Readers’ Queries

Dividend declaration

How many days does it take for a company to credit the dividend to the shareholders?

The dividend on equity shares when declared by the company will be credited / dispatched to the shareholders / members on or before 30 days from the date of AGM (annual general meeting).

Stamp duty: Physical shares

What is the stamp duty payable on transfer of physical shares?

As per Article 62(a) of Schedule 1 of Indian Stamp Act, 1899, currently stamp duty is payable @ 0.25% of total consideration viz being the market value of the shares as traded on the date of execution of transfer.

RGESS eligibility

I am a non-resident Indian. Am I eligible for RGESS (Rajiv Gandhi Equity Savings Scheme)?

The Scheme is for an individual resident in India as per the provisions of the Income Tax Act.

RGESS: Tax benefit

Can a guardian claim RGESS tax benefit if investment is done in the name of minor?

Yes. A guardian can claim tax benefit for investments done in the name of minor, subject to overall limit for guardian as an individual.

National Pension System

My daughter is 24 years old. How can she subscribe to NPS (National Pension System)? — Dharam Pal Panihar

National Pension System offers NPS Main Scheme, NPS Swavalamban (normally for small investors) and NPS Corporate Model.

To enroll into NPS Main Scheme, you need to fill in the NPS application form (Annexure UOS-S1) and submit it to the Point of Presence (POP) chosen along with the Know Your Customer (KYC) and other documents required.

Documents to be submitted to the POP for opening of an NPS account:

a. Completely filled in subscriber registration form

b. Proof of Identity

c. Proof of Address

d. Age/date of birth proof

NPS Main Scheme offers two types of accounts to its subscribers, namely Tier-I and Tier-II. In Tier-I account, minimum amount to be contributed is Rs. 500 and minimum contribution each year should be Rs. 6,000. For Tier-II account, the minimum amount to be maintained is Rs. 2,000. Tier-II account can be opened only if you have an active Tier-I account.

To enroll into NPS Lite (Annexure NL-S2) form should be filled and submitted with KYC and other documents.

To get the benefit of Swavalamban scheme, the minimum contribution is Rs. 1,000 and maximum of Rs. 12,000 in a year. Investors, who satisfy the above criteria, will get Rs. 1,000 contribution from the Government for that particular year. The Swavalamban benefit is valid till FY2016-17 and it may or may not be extended thereafter.

NPS Corporate Model is designed for employees working in a company. If your company is enrolled under NPS Corporate Model, then you need to speak to the HR department of your company to subscribe for the scheme.

NPS Corporate Model

My relative is a Haryana Government employee. The DDO (Drawing and Disbursing Office) deducts 10% of his salary for NPS and an equal amount is invested by the government (employer) in his NPS account. What are the tax implication on employee’s contribution and government's share? — Dharam Pal Panihar

The government gives special tax exemption for contribution towards the National Pension System (NPS) by employers on behalf of employees under the corporate model. Under this, both employee and employer's contributions are eligible for income tax deduction. While the employee contribution up to 10% of basic plus dearness allowance, or DA (dearness allowance), is eligible for deduction under Section 80CCD within the Rs 1 lakh limit, the employer's contribution up to 10% of basic plus DA is eligible for deduction under Section 80CCE over and above the Rs 1 lakh limit.

Home loan: Interest rate

The interest rate on my home loan is 12.25% per annum and my tenure is for 25 years i.e. 300 EMIs (equated monthly installments). How do I repay my loan faster and save my future EMIs? — Manisha Thorat

Longer the tenure of your home loan, lower your EMI will be. However, if you stretch your loan tenure, you will end up paying more interest amount and your loan will be costly. You can increase the amount of EMI in order to bring down the tenure of your home loan. For instance: If you pay more money in your each EMI for Rs. 12.5 lakh loan, and reduce you 10 EMIs, then you are saving interest money of Rs. 1,53,124, (10 EMIs x Rs. 12,760)

You also have an option to speak to your financial institution to lower down your interest rate.

Accelerated death benefit

What is accelerated death benefit with regard to life insurance? — Vijay Mathur

Some life insurance policies allow a portion of the death benefit to be paid before death if the life insured has developed a terminal illness. This is an accelerated death benefit. The money received in advance helps the terminally ill person pay for daily expenses and hospital costs. This benefit can be packaged into the main policy or as an add-on rider. People who become eligible for the accelerated death benefit generally die within six months to two years of diagnosis. The benefit paid on death is reduced to the extent of accelerated death benefit that has already been paid out.

Tax: Set-off & adjustment

Can I adjust my loss from house property against short term capital gain (STCG) from mutual funds?

Loss from house property can be adjusted against any income head in the same assessment year if the income from other house properties is not enough. Thus, short term capital gains from your mutual funds can be adjusted against loss from house property in the same assessment year.

Life insurance or home insurance

I recently bought a house. My building is new. I don’t have a term plan. What should I buy first—a home insurance or a term plan?

It is advisable to buy pure term insurance first as it protects our family in case of any eventuality. When we take a home loan, we enter into a long-term financial commitment as home loans are for long durations up to 20 years. In case of any eventuality during this period, it is better to make sure that the family is not burdened with the loan liability. Hence, to take care of uncertainties during such a long period, it is advisable to buy a term insurance plan with a higher sum assured. Home insurance takes care of the building structure, contents etc. It also covers against fire and allied perils, burglary & theft and optional cover for terrorism and additional expenses of rent for alternative accommodation. The need for home insurance may vary from person to person.

MFs: Expense ratio

What is an expense ratio in MFs? Do high expense ratio affect the returns of our mutual funds?

Expense ratio states how much you pay a fund in percentage term every year to manage your money. For example, if you invest Rs 10,000 in a fund with an expense ratio of 1.5%, then you are paying the fund Rs 150 to manage your money. In other words, if a fund earns 10% and has a 1.5% expense ratio, it would mean an 8.5% return for an investor. Expense ratio varies from schemes to schemes. Different funds have different expense ratios. Hence it will be difficult to say anything. However, a lower expense ratio does not necessarily mean that it is a better-managed fund. A good fund is one that gives good return with minimal expenses. Besides considering the expense ratio, investors should also see the returns that the fund is offering. Investors also have an option to buy direct plans. A direct plan has a lower expense ratio since it does not include commissions paid to distributors.

Banks: Base rate

Does base rate vary in case of home loans vary among banks?

Base rate is the minimum rate below which banks are not allowed to lend. The loan rate offered by a bank is usually base rate plus a margin, for example, base rate plus 25 basis points (0.25%). Banks arrive at the base rate after considering their cost of funds and other factors. Hence it is different for each bank. Banks review their base rates at least once a quarter. Thus floating rates may fall or increase based on the call taken by each bank.


How is RGESS different from ELSS?

Both ELSS (Equity Linked Savings Scheme) and RGESS (Rajiv Gandhi Equity Savings Scheme) are different schemes. ELSS offers passive investment avenues and is meant for indirect participation in the stock market. On the other hand, RGESS aims to encourage direct participation in the stock market. In RGESS, investments are made directly in listed equity stocks or in mutual funds and ETFs (exchange traded funds).

An investor can avail ELSS benefits every year. ELSS benefit comes under Section 80C of the IT Act which has a total limit of Rs. 1 lakh. Both ELSS and RGESS has a lock-in period of three years. But trading is usually allowed after one-year in case of RGESS.

In ELSS, investments are strictly done in mutual funds and 100% deduction (up to Rs. 1 lakh) is allowed under ELSS. Only 50% deduction of investment made (i.e. maximum of Rs. 25,000 in any one year) is allowed under RGESS. RGESS benefits are limited to the new investors and can be availed for only three consecutive years. RGESS deduction is available under Section 80 CCG. This is a separate investment limit exclusively for RGESS over and above the Section 80C limit of Rs. 1 lakh.

TDS: Is it refundable

I am selling my house and the sale consideration is Rs. 50 lakh for which there is a TDS (tax deducted at source) of 1%. Is the TDS amount (Rs. 50,000) refundable when I file income tax return? — Kartik Krishnan

According to Section 194IA of the Income Tax Act, 1961, any person responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property is liable to deduct TDS at the rate of 1% of the sale consideration if the consideration exceeds Rs. 50 lakh.

Hence if the sale consideration is Rs. 50 lakh, then TDS @ 1% i.e. Rs. 50,000 is required to be deducted and paid to the Income Tax department by the purchaser and balance amount i.e. (Rs. 50 lakh – Rs. 50,000) = Rs. 49.50 lakh is to be paid to the vendor. The vendor will claim the credit of Rs. 50,000 in his return of income. The purchaser deducting TDS and paying the same to the Income Tax department is not entitled to claim a refund of the same. — CA Vishesh Sangoi

Shares: Stamp duty

How to pay stamp duty on transfer of shares? — Suresh Yadav

If the shares are in demat form, then there is no stamp duty on transfer of securities. For physical shares, stamp duty relating to transfer of shares can be paid at the designated bank branches or the stamp office by having the transfer form franked for the value of the stamps.

How to invest in share market for beginner? — Rakshith Gowda

Since you are a beginner, stock market would be new to you. You need to start reading books and refer websites which provide information on the basics of the stock market. It is also advisable to attend seminars on stock market.

Try to understand the balance sheet and what the financial numbers of the company mean.

You need to consult a well-reputed broker in your locality. Your broker holds your cash for your account, and executes buy and sell orders on your behalf. You have to open an account with a broker in order to trade.

First invest in small quantities. The reason you start small is so you can begin to understand the mechanics of how buying and selling stocks works without putting your whole investment stake at risk.

Assuming that you are starting out with a cash only account your ability to make transactions will be pretty limited. In most cases you will have the ability to buy shares of companies, and later sell shares you already own.

You also need to understand how much tax do you have to pay from your profits and how do you manage your losses.

As a student, how and where can I invest in the stock market? — Rakshith Gowda

Assuming that you are a teenager, you may seek the advice of your parents or from a qualified financial advisor besides reading up on relevant topics. Probably the best advice anyone can give you is to seek professional advice before investing money. Ask your parents, relatives and friends if they can recommend a good financial planner.

If you are only looking at some savings out of pocket money, it is advisable to invest in a bank's fixed deposit and start investing once you finish your studies. Since you are a beginner, start investing in small amounts. Before signing any papers, make sure you read the fine print. Keep aside a certain portion of your income for investing in stocks.

The best investment strategies are those that allow you to make money steadily over a long period of time. Make it a point to review your investment strategies regularly. Remember that successful investors are those who are patient and research their investments. The mutual fund route would be best to begin with.

What does retail banking and brown label ATM mean? - Harvinder Singh

Retail banking is when a bank executes transactions directly with consumers, rather than corporations or other banks. Services offered include savings and transactional accounts, mortgages, personal loans, debit cards, and credit cards.

'Brown label' ATM are those automated teller machines where hardware and the lease of the ATM machine is owned by a service provider, but cash management and connectivity to banking networks is provided by a sponsor bank whose brand is used on the ATM.

What is green banking?

Green banking is like a normal bank, but it considers all the social and environmental factors with an aim to protect the environment and conserve natural resources.

A 'green' bank is one that has adopted sustainability practices across all lines of the organization; the employees, facilities, products & services, and governance. A green bank is also called an ethical bank or a sustainable bank. Green banks are controlled by the same authorities. However, they have an additional agenda toward taking care of the Earth's environment.

Green banking avoids as much paper work as possible and rely on online/electronic transactions. Less paperwork means less cutting of trees.

Capital gain tax

What is the income-tax treatment on gain / loss on redemption of mutual funds. For example: I invested Rs. 5,000 in MFs and on redemption I get Rs. 5,400. What would be the tax treatment on Rs. 400, which I gained, if I redeem before one year or after completion of one year? — Naresh Lodha

Long term capital gains on debt MFs

If you sell your debt scheme after the completion of one year, then the following tax rate would apply:

  • 10% without indexation

  • 20% with indexation

10% without indexation

  • Selling price less original cost x 10%

  • Rs. 5400 -5000 = Rs. 40 is LTCG tax without indexation.

20% with indexation:

  • Assuming that you bought the debt scheme in FY11-12 (Cost inflation index=785) and you sold in FY13-14 (CII=939).

  • 5000 X (939 / 785) = Rs. 5980---Long term capital loss.

  • Thus, you will show LTCL according to 20% indexation method.

  • Thus, for all types of debt MFs, the unitholder is liable to pay LTCG tax with indexation or without indexation whichever is lower. For individuals / HUFs, it is 10% without indexation and 20% with indexation for FY13-14.

  • Short term capital gains on debt MFs for FY14

  • Short term capital gain tax on debt mutual funds is 30% for FY14 assuming that the investor falls into the highest tax bracket.

  • For example, if an individual comes under 30% income-tax slab, STCG tax would be 30%.

  • Thus: Rs. 5400-5000 = Rs. 400

  • Rs. 400 X 30% = Rs. 120.

Stamp duty charges

Are stamp duty and registration charges—paid to the Maharashtra government—refundable? If these charges are refundable, what documents are required to be produced and what is the time period? - Bhagwanti Mirchandani

The stamp duty paid to the government may be refunded after deduction of certain charges, if lodged for refund within six months from the date of purchase and after fulfilling the conditions stipulated in Chapter V of the Bombay Stamp Act, 1958.

These conditions include that the deal has been cancelled or if the stamp paper is unused or mutilated. Stamp duty charges are also refundable in case excess stamp duty has been inadvertently paid to the Government and any other circumstances, in which the Stamp Papers are not required anymore or are expected to not be used.

To refund stamp duty, the person has to apply to the revenue / Collector of Stamps u/s 47 of The Bombay Stamp Act. The application should include original stamp papers, reasons for refund/ surrender and affidavit of the person who had originally bought the said stamp paper. If the authorities are satisfied that the reasons mentioned are genuine and the paperwork is in order, then the individual may get refund. The time period for refund of stamp duty is takes three to six months.

Refund of registration fees: Registering officer may permit withdrawal of the documents before completion of registration on written request by the individual who presented the document. In such circumstances, where withdrawal is permitted, 50% of the registration fee is refundable. - Adv RP Rathod

Section 80GG

What is Section 80GG of Income Tax Act, 1961?

According to section 80GG of the I-T Act, 1961, where an assessee does not receive house rent allowance from his employer and incurs expenditure on payment of rent, then he may claim deduction of rent paid, subject to fulfilment of conditions prescribed. Deduction available under Section 80GG of the Act is limited to lowest of the following:

1) Expenditure incurred on rent, less 10 per cent of total income

2) 25 per cent of total income

3) Rs 2,000 per month (i.e. Rs 24,000 per annum) Also, please note that no deduction is available under Section 80GG if the rent incurred by the assessee pertains to the house owned by him, his spouse or minor child or by an HUF, of which such assessee is a member at a place where he ordinarily resides or performs duties of his office or carries on his business of profession; or the assessee owns a self-occupied house at any other place whose annual value is nil.

House rent allowance

I don't get house rent allowance (HRA), but I pay rent. Am I eligible for claiming deduction under Section 80GG?

Even though you don't get HRA, you are eligible to claim deduction under Section 80GG.

Occupation certificate

What is an occupation certificate?

An OC is accorded to the builder by the local civic body once construction of a building is completed and the compound is ready for inhabitation. It states that the building is a legal construction and has all the approvals from the various government authorities. It is illegal to occupy a building without this document.

What are the advantages of Rajiv Gandhi Equity Savings Scheme (RGESS)?

The RGESS provides for a one-time deduction under Section 80CCG to a resident individual who has acquired listed equity shares in a previous year. The deduction would be 50% of amount invested in equity shares or Rs. 25,000, whichever is lower. The maximum deduction of Rs. 25,000 would be available on investment of Rs. 50,000 in such listed equity shares.

What are the conditions to be satisfied for claiming deduction under RGESS?

The gross total income of the assessee for the relevant assessment year should not be more than Rs. 10 lakh and the assessee should be a new retail investor. The minimum lock-in period for RGESS is three years from the date of acquisition.

If an individual, after having claimed deduction under Section 80CCG, sells the shares before three years, then what is his liability?

If an individual, after having claimed deduction under Section 80CCG, sells the shares before three years, then, the deduction earlier allowed shall be deemed to be the income of the previous year in which he fails to comply with the condition. The income shall, accordingly, be liable to tax in the assessment year relevant to such previous year.

If deduction has been claimed and allowed under this section for any assessment year, the assessee would not be allowed any deduction under this section for any subsequent assessment year.

What does operating expenses mean?

Operating expenses generally mean expenses that arise during the course of running a business. These expenses consist of items such as salaries paid to employees, research and development costs, legal fees, accountant fees, bank charges, office supplies, electricity bills and business licenses.

What does the term 'topline' growth mean?

Topline refers to sales or revenue shown on the top of the income statement of a company. When reporting quarterly performance, company’s post the period’s sales number as the first entry in the topline of the income statement. Therefore, when people talk about the company’s "topline growth", they refer to an increase in its gross sales or revenues. When companies speak about the need to increase their topline, they are discussing about the need to focus on generating/increasing sales.

What is bottomline?

The bottomline is the ‘net profit’ shown at the bottom of the income statement of a company. The bottomline is a company’s income after deducting all expenses from revenues. These expenses comprise interest charges paid on loans, income taxes, operating and administrative costs. This is what the company is left with after paying all its expenses for the period reported. A company’s bottomline can also be referred to as net earnings. Bottomline usually shows the efficiency of the company in controlling costs even as it delivers higher sales. A company that is growing its net earnings or reducing its costs is said to be "improving its bottomline".

What is dividend and dividend payout ratio?

Dividend is the share of the profit that a company decides to distribute to its shareholders. Dividend payout ratio is the percentage of earnings a company pays out to its shareholders as dividends.

What is earnings per share (EPS)?

A company's profit divided by its number of common outstanding shares. If a company earning Rs. 2 crore in one year had 2 crore common shares of stock outstanding, its EPS would be Rs. 1 per share.

What is insider trading?

Insider trading is the trading of a public company's stock or other securities (for example: bonds or stock options) by individuals with access to non-public information about the company. In many countries, insider trading based on inside information is illegal since it is considered unfair to other investors who do not have access to the information.

What are dual option warrants?

Dual option warrants are designed to provide the buyer with good potential of capital appreciation and limited downside risk. Dual option warrants may be used to sell equity shares in different markets. For instance, equity shares or debentures may be issued with two warrants—one warrant giving right to the buyer to be allotted one equity share at the end of a certain period and another warrant with a debt or preference share option.

What is a dual currency bond?

A dual currency bond is a debt instrument in which the coupon and principal payments are made in two different currencies. The currency in which the bond is issued, which is called the base currency, will be the currency in which interest payments are made. The principal currency and amount are fixed when the bond is issued.

What is securities lending?

Securities lending is the temporary transfer of securities by a lender to a borrower. Under the scheme, a person with idle shares can lend them to another who does not have the shares to fulfill his obligation under a trade finalised by him. There will be no direct contacts between the borrower and lender of securities. An intermediary who can guarantee the scheme and make good the loss in the borrower who fails to honour his obligations can alone provide substance to the scheme. The borrower has to put up collateral for his borrowings and pay cash margin levied on the securities by the authorities. Income from securities lending is exempt from capital gains tax.

What is Samvat 2070?

While the most common calendar used throughout the world is the English calendar or the Georgian calendar, in India, the Hindus follow the Vikrami Samvat calendar. According to the calendar, this year (2013) is Samvat 2070.

What is muhurat trading?

Muhurat trading is the stock market trading activity which happens for about an hour on the Diwali day. Usually, this trading session is held in the evening. It is a symbolic ritual which has been performed for years and investors make some token purchases on this day.

When is muhurat trading this year?

This year its on a Sunday. The Stock Exchanges will conduct a special muhurat live trading session from 18:15 hours to 19:30hours on November 3, 2013 on Diwali.

Do markets always go up during muhurat trade?

In recent years, the stock market has seen lackluster movement on muhurat day and has even ended negative during few years. Many investors are betting on a new high by Diwali this year.

What is the clean price and dirty price while trading in bonds?

Bonds trade at clean price and dirty price in different markets. Clean price is the price of the bonds which excludes accrued interest. The dirty price includes clean price along with accrued interest.

In India, bonds trade at dirty price in the NSE (National Stock Exchange) corporate segment. Dirty price is the price of a bond with accrued interest. Thus, a bond trading in the NSE corporate segment has accrued interest included in it. Accrued interest is the interest that has got accrued on a bond from last coupon payment date. As a buyer of the bond, you are supposed to pay accrued interest to the seller of bond.

What does Subsidy mean?

A subsidy is the benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.

The securities lending and borrowing allows long-term investors to loan out their securities to those who may wish to borrow securities to cover a short-position or hedge their exposure in the derivatives segment. It allows those lending the securities to increase the yield on their long term holdings.

Trust: Exemption u/s 11 of I-T

I am one of the founder members of a charitable trust. The trust gave a loan of Rs. 10 lakh to my wife at the rate of 6% per annum. Is there an exemption available to the trust under Section 11 of the Income-tax Act, 1961? — Ravi Raj

No exemption is available to the trust under Section 11 of I-T Act. Exemption under Section 11 in case of assessee claiming to be charitable institutions defines charitable purpose as providing relief to the poor, education, medical relief, etc. An entity with a charitable object of the above nature is eligible for exemption from tax under Section 11 of I-T Act. Providing loan and earning interest on it doesn’t seem to be a charitable activity and therefore this income would be considered as non-charitable and liable to tax as per the Act. However, interest income generated incidentally due to charitable activities of trust are deemed to be charitable income and are exempt subject to fulfillment of other conditions.

Entertainment allowance

What is the treatment of entertainment allowance?

In case of entertainment allowance, an assessee will not get any exemption but will be eligible for deduction under Section 16(ii) from gross salary. This deduction is only allowed to government employees. Non-government employees will not be eligible for this deduction. The entire amount of entertainment allowance will be added to gross salary. The minimum of the following will be available as deduction in case of government employees: (i) Actual amount of entertainment allowance received during the year; (ii) 20% of his salary; (iii) Rs. 5,000.

Will: Distribution of assets

My brother, who passed away recently, had a joint demat account with his late younger brother's daughter. In his Will, my brother mentioned that "any securities held by me jointly with another or others, with my name being the first... should be included in the valuation of my total property". Please let me know how his joint demat account should be handled. Also, the tax liability for both the beneficiaries and the other joint holder of the account. My brother was unmarried and the beneficiaries are his other nieces and nephews and not the joint account holder. I stay in USA and I am the administrator of his Will. I want that his assets should be distributed in an unbiased way as he has mentioned in his Will. — Name withheld on request

In property related matters, it is always advisable that one should seek professional advice from a person in whom the legal heir / administrator has confidence. It is necessary to take a holistic view of the entire issue before offering any advise. Hence, in this case also our view is that the administrator should talk to a lawyer of his / her confidence and seek a comprehensive advice. However, with regard to your concern. As there is a Will, the inheritance will be decided accordingly. If the joint demat account holder agrees with the Will, then there is no issue. However, if a person refuses to accept the Will or the joint demat holder refuses to give any share to the other beneficiaries, in such a case the administrator will have to approach the court and obtain a letter of succession / letters of administration for administering the property. Once the court passes an order all the persons have to adhere to the court order. He will have to engage the services of an advocate to handle the court related procedures. At present, there is no inheritance tax in India. Therefore, there is no tax liability upon the transfer of the shares. Please keep in mind that the above reply is broadly answered tailored to your situation. Once again, we would say the administrator should seek professional help from a lawyer in whom he / she has confidence.

Basket trading system

What is basket trading system in India?

In basket trading system, investors through the member-brokers of the stock exchanges are able to buy or sell all the stocks of respective indices (BSE Sensex or Nifty) at one time in proportion of their respective weights in the index. For instance: Investors through the member-brokers of the BSE (Bombay Stock Exchange) are able to buy or sell all 30 stocks of Sensex at one time in proportion of their respective weights in the Sensex. The investors can also create their own baskets by deleting certain scrips in the Sensex.

Trading volume

What does trading volume mean in stock market?

Trading volume is the sum of buying and selling of securities in the market. The trading volume is built on rising prices. It is also linked with falling prices. Trading volume represents bullish and bearish trend.

Banking: Base rate

What does base rate mean?

Base rate is the minimum interest rate below which banks do not lend.

Tax deducted at source

What is TDS and why is it deducted?

TDS stands for tax deducted at source, which literally means the tax required to be paid by the assessee, is deducted by the person paying the income to him. Thus, the tax is deducted at the source of income itself. However, not whole of the tax is deducted at source, but only a certain part is deducted. In some cases it may also get excess while in other cases it may be less then the total tax liability. However, in case of salary the total tax liability can be deducted at source itself. The intention behind TDS is fast collection of tax and to avoid tax evasion, by concealing income.

Debenture redemption reserve

What does debenture redemption reserve mean?

Section 117C of the Companies Act, 1956, was introduced in 2000 as a measure to protect the interest of debenture-holders. It requires every company which has issued debentures to create a Debenture Redemption Reserve (DRR). As per this section, a company shall credit adequate amounts to DRR from its profits every year until such debentures are redeemed. The amounts credited to the DRR shall not be utilised by the company except for the redemption of debentures.

Book-built issue

Can a retail investor also bid in a book-built issue?

Yes. A retail investor can bid in a book-built issue for a value not more than Rs. 1 lakh. Any bid made in excess of this will be considered in the HNI (high networth individual) category.

Can a retail investor change his bid?

Yes. The investor can change or revise the quantity or price in the bid using the form for changing/revising the bid that is available along with the application form. However, the entire process of changing or revising the bids should be completed within the date of closure of the issue.

Self regulatory organization

What is a 'self regulatory organisation'? What are its functions and obligations?

Self regulatory organisation (SRO) means an organisation of intermediaries which represents a particular segment of securities market and which is duly recognised by SEBI (Securities and Exchange Board of India) but excludes a stock exchange. An SRO is responsible for investor protection and education of investors and ensures observance of securities laws by its members. The members of SRO have to follow a standard code of conduct. An SRO conducts inspection and audit of its members on regular basis through independent auditors. An SRO must work in utmost good faith and must comply with the norms of corporate governance as applicable to listed companies.

ISIN number

What is ISIN number?

ISIN (international securities identification number) is a unique 12 digit alpha-numeric identification number allotted to each security (For example: INE383C01018). Fully paid-up equity shares, partly paid-up shares, equity with differential voting / dividend rights issued by the same issuer will have different ISINs. The details of ISIN number of securities are available on the website of National Securities Depository Ltd and Central Depository Services (India) Ltd.

Secured debentures

What are secured debentures?

Secured debentures are long-term investment vehicles where companies essentially borrow capital from investors. The company (issuer) of the debenture usually agrees to pay back the investor interest until the completion of the debenture agreement, at which point the principal is also repaid. One main advantage of secured debentures over other types of debentures is that they allow the investor a bit more protection. Should the issuer default on the repayment, the debenture holder can make a claim on the assets of the issuer until repayment is complete.

Debenture at discount

What does issue of debenture at discount mean?

If the debentures are issued at a price lower than their face value, then the debentures are issued at a discount. The difference between the face value and the issue price is the discount.

NCD: Interest payment

What are the interest payment option under non-convertible debentures (NCDs)?

NCDs are available with various options for interest payout with annual and cumulative payout being the most common options. The cumulative option is most rewarding since the interest is reinvested and investors can benefit from compounding. The payout option is suitable for investors who prefer to receive regular income.

Debenture: Voting rights

Do debenture holders have voting rights at a general meeting of the company like shareholders?

Debenture holders do not have voting rights. Section 117 of the Companies Act prohibits the issue of debentures carrying any kind of voting rights at the general meeting of the company.

TDS on immovable property

Who deducts TDS (tax deducted from source) on immovable property? - Bharat Sharma

According to Section 194-I of the Income-tax Act, the responsibility of deducting TDS on immovable property—other than agricultural land—lies on the buyer. For instance, if Mr. A buys a property worth Rs. 50 lakh from Mr. B, then Mr. A will have to deduct tax at 1% i.e. Rs. 50,000 on sale value and deposit it with the government. Besides making the payment, Mr. A will also have to obtain a challan for the payment and issue Form 16B to the seller.Form No. 16B is the certificate under Section 203 of the Income-tax Act, 1961 for tax deducted at source. As the buyer is responsible for tax deduction, the buyer is also responsible to give the certificate of TDS in Form 16B to the seller. CBDT (Central Board of Direct Taxes) clarifies that Form 16B should be given to the seller within 15 days from the due date of submission of the challan. This is to enable the seller of the house to claim credit for such TDS against his / her tax liability.

Current A/c vs Capital A/c

What is the difference between current account and capital account?

The two basic components of balance of payments is the capital account and current account. The current account reflects a nation's net income, while the capital account reflects net change in national ownership of assets. Capital account gives a summary of the capital expenditure and income for a country. The capital expenditure and income is tracked by way of funds in the form of investments and loans flowing in and out of an economy. This account comprises foreign direct investments, portfolio investments, etc. It gives a summary of the net flow of both private and public investment into an economy. In the current account, goods, services, income and current transfers are recorded. Current account records a nation's exports and imports of goods and services and transfer payments. The balance of the current account tells us if a country has a deficit or a surplus.

Investor Education and Protection Fund

What is Investor Education and Protection Fund?

The Investor Education and Protection Fund (IEPF) has been established under Section 205C of the Companies Act, 1956 for promotion of investors’ awareness and protection of the interests of investors. Amounts such as unpaid dividend of companies, matured deposits or debentures with companies, donations given to the Fund etc are credited to IEPF. The Fund is used for promoting financial educational activities—including seminars, training, research and publications—aimed at investors. The IEPF also aids investors’ associations recognised by SEBI (Securities and Exchange Board of India) to undertake legal proceedings in the interest of investors in stock market. Salary, allowances and other expenses of office of Ombudsman among others.

Sweat equity shares

What does sweat equity shares mean?

The term "sweat equity" indicates equity issued to directors and long time employees who have work hard from the inception of the company to build it with a brand image and thus contributed significantly by their efforts in this direction. Sweat equity shares can be issued by the company to employees or directors at a discount or for consideration other than cash, for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.

SEBI: Consent orders

What does consent orders mean?

Consent order means an order that settles administrative or civil proceedings between SEBI (Securities Exchange Board of India) and a person (Party) who may be found to have violated securities laws. A consent order may or may not include a determination that a violation has occurred. The main objective of the consent orders is to reduce the long drawn and expensive legal process of individuals before courts.

Bank rates

Please inform me the present bank rate, repo rate, reverse repo rate, CRR (cash reserve ratio) and SLR (statutory liquidity ratio)? — PD Bousally

According to RBI's (Reserve Bank of India) Q1 Monetary Policy 2013-14, bank rate is 10.25%, repo rate is 7.25%, reverse repo rate is 6.25%, CRR is 4% and SLR rate is 23%.

Provident Fund

My establishment discontinued deduction towards contribution of provident fund (PF) from the employees' salary and also stopped remitting the contribution of the employer's share to the PF when the number of the employees rolled down to 15 from 25. Is the establishment allowed to do so? — Jayesh Kulkarni

No, the provisions of Employees' Provident Funds and Miscellaneous Act, 1952 will not cease to be applicable to the establishment merely on the ground that the number of employees has reduced to 15. Though the applicability of the Act takes place on 20 employees yet if the number falls below, even then the Act remains applicable.

PF for part-time employees

I have been employed by my company as a part-time accountant. My company has more than 20 employees. Can I be covered under provisions of the Employees' Provident Fund scheme? — Gita Thakur 

According to Section 2(f) of the of the Employees' Provident Funds and Miscellaneous Act, 1952, the term 'employee' also includes a part-time employee. Thus, your company should cover you under the provisions of the Employees' Provident Funds.

Whaling scam

What is whaling?

Whaling is a sneaky attempt by fraudsters to hijack the personal computers of top-ranking business executives. In the case of whaling, fraudsters target an organisation and send personalised emails to either a group of employees, an executive officer or senior manager. Emails refer to fake but critical business matters, such as a legal subpoenas or customer complaints. Fraudsters attempt to lure executives to reveal sensitive details about their business or click on a link in an email that will secretly download malicious software onto their computer. Criminals could then attempt to defraud the company using the information they quietly gather.

Human life value

What does human life value (HLV) mean? Is it important to calculate HLV while buying life insurance policies? — Aarti Donde

Human life value is an estimate of the financial value of human life. In insurance, this value is used to determine the amount of insurance that a person should buy. Thus, sum assured must be equal to HLV.

The most common method to calculate HLV is to estimate your income each year until you expect to retire. For instance, 60 years. This income stream then needs to be discounted for inflation and expressed in current terms.

Insurance claim

My father passed away recently. However, I am unable to find his life insurance documents. Can I seek the help of the insurer to find his policy details and file the claim? — Kamal Soni

You need to find at least some proof of the life insurance policy such as your father's bank statements showing premium payments. If your father had bought insurance through an agent or a bank, then they may have some records.

In case you are unable to find a document, then you need to write to the insurance company with your father's name, date of birth, death certificate and proof of identity. You would have to produce more documents as the insurer will ask details of proof of legal representation so that the information can be shared with you. If you follow through on the paperwork, they will pull out the information from their records and share it with you.

Loan against EPF

I am working in a public limited company. I want to know the process to avail loan against my EPF (Employees' Provident Fund). Please guide. — Vikas Rao

Advance against EPF is sanctioned only for buying / reconstruction a house, marriage, medical treatment and education of children. For purchase of a house, one needs to have minimum five years of PF membership, while for marriage, medical treatment and education, at least seven years of PF membership is required. You also need to fill in the Application Form 31 which is for advance against EPF.

To avail loan against EPF for purchase of a house, documents such as flat allotment letter, possession memo, construction completion certificate, PAN card and a cancelled cheque are required. Besides Application Form 31, you also need to submit Declaration Form for purchase / reconstruction of a house. You also need to speak to the HR department of your company.

Bank FD: Senior citizen

My mother is 59 years old and wants to open a fixed deposit for five years with a well-reputed private bank. The bank says she will get 9.5% interest annually. My mother would be 60 years old after six months hence I requested the bank to give her the benefit of additional interest rate of 0.5% which is available for senior citizens. Can my mother get 10% per annum interest rate instead of 9.5% now? — Ramesh Yadav

According to the bank and Income Tax Act, only those who are 60 years old and above are considered as senior citizens. Since your mother's age is 59 years, she won't be able to get the interest rate which is available for the senior citizen currently. Your mother can surely get the benefit of additional interest rate of 0.5% when she completes 60 years. However, these will not be offered now.

Taxes applicable

I am starting a cafe in Bandra, Mumbai. The cafe will be set up in the non-air conditionedarea of a gymkhana, while the AC area of the gymkhana does not cater any food or liquor services. The only products prepared in-house will be coffee, tea, juices and smoothies, whereas rest everything will outsourced. We don't have any kitchen or chimney; only electrical appliances like microwave, griller and blenders for juices and smoothies. Do I need to pay service tax and VAT? — Ashish Janiani

If there is no AC installed in the cafe area, then service tax won't be applicable. VAT (value added tax) may be applicable. You may check the details, tax rates and exemptions of VAT from the Department Of Sales Tax-Govt. of Maharashtra website. However, if the cafe has centralised AC, then service tax is applicable. Hence, you need to ensure that no area of the cafe is covered by the AC.

Registration of business

I have heard that if it is a sole proprietorship, then the business is not required to be registered. Is it correct? Can I rent a space in a corporate canteen or a mall without registration of the business as long as I have acquired the required licenses. — Mahima Purohit

Besides having the required licenses, you also need to register your business under Stops and Establishment Act. Under this Act, registration of shop / establishment is necessary within 30 days of commencement of work.

Value added tax

Is a restaurant liable to charge VAT and how much percent?

VAT (value added tax) is a sales tax collected by the government of the state in which the final consumer is located. VAT is levied on the sale of any item. As food is being sold in a restaurant, VAT is liable to be paid on such sale. VAT is levied by the state government and is at the sole discretion of the state government. Different states prescribe different rates of VAT. Moreover, even in the same state, different rates of VAT have been prescribed for different items. The rate of VAT is different for alcoholic beverages and varies for other food items.

Capital gains

I had held shares of a private company since 2004. Now I plan to sell my stake to one of the directors. What will be the capital gain? Will I have to pay any other tax? — Kalpana Agarwal

The sale will result in long-term capital gains, which will be taxed at 20.6% subject to indexation benefit.

Securities Appellate Tribunal

What is Securities Appellate Tribunal? Is it useful for investors?

Securities Appellate Tribunal (SAT) is an appellate tribunal where an appeal can be filed by an aggrieved person or a listed company against an order passed by SEBI (Securities and Exchange Board of India) or any stock exchange in India.

SAT is a legal body established under Section 15K of the Securities and Exchange Board of India Act, 1992. SAT hears and disposes of appeals against orders passed by SEBI. Any person aggrieved by an order of SEBI may prefer an appeal to SAT. There is the prescribed fees payable while filing an appeal. SAT is certainly useful to investors as it is a forum of redressal at the appellate level. The purpose of SAT is to protect the interests of investors in the stock market and to promote the development of, and to regulate, the securities market.

A listed company or an aggrieved investor may file an appeal before the SAT against the decision of the stock exchange delisting the securities within 15 days from the date of the decision of the stock exchange delisting the securities. The final decision vests with the Presiding Officer who is the Head of SAT.

Service tax

I am starting a small business of providing meal to offices. Do I need to pay service tax? — Mahima Purohit

Service tax exemption has been provided to small scale service provider whose gross turnover is less than Rs. 10 lakh in a financial year. If the aggregate value of taxable services provided by you is less than Rs. 10 lakh, then you need not charge service tax to the customers.

If I prepare meals at home and deliver these to offices, do I have to charge service tax to my customers? — Mahima Purohit

According to service tax rules, this service comes under the category of outdoor catering and is liable to service tax (12.36%). However, your gross turnover should exceed Rs. 10 lakh in a financial year. Please note, you can charge service tax only on the 40% of the total amount of the food. You also need to register your business.

If I rent a space in a corporate canteen and prepare and sell meals to the customers, do I charge service tax? What are the other taxes besides service tax? — Mahima Purohit

This situation is different from the above two cases. Renting a corporate canteen comes under "Restaurant Services". Here a customer comes and buys / orders the food and eats it in the canteen premises. Hence this is not an outdoor catering service. According to the Finance Act 2013, restaurant service is taxable under service tax only when there is an air conditioner installed in any area of the restaurant. Service tax is applicable @ 12.36%. But on the 60% of total amount of the food. In addition to service tax, these services also attract VAT (value added tax).

Interest earned on NSC

Is the interest earned on the NSC (National Savings Certificate) taxable and liable for TDS (tax deducted at source)? Sushant Jain

Interest on NSC is liable for tax as per the Income Tax Act. However, no tax is deducted at source. Though the interest on NSC is taxable, this interest in not paid to the account holder but reinvested in NSC. As the interest is reinvested in NSC—a specified instrument under Section 80C—the taxpayer can claim interest income up to Rs. 1 lakh as a tax deduction under Section 80C. The interest earned on NSC on a yearly basis is added to the total income under the head ‘Income from other sources'.

Income from lottery

I won a lottery and received Rs. 27,640 as prize after TDS. I spent Rs. 10,000 to buy lottery tickets and won the prize for only one ticket. Can I claim deduction of Rs. 10,000 (money spent to buy tickets) from the prize which I have received from one ticket? Vijay Mane

Income from lotteries, puzzles, games and horse races and card games is taxable at a special tax rate of 30% under Section 115BB. This income is added under the head, 'Income from other sources'. According to Income Tax Act, no expense can be deducted under this category. Thus, expenses incurred on purchase of tickets cannot be claimed.

Preference shares

Loan taken from friend

I had borrowed money from my friend as loan to buy a house in Mumbai. I pay a certain amount of interest to my friend each month. Can I claim tax exemption on the interest amount paid while filing my income tax return? — Vinod Mhatre

Exemption for housing loan interest is provided under Section 24(b) of the Income Tax Act 1961. Section 24(b) does not provide any tax exemption for interest paid to friends or relatives. Hence you will not be able to claim for tax exemption for the interest amount paid to your friend.

What are clip and strip bonds?

Clip and strip bonds split the principal and coupon (interest) portion of a bond issue. Both the principal and regular coupon payments—which have been removed—are sold separately. These bonds is also known as zero-coupon bond. One party will receive the principal at maturity (zero-coupon bond) and the other party will receive the fixed-interest payment over the life of the bond in the form of a stream of coupons. Strip bonds usually trade at a discount and mature to par value or face value. The coupon payments are stripped away and the principal amount of bond is sold as a deep discount bond. The gain to the investor is the difference between the purchase price and the par value. The coupon streams are sold like zero coupon bonds where the investor pays discount for it and receives the payment at a lower rate.

Underwriters vs brokers

What is underwriting and how is an underwriter different from a broker? - Snehal Godbole

Underwriting means a contract signed between a company and some financial institutions—called underwriters—to buy the whole or a portion of the offered shares or debentures of the company that may not be subscribed for by the public. The underwriters are paid a certain amount of commission to do this work. Underwriting is an undertaking or guarantee given by the underwriters to the company that the shares or debentures offered to the public will be subscribed for in full. If the public response is poor, the underwriters will have to take up the balance of the shares or debentures not subscribed for by the public and to pay for them. Thus, the underwriters take over the risk of uncertainty of a public issue of shares or debentures of a company. On the other hand, brokers just try to get subscriptions to the shares or debentures issued; they do not take any responsibility of subscribing to the shares or debentures of the company. In exchange of their service, brokers get the commission also known as brokerage.


What is a carrot and stick bond? — Geeta Thakur

The returns of a carrot and stick bond is based on the carrot and stick strategy. According to the strategy, if the  bondholder remains with the issuer / company till the maturity of the bond, then he would be rewarded high returns. However, if the bondholder sells his bonds before the tenure of the bond, he would be penalised. This structure combines both rewards and punishments and it is up to the bondholder to go either hold the bond till the end of the tenure or sell it depending on his requirement. The bond is named in reference to a cart driver dangling a carrot in front of a mule and holding a stick behind it. The mule would move towards the carrot because it wants the reward of food, while also moving away from the stick behind it, since it does not want the punishment of pain, thus drawing the cart. - See more at:

What are preference shares and how are they different from ordinary equity shares?

Preference shares are shares in a company which give their holders an entitlement to a fixed dividend but which do not usually carry voting rights. The dividend on ordinary shares is uncertain and variable (high when the company does well, poor or non-existent when it does badly). Preference shareholders get a fixed dividend which, if not paid, usually accrues until it can be. Each ordinary share usually carries a vote. Preference shares do not usually carry a vote unless dividends fall into arrears. In the event of a winding up, preference shares are usually repayable at par value, and rank above the claims of ordinary shareholders (but behind bank and trade creditors).

Rent in arrears

I used to file my return of income showing income from rent on receipt basis and was assessed accordingly up to the assessment year 2013-14. During FY2012-13, I received Rs. 1 lakh by way of enhancement for the last six years as the government department (tenant) enhanced the rate of rent with retrospective effect. Will the sum of Rs. 1 lakh be taxable in AY13-14? Can it be spread over the last six years? Is there any provision of tax relief in such cases, like Section 89(1) of the IT 1961? What are the provisions of the Act governing such cases? — Komal Israni

Section 89(1) specifically refers to salary arrears and is not applicable in case of arrears of rent. In income tax, previous year is the concerned financial year in which income is received by you. Since you have been filing income on receipt basis, you must include arrears rent in the year in which it is received. There is no other option. This income cannot be spread in past six years income. Returns for the past years have been processed and the time limit of revising return has also passed, so no reason to consider revising past return.

Cashless payment

I may be hospitalised for surgery soon. What is the process for cashless payment? How can I ensure that my claim is settled soon? — Kavita Rao

Don’t depend on the hospital's TPA (third-party administrator) staff, as many times the TPA is not aware whether the insurance tie-up is there or discontinued. Send an email or call the insurer’s customer care before getting admitted. When you go to the hospital ensure that you have the doctor’s notes prescribing surgery and your photo identification. Hand these documents to the TPA or insurance desk at the hospital and they will coordinate with the insurer for approval.

If you want your claim to be settled soon, you have to be in regular touch with the TPA and insurer. Many times, the insurer or hospital will ask you to pay the bill and claim a reimbursement from the insurer later. Avoid that if possible.

Shopkeeper's insurance

I own a small convenience store. What are the advantages of buying the shopkeeper's insurance? — Nirav Shah

Shopkeeper's policy is a package policy specially designed for small shopkeepers. It is a single policy combining the various insurance requirements of shopkeepers. Two major risks are always covered: Damage to the shop structure and contents due to fire, earthquake, flooding damage and burglary. You can also insure your shop from theft of money, damage to the shop's signboard, theft by your staff or injury to third parties on your premises. Many general insurers offer this policy. You can check the premium rates and the scope of the policy on their websites. You may select the risks and sum insured most applicable to you and procure the insurance from the insurer’s branch.

Inter-settlement / beneficiary charge

What is an inter-settlement / beneficiary charge? - Name withheld on request

Inter-settlement / beneficiary charge is your demat account transaction charge. If you sell the shares before they are credited to your demat account, then an inter-settlement charge will be debited to your account. All transactions done in a month will be billed in the following month. Some brokering firms levy inter-settlement / beneficiary charge. You may check the same in the fine print of your account opening form.

Gift tax

I bought a flat in 1990, which I want to gift to my son and register it in his name. The price of the flat has increased from Rs. 4 lakh to Rs. 50 lakh now. How much tax will I have to pay for this transaction? Kiran Mishra

Gift tax is not applicable either to you or your son on the proposed gift. You may execute a gift deed to transfer your house to your son. However, you may have to pay stamp duty to the state government regarding the gift.

Education allowance

Can I use my company secretary (CS) registration fee receipt to claim tax exemption? Under which section can I apply for the same? — Chitra Gupta

If you are a salaried employee and receive professional or education allowance, you may be able to claim tax exemption under Section 10(14) of Income-Tax Act for payment of your CS fee. According to Section 10(14)(i), academic, research or training allowance granted in educational or research institutions are exempted from tax. You also need to speak to the HR department of your company.

Regular income and retirement planning

My husband passed away last month and I received Rs. 22 lakh as sum assured from his insurance policy. I am a housewife with two kids. My eldest daughter is 14 years while my son is 10 years. I want to invest in a financial product — which will provide me with a regular source of income — to meet my daily household expenses and requirements of my children. I also wish to save some money to fund my retirement goal, so as to receive regular annuity after 15 years. Please guide. — Name withheld on request

The mail doesn’t provide details such as your present investments, other sources of income, monthly expenses, and liabilities (if any). But based on the details provided and given the current inflation rate, the amount may not last beyond five to seven years.

Assuming you have only Rs. 22 lakh as capital, we would suggest you stay away from stocks, real estate, gold, and mutual funds. At this stage, capital protection is the key. So, invest a certain sum in bank fixed deposits with a mix of different tenures — three years, five years and 10 years — for regular income.

If you decide to choose this option, do remember to fill Form 15G every year, if your age is below 60 years, so that tax is not deducted from your fixed deposits. Since the rates of interest offered by banks differ, you will need to personally visit the banks near your area to find out the current rate. Since both nationalised and private banks are regulated by the Reserve Bank, there should not be a problem with regard to the safety of your principal. However, given the poor financial state of some co-operative banks, we would suggest you to avoid unless you can determine their financial strength.

To fund your retirement goal, you may invest a one-time investment in a pension plan, which provides a death cover during the deferment period and offers annuity on survival to the date of vesting. Vesting is the date from which benefits start accruing.

Marriage Registration

I got married last month. By religion, I am a Muslim and currently reside in Thane. How should I register my marriage? Riyaz Khan

You may register your marriage under the Muslim Law. For this, you need to approach the Sub-Registrar office in Thane district. According to the Law, an application is to be made in the prescribed form duly signed by both the husband and wife.

Residential proof of both the bride and bridegroom should be attached along with the application. For age proof, an attested copy of the school leaving certificate, passport, birth certificate or PAN card will suffice. For proof of marriage, you are required to submit Nikah Nama. A separate passport sized photograph of the bride and bridegroom also needs to be included. The bride and bridegroom have to appear in front of the marriage officer along with three witnesses.

You can also approach the Sub-Registrar office for any help with regard to the procedure or documents /forms to be submitted.

Taxation: Section 24(B) 

I bought a house five years ago which I am planning to sell this year. In the cost of acquisition, can I mention expenses such as water and electrical connection charges? Kiran Patil

Yes, you can mention all such one-time charges in the cost of acquisition. The other expenses—which you can add in the cost of acquisition—include lawyer’s fee, brokerage charges, travelling expenses, processing fees, and the interest paid on loan taken for the purchase of property during the pre-construction period, if the deduction has not been claimed under Section 24(b).

Section 54 & Section 54 EC

I had bought a house 10 years back. Can I claim exemption from long-term capital gains by selling my house and reinvesting the sale proceeds in a new residential flat or in capital gains tax saving bonds? To claim exemption, should the entire sale proceeds or only the long-term gains be reinvested? Rishi Roy

Section 54 of Income Tax provides for exemption on long-term capital gains arising on sale of a house on reinvestment in another house within a stipulated time. Section 54 EC provides exemption on any long-term capital gains on reinvestment in certain bonds within a stipulated time. The amount of exemption either under Section 54 or under Section 54 EC, is lower of the amount of long-term capital gains and amount reinvested in the stipulated period.

Non-tariff Products

I had bought health insurance in 2011 and have been paying the policy premiums regularly without making any claim. However, this year my renewal premium was five times more than the premium I used to pay. I had approached the Grievance Redressal Officer of my insurer asking the reason for hike in the premium. However, I have not received any response. Please guide. Manish Kulkarni

Health Insurance premiums are non-tariff products. This implies it is not regulated by the Tariff Advisory Committee (TAC). Under non-tariff regime, an insurer can offer their own premium rates, which are decided on the basis of their past claim ratios, future expectations of claims, etc. If you are not satisfied with the hike in the premium, you can switch to some other insurer who is offering competitive rates.

My mother is 45 years old and recently underwent a heart surgery. I thought that her mediclaim policy will cover the entire cost of operation. However, the insurance agent told me that only hospitalisation expenses will be covered and that too are subject to conditions. Is there any medical policy that covers all the costs? - Prakruti Roy

A mediclaim or health insurance policy usually covers hospitalisation expenses for the treatment of an illness or injury, provided the hospitalisation is for more than 24 hours. The pre-existing diseases are covered only after a continuous and claim-free renewal for a specified period in the policy. Sometimes a co-pay or sublimit clause is applicable in the policy for various treatments and procedures. Also, before buying a mediclaim policy, you need to read the fine print carefully. Make an analysis of what is covered and what is not covered under the policy.

Housing Loan

I have taken a housing loan and pay my EMIs regularly before the payment due date. However, I bought the house in my wife’s name. Can I avail the tax benefits under Section 80C for the principal and under Section 24B for interest payments? - Krishna Pandey                                                  

You cannot claim tax benefits on a housing loan if the property is not owned by you. However, if your wife is the owner of property and you pay the EMI, you can follow the rules of clubbing of income and can be eligible for claiming tax deduction on the interest paid.    

Account transfer      

My father passed away one year back, but I failed to inform his bank about it. He did not have a joint account. How can I close the account or transfer it in my mother’s name? - Shashikant Mali

The question doesn’t provide any details about the nomination. You need to submit a letter carrying the necessary information, along with a copy of death certificate to the bank. If the nomination was not done, or if it is a single or joint account, banks are required to follow a basic procedure for repayment to the depositor’s legal heir. The legal heir needs to submit death certificate of the account holder and proof of legal representation. You should also approach the bank, in which your father had his account, to help you with regard to the procedure and documents /forms to be submitted.

Online term plans

I have already bought a term insurance plan worth Rs. 20 lakh from an agent. But now he has changed his profession and doesn’t provide insurance service. Will this affect my policy? I also want to buy a term plan worth Rs. 50 lakh. Is it better to buy term plan online or through an agent? - Ajay Vaity

If your agent has changed his profession and is no longer providing you the service, that doesn’t affect your insurance policy. You can avail the service directly from the insurance company. Buying an online term plan is a good and safe option. You can purchase a term plan 24x7, 365 days a year. This could be from your office or home. You can also seek help of customer care representatives of insurers through online chat / 24x7 toll-free calling facility to resolve your doubts. Purchasing a life insurance online is usually cost-effective since companies pass on the savings from distribution, administration and courier expenses to the customer.

Access to operate locker

My parents passed away recently and since I am their only child, how can I get legal approval to operate their bank locker? - Kishore Shah

The question doesn’t provide any details about the nomination. According to RBI guidelines, if all joint locker holders die and the nomination is done, the nominee can access the locker. The nominee has to submit a death certificate of the account holders along with an identity proof of the nominee. In case the nomination is not done, access to the locker can be given jointly to legal heirs of all the deceased account holders. The legal heirs need to submit death certificate of the account holders and proof of legal representation. You should also approach your bank to help you resolve the issue.

Interest income

My mother has earned an interest of Rs. 1 lakh from her bank fixed deposits. She is a housewife and has no other source of income. Is the interest amount taxable? - Dinesh Saney

The basic exemption limit from taxation for individuals (both men and women below 60 years to age) for FY12-13 is Rs. 2 lakh. Your mother can submit Form 15H to the bank, which will stop deducting tax on the interest income. If the bank has already deducted tax, she can file her income tax return and claim it as refund.

What is DRCA?

My Axis Bank savings account statement showed an amount of Rs. 112.36 debited from my account as DRCA. May I request you to please let me know what is DRCA and why this money is debited to my account? - Bhagwanti Mirchandani

Assuming that you would be holding an international debit card, an amount of Rs. 112.36 would have been debited from your card towards debit card annual charges according to the card type. DRCA basically stand for debit card annual charges. In banking term, DR is usually an abbreviation used for debit. DRCA is charged once every year to your savings bank account by the banks if you owe a debit card. The Rs. 100 would be the debit card fees per annum, while Rs. 12.36 would refer to the service tax.

Who qualifies as a non-resident Indian (NRI)?

According to the Income Tax Act, an individual is considered to be a resident of India if he meets either of these conditions—he should be present in India physically for 182 days or more in a tax year (April 1 to March 31), or for 60 days in the previous year and 365 days or more in the preceding four tax years. If the individual doesn’t meet any of the above two conditions, then he is deemed to be an NRI.

Can an NRI open account without having to come to the branch in India?

Yes. An NRI can open an account with any Bank branch in India without having to come to the branch in India. The type of accounts available to an NRI are: Non-resident external (NRE), non-resident ordinary (NRO) and foreign currency non-resident (FCNR)

What is MCX-SX40?

Multi Commodity Exchange of India (MCX) has started its live trading in equities and equity derivatives from 11th February. MCX-SX is India’s third full-fledged equity bourse after the Bombay Stock Exchange (BSE) and the National Stock Exchange. BSE is over 132 years old, while NSE is almost 20 years old.

With the launch of SX40, India now has three national stock exchanges—BSE, NSE and MCX-SX. The MCX-SX benchmark index—called SX40—is similar to BSE’s Sensex and NSE’s Nifty. There are 1,116 companies currently listed on MCX-SX, compared to 1,665 firms on NSE and 5,191 companies on BSE.

What is the base value for SX-40? 

The base value will be 10,000 with a base date of March 31, 2010. A free float based index of 40 large cap—liquid stocks representing diversified sectors of the economy. The term free float refers to shares that are readily available for trading. The index allows fast entry for companies with better free float, market cap and liquidity. SX40 includes companies that have a minimum free float of 10% and must have a positive net-worth. MCX-SX has taken stocks from 100 liquid companies for its SX40.

What is the objective of SX-40?

SX40 is designed to measure the economic performance with better representation of various industries and sectors. The Index is devised to offer support for investment products such as index futures and option, index portfolio, exchange traded funds, index funds, etc.

MCX-SX will work with Indian Statistical Institute, a research organisation, for its indices. SX40 is formed to be a performance benchmark and to provide for efficient investment and risk management instrument. It would also help in structuring passive investment vehicles. The stocks in SX40 have an industry cap at 20% (+/- 2% band). This means stocks from a particular industry cannot have over 20% weightage in the index. There is no industrial cap in the composition of the Nifty.

Which companies constituent SX40?

Constituents of SX40 include ACC, Ambuja Cements, Asian Paints, Bajaj Auto, BPCL, Bharti Airtel, BHEL, Cairn India, Cipla, Coal India, Dr Reddy’s, Gail (India), HCL Tech, HDFC Bank, HDFC, Hero MotoCorp, Hindalco, HUL, ICICI Bank, Infosys, ITC, JP Associates, JSPL, L&T, Lupin, M&M, Maruti Suzuki, NTPC, ONGC, Power Grid Corp, RIL, Sun Pharma, TCS, Tata Motors, Tata Power, Tata Steel, Titan Industries, United Spirits, Wipro and Zee Entertainment.

Industry wise weightage: Financials (22%), consumer goods (18.2%), industrials and oil & gas (both 14.8%), tech (14.2%), healthcare (5.1%), basic materials (4.7%), utilities (3.1%), telecom (2.4%) and consumer services (0.7%).

What is the membership fee?

MCX-SX is offering an entry-level membership fee and deposit at Rs. 25 lakh to be valid till October 18 and afterwards it would be raised to Rs. 50 lakh.

Transfer of Shares

What is the fee to be paid for transfer of physical shares? - Jayantilal Shah

Assuming that you want to transfer (transferor) physical shares to some other person (transferee), the fee is 0.25% of the market value of the total shares prevailing on the date of execution of the transfer deed.

Can stamp duty be paid in the form of stamps affixed or one has to get it franked? - Jayantilal Shah

You can affix share transfer stamps at 0.25% of the market value on the date of execution of the transfer deed. Or you may get the transfer deed franked. However, it is advisable to pay stamp duty by way of franking for big amounts for all practical purposes.    

Where can one buy the stamps or get the transfer deed franked? - Jayantilal Shah

Share transfer stamps can be obtained from the authorised stamp vendors. Your share broker can also help you in this regard. The share transfer stamps are also available at the Bombay Stock Exchange (BSE) in Mumbai. The BSE also provides the franking service.

Where are the stamp vendors located? - Jayantilal Shah

A list of licenced stamp vendors is displayed at General Stamp Office (; Town Hall Building, Shahid Bhagatsingh Road, Fort, Mumbai-400001; Phone no: 022-22664585, 22656904.

Are old forms valid?  - Jayantilal Shah

A transfer deed is valid for one year from the date of its presentation as specified thereon.

Stock Market Basics

What is share market? - Krishna Chaitanya

Share market is generally a public market where stocks, mutual funds, bonds and derivatives are sold. The share market is also called equity market or secondary market. It is a place where the shares of various companies are bought and sold. The stock market is an organised platform through which the buyers and sellers can trade in shares or other forms of securities like bonds, derivatives, etc. The stock exchanges serve the purpose of listing and trading the shares.

In India, there are two stock exchanges: National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). There are also regional stock exchanges like Ahmedabad Stock Exchange and Calcutta Stock Exchange among others. 

What is Sensex and Nifty? - Krishna Chaitanya

The Sensex is an "index". An index is basically an indicator. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. The Sensex is an indicator of all the major companies of the BSE. 

If the Sensex goes up, it means that the prices of the stocks of most major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. The Nifty is an indicator of all the major companies of the NSE. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. 

What factors which make the stock price go up or down? - Krishna Chaitanya

Stock prices change every day because of market forces. Stock prices usually change because of "supply" and "demand". If more people want to buy a stock (demand) than sell it (supply), then the price moves up!On the other hand, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall. Thus supply and demand in the market determines stock price. 

What happens if the beneficiary/nominee of a life insurance policy dies during the policy term?

A beneficiary/nominee is the receiver of the proceeds of the policy when the named insured dies. If the beneficiary of a life insurance policy dies before the insured, then the entire proceeds of life insurance will go to the insured.

Beneficiaries are typically categorized as primary and contingent. A primary beneficiary is entitled to the proceeds of the policy upon the death of the insured, but such rights expire if he or she dies before the insured. A contingent (secondary) beneficiary is entitled to the policy proceeds if the primary beneficiary has predeceased the insured. Thus, if the primary beneficiary dies before the life insured does, then the contingent beneficiary(ies) would become the primary beneficiary automatically.

Does a beneficiary also enjoy life insurance policy in the same way as the owner of the policy?

No. A beneficiary is only entitled to receive the insurance amount after the demise of the insured. A beneficiary does not enjoy any life insurance as he/she is not a party to the insurance policy contract signed between the insured and insurer.

How long after an insured dies can a beneficiary get paid on a life insurance policy?

As long as the policy was in force at the time of the insured’s death you can place a claim. Simply contact the agent who will be happy to assist you or contact the claim department directly at the insurance company.

Does a beneficiary own the policy after the insured dies?

No. A beneficiary does not own the policy. A beneficiary / nominee will only receive the policy proceeds after the insured person dies.


Request you to guide me on a PF query, if a person resigns from a company and withdraws his PF. He then wants to rejoin the same company and continue his PF account after waiting for a mandatory period of two months. However the PF department says, he has to wait till the financial year closes to become a PF member again. Is it so then under what section of PF does the following rule come? Please guide me. – Sengupta

The mail mentions "PF department" whether it is the official EPF (Employees’ Provident Fund) department or the ‘company’ PF department is not clear. If the employee has resigned from an XYZ company and wants to rejoin the same XYZ company after completing the mandatory two months waiting period, then he can send in the request to his HR dept to open a new PF account. He has to submit the required forms and documents. He would get a new PF number. There is no need to wait till the financial year closes to become a PF member.


This is with regard to your article, "Mutual Funds to send CAS via email". When did this start? I absolutely want postal mails to stop. How can I start receiving soft copies of my MF statements? My one correct email address is already on file with all my mutual funds. - Sadhu Ananda Baba

Consolidated account statement or CAS by email was introduced around six months back. You may request for a single CAS—across all your MFs investments—to CAMS or Karvy. You have mentioned, "My one correct email address is already on file with all my mutual funds." To get the CAS, the same email address that you had originally registered while opening your account is needed.

If you have registered an email address in your folios to fund houses serviced by CAMS / Karvy, you can use your email ID to obtain a consolidated PDF Account Statement at your registered email address.

Please check the

RL: to set the delivery option. If you have not registered your email ID, you should send a written and signed instruction to CAMS/Karvy serviced mutual funds.

To stop physical statement: You can call the respective fund houses’ customer care executives, give your MF folio number and ask them to stop physical statements. You can also visit the URL:

Fill in the following data: AMC name, Folio no, your email ID and you would like account statements to be sent via email. You can also send application to each of the MF house quoting your folio number, fund name and asking them to switch to email based statements. Do not forget to mention your email id.


In my demat account, my name is mentioned as Rakesh Narain, instead of Rakesh Narain Sharma. My name in the higher secondary school certificate of CBSE is Rakesh Narain. During those days (in the year 1956), last name was not allowed to be written in the school but it was added to the father’s name in the school. In my PAN card, my name is written as Rakesh Narain Sharma.  

Now, I want to add my last name in my demat account. My bank account, mentions my full name Rakesh Narain Sharma. Kindly let me know the procedure to add my full name in the demat account. — RN Sharma

Your last name cannot be added to your demat account because modifications to the existing demat accounts are not allowed, according to CDSL (Central Depository Services (India) Ltd). You have an option to close your current demat account and open a new demat account (adding your full name). For further information you may contact CDSL’s operation department: 022-22728650;30. 

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