Finance Minister cuts Service Tax by 2% ;

Finance Minister decided to cut Service Tax by 2% ; Thus bringing it down from 12% to 10%. What does that mean to a common man ?.

Its not a huge saving but quite a good amount of saving for an Individual.

Lets a take a simple example of an Individual look at things we use in daily lives for monthly bills.
1) Telephone bill = Rs 500
2) Cell Phone bill = Rs 700
3) Internet bill = Rs 1000
4) Cable TV = Rs 300

This comes to nearly Rs 2,500 per month meaning Rs 30,000 a year and the service tax @ 12% would come to around Rs Rs 3,600 now the same would come down to Rs 3,000 so you end up saving around Rs 600 bucks for a year.

This list above does not include various other service tax you might be paying, like courier fees, lawyers fees, Chartered Accountants fees, Doctors Fees etc . Everywhere now you would saving around 2% which is really good in this tough times.

How to calculate Surrender value, Loan Value of an LIC policy ?

In order to find a surrender value of a LIC Policy, first you need to find out is PAID UP Value.

PAID up Value = [No of years premium paid * S.A /Policy Term] + [Bonus * S.A/1000]

where S.A = Sum Assured

Example: from LIC Wings Ready Reckoner book, Mr. A has taken an Endowment policy of 30 years term on 15.7.1983 for S.A of 2 lakhs and has paid premium upto date till 15.7.2007 i.e 25 years. Now he wants to know how much is the surrender value.

First let us find out the Paid up value by using the above formula
Paid up value = [25 * 2,00,000/ 30] + [ 1583 * 2,00,000/1000] = [ 166667 + 316600]=4,83,267
* Bonus is given from the bonus chart of LIC for 25 years Endowment plan
* Most of the people would get a reminder from LIC with details of your bonus , you can just put the total bonus amount in the second part of above formula or you can also call up 1251 from MTNL or BSNL and get the bonus information by just entering the policy number.


SURRENDER VALUE = Surrender value factor * Paid up value /100

for above example surrender value factor from lic chart is 65.84 so substituting we get
Surrender value = 65.84 * 4,83,267 / 100 = 3,18,183

Loan Value = 90% of Surrender Value (approximate)
In above case you can get loan of up 90% of 318183 = 2,86,365

Jeevan Varsha close ended Money back policy from LIC

After hugely popular and successful Jeevan Astha which collected more then 1k crore, LIC has come up with a new money back policy called Jeevan Varsha.

• The plan will be available for sale only between February 16 and March 31, 2009 .
• Jeevan varsha plan is available with two policy terms of 9 years and 12 years.
• The policy will offer Rs 65 per Rs 1,000 sum assured for 9 year term and Rs 70 for a 12 year term.
• The first time survival benefit are payable every three years.
• Amount received 15%,25% (60%+G.A+L.A) at the end of 3, 6, 9th years respectively for 9 year plan.
• Amount received 10%,20%,30%,(40%+G.A+L.A) at the end of 3,6,9,12th year respectively for 12 year plan.

LIC officials said though guaranteed additions in Jeevan Varsha is lower than Jeevan Astha, the rate of return will be similar to it taking into consideration other factors.

Below is an example from LIC for 35 years Male for a term of 9 year and sum Assured Rs 1,00,000

End of year	Premiums Paid during the year	Benefit on Survival / Maturity at the end of year
		Guaranteed	Variable		Total
			Scenario 1	Scenario 2	Scenario 1	Scenario 2
1	15918	0	0	0	0	0
2	15918	0	0	0	0	0
3	15918	15000	0	0	15000	15000
4	15918	0	0	0	0	0
5	15918	0	0	0	0	0
6	15918	25000	0	0	25000	25000
7	15918	0	0	0	0	0
8	15918	0	0	0	0	0
9	15918	118500	0	20000	118500	138500

Max New York Life 'Life Maker Unit Linked Investment Plan' - Risk Element

Most of the readers of Financial Planning articles would know that ideally you should have your Investment and Insurance separate. But because of the lack of financial knowledge or aggressive marketing campaign and aggressive follow-up by agents most of the people tend to take ULIP plans. But I would say at least it's better that you started thinking of Insurance and investments which most of common man don't even think in there busy day to day life.

Following is an example of ULIP plan from Max New York Life the plans name is Life Maker Unit Linked Investment Plan - Risk Element.

This plan the allocation is 50% in Balanced Fund and 50% in Growth Fund.
Out of investment of Rs 1499.94
Balanced Fund investment is of Rs 581.28 and Units alloted are 35.926 at the rate of 16.18
Growth Fund investment is of Rs 581.25 and Units alloted are 30.337 at the rate of 19.16 as on 18/12/2008

so the total investment is of (581.28 + 581.25 = 1162.53 ) so out of Rs 1499.94 your actual investment is of only Rs 1162.53 and the remaining Rs 337.44 which is almost 22.5% of total investment has gone for various charges such as admin charges mortality charges etc.

so you can make your own conclusion how good is this ulip plans where charges are as high as 22.5%

TIP: If you have taken similar policy then you can maximize your returns by using the switch option and rebalance yours investment. If the markets are down and you think it will go up in the future then allot maximum investment towards Growth portion and when the markets are at high then you can move the maximum investments towards Balanced option.

Top performing equity diversified Mutual Fund for the month of January 2009

Few of the Top performing Equity Diversified fund for the month of January 2009.

1) ICICI Indo Pru Indo Asia Equity RP (G)
2) DSP-BR Natural resources RP (G)
3) JM Multi strategy fund (G)

Sensex gave a return of -3% during the month of January 2009. The above funds performed better then broader market.

Top performing ELSS funds for the month of January 2009

Few of the Top performing ELSS fund for the month of January 2009.

1) IDFC Tax Advantage ELSS (G)
2) Quantum Tax saving Fund (G)
3) UTI Long Term Advantage S2 (G)

Sensex gave a return of -3% during the month of January 2009. The above funds performed better then broader market.

What is Estate Planning ?

Estate is the total property, real and personal, owned by an individual prior to distribution through a trust or will. Estate includes real estate, cars, bank accounts, Insurance policies, Mutual Fund investments, FD's, stocks, provident fund, Jewellery etc.

Estate planning distributes the real and personal property to an individual's heirs. Estate planning is the process by which an individual or family arranges the transfer of assets in anticipation of death or incapacitation. An Estate plan aims to preserve the maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual prior to death.

Wills and trusts are common ways in which individuals dispose of their wealth. Power of Attorney, Gifts, Partition, Succession are other ways.

Financial Planning is the process of meeting individual life goals through the proper management of one's finances. Life goals can include buying a house, saving for your child's higher education, planning for retirement or distribution of assets among beneficiaries.
Estate planning is part of financial planning by which an individual can arrange the transfer of assets in anticipation of death or incapacitation. An estate plan aims to preserve maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual prior to death.

Objectives of Estate Planning

1. Transfer of assets to beneficiaries: Almost all individuals want there accumulated wealth should go to their beneficiaries. The beneficiaries may be a family member, a friend or even other people in the society. The basic objective of Estate Planning is that all this accumulated wealth should be transferred to the beneficiaries

2. Paying least amount of taxes:
Planning should be done such that Maximum amount should go to the beneficiaries with minimum amount of tax deduction.

3. Planning for Incapacity:
There should be plan if there is incapacity to avoid court guardianship and legal battles creating unnecessary waste if time and money. This can be done through tools like Power of Attorney.

4. Orderly Business Succession:
If someone owns a business, his will should provide for management of succession plan, including who should be given management and operating powers of the company.

5. Who Shall Receive and When ?
Properly executed Will should mention all beneficiaries and who should get what and in what proportion. Also if there is a minor then there should be a trust formed to look afters his share till he gets major and can handle on his own.

6. Selecting Executor, Trustee, and Guardian:
An Executor is a clients personal representative after his death and responsible for functions such as
a) administering the estate and distributing the assets to clients beneficiaries
b) paying estate expenses and outstanding debts
c) ensuring that all life insurance and retirement plan benefits are received
d) Filing or hiring a person to file all necessary tax returns and paying the appropriate central and state taxes from estate funds. When those duties are complete, this responsibility ends.

Trustee is required if the clients will creates trusts to accomplish more long-term goals, such as providing for minor children or giving to a charity or educational institutions. Trustee is responsible for the managing the trusts assets and ensuring that the beneficiaries are provided for in accordance with the provisions of the Trust.

Guardian: is appointed to act as a surrogate parent for the clients children, ensuring that it is in the best interests of children.

Risk associated with failing to plan for Estate Transfers

• Clients property transfer wishes go unfulfilled.
• Transfer taxes are excessive
• Transfer costs are excessive
• The clients family is not provided for financially in a proper manner
• Insufficient liquidity to cover clients debts, taxes and cost at death
• Time consuming and expensive Probate.

Steps of the Estate Planning Process
1. Establish the client/planner relationship:
The financial planner should clearly explain or document the services to be provided to the client and define both his and the clients responsibilities. The client and the Financial planner should decide on how long the relationship should last and how is the compensation and How the the decisions will be made.

2. Gather Clients Information: Financial planner should gather all the information from the client including the cash flow , expenses, income, future long term expenses, long term goals. clients intentions and expectations.

3. Determine the clients Financial Status:
The financial planner should analyze clients information to assess his current situation and the total worth of his estate to determine what he must do to meet clients goals like analyzing assets , liabilities and cash flow, insurance coverage , investments, tax strategies etc.

4. Develop a comprehensive plan to transfers consistent with all information and objectives: The planner should address clients objectives like transfer to beneficiaries with least amount of taxes.

5. Implement the Estate Plan: There should be an agreement between the client and the planner how should the plan be implemented.

6. Review the Estate plan periodically: The client and planner should also agree on who should monitor the progress of the plan. If the planner is in charge of the process. he should report to the client periodically to review the situation and adjust recommendations, if needed as the clients life changes.