Chaitanya Patel

Life Insurance – mis-selling and cures

Despite insurance companies swearing about their customer friendly and anti-fraud approach, the complaints of insurance miss-selling are on a rise, why this contradiction?

Saying we are customer friendly and being customer friendly are really 2 different things. If a customer really understood risk and bought only risk products NO INSURANCE company will be able to afford all the overheads that they have. Most of the mis-selling comes when they sell ‘investment products’ which promise about 13% per annum buy actually yield about 4%p.a.

If they do not mis-sell, there will be NO SALES, make no mistake. So obviously there is mis selling. IN a country where national savings certificates and PPF give about 8.5% p.a. WHO WILL BUY A 4% yield product’? Hence the mis selling.

-          Are the companies, their employees or agents honest enough in telling prospective customers the truth of the insurance products which they are going to buy?

No. They dare not. See the real returns of Endowment plans, Money Back plans, etc. ALL OF THEM would have yielded less than bank FD returns. So to hide this, they create big documents to confuse the people with tax impact, post tax return, etc. – all this is subterfuge – the returns are sub bank Fd. Period. So telling the TRUTH the way the client understands CANNOT BE DONE.

-          In the name of insurance penetration, both the Government and IRDA seem to close their eyes towards the malpractices prevalent in the insurance sector. What is the solution?

Look I have said this a billion times – the only protection that an Investor can really get is EDUCATION. He/she needs to know what amount they are investing, what to expect, and what has really come. If a person has bought life insurance in 2004, 2008, 2012 – one has to assume that he/ she is HAPPY WITH THE PRODUCT, and therefore buying a similar product again and again.

Customer has to behave much much much better – and sensibly.

-          The discussions are going on to allow banks to sell the products of all insurance companies (act as broker) with the caveat that in case of miss-selling the banks will be responsible. Will this step help to curb the menace of insurance fraud?

No. It will not. This has come a full circle – first IRDA said banks should become brokers. RBI said no. Now RBI is saying banks should become brokers. Difficult to understand, but the BIGGEST beneficiary will be LIC. With their investing clout they will be able to FORCE every bank to sell their products. The other big insurance companies like Hdfc and Icici will also benefit because they may increase their ad budgets and increase the points at which their products will be available. The banks may not spend enough money on training, so mis-selling will increase, not decrease – at least in the short run. Frauds will INCREASE, not decrease – more banks will be under sales pressure, not LESS.

-          If as a broker, bank can be made responsible for miss-selling, why can’t the individual agents of the companies?

Most insurance companies turn a blind eye to mis-selling. Only when a customer complains do they act as if it bothers them. Most products are of poor design – too much upfront commission being one of the defects. The other defect is ‘compulsory pay for 10 years’ – the surrender is so bad that most people will not be willing to surrender it. SO IT IS A DESIGN FAULT and supervision fault. A bank can be made responsible because the insurance company can sue them, take action against them, etc. but an individual just vanishes. He might exit the industry – a bank will have to make good the losses – to the client and the insurance company.

-          Even today insurance products are sold as investment products and the companies pitch their sales strategy around this misconception only, what are the ways out to break this myth? 

Media, IRDA, etc. should show people what returns are ‘normal’ in a 30 year plan. People should understand that insurance is a RISK product, not a ‘return’ product. If you want insurance, take TERM INSURANCE – not endowment. Even today life insurance companies pride themselves on the AUM that they have, not on the SUM ASSURED figure! And fund management is far far more profitable than peddling risk.

Ministry of Finance has to make the changes that it claims to espouse.

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In our article Notice for Adjusting Refund Against Outstanding Tax Demand, Section 245 we talked about notice from the Income Tax Department which said the Refund determined during processing is being adjusted against the outstanding demands. The details of demand are given in the table annexed.  Other than the table the document has no information.

Income tax outstanding demand breakup

Before breaking your head on what the demand is about Check if the demand is for you.

Check If Income Tax Demand Notice is for you

These days demand notice is sent by email (the one you registered in filing your income tax) and also by post(address in your Income Tax return). Don’t ignore the notice.  First check if the notice is for you and whether you are aware of discrepancy. In the notice check for details like

• PAN : It is possible that the notice was meant for someone who shares your name or date of birth.  Check the PAN even if there is a discrepancy in the name and address. The Income Tax Department issues notices according to PAN, not name. 
• Communication Reference Number or  CPC Reference No. It is available on the first page of Intimation. When you call CPC first thing they ask for is Communication Reference No. Example for AY 2012-13, ITR 3, the Communication number is  CPC/1213/I3/15670003276 where I3 stands for ITR of type 3.
• Demand Identification Number :  If you look at the table above you would see the DIN for every demand. So if a letter has been sent asking for demand earlier, DIN corresponds to that number.

Many a times it happens that one is not aware of this demand as one did not receive any notice for the demand from Income Tax Department earlier. It is not that demand notice was not sent, but it’s that the notice was either lost in post or was delivered to your old address.   Its very important to clear that demand  as unless the past demand is settled IT will keep on adjusting our refunds against that demand. Don’t worry, no police is going to come to your house. Purpose of sending the demand notice is to give you an opportunity to explain the discrepancy.

How to Request for Intimation

Often the question that comes to mind of person who got the notice is How to get the intimation mentioned in demand notice?  Only then can one figure out reason for the demand 

For Income Tax Return Filed Manually : For the years when you filed your Income Tax returns physically and not electronically, you need to contact  your Jurisdictional assessing officer and ask for the demand notice from. He  will provide you the copy of notice, by which you can choose the course of action needed to clear the demand. Jurisdictional Assessing Officer  is a person who has jurisdiction(means: official power to make tax decisions and judgements ) to tax make assessment of an assessee, who is liable to tax under the Act. Our article How to find Jurisdictional Assessing Officer : Income Tax covers in detail how to find Jurisdictional Assessing officer ,address , phone number, room Number of your Income Tax officer.

For the returns filed electronically : The income tax e-filing portal has an option to send request for the demand notice sent earlier by email to your registered email id.  We shall explain the process later in the article This intimation from CPC will show you the details of assessment done by the Income Tax department of your Return. If you have any demand for that year, the intimation will also show you the details of mismatch in tax paid or TDS.  Our article Understanding Income Tax Notice under section 143(1) explains the intimation that Income Tax Department sends and how to interpret the document.  The document shows computation of income, with income reported under various categories, deductions claimed, taxable income, tax due,  tax paid  ex advance tax, self assessment tax, TDS, etc  in two columns as shown in image below:

• a) As provided by taxpayer in his Income tax return is from the ITR filed by the tax-payer.
• b) As computed under section 143(1) are computations by CPC .

Computation by Income Tax Department in the notice

Please check that TDS claimed, Advance Tax and Self Assessment Tax paid is reflected in the computation by CPC. CPC picks up the figures from your Form 26AS. 

Scroll down and at the end of all calculations you would see two headings Net Amount Refundable and Net Amount Payable as shown in image below

143(1) Net tax payable or refundable

If net amount refundable mentioned in Intimation under section 143(1) more than 100 rupees, it means that tax refund is due from income tax department to tax payer.

If net amount demand mentioned in Intimation under section 143(1) is more than 100 rupees, then tax payer needs to pay tax . This will be treated as demand notice for the payment of income tax due.

But it may happen that when you try to request it says No intimation order exists for that Assessment Year. Even though for that Assessment Year you have a demand! Then you need to contact your  jurisdictional assessing officer like for physical filing for returns.

Request to CPC for the Intimation

If you filed your return electronically, you can request CPC for sending you the intimation for that year.  Step by step process to send the request to CPC  is as follows

• Log in to e-filing portal of Income Tax Department ie.  https://incometaxindiaefiling.gov.in
• On the Blue Bar(Menu Bar) selects My Account . (shown marked by red box in the image below)
• From the drop down menu of My Account select Request for Intimation u/s 143(1)/154 ((shown by red box in the image below)

Request for Intimation of Income Tax

• From the page displayed as shown in image,Select the Assessment Year by clicking the drop down arrow.(Please remember the difference between Financial Year(FY) and Assessment Year(AY) For the financial year 2012-13 the Assessment Year will be 2013-14). The information is available from AY 2009-10.

Request for Intimation Income Tax

• Select the Category. Options are Intimation u/s 143(1) or Rectification Order u/s 154. Usually for intimation for demand notice you need to select Intimation u/s 143(1)
• Select the Sub category.
  • For  Intimation u/s 143(1)  Sub category has only one option Resend by Email.  
  • For Rectification the options are Resend by email or Latest by email.
  • As intimation will be sent by email, make sure that your email id registered on e-filing portal is correct .( To check or verify your email id , on the blue bar select Profile Settings-> Update Contact Details. You can update your email id here.  Please note If now you decide to check your email id , for requesting Intimation you will have to come back and do above mentioned steps again)
• Now enter the captcha code given in the image and submit the request.
• You will receive a confirmation mail from CPC the same day and the intimation with in 5-6 days of your submitting the request.
• In case you do not receive the intimation within 5-6 days you can track the status of request by logging on to your e-filing account and clicking on the My Request List Tab on the blue menu bar of your account. A screen will appear asking you to select the type of request and to enter the Captcha code. Submit the same and it will show the status of your request.

It may happen that though you have got intimation for an earlier year mentioned in the demand notice. you may still get No intimation order exists for that Assessment Year as shown in image below. As mentioned earlier Then you need to contact your  jurisdictional assessing officer like for physical filing of returns.

No intimation order exists for that Assessment Year

 My personal experience with Request for Intimation, Demand Notice

We had not got the intimations mentioned in the outstanding demand notice . So I tried sending Request for Intimation but for the year I was interested I got the message No intimation order exists for that Assessment Year. For another year I tried the Request for intimation and got the intimation within a week. For the year we had demand I had to send my CA to go to Income Tax office, contact the Assessing Officer and get the details. Reason for every year was different

• For one (FY 2006-07) we had got to the income tax order which had demand of Rs 327. We had paid the demand that  year but it was not considered. Now that demand had become more than 1,50,000.
• For another year our self assessment tax was not considered.

We submitted the letter,drafted by our CA, to the Income Tax Office within 15 days of receiving the notice with proofs (xerox not original) and took acknowledgement on a copy of the letter. Keeping our fingers crossed.

 Related Articles:

•  Notice for Adjusting Refund Against Outstanding Tax Demand, Section 245
• How to find Jurisdictional Assessing Officer : Income Tax
• Understanding Income Tax Notice under section 143(1)
• After e-filing ITR: ITR-V,Receipt Status,Intimation u/s 143(1)
• Income Tax Notice :Sections,What to check,How to reply

Did you need to meet Assessing Officer? Did you get your request for Intimation from net or you had to meet Jurisdictional offer. How was the experience, did your problem got solved. Please share your experiences and help in spreading awareness. Please comment, correct, add details , give feedback on the article, it means a lot to us. If you liked it please share it atleast one more person.

Even though debt funds are the biggest contributors to the mutual fund corpus in India, there is surprisingly not much literature on debt funds.

Let me start by clearing some misconceptions about debt funds:

1. Debt mutual funds  are EXACTLY like bonds:

Debt funds and bonds are very different. If you can lock in today into a PSU bond at 9% current yield for a 20 year period, it is an amazing saving instrument. I daresay no fund scheme can give such a good return over such a long period. If they had zero coupon and fully back ended interest, I would have been happier, but this is a brilliant product.

2. Debt fund is only for the retired person

Not true at all. Even when you are younger, say 45 a debt fund makes sense. Invest in a longer duration fund and remove only when you retire.

3. Debt funds carry NO RISK, especially gilt funds

Debt funds carry 2 types of risk (like any debt product) – one is the risk of default (on a part of the portfolio, not the full portfolio) and interest rate risk. When interest rates go up, the value of your bond fund will go down and the reverse is also true. So depending on YOUR time horizon you should choose your funds. This means you can LOSE money EVEN in government guaranteed ‘gilt’ fund. However you can NEVER EVER lose money in a NOMINAL sense in a gilt bought and held to maturity.

4. All debt funds are the same!

Sorry, no. If you have money for the short term – say 3 days or you are accumulating money for your retirement about 30 years away you will have to choose DIFFERENT PRODUCTS. For a short duration you need to choose funds with low duration (like liquid fund) whereas for a long term requirement you will choose an Income fund or a gilt fund. Your choice will depend on a) your own outlook about the time you wish to hold the fund scheme b) how much fluctuation you can stomach c) at what point of the interest rate curve we are sitting at.

5. Indians invest very heavily in debt funds

Partially true and partially false. Indians invest in bank debts and sometimes even in post offices and LIC policies. However most of the money you see in the mutual funds are the corporate monies. These are parked in liquid funds, Fixed Maturity Plans, etc…

6. Debt funds are cheap

Not true at all. You need to be careful about debt fund costs.

7. Debt funds are useless, one should stick to bank fixed deposits, especially for older people

Wrong. Debt funds are the ONLY way you could consider deferring the tax on debt investments. If you had a bank fixed deposit you would pay tax on interest earned on a regular basis. You could convert this to a capital gain by investing in growth option.

8. It is easy to build a debt fund portfolio

Wow!! It is far more difficult to build a dynamic bond portfolio – and the Indian market does not have enough bonds on tap – so building a debt portfolio is also ALMOST a nightmare!!

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Here’s a letter from a reader on insurance topics:

Hi David. I’ve been following your blog. Just want to say thank you for willing to share your knowledge in the public domain.

I have a question for you – as you know, “climate change” is happening… whether human caused or not, it certainly feels like we are seeing more extreme weathers of late.

How do you see this affecting P&C insurers? Does this give them the chance to start rising prices?  

Lastly, just wondering if you have an opinion about Markel and Lancashire and Allied world. I owned allied for a long time. Made some gains. But the recent blow up at tower and short attack at Am Trust prompted me to really stick with firms that have a much longer record. Which lead me to Markel and Lancashire. Not that this verifies these guys are clean. I’m not an accountant and nor do I think accountants can catch anything. Nonetheless, their long term record offers me a better sense of security in my mind. 

First, I *don’t* know that climate change is happening, except that it always happens.  Evidence for climate science is weak, like that for economics.  We don’t have a good model yet.  If we had a good model, we would have better predictions on hurricanes, which have been uniformly lousy for the last ten years.  And as for warm climates, the Earth has been warmer than now in the past, and far colder, if the history books are correct.

As to how it affects P&C insurers and reinsurers, for that we do have a simple and reliable model.  Look at industry surplus relative to the past — when it is high, as it is now, premium rates will be lower than the risk demands.  Most P&C pricing is weak now — I have been decreasing exposure to P&C insurers.

Markel and Allied World I know and respect.  Good companies both, though I own neither of them.  I’ve heard of Lancashire, but I do not know them in any detail.  To analyze, look in my On Insurance Investing series.

Thanks for writing.

Have you ever wondered why we are willing to hold on to our real estate investments for years even as we trade in and out of stocks?

So, we may buy and/or sell just 1-2 properties in our lifetimes, but the count of stocks we move in and move out of runs into 100s.

Of course the size of the investment plus ability to liquidate (buy and sell) is one factor. But the most important factor that is at work here is – Stocks provide you minute-to-minute valuations for your holdings, whereas you don’t see quotations for your real estate holdings so frequently.

When it comes to stocks, Ben Graham’s mentally-ill fellow Mr. Market comes to you daily and quotes a random price that causes you to behave irrationally.

“Don’t just sit there, do something!” he shouts at you daily, and you gladly take his advice and buy stocks when he quotes a high price and sell when he quotes a lower price.

In other words, like Pakistan’s Shahid Afridi or an Indian cricket team’s tail-ender, you swing at every ball Mr. Market throws at you, without knowing the speed, swing, or height of that ball.

But when it comes to real estate, there is no Mr. Market to yell prices daily at you. So you play with poise, like Ravi Shastri or Rahul Dravid.

Now, if what I have written above is really the case with you, you ought to read Warren Buffett’s upcoming 2014 letter to shareholders, which will be out later this week.

You can however read an excerpt of that letter that Fortune has released here.

In this excerpt, you will find Buffett talk about his real estate investments he made decades ago and the lessons they have served him with respect to his stock market investments.

The excerpt in itself is a wonderful dose of investing wisdom that has made Buffett what he is today. He talks about the importance of…

• Remaining within one’s circle of competence;
• Ignoring Mr. Market’s daily rants;
• Differentiating between a stock’s price and value;
• Paying a fair price; and
• Reading Graham’s Intelligent Investor

Here are five key lessons Buffett asks you to remember at all times (the emphasis is mine), as they will serve you well in your investing journey…

1. You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”
2. Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn’t necessary; you only need to understand the actions you undertake.
3. If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.
4. Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.
5. Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: “You don’t know how easy this game is until you get into that broadcasting booth.”)

How to Change Your Life
Through all the five lessons Buffett has enumerated above, he has highlighted things that you can learn as an investor.

Investing sensibly, after all, isn’t rocket science.

However, while the rules for success are simple, it is the willingness and integrity to play by those rules that differentiates successful investors from others.

It’s important to remember these age-old rules and stick to them through the times, whatever Mr. Market or others around you are doing.

That is slow, but proven, mantra for changing your financial life for the better while others around you are suffering in their own.

      

Comments

• By: 10 Big Ideas from Warren Buffett’s 2014 Letter | Safal Niveshak by 10 Big Ideas from Warren Buffett’s 2014 Letter | Safal Niveshak
• I liked the analogy of cricketers..though don't recall Ravi ... by Vikas Rana
• Agree with every word. How simple to read and how difficult ... by sudhir
• Plus 3 more...

 

Right from VCs to gurus will tell you that as a startup, you should be solving a problem. Solve a pain point.

Yes. You should be.

Eat this:

redBus was acquired for ~INR 800 crores (i.e. $138mn).

Bash Gaming got acquired for $160mn!

Who was solving the real pain?

Bash Gaming?

redBus? Yes. The team integrated offline-online world and took a while to build the industry, got bus operators onboard. They were solving a serious problem statement that nobody in the industry dared to. The team put in a lot of effort to get here.

And yeah, WhatsApp for $19Bn and Nokia for ~$7.5 Bn ? And Blackberry for..?

Why is Box.net valued at $2Bn and Dropbox at $10Bn? That too, when Dropbox took so many years to enter the Enterprise segment, while Box was enterprise from day one (the hypothesis is that enterprise focus bring better valuation)?

Who was selling Vitamin and who was selling Painkiller?

 Welcome to The New Digital Economy

What problem did WhatsApp solve? Think about it – $19Bn valuation = GDP of 100 countries!

 The Characteristics of New Economy

1. People have time (though we think we don’t have enough, but we ensure that we update our ‘close friends’ in social media that we just don’t have time).

2. People have money (yes!).

3. People are bored (immensely! Plus, we all are going thru’ FOMO syndrome, i.e. Fear of Missing Out).

4. People want to believe that they are happy (and update Facebook when they want to be!).

5. People don’t want to think.

Take a look at top 100 sites in the world – except Wikipedia (and Google search), how many of them are actually solving a pain point?

What about Youtube? Yes, there are educational content – but that’s not what Youtube actually is.

“The internet makes human desires more easily attainable. In other words, it offers convenience. Convenience on the internet is basically achieved by two things: speed, and cognitive ease.” In other words, people don’t want to wait, and they don’t want to think — and the internet should respond to that. “If you study what the really big things on the internet are, you realize they are masters at making things fast and not making people think.” [Evan Williams, Twitter/Blogger/Medium Founder/via]

#Note : Convenience. ‘Not Make People Think’. ‘Don’t Want to Wait’.

Think about it : How do most of us use free time (10-15 minutes) during the day? We call up friends/family or logon to social network. It’s not that we want to stay connected, but we just want to avoid thinking. A few minutes of *doing nothing* actually leads to boredom (and fiddling with smartphone is the best way out).

 And that’s where the money is : In keeping everybody busy. And NOT letting them think.

Is there a pain point you are solving? Actually not. Nobody wakes up saying ‘I will not think today. Give me tools’. Some of the greatest successful companies are solving your latent needs which are not necessarily pain points (and apparenly, those solving latent needs are getting higher valuation/exits).

The new economy is about convenience, latent needs and hitting the higher levels in Maslow’s Hierarchy of Needs.

“Take a human desire, preferably one that has been around for a really long time…Identify that desire and use modern technology to take out steps.”

And how can one justify the crazy valuation?

Remember, the valuation in new economy is not defined by value you are creating, but a LOT from the threat, you pose to market leaders.

Whose Lunch Are You Going to Eat Today, Defines Who You Are!

Back to the question : Do you really need to solve a pain point to do all of this? Aren’t we getting used to paying more (and frequently) for vitamins than pain killers?

The post Of Startup Valuations And Do You Really Need to Solve A Pain Point? appeared first on NextBigWhat.

Amazing how people can do WRONG things, just because it is convenient.

Had been to a friend’s house and his wife told me that they had redeemed some mutual funds to pay an EMI. I was quite perplexed because he had not told me about the new asset acquired – a Rs. 2.4 crore house in Gurgaon.

As usual I probed. He was on a business trip to Gurgaon and saw an offer – Rs.40L down payment and the balance in installments, and possession in 2016. The builder had told him that he would take money on a Quarterly basis, and he thought he would meet it from his salary by stopping the SIPs. So he did stop his SIPs, and started keeping money in his savings account.

However the construction was faster, his wife made a trip to the builder and had suggested changes worth Rs. 10 lakhs, the interiors had to be done (approx another Rs. 20L) – all this was taking his toll.

SO THE WITHDRAWAL FROM HIS mutual fund. I asked him he said “market is very high, so I pulled out” – first time this guy was having a ‘market’ view in his life!

I did not mind his 69% allocation of assets to Real Estate, I did not mind anything…but asked him a few questions..and here are his replies:

1. Why did you withdraw from your mutual funds – debt, equity, and balanced funds (gold left intact)?

Ans: Withdrawal was very easy! I printed the form signed it and couriered it. In 2 working days the money was credited to my account.

2. Why did you not withdraw from your Endowment plan?

Ans: It was too much of a hassle – I had to fill up some forms, and they would charge interest on the borrowings, etc. I thought it was too painful

3. Why did you not encash your National Savings certificate, withdraw from your PPF or own PF?

Ans. ——–ditto———- to 2.

4. Do you plan to live in Gurgaon?

Ans. No, of course not. We will give it on rent.

5. To give on rent, why are you spending Rs. 20L on the internal furnishings?

Ans. The broker said ‘Nobody will take on rent unless you have the basics like a kitchen set, airconditioner, etc.

Seriously I have no comments, happy to receive YOUR comments and feedback…

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Getting rich and wealthy is something which everybody wants, but they spend half their lives (sometimes whole lives) trying to find short cuts.

Sir Issac Newton, Mark Twain, Scott Adams – all have long tales of losing money. Luckily all of them did not lose their learning! Here are a few steps. Short and sure, NOT EASY, but can be done by all:

1. Shun debt: the REVERSE of compounding, you must get into debt only, only, only if it is a must. Not for luxuries or depreciating assets like a car or a foreign vacation.

2. Stop searching for secrets. There are none. Read, read, read – elsewhere on this blog I have complete list, but at least start with 1. Random Walk Down Wall street and 2. Richest Man of Babylon. Then grow your reading. Comment on that blog if I have missed something OBVIOUS.

3. Happiness comes from managing expectations and desires, NOT from buying everything and hoarding it at home.

4. Spend for YOUR happiness, not to impress others. They soon find out.

5. Cut expenses ruthlessly, Online buying is far more lethal an addiction than tobacco!

6. You can have many things that you want, but not EVERYTHING that you want!

7. Implement your financial plan. The perfect is an enemy of the best / good.

8. Stop blaming your parents, caste, creed, community, the Prime Minister, the regulator – NONE of them care.

9. A fallout of 8 is – ONLY YOU, AND YOU ONLY are (or should be) worried about your Wealth increase. Do it well.

10. Start now and today – NO MORE EXCUSES for delaying your SIP in an index fund, term insurance, etc.

this is shorter than Dilbert’s 287 words I guess!

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In mid-September 2013, 10 professionals returning from multi-year career breaks walked into 270 Park Avenue in New York City to begin the J.P. Morgan ReEntry Program. Elsewhere on Wall Street, Morgan Stanley and Credit Suisse have recently initiated internship programs for return-to-work professionals. The Onramp Fellowship for returning lawyers, backed by four major law firms in 15 cities, opened for applications last month, and MetLife just announced a similar program to commence this spring.

In the six years I have been tracking return-to-work programs, I have never seen five, new, big-employer returning professional internship programs debut in such a short span. And last week J.P. Morgan Asset Management’s Head of Diversity Gordon Cooper told me his firm is now introducing a Legal ReEntry Program. (In full disclosure, Credit Suisse, Goldman Sachs, J.P. Morgan, MetLife, Morgan Stanley, and Onramp Fellowship have all worked with my firm.)

In November 2012, I wrote an article for HBR about the emergence of returning professional internship programs across a wide range of sectors: for-profit, non-profit, military and academic institutions. At the time, Goldman Sachs’ Returnship was the only thriving, return-to-work internship program at a large company. To date, 123 “returnees” have participated in the 10 week Goldman program in the U.S., and roughly 50% have been hired into permanent positions. The three new Wall Street programs follow a similar formula to Returnship in terms of timing and small class size. All of the programs are paid.

The OnRamp Fellowship operates on a different model.  Applicants pay a $250 fee to cover the cost of career development assessments, but those who are selected receive a $125,000 work and training fellowship, plus benefits, for their first year at one of four major law firms: Baker Botts, Cooley, Hogan Lovells, and Sidley Austin. Applications are being accepted until March 7 and fellowships begin this summer.

What triggered all of this activity? Why now? J.P. Morgan’s Cooper explains it this way: “Many companies are waking up to the incredible amount of untapped talent that has left Wall Street firms.” The Onramp Fellowship’s Caren Ulrich Stacy adds: “This year marks the fourth consecutive annual decline in the number of mid- to senior-level female associates in large law firms. We need a way to replenish this pipeline, and fast. The Fellowship was built to increase gender diversity in law firms while also giving women who want to return after a hiatus an opportunity to expand their skills, experience, and legal contracts as they re-enter.”

Now that the economy is stable enough for companies to look beyond the recession, we are seeing a renewed focus on building pipelines with the top candidates from all recruiting pools, including the returning professional pool.  Forward thinking companies have long recognized that the return-to-work demographic, composed primarily of women who took time off to care for children, is full of high achievers. “This talent pool is especially strong, and we expect our Return to Work Program to uncover some exceptional individuals who will contribute greatly to the Firm,” says Susan Reid, Morgan Stanley’s Global Head of Diversity and Inclusion. At Credit Suisse, firm representatives characterized their Real Returns program as an “opportunity to connect with a highly skilled and untapped diversity pool.”

Recruiting professionals at the end of career breaks, when they are largely done with maternity leaves and spousal job relocations, is a smart strategy.  The use of internships as a testing ground helps remove any perceived risk that some managers may associate with hiring from this pool, and gives the participants a gradual and structured ramping-up platform.  The internship allows the employer to base the permanent hiring decision on work product and a longer opportunity to get to know a prospective employee, instead of a short series of interviews. As one hiring manager commented “I wish I could hire everyone this way.”

Making the decision to found your own business is a life-altering experience. Of course, it’s what comes after that breakthrough moment – how unique the idea, how quickly you move, how you continue to innovate – that ultimately separates the wheat from the chaff.  

And whether you’re in the culinary arts, book publishing or cloud technology, when you become an entrepreneur, work-life balance becomes a thing of the past. Your work must subsume your life if you want any shot of making it big.

There’s a reason why many compare starting a technology company to having a baby. In doing both, you’ll need to make sacrifices. You’ll inevitably miss important commitments. You’ll pull many all-nighters. You’ll be stretched past your limit. The most important thing is that you need to be okay with those changes – and internalize them before their force becomes overwhelming. What’s more, your family and those immediately surrounding you must also be onboard. In most cases, you’re risking everything you have for your idea, and they need to be prepared to support you and do whatever it takes to allow your idea to reach its potential.

There’s no sugarcoating it. It’s not easy. However, if you get in the right mindset and surround yourselves with the right people, venturing out on your own is also one of the most rewarding things you can do in life.

Making Sacrifices

It’s common knowledge that you’re going to have to make sacrifices to be successful. For me, weekend trips became a thing of the past after starting our company Okta. As a big skier, I head to Snowbird in Utah each January with other entrepreneurs to hit the slopes. But the needs of my company became the top priority during these vacations, and I spent the entire weekend of our trip in 2010 in the hotel room closing our first round of funding – and was unable to let my friends know what was going on because some worked in venture capital. I missed the 2011 ski trip entirely due to business, and I’ve missed four close friends’ weddings in foreign countries since founding Okta. My co-founder Todd McKinnon and I have given countless weekends, early mornings and late nights to talk with customers as we build and grow our company.

At the time, there was no question about whether or not I would miss the weddings, or whether or not I would spend my ski trip indoors. Like a baby, our business’s needs come first. Internalizing these decisions was part of building our company and making sure it became successful. If that meant changing my mindset to reorient it toward our business, then that was what I was going to do.

A Strong Inner Circle

It’s common knowledge that the people you surround yourself with during the startup process can make or break your business, but there are a couple of people that will make all the difference.

My co-founder, Todd McKinnon, and my wife, Sara Johnson Kerrest, help me cope with the strain that comes with being an entrepreneur more than any well-prioritized to-do list ever will. As my business counterpart and my counterpart in every other way, the two of them make up my inner circle – confidants that are always there when I need to bounce around ideas or ask tough questions others may be afraid to. And they’ll be there for every risk you need to take.

Todd and I are very lucky that we have such supportive spouses – though when we both decided to leave stable positions at Salesforce.com to start something from scratch (with no revenue stream in sight) just after Sequoia Capital said “RIP Good Times,” tough questions had to be asked.

For Todd, that meant presenting a very text-heavy, yet persuasive PowerPoint to his wife. For me, that meant convincing my then fiancé (and now wife) that it was the right thing to do. Your family is there to ask the tough questions,  but it’s encouragement and reassurance from your close friends and family that can make the difference when you start a business.

Things Change As You Grow Up

Of course, the sacrifices you make change as your company grows, too. Collaborating as a team of two is much different than managing a company of 300+, and that means you are going to have to make changes to how you work and also to how your work impacts your personal life.

It may mean no longer needing to review every line of code, and instead, taking those nights and weekends to build out an engineering team. It may mean no longer giving your cell phone number out to every customer as the sole company support person, and instead, giving your cell number out to every member of your new customer support team. It may also mean exchanging the speed of getting things done for the increased process required for automation and scale – and while these types of workflow changes can be some of the most challenging to internalize, they are the ones that ensure your company is able to continue growing.

It also means adapting your professional endeavors to fit with your personal life. When I co-founded Okta, I was engaged. Now I’m married with an 8-month-old at home. I make different sacrifices than I did when I first started. I still work 16 hours days, but no longer work both days of the weekend (or at least not regularly). I don’t watch many San Jose Sharks games on TV because when I do get home, I’m spending time with my son — or catching up on sleep.

While the sacrifices I make now are different, the care of my first baby, my business, will always be a priority, so whether it’s missing out on weddings, hockey games or the appropriate amount of sleep, giving up something is a given. But like having a child, it can be one of the most rewarding things you ever do.

Thriving at the Top
An HBR Insight Center

Only hours back, Nokia unveiled their first wave of Android smartphones. These include the Nokia X, the X+ and the XL. We spent some hands on time with the Nokia XL at the MWC, and here’s what we have to say about the 5-inch smartphone from Nokia. Nokia XL Quick Specs Display Size: 5-inch, 800 […]

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Have you ever seen the graphs showing “Look at all the money sitting on the sidelines!  This market has to go up!”  Those analyses are bogus.  Why?

Several reasons, but the leading one is that much cash has to be held as part of portfolio margining, securities lending, or derivative agreements.  What would be valuable, maybe is a graph of cash that is free to be spent on new securities.

The word “new” is important.  With most trading, liquidity does not disappear.  Instead, liquidity moves from the account of the buyer to that of the seller.  When is that not so?

With initial public offerings, where the proceeds are not solely going to selling shareholders, liquidity disappears into the coffers of the new company, that it can do business.   That’s not a bad thing, aside from periods in the ’60s and late ’90s where there was a craze that led people to invest in bogus businesses that sounded cool.

When there is too much liquidity available to invest, Wall Street produces new companies to absorb the liquidity, many of which will be of dubious value, because there is money to be made.  Trot out the speculative stocks and bonds, especially near the end of the boom phase of the credit cycle.

Liquidity disappears into new corporations, and reappears when corporations are bought for cash.  Aside from a few other similar events, secondary trading has no effect on liquidity.  So when you hear that there is a lot of liquidity on the sidelines, review the above arguments and say, “There is almost always a lot of liquidity on the sidelines, but is it buying up new stock issues?”

Therefore, look at the quality of new IPOs.  Quality is a thermometer for whether the market is cold to overheating.  The same applies to corporate M&A to a lesser extent when they purchase poor assets for cash.  On the other hand, if corporate M&A is finding inexpensive assets that they buy for cash, the market as a whole may be cheap.

Secondary trading does not inform us much about market valuations.  Look to the primary markets, where cash creates new assets, and where old assets get sold for cash.  Valuations are on display there, and should inform our investing.

The Aam Aadmi Party (AAP) is changing India’s politics for the better, and for good. It is making other parties change, by the force of its own example, and this might prove to be its lasting contribution rather than its own direct achievements. 
    Except in Kerala, democracy is an abstract norm in India, not the lived reality it should be. The entrenched personnel of the state lack any accountability to the people, in whose name and for whose welfare they have been appointed. The state rules over its subjects, those manning it constituting an oppressive, kleptocratic elite. Nominal democracy means the periodic shuffling of the political executive, whose main focus is on looting the resources of the nation while it has the opportunity to. 
    Of course, some welfare crumbs are distributed to the people, as a necessary cost of the competitive process for becoming the political executive of the moment. And the nominal framework of democracy allows social anger and distress to be dissipated and alleviated before they reach any threshold of explosion. 
    Liberalization and globalization have dispersed prosperity and access to the means of communications across large sections of the population. The process gained momentum over the past 10 years, with nominal democracy seeking to achieve greater legitimacy by expanding nominal democratic rights, such as the right to information and the forest rights law that decriminalizes the very existence of India’s tribal people. These two trends have combined to crystallize popular resentment against the oppressive state into a political movement. 
When Subjects Become Citizens 
AAP and its wild, enthusiastic support, at least in the cities, represent the Indian people’s aspiration and effort to transform themselves from subjects to citizens, something that nominally happened when India gained Independence but did not, in reality. The elite underestimate the appeal of AAP’s stress on people’s gatherings — mohalla sabhas, etc — but these offer the people their first shot at real political empowerment. 
    When Kejriwal was chief minister of Delhi, the parking lot attendant in front of our office told the cop who came to collect his regular pay-off that he would complain to the chief minister. The cop went away, but came back and collected his money the day after Kejriwal resigned. 
    In contrast, the Congress offers patronage. You give us power, and we will give you houses, roads, jobs, all sorts of rights. Rahul Gandhi, for all his obsession with opening up the system, is not able to shift gears from patronage to empowerment. 
    The BJP offers a more subtle cocktail. The ingredient it flaunts in polite society is the saviour of the millenarian dreams of all primitive traditions, the miracle worker from Gujarat, who, on his own, would right every wrong and set everything right. The darker, stronger stuff that goes into its political mix is on display when it felicitates the MLAs who played a lead role in the recent Muzaffarnagar riots, playing on another, more recent myth, of the majority being victimised in its own land. 
Shaking Up Cosy Relationships 
But apart from its vigorous commitment to opening up a third front of empowerment, AAP has little to offer by way of clear policy. Their leaders’ ideas are confused, contradictory and often self-defeating. For example, it makes a big deal of opposing Reliance Industries chief Mukesh Ambani. The chief beneficiary of its opposition to foreign direct investment in retail is none other than Reliance itself, which has no plans to sell out to a foreign investor unlike some other Indian retail players, and benefits from the absence of aggressive, competent competition. 
    AAP is clearly out of its depth when it pronounces on gas prices or power tariffs. AAP is, however, less interested in their specificities than in the theme it wants to highlight using these examples: a cosy nexus between business and politics that is inimical to the people. 
    And it has the most potent weapon to dismantle this cosy relationship: its own wholly transparent method of raising political funding. Mainstream parties raise money via loot of the exchequer, sale of patronage to business and plain extortion. Businessmen bankroll individual politicians, who pass on a portion of what they get to the party. Since this method of raising political funding entails collusion by civil servants, it suborns them and makes the entire administration dysfunctional and bereft of accountability. 
    India’s polity is evolving towards deepening of democracy and greater accountability. AAP is an instrumentality of that evolution. It might self-destruct in the process of forcing this change through, it might flourish as an alternative that truly champions the spirit of liberal democracy that the Constitution seeks to articulate as the law or it might degenerate into the power-for-its-own sake paradigm of mainstream parties. Which way things will go, no one can forecast at this stage. 
    What is absolutely clear is that we are better off with the emergence of AAP and it is a project that needs to propel ahead. 

Online marketplace Snapdeal has now entered into the services commerce space. In a first, Snapdeal will now be a marketplace for education services companies.

With this move, Snapdeal seeks to aid online education companies in the distribution of its services.

“There are lots of companies which have great learning content but no marketing and distribution. They face the same challenges which sellers of physical products faced before e-commerce started to become big,” said Kunal Bahl, founder, Snapdeal. (via)

He expects the space to be worth $3-4 billion in the next few years.

Snapdeal currently has partnered with 6 online education companies for the new offering. Sites whose services will be distributed via Snapdeal include Edukart, Mockbank, Simplilearn and TestFunda.

The Indian e-learning technology market had grown to $173.4 million in 2013. 

Snapdeal looks to rake in 20% of its turnover from the services commerce business in the next few years(via). The entry into being a marketplace for online education will aid this. The company is also looking at a US listing soon.

The post Snapdeal Enters Services Commerce Space with Education Marketplace appeared first on NextBigWhat.

If you had asked me a question in 2008 or 9 – which was a better strategy – buy and hold or trading – I would have said buy and hold. In 2014 I am not so sure.

In the year 2012 and 13 I have done lot more trading than I would ever have done earlier. And the shares in which I have done trading include blue chips (?) like Tata Steel, Reliance, Bharti Airtel, Tata Power, and Hindalco. The IRR on these have improved only because of the trading. It hardly matters that some of these shares have been in the house portfolio for upwards of 5 decades.

Apart from these I have also done tremendous amount of trading in Coromandel fertilisers, Cholamandalam, Eid Parry, Kajaria Ceramics, Essel Packaging, Timken, Shanti Gears, Sona steering, .. …so much so that I could much more than recover my worst trade since 2012 – Hindustan Oil Exploration.

Most of these shares gave so many chances for volatile movements that one could go long or short without any anxiety or regrets. Take for example Cholamandalam – Rs. 265 and Rs. 235 have been awesome swings. Coro, Timken all of them gave such an ample swing – all that it required was a smart kid sitting at the terminal. I have no clue whether I could have done so well if I were trading online. I just do not have enough data to see on the online screen of a retail broker. I prefer the trading terminal for data, and a smart kid sitting at the screen. Oops that works for me better, not the ‘net’ .

So go there build a portfolio, but be ready to sell off your ‘best buys’ if there is a price spike like these shares have given….

Strategy keeps changing along with the market swings….but please remember in terms of value only about 20% or 30% of my portfolio goes into the swing trade game. It has paid off very very well in the past 2 years….

DISCLAIMER: These are acts of a professional who has been in the field for over 4 decades, helped by a brokerage house which has been in this business for 10 decades plus. Because it is a non leveraged, delivery based trading, the losses are limited to a fall in the market. THAT IS A RISK I know to handle. Be careful if you want to do it. These trades will of course be great for your broker, make sure it makes MONEY for you

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Since November last year, I’ve been looking at the hysteria in the Western media about Ukraine with large doses of cynicism. Possibly, like the Russians, I couldn’t quite see why the EU was so aggravated when Ukrainian President Viktor Yanukovych opted out of a trade agreement with the EU, and opted for a $15 billion cash handout from its nearest neighbour Russia. Ukraine needed the money to stave off sovereign default, and it isn’t as if the EU was offering any.

The EU is ambivalent, after the eurozone crisis and with the rising anti-immigrant rhetoric, about how it wants to treat East European states it has already admitted into the club — like Bulgaria, Romania, Croatia — not to mention Greece, Cyprus or Portugal. Given this, I’d have thought that the EU had bigger headaches at home than to get all hot and bothered about Ukraine ignoring it. As for the protestors, I get the glamour of being part of the common market, but this isn’t the same EU it was a decade ago.

However, as the events have unfolded — the ghastly footage of last week with pro-EU protestors and the police in armed clashes, deaths on the street — one can’t ignore Ukraine as just another instance of the peculiar delusions of empire the EU seems to have. It’s almost impossible to ignore that Ukraine has now become the bone that the West and Russia are snarling at each other over.

Look back at Greece

Pity the bone. I’ve been reading the official US statement about the hasty agreement hammered through by the foreign ministers of France, Germany and Poland between battered President Yanukovych and his opposition late Friday. It’s full of laudable statements abut de-escalation of violence, constitutional change, a coalition government and early elections. It also says the US stands with the people of Ukraine in restoring peace and human dignity. There’s not a word, or even a hint, about any serious cash on the table or IMF aid.

Ukraine blew up at a particularly bad time for Russian President Vladimir Putin, with his Winter Olympics on. So he chatted with US President Barack Obama and agreed that an end to violence was a jolly good thing. But he didn’t say if Moscow would continue its cash handout or subsidy on gas. Of course, France, Germany or the EU, while hailing this triumph of democracy, didn’t say a word about any bailout either. I’ve no idea what the Chinese think about all this, but I suspect that they’re going to view Europe’s push to extend its area of influence rather critically.

Of course, nobody in Europe wants a civil war — like in Syria — in Ukraine, in their own backyard. The Russians, apparently, are worried about a breakup of the country itself, into Russianfavouring east and Europeanfacing west, with the ensuing chaos. The West wants to limit Russia’s influence in the region, and stop Putin from getting further with his grand Eurasian alliance plans. All very well and laudable. What nobody seems to know how to tackle is that Ukraine’s currency is pretty much toilet paper. Its debt yields are astronomical. Without some bailout, from someone, the country is on the verge of sovereign default of massive proportions.

Ukraine, once the breadbasket of Europe, and home to high-tech industries, is broke. Who made it that way is irrelevant.

Given the IMF and the EU’s track record, even if all of Ukraine — and it won’t — hails the West and EU as glorious liberators and roll over for them, they are going to be disappointed. They should ask Greece or Cyprus, or any country that has been subject to Germany’s stinginess and IMF’s draconian restructuring. Whoever replaces Yanukovych is going to be between a very horrible rock and an even harder place.

Possibly the best thing a bone can do between two snarling dogs is to up the stakes. If it can convince Putin to play hardball, the chances of the US loosening its purse strings are higher, and then Russia will chip in more too. Unfortunately, that sort of statesmanship doesn’t seem to be available in a time of political vacuum; at best, Ukraine faces a decade of hardship and economic and political turbulence. At worst, it faces civil war and a breakup.

Cash is king, but the future is digital payments, we all know that. It's been more than a decade that the RBI has been working towards setting up, improving and encouraging electronic banking, yet when it comes to the retail world, we remain an economy caught up with paper money with around 90% of our daily transactions in cash. Cash won't go away easily; getting people to overcome the digital divide will take a long time and needs considerable push. People can of course access the systems through the internet but given that the mobile phone is with almost everyone now, especially in the cities, it makes for an easy access channel, and mobile banking through dedicated apps has only just recently picked up some speed.

Yet the RBI Committee on Mobile Banking whose report was released early this month emphasized that the advantage we have of large mobile penetration has hardly been leveraged, putting together the following estimates for the current status.

While the numbers show that Indians are still getting used to net banking, most of these would be urban net-savvy customers, but seeing the success it has had in so many developing countries, it isn't difficult to imagine the potential of using the mobile to tap the unbanked. We have a long way to go on using the mobile for inclusion, though with the Aadhaar-enabled eKYC allowed some enterprising banks have started quick and fast account opening.

The mobile is of course just a channel, and adoption of this new way of making payments or even checking your account balance is easy, but only once people have learnt to trust and use the app. While trust will spread by word-of-mouth of satisfied customers, we still don't see massive ad campaigns on using the phone as a quick and easy way to do basic transactions. RBI tells us that 80 banks have been allowed to give mobile banking services, of which 64 have started, but not many banks have ad campaigns out.

Apart from customer outreach, there is also changing the mindset within the banks - how many banks really see the advantage that mobile banking will give them, are ready to invest and understand what is needed by the customer? In fact, the RBI Committee has a string of suggestions covering many points from training bank staff to a standardized app across all banks to measures like allowing customers to begin the service through the phone rather than at the branch, and so on.

The aim has to be to simplify, simplify, simplify and get more people onto using the phone. The sooner all banks understand this, the faster we will move on the digital highway.

Of course, if we are to ever get anywhere close to a less-cash society, we have to get both banks and telcos working together. This has proved to be quite a stumbling block in the past, but with the RBI Governor's latest assurance that in the next few months "we will try to accelerate the dialogue between key players', we can hope that the RBI and TRAI manage to get both banks and telcos on the same wavelength soon. But that is a separate story altogether.

“You cannot hide any longer …therefore, today the best policy is to admit your income and pay tax” Finance Minister  P Chidambaram had said in Mar 2013.  P Chidambaram said the tax department has information about people’s expenditure patterns and their financial transactions.We have issued notices to 35,000 people saying that on the basis of information we have, you should have filed your returns. Another 35,000 notices are going next week “No. In income tax there is no case for amnesty. Because now almost all returns are online except a small category which was exempt. We have a huge amount of data which is being mined. Therefore, there is no case for amnesty today” Ref Livemint Tax Dept sends notice to 35,000 next week. (Mar 2013)

 Earnings and Income Taxes paid by Indians

According to the Parliamentary Committee Report on the Direct Tax Code (DTC) 2011-2012 headed by Yashwant Sinha,

• Our total individual taxpayer base is around 3.25 cr. (32.5 million)
• The total number of individual taxpayers (2010-11) that earned more than Rs. 20 lakhs (Rs. 2 million, or $40,000) a year were just 406,000. That is 1.3%, as the total.
• Although, only 1.3% of all tax-payers earn more than 20 lakhs in India, they account for a whooping 63% of all the taxes collected by Indian Government. So 4.6 lakh Indians pay a total of 93,229 crore rupees of tax. That comes to an average of roughly 23 lakh per person!

Another article on NDTV No shame  says

Data suggest that nearly 1 per cent of the country’s total population earn 9 per cent of total earnings. According to a report by Capgemini and RBC Wealth Management released last year, India had 125,500 dollar millionaires in 2011. Of the 3.2 crore tax payers,

• 89 per cent say they earn less than Rs. 5 lakh per year, for whom the minister has announced a tax credit of up to Rs. 2,000.
• 14 lakh tax payers say they earn between Rs. 10 lakh and Rs. 20 lakh,
• while 40 lakh admit to earning over Rs. 20 lakh per annum.

There are only 42,800 people with incomes of over Rs one crore a year, for whom 10 per cent surcharge is applied for year AY 2013-14 and AY 2014-15

Transactions reported to Income Tax Department

Under income tax laws  institutions are required to report the details of those transactions which you have entered into or registered with them. All the banks, mutual funds and companies issuing shares are required to submit the details. Besides, the office of the registrar where your sale and purchase transaction of immovable properties are registered, is also required to send the details of such transactions to the income tax department. These establishments have your PAN and other details, so there is virtually no way one can sneak past them. The following transactions are required to be informed to the Income Tax Department

1. Cash deposits aggregating to Rs. 1,000,000 or more in a year in any of your savings account in the bank. Banks also includes cooperative banks. Infact it applies any bank or banking institution which comes under the section 51 of Banking Regulation Act, 1949 (10 of 1949). Banks are not required to report in cases where cash exceeding Rs 10 lakh has been withdrawn from the savings account but the cash deposits have not crossed the threshold limit during the financial year.
2. The transaction of payments for credit card if the aggregate payment made during the financial year is Rs 2 lakh or more during the financial year.
3. Investments of Rs 2 lakh (200,000) or more in Mutual Fund
4. Investments of Rs 5 lakh (500,000) or more in bonds or debentures issued by a company or institution
5. Investments of Rs 1 lakh (100,000) or more in the shares issued by a company
6. Purchase or Sale of any immovable property valued at Rs 30 lakh (30,00,000) or more
7. Investments of Rs 5 lakh (500,000) or more in a year for investment in bonds issued by Reserve Bank of India

The values of the transactions mentioned above have to be considered as aggregate in a year and not per transaction. However, in case of property transactions, the limit is for single transaction.

 If you are wondering how many fall into the category here are the statistics. In 2010-11

• Nearly 62 lakh investors put more than Rs 2 lakh in mutual funds or over Rs 1 lakh in stocks in 2010-11.
• Almost 27.5 lakh account holders deposited Rs 10 lakh in their savings bank account that year.
• More than 15 lakh credit card customers spent more than Rs 2 lakh
• More than 6.5 lakh buyers bought property valued at over Rs 30 lakh.

Big brother is watching. Almost 23 crore of such high-value transactions are under the scanner and notices have already been dispatched to thousands of taxpayers. The notice typically asks the taxpayer to respond in writing. His personal presence is not required. If the system detects a mismatch in income, investments and expenses, it will automatically pick the return for scrutiny.

 AIR: How are the Transactions reported to Income Tax Department?

As per the amendment to Section 285BA of the Income Tax Act, 1961, specified entities or Filers are required to furnish an Annual Information Return (AIR) in respect of specified financial transactions registered/recorded by them during the financial year (beginning on or after April 1, 2004) to the income tax authority or such other prescribed authority. CBDT has authorized NSDL e-Governance Infrastructure Limited (NSDL) to receive AIR. AIR should be furnished in electronic form by all categories of entities required to furnish AIR. Furnishing of AIR in physical form is not permitted. NSDL receives the AIRs through its country-wide network of front offices called TIN Facilitation Centres (TIN-FCs) and on-line through web-based facility. The data received by TIN-FCs and data received on-line is collated by NSDL and disseminated to the Income Tax Department.   For more details check Tax Information Network (TIN’s) webpage on Annual Information Report.

Related Articles:

• Income Tax Notice :Sections,What to check,How to reply
• E-Filing of Income Tax Return
• Income Tax for Beginner
• Filling ITR-1 : Bank Details, Exempt Income, TDS
• Income Tax articles organized 

Due to advancement of technology now it’s easy to find out the financial transactions (for most PAN is compulsory. The process of filing tax returns has been changed tremendously over the past few years. Even a minor error may invite a notice from the income tax department for correction or explanation. So  please be careful in your financial transactions.

“There are always three speeches for every one you actually gave: the one you practiced, the one you gave, and the one you wish you gave.” — Dale Carnegie

I thought I’d post some excerpts from a recent talk I gave to student athletes at Bradley University on accountability.

In the dictionary, accountable means that you are required or expected to justify decisions. It means, quite literally, to “account” or “answer for.”

We commonly think of accountability as ‘being held responsible for something.’

Hammurabi’s Code.

An example of a really responsible system is Hammurabi’s code. Hammurabi was the sixth king of Babylon from 1792 BC to 1750 BC. Hammurabi created one of the first written codes of law in history. And one of those codes specified:

“If a builder builds a house for a man and does not make its construction firm, and the house which he has built collapses and causes the death of the owner of the house, that builder shall be put to death.”

Your book

To paraphrase Jamie Dimon, the CEO of JP Morgan Chase, one of the biggest banks in the world, for each of us there is a book being written and we add to it each day through our actions, our inactions and our intentions.

I can quickly learn what’s in the book being written about you by talking to your teachers, friends, family, neighbors, teammates, and anyone else who interacts with you on a regular basis.

And what does your book tell me?

I’d learn whether you’re trustworthy. I’d have a pretty good idea whether you deliver on your commitments or if you have a history of letting people down. I’d learn about your humility, how hard you work, and your integrity. I’d learn if you’re responsible and what kind of standard you hold yourself to. I’d learn whether people like you and why.

You may not have control over what happens to you in life but you have control over how you respond.

Viktor Frankl survived the Holocaust. Needless to say, no matter how tough your life has been, I bet he had it worse.

Imagine having everything taken away from you and being sent to Auschwitz.

He survived and wrote one of the most powerful and moving books you will ever come across: Man’s Search for Meaning.

Frankl’s most enduring insight is that no matter what is taken from you, you have the freedom to choose how you respond to the situation.

In his book he writes, “We who lived in concentration camps can remember the men who walked through the huts comforting others, giving away their last piece of bread. They may have been few in number, but they offer sufficient proof that everything can be taken from a man but one thing : the last of the human freedoms— to choose one’s attitude in any given set of circumstances, to choose one’s own way.”

Courage

Courage means saying what you think even when it’s unpopular or will upset social norms.

It means calling out your teammates, respectfully, when they are not doing what’s in their control to help the team win. It means calling out your coaches when they are not doing all they can to help prepare you.

Too often this doesn’t happen. No one wants to bring reality to a situation and disrupt the social cohesion. And this doesn’t just happen in sports, it happens in the corporate world too.

Acquiring Knowledge

The simple key to acquiring knowledge is going to bed smarter than when you woke up. Over a long life, this adds up. But that means acquiring knowledge, or what some people call worldly wisdom, must be a priority. It’s easy to go out after school, land a job, come home and watch TV until you fall asleep. It’s a lot harder to make an agreement with yourself to be responsible for continuing your education and holding yourself accountable for that.

Deserving success

In short, the best way to get success in life is to deserve it.

If you want people to think of you as honest, then be honest.

Being honest, however, is more than just not lying. You have to tell the truth. The philosopher and mathematician Nassim Taleb says “If you see fraud and don’t shout fraud, you are a fraud.”

If you want to be a leader you must lead. This means, you can’t shy away from the hard and difficult conversations. It means that you stand up for what’s right when everyone else is watching. It means you have be an exemplar for others. It means you have to hold yourself accountable.

Failure

I’m sure some of you have already overcome a great deal in life in order to be here today. And there are some of you who have yet to be challenged. But—if you are fortunate enough to live a long life—you will face failure or setback at some point.

In my experience, how we deal with failure and setback, is what really separates people. In fact, it may be the single most important thing determining your success in life.

There is a beautiful quote by Michael Jordan, who said:

“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”

Skills will only get you so far. Jordan was cut from his high school basketball team. But he didn’t give up. He re-doubled his efforts and tried harder than everyone else.

Jordan is not the only one. Any elite athlete has, at one point or another, failed. The same for any successful person.

But it’s not just failure in the traditional sense. How you deal with setbacks matters too.

Some of the greatest people of all time have faced setbacks that would have derailed others. Nelson Mandela is a great example. So is Steve Jobs, who was fired from the company he founded. JK Rowling was rejected by most publishers before someone took a chance on what we now know as Harry Potter. Others have been fired, victims of circumstance, or rejected hundreds of times. But they all got up.

A lot of successful people—in fact almost every successful person I know—all do the same thing in the face of failure: they use it as an opportunity to examine what went wrong, what they did, and reevaluate the methods they used. This requires a lot of what we’ve talked about tonight, humility, courage, knowledge, and ultimately accountability to yourself.

…

Marcus Aurelius wrote “The impediment to action advances action. What stands in the way becomes the way.” In other words, the obstacle is the path.

While “failure” is not an opportunity in the traditional sense, you can make it one. Admit mistakes, learn as much as you can, and move on and you’ll turn your failure into a learning opportunity. You’ll be better next time.

—
Brought to you by: CURIOSITY — A curiously unconventional ad agency that helps you stand out in today’s crowded world.

The ruling elite need a constant supply of clerks for offices and sepoys for the army. So the Englishman designed our education system and it still works perfectly for the UPA and the BJP. Most of us in the middle class cannot really break away from the school education and do something different, can we?

Let us see what the Financial service sector does to keep us ignorant, ill informed, ….etc.

1. Hiring top class communication experts to fool us: The communication and body language experts write copy, decide where to locate what news item in the press, on tv, etc. They brilliantly manipulate data.

2. Get the Regulators to speak in a caring tone, but deliver toxins. Look at the changes that ULIP has gone through in India! From being a very customer friendly product (2004 you could top up a ULIP up to 20% of the sum assured) NOW YOU CANNOT. All changes were supposed to ‘benefit’ the common man. Brilliant manipulative communication skills.

3. Freeing well paid ‘experts’ to come on TV to manipulate you. Why do professionals come on Television? who pays them? what language do they use? Have you ever wondered? Why does a person spend 5 hours a week on TV?

4. Scare mongering the common investor to REACT IMMEDIATELY in panic and do completely wrong things! Even doing a survey on a day when the market has dropped 4% is MANIPULATIVE.

5. Pay tons of money to manipulate the system and create vested interests! Have you wondered how profitable banks are just because a few million of us leave a few thousand rupees in our savings bank and current accounts? And those accounts which we ABANDON just because it has only Rs. 2000 as balance? or Rs.350 as balance? Suits the banks!

6. Fuel our anxiety – leading us to hyper trade? and despite losing money believe we are great traders!

7. Make millions of agents, and sell through every bank branch: Look hard and you will find a million victims in this country of a billion people! Most of the agents and Relationship Managers have NO clue that they are not the looters, but the agents of looters.

8. Keep defective product structures ON for so long that people believe that the product is good. Look at a Classic Endowment product, it is a structural defect! It is DESIGNED to give you a NEGATIVE REAL RETURN immaterial of how long you propose to hold or hold. And the Government says Viaticals is illegal. Brilliant manipulation.

9. Constantly sow doubts about long term uncertainty, create a highly volatile market, – thus getting people to think short term instead of long term.

10. Creating a compensation system which ENCOURAGES short termism! Imagine a 40% upfront commission for a product with a 30 year premium payment.

11. Making the Government a partner (or in case of LIC, the full owner), the regulator ENSURING that people do not understand the difference between GUARANTEED RETURNS and REAL RETURNS – 4 generations of investors have lived through this!

12. Self serving ‘Investor Education Programs’ – this calls for a book, not just a post!

13. Creating new products to beat the legislation. When Sebi said ‘no entry load’, India’s private sector banks created PMS schemes and got the HNI to part with tons of money.

14. The managers who handle your Provident fund, NPS, etc. – If you meet them YOU are likely to stop putting one more PAISA into those funds. Honestly, I have dealt with them, and have NEVER come out impressed.

15. Employ a hit and run truck driver to get rid of Subra. Not sure if I am significant enough for them to worry about me!! Just my ego!

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Parliament is in turmoil: a handful of MPs from coastal Andhra Pradesh and regional parties like Trinamool Congress (TMC) and Samajwadi Party (SP) do not want the creation of India’s 29th state, Telangana.

Seemandhra’s opposition hinges on the state capital, Hyderabad, which will be located squarely within Telangana.

Wealthy Seemandhrans have invested heavily in property in and around Hyderabad. They fear erosion of their investments in the new state. The TMC probably opposes Telangana because it feels the large Nepali population in the northern reaches of Bengal will start agitating for Gorkhaland. The SP is opposed to the creation of several compact states out of the vastness of Uttar Pradesh.

Extended Nuclear Family

It is pointless to oppose the creation of Telangana: in a democracy, if the vast majority of people feel that they will be better off with a new administrative set-up, they should get it. There is some evidence to show that smaller states are better managed.

After their formation in 2000, Uttaranchal, Jharkhand and Chhattisgarh can now claim to be much better off than when they were constituents of UP, Bihar and Madhya Pradesh, respectively. We think of states and administrative boundaries as being immutable, cast in stone. But it was never that way. The British formed administrative units as they went around, absent-mindedly consolidating their grip on India. They started from the coasts, where they landed: unsurprisingly, Bengal, Madras and Bombay became the first presidency towns.

Large areas of the interior of India were left almost untouched, ruled by princes friendly to the Crown. By 1947, there were more than 600 of these.

The Hills have Eyes In the northeast, the British administered the Brahmaputra valley with a firm hand. They had vast economic interests there: lush tea estates, oil and timber. But they preferred to leave the tribal populations that lived in the hills and two princely states of Manipur and Tripura, more or less on their own.

Under pressure from missionaries, the British banned headhunting in the hills. And occasionally, the sahibs would launch large, punitive expeditions — entire armies of Gurkhas, Jats and their British officers marching up the hills — when they felt threatened by the raids of “hillmen” on their estates.

 This remoteness from administration and their relative isolation from the arms of the state led to ideas of forming different tribal states in the hills. The Nagas were the first to latch upon the idea of a Naga nation — their agitation started immediately at Independence, and turned violent over the years.

In the south, the British administered the geographically vast Madras presidency. After Independence, it was clear that India would need to reorganise its states, only it wasn’t clear to anyone how this would be done. In the 1920s, the Congress had adopted a resolution that said states should be carved up according to the language spoken.

In the 1950s, Telugu-speaking people of Madras began to agitate for a separate state. Potti Sriramulu, a Gandhian, began a fast and refused to call it off. In December 1952, he died, only the second person after Jatin Das, who fasted to death in Lahore jail in 1929, to have died in a hunger strike in this country. Sriramulu’s death shocked India.

It forced the government to set up a States Reorganisation Commission (SRC). The SRC argued that language alone could not justify state formation, other factors like culture and economic viability had to be factored in. Ultimately, the SRC asked for the creation several new states, including Andhra Pradesh, Karnataka, Kerala and Madhya Pradesh. These were formed in 1956.

Divide and Drool

It didn’t end there. Gujarat was formed in 1960, Nagaland became a state in 1963 and Haryana was carved out of Punjab in 1966. In 1971, India fought a war with Pakistan and created Bangladesh.

As fighting raged on the eastern front, a lot of it spilled into the states of Tripura, Meghalaya and Manipur, on the border of East Pakistan. In 1972, one year after the war, these three were also made states of India.

In 1975, India took over Sikkim, after its people revolted against its then-monarch. From 1966 to 1986, the Mizos had fought off the Indian state in their struggle for freedom. This ended only with a negotiated settlement, and statehood for Mizoram in 1987, the same year that Arunachal Pradesh also became a state.

Seemandhra protesters want a return to the status quo. But as we see, there was never any status quo in the first place. After Telangana, there will be demands to create other new states, based on many issues and anxieties. Instead of shouting in Parliament and on streets, the government should set up another SRC, to deal with the new demands.

The United States has a population of 317 million people and 50 states. India’s population, at 1.24 billion, is four times that. Why can’t India have 200 states?

There are just 3 important steps to wealth:

1. Earn Well: To earn well, generally you need to get decent academics. Remember the average CA earns much better than the average cricketer or the average movie star! We compare to the top star and say ‘why do CA, let us play cricket’. Poor understanding of statistics!

So go out there and get a nice education / training which will teach you to earn good money.

I am not saying that education is the ONLY method to earn money, but that is the only route that I know.

2. Having earned that money remember that money spent is just money gone! So if you have earned money learn to spend less! If you spend less, you will have SAVED the money…

Savings are good, in fact great. However, it will not make you rich.

3. To get rich you need to INVEST that money! And invest wisely.

How do you invest wisely?

To start with invest in an index fund. Do a SIP in a good fund from a good fund house. If you do not know how to spot this, use an Index fund. Then learn equity investing and start picking up 2-3 scrips a YEAR. Over a 20 year investing life you would have created a portfolio of about 50 scrips. Frankly you do not need more than that. And of course there is one more step. A simple step.

Simple. Read www.subramoney.com regularly, and read the old blogs too!

Remember i have 3900 posts for you to read. Many are boring, but most of them are nice and all of them will make you wealthy.

One of those posts will even tell you the difference between Rich and Wealthy.

Go on, Read.

Remember I will know that you have read only and only if you comment – like, love, hate, anything is fine. Feedback is a must please!!

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Hawala premiums for gold smuggling are up to 4%, says Business Standard.

Bad Housing Starts data in the US? No, says Calculated Risk; it’s the cold weather and higher prices.

Why I didn’t go to jail, writes Ben …

Nasscom founder-president Dewang Mehta, 39, was found dead in a Sydney hotel in 2001; Yes Bank founder Ashok Kapur fell to bullets during the 26/11 carnage in Mumbai; Retail pioneer Raghu Pillai died following a cardiac arrest in April 2009; and only last fortnight, we read about Karl Slym, 52, CEO of Tata Motors jumping off a Bangkok hotel.

All these ace professionals left the world at the prime of their careers. And they also left their respective companies in a world of disarray, in the absence of a robust succession plan ready in time. Now add to this the huge number of top brasses, who resign without warnings. The picture is more alarming.

I am happy that the market regulator Sebi has come up yet again (first it mooted the same two years ago) with a proposal to mandate all listed companies to have succession plans in place. Let's not get into the legalities of the proposal, instead just look at the positive changes it can usher in.

Firstly, it is a first in the world, as nowhere such a regulatory mandate on publicly traded companies exists. If it gets through, we will be a proud example to the whole world. And then, investors are the ultimate beneficiaries of such succession plan, if the company is caught unawares by the death or departure or even poor performance of its leader.

As this topic is something really close to my heart, I have some suggestions:

a) Have nomination committees in all the key departments: Create a system to track every key person right from day one in the company. Make sure his/her appraisal report is tested across various levels of work and reaches the top management.

b) Keep replacements ready: The nomination committee should submit its reports on key personnel to the top management on a regular basis. But, I see two issues of conflicts here: preparation and de-motivation. Some members are likely to feel de-motivated, as only a few may take it in the right spirit. So, it is important to balance on the ropewalk. This, to a larger extent, can be avoided if you have a transparent selection process, more so by involving outsiders.

c) Have a proper appraisal system: In fact, succession planning begins with the appraisal system. For this, it's extremely important to have a fool-proof recruitment process. At SBI and ICICI for instance, it is quite usual for the top leader to have worked in a subsidiary before occupying the corner room. My point is that the staff easily accepts such promotions. If the new boss is an outsider, his/her success fully depends on the ability to bring in a whiff of new perspectives.

d) Ensure orderly changeover:  One key point in rolling out succession planning is to ensure that the changeover is in order, while keeping all options open. This is a must to ensure that the culture and the basic ethos of the group are intact.

It is easily said than done, I know, especially when it comes to family-run ventures where natural succession is the order of the day. Succession planning assumes urgency because of the sheer fact that over 90% of our publicly traded companies are still run by promoter or their families. This is true even in the Tata Group-the least promoter-driven group. The tag value of JRD or Ratan Tata with the companies is so high. Or just look at the way investors reacted when Narayan Murthy returned to Infosys!

One very important thing in equity research is ‘knowledge gathering’. Being an auditor (doing articles + a couple of years could be useful enough) is a very good place to start. The basic audit experience teaches you a lot of ‘hiding’ techniques, and the bank audits teach you ‘appraisal’ skills.

One important trait that FIIs taught us to look for is ‘core competence’ – a company should stick to its knitting. So a Colgate, Infy, TCS, Tata Steel, are really liked.

In the Murugappa group they have defined competence in a slightly broader sense – EiD Parry for e.g. is farm oriented. This is the reason why it is the holding company of Coromandel International – a fertiliser company. So it will not be surprising to see EiD Parry being in sugar, fertilizer, seeds, pesticides, and maybe branded ‘agricultural products’ at a later date. Makes sense.

However, some companies use their cash flows in one business to set up another business. MNCs do not do this much but Indian companies have done this quite a bit. Sometimes successfully, sometimes not so successfully. When Tube Investments invested in Cholamandalam General Insurance – you kept wondering why. When Cholamandalam Investments and Finance – core competence lending – set up a brokerage arm, mutual funds, distribution arm you wondered why. The market ruthlessly slashed its price earning ratio – the EPS fell because of a mis-allocation of funds. IF A COMPANY DOES NOT ALLOCATE MONEY to its core competence, it is misallocation.

The best thing in case of Cholamandalam is the management woke up and got rid of the mutual fund business, and pruned the lending at the bottom of the pyramid. The slashed the wage bill, and hey the p/e and price are back.

Ditto in case of Jain Irrigation.

Take the case of Tata Steel and Hindalco – leverage but core competence in its acquisition. The Jury is still out on the acquisitions.

2 companies which are PSUs masquerading as big private sector companies are ITC AND L&T. And they regularly allocate wrongly. Older investors should remember L&T’s foray into shipping and cement, and now finance (remember the famous statement ‘we want to be a global finance player in 7 years? 5 years are over!!).

The market has already reduced their price earning ratio….however since a big chunk is held by the INACTIVE investor a.k.a Ministry of Finance, the re-rating has not been so sharp….

Read Bala’s blog
http://frustrationsamalgamated.blogspot.in/2014/02/reading-balance-sheet-abusing-capital.html

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I see the typical 23-29 year old investors EVERYDAY. I see them earn money, spend money, save, grow, look for jobs, talk about money…..etc.

I can claim to have a good overview of what they do and I have a wish list of what I think they should do.

Here is my list of their big few financial mistakes:

1. Speculating instead of Investing: Investing in long term assets like equities can be as boring as watching paint dry! On the other hand the thrill of buying and selling (on your handphone dummy!) is far too exciting. So many of the kids have trading accounts, and their ‘relationship’ manager’s phone number on the speed dial. No, they may not make money buy they will argue (rationalize?) saying it is ‘only Rs. 43,000 or only Rs. 150,000 or….something like that! Most of them lose money in speculation. After burning about 3 lakhs, and still hurting one girl recently quit. Her CTC was that amount about 2 years ago. Ouch!

2. Procrastinating:

Sir I want to do a SIP – I will start next month is a statement I hear so often that I cannot believe it. Not understanding the importance of Time in the Compounding formula is a monumental error, but all kids do it. Those who have come to me are all fine kids and saying the right things, but just not getting to implement the gyan!

3. Not having adequate Medical and Life insurance for SELF and for parents. At some stage this can hurt.

4. Too much leverage: Either too much like Rs. 80 lakh leverage for a Rs. 1 crore debt or worse a Rs. 80 lakh debt when you have a job paying Rs. 20 lakh in a job which you may lose anytime! In a poor market where jobs are difficult to find, this will hurt. I know of a kid with a Rs. 1.3 crore debt, a Rs. 24 lakh job WITH the full knowledge that if she were to quit that job (or lose it) she will find it tough to get a Rs. 12 lakh job. Awesome self deceit.

5. Not LEARNING personal finance - start early, compounding, investing,….DAMMIT you need to learn, NOW. This leads to buying lots of endowment for insurance, credi cards, not reading at all, buying real estate just to get 80C benefits….

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When I ask this question, most people say 9-10% p.a. – just by adding about 100 basis points to the P Chidambaram’s random generated number of 8%.

This of course is just another case of innumeracy. The real number in the past 3 year is much higher. RBI and MoF are both aware of this number and hence their silence. Both RRR and his predecessor at least accepted that inflation is an important monster and we should fight it.

I did an exercise with a few friends and found that school fees, school bus charges, medicines, doc fees, etc grew at a clipping rate of 15% p.a. This means if YOUR income is not growing at ATLEAST that rate, YOU HAVE GOT POORER.

Here is an interesting article…read on

http://www.firstbiz.com/economy/inflation-small-things-bites-hard-52644.html

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