSS is the best option to create wealth and beat the inflation. If you do not have time to plan your finances then you should contact certified financial planner.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Insurance Sector Update

Sector Update: Insurance

Ø       Most of the travel insurance do not cover adventure sports. Adventure sports like river rafting, long distance biking, para-gliding etc are becoming popular in India. These activities are part of the exclusions in most of the travel insurer. Bajaj Allianz General Insurance offers cover for any injury that occurs during adventure sports under a professional trainer / assistance. ICICI Lombard General Insurance do not cover it in travel insurance but the company offers it as add on cover. They insist that tour operators should be recognized and should follow all safety precautions.

Ø  Life insurance has emerged as the most preferred investment option for Indians with an income up to Rs 25 lakh, according to a survey. 75% of affluent population of the country, who hold investments other than cash, have put their money in life insurance while only 33% invest in equity mutual fund.

Ø   The IRDA is likely to revamp the Indian Market Terrorism Insurance Pool due to changing circumstances. It was formed in April 2002, after terrorism cover was withdrawn by international reinsurers after 11 September, 2001 attack on the US.

Ø    The IRDA has raised the concerns over the high attrition rate of of agent. In 2013-14, the total no. of agents appointed by life insurers was 7.25 lakh but those terminated was as high as 6.59 lakh. To tackle this issue, the IRDA had earlier reduced the pass percentage from 50% to 35%.

Ø   Crop insurance schemes are available now for farmers in Kerala. The weather based crop insurance scheme (WBCIS) and the modified national agriculture insurance scheme (MNAIS) are being extended to farmers in the state for the ongoing crop season. Paddy, plantain, cashew, sugarcane, mango and tapioca are covered under the schemes.

Ø   Union government of India’s move to increase the foreign investment cap in insurance sector will boost the finances and improve the innovation in products.

If you have doubt about any investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com