Tips to make your Finances tidy

Neat and Tidy Finance:

We generally end up in forgetting our debts, or any sort of other income, if our finances are not tidy. This may lead to another amount of interest on debt or an unrecoverable income. We often lose our important paper documents, our credentials, passwords and many more important things, for which we have to lose a major amount financially and our earned credibility. This may lead to bad record, an irrecoverable loss and a mental stress. But, there is a way out to get rid of this interrupting mess. Let’s find out some important tips to make our finances neat and tidy:

• Take a look at your credit report: One should always keep on reviewing his/her credit report. If the credit report shows some unpaid debt, then he/she should immediately pay off the pending debts. Credit report should look managed and good with a good credit history.
• Keep current documents at one place and tear off the old and unnecessary documents: One should keep all their documents at one place with proper management and should time to time check their folders and files to tear off the old and unnecessary documents in line. This will avoid meshing up the unnecessary documents with the required ones and your folders and files will look neat and tidy.
• Keep the Xerox and scanned copies of your important documents: One should always keep in place the Xerox or scanned copies of their important documents, so that if some document found missing, then having a scanned or Xerox copy can solve a problem.
• Keep reviewing your Income and Expenditures: Every month review your income and projected expenses to plan your investments out of savings. Prepare a budget on the first day of every month and try to stick on that for the whole month apart from any contingencies.
• Use online statements and manage all your transactions and documents online: Going for online from paper is always beneficial. There are certain applications like SkyDrive, Google drive and internet banking facilities that will help you in managing all your necessary documents and transactions at one place with accessibility from anywhere with internet connection.
  

  

  
  
• Don’t share your online passwords: Just make it a point that you should not share your online passwords with anybody so as to avoid any chance of frauds and fraudulent transactions from your accounts.
• Clean your wallet every alternate day to avoid messing papers and unwanted clutter: Our wallet generally contains some unwanted clutter and papers. So, cleaning our wallet every alternate day will organize our things in place owing to a neat and clean organized finances.
• Take a Financial Expert’s advice: You must take a financial expert’s advice in managing your portfolio, budget and finances. This will help you in making a good returns, good credit history and a tidy finances.

Therefore, these are some of the tips for making your finances tidy and organizing your portfolio in a fruitful manner. Get adhesive to these and find yourself in a line with a proper budget, good portfolio, good credit record, managed documents and financial records.

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Indian Financial Code

Our economy has, in the recent years, been dogged by low-growth, corruption and a general lack of investor/consumer confidence. With the recent elections bringing about a change in governments, new and inspiring leadership has indicated a positive future for India once again by laying out measures to revive our economy, including reducing inflation, enhancing production and output, maintaining healthy for-ex reserves and narrowing the current and fiscal deficits, among others.

The Indian financial sector is an important part of India’s growth story and deserves strong focus so as to ensure it can handle the test of time as our economy engines on towards becoming an economic powerhouse. The financial crisis of 2008, felt so acutely in developed countries like U.S., Europe etc., taught us the importance of good governance and regulations in the finance sector.

Recognising the need for a review of the Indian financial system way back in 2009, the government eventually set up the FSLRC (Finance Sector Legislative Reforms Commission) who came out with their report in March 2013.. Their study on the legislations/framework governing financial processes and institutions in our country threw up issues concerning gaps and inconsistencies in regulations, presence of arbitrage and overlaps in the functioning of regulatory bodies.

Recommendations of the FSLRC:

- To bring different regulatory bodies under the ambit of one regulator by setting up a UFA or United Financial Agency.

The idea is to merge the major regulators SEBI, IRDA, FMC and PFRDA. Currently, we have sector-specific regulatory bodies e.g. the insurance sector has the IRDA (Insurance Regulatory and Development Authority), the equity markets have SEBI (Securities and Exchange Board of India), the commodities derivatives market has the FMC (Forward Markets Commission), national pension schemes are governed by the PFRDA (Pension Fund Regulatory and Development Authority) etc. These bodies function in a manner that show tendencies to overlap in their regulations. Moreover, these bodies also display the need for restructuring to improve efficiency. A multitude of regulatory authorities within the financial system creates unwanted complexity, making it difficult for the government to address issues related to overall governance and legislation besides crafting long-term plans requiring inter-regulatory cooperation and coordination.

- To narrow the RBI’s (Reserve Bank of India) focus and purview.

The aim is enable the RBI to strengthen the Indian banking system which needs to be broadened for increased financial inclusion.Establishment of new banks and legislation to this effect will be a part of the RBI’s new focus. This move also proposes to take NBFCs (Non-Banking Financial Companies) out of the purview of the RBI. The RBI would also be expected to increase its concentration on the country’s monetary policy which is so crucial to our financial stability. It has been outlined that the RBI will manage all monetary outflows from the country leaving the management of monetary inflows to the government. Another function to be taken out of the hands of the RBI is the management of public debt. It appears to the FSLRC, to be more beneficial, if this function is controlled by a separate agency.

- Financial sector development

This is to be achieved through more micro-prudence and consumer protection. Under the IFC, proposals are in place for the structuring of financial consumer rights. As of now regulations are at a macro level whereas there is a pressing need for more micro-regulations. Especially given the increasing depth of the financial market with the mushrooming of new players and innovative products outpacing the absorption of financial knowledge by lay consumers/investors. For e.g. there are no real mechanisms in place to ascertain that those investing in a particular mutual fund claiming returns of say 10% are actually going to get the benefits promised to them. How does one track the actual investments made by the funds or the appropriation of funds. In the absence of proper legislations or redressal mechanisms many consumers fall prey to mis-selling. Financial institutions try to increase their customer-base with a number of unverified claims especially since accountability is low. The IFC recommends the creation of the FRA or Financial Redressal Agency to address financial consumers’ grievances.

- Prevention is better than cure

When major financial corporations can fall from grace (as witnessed in the financial crisis of 2008), impacting the entire economy, local and global, adversely affecting the interests of its stakeholders, there is a definite need for prevention of financial meltdowns/failures. The IFC hopes to establish the means through which such failing institutions can be identified and move them out of the system through liquidation or any other means that safeguards the interests of its stakeholders especially small investors/customers who are, presently, largely neglected during trying times.The FSLRC is of the opinion that there should be a single agency to monitor systemic risk i.e. the risk arising from an upset caused in the financial system that can have real and negative consequences on the economy. With sector-specific regulatory bodies, there is a need for inter-regulatory coordination to address the risk, which decreases responsiveness in adverse situations. However, this can be simplified with the establishment of an FSDC or Financial Stability and Development Council headed by the Ministry of Finance (MoF). The FSDC will help collate important and meaningful data from the various sectors and identify institutions that are critical to the financial system i.e. those institutions whose failure/success can negatively/positively affect the economy. Besides coming up with risk-adequacy norms, the FSDC will aid the MoF in resolving issues during downturns/crises.

The FSLRC’s recommendations have led to a draft Indian Financial Code. This is being modified for implementation by 2015. However, it is also being met with opposition from within the financial system with regards to some of its features/propositions. With due discussion, revision and modifications where appropriate, the IFC should prove to be a catalyst in propelling the Indian financial system to greater strengths.

To learn more about banks and other financial institutions and their offerings visit Bankbazaar.com.

Report of the Financial Sector Legislative Reforms Commission (PDF): http://finmin.nic.in/fslrc/fslrc_report_vol2.pdf

Importance of IFSC code and MICR code

The Indian banking system has constantly evolved over the last decade embracing new technological advancements and systems. From being a totally manual working mechanism, the Indian banking sector has become fully computerized with semi rural and rural branches connected to the mainstream by a central network. 

Indian Financial System Code (IFSC) and Magnetic Ink Character Recognition code also known as MICR code are two of the prime examples of technological up gradations in the banking and finance sector in recent times. While IFSC or Indian Financial System Codes are unique for each bank branch useful in branch identification in online financial transactions, MICR codes are important for quick cheque clearance mechanism. 

MICR code is printed in the cheque leaf readable only by the cheque clearance house. This facility allows the clearing house to clear all domestic, outstation and foreign cheques in real time.

Significance of IFSC Code:

All online banking transactions including net banking, online purchases, NEFT and RTGS online payment transfers are all possible due to IFSC codes. Indian financial system code of IFSC as it is commonly known is a set of 11 special characters including numbers and alphabets. 

• The first 4 characters of the code correspond to the bank concerned and are always alphabetic. 
• The last six characters of the code correspond to the exact bank branch and can be numeric or alphabetic or a combination of both. 
• The fifth character from the front is reserved by the regulator Reserve Bank of India and reserved for future use. 
• As of now the fifth character in IFSC code is always 0.

Example of IFSC Code:

Let us consider the IFSC code for Citibank Bank Andheri branch in Mumbai city. 

• The IFSC code for the bank is CITI0000036. 
• First 4 characters are CITI representing the name of the bank which is Citibank India in this case. 
• The last six characters are 000036 which correspond to the Andheri Branch of Citibank India in Mumbai. 
• The fifth character from the front is o and reserved for future use. 

Likewise let us consider the IFSC code for Andhra Bank located in Achanta in the Western Godavari district of Andhra Pradesh. 

• The IFSC code for the bank is ANDB0000001. 
• First 4 characters are ANDB representing Andhra Bank, the name of the bank in this case. 
• The last six characters are 000001 which corresponds to the Achanta city Branch located in the Western Godavari district of Andhra Pradesh. 
• The fifth character like in all IFSC codes is 0.

Significance of MICR Code:

MagneticInk Character Recognition Code better known as MICR code is a 9 character code which is used in cheque clearance leading to faster processing and settlement of funds. MICR codes are printed in each cheque leaf of the bank but are invisible to the naked eye. A special ink is used to print the MICR code which is readable only by the code reader in cheque clearing houses. 

• The special ink makes MICR codes tamper proof and difficult to copy. 
• MICR codes consist of a nine digit numeric code. 
• The first three digits correspond to the city codes which are usually same as the pin code of the city. 
• The next three characters represent the bank code. 
• And the last three are reserved for the concerned bank branch.

Budget 2014: How it will Impact Tax for Middle and Lower Class People in India?

The Union Budget for the year 2014-15 is the first one that our new Finance Minister Mr. Arun Jaitley will unveil in a few days. For the newly formed government, the challenges and expectations are abundant. The BJP-led NDA government needs to do a powerful balancing act between adopting pro-people programs and resorting to tremendous reform push. 

The government led by Mr. Narendra Modi has the huge task to meet the anticipations related to corporate houses, foreign investors and the common man of the country. It is also very important for the government to get rid of problems like high inflation regime and corruption so that the investors’ confidence can be regained. It wouldn’t be wrong to say that the Indian budget 2014 is one of the most anticipated ones in recent times.

The Budget 2014 will surely impact the middle and lower class people in India and it remains to be seen which sectors will see the most number of changes. The Indian tax system is a comprehensive web of formalities, which affects the lower class people in a big way and, therefore, the government needs to concentrate on the DTC (Direct Tax Code) and implement the GST (Goods and Services Tax) system, which will definitely make the Indian tax regime simple, accountable and transparent. The government needs to push through several reforms for making the nation an investment friendly one.

Tax Relief:

Have a look at some of the major points which could be taken up by Mr. Arun Jaitley regarding tax relief for middle class people in India.

1. For individuals, the basic exemption limit of the tax can be raised from Rs 2,00,000 to Rs 3,00,000. For senior citizens, the limits should be raised from Rs 2,50,000 to Rs 3,50,000. This would surely help the finance minister in compensating all the tax payers for the superior level of inflation that has had a negative impact on the economy as a whole. It will also help in increasing the purchasing capacity of the individuals.
2. The deduction limit on income tax under section 80 C can be increased from Rs 1,00,000 to Rs 2,00,000. This will help in stimulating forced investments and savings.
3. The medical insurance premium deduction under section 80D which is at present capped at Rs 15,000 for spouse, self and kids and Rs 20,000 for guardians must also be revised, considering the medical inflation.

In addition to the direct taxes which are borne by the salaried class individuals, the indirect taxes like excise duties, service tax, VAT and sales tax pinch the pockets of the employees as well. A restaurant bill of Rs 1,000 becomes Rs 1,300 and this is why the finance minister needs to offer some tax relief under the indirect tax codes as well.

It would be appropriate to say that only a pragmatic approach can help the government form a union budget that allows sustainable growth to take place in the country. By studying these points about Indian budget 2014, you’ll get a better idea regarding how it will impact the middle and lower class sections of the society.

About Budget and its Importance

The whole nation will possibly look for several bold reforms in the newly formed budget this Thursday in a strong bid to turn around the economy, which has been going down consistently. Even though major changes to the taxes are not expected, there might still be a lot of positives to look at. The finance minister Mr. Arun Jaitley will put forward his maiden budget after his party won by a landslide victory in the month of May this year. It would not be wrong to admit that the upcoming budget has immense significance and the expectations of the people are also quite high as the party won with majority votes.

The significance of the budget is immense because it will affect the middle and lower income class groups in a strong way. It remains to be seen whether some steps against inflation will be taken by the new government or not. To understand the budget, it is important to be well versed with the key terms and structures.

Have a look at the key terms associated with the budget which you must know about.

Demand for Grants:

The statement of estimates of all the expenses related to various departments and ministries in India are incurred out of India’s consolidated fund. The estimates require the approval of the House of People in India.

Consolidated Fund of India:

All the revenues which are collected by the Indian government in the form of loans raised by it and the various recoveries and receipts of loans granted form the consolidated fund.

Contingency Fund of India:

This is the fund into which the current government of India dips its resources into in times of emergencies for the purpose of meeting some unforeseen expenditures. The fund is a little over Rs 500 Crores at present.

Capital/Revenue Expenditure:

All the expenditures which are incurred with the major objective of acquiring tangible assets that are permanent in nature can be classified as capital expenditure. However, the assets which are acquired for the normal running of the government system are related to revenue expenditure.  

Finance Bill:

The finance bill basically contains all the government proposals for the purpose of imposing some new taxes and modifying the present tax structure in the upcoming year. It forms an integral part of the government’s system.

The General Budget Paper’s Structure:

• Speech of the Finance Minister  
• Specific features of the budget
• Budget at a glance
• Annual Financial Statement
• Finance Bill
• Demand for Grants by the Central Government
• Memorandum Explaining the Provisions in the Finance Bill
• Fiscal Responsibility and Budget management Statement
• Receipts Budget
• Statement of Revenue Foregone
• Implementation of Budget Announcements

The General Procedure in Lok Sabha:

• General Discussion on the Budget
• Vote on Account
• Consideration of Demands for Grants
• Discussion and voting on Demand for Grants
• Appropriation Bill
• Finance Bill

These are some of the most important things which showcase the importance of budget in today’s time. The upcoming budget is one of the highly anticipated ones and we can just hope that it will bring some good fortune for the people of the middle and lower sections of the society. 

Tips for Financial Planning - Professional Tip for Indians

Much has been said and written about the benefits of financial planning. There is no denying the fact that financial planning is a must to usher in financial security for the individual and his or her family. There are however a lot of myths surrounding financial planning and a lot of common mistakes. Not everyone can be a financial planner and a number of people with self devised financial plans often end up in a messy financial situations. It is recommended to get the services of a professional financial planner especially when faced with a life changing situation like marriage or birth of a child. Let us look at some common financial planning tips that can help create a secure financial future.

Prepare and Stick to a Budget:
The basic principle of having a well developed financial plan is to spend less than one earns. It is easier said than done as most people fail to follow a savings plan involving keeping aside money for a rainy day. The best way to offset such a scenario is to create a monthly financial budget depending on the income and expenses and allocating some part for regular monthly savings. One big advantage of having a monthly financial budget is the fact that it brings transparency to the funds keeping you aware of where your money is being used. This can be helpful in cutting out any unwanted expenses and money used for savings instead.

Plan Finances:
Planning one’s finance is the most important part of any financial planning program. Financial planning begins by cutting out any unwanted expenses and paying and debts. Pay off any high interest debt or loans like credit card loans. This is significant as high interest loans like credit card debts can undermine even the best of financial planning. Having a well oriented financial planning program must include three intrinsic features, repaying old debt, creating emergency reserve funds and investing the money for wealth creation for both short term and long term. If you are not sure where to begin, hire the services of a professional financial planner to create your personalized financial planning program.

Have an Emergency Corpus:  
A well drafted financial plan must keep allowance for an emergency fund which can be useful in case of a sudden financial need or emergency. Ideally speaking an emergency corpus must cover minimum six month of all household and essential expenses. Keeping an emergency fund as a debt fund is recommended as it is safe investment option while offering returns on the corpus when left unused.

• A savings bank account is also a good option for keeping emergency corpus fund.
• Avoid keeping emergency fund as cash stacked din the house as it can be at high risk of theft or impulsive spending.

Start Retirement Planning early:
One big mistake a lot of people commit is that they keep retirement planning till very late in life. Retirement planning must be initiated in the early 20's as it offers the best time to devise a long term retirement planning solution. Since retirement planning works on the principle of compounding, the earlier one starts the better. Remember to take inflation into account while planning for your life after sixty and make sure your retirement corpus grows at a better rate than inflation rate.

Keep Reviewing your Financial Plan:
Remember financial planning is an ongoing process and one must always review the financial plan after every couple of years. Any major changes in life like marriage, birth of a child, a change in job or any other circumstances that can lead to alter one's risk capacity must be covered in a financial plan. The best way is to monitor one's investments and review financial plan annually.

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