New Cheque Norms: Cheque Truncation System – CTS 2010

                      

What is CTS 2010 Standard (Cheque Truncation system)

Cheque Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point.

In its place, an electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc.

Hence – Cheque leaf is being redesigned in terms of size, MICR band, quality of paper, etc., to make them of CTS standard, which each bank is doing.

CTS 2010 chequebook has the following distinguishing features:

                •"Please sign above" is mentioned on cheque leaf on the right hand side bottom.

                 

                •Void Pantograph (a wave like design) is embossed on left hand side of Cheque leaf.

                This feature should not be visible on the scanned image but should be clearly visible in photocopies and scanned color images.

                This would act as a deterrent against color photocopy or scanned color images of a cheque.

Advantages of Cheque Truncation system

With the introduction of imaging and truncation,

                •The physical movement of instruments is stopped.

                 

                •Electronic movement of images of cheques speeds up the process of settlement and can facilitate reduction in the clearing cycles as well.

                •There is no fear of loss of instruments in transit.

                 

                •Limitations of the existing clearing system in terms of geography or jurisdiction can be removed.

                •Will Enable consolidation and integration of multiple clearing locations managed by different banks with varying service levels into a nation-wide standard clearing system with uniform processes and practices.

                •Scope of frauds inherent in paper instruments is reduced. Cheque frauds can be greatly reduced with introduction of minimum security features prescribed under CTS Standards 2010, such as embedded verifiable features such as bar-codes, encrypted codes, logos, watermarks, holograms, etc., for early interception of altered / forged instruments.

Importance of filling up the cheques correctly in CTS 2010

                1)Post implementation of the Cheque Truncation System (CTS) 2010 Standard the cheques will not travel physically from one location to another location for clearance, it would be through electronic image transfer from the bank where the cheque is deposited to the drawee bank, This also means even a small mistake on the cheque will result in the cheque not getting cleared.

                 

                2)Also use image-friendly colored inks to write the cheques to ensure good image quality.

                3) In addition, writing the cheque properly also prevents the risk of frauds on your cheques. Not to mention that banks charge a few hundred rupees as a fine, for cheques that get bounced due to non-financial reasons

 Note: Effective 01-01- 2013, Non CTS cheques is not  accepted for any kind of Financial Transaction.

                 

                 

Term Insurance Plan- Building a Solid Personal Financial Foundation

“World’s longest bridge is 4000 m across the sea and can withstand an earthquake of magnitude 9”.

“Chinese bamboo trees expand its roots for 4 years without any growth above the surface and shoots to a height of 80 meters in the 5^th year”.

If we take the example of bridge, it takes years to build, with tones of concrete and steel bound together. A bridge is build over rough terrain, unbalanced surfaces and is made to suffer harsh weather. Yet a bridge never falls on the itself. It holds itself together and connects our world. It stands strong and unshaken.  A bridge… lives on because it was built strong. It’s foundation and planning makes all difference. A bridge represents our life. Without a strong foundation, the uncertainties of life can take away all the happiness and security we wish to offer our loved ones.

                             Importance of solid foundations at different stages of life

Foundations laid down during the earlier stages of life will secure the well being and progress that unfolds in the later stages of life since,  From Birth to Death, an individual has to cross different stages of life as follows:

Ø  Birth---- ---à

Ø  School

Ø  Birth + School

Ø  Birth + School + Career

Ø  Birth + School + career +Marriage

Ø  Birth + School + Career + marriage + Retirement-----------then-----à Death

One should ask themselves the  following questions to know exactly where they stand as of now.

a)      Have you saved enough?

b)      Are your loved ones financially secured?

c)       Do you see most of your aspirations come true?

d)      Will your family be all right in your absence?

As you answer these questions, you might realize that many dreams are still in the making. And many more, have not yet come to pass. The following are the dreams, most of us got in general:

Ø  Children’s needs like higher education, Marriage.

Ø  Personal needs like a Better lifestyle, Family vacations, Health expenses

Ø  Future needs like having a dream Home, Retirement savings, Car purchase etc..

But the point is “WHAT WILL BUILD A STRONG FOUNDATION FOR TOMORROW? “

It is very important to build a solid foundation and plan for uncertainties & future income. It is good to review dreams in the wake of uncertainties. An uncertainty may cause you a loss of income or wealth, and bring your dreams to a standstill. It is important how one is prepared to face the same? The following questions will make better understand of the topic.

Ø  How will you meet your daily expenses?

Ø  How will you pay for your child’s education?

Ø  How will you pay for your home loans?

Ø  How will continue with your life style?

Ø  How will you match your financial goals?

There are circumstances which are unavoidable in nature that affects your family’s financial future. Your income may be impacted by any of the following events:

1)      Premature death: Results in total loss of income.

2)      Accidental Disability: Reduces your chances of employment & hence income earning capacity.

3)      Critical illness: Puts you off the job for an indefinite and may consume major chunk of your income and savings.

4)      Hospitalization of you or a family member: Consumes your income and savings drastically.

Protection is the foundation of your family’s financial well being. Your dreams can stay protected and in time come true, if you plan for all contingencies today. By protecting your future, you take the first step to laying a strong foundation for you and your loved ones. Protection needs differs for different stages of life. The below given example make better understanding of the same.

Ø  Age 25-35( Young & Single)---à  a) Saving for wealth creation : Life insurance & Disability riders

Ø  Age 30-40(Married)----à a) Home Purchase b) Financial Millstones (buying a Car)  : Life insurance - Mortgage protection

Ø  Age 35-40(Married with young children)----à a) Saving for children’s education /Marriage : Life insurance -Health Insurance.

Ø  Age 40-50(with Grown up children)---à a) Start Saving for Retirement b) Health Care c) Mortgage Insurance: Life insurance-Health insurance.

Ø  Age 55+ (Retired) -----à Retirement Support Medical expenses.

You can invest in a protection plan and the cover will depend on your age, income, immediate & ongoing financial commitments, liabilities and other planned milestone expenses. The following equation will help explain this better:

Current Monthly expenses (Rent, Food, clothing, school fees, etc..)With assumed inflation rate + Outstanding Loans (on mortgages, auto etc) + Future Milestone Expenses (child’s Higher education, Marriage etc.)  - (Minus) - Existing Insurance + Current savings.

All insurance plans offer a life cover. It’s prudent to go for higher life cover that helps in building a solid foundation. A Term Insurance plan:

a)      Provide lump sum amount which can be used to  take care of regular life style expenses, life stage based goals, purchase of assets or payment of any outstanding loans.

b)      Offer the option to take certain money as income for certain period.

Accidental Disability Riders: Offer lump sum amount in case of disability due to an accident.

Critical Illness Protection Riders: Offer lump sum amount in case any of the critical illnesses diagnosed with.

To avail complete benefits and build a Solid Foundation for your family’s financial future, Term insurance plan with Accidental, Disability, dismemberment & Critical illness Riders is the best solution.

Disclaimer: The information given above are the result of personal readings of related genuine documents and personal understanding of the subject matter. This  is written to make the readers understand, how it is importance to go for Term Insurance plan . However, this blog is not responsible for any error or inaccuracy in the same.

Do mail/call for services of Term Insurance plan

Ravi Kumar

Sr. Sales manager

ING Vysya Life Insurance

MG Road, Bangalore-560001

Email: ravi.kumar5@inglife.co.in

           Ravi.sampige@gmail.com

Cell: 9844519872

Benefits of transferring UK Pension fund to a QROPS

                                    Qualifying Recognised Overseas Pension Scheme (QROPS)

A QROPS is a medium of moving one’s UK pension corpus  to a scheme administered outside the UK, that is more flexible and easily accessible for people who have retired abroad or are planning to do so.

All most all QROPS work in the same way as UK pensions –that is pension administrator (trustee) will manage the pension scheme on your behalf. For a QROPS the trustee must be based outside the UK.

A QROPS could be ideal if one:

Ø  Is definitely intending to retire outside the UK and not return.

Ø  Has a substantial amount invested in an existing UK pension scheme or has a smaller amount in his/her UK pension scheme but he/she is living and working abroad already and want to continue saving for their retirement.

Ø  Has at least five years left before retirement

It could be better off with the QROPS for the following reasons:

Ø  It adds extra flexibility and control on one’s pension corpus

Ø  Increased flexibility over who can benefit from one’s pension fund following death of the pension account holder

Ø  Reduce one’s exposure to sterling denominated funds and other pension restrictions

                                                          Benefits of a QROPS

In comparison to general UK pension rules, a QROPS could offer the following advantages, subject to local pension rules.

Ø  It could avoid you needing to complete HMRC paperwork to get your pension paid without deduction of UK income tax.

Ø  If you die whilst taking payments, the remaining funds are not lost. Your family will be able to inherit your pension benefits free of UK inheritance tax.

Ø  A wider choice of investment opportunities- particularly useful if you want to invest in assets which reflect the currency and inflation factors where you plan to retire, rather than UK-baised choices.

Ø  Only 70% of your transferred fund must be used to provide you with an income for life.

Ø  No restrictions on fund size.

                                                  Choosing the right QROPS

You are free to choose any scheme that’s appropriate to your circumstances rather than restricting yourself to local schemes. For instance, if you are currently living in Singapore but planning to retire to Thailand, you could still choose a QROPS administered in the Isle of Man (the jurisdiction). However, you should choose your jurisdiction carefully, to ensure that their local rules fit in with your needs.

You will only avoid a UK tax bill if the overseas scheme is a QROPS. That means it meets HMRC rules in the UK. The rules are as follows.

Ø  At least 70% of the funds transferred to your QROPS must be used to provide you with an income for life.

Ø  The scheme administrator will inform HMRC if you take any money out of the scheme while you are still a UK tax resident, or within the first five tax years after you have moved permanently abroad.

Ø  The scheme must be recognized in the jurisdiction as a pension scheme and be open to local resident there.

If you transfer your pension pot to an overseas pension scheme that is not a QROPS, certainly HMRC would consider it an unauthorized transfer, and you would have to pay HMRC up to 70% of the value of your pension. The QROPS will combine the local rules with the UK’s QROPS requirements. Typically, if these rules differ, the stricter ones will apply. One can also consolidate several UK pension schemes into a single QROPS. So it will make record keeping easier and also saves from paying multiple administration costs.

 Comparison of benefits between QROPS and a UK based Pension scheme (QROPS vs UK based  Pension scheme)

1)      UK-based scheme:  Designed for UK residents, so if you are based overseas it can be hard to access UK pension’s expertise.

QROPS:  Whereas QROPS designed for a more transient population, and international advisers are more familiar with them.

            

2)      UK-based scheme: Most investments are held in sterling, so payments are affected by exchange rate fluctuations and currency conversion charges.

QROPS: Whereas in QROPS, you can invest in most currencies, and choose to receive payments in your local currency.

3)      UK-based scheme: You can choose to retire at any age from 55 onwards.

QROPS: Most schemes allow the same flexibility as the UK, but local rules may differ.

4)      UK-based scheme: Most UK schemes allow you to withdraw a lump sum of up to 25% of the pension fund on retirement.

QROPS: You can withdraw the entire pension fund except for 70% of the value transferred from your UK pension, depending on local rules.

5)      UK-based scheme: Following changes made from 6 April 2011 by the UK Government, you can now leave your asset invested as long as you want. However, the amount of income you receive for your pension fund is determined by set rates agreed by the UK Government.

QROPS: You can leave your assets invested as long as you want, and have greater flexibility when choosing the amount of income you take.

6)      UK-based scheme: Your pension income will be paid via the pay as you earn (PAYE) system. To have payments made to you without deduction of UK income tax, you must complete an HMRC form to declare non-UK residence.

QROPS: You can choose a QROPS jurisdiction where income is paid without deduction of local taxes, so you are only liable for any taxes applying where you are resident.

7)      UK-based scheme: Usually offers UK-based investments so may be less suitable for your new country of residence.

QROPS: Can offer a wide choice of investments, including shares, mutual funds and packaged investment products.

8)      UK-based scheme: UK pension schemes often have complex charging structures, so it’s hard to tell whether you are getting value for money.

QROPS: More modern and streamlined, QROPS are also a good way to consolidate your pension arrangements.

9)      UK-based scheme: If you purchase an annuity, it will almost certainly end when you die, so you can’t use it to make provision for your family.

QROPS: You can leave the assets & investments in your pension fund to your family by making an expression of wishes to the QROPS provider.

10)   UK-based scheme: If a lump sum death benefit is paid from your pension to your spouse rather than income, a member payment charge of 55% will apply to the lump sum.

QROPS: Provided you are not UK resident when you die, then no member payment charge will be payable on any lump sum paid.

QROPS offer a wide range of benefits if you are living, or planning to spend your retirement, abroad. However, QROPS are not for everyone. It’s better to check properly, whether a QROPS could be right for you, before going for the same.

It is good to consider a QROPS if:

a)      You are no longer resident in the UK, but have an existing UK pension.

b)      You are certain that you will continue to live outside the UK for at least five tax years.

c)       And you have no plans to return except for short visits.

On the other hand it is good to keep the existing UK pension plans if:

a)      You expect to return to the UK for long periods, or permanently, in the future.

b)      Or you plan to stay in the UK

A QROPS may also be suitable if you are still living in the UK, but plan to retire permanently abroad and are sure that you will then be able to retire abroad. Before transferring pension to a QROPS, it is good to be aware of all the benefits offered by your current arrangements. It is advisable to consider a QROPS if:

a)      You have a substantial personal and/or occupational pension plan or you have a smaller amount in your UK pension scheme but you are living and working abroad already and want to continue saving for your retirement.

b)      You have not yet purchased annuity.

c)       Your existing pension arrangement is not particularly attractive for one of these reasons:

Ø  You are in a “final salary” scheme, but mergers, acquisitions or poor investment returns mean there may not be enough funds to meet all the liabilities and you are not entitled to compensation from the UK pension protection fund(if you are entitled to compensation, moving to a QROPS would deprive you of that right)

Ø  You have a “defined contribution” or “money purchase” scheme with no guarantee, or you are concerned about high charges.

It could be better to keep your existing UK pension plan if:

a)      Your only pension is the basic state pension.

b)      Or your pension plan is relatively small.

c)       Or you have already bought a pension annuity.

d)      Or your pension is in a valuable ‘final salary’ or ‘defined benefit” scheme, with enough funds to meet all its liabilities.

e)      Or it includes benefits such as a guarantee, spouse’s pension, life cover or higher tax-free lump sums.

f)       Or your employer bears the costs of the scheme.

g)      Or you have a ‘defined contribution’ or ‘money purchase’ scheme with a guarantee, or with very competitive charges.

                                      QROPS can benefit your family

UK annuities usually end when when the recipient dies, and don’t leave any extra money for their family or beneficiaries. It is possible to arrange one that will continue paying after your death, but it would increase the cost and reduce your income.

With a QROPS, on the other hand, since you don’t need to buy an annuity, your fund won’t vanish when you die. Instead, you can pass it on to your loved ones. QROPS are not usually subject to inheritance tax, although some jurisdictions may apply a form of tax. This means you should be able to pass the entire pension fund on to your beneficiaries free from UK inheritance tax. Moving your pension plans abroad can also support a claim that you are no longer considered subject to UK inheritance tax, which should mean your beneficiaries do not pay UK inheritance tax on anything they inherit from you. You can nominate beneficiaries when you set up your QROPS, which will simplify and speed up the process of paying your loved ones. 

Disclaimer: The information given above are the result of personal readings of related genuine documents and personal understanding of the subject matter. This  is written to make the beneficiaries understand, how importance to  transfer pension fund to a QROPS . However, this blog is not responsible for any error or inaccuracy in the same.

For More details & assistance in transferring Pension fund from UK to India,

Do mail/call me

Ravi kumar

Bangalore, Karnataka-India

Cell:9844519872

Email:  ravi.sampige@gmail.com

      

Qualifing Recognised overseas pension scheme.(QROPS): Real Estate Bill - Proposed Draft

Qualifing Recognised overseas pension scheme.(QROPS): Real Estate Bill - Proposed Draft: The much awaited Draft Real Estate Bill has been anticipated by the industry and consumers since long time as it would be the first step t...

Real Estate Bill - Proposed Draft

The much awaited Draft Real Estate Bill has been anticipated by the industry and consumers since long time as it would be the first step towards bringing some regulatory checks and consumer empowerment. Considering little recourse available to buyers when it comes to property or any transparency in pricing and nomenclature, the bill has a very strong role to play when it comes into effect. However, as has been the case with several other important legislations that have serious repercussions towards consumer benefit are in cold storage due to parliamentary inaction.

In its current form the bill has a long way to go, yet there are few indications that will make the prospects of buying result a nice experience in future. The following are highlights of some aspects of the guideline in its current form that consumers need to be aware of.

Ø  Regulatory Authority :  The bill proposes establishing a real estate authority that will regulate the sector and enforce the provisions of this law. It also allows for the establishment of an appellate tribunal before whom appeals against the authority’s rulings can be made. This is the same structure as SEBI and the securities appellate tribunal. This move will bring in the much needed regulatory mechanism into a highly unregulated multi-layered industry that is notorious for dealings that have left many consumers high and dry.

Ø  Registration and Disclosure : The bill proposes that each new project be registered and approved by the real estate regulatory authority. This mandatory clause will be similar to the way insurers and fund houses file  for every product before selling it. The information on a registered project will be available at the regulator’s website and no project will be allowed advertisement before this process. This will bring in transparency; reveal details on promoters, developers and other stakeholders in the project. The biggest advantage of such detailing will mean; developers cannot change the course of a project after commencement.

Ø  Standardizing Terminology: The confusion and doubts over carpet area, floor area and super area can flummox the best of the linguists. The guideline suggests standardizing real estate terminology to make it more understandable to the consumer. The exact definition of such terms besides sales and purchase documents in a language that is clear and understandable will come into effect. The role of real estate agent and developer will become clear and so will be pricing.

Ø  Deadlines and Schedules :The biggest worry among buyers is with absconding developers,  delays in construction and development. According to the guidelines; all projects will be registered for three years and registrations extended by two years. The projects registration will be cancelled if it is not implemented in the period and there are provisions to complete failed projects. The guidelines empower the regulator to take necessary action to ensure projects can be completed, including handover to buyers. The inference from this provision is that once an allotted buyer has paid up, he has right to the projects and if a developer fails to develop the project he can be removed.

Ø  No Power of Attorney : when a POA is used for a property transactions, the property is not registered in the name of the new owner, thereby leaving a gaping hole for possibilities of fraud. Usually, such transactions also involve unaccounted money since legally the property has not been sold or bought. The Supreme Court put an end to this in October by making the registered sale deed the only valid document for property transactions, which already gives teeth to the new guidelines on ownership.

Ø  Fund Diversion: Like all good, there are also areas that do not offer sweet deals to buyers. For instance in comparison to the draft bill of 2009, the current proposed guideline has weakened the anti-fund-diversion provisions of the bill. This will allow developers to use only 70% of the funds collected from buyers towards their project and divert the rest, which will make it easy for developers to divert funds into other activities and also cause delays in completion of the projects for which the money is collected. This weak link in the bill will encourage builder to build land banks and delay existing project schedules and increase speculation raising real estate prices.

Ø  Small Size Concession: The guideline is lenient with small developer and projects that are on less than 4000 square meter area and waives of the necessary registration for such projects.

Ø  Defect Rectification: According to the draft bill if an allottee brings up a major structural defect or deficiency to the promoter’s notice within one year of allotment, such a defect will be repaired by the developer free of cost within a reasonable time frame. By leaving the definition of reasonable time open, the regulation leaves the owner short-changed. A better way to address such a scenario would have been to enforce guarantee on quality and warranty on fixtures that are charged for by the developers. Protecting the consumer post sale does not seem to feature in the guideline, especially when consumer good come with guarantee and extended warranty that are far less valuable than a house which for many is still their biggest asset in life.

Finally, the guideline has no provision for older projects with delays or developers with dubious pasts into the picture. With several incomplete projects abound, this guideline should have had some provision to check on erring developers by bringing in provisions of not allowing fresh registrations unless solutions to past issues are resolved and rested. Given the mixed proposals and the fact that the government has sought feedback on the proposals, the light of day for this bill is still a long way to go. At best, in its current form it gives scope for stake holders, especially consumers to figure the loopholes and push for its fixing with the government.  An effective real estate regulatory mechanism will not only benefit consumers, it will also make real estate a reputable business which is clean and not associated with deceit.

Residential Housing property investments - Tax Implication

Real estate is a booming industry in India providing ample investment opportunities for investors. It is observed from the past returns delivered that real estate investments can beat inflation in future course also. For buyers of residential house property it is most essential to understand the economics and tax implication of the same. The investor should consider all aspects of buying, owning, renting  and selling a residential house property.

Tax Benefits

There is a tax concession available if the investment is made in a residential house property for self occupation purpose.  This concession is in the form of a deduction from total income of an individual to the tune of Rs 150,000 being the interest payable by the individual on a housing loan, provided, that the construction or acquisition should be completed within three years. This tax deduction is available under section 24(2) of the income tax act 1961 on account of interest payment in respect of loan taken for buying residential house property for self occupation purpose.  The loan can be availed, not only from a financial institution. It can be availed from any persons like friends, relatives and it makes no difference in availing the tax benefits on the same. In order to take the benefit of this deduction of the income tax, one should ensure that the investor do not possess any other residential house property for self use. If, the investor owns another residential house property and the same is given on rent and thus the investor does not own any residential house for self occupation, then he or she eligible to claim tax benefit.

It is important to note that, it is immaterial whether the interest has been actually paid or merely credited and made payable at a later date, irrespective of a actual payment, non-payment or partial payment, this deduction would be allowed under the Income tax act. Those looking to buy  for rental incomes from housing properties can also avail tax benefits. From the rental income it is 30% standard deduction available which is the biggest incentive for the home buyers that too without submitting any proof or evidence for the same. Tax payers coming under highest tax bracket would gain a lot. The individuals are eligible to claim deductions on account of Municipal taxes paid during the financial year. Another tax benefit that is available in respect of the let out property is the payment of interest.  100% interest payment is allowed as a tax deduction to the tax payers from their rental income.

 If the property is owned by co-owners their definite and ascertainable share will be included in his/her total income as below:

a)      Where house property is self occupied by each owner, the annual value for each co-owner will be Zero and each of the co-owner will be entitled to the deduction of Rs 30000/150000 on account of interest on loan taken.

b)       If entire or part of the house is let out, the income from that property will be computed as if property is owned by one owner and thereafter the computed income will be apportioned amongst each co-owner as per their definite share.

In order to avail tax benefits on account of capital gains, one should hold the property for at least three years.  If the property is holded for three years and above, the  capital gain availed is termed as long term capital gain and the same is  taxed at a concessional rate of 20%. One should invest the gains in acquiring new residential property or else one can go for investing in a Capital Gain bond Scheme upto maximum limit of 50 Lacs Rupees in order to get away completely with tax liability. On the other hand, If the property is sold after holding for less than three years then it is treated as short term capital gain for which there is no tax benefit.

One should remember that the second residential house is subject to wealth tax. Also the interest on loan can’t be taken advantage of if the investor is buying second residential house in his/her own name for self use. The second residential house for self occupation is subject to income tax in respect of deemed rental income. So, it is advisable for all categories of investors and tax payers  to go for second residential house, in the name of different family members and each family member is co-owner of one self occupied residential property only. Thus, it is good to go for second house property in name of another family member who has no residential house property of his or her own.

Disclaimer: The information given above are the result of personal readings of related geniuine magazines and personal understanding of the subject matter. This  is written to make the readers understand, how importance in investing in real estate sector at present scenario in india. However,this blog is not responsible for any error or inaccuracy in the same.

Warren buffet's execellent Quotes

ON EARNINGS          :  Never depend on single source of income.Make  investment to create a second source of income.

ON SPENDING          : If you buy things you don't need, soon you will have to sell things you need.

ON SAVINGS             : Don't save what is left after spending,but spend what is left after saving.

ON TAKING RISK      : Never test depth of the river with both the feet.

ON INVESTMENT      : Don't put all eggs in one basket.

ON EXPECTATIONS  : Honesty is very expensive gift. Do not expect it from cheap people.